Category: Regulation

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Australia Blockchain Crypto News Cryptocurrency Law Regulation

Senator Urges Australian Blockchain Industry to Pick Up the Pace

Liberal Senator Andrew Bragg has urged the Australian blockchain industry to pick up the pace or risk falling behind other developed nations, saying Australia is likely to miss an opportunity to become a world leader in cryptocurrency if the government is not given more power to prioritise digital asset reform.

According to a report titled ‘Cryptocurrency and the Distributed Digital Economy in Australia’, cryptocurrency and related digital assets could generate A$68.4 billion for the Australian economy and create jobs for 205,700 people by 2030. The central issue is that Australia does not currently regulate crypto use and could potentially let this opportunity slip by.

Regulatory Framework a Long Time Coming

Federal Treasurer Josh Frydenberg has announced intentions to establish a regulatory framework to guide crypto’s future growth. However, such a plan will not be ready before the year’s end.

NSW Senator Bragg, a pro-crypto politician ranked #82 in the Cointelegraph Top 100 of People in Blockchain and Crypto 2021, has stated he would prefer this framework be put in place much sooner, despite acknowledging that “governments move slowly”.

NSW Senator Andrew Bragg, #82 on Cointelegraph’s Top 100 People in Blockchain and Crypto 2021. Source: ioandc.com

Bragg intends to call for increased treasury funding so dedicated units can work on these reforms. He is also set to insist on “broad, principle-based, regulation-making power delegated by law to a minister”, and is expected to request these changes prior to the release of the federal budget on March 29.

The Current State of Australian Crypto

Last October, the Australian Senate Committee finalised its 12-point crypto reform plan. The successful implementation of the long-awaited plan should alter the nation’s regulatory approach to the digital asset ecosystem. Bragg is a champion of this reform.

Before finalising the plan, the Australian Senate Committee hosted several hearings with domestic crypto-related businesses who shared their struggles with financial institutions denying or terminating banking services without notice – a practice known as ‘debanking’. The 12-point reform plan has a step dedicated to addressing this issue.

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Bitcoin Bitcoin Mining Crypto News Mining Regulation

EU Proposes Bill to Ban Proof-of-Work Mining by 2025

Given previous comments decrying Bitcoin’s energy use, it comes as no surprise that the European Union (EU) has proposed a regulatory package that includes provisions banning the use of proof-of-work (POW) consensus mechanisms across the union’s 27 member states.

Ban Forms Part of a Broader Crypto Regulation Discussion

POW has increasingly been under the microscope, with environmental harm being the most common concern cited. The favourite line of the corporate press is that Bitcoin consumes more energy than (insert country).

In the EU specifically, Swedish regulators began calling for a ban in November 2021, and this appears to have gained support from politicians across Germany, Spain and Norway.

The most radical proposal outlined in the package is one that prohibits “crypto services” that rely on “environmentally unsustainable consensus mechanisms”, starting January 2025. Put differently, the EU wishes to ban bitcoin mining, given Ethereum’s proposed transition to proof-of-stake.

Although environmental concerns have been frequently raised, its inclusion in the package came as a surprise to many, as one commentator noted:

Nobody expected it to become a dealbreaker and to make it into the final report.

Patrick Hansen, head of growth, Unstoppable Finance

EU parliamentarian Stefan Berger hinted that the MiCA (Regulation of Markets in Crypto-assets) package was as much a political debate as one about technology or facts:

The Greens and Socialists, as you can imagine, are criticising the proof-of-work concept and criticising the energy use, saying that bitcoin needs more energy than the Netherlands.

Stefan Berger, EU parliamentarian (Germany)

However, Berger did note that he felt that MiCA was an inappropriate forum for debating and settling “technological or energy-related rules”.

Discussions on finalising MiCA are set to begin at the end of February, and there is hope among some that the amendments relating to POW will be dropped:

Bitcoin Mining Levels ‘Inconsequential’

For ideologues looking to score political points, no amount of data is likely to change their mind. However, for those interested in facts, a recent study shows that Bitcoin consumes less than 0.05 percent of global energy. Moreover, close to 60 percent of its energy consumption is renewable.

And this does not even cover how Bitcoin naturally gravitates towards cheap, stranded energy and how its energy use is not in competition with any other uses. Neither does it touch on the most critical aspect, namely why POW is in fact critical for a global, decentralised store of value.

Lyn Alden said it best: ” … a lot of energy concerns directed at Bitcoin start with the presupposition that it’s useless. A trillion dollars in market cap disagrees. Little concern is given to worldwide washing machine energy usage, for example, because we understand the value.”

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Australia Crypto News Cryptocurrencies ETFs Regulation

ASX Chief Executive: More Crypto Companies to List on Australian Stock Exchange  

Dominic Stevens, chief executive of the Australian Stock Exchange (ASX), predicts that more companies with crypto ties could be listed on the Australian sharemarket in the coming year as cryptocurrencies start to play a bigger role in the tech industry.

With an eventful year of crypto companies making it into the mainstream, it seems 2022 may have some more of the same in store. The soon-to-retire ASX chief announced in his retirement speech last week that his mission over the past five years has been to expand the small role of tech companies in Australia’s mining and bank-heavy sharemarket.

Stevens has attempted to do this by allowing Australia to make strides in access to crypto but also by competing globally in the development of the blockchain industry. According to Max Cunningham, group executive of listings at the ASX, the exchange was establishing a framework for other companies backed by blockchain to debut by the middle of this year.

“We are moving on it and our goal is to bring investment-grade opportunities in various crypto asset classes to the ASX in the coming months and years,” Cunningham told The Sydney Morning Herald.

I think as the industry matures, you may see Square-like companies listing into the future, but we’re protective of the quality of the companies on our exchange, and it is a very fast-moving space.

Dominic Stevens, chief executive, ASX

Dorsey’s Block Lists on ASX

Stevens’ comments came just as Jack Dorsey’s Block (formerly Square) was listed on the ASX on January 20 after acquiring the Australian buy-now pay-later firm, Afterpay. The merged company will trade under the ticker SQ after being the first cryptocurrency-related company in the bourse’s history to be listed.

Aussie Crypto Progression

Initially, the ASX was cautious of how it approached crypto-affiliated companies but, as 2021 showed, Australia has been a hotbed for development in the nascent crypto industry. In October the ASX gave the go-ahead to investors to invest in crypto-based ventures through an exchange-traded fund (ETF). The following month, Australia also welcomed Chainalysis, one of the leading blockchain analytics firms, to establish a new office in Canberra after partnering up with the Commonwealth Bank to meet increased demand for its products.

Stevens further revealed that the ASX was looking into adding “pure” cryptocurrency ETFs to allow investment directly into the top cryptocurrencies:

At the end of the day if you look out to 2030, there will only be more technology companies, not less, and it will be a bigger section of the index because that’s just the way the world’s going. To not actually focus on that would have been a mistake.

Dominic Stevens, chief executive, ASX
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Bitcoin Crypto News Regulation

Crypto Twitter Slams SEC Amid $100 Million BlockFi Lending Settlement

BlockFi, a crypto services provider offering credit facilities to both institutions and retail investors, has for the past year been under persistent investigation by the US Securities and Exchange Commission (SEC) for its high-yield lending product.

In a dramatic turn, BlockFi has now agreed to settle the matter for US$100 million, and crypto Twitter is having none of it:

No Stranger to Controversy

Founded in 2017, New York-based BlockFi has often been in the news, albeit for the wrong reasons. Last year, it suddenly went down and then later it credited 700 BTC to the wrong customers’ accounts.

Much of the recent controversy has surrounded its lending product, as various states issued orders preventing it from registering new customers.

For much of its history, BlockFi was a significant beneficiary of the Grayscale Bitcoin Trust (GBTC) premium – an arbitrage trade that seemingly was able to fund its business. In short, it was able to offer clients attractive yields by taking their Bitcoin deposits, putting them into GBTC for the six-month lock-up period, and then selling them on the secondary market with a premium attached.

On the back of growing competitive products tracking the spot price of BTC, the GBTC premium has since flipped negative, resulting in BlockFi dramatically reducing yields from above 6 percent to as low as 0.1 percent in some cases:

BTC yields on BlockFi as of February 1. Source: BlockFi

Understandably, few are interested in risking their stack for such paltry returns:

SEC Targets Lending Product

During 2021, BlockFi was ordered by the states of New Jersey, Texas, Kentucky, Vermont and Alabama to immediately suspend onboarding residents to its lending products.

Drawing on the weight of these orders, the SEC’s position aligns with the views espoused by the states in question, namely that BlockFi’s lending product constitutes an unregistered security.

Although the company has yet to admit as much and come out with a formal statement, insiders say that of the US$100 million settlement, half is going to the SEC, while the balance will be shared by the state regulators.

Contents of the settlement remain unclear, but it is expected that the deal included provision that no additional clients would be onboarded, and that existing account holders would be grandfathered in.

The irony of restricting users from actually generating a yield on their assets was somehow lost on the SEC, which ostensibly exists to provide protection to investors:

Commentators were quick to point out that if the SEC genuinely cared about investor wellbeing, it would instead focus its energy on leveraged products, which are widespread and offered by a majority of major exchanges:

It’s difficult to argue with that sentiment, as few things can wipe out a retail investor’s wealth better than leverage.

This, together with its refusal to approve a spot Bitcoin ETF in the US, suggests that when it comes to the SEC, there are likely other factors at play beyond “investor protection”.

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Regulation Russia

Russia Shifts from Banning to Regulating Crypto Like Foreign Currencies

Russia has decided to shift from banning cryptocurrencies to recognising them as a form of currency, according to local newspaper Kommersant.

As per the local report, the Russian government and the country’s central bank have decided to integrate cryptocurrencies into the same regulatory framework as for foreign currencies, thus becoming part of Russia’s financial system.

This new law would seek to put digital assets under state oversight with “strict obligations for all participants in the professional market and an emphasis on protecting the rights of ordinary investors”.

The decision comes not long after Russia’s central bank decided to fully ban digital assets, claiming that their speculative nature posed a threat to the financial stability of Russian citizens. This, however, was met with great opposition from the country’s finance ministry.

Banks Will Take Control of Crypto Transactions

The new law proposes a framework that will treat crypto as an “analogue of currencies”, and it’s expected to come into force by February 18.

First of all, citizens will only be able to buy crypto through “licensed and locally registered financial entities”. This means, of course, that local banks will work as intermediaries between users and crypto companies. It also means that users won’t have control of their funds.

Cryptocurrency exchanges, decentralised marketplaces and other related platforms will be forced to open a bank account to register as legal entities – as long as they meet certain conditions, such as having sufficient capital and liquidity.

Criminal Charges For Not Declaring Crypto Transactions Over $8000

Second of all, the Russian government could collect over US$13 billion as tax payments from this crypto law. All crypto transactions over 600,000 rubles (approximately US$8,000) must be declared to the Federal Taxation Service (FNS), or criminal charges will result.

Third, banks working with crypto exchanges won’t use blockchain analytics tools from security companies such as Elliptic or Chainalysis. Instead, they’ll be using the “Transparent Blockchain”, a tracking tool developed by Russia’s financial watchdog (Rosfinmonitoring).

The Transparent Blockchain is capable of identifying owners of crypto wallets and collecting information from the darknet, thus detecting illegal activity with the use of digital assets.

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Cardano Crypto News Regulation Ripple Solana

XRP Overtakes ADA and SOL, Soaring 50% Amid Positive Developments in SEC Case 

XRP marched from 60 cents to 90 cents in just five days, reaching the #6 rank with a market capitalisation swelling to more than US$42.26 billion amid developments in the ongoing Ripple vs SEC case.

XRP Price Chart. Source: CoinGecko.com

Ripple Moves to #4

If you ignore stablecoins Tether and USD Coin, Ripple is now the world’s fourth-biggest cryptocurrency behind Bitcoin, Ethereum and Binance Coin.

For those who don’t know what all the beef is about, Ripple has been dragged into court after the US Securities and Exchange Commission (SEC) filed a suit in December 2020. Ripple stands accused of selling US$1.3 billion in XRP in unregistered offerings between 2013 and 2020.

The SEC alleges that the token is a security and therefore Ripple has broken the rules. It seems, however, that the SEC has broken quite a few rules of its own, having been accused of “deleting” material relevant to Ripple’s lawsuit.

The latest news in the case against Ripple has been bullish for the price of XRP as things look up for the defendants in the court of law.

Key Evidence Unsealed to Favour Ripple

As the case unfolds, sealed documents submitted by Team Ripple are set to be made public by February 17. The SEC argues that the documents show Ripple was well aware of the risk that XRP would be deemed a security under federal law. Ripple rebuts this profusely and says the documents show that its legal team had ultimately concluded its tokens were not securities.

Two memos were attached as sealed exhibits in the motion to dismiss the SEC case by Ripple founder and chairman Chris Larsen. Ripple has previously argued that documents sent to prospective investors in 2012 did not refer to XRP as investment contracts or securities. These documents are to be unsealed as per the ruling by US District Judge Analisa Torres.

According to Ripple general counsel Stuart Alderoty, the documents “will show that in 2012 Ripple received a legal analysis that XRP was not an investment contract”.

This will not be the last time we will see news around the case cause speculation and buying pressure, thus pumping XRPs price. Crypto News Australia reported last year how XRP surged over 100 percent in a month following its last court victory against the SEC.

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Crypto News Cryptocurrencies Regulation Russia

12% of Crypto Market is Owned by Russian Citizens, Says Russian Government

Russian government authorities have revealed that the federation owns more than 16.5 trillion rubles, or US$214 billion worth of cryptocurrencies – controlling roughly 12 percent of the crypto market. 

Russians Own More Crypto Than Expected

According to sources within the Kremlin, the report was an estimate calculated by analysing IP addresses of some of the biggest crypto exchanges in the country. Russian authorities are using this estimate to form a better overview of the industry and implement proper regulations.

It’s unclear if this estimate is lower than the actual number of crypto users in the Russian federation, since a lot of them use anonymous tools to transact cryptocurrencies:

It is, however, a huge leap from December 2021 when it was reported that Russians held only 5 trillion rubles in crypto, or US$67 billion at that time.

Russia Finally Comes Out in Favour of Proper Crypto Regulation

The regulatory weather in Russia has been a quite confusing environment for crypto users. Two weeks ago, the Russian central bank attempted to ban crypto, only to be countered by the finance ministry with a crypto regulatory framework:

But after a bunch of back and forths between authorities, it seems Russia is finally preparing the roadmap for establishing proper crypto regulation, starting first drafts this month. Dmitry Chernyshenko, deputy chairman of the Russian Federation, last week signed a crypto regulation roadmap valid until the end of the year, as per a report from RBC.

Additionally, finance minister Anton Siluanov suggested that banks and other licensed financial entities should be allowed to provide crypto services, reiterating the ministry’s stance on regulating crypto rather than banning it.

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CBDCs Crypto News Cryptocurrency Tax India Regulation

India Set to Tax Crypto Income at 30% and Plans to Launch ‘Digital Rupee’ CBDC

Following the country’s annual budget speech, India’s finance minister Nirmala Sitharaman announced a 30 percent taxation rate on any income stemming from the transfer of virtual digital assets. She added that the country is likely to issue the digital rupee in the 2022-2023 financial year.

News Welcomed by Indian Crypto Investors

In a country where crypto investment has shot up by 19,000 percent in a year, and the younger cohort is opting to invest their assets in crypto rather than traditional options such as gold, the news has been welcomed.  

“There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” the minister said in the budget speech delivered on February 1.

Clarity regarding taxation suggests that crypto would not be banned as some had feared. Apart from the high tax rate, India will not provide any deductions on crypto income except the cost of acquisition. Further, losses incurred by transferring crypto cannot be offset against any other income, unlike losses from stocks.

According to the speech, tax deductions at source will also be imposed on payments for the transfer of crypto assets at a rate of 1 percent for transactions over a certain threshold. Any gifts of crypto assets will also be taxed in the hands of the recipient.

Although the words “crypto” and “cryptocurrency” were not used during the speech, the minister used the phrase “virtual digital asset”, which the industry takes as a term for cryptocurrencies and NFTs.

India to Launch ‘Digital Rupee’ CBDC in Fiscal Year 2023

The budget speech also gave a specific timeline for the launch of India’s central bank digital currency (CBDC). Minister Sitharaman has said that a “digital rupee using blockchain and other technologies” is set to be issued by the Reserve Bank of India starting in the fiscal year 2022-2023. According to the minister, “digital currency will lead to a more efficient and cheaper currency management system”.

Although the clarity given regarding taxation is a step in the right direction, the country still awaits regulatory clarity. The government was scheduled to introduce a crypto bill for discussion in parliament but has not done so yet. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, when presented, will provide specific details on whether India is going to embrace cryptos officially or not.

Will Taxation Deter Retail Investors?

The news from India is significant, seeing as it will affect over one billion people and is likely to set a trend. But the question remains whether imposing a 30 percent tax on virtual digital assets will deter retail investors. While some have argued that 30 percent is too much, others disagree, saying it is in line with taxation on personal income.

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Crypto Exchange Crypto News Regulation Security

Crypto Advertising Crackdowns Kicking in Around the World Again

As quickly as cryptocurrency is increasing its pace of adoption, so too is regulation pertaining to its promotion. Spain, Singapore, and the UK are the latest jurisdictions to have made changes to their advertising regulations.

Spain Releases New Rules for Crypto Influencer Posts

Spanish regulators are advocating to control the way crypto is marketed, focusing specifically on restrictions on influencers’ promotions. The Comisión Nacional del Mercado de Valores (CNMV), the governmental organisation responsible for the financial regulation of Spanish securities markets, issued a release on January 17 outlining its new rules.

The CNMV now stipulates that promoting crypto assets must include the following disclaimer: “Investments in crypto assets are not regulated. They may not be appropriate for retail investors and the full amount invested may be lost.”

Influencers or outlets with more than 100,000 followers must also now notify the CNMV on the content of promotions related to crypto with a minimum of 10 days’ notice. Spain’s new rules come into effect next month, and non-compliance may result in fines.

Crypto.com billboard in Singapore’s Orchard Plaza. Source: bloomberg.com

Although this is the first strict regulation for the EU, several other countries have also moved to control how crypto firms and agencies advertise their services. The UK recently banned two ads from Crypto.com because they were deemed to be misleading by the UK’s advertising regulator, the Advertising Standards Authority (ASA). The ASA determined that the Singapore-based exchange’s ads took advantage of consumers’ “inexperience” and failed to make it clear that crypto investments aren’t regulated in the UK.

Singapore Curbs Crypto Marketing

Singapore has also cracked down on crypto marketing to curtail a recent surge in retail trading of digital assets. According to guidelines issued by the Monetary Authority of Singapore, “the public should not be encouraged to engage in the trading of [digital payment tokens (DPT)].” The regulatory body advised service providers to only market their goods on their own websites, social media and apps, and that they should take care not to trivialise the risk of investing digital assets.

Singapore has also made the decision to ban all ATMs that deal in digital currencies, citing that their convenience and accessibility may mislead the public to trade crypto assets on impulse.

Common Themes? 

The recent cryptocurrency ad crackdown has mainly been fuelled by companies and influencers taking advantage of unwitting and inexperienced crypto customers. Regulation thus far had served to protect consumers against the risks still associated with the unregulated market.

Last year, Google reviewed its policy on advertising after lifting its ban in August, adding specific requirements to which advertisers had to adhere.

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Australia Crypto News Regulation Scams Superannuation

ASIC Cautions Investors Against Switching to an SMSF to Invest in Crypto

The Australian Securities and Investment Commission (ASIC) has issued a warning to consumers to not rely on people advising to invest in crypto via an SMSF.

SMSFs Are Crypto Scam Targets

There has been an increase in marketing that recommends Australians switch from retail and industry superannuation funds to self-managed super funds (SMSFs) to invest in cryptocurrencies. ASIC cautions investors to be wary of relying on ads and people inciting them to invest in crypto via their SMSF.

Do not rely on social media ads or online contact from someone promoting an ‘investment opportunity’. Be wary of people cold calling, text messaging, or emailing you with a recommendation to transfer your super to an SMSF, or invest in crypto assets via your SMSF.

ASIC

SMSF Association CEO John Maroney told The Australian newspaper that there had been an increase in crypto marketing in recent years, though not specifically relating to SMSFs. Maroney added that according to data from the ATO (Australian Taxation Office), in 2019 crypto represented less than 0.1 percent of SMSF assets. This number had grown significantly since then, Maroney said, consistent with the number of scammers trying to deceive investors through crypto-related ads and marketing.

Before investing in crypto assets, SMSF trustees and members need to consider the level of risk of the investment and ensure [it] is consistent with the fund’s investment strategy and the SMSF’s trust deed.

John Maroney, CEO, SMSF Association

Beware of Unlicensed Crypto Companies and ‘Finfluencers’

The ASIC warning came after it shut down A One Multi Services, an unlicensed financial company in Queensland, in November for buying A$2.4 million worth of cryptocurrency with members’ funds. In August, the regulator had warned investors about investing in unlicensed crypto companies as the number of crypto-related scams had significantly increased in Australia.

Finfluencers have also become a problem for Australians. Finfluencers are celebrities on social media channels such as YouTube, Instagram and TikTok who claim they can help their followers achieve “financial freedom” but without providing any kind of financial advice. This is specially worrisome for young people and newcomers keen to invest in crypto since they tend to be the most vulnerable.