Crypto regulation in the world: weekly digest #110

China

China's highest court has explicitly stated that using virtual assets to transfer or convert criminal proceeds is considered a form of money laundering that violates Chinese criminal law. This judicial interpretation, issued jointly by the Supreme People's Court and the Supreme People's Procuratorate, highlights the serious legal risks associated with cryptocurrency transactions in mainland China.

Ordinary investors could potentially be held as suspects in money laundering cases if they inadvertently receive proceeds from criminal activities during crypto transactions. While this interpretation does not equate all cryptocurrency trading with money laundering, it significantly increases the legal risks for crypto investors in China.

Chinese authorities have been actively investigating and prosecuting crypto-related money laundering cases. In 2022, law enforcement in Inner Mongolia arrested 63 individuals for laundering approximately 12 billion yuan (US$1.7 billion) through cryptocurrencies.

China is in the process of amending its Anti-Money Laundering Law to specifically address risks associated with virtual assets and cryptocurrencies. This move aims to align Chinese regulations with international standards set by organizations like the Financial Action Task Force (FATF). The Chinese government's stance reflects its ongoing efforts to tighten control over cryptocurrency activities and combat financial crimes. Investors and individuals involved in crypto transactions within China must exercise extreme caution to avoid potential legal consequences.

About prohibition of cryptocurrencies in China you can read in our specially related article.

UAE

Tether has announced plans to launch a new stablecoin pegged to the United Arab Emirates Dirham (AED). This initiative is being developed in collaboration with UAE's tech conglomerate Phoenix Group PLC and Green Acorn Investments Ltd.

Each Dirham-pegged token will be fully backed by liquid UAE-based reserves, adhering to Tether's transparent reserve standards. The stablecoin aims to leverage blockchain technology for seamless and cost-effective transactions. It is expected to streamline international trade, reduce remittance costs, and provide a hedge against currency fluctuations.

Paolo Ardoino, CEO of Tether, emphasized the strategic importance of this move, citing the UAE's growing status as a global economic hub. The company anticipates that the Dirham-pegged stablecoin will become an essential tool for businesses and individuals seeking efficient means of transacting in AED.

Tether is the largest stablecoin issuer in the digital asset industry, with its flagship product USDT commanding a market cap of over $115 billion. The company has established itself as a leader in providing fiat-pegged cryptocurrencies, offering a range of stablecoins tied to various currencies including the US dollar, Euro, Chinese yuan, and Mexican peso.

The launch of Tether's Dirham-pegged stablecoin coincides with significant regulatory developments in the UAE, including the creation of requirements for stablecoin issuers in the country. The Central Bank of the United Arab Emirates has recently introduced comprehensive regulations governing payment tokens and related services, which establishes rules and conditions for licensing and regulating payment token services in the UAE. The regulation covers Payment Token Issuance, Payment Token Conversion, and Payment Token Custody and Transfer services.

These regulatory efforts reflect the UAE's commitment to fostering a favorable environment for cryptocurrency and blockchain innovation. As the global stablecoin market continues to expand, with projections suggesting growth to $2.8 trillion by 2028, Tether's Dirham-pegged stablecoin is poised to play a crucial role in the UAE's digital economy and beyond.

France

Pavel Durov, the 39-year-old billionaire founder and CEO of the messaging app Telegram, was detained by French authorities this Saturday, after his private jet landed at Le Bourget airport near Paris. The arrest was reportedly based on a French warrant related to allegations of insufficient moderation on Telegram, which has allegedly facilitated illegal activities such as money laundering, drug trafficking, and the sharing of child sexual abuse content.

Pavel Durov became a French citizen in 2021 and has been based in Dubai, where Telegram is headquartered. Telegram has grown to become one of the world's most popular messaging apps, with nearly one billion users. It's particularly influential in Russia, Ukraine, and former Soviet republics, serving as a primary source of unfiltered information about conflicts and political issues.

The arrest has sparked debate about the balance between free speech and content moderation. Telegram is known for its hands-off approach to moderation and strong focus on privacy, which has made it popular but also controversial. This case could have significant implications for social media platforms and their content moderation policies worldwide.

Durov's arrest also had a significant negative impact on the TON cryptocurrency and ecosystem. The price of Toncoin (TON) fell by approximately 16-17% within hours of the news breaking about Durov's arrest. It dropped from around $6.80 to $5.60-$5.67. TON's market capitalization decreased to about $14.16 billion following the price drop.

While TON is technically separate from Telegram and Telegram Wallet, its popularity and value are still closely tied to the messaging app's reputation and user base. The uncertainty surrounding Telegram's future could have broader implications for the TON ecosystem. The TON Foundation attempted to reassure its community by stating that it remains strong and committed to its principles, despite the news. However, the market reaction demonstrates the close association investors still perceive between TON, Telegram, and Durov, despite efforts to separate the brands.

News from other countries:

• Russia is planning to launch two new cryptocurrency exchanges to support foreign trade and boost its economic activity amid international sanctions. One exchange will be based in Moscow, potentially built on the Moscow Exchange infrastructure or as a separate entity. The other one will be located in St. Petersburg, utilizing the existing infrastructure of the St. Petersburg Currency Exchange. While this move shows Russia's increasing pivot towards cryptocurrency adoption, experts warn of potential risks and limitations, particularly due to international sanctions and the transparency of blockchain technology.

• Bitcoin staking has been launched through a new protocol called Babylon. This is a self-custodial Bitcoin staking protocol, launched phase one of its mainnet on August 22, 2024. This marks a major milestone in expanding Bitcoin's utility beyond just value storage and payments.