Category: Regulation

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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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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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Australia Crypto Art Crypto News NFTs Regulation

NFTs ‘Inadvertently’ Taxed, Says Australian Senator During Sydney Art Exhibition

Australia is preparing policy ahead of the federal election in May focusing on clearer rules for digital assets and artists. Policy specifically relating to NFTs needed to be implemented quickly to stave off a potential “brain drain” on Australia’s economy, according to NSW Liberal Senator Andrew Bragg.

Tax Restructuring Sorely Needed

Senator Bragg, speaking this week at Sydney’s inaugural 3D art NFT exhibition, Satellite, said the country needed to hear from artists on the best way forward for digital asset regulation. Tax restructuring was sorely needed to counter local firms looking to establish themselves in more favourable jurisdictions overseas, including in Singapore and the UK, he added.

At the moment, I think there are cases where NFTs are being taxed inadvertently. There’s no real transfer of value. We want to make sure that we’re not doing that – we need to make sure we’re tax-competitive. Otherwise, why would you do business here?

NSW Liberal Senator Andrew Bragg

What Does the ATO Say?

The Australian Tax Office (ATO) has provided broad guidelines on the tax treatment of NFTs. You pay tax according to the method that applies to your particular use case:

  • under the capital gains tax (CGT) regime;
  • on revenue account as trading stock;
  • as part of a business or profit-making scheme; or
  • depending on the terms of the NFT smart contract and the rights it grants, a combination of the above.

For most users who are buying or selling NFTs, crypto art assets are treated in the same manner as normal cryptocurrency as they fall under the same rules for capital gains. The following actions involving NFTs are considered disposals and will accordingly attract CGT:

  • selling NFTs in exchange for cryptocurrency;
  • exchanging one NFT for another NFT or fungible cryptocurrency; or
  • giving an NFT as a gift (unless it is to a tax-deductible entity such as an Australian charity).

Minting an NFT is generally not subject to tax. Only the disposal of an NFT (through sale, trade or bridging) constitutes a CGT event.  The exception is when the value of the asset the NFT was minted for has increased since the original purchase, which would constitute a CGT event in itself.

Last month, the ATO signalled its intention to apply more pressure on Australian crypto traders and investors this year, as cryptocurrencies become more popular among the general Aussie population.

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Blockchain Crypto News ICON Korea Markets Regulation

New South Korea President Sends ICX Token Soaring 70%

The native token of the South Korean-based ICON blockchain, ICX, has jumped 70 percent following the election of a new crypto-friendly president.

In the 24 hours following the election of Yoon Suk-yeol, the ICX token went from a low of US$0.61 to a high of US$1.06. It has since retraced some of those gains and currently sits at US$0.83 – still down some 93 percent from its all-time high of US$13.16, reached in January 2018.

Crypto Plays Important Role in Close Result

Yoon Suk-yeol, who only came to politics in 2021 having previously worked as a high profile prosecutor, was the candidate for the conservative opposition party, People Power Party. His victory was not clear-cut, with the final margin being under 1 percent, reflecting how contentious politics has become in South Korea recently.

Suk-yeol ran on a platform promising to deregulate digital asset markets, lower taxes on crypto and reimburse victims of crypto fraud, in addition to tackling the stagnating South Korean economy and soaring housing prices.

New Direction for Crypto in South Korea

The previous South Korean president, Moon Jae-In, had been relatively anti-crypto, cracking down on South Korean-based exchanges in 2021 and forcing the vast majority of them to shut down.

The new president has taken a forward-looking approach to crypto, vowing to take what he characterises as a more realistic regulatory stance:

To realise the unlimited potential of the virtual asset market, we must overhaul regulations that are far from reality and unreasonable.

Newly elected South Korean President Yoon Suk-yeol

Crypto Becoming More Politically Relevant 

In a sign of its growing political significance, crypto was used by both major parties to appeal to younger demographics. In addition to offering crypto-friendly policies, the candidates from both major parties minted election-related NFTs to demonstrate their crypto bonafides during the campaign.

Following the executive order released by US President Biden this week, this election in South Korea may signal the beginning of a trend towards increased regulatory clarity and adoption for cryptocurrencies globally.

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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:

Image
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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Crypto News Markets Monero Privacy Regulation Zcash

Privacy Coins XMR, ZCASH Surge Amid Political and Regulatory Uncertainty

The past 24 hours has been kind to privacy coins, with many seeing gains of over 20 percent amid concerns about the regulatory environment in the US, a crackdown by exchanges on accounts linked to Russia, and ongoing economic sanctions.

Monero, the largest privacy coin by market cap, shot up 22 percent in under three hours according to CoinGecko, peaking at almost US$206 before consolidating around the US$185-190 range.

Likewise, Zcash is up over 30 percent since March 8, having climbed from US$106 and is currently trading at close to US$145, according to CoinGecko. This rally from Zcash follows a significant bounce in November 2021 after the announcement of plans to transition to a proof-of-stake blockchain.

Smaller Privacy Coins Also Up

The surge in privacy coins hasn’t been limited to the large caps; most smaller plays are also up significantly in the past day: Oasis has gained 10.4 percent, Secret is up 14.5 percent and Horizen 17 percent.

Even low-cap and relatively unknown privacy protocols are surging: Pirate Chain is up 18 percent, Tornado Cash 32.7 percent and Verge by 25 percent, all in the past 24 hours.

What Caused the Surge?

Opinion is divided on what exactly has sparked this sudden surge in privacy coins, and there are likely several factors at play.

The release of the crypto executive order by President Biden, with its focus on consumer protection and illicit activity along with the suspension by Coinbase of over 25,000 addresses linked to Russian criminals, are thought to be important factors.

There is also some speculation that Russian oligarchs may be buying up privacy coins to help them get around economic sanctions while maintaining their anonymity:

To put the surge in privacy coins in context, according to CoinMarketCap the overall crypto market cap is up around 4 percent over the past 48 hours.

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Crypto News NFTs Regulation

US Regulator Scrutinises NFTs as Potential Unregistered Securities

The US Securities and Exchange Commission (SEC) has commenced investigation into the question of whether non-fungible tokens (NFTs) constitute securities. Those with their finger on the regulatory pulse are not in the least bit surprised:

What is the likely outcome? Let’s start by defining “securities”.

Securities Defined

Securities are financial instruments that can be traded between parties in open markets, such as stock exchanges. Of the four main types, equities, or shares, are the most widely understood.

From a US legal perspective, there is a four-prong test to determine whether an offering constitutes an investment contract rendering it a security, and thus requiring registration with the SEC. The transaction must satisfy all four elements, known as the “Howey test”:

  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.

Are NFTs Securities?

Reports suggest that SEC attorneys have sent subpoenas to NFT creators and various exchanges requesting more information. In particular, they are apparently focused on fractional NFTs – those where the NFT is broken down into many parts and sold separately.

SEC Commissioner Hester Peirce forewarned that this was coming in December:

Given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction … people need to be thinking about potential places where NFTs might run into the securities regulatory regime.

Hester Peirce, SEC Commissioner


SEC chief Gary Gensler has also previously said he believes many tokens are probably securities within the purview of the SEC since they pass the Howey Test.

While it is unclear whether the investigation is limited to fractional NFTs or the broader sector, some evidently understand that a strict interpretation of the Howey test may render them securities:

The SEC has had its hands full of late, from perpetually denying crypto exchange-traded funds (ETFs) to tackling initial coin offering (ICO) frauds.

At this point, it’s not clear what the end result of this NFT investigation will be. However, on a plain language understanding of the Howey test:

  1. Do NFTs involve an investment of money? Tick – fiat currency or ETH.
  2. Are NFTs a common enterprise? Tick – the project or club.
  3. Are NFT offerings made with a reasonable expectation of profits? Tick – of course.
  4. Are NFTs derived from the entrepreneurial or managerial efforts of others? Tick – the creators, developers, marketeers and entire team.

As with all things, the devil is in the detail. In addition, when it comes to enforcement action, politics are as relevant a factor as the law itself – just ask Wall Street.

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Australia Crypto News Regulation

Australian Advisory Committee Outlines Factors for Easing Crypto Adoption

An advisory committee to the Australian government released a report this week highlighting issues that need attention in order to facilitate the safe and widespread adoption of crypto technology in Australia.

The report, developed by the Cyber Security Industry Advisory Committee and released by the Australian Department of Home Affairs, outlines the risks and opportunities presented by cryptocurrencies and suggests Australia would benefit from the creation of a set of guidelines to protect businesses and investors.

There is a need for regulatory settings that provide greater clarity and confidence about how the cryptocurrency market can operate in Australia.

Cyber Security Industry Advisory Committee report

Key Areas For Government

The report recommends the government explore four key areas to help keep Australians safe:

  1. setting minimum security standards for exchanges;
  2. improving crypto-centric capability and training for law enforcement;
  3. adopting best-practices and infrastructure from other jurisdictions; and
  4. increasing transparency requirements for operators of blockchain-based products and services such as DEXs and NFT marketplaces.

Opportunities Aplenty

Although the report focuses on how government can regulate the crypto space to minimise criminal activity, it also highlights some of the opportunities crypto presents:

“Distributed ledger technology is useful to businesses beyond its cryptocurrency capabilities. It can increase brand trust through its ability to enhance transparency and provide an immutable record of assets for other purposes.”

Apart from crypto acting as a currency, the four main opportunities mentioned in the study are:

  • supply chain tracking;
  • the tokenisation of traditional assets such as loans and real estate;
  • the possibility for businesses to attract a new set of customers; and
  • the potential for lower energy use than existing financial infrastructure.

Australian Crypto Adoption Growing, Regulation Coming

A report of this kind comes at an important time for the Australian crypto industry, following significant growth in adoption in the past two years. We’re now seeing more and more crypto companies listing on the ASX and large crypto-based events starting to attract interest. 

As the industry grows, it’s important that government keeps up and provides both clarity to the market and protection to consumers and businesses.

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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.