Crypto regulation in the world: weekly digest #102

The USA

In a significant move, the U.S. Supreme Court has issued a ruling that limits the authority of federal agencies, including the Securities and Exchange Commission (SEC) to interpret laws through the rulemaking process. In the case of SEC vs Jarkesy, the Court ruled 6-3 that the Seventh Amendment entitles a defendant to a jury trial when the SEC seeks civil penalties for securities fraud. This decision limits a key enforcement tool of the SEC, as it can no longer pursue such cases through its own internal administrative proceedings overseen by SEC-appointed judges.

The ruling stems from a 2013 SEC case against hedge fund manager George Jarkesy, who contested the agency's actions and argued that its procedures were unconstitutional. The Supreme Court agreed, finding that the SEC's reliance on in-house courts violates the right to a jury trial.

The Court found that the SEC violated the Seventh Amendment right to a jury trial by using its own in-house administrative judges to adjudicate securities fraud cases instead of federal courts. This decision undermines the SEC's ability to pursue enforcement actions through its own administrative proceedings, as defendants now have the right to demand a jury trial in federal court.

The ruling suggests the Court may be skeptical of the broader «administrative state» and the powers granted to federal agencies by Congress. The dissent warned the decision could threaten the constitutionality of numerous statutes empowering agencies across the government. By curbing the SEC's enforcement capabilities, the decision could make it more challenging for the agency to pursue crypto-related cases, as defendants may be more likely to prevail before a jury compared to SEC-appointed judges.

The Supreme Court's ruling in SEC v. Jarkesy represents a significant shift in the balance of power between federal agencies and the judiciary. As the crypto industry continues to navigate the evolving regulatory landscape, this decision may serve as a catalyst for further legal battles and a reevaluation of the SEC's enforcement strategies in the crypto space.

Turkey

The Turkish Parliament has adopted a new law regulating the cryptocurrency market in the country. The law establishes the comprehensive crypto legal framework in the country and fines for it’s violation.

Crypto asset service providers must obtain permission from the Capital Markets Board (SPK) before establishing and operating in Turkey. The SPK will have the authority to regulate the crypto ecosystem, including setting technological standards in collaboration with the Scientific and Technological Research Council of Türkiye (TÜBITAK). Existing crypto asset service providers must apply to the SPK for permission within one month, and those that do not apply must terminate their activities and liquidate within three months.

Independent audit firms approved by the SPK will be responsible for the financial and information systems audits of crypto asset service providers. However there are no specific regulations yet on the taxation of crypto assets, which will be addressed in a separate law or regulation in the future.

Individuals and officials of legal entities operating as crypto asset service providers without permission will face imprisonment from three to five years and fines up to $183000. VASPs misappropriating money or assets entrusted to them, including crypto assets, will face imprisonment from eight to fourteen years, and must compensate for damages.

Following the adoption of the law, the country has been removed from the Financial Action Task Force (FATF) grey list of countries requiring increased monitoring for deficiencies in their anti-money laundering and counter-terrorist financing regimes. The FATF announced on June 28, 2024 that Turkey had made «significant progress» in improving its anti-money laundering and counter-terrorism financing regime and was no longer subject to the FATF's increased monitoring process.

Bolivia

Bolivia has lifted its ban on cryptocurrency transactions, allowing financial entities to conduct transactions with digital assets. The Central Bank of Bolivia (BCB) announced this regulatory change, reversing a previous ban that was in place since 2020.

The new regulations permit banks to conduct cryptocurrency transactions through authorized electronic channels. However, the BCB has emphasized that cryptocurrencies are not recognized as legal tender in Bolivia. This means that while digital assets can be used for transactions, they are not considered official currency by the Bolivian government, and there is no obligation for businesses to accept them as payment.

The lift on the crypto ban marks the end of stringent regulations that began in 2020 when Bolivia's Financial System Supervision Authority prohibited cryptocurrency use due to concerns over consumer protection and money laundering. In 2022, the BCB further restricted the banking sector from engaging with cryptocurrencies to prevent risks, frauds, and economic losses.

Despite the newfound acceptance of Bitcoin and other cryptocurrencies, the BCB remains cautious. It plans to incorporate information on the risks associated with cryptocurrency trading into its Economic and Financial Education Plan. This initiative aims to educate the public on the safe handling of digital assets, underscoring the importance of being aware of potential risks.

The lift on Bolivia's crypto ban is part of a broader trend in Latin America, where several countries have been embracing digital assets to combat economic challenges such as inflation and dollar scarcity. Countries like El Salvador, Mexico, Brazil, and Argentina have all taken steps to regulate or adopt cryptocurrencies in recent years.

News from other countries:

• Monaco and Venezuela were added to the FATF grey list. The FATF found that Monaco had not made enough efforts to stop laundering money from fraud committed abroad or moved aggressively enough to seize criminal assets. It also judged money-laundering penalties to be insufficient and investigators lacked sufficient resources.

• The European Banking Authority (EBA) plans to finalize its monitoring framework for stablecoin issuers by the end of July, 2024. We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!