Welcome back,
Despite my expectations last time I published a newsletter, there have been no major crypto regulatory developments over the past two weeks. However, some interesting news stories did come up across different geographies, and this newsletter will run through them.
I hope you enjoy and see you soon.
-Katja
October 10th - 23rd, 2022
US
Senator Hickenlooper (D-CO) issued a letter to the SEC calling on the organization to open public comments and develop a regulatory framework for crypto assets. This step by Sen. Hickenlooper made him one of the first Democrats to publicly criticize the slow approach to crypto by Gary Gensler, Chair of the SEC. [On the topic of Gary Gensler, in a recent speech, he endorsed the idea of Congress granting the CFTC more direct authority over certain tokens. This stands in opposition to his general attitude surrounding the ongoing battle between the SEC and CFTC for regulatory power.]
The United States Financial Accounting Standards Board (FASB) made the decision to require entities to measure crypto assets at “fair value,” allowing companies to update their balance sheets regularly. As Anthony Tuths, principal of KPMG's Alternative Investment Tax practice, said “When this guidance goes into effect (likely in 2023) it will greatly help smooth the way for broader mainstream adoption.”
United States Acting Comptroller of the Currency Michael Hsu identified three areas that need regulatory clarity in the near term: liquidity risk management of deposits from crypto-asset companies (including stablecoin issuers), finder activities (especially related to crypto trade facilitation), and crypto custody. He also echoed FSB’s concerns over the stability of stablecoins (mentioned later).
Europe
The UK government introduced The Electronic Trade Documents Bill that proposes using the blockchain to store documents (i.e. legally recognize electronic documentation) as part of the country’s “paperless” initiative to reduce admin costs and carbon emissions. The UK’s Financial Services and Markets Bill also received some amendments that would provide the Financial Conduct Authority and HM Treasury with more crypto oversight powers.
Following the Minister of Finance of Portugal’s earlier commitment to taxing crypto, the government recently released its 2023 budget draft, which proposed a 28% income tax on crypto owned for less than a year. This move will dethrone Portugal as the “crypto tax haven,” but response from the industry remains positive.
With the ongoing war in Ukraine continuing to put pressure on energy supplies in Europe, the European Commission issued a statement saying that member states must prepare to halt crypto mining “in case there is a need for load shedding in the electricity systems.” In the same announcement, the European Commission discussed introducing a rating system for cryptocurrencies according to their environmental impact and other measures to meet climate-related goals.
Asia
The Minister of Finance of India revealed India’s plan to develop standard operating procedures (SOPs) for cryptocurrencies during its G20 presidency. [For more on India’s ventures into the blockchain space, see The Reserve Bank of India’s recent publication on their digital rupee pilot.]
Japan plans to loosen its restrictions on crypto exchanges by making it easier to list tokens, lowering the entry barriers and “revitalizing Japan’s crypto asset market.”
Latin America
Rio de Janeiro will accept crypto property tax payments, as long as they come through third-party service providers. This is another step for Brazil in embracing crypto and FinTech innovation, and its regulatory practices continue to parallel these digitization efforts, as a16z recently covered in this report.
Africa
The Financial Sector Conduct Authority (FSCA) in South Africa has declared crypto assets as financial products and will now subject crypto exchanges to supervision in order to increase consumer protection.
Global
The Financial Stability Board (FSB), an international body composed of central bankers and financial regulators from across the G20 countries, released two reports around crypto: an assessment of the stability behind stablecoinsand a high-level crypto regulatory framework. Overall, neither report is crypto-friendly. [For a deeper dive on the stablecoins report, see this article. For an overview of the crypto regulatory framework, see this video.]