CryptoLaw Newsletter 36

Tighter crypto rules looming in US; crypto tax in Thailand, India and Colombia; South Africa warning against FTX; wash trading in NFTs; Hong Kong wants to limit ETPs to pro’s.

Hello everyone,

The battle over crypto regulation is heating up in the US. India wants a digital rupee by the end of the year and there are “mountains” of fraud in NFT and crypto space, according to a US IRS agent – here are the highlights of the week:

Digital assets

  • US Will the Treasury re-vive a controversial rule for selfhosted wallets? Former Treasury Secretary Mnuchin had initially proposed the rule in the final months of the Trump administration in 2020. The rule would have required, among other things, that banks or crypto exchanges verify the identity of their customer if the counterparty to a transaction exceeding a certain amount used an unhosted wallet. The proposal led to a flood of comments at the time. Now the rule is back on the Treasury’s agenda. Banks and money service businesses would be required to “submit reports, keep records and verify the identity of customers” transacting with unhosted wallets. The agency also plans to consider adding crypto to the Bank Secrecy Act in 2022. (Forbes) *** The COMPETES Act caused another mini-storm. The bill would allow the Treasury to block international crypto-transactions. (Coindesk) CoinCenter and Congressman Jim Himes joined forces to amend the language. (The Block) *** The SEC is looking into crypto lending products offered by Gemini and Celsius, according to reports. (Bloomberg and Cointelegraph) *** Among the expected regulatory tightening, the crypto industry is boosting its lobbying capacity: Sheila Warren is leaving the World Economic Forum to become the (first) CEO of the Crypto Council for Innovation. (Bloomberg)

  • Thailand – Plans to levy a 15% crypto withholding tax were abandoned after pushback against the plans. Income earned on crypto trading or mining can be reported as capital gains for income tax, according to officials. (Coindesk)

  • India – More crypto tax news: India wants to impose a 30% tax on income from digital assets, putting income from i.a. crypto trading, NFT sales and even crypto gifts into the highest tax bracket. The country also plans to launch a digital rupee by the end of the year, said Finance Minister Sitharaman. (BBC) The Finance Secretary warned the public that Bitcoin, Ether and NFTs “will never become legal tender”. (Cointelegraph)

  • Hong Kong – Regulators want to limit access to crypto-linked products like exchange-traded funds to professional investors. The Hong Kong Monetary Authority and the Securities and Futures Commission said in a circular that crypto spot markets are “largely unregulated” and “more likely to present investor protection issues, ranging from a lack of pricing transparency to potential market manipulation.” (Coindesk)

  • Russia – Last week, President Putin asked the Bank of Russia and the Finance Ministry to find a compromise on their opposing positions on potential crypto asset regulation. This week, a cross-agency group agreed on principles for future crypto regulation. The Bank of Russia, which has repeatedly called for a crypto ban, was the only member of the group to object. The government reportedly wants to introduce anti-money laundering rules for crypto platforms, bring clarity on their legal status and set up a supervisory body, by the end of the year. (Coindesk)

  • Colombia is cracking down on crypto tax evasion. Although financial institutions are restricted from crypto-activities, retail crypto use is thriving. Now DIAN, the tax authority, wants to make sure crypto users pay their taxes. (Cointelegraph)

  • South Africa‘s financial regulators is warning crypto traders on using FTX. (Bloomberg)

  • Global The crypto industry appears willing to adopt the so-called Travel Rule of the Financial Action Task Force (FATF), according to an industry survey. Crypto compliance company Notabene found 70% of respondents either already comply with the travel rule or plan to complete their compliance by mid-2022.


  • US – SEC plans to supervise trading platforms for government securities may threaten DeFi platforms, according to „CryptoMum“ Commissioner Peirce. The 654-page plan does not mention crypto and DeFi, but Peirce warned the plan’s “very expansive wording”, together with “the chair’s apparent interest in regulating all things crypto”, would allow regulators to target crypto platforms, including DeFi protocols. (Bloomberg)

  • Academic – “From Centralized to Decentralized Finance: The Issue of ‘Fake DeFi’”, by Dirk Zetsche and Linn Anker-Sorensen. (Oxford Business Law Blog)


  • US – The Federal Reserve published a discussion paper on stablecoins. Stablecoins: Growth Potential and Impact on Banking looked at various stablecoin scenarios: “two-tiered banking system can both support stablecoin issuance and maintain traditional forms of credit creation. In contrast, a narrow bank approach for digital currencies can lead to disinter-
    mediation of traditional banking, but may provide the most stable peg to fiat


  • The NFT sector has seen significant wash trading and money laundering, according to blockchain analytics company Chainalysis. 110 of the identified repeat-washtraders collectively made nearly $8.9 million in profit from this activity.  (Decrypt)

  • US – Fraud is rampant in the NFT and crypto space, said Ryan Korner of the Internal Revenue Service. Korner sees crpyto as „the future“ but also warned we’re facing “mountains and mountains” of fraud in the industry. He pointed to market manipulation, pointing to the ability of high-profile investors to affect asset prices with a single Tweet. (Cointelegraph)


  • India – India will launch a central bank digital currency the next fiscal year, the Finance Ministry announced. (Reuters and Bloomberg)

  • Japan – A former Bank of Japan official warned against using a digital yen. Hiromi Yamaoka now heads a private consortium of companies seeking to launch a private digital currency. (Cointelegraph)

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