CryptoLaw Newsletter #30

BIS on DeFi’s “decentralisation illusion”, Defiant on incorporating DAOs, Japan plans stablecoin rules, Korea postpones crypto tax, does Europe gain from US reluctance re exchange traded products?

Hello CryptoLawyers,

Another crypto hearing in the US tomorrow, with several high-profile crypto executives testifying. But first, this week’s highlights:

Digital assets

  • India – Proposed legislation that would ban the use of cryptocurrencies as a method of payment in India also seeks to make those who infringe the law subject to arrest without a warrant and being held without bail, reports Reuters.

  • India  – While many banks remain highly reluctant to do business with crypto companies, large private bank Kotak has decided to unboard crypto exchange Wazir-X as a customer. (Cointelegraph)

  • US – Several well-known crypto CEOs, including those of FTX, Bitfury, Coinbase Inc and Circle, will testify before Congress on 8 Dec. The hearing, entitled  Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States will be livestreamed. Crypto exchange FTX released 10 Key Principles for Market Regulation to US lawmakers just prior to the hearing.

  • US – The CIA is working on crypto projects, its director William Burns confirmed. The CIA director provided few details, but the statement came in response to a question on ransomware.  (Decrypt)

  • Korea – South Korean lawmakers decided to delay a new crypto tax. Analysts see the move as an attempt to appeal to younger voters ahead of a presidential election in Spring 2022. The 20% tax on crypto gains would have come into effect next month. The tax is now delayed until 2023. (Coindesk)

  • Thailand – Banks should avoid activity in digital asset trading, the Bank of Thailand said, citing concerns over volatility and financial stability. (Bloomberg)

  • UK – Binance wants to regain a foothold in the UK. After a staunch consumer warning by the Financial Conduct Authority that a Binance entity was “not permitted to undertake any regulated activity in the UK”, Binance now plans to apply for a license from the regulator. (Decrypt)

  • Europe  – US-based crypto companies are turning to Europe to offer crypto-related exchange-traded products. Wisdom Tree last week listed its crypto-backed ETP on Euronext in Paris and Amsterdam. Wisdom Tree had previously applied with the US SEC to offer a crypto ETF there, but the US regulator rejected the application on 1 December, citing the familiar concerns over “fraudulent and manipulative” practices. (Cointelegraph)

  • Ukraine – Is the new crypto law a blessing or a curse for the thriving crypto industry in the country? (Euronews)

  • Russia – State-owned bank Sper plans to launch a digital asset issuance platform, but is reportedly facing an uphill battle with regulators to get its plans approved. (Cointelegraph)

  • Japan  – The Financial Services Agency plans to propose legislation next year restricting stablecoin issuance to only bank and wire transfer companies. (Cointelegraph)

  • US – “The OCC is approaching crypto-related activities in the federal banking system very carefully with a high degree of caution and expects its supervised institutions to do the same,” the Office of the Comptroller wrote in the Semiannual Risk Perspective report.

     

    Twitter avatar for @lex_node_gabrielShapir0 @lex_node
    every lawyer I know who has had settlement discussions with the SEC over DAOs, DeFi etc. has heard from enforcement their client must register and then heard from trading & markets their client is not eligible to register maybe figure this out before cracking skulls?

    Perianne @PerianneDC

    The fireside chat btwn Clayton and Gensler is over. Ppl in the room are looking around and asking “register as what?” Lots of questions still remain about the future regulatory path for #crypto.

DeFi

  • Bank for International Settlements – There “is a ‘decentralisation illusion’ in DeFi, according to a new report on DeFi by three BIS officials. The “need for governance makes some level of centralisation inevitable and structural aspects of the system lead to a concentration of power”, the authors write. “[C]entralised governance is needed to take strategic and operational decisions. In addition, “some features in DeFi, notably the consensus mechanism, favour a concentration of power.” The report points to the risks of interconnectedness and high leverage in DeFi.  How should regulators start regulating DeFi? “Existing governance mechanisms in DeFi would provide natural reference points for authorities in addressing issues related to financial stability, investor protection and illicit activities.”


DAOs

  • Should DAOs register as legal entities? The Defiant’s Mark Lurie thinks so. “But every member of every DAO lives in the physical world, which means that despite its counterculture appeal, opting not to incorporate as a legal entity is a bad idea for DAOs.”


Blockchain

  • Gibraltar will integrate distributed ledger technology into its public services. (Coindesk)

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