CryptoLaw #46

Meta to charge nearly 50% fee on metaverse creator sales – will regulators take notice? India crypto volumes plummet after new tax. China NFT crackdown? US Treasury Chair Yellen softens crypto stance.

Hello everyone,

TLDR:

• Crypto transaction volumes nosedived in India after a 30% gains tax entered into effect.

• High-interest crypto accounts are feeling the regulatory squeeze in the US.

• Meta wants to charge its metaverse creators almost 50% of sales.

• Joint statement on NFT risks by three associations in China: a sign of what’s to come?

• US Treasury Chair Yellen softened her stance on crypto in her first dedicated crypto speech – but only a little.

Top-5 this week:

1. How much more do you want? After all the regulatory investigations and parliamentary hearings about Big Tech and competition concerns, Facebook/Meta seems undeterred: Meta plans to charge almost 50% fees on sales made by metaverse creators on its platform. If the plan is to draw more regulatory scrutiny, make Apple look modest with its 30% cut on the App Store, or simply to anger creators, then this may seem like a good idea. Or perhaps Meta just needs the cash. Either way, it shows once more that we need to decide what kind of metaverse we want: more of the same or something actually decentralized?

2. Is China about to crack down on NFTs? Three industry associations issued a joint statement warning about the financial risks of NFTs. China‘s banking, securities and internet finance associations also barred their members from providing trading venues or financing for NFTs, Reuters wrote. In addition, NFTs cannot be priced or settled in crypto, the statement said, and NFT issuers need to use real-name identification.

3. New technology “has raised the possibility of reduced reliance on centralized intermediaries like banks and credit card companies”, said US Treasury Chair Janet Yellen in her first crypto speech. Although still cautious, the speech wasn’t as crypto-critical as Yellen’s earlier statements on the topic. “Responsible” tech innovation can benefit society, but vulnerable people often suffer the greatest harm when regulation fails to keep pace with innovation, she warned. Yellen listed a number of pain points with current financial markets that tech could address, although she still seems highly critical of stablecoins.

   Patrick Hansen @paddi_hansen

   US vs. EU in a nutshell: US treasury secretary Janet Yellen - “New technology has raised the possibility of reduced reliance on centralized intermediaries” ECB president Christine Lagarde - "Cryptocurrencies are highly speculative and suspicious"

   

   Alex Gladstein 🌋 ⚡ @gladstein

   1/ Secretary Yellen’s latest public remarks are nothing short of remarkable. Here, the top US govt official in charge of the financial system talks about Satoshi Nakamoto's innovation: “New technology has raised the possibility of reduced reliance on centralized intermediaries” https://t.co/rAG7txHTLl

4. Crypto transactions in India appeared to plummet after new tax rule. In the 10 days after India’s 30% tax on crypto profits entered into effect (on April 1), WazirX, one of the largest exchanges, saw transaction volumes plummet by 72%. Other exchanges also saw volumes nosedive. It’s unclear whether users moved transactions off-chain or simply trade less in the wake of the new crypto gains tax. A more controversial rule, a 1% tax deducated at source, will enter into effect in July. India’s lack of regulatory clarity continues to sow confusion. Two big crypto exchanges in India blocked users from depositing rupees to buy crypto on their platforms, which link to a state-backed payments system. The operator of that state-backed system had said a few days earlier that it was unaware of any crypto exchanges using its payment infrastructure. It looks like the crypto exchanges didn’t want to take a risk after that statement and decided to halt rupee deposits until further notice, to the frustration of users.

5. Crypto lending company Celsius is phasing out its high-interest crypto accounts to US non-accredited investors. Existing users (including retail users) will continue to have access to their high-interest accounts. New US customers can use Celsius‘ custody services, but won’t be eligible for the interest-bearing accounts if they’re not accredited. It’s common for financial market rules to distinguish between retail and professional investors. Although the intent is to protect smaller retail investors, this may offer little consolation to Celsius‘ new retail users who see well-off US investors earn double-digit interest on their crypto holdings while they earn… nothing.

Shout out to @jacobrobinsonjd who’s turning this newsletter into a podcast: check out Law of Code.

And also…

• Ethereum developer Virgil Griffith was sentenced to 63 months in prison for conspiring to help North Korea evade US sanctions, after his 2019 North Korean blockchain presentation.

• Russian persons can’t transfer more than €10,000 to EU wallets, after fresh EU sanctions.

• The US Senate Republicans released a policy paper on cryptoassets, a month after Pres. Biden’s Executive Order on the topic.

• The lack of interoperability between stablecoins risks creating walled gardens, warned US OCC’s Acting Chief Michael Hsu.

• The US FDIC wrote to the banks it supervises, expressing concern about crypto risks. The agency wants banks to notify it if they intend to engage in crypto activities.

• Only 5 crypto companies (including Revolut) remain on the UK FCA’s Temporary Registration Regime list. So far, 34 companies have been fully registered under money laundering rules, which the FCA oversees.  Several other companies have withdrawn their registration application.

• Bank of Japan won’t be issuing a CBDC with the aim of achieving negative interest rates, Bloomberg quoted a BoJ senior official.

• Cameroon, the DRC and the Republic of Congo are in talks with the TON Foundation to launch stablecoins. Separate from CBDCs, the stablecoins would target retail payment transactions, similar to mpesa mobile money, and potentially integrate with Telegram.

• Brazil’s Senate passed a crypto bill in the first reading, which is expected to be approved in the first half of this year. The bill would give the President authority to designate a federal authority to draft new rules for the crypto industry, among other things.

• Binance obtained an in-principle approval in Abu Dhabi.

• The BIS published a report on CBDCs and financial inclusion.

• In the ongoing Ripple case, a New York judge denied the US SEC’s motion to re-classify a 2018 speech by a former director as the agency’s policy (rather than the director’s personal views) in an attempt to make it privileged. In the speech, the director said bitcoin and ether were not securities.

• The US New York State Senate authorized the Department of Financial Services to collect supervisory costs from licensed virtual currency businesses it oversees. This is in line with the fees it charges the banking and insurance companies it monitors.

• An overview of (US) copyright considerations for NFTs.

Thanks for reading! Happy to hear any comments or suggestions: ascc2 [at] cam [dot] ac [uk]