Crypto regulation in the world: weekend update
Europe
The Basel Committee on Banking Supervision (BIS), an organization that provides a forum for cooperation on banking supervisory matters to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide, has published an updated guidance for financial institutions on crypto assets risk assessment. The document recommends banks to be cautious about accepting crypto assets as financial instruments as crypto assets themselves and related services increases risks of losing a financial stability. At is stated that some crypto assets show high volatility and acceptance is also associated with the threats of fraud, money laundering and terrorist financing. The Basel Committee is proposing a 1% capital cap on cryptocurrencies such as bitcoin and some stablecoins.
We already noted that the European Commission plans to finalize a comprehensive bill on the regulation of MiCA cryptocurrencies in June. On June, 30 agreement was reached on European crypto-assets regulation.
At the same time, one of the controversial issues regarding the inclusion of NFT regulation in the bill has not been finally resolved. NFTs will be excluded from the scope except if they fall under existing crypto-asset categories. Within 18 months the EC will be tasked to prepare a comprehensive assessment and, if deemed necessary, a specific, proportionate and horizontal legislative proposal to create a regime for NFTs and address the emerging risks of such new market.
Also, MiCA requires that the European Banking Authority (EBA) will be tasked with maintaining a public register of non-compliant crypto-asset service providers. Actors in the crypto-assets market will be required to declare information on their environmental and climate footprint and issuers of asset-linked token (ART) issuers of ARTs will need to have a registered office in the EU to ensure the proper supervision and monitoring of offers to the public of asset-referenced tokens.
The European Parliament also announced new rules for tracking transfers of crypto assets, in order to prevent cryptocurrency illicit transactions and possible circumvention of sanctions. Before making a transaction with crypto assets, crypto assets service provider (CASP) must ensure that the recipient does not fall under restrictive measures or sanctions and there is no risk of money laundering or terrorist financing. This law is being prepared to comply with FATF Travel Rule. The brief explanation of this regulatory measure can also be found on our pages.
To further strengthen the position of the EU in the field of combating money laundering and terrorist financing, on June 29 it was decided to create a new European supervisory body - Anti-Money Laundering Authority (AMLA). The European Council empowers the Authority to proceed supervision on certain types financial institutions, including crypto assets service providers.
CIS
Cryptocurrency mining has been allowed in the Republic of Uzbekistan. According to the rule issued by local regulator, mining can be carried out only by legal entities and using a solar energy. It is allowed to mine any crypto assets, except anonymous ones. It is also notable that income in crypto assets is not a subject of taxation as miners only must pay monthly fees for operating activities. Crypto assets obtained during mining must be sold exclusively on local crypto exchanges. At present, only one such a platform is active in Uzbekistan.
The Central Bank of Russia on the contrary believes that the legalization of mining is possible only if the sale of the mined crypto assets takes place outside of the country. Russia remains one of those countries where decentralized digital currencies are still not covered by the legislation framework, even though a special regulation on digital financial assets has been in force for a year, which includes various tokens and other digital rights. A specific law to regulate cryptocurrencies has not yet been passed, although some legal regulations and courts consider them as a property.
At the same time, this week the Russian Duma adopted a law on taxation of operations with digital assets. The document provides the specifics regulation framework for digital assets taxation including VAT and taxes for corporate and private entities.
FATF
On June 30, the FATF released a targeted update on implementation of its Standards on virtual assets and virtual asset service providers (VASPs, quite the same as EU’s CASPs), with a focus on FATF’s Travel Rule.
This report comes three years after FATF extended its anti-money laundering and counter-terrorist financing (AML/CFT) measures to VAs and VASPs to prevent criminal and terrorist misuse of the sector.
The report builds on the FATF’s previous two reviews on implementation by providing a short update on the latest country compliance with FATF’s Recommendation 15 and its Interpretative Note. The report places a specific focus on FATF’s Travel Rule to respond to FATF’s June 2021 findings that countries and private sector face particular challenges in this area. Further, the report includes relevant emerging risks and market developments, including on Decentralized Finance (DeFi), Non Fungible Tokens (NFTs) and unhosted wallets.
FATF’s report highlights that there are now technological solutions available to facilitate Travel Rule compliance in practice, but private sector need to continue to increase interoperability between solutions and across jurisdictions, and to work towards full compliance.
We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!
