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News/Regulation and Policy Updates in the Crypto World: A Week in Review

Regulation and Policy Updates in the Crypto World: A Week in Review

Jun 8 2023

last year3 minutes read

Global Leaders Clash Over Stablecoin Regulation, Australian Bank Implements Enhanced Customer Protection

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Written by Van

In the ever-evolving world of cryptocurrencies, regulatory frameworks and policies play a crucial role in shaping the industry. This week witnessed significant developments, with global leaders grappling to establish universal rules and standards for the crypto sector. At the forefront of the debate was the regulation of stablecoins, a type of cryptocurrency designed to maintain a stable value.


Stablecoin Regulation Is a Sticking Point Between the G-7 and G-20

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The G-7 and G-20, consisting of advanced and emerging economies, respectively, found themselves at odds over stablecoin regulation. While advanced economies in the G-7 leaned toward allowing and regulating stablecoins, emerging economies in the G-20 demanded stricter restrictions or outright prohibitions. This disagreement could potentially hinder the establishment of global norms for stablecoins.

Both groups looked to influential global standard-setters like the International Monetary Fund (IMF), Financial Stability Board (FSB), and Financial Action Task Force (FATF) for guidance. The G-7 aligned with the FSB's recommendations, while the G-20 turned to a synthesis paper by the IMF and FSB. The G-7 expressed support for tighter norms in regulating crypto assets and stablecoins.

As the G-20 president, India brought in the IMF to lead consultations. Emerging economies expressed concerns about stablecoins' impact on monetary policy and tax collection. Despite the differences, the international community aims to reach an agreement on stablecoin regulations. The FSB is expected to release its recommendations in July, and the IMF is considering the macro-financial implications involved. It is worth noting that certain emerging economies may even consider disallowing stablecoins altogether.


Australia's Commonwealth Bank Implements Enhanced Customer Protection

In Australia, the Commonwealth Bank (CBA), the country's top bank by assets, took steps to enhance customer protection in relation to crypto exchanges. Beginning this week, CBA will either reject or temporarily withhold specific payments made to crypto trading platforms. Additionally, a monthly limit of $10,000 AUD ($6,664) will be imposed on customer payments intended for purchasing cryptocurrencies from exchanges.

These measures aim to curb scams and prevent losses suffered by customers due to fraudulent activities in the crypto space. CBA also plans to share its NameCheck anti-scam technology with government organizations and other financial companies to collectively combat scams and fraud. Westpac, another Australian bank, has initiated a trial of customer safeguards for certain cryptocurrency payments to minimize losses from scams. Binance Australia has suspended specific Australian dollar deposits.

Australia is actively working on regulating cryptocurrencies. However, establishing comprehensive laws that protect retail customers may take more than a year. It's worth mentioning that CBA had a trial program allowing users to buy cryptocurrencies within its banking app, but it was discontinued last year.


UK FCA Introduces Stricter Rules for Crypto Ads, Bans Referral Bonuses

The Financial Conduct Authority (FCA) in the United Kingdom announced plans to enforce stricter regulations for crypto services starting from October 8. These regulations include a "cooling-off period" for first-time crypto investors and a ban on "refer a friend" bonuses. The FCA aims to enhance investor awareness of risks and provide individuals with sufficient time and risk warnings to make informed decisions.

Crypto companies will be required to verify investors' knowledge and experience, provide transparent risk warnings, and ensure fair and clear advertisements. These regulations align with government legislation aimed at subjecting crypto promotions to regulatory oversight. The FCA is also seeking feedback on additional guidelines for crypto advertisers until August 10.


US Lawmakers Call for Tax Regulations in the Crypto Industry

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Two members of the United States Congress have written a letter to the Treasury Secretary and IRS Commissioner, highlighting the need for tax regulations in the crypto industry. The congressmen expressed concerns about tax compliance practices, stating that the crypto industry has been a significant source of tax evasion, contributing to the tax gap.

Referencing an audit report from September 2020, they noted the IRS's struggle to identify crypto taxpayers due to inadequate reporting. While the Infrastructure Investment and Jobs Act signed into law in November 2021 required taxpayers to report crypto transactions, the proposed regulations are yet to be released.

The congressmen called for the prompt release of the proposed regulations to close the tax gap and ensure full tax compliance within the crypto industry. Although the Biden administration previously proposed a 30% tax on cryptocurrency miners, this provision did not make it into the recent legislation addressing the U.S. debt ceiling. However, some believe the tax on crypto mining may still be attempted through an omnibus bill in the future.


Surge in SEC's Crypto Actions After FTX Collapse

Following the bankruptcy of the FTX cryptocurrency exchange, the U.S. Securities and Exchange Commission (SEC) significantly ramped up its cryptocurrency-related enforcement actions. In the six months prior to FTX's collapse, the SEC took approximately six enforcement actions. However, in the six months after FTX's bankruptcy, the SEC initiated at least 17 enforcement actions—an estimated increase of 183%.

It's important to note that this analysis excludes recent lawsuits filed by the SEC against major platforms like Binance and Coinbase. Observers speculate that the increased enforcement actions, including the recent ones, are the SEC's attempt to redeem itself for its failure to regulate FTX effectively.

US Representative French Hill criticized SEC Chair Gary Gensler, accusing him of diverting attention to unrelated issues instead of properly overseeing FTX. Markus Thielen, head of research and strategy at Matrixport and author of "Crypto Titans," believes that those who missed the warning signs at FTX are now feeling a sense of embarrassment. Ripple CEO Brad Garlinghouse claimed that the SEC is using lawsuits to deflect attention from its mishandling of the FTX situation.


The Philippines Delays Crypto Framework Implementation

The Philippines' financial regulator has decided against rushing the implementation of a legal framework for the crypto industry. Initially planned for late 2022, the framework's introduction was delayed due to market failures that occurred last year. The regulator aims to thoroughly study the reasons behind the collapse of the FTX exchange and protect investors before introducing the framework.

The chairman of the Philippines Securities and Exchange Commission (SEC) stated that the framework might still be issued by the end of 2023. To aid in the development of guidelines for digital assets, the SEC partnered with the University of the Philippines Law Center (UPLC). Both the country's central bank and the SEC have been urging citizens to avoid engaging with unregistered or foreign crypto exchanges. Gemini Derivatives was identified as an unregistered security product under national law.

Despite regulatory challenges, the Philippines remains an attractive destination for crypto, with over 11.6 million Filipinos owning digital assets, placing the country 10th worldwide in terms of crypto adoption.


Europe's MiCA Law: A Landmark Development in Crypto Regulation

The European Union's Markets in Crypto Assets law (MiCA) has been published in the Official Journal of the European Union. This comprehensive legislation aims to establish a harmonized regulatory framework for cryptocurrencies within the EU, bringing clarity and investor protection to the sector.

One of the key provisions of MiCA is the requirement for crypto wallet providers to identify their customers during fund transfers. This measure aims to combat money laundering and enhance transparency in crypto transactions. By implementing robust customer identification procedures, wallet providers will contribute to the overall integrity of the financial system.

Under MiCA, crypto companies, including exchanges and wallet providers, will have the opportunity to obtain a license to operate across the European Union. This licensing scheme will enable them to offer their services to customers throughout the EU, fostering innovation while ensuring compliance with regulatory standards.

The law also introduces new governance and financial requirements specifically targeted at stablecoin issuers. These requirements seek to mitigate potential risks associated with stablecoins, such as systemic risk, investor protection, and monetary policy concerns. By imposing stringent rules on stablecoin issuers, MiCA aims to enhance market stability and build trust in these types of cryptocurrencies.

MiCA is set to enter into force in 20 days, with its provisions applying on December 30, 2024. However, certain provisions will take effect earlier, starting from June 30, 2024. It's worth noting that while the political outlines of the law were agreed upon in June of the previous year, the process of translating the final text into all EU languages caused delays in reaching a formal agreement.

The implementation of MiCA marks a significant milestone in the regulation of cryptocurrencies within the European Union. By establishing a comprehensive legal framework, the EU aims to provide clarity, investor protection, and foster innovation in the fast-growing crypto industry. Market participants will now have clearer guidelines and requirements to navigate, contributing to the long-term sustainability and credibility of the crypto sector in Europe.


FAQs about Crypto Regulation and Policy 

Q: What is the importance of crypto regulation and policy?

A: Crypto regulation and policy provide a framework for the industry, ensuring investor protection, market integrity, and financial stability. They establish guidelines for the operation of crypto exchanges, initial coin offerings (ICOs), and other crypto-related activities.

Q: How do regulations affect the adoption and growth of cryptocurrencies?

A: Regulations can either foster or hinder the adoption and growth of cryptocurrencies. Clear and balanced regulations can boost investor confidence, attract institutional participation, and facilitate mainstream adoption. However, overly strict or uncertain regulations may stifle innovation, limit market access, and create barriers for crypto businesses.

Q: What are some common regulatory challenges faced by the crypto industry?

A: One major challenge is the lack of harmonized global regulations, resulting in fragmented approaches across jurisdictions. Other challenges include clarifying the legal status of cryptocurrencies, addressing concerns of money laundering and terrorist financing, and balancing innovation with investor protection.

Q: How can individuals and businesses stay compliant with crypto regulations?

A: To stay compliant with crypto regulations, individuals and businesses should:

  • Stay informed: Keep up to date with regulatory developments and guidelines in your jurisdiction.
  • Conduct due diligence: Verify the legitimacy of crypto projects, exchanges, and service providers before engaging with them.
  • Follow KYC/AML procedures: Comply with know-your-customer (KYC) and anti-money laundering (AML) requirements when using crypto services.
  • Seek legal advice: Consult with legal professionals who specialize in crypto regulations to ensure compliance.

Q: What role do regulatory bodies play in shaping the crypto landscape?

A: Regulatory bodies, such as the SEC, FCA, and others, play a crucial role in setting and enforcing rules for the crypto industry. They oversee activities, monitor compliance, and take enforcement actions against fraudulent or non-compliant entities. Additionally, regulatory bodies collaborate with other stakeholders to develop industry standards and best practices.


Conclusion: Navigating the Ever-Changing Crypto Regulatory Landscape

As the crypto industry continues to gain momentum, regulatory frameworks and policies are being established to bring order and protection to this dynamic space. Global leaders are engaged in discussions and debates, with differing perspectives on stablecoin regulation highlighting the challenges of reaching a consensus. Meanwhile, individual countries like Australia and the UK are taking proactive steps to enhance customer protection and mitigate risks associated with cryptocurrencies. 

The SEC's increased enforcement actions and the Philippines' cautious approach demonstrate the diverse approaches taken by regulatory bodies worldwide. As the crypto landscape evolves, navigating the regulatory landscape remains crucial for all stakeholders involved.

This article has been refined and enhanced by ChatGPT.

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