Crypto regulation in the world: weekly digest #45
The crusade against digital Dollar, the future US digital currency (CBDC), continues in the United States. Recently, Florida Governor Ron DeSantis signed a bill that restricts the use of CBDCs in the state. The new law prohibits the use of a United States federal CBDC «as money within Florida’s Uniform Commercial Code (UCC)» and also bans the use of CBDCs issued by foreign governments. The governor urged state lawmakers in March to draft the bill, and it was passed by the Florida Legislature with near-unanimous votes. The law is expected to take effect on July 1, 2023.
Other states are also considering similar prohibitions on CBDCs, including Louisiana, North Dakota, and Alabama. The legislative proposals aim to protect consumers and businesses from a federally controlled CBDC and to fight back against this concept nationwide.
This week the concern has raised on federal level when Senator French Hill introduced a Mint Act, a bipartisan legislation prohibiting the federal reserve from issuing CBDC.
«Usually, the only time my constituents from central Arkansas ever call into my office about digital assets is when they’re worried that Uncle Sam is going to use a central bank digital currency to surveil where they’re spending their money and how much, and ultimately block them from using the banking and payments system», said the Senator.
The main reasons behind the proposed CBDC ban in the USA are related to concerns about the potential risks and negative impacts of CBDCs. The legislation introduced aimed to protect consumers and businesses from a federally controlled CBDC that could give government officials the ability to see all consumer activity and even cut off access to goods and services for consumers. Another point is that the legislation is a reaction to the Biden administration’s weaponization of the financial sector through a Central Bank Digital Currency (CBDC).
Right now CBDCs are a topic of debate and exploration around the world as they could offer more resilience, more safety, greater availability, and lower costs than private cryptocurrencies if designed prudently. Also CBDCs could facilitate the citizen-driven shift while keeping the central bank in control, and in developing countries, they could boost financial inclusions.
Over 114 nations around the world are exploring CBDCs introduction, with 18 of the G20 nations in advanced stages of launching one.
Pakistan has announced a ban on cryptocurrency services operating in the country, and will never legalize crypto trading. The Minister of State for Finance and Revenue, Aisha Ghaus Pasha, declared that cryptocurrencies will «never be legalized in Pakistan» and that the State Bank of Pakistan (SBP) and the Information Technology Ministry have been ordered to initiate work on banning them.
The ban is partly due to the potential risks for the country's anti-terror financing efforts, as per the guidelines of the global AML/CFT watchdog, the Financial Action Task Force (FATF) and now the SBP and the Information Technology Ministry are drafting legislation for its implementation in the nearest future.
Cryptocurrency adoption in Pakistan has been relatively high, with Pakistani citizens reportedly holding $20 billion. However, banks in Pakistan have started informing customers that cryptocurrency trading is illegal. Despite this ban, some retailers continue to hedge their financial bets against a devaluing Pakistani rupee partly due to a volatile political situation in the nation.
If the ban comes into effect Pakistan will stand in a raw with few countries headed by China where cryptocurrencies are illegal.
It has come to light that South Korean prosecutors are scrutinizing accounts at the country's largest cryptocurrency exchanges in connection with digital currency transfers made by former MP Kim Nam Kook. Earlier it was reported that the politician was accused of illegal actions with virtual assets and left his party. The prosecutors raided the offices of two major cryptocurrency exchanges in the country, Upbit and Bithumb, as part of an investigation into transaction records and other materials.
The specific allegations that South Korean prosecutors are investigating in relation to crypto exchanges include embezzlement, breach of trust, fraudulent illegal transactions, and stock price manipulation. Earlier this year the investigations have led to the arrest of Kang Jong-Hyun, chairman and owner of cryptocurrency exchange Bithumb, on allegations of embezzlement related to his activities at the exchange.
These law enforcement actions suggest that South Korean authorities are taking a closer look at crypto exchanges and their activities.
South Korea is a well-known crypto-friendly country. While there are regulations in place to ensure the safe and secure operation of the cryptocurrency market in South Korea, there are no explicit prohibitions against cryptocurrencies, and South Korean citizens can own cryptocurrencies and trade on licensed exchanges.
This year the country’s parliament is expected to pass a bill regulating the digital asset market, which would become one of the most sweeping pieces of national cryptocurrency legislation in existence if passed. The bill would require exchanges and similar service providers to separate internal holdings from user assets and would have myriad stipulations governing the sale, storage, and trading of cryptocurrencies, with a particular emphasis on consumer protection and compliance reporting.
News from other countries:
- On G7 Summit in Japan the FATF President Raja Kumar called on the finance ministers from some of the world’s seven most influential economies to implement recommendations from the FATF to mitigate cryptocurrencies risks.
- Commodity Futures Trading Commission Chair Rostin Behnam said decentralized crypto exchanges will be regulated either by the CFTC or the SEC even if they are based on «self-effectuating» protocols that are «just code» in a conversation for Bloomberg’s Odd Lots podcast.
We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!