Category: Cryptocurrency Law

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Australia Cryptocurrencies Cryptocurrency Law Regulation

ASIC Warns Aussie Crypto Companies to Expect Higher Regulation Moving Forward

The Australian Securities and Investments Commission (ASIC) has warned cryptocurrency companies that they will be held to the same standards as traditional finance companies, as the prospect of digital asset regulation strengthens.

The news was shared by ASIC commissioner Cathie Armour at Blockchain Australia’s crypto conference on March 24.

Higher Crypto Regulations Coming

Armour detailed to conference attendees that the “growing maturity” of the crypto industry means that crypto businesses may need to alter how they interact with the regulator. Businesses looking to offer crypto-related products will be expected to meet the same requirements as all other companies in the wider finance industry.

https://www.linkedin.com/in/cathie-armour-50b89013a/overlay/photo/

We’re doing this because we’re keen to maintain our robust regulatory framework. We’re really looking for industry to work closely with us and to do a lot of their own homework to navigate the details.

ASIC commissioner Cathie Armour

This isn’t the first time Armour has bestowed a warning on the financial industry. She has previously stated that Aussie influencers – specifically, “finfluencers” – could face up to five years’ jail time for breaking financial advice laws.

Past ASIC Warnings to Investors

ASIC is repeatedly warning investors about various dubious practices occurring within the financial industry. Most recently, the regulator cautioned against switching to a self-managed super fund (SMSF) to invest in crypto. Following an increase in crypto marketing for “investment opportunites”, Aussies were being “enticed” to switch to an SMSF before investing.

In October 2021, ASIC began joining investor Telegram groups to warn about an increase in pump-and-dump schemes. ASIC contacted one particular private Telegram group of 288 members, involving potentially illegal market tip-offs, to warn those involved that they were being monitored.

In August 2021, ASIC again cautioned Aussies to beware of unlicensed crypto companies. The warning was warranted due to an increase in losses from trading crypto-related products.

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Crypto News Cryptocurrency Law NFTs Real Estate

‘Satoshi Island’ Crypto Utopia Receives 50K Citizenship NFT Applications

The four-man team of entrepreneurs behind the ‘Satoshi Island’ project in the South Pacific claims to have already fielded 50,000 NFT visa applications to become permanent residents of the mooted crypto paradise.

The team’s declared vision is of a fiat-free, true crypto-economy where everything will be paid for in cryptocurrencies and all land ownership on the island represented by non-fungible tokens (NFTs).

As first reported by Crypto News Australia in January, it’s intended that Satoshi Island – so named for the pseudonymous creator of Bitcoin, Satoshi Nakamoto – will host events year round, house and headquarter crypto projects, as well as being a gathering place and residence for crypto enthusiasts worldwide.

The Satoshi Five-Year Plan

The Satoshi Island vision took flight during the 2017 bull run, though a tight checklist of objectives had to be met over ensuing years before it could become a reality:

  • the island had to be remote enough for privacy but not so remote that development would be too difficult;
  • it should ideally not be at risk of climate change and be protected from natural disasters; and
  • the slog to find an adequate location was compounded by the knowledge that the team “had to be realistic”.

Options Narrowed Down to Vanuatu

Most importantly, the government managing the territory where the island was located had to be open to the idea of a “crypto city”. After years of searching, the team settled on Vanuatu: “The government showed a willingness to innovate and were open to discussions right away.”

Pacific island nations in general are building a reputation for being crypto-friendly. Nearby, in Tonga, the prospect of Bitcoin becoming legal tender could happen as soon as November this year, while the neighbouring Marshall Islands are open to decentralised autonomous organisations (DAOs).

Proposed waterfront prefab villas on Satoshi Island. Source: satoshi-island.com

However, as with any proposed utopia, there are hurdles ahead for the developers of Satoshi Island. Vanuatu passed a law last year that allows companies to gain a special licence to deal with crypto assets. The Vanuatu Financial Services Commission, which provides those licences, recently issued a media release stating that Satoshi Island has not been granted one, and that it “could be a scam”.

Vanuatu’s Finance Minister has said that “proper policies” around cryptocurrency and blockchain still needed to be worked out:

It’s a new form of doing things and from our perspective it’s something Vanuatu will have to think seriously about. We need to have legislations updated so they can absorb the implementation of the cryptocurrencies.

Johnny Koanapo Rasou, Minister of Finance, Vanuatu

Moreover, NFT residency does not automatically confer citizenship of Vanuatu, where the government stipulates that actual citizenship costs US$130,000 for each aficionado who wishes to bid farewell to fiat and say hello to a crypto life in the sun.

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Australia Cryptocurrency Law Queensland

QLD Construction Company Moves into Liquidation After Buying $3 Million of Qoin

Liquidator FTI Consulting has announced that a significant purchase of troubled token Qoin is behind Queensland construction company Privium’s collapse, leaving hundreds of homes across the state unfinished and their prospective occupants fuming:

According to this week’s FTI report, Privium took an A$3 million gamble on cryptocurrency Qoin, transferring another half a million dollars to a Christian charity.

FTI stated that Qoin sales were limited to a few hundred dollars each day, describing the token as an “extremely illiquid” asset. When commenting on the company’s collapse, Privium CEO and founder Rob Harder proved a master of understatement when it came to placating disgruntled clients:

I understand that this is not the news you wanted to hear and that this will create real difficulties.

Rob Harder, Privium chief executive and founder

Both Harder and his wife are members of Hillsong Church in Brisbane’s southern suburban Mt Gravatt. While sources claim Privium had no connections with the church, the FTI’s investigation is ongoing.

Qoin Has Form

This isn’t the first controversy Qoin has been embroiled in. In February 2021, Blockchain Australia terminated Qoin’s membership via a notice of member disciplinary resolution, with locals at the time calling the token a scam.

In November, Salerno – an Australian crypto dispute specialist law firm – began preparations for a class action suit against Qoin for A$100 million. The firm was investigating Qoin’s potential breaches of Australian consumer law and the Corporations Act on counts of fraud and pyramid-like selling of financial products.

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Australia Crypto Exchange Cryptocurrency Law Regulation

Australian ‘2022 Digital Services Act’ Published for Crypto Custody Providers

The Australian Treasury has released a consultation paper outlining its proposed regulatory approach to crypto markets with a view to potentially introducing a Digital Services Act in the next 12 months. 

Industry has been given until May 27 to provide feedback on the proposals.

This follows appearances by NSW Liberal Senator Andrew Bragg and Jane Hume, the federal Minister for the Digital Economy, at Blockchain Week where they spoke about the need for a Digital Services Act to allow Australians to safely invest in crypto and to encourage investment and innovation in the burgeoning sector.

Government Focused on Secondary Service Providers

The proposed approach focuses on the regulation of what the government calls crypto asset secondary service providers (CASSPrs), which includes exchanges, brokers, assets managers, custodians and DeFi services such as decentralised exchanges.

According to the consultation paper, the digital services legislation would effectively seek to impose two types of regulation on CASSPrs: 

  • regulation of, and the introduction of a licensing system for CASSPrs; and
  • regulations relating to custodians and the secure handling of private keys.

Purpose of the Act

The overarching purpose of the proposed regulation is to provide more protections for investors and thereby increase public confidence and drive innovation in crypto. 

This focus was reaffirmed by Minister Hume during her March 21 Blockchain Week address, describing the proposed regulation as providing an “Australian-made badge of approval for CASSPrs”. She added:

The Morrison government wants to make sure that consumers can trust the exchanges that they use to buy crypto.

Jane Hume, Minister for the Digital Economy

Specifically, the proposed regulations will seek to mitigate the risk of investors losing their assets due to exchange insolvency or lack of liquidity and security risks such as hacking.

Government on Front Foot

These newly proposed regulations are part of a broader crypto focus by the federal government which includes a crypto taxation review and a token mapping exercise, both of which are due to be completed by the end of 2022.

This follows the release of a 12-point crypto regulation plan last October and recent calls from NSW Senator Bragg for Australia’s crypto industry to pick up its pace or risk missing opportunities.

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Australia Crime Cryptocurrency Law Facebook Scams Social media

Australian Consumer Watchdog Sues Meta Over Crypto Scam Ads

The Australian Competition and Consumer Commission (ACCC) has announced it will be suing Meta over the company’s failure to block crypto scam advertisements involving Australian public figures that are in breach of Australian consumer law.

person holding silver iphone 6 https://unsplash.com/photos/iurEAyYyU_c
ACCC takes action against Meta, the owner of Facebook and Instagram. Source: ABC

False Endorsements of Crypto Investments

Dick Smith, David Koch and Andrew Forrest are some of the prominent Australian personalities unwittingly involved in a series of crypto scam ads circulating on Facebook. The ads claim that the featured celebrities have hugely benefited from cryptocurrency investments, then direct users to scam websites on the strength of these false endorsements.

The consumer watchdog believes that Meta is not doing enough to prevent the circulation of these ads on both Facebook and Instagram. The personalities in the ads have not given any permission for their names and faces to be used in the money-making schemes, and users who have engaged with this material have reportedly been the victims of intense pressure tactics, including phone calls asking for funds.

Rod Sims, the ACCC’s chair, outlined his disappointment with Meta’s lack of action and solutions in a March 18 media release:

https://www.accc.gov.au/media/image-library

Meta should have been doing more to detect and then remove false or misleading ads on Facebook, to prevent consumers from falling victim to ruthless scammers.

ACCC chair Rod Sims

Sims stated that in one circumstance an individual consumer lost A$650,000 to one of these scams. The ACCC will be seeking injunctions, penalties, declarations, costs, and other orders from Meta to ensure the practice does not continue.

Australia Cracks Down on Crypto Scams

News of the ACCC’s legal action against Meta follows an investigation into how Australians lost over A$70 million in 2021 through investment scams alone.

Scamwatch reported in July last year that investment scams involving cryptocurrency and other digital assets were on the rise. Other prominent fraud-related practices have included romance scams, personal identity theft and illegal crypto mining.

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Bitcoin Coinbase Crypto News Cryptocurrencies Cryptocurrency Law Tokens

Coinbase Dragged into a Class Action Lawsuit for Selling 79 ‘Unregistered Securities’

One of the world’s leading digital asset exchanges has once again landed itself in hot water. This time it has been hit with a class action lawsuit which, among other things, claims that it sold 79 different digital assets that constituted “unregistered securities”:

‘Howey Test’ is Back

Legal proceedings have been launched by three users who accuse Coinbase of selling unlicensed securities and are seeking damages amounting to at least US$5 million on behalf of themselves, in addition to others who have purchased Dogecoin, Solana, Cardano, and more than 70 other tokens listed in the claim.

The suit argues that although some digital assets such as Bitcoin closely resemble commodities, in that they are decentralised, others are more akin to traditional securities (or shares).

The plaintiffs argue that the manner in which some tokens were offered to the public was in fact modelled on an IPO (initial public offering), which necessarily requires a significant amount of disclosures. In the case of the tokens in question, it was argued that disclosures were extremely limited, typically in the form of a “whitepaper” supplemented with adverts and social media posts.

In short, the argument is that the tokens constitute “securities” as defined by the “Howey test”, which requires that all four elements be met on the following criteria:

  1. It involves an investment of money;
  2. It has a common enterprise;
  3. It was made with a reasonable expectation of profits; and
  4. It is derived from the entrepreneurial or managerial efforts of others.

This test, originating from a 1946 Supreme Court decision, is all too familiar for the Securities and Exchange Commission (SEC), which recently began looking into the question as to whether some NFT drops pass this test.

Case ‘Not Much of a Surprise’

Philip Moustakis, counsel at Seward & Kissel for Coinbase, suggested that “the case is not much of a surprise. After all, the SEC has signalled that it intends to pursue investigations or actions against crypto-exchanges.”

He added that the court would need to do the painstaking one-by-one examination of each of the tokens, highlighting the need for greater regulatory clarity:

Unless and until the SEC provides further guidance and a path to compliance for token issuers, crypto lending products, exchanges, and other market participants, the question of whether any particular crypto-asset or transaction is a security will be litigated one at a time.

Philip Moustakis, senior counsel, Seward & Kissel

Having felt the heat of regulatory scrutiny over its lending product, this latest lawsuit comes as another blow to Coinbase. The lawsuit may well have far-reaching consequences given that it aims to cover all persons and entities who transacted in any of the 79 tokens between October 8, 2019, and the present.

From an outsider’s perspective, this case may just be what is needed to finally put the question to rest as to whether some tokens are “unregistered securities”. Michael Saylor, the unofficial King of Bitcoin, clearly believes that most will:

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Cryptocurrency Law Regulation Ukraine

Ukraine’s President Signs Crypto Bill into Law Amid Fighting a War

Ukrainian President Volodymyr Zelenskyy has signed into law a bill that legalises the cryptocurrency sector and establishes a more favourable regulatory environment for virtual asset markets in the war-torn nation.

Ukraine had previously passed laws that recognised virtual assets, provided some consumer protections and clarified their tax status, but this new law goes much further towards creating a fully fledged legal framework for crypto:

Defined Legal Status, New Regulatory Body

In a statement released by the Ukrainian government on March 16 describing the new law, its main effects will be to:

  • determine the legal status and ownership rights of virtual assets;
  • appoint the National Bank of Ukraine and the National Commission on Securities and Stock Market as the regulators; and
  • determine who can provide virtual assets and handle registration.

Establishing the National Commission on Securities and Stock Market as the regulator of the crypto sector means that virtual assets will now be treated much more like traditional securities. 

The Ukrainian government says the new regulator will be given responsibilities including:

  • shaping policy in the field of virtual assets;
  • issuing permits to virtual asset service providers; and
  • conducting regulation, supervision and financial monitoring of virtual assets.

Crypto Seen As Source of Opportunities

The new law follows a massive influx of crypto donations into Ukraine from around the globe, with over US$100 million already donated.

But it’s not only crypto donations that have encouraged Ukraine to accelerate its adoption of crypto – the sector is a seen as a source of significant economic opportunities by the Ukrainian government. 

In a tweet following the signing of the new law, Alex Bornyakov, Ukraine’s Deputy Minister of Transformation, praised the move: 

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Australia Cryptocurrency Law Investing Regulation

Australian Insurers Include ‘Crypto-Asset Exclusions’ in their AFSL Policies

Australian insurance providers have begun including specific crypto-asset exclusions in their professional indemnity coverage for financial services licensees, despite a growing demand for informed crypto investment advice.

According to Jared Timms from PNO Insurance, many insurers have felt the need to clarify their stance on crypto-assets and may soon update their policies accordingly. He stated in a recent blog: 

Having spoken to the major insurers of AFS licensees, the feedback has been there is no intention to cover advice from financial planners around cryptocurrency and it is likely specific exclusions may soon start to appear on Financial Planning PI policies. 

Jared Timms, senior account manager, PNO Insurance

Timms warns: “Any financial planner considering recommending investments into cryptocurrency should think about the uninsured risk they are potentially exposing to their business.” 

Insurance and regulatory roadblocks were key topics of discussion at the Professional Planner’s Researcher Forum in Sydney last week, where some financial services firms expressed an openness to adopting digital assets. 

What Does It Mean For Crypto Investors?

Insurance industry caution indicates that financial advisers covered by these policies cannot include crypto-assets in their approved product list and therefore cannot provide any advice on these assets without exposing themselves to significant risk. 

For now, crypto investors looking for advice will generally have to continue to look somewhere other than to qualified financial advisers. Despite this, crypto in Australia continues its slow march toward legitimacy. 

Recent news such as the CommBank offering crypto services to its customers, the announcement of the first Australian Bitcoin and Ethereum ETFs, and the CEO of the ASX predicting that crypto companies will soon start to play a bigger role in Australia’s tech sector all indicate crypto is gaining ground.

Interestingly, this lack of insurance cover for advice on crypto-assets now leaves some organisations, such as CommBank, in the potentially awkward position of offering investment products on which they cannot provide any advice.

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CBDCs Crypto News Cryptocurrency Law Regulation

Key Takeaways From President Biden’s Long-Awaited Crypto Executive Order

US President Joe Biden has signed an executive order calling government agencies to examine the risks and benefits of cryptocurrencies. What are the key insights and reactions from industry players?

Addressing Risks and Benefits of Digital Assets

Contrary to the fears of some market participants, no direct action will be taken from the order, at least for now. Instead, it lays out a process and series of deadlines for the alphabet soup of government agencies to work together and deliver a report to the president.

Specifically, the executive order covers seven main areas and calls for measures to:

  1. protect consumers, investors and business;
  2. protect US financial stability and mitigate systematic risk;
  3. mitigate the financial and national security risks posed by the illicit use of digital assets;
  4. promote US leadership in technology and economic competitiveness within the global financial system;
  5. promote equitable access to safe and affordable financial services;
  6. support technological advances and ensure responsible development and use of digital assets; and
  7. explore a US central bank digital currency (CBDC).

Although lacking in detail, the White House noted the order would work “across agencies and with Congress to establish policies that guard against risks and guide responsible innovation”.

Put differently, the administration appears to be making an attempt at striking a regulatory balance between consumer protection and embracing innovation. Or at least appearing to do so.

Mixed Responses to EO

Despite the order lacking any real substance, most seemed to share the sentiments of Jerry Brito, director of Coin Center:

The message I take from this EO is that the federal government sees cryptocurrency as a legitimate, serious, and important part of the economy and society, and I think it’s a good signal to serious people who’ve been holding back from getting involved. The EO also presents another striking contrast with alarmist politicians and media in that it is ultimately a call for further study and deliberate planning, not a reactive rush to legislate or regulate.

Jerry Brito, director, Coin Center

Dave Grimaldi, head of government relations at the American Blockchain Association, agreed with these sentiments:

However, crypto libertarians such as Erik Voorhees regarded the announcement as a series of meaningless platitudes. Or, in his words, “a perfectly political communication”:

Bitcoin-friendly Senator Cynthia Lummis was equally uninspired, and issued a statement questioning the need for a CBDC:

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Senator Cynthia Lummis’ statement. Source: Twitter

Conclusions to be Drawn

On a close inspection of the executive order, it’s difficult not to be somewhat cynical, given that it is devoid of any real substance. While it may appease some market participants, it would seem prudent to reserve judgement pending the release of concrete information.

However unpopular, regulation appears to be an inevitable feature of any market on the path towards widespread global adoption. The hope, of course, is that regulators are not too heavy-handed, to the point where innovation flees to friendlier jurisdictions.

Australia appears to be on the right path with the Senate Committee recently publishing a 12-point reform plan designed to strike a balance between consumer protection and ensuring Australia remains competitive in the global digital asset arena. Recently, the former head of payments policy at the RBA suggested that regulation would threaten the crypto market, however money sitting on the sidelines awaiting regulatory clarity would argue otherwise.

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Bitcoin Bitcoin Mining Crypto News Cryptocurrency Law Digital Asset Mining Regulation

EU Scraps Plans to Ban Proof-of-Work Following Backlash

In what has been heralded as a victory for Bitcoin, European lawmakers have backtracked on provisions in a crypto regulation bill that would have effectively banned proof-of-work (POW) tokens, most notably Bitcoin.

European Union Parliament’s U-Turn

Following outcry among miners and the broader investment community, German outlet BTC Echo first reported that the controversial provisions of the Markets in Crypto Assets (MiCA) bill had been struck.

Just days ago, Crypto News Australia highlighted the significant impact that may result from a ban which provided that by 2025, “no crypto assets could be created, sold, or traded within the EU if they used environmentally unsustainable consensus mechanisms”.

Most construed this as a de facto ban on Bitcoin, given that by 2025 it would likely be the only digital asset of value still using POW. This is, of course, assuming that Ethereum successfully transitions to proof-of-stake, a process that is apparently well under way.

Stefan Berger, a German EU member of parliament, was tasked with driving the legislative change and took to Twitter saying:

Correct is: The paragraph is no longer in the text. The report has yet to be voted on in committee. In this vote we will then see where the majorities lie. The decision has not yet been made.

Stefan Berger, Twitter (translated)

According to Berger, the vote on MiCA was originally scheduled for February 28, but since the deletion of the offending paragraphs, the vote has been postponed for an indeterminate period.

Bitcoin Battles ESG

With the risk of China nationalising miners well and truly behind us, it’s become evident that ESG (environment, social and governance) concerns are presently one of Bitcoin’s greatest hurdles to overcome.

Even though Bitcoin consumes less than 0.05 percent of global energy, of which more than 60 percent originates from sustainable sources, the bigger challenge seems to be persuading detractors that it has any value at all.

As long as one fails to see the value of Bitcoin and the importance of POW to security and decentralisation, from their perspective the appropriate amount of energy consumption is likely zero.