CryptoLaw Newsletter #52
OECD looks at DeFi x TradFi, but its tax proposal gets pushback. ECB sees crypto risk to financial stability. G7 wants stricter stablecoin rules. Portugal not (yet) imposing crypto tax. NFT IP rights.
Hello everyone,
This week was full of crypto statements and reports from public bodies, including the ECB, OECD, and G7.
TLDR:
Should we have stricter tax reporting rules for NFT and DeFi? OECD proposal gets industry pushback.
ECB sees a lot of (financial stability) risks in crypto. Its president thinks crypto is “worth nothing”.
OECD on DeFi x traditional finance: could have benefits in terms of competition, transaction costs.
G7 wants stricter standards on stablecoins.
What happens to IP rights when a scammer gets hold of your NFT?
Top-5 this week:
Should the taxman know about your NFTs and DeFi assets? Earlier this week, the crypto industry pushed back against tax rules proposed by the OECD to ensure crypto holders cannot hide their assets from tax authorities. Those proposed rules are stricter than existing tax reporting rules for traditional assets. Critics argue this goes against the principle of „technology neutrality“. Others, however, argue the stricter rules are needed because crypto raises higher tax evasion risks. Also, existing rules require banks to distinguish between payment & investment assets, and other assets held by their customers. This is easy enough to do for fiat currencies and traditional stocks, it’s much harder to classify crypto assets. Therefore, proponents argue, banks should report all crypto holdings to the tax man, to cast the net sufficiently wide.
The ECB’s Financial Stability Review (May 2022) also weighed in on crypto-assets. It starts with a list of risks (such as lack of intrinsic economic value, speculative and illicit use), but acknowledges that investor demand for cryptoassets is increasing: “56% of European institutional investors surveyed … indicated that they have some level of exposure to digital assets – up from 45% in 2020”. On retail investors, an ECB survey in six large euro area countries found “based on experimental questions, that as many as 10% of households may own crypto-assets”. “On average, young adult males and highly educated respondents were more likely to invest in crypto-assets,“ it found, which is in line with previous surveys. The ECB also saw a “slight increase in crypto-asset leverage in recent years” and warned that “crypto lending may fall under existing financial regulation”. ECB president Christine Lagarde added crypto is “worth nothing” because it is “based on nothing”.
The G7 chimed in and called for more crypto regulation, specifically for stablecoins. It wants the FSB and other international standard-setters to work on regulation “In light of the recent turmoil in the crypto-asset market, the G7 urges the FSB, in close coordination with international standard-setters, to advance the swift development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers, with a view to holding crypto-assets, including stablecoins, to the same standards as the rest of the financial system. In particular, the G7 calls for rapid implementation of the Financial Action Task Force (FATF) ‘travel rule’ and stronger disclosure and regulatory reporting, for instance, as regards reserve assets backing stablecoins.”
When DeFi meets TradFi. The OECD delved into the links between DeFi and traditional finance, looking into institutional whitelisted lending pools, for example. Although it emphasized the risks of such linkages, the OECD also acknowledged that it can have positive effects such as “stronger competition accompanied by lower transaction costs to the benefit of end users.” The BIS also looked at DeFi, with a revamped paper on how to embed supervision into DeFi. Embedded supervision “should promote low-cost compliance and a level playing field for small and large firms,” it wrote.
What happens to IP rights when a scammer gets hold of your NFT? Seth Green lost his bored ape NFT after a phishing attack. Unfortunately for him, he had licensed out his NFT for a series. So what happens to the show? Who owns the IP rights to the NFT? The Law of Code dives in.
And also…
Portugal’s parliament says no to Bitcoin tax – for now.
Access to insurance would help boost institutional crypto adoption, according
to exchanges and custodians.
South Korean police asked crypto exchanges to seize funds linked to the Luna Guard Foundation in the aftermath of the Terra meltdown.
Crypto exchanges should be held liable for KYC violations and flouting investor protection rules, says Korean official in the wake of Terra collapse.
12% of US adults held crypto in 2021, according to a US Fed survey.
US SEC Commissioner Peirce says her country has dropped the ball on crypto regulation.
Perhaps the US Commerce Department can come to the rescue: it is requesting feedback on US competitiveness in the digital asset space to prepare a report on the topic, as required by President Biden’s Executive Order on digital assets from March this year. The Department is asking feedback on questions such as the impact of crypto regulation on US competitiveness and financial inclusion.
US Senators Lummis and Gillibrand plan to make their Crypto Oversight bill public in June. The bill wants to clarify the roles of the CFTC and SEC, among other things.
ARK and 21Shares re-apply for a spot Bitcoin ETF in the US.
The Central African Republic plans to launch its offical crypto hub, Sango.
Russia’s draft crypto mining law got rid of a miners‘ registry and a one-year tax amnesty.
Kazakhstan wants to grow its crypto activities and Binance will advise it on the regulatory framework to do so.
A bill on crypto mining and trading in Paraguay cleared another hurdle.
Thanks for reading!