Update: July 18th - 31st, 2022
Gurbir Grewal, Director of the Securities and Exchange Commission’s (SEC) Enforcement Division, testified before a House subcommittee...
Welcome back,
As would be expected, no major regulatory developments occurred in the past couple of weeks. Despite this, some interesting news did surface.
I hope you enjoy and see you soon.
-Katja
July 18th - 31st, 2022
Gurbir Grewal, Director of the Securities and Exchange Commission’s (SEC) Enforcement Division, testified before a House subcommittee.
This subcommittee, part of the House Financial Services Committee, has direct oversight of the SEC and questioned Grewal on two main areas: definitions and ESG (not discussed in this newsletter).
The crypto industry has continued to push for clarity around definitions (like for securities and dealers). Even the members of Congress with the most anti-crypto stances, like Representative Brad Sherman (D-CA), have also (finally) acknowledged this regulatory need. However, the SEC seems to only focus on regulation by enforcement, which ultimately deters domestic investment and innovation.
[In the meantime, the Law Commission for England seeks to add clarity to its crypto laws by making a distinct “data objects” category in personal property laws to aid ownership claims.]
Not only does the SEC want to continue with its current enforcement actions, but it also wants to increase its crackdown on the crypto industry. It asked the subcommittee for an 8% increase in its budget to add 120 more employees to the organization, with plans to make 20 of these employees focused on digital assets.
For background, the SEC already doubled its Crypto Assets and Cyber Unit in May 2022, and the battle between the SEC and CFTC for crypto regulatory authority continues. Besides this, the feasibility of the request is also questionable. The chair of the European Banking Authority recently voiced concerns over hiring and retaining staff knowledgeable on crypto, given the growing demand for such experts.
Speaking of the growing demand for crypto experts, the House of Representatives passed the Chips and Science Act that seeks to expand the executive branch’s exposure to the blockchain space. Although aimed at the semiconductor industry, this Act also incorporated Representative Darren Soto’s (D-FL) bill to establish a blockchain and cryptocurrency specialist for advising the President on matters related to the digital asset space.
[All this comes at the time of Senators accusing Google and Apple of defrauding investors with fake crypto apps as well as the crypto market crash.]
In other US news,
The Office of Government Ethics issued new guidance for US executive branch employees in reporting their NFTs (including fractional NFTs).
California repealed its ban on allowing crypto contributions for political campaigns.
The House Financial Services Committee conceded that the stablecoin regulation bill will not get released before the August recess.
The two Representatives leading this stablecoin effort, Maxine Waters (D-CA) and Patrick McHenry (R-NC), admitted to not being quite there yet for this piece of legislation. Waters issued a statement,
"Although the Ranking Member, Secretary Yellen and I have made considerable progress towards an agreement on the legislation, we are unfortunately not there yet, and will therefore continue our negotiations over the August recess. It’s critical that we continue moving the ball forward on this so we can have a regulatory framework that protects consumers, while allowing for responsible innovation."
While stablecoin efforts have stalled in the US, the UK Treasury unveiled its plan for stablecoin regulation as part of the Financial Services and Markets Bill. This bill does many things like repeal retained EU laws and regulate stablecoins (use them to widen England’s payment methods). As Cointelegraph explained,
“The bill extended the Banking Act of 2009 and Financial Services (Banking Reform) Act of 2013 to cover “digital settlement assets” (DSAs) and authorized the Treasury to regulate DSAs, payments made with DSAs, DSA service providers and DSA insolvency arrangements. Those regulations will be made in consultation with the Financial Conduct Authority (FCA), the Bank of England and other regulators as appropriate.”
[For more on regulation, see this article about the US and EU coming together to discuss stablecoins and MiCA at a joint forum.]
More news …
The Ministry of Economy, Trade, and Industry (METI) of Japan created a new Web3 Policy Office to bring together financial regulators and creative industries in strengthening the business environment for web3. [In addition to this, Japan’s lobbying groups continue to push for lower crypto tax rates to promote growth and retain talent in the industry.]
The Reserve Bank of India (RBI) revived its 2018 attempt to ban crypto for its “destabilizing effect” on the “fiscal stability of a country.” [This news follows India’s recent crypto tax laws that have suppressed domestic crypto activity. On the topic of crypto taxes, in the US, Senators Toomey and Sinema introduced a bill that would exempt small crypto transactions from capital gains taxes.]