CryptoLaw Newsletter #51
China crypto mining recovers, Nigeria crypto guidance, Portugal changes crypto tax, DAO M&A, US crypto sanctions evasion case, BIS finds limited bank crypto exposure.
Hello everyone,
TLDR:
China re-emerges as no.2 crypto mining hub despite ban
Sanctions rules apply to crypto, says US judge
Nigeria SEC issues crypto guidance
Analysing DAO x DAO M&A
Banks only have US$200 million crypto exposure
US$-backed stablecoins risk dollarizing Indian economy
Why are there no notable euro-backed stablecoins?
Portugal’s U-turn on crypto tax
Top-5 this week
China re-emerged as the No. 2 crypto mining hub, after the US, with 21% of global hashrate power. Crypto mining activity went underground after the government’s mining ban.
“Issue One: virtual currency is untraceable? WRONG … Issue Two: sanctions do not apply to virtual currency? WRONG,” wrote a US judge in a crypto sanctions evasion case. The US defendant had sent US$10 million worth of bitcoin to a sanctioned country. US sanctions apply to crypto transfers, the judge found.
How does M&A work for Decentralized Autonomous Organizations (DAOs)? Bankless Consulting evaluates the Rari x FEI merger (or was it an acquisition?), valuation, tax implications and the alternatives of forking or a leveraged buyout.
“[W]e still do not know if today's DeFi and crypto ecosystem will deliver net benefits to society or not. The much-cited mantra of the usefulness of the underlying distributed ledger technology now needs to be backed up by compelling real use cases that will benefit society as a whole,” said Pablo Hernández de Cos, Chair of the Basel Committee and Governor of the Bank of Spain. His remarks don’t close the door to DeFi entirely. Although he acknowledged issues with the existing financial architecture and called DeFi’s aims “noble”, he wondered out loud if known pain-points cannot be better addressed in the existing architecture.
Why are there no notable euro-backed stablecoins? Negative interests rates play a role, and so may the EU’s MiCA draft:
And also…
Banks‘ exposure to crypto assets is very limited: less than US$200 million in 2020, largely related to trading on behalf of clients and clearing of futures, according to a BIS Working Paper. A “handful of internationally active banks reported having any cryptocurrency exposures, with the average exposure” less than 0.02% of their risk-weighted assets.
Dollar-backed stablecoins can lead to a “dollarization” of the Indian economy, warned the Reserve Bank of India. "It will seriously undermine the RBI's capacity to determine monetary policy and regulate the monetary system of the country," an RBI official reportedly stated.
Digital assets are considered securities in Nigeria, according to new guidance published by the country’s Securities & Exchange Commission. The 54-page document requires crypto issuers to publish a white paper. Retail investors are subject to an investment cap of N200,000 per issuer and N2million in total in any 12 month period. The new rules are strict, but provide some clarity about the legality of crypto in the country.
Portugal is reversing course on crypto tax for investors: the country reportedly plans to impose capital gains tax on crypto trades and sales. The future tax treatment of staking and yield farming is still unclear.
South Korean lawmakers are considering a new crypto licensing regime, which would impose harsher rules and sanctions on crypto than those currently in the Capital Markets Act. The rules were proposed by the financial regulator, which called for more rules on insider trading, wash trading and other concerns also addressed in the EU’s MiCA draft rules. The report was commissioned before the meltdown of Terra, co-founded by South Korean Do Kwon, who was summoned for a parliamentary hearing. Kwon also faces a lawsuit from tokenholders affected by the Terra implosion.
44 central bankers are in El Salvador for a 3-day conference on financial inclusion and… bitcoin.
Norway is tapping an Ethereum Layer-2 to test its CBDC in a sandbox.
S&P Global is hiring analysts to staff a new DeFi unit to rate DeFi projects, for both TradFi and DeFi clients.
“It gets harder to tell the difference between DeFi and TradFi by the day” (The Defiant on Robinhood’s non-custodial crypto wallet announcement)
India’s securities regulator proposed a ban on celebrity endorsement for cryptoassets. The country’s advertisement council, ACSI, doesn’t have the power to do so, but has issued guidelines on crypto ads.
The US SEC is “out-personed” on crypto, says chair Gensler.
Crypto tax is also high on the agenda for the Australian Tax Office: crypto capital gains tax is one of its key focus areas for the 2022 tax year.
DeFi needs a pan-EU “innovative” legal framework, argued the executive director of Germany’s financial markets regulator BaFin.
Binance is seeking a license in Germany, after obtaining one in France. The crypto exchange is also looking to hire 30 more legal staff.
Crypto is not (yet) suitable as a payment or investment tool and retail investors should stay away from crypto derivatives, said an official of the Dutch financial markets regulator.
Seven large crypto companies launched Chainabuse, a scam-reporting tool.
Thanks for reading!