Category: Regulation

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Australia Crypto News Regulation

Australia’s New PM Highlights Crypto Regulation Among Top Priorities

As newly minted Prime Minister Anthony Albanese settles in to his role after the Australian Labor Party’s victory in last weekend’s federal election, emphasis is being placed on crypto regulation as one of the new government’s top priorities.

Anthony Albanese sworn in as Australia's new prime minister | NewsTrack ... https://english.newstracklive.com/news/anthony-albanese-sworn-in-as-australias-new-prime-minister-sc57-nu318-ta318-1229906-1.html
Australia’s new prime minister, Anthony Albanese, vows to prioritise the crypto industry.

Albanese Prioritises Crypto

Labor has a lot of priority policies to install as it gets stuck into its term and, notably, crypto is a highlight on the list. Alongside its plans to tackle the cost of living and more urgently address the issue of climate change, Albanese’s government will be continuing the outgoing Liberal Party’s work towards regulating the industry as efficiently as possible.

Caroline Bowler, CEO of BTC Markets, has weighed in on the subject, stating that Labor will be looking to create a digital assets-focused regulatory bill. However, it will be a priority to avoid the restriction of future innovation while developing such a bill:

https://www.linkedin.com/in/carolinebowler/overlay/photo/

The primary concern would be to put together the appropriate regulatory regime for the marketplace, but also to leave room for innovation.

Caroline Bowler, CEO, BTC Markets

As Labor has inherited an increasingly difficult economic situation, crypto is unlikely to be the only financial sector up for examination.

Roadmap to Regulation

Crypto regulation had been a hot topic in government prior to Labor’s electoral win. April 23 saw the Australian Prudential Regulation Authority (APRA) produce a regulatory roadmap for the crypto industry. The roadmap outlined APRA’s preliminary risk management expectations for “regulated entities dealing with digital assets”.

More recently, the Commonwealth Bank of Australia was forced to halt trading on its pilot crypto app amid market turmoil. The decision was justified by stating that CBA’s focus was on ensuring the endeavour was aligned with the required regulations.

Conversations surrounding the regulation of crypto really picked up in late 2021 as billions of dollars of investors’ money caused an industry boom, with the associated risks noticeably high for both investors and businesses.

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Bitcoin Crypto News Cryptocurrency Law Regulation Terra TerraUSD

UST Meltdown Spurs Global Warnings of Crypto Regulation

Unsurprisingly, the UST depegging fiasco has triggered regulators around the world to accelerate their efforts. While some persist in being hostile towards any regulation, others have expected it from the outset:


Regulators Seize the Opportunity Amid LUNA Debacle

When history is written, this past week may well be regarded as a watershed moment for the crypto sector as LUNA plunged 97 percent overnight.

To illustrate the extent of the carnage, consider that LUNA plummeted from an all-time high of US$119 in April to US$0.000143 at the time of writing. In addition, its sister not-so-stablecoin UST has completely depegged from the US dollar since May 9, currently trading at US$0.0901.

The LUNA collapse alone saw US$50 billion in market capitalisation erased in a week, leading crypto-sceptic regulators around the world to seize the opportunity to capture the narrative.

Regulations Incoming

With the market down US$500 billion in the past two weeks and with UST completely depegging from the US dollar, regulators’ initial focus has been on stablecoins.

In addition, crypto regulation has been placed on the agenda for the upcoming G7 summit in Germany, with French central banker Francois Villeroy de Galhau commenting:

What happened in the recent past [UST meltdown] is a wake-up call for the urgent need for global regulation.

Francois Villeroy de Galhau, governor, Bank of France

In the US, Securities and Exchange Commission chair Gary Gensler said on May 16 that “a lot [needs] to be done here, and in the meantime, the investing public is not that well-protected”, adding: “We’re going to continue to be a cop on the beat.”

Treasury secretary Janet Yellen also told told lawmakers last week that UST’s fate underscored the need for bank-like regulations to be imposed on stablecoin issuers. An anonymous official familiar with the matter added: “In the absence of congressional action, last week’s volatility will put regulators and stakeholders on a stronger footing if they feel the need to act alone to mitigate the risks.”

Shortly after, a non-partisan report by the Congressional Research Service echoed Washington’s sentiments, arguing that the stablecoin industry lacks the regulations found in traditional finance systems to safeguard investors. The overarching theme of the policy recommendations relates to transparency and disclosure.

Separating the Wheat from the Chaff

While regulation is not welcome by many, it appears all but inevitable that it will play an increased role going forward. It’s difficult to envision how a parallel system (ie, crypto) with little to no disclosure obligations can persist for long.

As exchanges like Coinbase face class action lawsuits for selling “unregistered securities”, it’s likely that most cryptocurrencies will find themselves falling within the parameters of increased regulation.

Not everyone is concerned, however, as Bitcoiners like Michael Saylor believe that everything outside of Bitcoin is an unregistered security.

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Australia Crypto News Cryptocurrency Law Investing Regulation

Portugal’s Crypto Tax Haven Status Set to End, 28% Capital Gains Impost Coming Soon

Portugal’s Finance Minister Fernando Medina has confirmed that the southern European nation will begin taxing cryptocurrencies, reversing a six-year-old tax law that excluded crypto gains on the grounds that they are not legal tender.

The current capital gains tax rate for financial investment in Portugal is 28 percent. However, legislation relating to the introduction of such an impost on crypto could take two or more years to implement, given Portugal’s notoriously slow-moving bureaucracy:

Portugal’s altered tax stance will bring the country into line with many other nations around the globe. Among them are Australia – whose Tax Office earlier this week warned investors of the need to report annual crypto capital gains and losses – the UK and US.

Goodbye ‘Golden Visa’

Until now, Portugal has been seen as a crypto tax haven that offers permanent residency via what is known as the ‘Golden Visa’, because it grants holders special tax exemptions and a path to citizenship. The program was instituted as a means of attracting foreign investors, and in response to the country’s new tax plan, industry observer and cyber security professional Anthony Sassano saw the funny side:

Portugal may wish to take note of the fact that late last month, Panama passed a bill exempting crypto from capital gains tax, making the Central/South American republic a more attractive destination for digital asset investors.

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Crypto News Markets Regulation Stablecoins TerraUSD

US Fed and Treasury Hint at Incoming Stablecoin Regulation Following UST Fiasco

Both the US Federal Reserve and Treasury are eager to see stablecoins regulated by the end of this year, a move they say would improve the overall financial stability of the US economy.

A new report from the Federal Reserve has identified several risks associated with stablecoins – cryptocurrencies whose value is pegged to the US dollar – and has suggested that government-backed alternatives may reduce risks to consumers and investors.

The report follows the recent collapse in value of the stablecoin Terra USD (UST), which threatens to destabilise the DeFi market, and calls from Treasury Secretary Janet Yellen for stablecoin legislation to be enacted by the end of 2022.

Report Identifies Weaknesses of Asset-Backed Stablecoins

The Federal Reserve Board’s ‘Financial Stability Report’ identifies significant stability risks in the US economy. When discussing stablecoins the report focuses on centralised, asset-backed stablecoins such as Tether and USDC, highlighting the opaque nature of the assets backing the coins and the risks posed if or when there are runs on these coins.

Stablecoins typically aim to be convertible, at par, to dollars, but they are backed by assets that may lose value or become illiquid during stress; hence, they face redemption risks similar to those of prime and tax-exempt MMFs [money market funds]. These vulnerabilities may be exacerbated by a lack of transparency regarding the riskiness and liquidity of assets backing stablecoins.

US Federal Reserve report

Algorithmic Stablecoins Aren’t Necessarily Stable

The recent decoupling of TerraUSD from the dollar has shown yet again that algorithmic stablecoins, like their asset-backed counterparts, are not necessarily as stable as they purport to be. 

Over the past few days UST has fallen dramatically in value, at one stage dropping as low as US$0.60 after its algorithm failed to function as intended and the delayed deployment of its Bitcoin reserves failed to prop up its price. According to CoinGecko, at the time of writing UST was changing hands at US$0.83.

UST isn’t the first algorithmic stablecoin to face stability issues; last year, Iron Finance plunged all the way to zero after a similar decoupling triggered a bank run costing investors millions.

Treasury Secretary Wants Legislation, Fast

US Treasury Secretary Janet Yellen. Source: ledgerinsights.com

In a further sign that legislation governing stablecoins in the US may be imminent, Treasury Secretary Yellen, when questioned on the issue during a May 10 hearing, responded that it was “important, even urgent” that Congress act. She went on to say she considers it “highly appropriate” that regulation should occur by the end of the year.

Yellen’s sense of urgency for legislation seems to have been heightened by the problems currently confronting UST:

A stablecoin known as TerraUSD experienced a run and had declined in value. I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate.

Janet Yellen, US Treasury Secretary

This talk of imminent stablecoin legislation follows speculation last year that the US government was considering offering insurance to stablecoin holders of up to US$250,000, similar to the protections provided to account holders at insured banks.

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Australia Crypto News ETFs Regulation

Senator Bragg Intervenes in Crypto ETF Race, Backing Local Investment Managers

Andrew Bragg, an Australian Liberal Senator and pro-crypto lawmaker, has requested that the Australian Securities and Investments Commission (ASIC) back local investment managers for the first Aussie crypto exchange traded fund (ETF).

Senator Bragg has addressed a letter to ASIC strongly recommending that the interests of Australian investment managers are kept in mind as the country’s first crypto ETF moves closer to fruition. The letter stated:

It would be a very regrettable outcome if foreign exchange-traded funds with direct exposure to cryptocurrency were widely available before domestic products.

NSW Senator Andrew Bragg to ASIC chairman Joseph Longo

While Bragg said he would not retaliate against the development of digital assets by foreign companies, he suggested that ASIC prevent them from capitalising on the delays that local firms are experiencing. The planned Aussie ETFs were supposed to have been greenlit a week ago, and Bragg expressed that he would be hesitant to see foreign products dominating Australian ones.

'This is a good and fair idea': Liberal senator Andrew ... https://www.theage.com.au/politics/federal/this-is-a-good-and-fair-idea-liberal-senator-andrew-bragg-backs-indigenous-voice-to-parliament-20190724-p52adz.html
NSW Senator Andrew Bragg backs local crypto ETFs.

Crypto ETFs: Momentum and Setbacks

April 2022 saw the Australian crypto ETF race heat up following the announcement of two more listings being ready to launch. These include the first Ethereum ETF and another Bitcoin ETF.

However, a week ago it was announced that the first crypto ETFs had been delayed due to an issue with an undisclosed third-party broker. This follows several tumultuous months. The hold-up was allegedly the result of standard checks prior to trading – no further information was given.

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Airdrop ETFs NFTs Regulation

VanEck Community Airdrop ‘NFT to Function Like a Digital Membership Card’

US asset management firm VanEck has announced that the first NFT of its upcoming collection is set to be launched and delivered via Airdrop. The collection will follow “Hammy” (Alexander Hamilton, the first US Treasury Secretary) and his journey through monetary policy’s past, present and future.

265 Alexander Hamilton Ten Dollar Bill Photos - Free ... https://www.dreamstime.com/photos-images/alexander-hamilton-ten-dollar-bill.html
US monetary policy pioneer Alexander Hamilton set to become an NFT.

For the first 1,000 of those who signed up for the project, the initial Airdrop takes place this week. At the end of the month, each purchased NFT will transform into a unique avatar that permits exclusive access to content produced by VanEck.

https://www.linkedin.com/in/mattbartlett1/overlay/photo/

The use of this NFT allows us to build an exclusive community where members who hold said NFT are invited to experiences and events where they can network with like-minded investors and crypto enthusiasts.

Matthew Bartlett, internal sales manager, VanEck

The major selling point of the collection will be the exclusive access it grants to in-person and digital events. It is intended to be an “NFT [that] functions as a digital membership card”, with the collection split into three tiers – common, rare, and legendary, with the latter tier having only 20 NFTs in circulation. The higher your NFT’s ranking, the more exclusive benefits will be available to you.  

Airdrops Gain Traction

Airdropping is now a popular method of dispensing crypto and NFTs to users. Last month, Ethereum scaling solution Optimism announced plans to utilise Airdrop to help its new token, OP, take off. It plans to feature several more Airdrop-based events, the next scheduled for a yet-to-be-announced date in Q2.

In other recent, less positive news regarding VanEck, November 2021 saw its rejection by the US Securities and Exchange Commission (SEC) regarding ETF manipulation concerns. VanEck’s application for the Bitcoin ETF was denied as the fund allegedly did not meet its burden under the Exchange Act and the SEC’s Rules of Practice.

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Bitcoin Mining Crypto News Regulation

Saylor and Dorsey Write to Environmental Agency to Tackle BTC Energy FUD

Persistent and well-funded ESG (environment, social and governance) criticism of Bitcoin has led to the Bitcoin Mining Council (BMC) issuing a stinging letter to the US Environmental Protection Agency (EPA):

Setting the Record Straight

Over 50 signatories, including Jack Dorsey and Michael Saylor, have endorsed a letter from the BMC responding to an April 20 letter co-signed by 20 House representatives arguing for increased regulation over Bitcoin and proof-of-work consensus mechanisms.  

The BMC, established last year, carefully proceeded to respond to several of what it termed “misconceptions”, outlined in the original letter of complaint.

The first was that “bitcoin mining facilities across the country are polluting communities and are having an outsized contribution to greenhouse gas emissions”. BMC responded by pointing out that the authors were confusing data centres and power generation facilities:

Emissions are created at the power generation source upstream from the data centres. Digital asset miners simply purchase electricity from the grid, the same as Microsoft and other data-centre operators. Data centres engaged in the industrial-scale mining of digital assets do not emit CO2 or any other pollutants, like other industrial facilities do; they are merely server farms engaged in computation.

BMC letter

BMC Survey: 58.4% of BTC Mining Sustainable

Regarding the “outsized” contribution reference, BMC noted that its recent survey found 58.4 percent of global bitcoin mining was sustainable, notably higher than the average industrial sustainable energy usage in the US, which is at 21 percent. As reported by Crypto News Australia earlier this year, BTC mining emissions have been found by others to be “inconsequential”.

Another accusation in the letter stated that “a single Bitcoin transaction could power the average US household for a month”. In response, the BMC said the claim was “patently and provably false” as Bitcoin transactions do not carry an “energy payload”:

Broadcasting a transaction requires no more energy than a tweet or a Google search.

BMC letter

It isn’t the transactions that consume energy, it’s the energy consumed by miners competing for issuance and fees, which by design are drastically falling given that 90 percent of BTC supply has already been issued.

After outlining the Lightning Network’s ability to scale BTC payments, BMC concluded that “it therefore makes no sense to associate energy consumption with individual transactions, since Bitcoin’s energy usage is not related to transactions, and Bitcoin can scale arbitrarily without increasing its transaction count or energy usage”.

PoW vs PoS: Unfair Comparison

Finally, the BMC letter went into painstaking detail as to the difference between proof-of-work versus so-called “environmentally friendly” proof-of-stake consensus mechanisms. The latter, it suggests, “should be understood as an industry term for a shareholder-governed financial consortium” and is “wholly taxonomically different, with different objectives and capabilities”. BMC concluded that it was highly misleading to compare the energy use of both:

Across a long enough timescale, facts usually triumph over ignorance. In this case, it seems inevitable despite the best efforts of some who appear to prefer repeating one refuted claim after another.

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Bitcoin Crypto News Payments Regulation

Central African Republic Becomes Second Country to Adopt BTC as Legal Tender

The rumours are indeed true – the Central African Republic (CAR) has become the second nation state to adopt bitcoin as legal tender, according to official government sources:

‘Now Our Country is One Step Ahead’

According to a statement from President Faustin Archange Touadera’s office, the National Assembly has passed, and he has signed, a bill establishing a legal and regulatory framework for cryptocurrencies, making bitcoin legal tender alongside the CFA franc:

Official announcement per Minister of Digital Economy

To some the news was surprising but to others less so, as CAR’s finance minister Herve Ndoba told Bloomberg last week:

There’s a common narrative that sub-Saharan African countries are often one step behind when it comes to adapting to new technology. This time, we can actually say that our country is one step ahead.

Herve Ndoba, CAR finance minister

Details Somewhat Murky for Now

Several sources in both traditional and crypto media have managed to verify the announcement on the ground, along with several credible Bitcoiners who make it their mission to establish the facts.

One of those is human rights advocate Alex Gladstein, who noted that the bill had been in the works for the past month “with a lot of debate and criticism from the opposition, but [it] was passed unanimously on April 22”. It is also understood that “some opponents of the bill didn’t show up for the vote, and some plan to challenge it later”.

Another Bitcoiner with her ear to the ground is Anita Posch, a Bitcoin educator on a mission to orange-pill Africa. She took to Twitter saying that the official statement “looked legit”, but that bitcoin wasn’t legal just yet as several compliance measures were required to “complete the process”:

Clear Obstacles Stand in the Way of Adoption

The most obvious challenge is that less than 11 percent of CAR’s population of 4.83 million have access to the internet, suggesting that the CFA franc will remain dominant for now. In fact the United Nations describes it as the second-least developed nation on Earth.

In addition, many in the opposition and civil society continue to believe that Bitcoin is a scam, as noted by Gladstein. He adds, however, that the government’s motivation may be twofold:

  1. it could open new opportunities and provide new economic development; and
  2. due to civil war, bitcoin could make it easier to trade in/out of the CFA franc.

Despite these challenges, Bitcoiners have cheered on the news, suggesting “two down [referring to El Salvador and now CAR], just another 193 to go”.

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Crypto News Cryptocurrency Law Illegal NFTs Regulation Scams

US Senator Proposes Laws to Make Rug Pulls a Crime

Under new legislation filed in the US state of New York, lawmakers intend to confirm fraudulent rug pulls as a crime along with other crypto-specific forms of duplicity.

Companion Bill Filed in Lower Chamber

According to public records, Senate Bill S8839 “establishes the offences of virtual token fraud, illegal rug pulls, private key fraud and fraudulent failure to disclose an interest in virtual tokens”. A companion bill, Assembly Bill A8820, was also filed in the New York State Legislature’s lower chamber. The bills were introduced by State Senator Kevin Thomas and Assembly member Clyde Vanel, respectively.

The legislation places particular focus on rug pulls – a term referring to the sudden exit of a developer or founding team and the resultant defrauding of investors – given how prevalent the practice is in the crypto space. The framed New York legislation proposes limits on the ability of founding teams to sell significant percentages of their token holdings within a period of five years.

The specific text of the proposed legislation reads:

Illegal rug pulls:

1. A developer, whether natural or otherwise, is guilty of illegal rug pulls when such developer develops a class of virtual token and sells more than ten percent of such tokens within five years from the date of the last sale of such tokens.

2. This section shall not apply to non-fungible tokens (NFTs) where a developer has created less than 100 NFTs that are regarded as part of the same series or class of NFTs or where such NFTs regarded as part of the same series or class are valued at less than $20,000 at the time the rug pull occurs.

Proposed New York rug pull legislation

If the legislation is approved and signed, it will take effect 30 days after passage.

Need for Legislation Parallels the Rise of Rug Pulls

Legislation such as this is becoming all the more necessary given the rising incidence of rug pulls and crypto scams. Last year Crypto News Australia reported on a Solana NFT project that was accused of a rug pull of the coin Eternal Beings. And in December, Bent Finance confirmed that its pool had been exploited for US$1.6 million in a rug pull incident.

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Crypto News Cryptocurrencies Cryptocurrency Law Regulation Ukraine

Ukraine Bans Citizens From Buying More Than $3,400 Crypto Per Month

Shortly after Russia’s invasion of Ukraine, crypto donations poured in from around the globe to help fund the war effort, eclipsing US$100 million. In a surprising twist, the nation’s central bank has now placed limitations on crypto purchases for its citizens:

Preventing ‘Unproductive Capital Outflows’

According to a National Bank of Ukraine (NBU) announcement, Ukrainians are now prohibited from purchasing digital assets using the country’s fiat currency, the hryvnia (UAH).

They are, however, permitted to purchase crypto up to a maximum of 100,000 UAH (approximately US$3,400) per month, provided it is done with foreign currencies. According to the announcement, these measures have been put in place under martial law to prevent “unproductive capital outflows” from the country.

The NBU commented that the measures were “temporary” and that it planned to allow those citizens fleeing the country to make cross-border peer-to-peer (P2P) transfers within the above limit from accounts in its national currency.

Not as Crypto-Friendly as Expected

With the Ukraine government being a beneficiary of crypto donations, even partnering with FTX to do so, the NBU’s move has been almost universally criticised on Twitter:

Capital controls are common, particularly during times of war, but there is something particularly stinging about this ban. Perhaps because it emanates from a nation that appeared to be progressive and on board with the crypto industry and community. It could also be the realisation that the NGU has effectively denied Ukrainians a financial offramp to further currency debasement, inflation and economic ruin.

As much of the developed world has “stood with Ukraine”, it’s evident that the latest measures represent just another blow for a population knee-deep in kinetic war: