Singapore-based crypto Terraform Labs has filed a fresh lawsuit against the U.S. Securities and Exchange Commission (SEC). This development is in response to the subpoena issued by the securities regulator to Terraform chief executive for attending an event in New York.
The subpoenas are the latest efforts from the U.S. SEC to extend its purview over crypto firms even when based abroad. It is also an effort by the U.S. SEC to extend its global reach in the crypto space.
Terraform Labs said that the SEC’s process server approached its chief executive Do Kwon when he was on his way to the “Mainnet 2021” summit last month in September. The crypto firm’s attorneys argued that this subpoena was an improper attempt by the U.S. SEC to claim jurisdiction.
What Led to the SEC Issuing the Subpoena?
Singapore-based Terraform specializes in offering synthetic stocks on its blockchain through its Mirror Protocol. Similarly, it offers synthetic versions of the ETFs like the Ark Innovation ETF. Terra’s native cryptocurrency LUNA is currently the 11th largest cryptocurrency with a market cap of $17.6 billion.
The lawsuit notes that Kwon had voluntarily consented to an interview by the SEC. It further adds that post the interview, the SEC demanded documents from Kwon and the company. Terraform noted that this request was overly broad and didn’t make sense.
But last month in September, SEC told Kwon’s lawyers that the sanctions were warranted. The latest rift between the SEC and Terraform comes amid a broader crackdown by the U.S. regulators. The U.S. regulators have been cracking down on crypto companies recently.
Furthermore, the U.S. SEC has recently set its eyes on the rapidly emerging decentralized finance (DeFi) space. A few months back, SEC Chairman Gary Gensler warned that unregulated crypto markets “will not end well”.
Gary DeWaal, a former senior trial attorney at CFTC told Bloomberg: “It’s a clever effort to try to quash this subpoena, but I’m not aware of a case like this being successful”.
Even if Terraform’s efforts are successful, the SEC can pursue the information by working with foreign government wherein Kwon and the company is based. DeWaal also said that the courts are usually sympathetic to SEC subpoenas.
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).’”