The regulatory battles against the crypto industry continue, with new ones instigated daily it seems – as, in the US, the latest to find itself as the mark is crypto exchange Kraken. Yet, while some warn of bulldozing power of regulations, others argue that crypto in its essence is unstoppable.
Yesterday, the US Commodity Futures Trading Commission (CFTC) issued “an order filing and settling charges against respondent Payward Ventures, Inc. d/b/a Kraken […] for illegally offering margined retail commodity transactions in digital assets,” including bitcoin (BTC), and failing to register as a futures commission merchant. The company must pay a USD 1.25m civil monetary penalty.
This is what Kraken CEO had to say about the state of crypto regulation:
State of crypto regulation right now:
👮All carriages must have manure bags!
🧑💻Motor carriages don't have horses.
👮Sounds like a wagon then but wagons are for supplies, not people.
🧑💻Motor carriages can do both
👮Yes, so attach the manure bag and don't let people in there.
🤦— Jesse Powell (@jespow) September 29, 2021
Meanwhile, per Acting Director of Enforcement Vincent McGonagle, this is part of the regulator’s “broader effort to protect US customers,” stating that margined, leveraged, or financed digital asset trading offered to retail US customers “must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.”
Meanwhile, the US Securities and Exchange Commission (SEC) Chairman Gary Gensler said that US cryptocurrency markets and regulated platforms will “not end well” if they stay outside regulators’ purview, Bloomberg reported. “There are trading venues and lending venues where they coalesce around these, and they have not just dozens but hundreds and sometimes thousands of tokens on them,” he reiterated on Monday during the Code Conference in California.
And there are more reports that crypto will not see an ally during the President Joe Biden’s administration. The White House nominated Saule Omarova to lead the Office of the Comptroller of the Currency, reported Bloomberg, noting that Omarova’s “critiques of digital tokens fit right in with statements that have recently emerged from government watchdogs” – such as that of Gensler.
“It took several years for regulators to wake up, but it’s like a bulldozer,” Jim Angel, an associate professor specializing in market structure at Georgetown University is quoted as saying. “It’s slow, it’s steady and it will grind down anything in its path.”
Yet, some, like Karen Shaw Petrou, a managing partner at research firm Federal Financial Analytics, suggest that it may be too late for market participants to find common ground with regulators, stating that crypto “conveniently believed that spouting often dubious inclusion and innovation propositions would forestall regulation,” and that the sector “was extraordinarily intoxicated with the cool factor.”
Tesla chief Elon Musk shared his own opinion, during the Code Conference, on the US regulating crypto, opining that – it shouldn’t. On the question of whether the US government should be involved in regulating the space, he replied: “I would say, ‘Do nothing’.”
Slowed down maybe, but not stopped
Per CNBC, Musk said that, while it’s impossible to destroy crypto, “it is possible for governments to slow down its advancement.”
Similarly, Timothy Spangler, a partner at Dechert LLP, told Bloomberg that innovation is “not going to be denied; It’s not even going to be meaningfully delayed.”
As for China’s ongoing crackdown on the crypto industry, the Tesla chief noted that the country’s electricity shortages may be a part of it, as well as that “cryptocurrency is fundamentally aimed at reducing the power of a centralized government,” which the Chinese government doesn’t “like.”
Per Aaron Tilton, CEO at cryptocurrency platform SmartFi, who is also a former Utah state legislator, “Ironically the SEC Chair enforcement approach reminds me of the earlier tactics the Chinese regulators had taken a few years ago by warning people that crypto must be re-made in an acceptable image of regulators for protection of the people. After all the “warnings” China made their own digital currency and outlawed private cryptocurrencies.”
“The Congress, the SEC and crypto users should be engaging in proactive collaboration to serve the people, but it appears to be saber rattling warning the people to fall in line or else,” Tilton told Cryptonews.com in an emailed comment.
There are even more opposing voices, stating that crypto, despite the regulatory pressure, is not that easy to put a full stop to – even if regulation is inevitable or necessary in certain cases. As a matter of fact, quite a few entities in the space are already regulated, experts argue.
Kristin Smith, executive director of the Blockchain Association, said at Yahoo Finance’s All Markets Summit Plus: Crypto Investing, that:
“Decentralization is incredibly powerful and these networks can exist in many different places. China has attempted to crack down on crypto multiple times now. They may be getting more aggressive on that front, but as long as the internet persists, crypto networks will persist as well.”
Per Nic Carter, co-founder at CoinMetrics and general partner at Castle Island Ventures, markets will eventually win if they clash with the state. “It just so happens, cryptocurrency [being] virtual, being something that is peer-to-peer by its very nature, something you can take full ownership of on a smartphone, is uniquely resistant to state control.”
Banks Must Meet These Conditions To Deal Crypto, US Regulator Says
The mainstream adoption of digital assets has been one of the main targets that the crypto space set.
More and more moves are taking place in order to achieve this important goal and they continue.
Banks adopting crypto for their clients is one important step in this direction and you can check out the latest news about this below.
US regulator details conditions for banks to deal crypto
It’s been just revealed that the U.S. Office of the Comptroller of the Currency (OCC) is outlining the conditions that national banks and federal savings associations have to mark before engaging in specified crypto activities.
The online publication the Daily Hodl says that according to the regulator, national banks and federal thrift institutions must do the following:
“demonstrate that they have adequate controls in place before they can engage in certain cryptocurrency, distributed ledger and stablecoin activities.”
The OCC also addressed some matters regarding interpretive letters issued in 2020 and early 2021.
The regulator noted that banks can do the following:
“provide crypto custody services, hold dollar deposits that back stablecoins, act as nodes for distributed ledgers to verify payments and engage in particular stablecoin activities to facilitate payments on blockchain networks after notifying their supervisory office.
The same regulator also notes that the bank should not engage in the activity until “it receives a non-objection from its supervisory office.”
The Acting Comptroller of the Currency, Michael J. Hsu stated the following issues:
“Because many of these technologies and products present novel risks, banks must be able to demonstrate that they have appropriate risk management systems and controls in place to conduct them safely.”
The regulator also said that this will “provide assurance that crypto-asset activities taking place inside of the federal regulatory perimeter are being conducted responsibly.”
Breaking: India Likely to Table Cryptocurrency Bill Before Parliament Session
India is reportedly working to table the much-talked cryptocurrency bill before or during the upcoming parliament session. The bill will be reportedly tabled during the upcoming union cabinet meeting while the winter session is set to start from November 29.
The said cryptocurrency bill comprises new regulations on crypto assets, their classification, and intended tax earnings from them. If the bill gets the cabinet nod, it might get approved during the upcoming parliament session. Earlier, inside sources indicated that the government might regulate cryptocurrencies as an asset class and will prohibit their use as a payment.
A top government official indicated that the new regulations would incorporate taxes on crypto gains based on the current rules of capital gains. Tarun Bajaj, Revenue Secretary shed some light on the taxation on crypto assets and explained,
“We will take a call. I understand that people are already paying taxes on it. Now that it has really grown a lot, we will see whether we can actually bring in some changes in the law or not. But that would be a Budget activity. We are already nearing the Budget; we have to look into it at that point in time,”
The Indian crypto ecosystem has strived despite the uncertainty around regulations for nearly four years. According to one report, the Indian crypto ecosystem has become a $6 billion industry with several new unicorns. Now with the government looking set to clear crypto regulations, the Indian crypto ecosystem could reach new highs.
Indian Central Bank Still Sceptic of Cryptocurrency
The Reserve Bank of India (RBI), the Indian central bank is still quite a sceptic about digital assets use and has warned about its potential harm to the financial system. RBI governor Shaktikanta Das has recently warned about the disastrous impact that digital assets could pose on macroeconomic and financial stability.
The infamous banking ban was also imposed by the RBI in 2017 that choked the crypto ecosystem and created many misconceptions among the mainstream. The banking ban was later overturned by the Supreme court of India in 2019.
US Senators Introduce New Bill That Seeks To Amend Crypto Provision in Newly Signed Infrastructure Package
Two United States senators are introducing legislation to amend the crypto provision of the infrastructure bill that President Biden just signed into law.
Reaching across the aisle, Democrat Ron Wyden and Republican Cynthia Lummis seek to revise the new information-reporting rules imposed on the digital asset space.
The proposed amendment intends “to revise the rules of construction applicable to information reporting requirements imposed on brokers with respect to digital assets, and for other purposes.”
As a press release from Sen. Lummis explains,
“Under current law, those who are involved in digital asset mining or staking, providing digital asset hardware or software wallets, or developing digital asset protocols may fall under the definition of ‘broker’ for tax purposes and would be subject to certain Internal Revenue Service (IRS) reporting requirements.
The senators’ bill would clarify that the ‘broker’ definition excludes miners and stakers, as well as wallet providers and developers, and would ensure that only those digital asset intermediaries that actually have access to material customer information are required to report to the IRS.”
Senator Wyden says it is “critically important to protect innovation in the digital asset space.”
“Our bill makes clear that the new reporting requirements do not apply to individuals developing blockchain technology and wallets. This will protect American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe.”
Lummis, who has been a vocal advocate of cryptos as well as a buyer of Bitcoin (BTC), says digital assets are now a part of the financial system and today’s decisions will have long-term effects.
“We need to be fostering innovation, not stifling it, if we are going to maintain America’s position as the global financial leader. I’m proud to introduce this bipartisan bill to ensure that our tax system reflects the realities of digital assets and distributed ledger technology.”
President Biden signed the Infrastructure Investment and Jobs Act/Bipartisan Infrastructure Framework (HR 3684) bill into law on Tuesday.
Currently, Section 80603 of the law says,
“Return Requirement for Certain Transfers of Digital Assets Not Otherwise Subject to Reporting.
Any broker, with respect to any transfer (which is not part of a sale or exchange executed by such broker) during a calendar year of covered security which is a digital asset from an account maintained by such broker to an account which is not maintained by, or an address not associated with, a person that such broker knows or has reason to know is also a broker, shall make a return for such calendar year, in such form as determined by the Secretary, showing the information otherwise required to be furnished with respect to transfers subject to subsection (a).’”