Crypto regulation in the world: weekly digest #44
The European Commission has submitted Tax transparency rules for crypto-asset transactions (DAC8) that will oblige crypto companies to provide tax authorities with information about the balances of their clients. The reporting framework would be set-up by amending the Directive on Administrative Cooperation (DAC), which is the main framework for other data exchanges between tax authorities in the EU.
To introduce a reporting framework for crypto-asset transactions, the Commission's proposal closely follows the provisions of the OECD's CARF. The proposed directive identifies two types of entities that would be obliged to report information to the local authorities:
- Crypto-asset providers: any legal person or undertaking whose professional activity is the provision of one or more crypto-asset services to third parties. The definition as used in DAC8 is the same as that of MiCA.
- Crypto-asset operators: a provider of crypto-asset services other than a crypto-asset service provider. These operators do not fall within the scope of MiCA.
These entities called reportable crypto-asset service providers (RCASPs) would be subject to the DAC's reporting requirements if they have reportable users within the EU. This is regardless of the size of the RCASP, nor their residence. The type of crypto-assets that need to be reported are all crypto-assets that can be used for investment & payment purposes. Transactions that the RCASPs would need to report are any exchange transactions and transfers of reportable crypto-assets (both domestic and cross-border transactions), including transactions of reportable crypto-assets for fiat currencies, and transactions between reportable crypto-assets.
As part of the initiative, a special commission will compile a register of RCASPs by December 2025. The new rules will come into effect on January 1, 2026.
The new rules follow the MiCA, which does not cover issues related to the information exchange between crypto companies and tax authorities. At the same time, MiCA also significantly tightens control over crypto assets, obliging to additionally verify transactions between individuals with non-custodial in the amount above €1,000.
According to the FATF recommendations, transactions with such wallets are subject to the European Transfer of Funds Regulation (TFR). When making transactions with a self-hosted wallet, European CASPs must collect the necessary information about the sender and recipient, as well as fulfill the following additional obligations to verify wallets.
We also reported that The European Parliament’s Committee on Economic Affairs had approved a bill proposal, which expands the requirements of the EU AML/CFT directives to DAO, NFT and other DeFi platforms.
Registered payment service providers also known as PSPCP now cannot perform or facilitate digital asset transactions that are not regulated or authorized by the Central Bank. According to the Bank’s statement providers will not be able to conduct transactions themselves or initiate them in their applications or web platforms.
Companies officially registered with the Central Bank as payment service providers include major players in the field such as MercadoLibre, or Nubi. From the other side new rules do not affect crypto-companies and major crypto asset platforms such as Binance which also provides services in the country.
The central bank said the new measure aims to mitigate risks that crypto transactions could create for users of financial services in the country. It seems that the main reason the new rules have been created is to prevent the promotion of cryptocurrencies by fiat payment providers.
Russia remains the only country in Europe where there is still no legal framework for cryptocurrencies. The country's authorities have repeatedly spoken about the need to adopt them, but it never came to the point.
This time, Russian officials revealed plans to adopt the comprehensive framework for crypto by the end of July. The Russian Duma (Russian parliament) plans to pass 4 bill proposals to regulate crypto mining, crypto payments for international transactions, taxation and penalties for illicit activities related to crypto.
By present time a large number of local crypto companies operate in the country, as well as major international crypto exchanges. On the other hand, companies from the EU and the US cannot provide services to Russian citizens due to the sanctions imposed against the country. Therefore, the need to create Russian legal crypto exchanges has already matured a long time ago.
News from other countries:
- At the G7 summit in Japan member states call on the Financial Action Task Force (FATF) to strengthen oversight of cryptocurrency transactions between individuals. The main goal of the initiative is to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements.
- Liechtenstein plans to allow Bitcoin payments for certain state services. The country plans to accept deposits in Bitcoin and immediately exchange them for the Swiss franc, the national currency.
- Binance intends to leave Canadian market after the country moved to impose new regulations on digital-currency trading platforms. The new Canadian guidance on stablecoins has made the market “no longer tenable” for the company.
We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!