Where to set up a crypto company? Nigerians turn to crypto. US SEC calls 9 tokens a security - is Coinbase next? Japan plans Web3 policy office. Pay revolt at decentralized exchange SushiSwap.

CryptoLaw's newsletter #59

Hello everyone,

TLDR:

• What’s the best place to set up a crypto company?

• Naira hits new lows as Nigerians turn to crypto

• US SEC labels 9 digital assets as securities in insider trading case. Coinbase may be its next target

• Can Celsius reclaim $840m loan recovered by Tether before official Celsius insolvency filing?

• South Korea postpones 20% crypto levy once more

• UK Treasury to receive broad powers to regulate stablecoins

• Digital asset amendments to US Uniform Commercial Code

• Proposed pay package for decentralized exchange ruffles feathers

  Blockworks @Blockworks_

  🇯🇵 Japan's Ministry of Economy launches a Web3 policy office to develop the country's Web3 business framework

Top-5:

1. What’s the best place to set up a crypto company? The Bahamas, according to a new ranking from Solidus Labs. Switzerland is ranked #4, Singapore #10 and the UAE #13. France and Germany share #16 and the UK is #21.Other rankings came to different conclusions. Which country is best for your crypto company very much depends on what you want: are you a DeFi start-up looking at KYC/AML rules for non-custodial services? Are you tokenizing real estate? Are you catering to institutions or crypto retail HODLers? There  are various tradeoffs to consider depending on your type of business and your preferences. No ranking can make those tradeoffs for you. But this ranking does give you a brief overview of the legal framework in each of the 42 jurisdictions featured, in case you need a cheat sheet.

2. UK Treasury to receive broad powers to regulate stablecoins. The Treasury will receive broad powers to regulate stablecoins under a Bill that would also allow it set up a sandbox for DLT-based financial market infrastructure (FMI). The Bill does not mention the word stablecoin, instead using the broader term ‘digital settlement asset’. The Treasury will be able to amend payment laws to regulate stablecoins and insolvency rules for stablecoin arrangements. It can even change the definition of ‘digital settlement asset’, potentially opening the door for the UK government to regulate other digital assets without having to pass by parliament again. The FMI sandbox is seen as a response to the EU’s DLT Pilot. However, the UK sandbox gives HM Treasury the sweeping power to make arrangements tested under the FMI sandbox permanent by amending, repealing or revoking other legislation.The Treasury, headed by Rishi Sunak who’s now one of the two remaining candidates to replace Prime Minister Borish Johnson, has been a driving force behind the government’s plans to become a crypto hub.

3. Nigerians turn to cryptocurrency markets as hedge against a weakening naira, driving the fiat currency to new lows.

4. Smart contracts and secured loans in crypto insolvency: who wins?  Tether recovered a US$840 million loan from Celsius before the latter filed for insolvency. Nothing special, you could think. However, the loan recovery happened in the so-called insolvency ‘twilight zone’ (less than 90 days prior to Celsius‘ formal insolvency filing). The transaction is now being scrutinized, in a test of how insolvency rules apply to crypto bankruptcies. “Can Celsius recover . . . loan liquidations completed in the 90 days before filing?”

5. The US SEC categorized 9 crypto assets as securities in a lawsuit on insider trading by a former Coinbase employee. Although those charge did not name Coinbase as a defendant, shares in the crypto exchange fell more than 20% in the aftermath of the SEC’s action. Cathie Wood’s ARC, previously the third largest shareholder in Coinbase, sold US$75 million worth of shares on Tuesday. Bloomberg reported that the SEC is now also investigating Coinbase’s role in listing the coins as unregistered securities.

And also…

• South Korean authorities raided the home of Terra co-founder Daniel Shin, as part of investigation into the collapse of the Terra ecosystem. The country postpones its crypto tax plans once more… to 2025. The plan itself remains unchanged: levy an additional 20% tax on crypto gains exceeding KRW 2.5 million ($1,900) in any one-year period.

• CZ, head of crypto exchange Binance, sued Bloomberg Businessweek in Hong Kong for defamation.

• Finding staff to oversee the crypto industry is a concern, the European Banking Authority’s chair acknowledged.

• Talking about building in-house crypto capacity: the US CFTC will establish a Tech Innovation Office to assist with its crypto supervision.  The new Office will replace LabCFTC. In the UK, the Financial Conduct Authority is still recruiting for its new Digital Assets & Payments Directorate.

• Yuga Labs, the company behind the Bored Ape Yacht Club NFTs and Apecoin, is threatened with a US class action law suit for selling securities that failed to deliver on promised returns, according to an announcement by law firm Scott+Scott.

• Another provisional crypto license in Dubai: crypto custodian Komainu, co-founded by Nomura, Ledger and CoinShares, is the latest crypto company to obtain a provisional approval to operate in Dubai, following prior approvals for crypto exchanges Binance, FTX, Crypto.com and OKX.

• A new bipartisan US bill wants to exempt crypto transactions under $50 from capital gains tax.  The IRS would be barrred from collecting taxes on crypto retail traders when the token appreciates less than $50 under the draft Virtual Currency Tax Fairness Act.

• The IMF briefly mentioned turmoil in crypto assets in its World Economic Outlook: although crypto assets “have experienced a dramatic sell-off that has led to large losses in crypto investment vehicles and caused the failure of algorithmic stablecoins and crypto hedge funds”,  spillovers to the broader financial system “have been limited so far”.

• Law firm Kirland & Ellis is the go-to firm for crypto bankruptcies, according to Bloomberg: the firm has been hired for the bankruptcy filings for both Celsius Network and Voyager Digital.

• Digital asset amendments to the US Uniform Commercial Code: law firm Cleary Gottlieb summarizes.

• Kraken reportedly is under investigation by the US Treasury for violating sanctions by allowing users in Iran to trade crypto assets on its platform.

• Decentralized exchange SushiSwap wants to hire a new ‘head chef. But its community isn’t happy with the proposed pay package of $800,000 USDC plus potentially millions worth of bonuses.

Around the Blockchain published its latest weekly newsletter, covering SEC's new lawsuits & power struggles; UK's Stablecoin Proposal; Lummis Bill Timeline; the Solana Lawsuit; and more. Awesome work, as always.

• Law of Code’s latest episode on DAO research

Thanks for reading!