CryptoLaw Newsletter #43

Russia U-turn on crypto? EU MiCA close to fast-track, India nears crypto tax vote, OECD releases crypto tax consultation, are DAOs an existential threat to tax base?

Hello everyone,

A slightly different format, but the same quality content!

TL/DR

• EU's crypto regulation seems to be heading for the fast lane

• Crypto-ads beware: the UK advertisement regulator is watching you

• Russia’s U-turn on crypto?

• OECD starts consultations on crypto tax standards

• El Salvador's $1bn bitcoin bond postponed

• Disintermediation is bad, suggests IMF-Argentina letter of intent

• US Senator Elizabeth Warren steals the limelight on crypto for the wrong reasons and submits yet another crypto bill

• Singapore as a crypto-friendly hub? Maybe not.

• Are DAOs an existential threat to the tax base?

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Highlights

• MiCA fast-track? In the EU, we'll know very soon whether MiCA (Markets in Crypto Assets Regulation) can be fast-tracked through so-called trilogue negotiations. A minimum of 71 EU parliamentarians could object to fast-tracking MiCA and call for a full plenary vote, if they do so by midnight tonight. That would open another opportunity to re-introduce a controversial provision to discourage Proof-of-Work related crypto assets in the EU. Such proposal, viewed by some as a de facto EU bitcoin ban, was rejected in a subcommittee last week.

• Is Russia turning pro-crypto? Russia's Central Bank is moving away from its staunch opposition to crypto in general: Bank of Russia granted a license to Sberbank, the largest Russian retail bank, to issue and exchange digital assets. Bank of Russia had staunchly opposed calls by the Ministry of Finance to loosen the country's crypto rules but it appears to be caving in.

• The taxman cometh for your crypto. The OECD opened a public consultation on its Crypto-Asset Reporting Framework. The OECD wants greater tax transparency on crypto-assets, fearing crypto can be used to undermine existing tax transparency treaties. The consultation closes on 29 April.

• To tax ≠ to approve… or is it? India's proposed crypto tax rules are scheduled for a vote on Thursday. If approved, India will implement a 30% crypto capital gains tax as well as a 1% tax deducted at source for crypto transactions. The government said taxing crypto-assets does not imply a tacit approval.

• To be bipartisan or not? The debate on crypto regulation in the US has been highly partisan so far. However, a few signs hint at a potential thaw. President Biden's recent Executive Order on crypto was much less crypto-hostile than expected. Then there was the bipartisan letter from 8 members of Congress to SEC Chair Gensler, questioning the SEC's information gathering practices on the crypto industry. Now Republican Sen. Lummis is drafting a bill that would clarify capital gains relating to crypto mining, staking, and spending, as well as exclude miners and stakers from the definition of 'brokers' subject to disclosure obligations to the IRS. The bill reportedly will have Democrat co-signers. The bipartisan efforts are unlikely to convince crypto-sceptic Sen. Elizabeth Warren, whose questioning of a Chainalysis witness testifying in a Congressional hearing went viral – but not for the right reasons. Warren, a Democrat, repeatedly interrupted the witness when he wasn't given the answers she was expecting. Warren also introduced a bill that would allow the President to sanction non-US crypto companies that help sanctioned Russian entities to evade sanctions.

• Crypto ad crackdown continues. The UK's advertisement regulator sent enforcement notifications to 50 companies on their crypto ads. The list includes big crypto names like Coinbase, Crypto.com and eToro. The companies have until 2 May to make their crypto ads compliant. Non-compliant ads will be forward to the Financial Conduct Authority, which is looking to boost its crypto-assets team significantly.

• Is Singapore (still) an attractive crypto hub? Alex Svanevik tweeted that Singapore is “not as crypto-friendly as I thought when I moved here a year ago”. One reason: the inclusion of Singapore-based VC firm Defiant Capital on the Investor Alert List of the Monetary Authority of Singapore without a clear reason. Inclusion on the list doesn't imply wrong-doing: it simply warns investors that an entity is not regulated. Crypto twitter responded to the tweet by recommending Dubai, Malaysia or Portugal as alternative crypto hubs, although adding that Portugal's appeal may change once the EU MiCA Regulation is adopted.

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And also...

• Thai commercial banks will be allowed to invest up to 3% of their capital in regulated digital asset businesses under new proposed rules. However, crypto-payments will be banned in the country from 1 April.

• US and UK regulators are calling for greater coordination to oversee DeFi.

• The US SEC delayed another two spot bitcoin ETF applications.

• Crypto assets not currently regulated in the US most likely will be in the future, said US Federal Reserve Chair Powell.

• Argentina signed a multi-billion deal with the IMF, with a remarkable crypto provision in the letter of intent: “To further safeguard financial stability, we are taking important steps to discourage the use of cryptocurrencies with a view to preventing money laundering, informality and disintermediation”. What's remarkable about this provision is that it discourages 'disintermediation' through crypto entirely and puts it on the same level as money laundering.

• El Salvador's $1 billion bitcoin bond has been postponed, citing market conditions in the wake of the war in Ukraine.

• The European Supervisory Authorities issued another warning on the risks of crypto for retail consumers.

• Euroclear invested in Fnality in an attempt to boost blockchain-based settlement of digital securities against digital cash.

• An Australian senator is proposing a sweeping crypto asset law. The Digital Services bill addresses crypto tax issues and also proposes to regulate DAOs (decentralized autonomous organizations), distinguishing between wholesale and retail DAOs, imposing 'replaceable' rules to 'standardize' DAO governance and giving limited liability to DAO members. “DAOs are an existential threat to the tax base,” the senator added.

• Abu Dhabi's free zone ADGM is consulting on proposed rules for NFT trading for companies licensed in the zone.

• Coinbase faces a $5 million class action lawsuit by 3 users who claim the crypto-exchange listed coins that are securities and that should have been registered with the US SEC.

• The Qatar Central Bank is considering a CBDC, as well as issuing digital bank licenses.

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Markets

• Lots of talk about Larva Labs selling the intellectual property over the high-profile CryptoPunks NFTs to Yuga Labs, the company behind the Bored Ape Yacht Club. Soon after, Yuga announced a $450m investment led by a16z at a $4bn valuation.

• Former a16z partner Katie Haun raised $1.5 billion for a web3 fund, in “the largest debut fund by a female VC”.

• Goldman Sachs became the first big US bank to make an over-the-counter Bitcoin trade.

• The Cambridge Centre for Alternative Finance launched a 2-year Cambridge Digital Assets Programme with 16 initial partners (including the BIS, IMF, Goldman Sachs, Visa and EY).

Thanks for reading!