Crypto regulation in the world: weekly digest #118

The UAE

RAK DAO, one of the UAE’s free economic zones is set to unveil a significant legal framework for decentralized autonomous organizations (DAOs) on October 25. This initiative aims to provide clarity on governance, legal compliance, and tax obligations for DAOs operating within the region.

DAOs will be able to register without needing a physical presence in the UAE, facilitating global participation in the local digital assets sector. The framework will establish a legal identity for DAOs, offering protections against personal liability for founders and members. It will also allow DAOs to enter legally binding contracts and provide guidelines for resolving disputes. The framework will also clarify tax obligations and exemptions, making it easier for DAOs to understand their financial responsibilities.

DAOs will be permitted to own both on-chain and off-chain assets, enhancing their operational capabilities within the legal structure.

This legal framework is expected to position the UAE as a competitive hub for blockchain innovation, attracting international DAOs seeking a favorable regulatory environment. By reducing barriers to entry and providing clear guidelines, the initiative aims to foster collaboration between decentralized organizations and traditional businesses.

The EU

Italy is set to significantly increase its capital gains tax on Bitcoin from 26% to 42%. This decision, announced by the country’s Ministry of Finance on October 16, is part of a broader strategy to reduce the fiscal deficit in the country.

This tax hike is expected to contribute to a budget plan that seeks to balance Italy's finances by 2025, with projections estimating an additional €3.5 billion in revenue from financial institutions. Alongside the tax increase, Italy plans to eliminate the €750 million minimum revenue threshold for its Digital Services Tax (DST), broadening its application to more domestic digital service providers.

This move aligns with ongoing regulatory trends across Europe, particularly as the European Union prepares to fully implement its Markets in Crypto-Assets Regulation (MiCA), aimed at creating a unified regulatory framework for cryptocurrencies. Despite concerns that increased taxation could deter trading activity—as seen in other countries like India — Bitcoin's value has shown resilience, continuing to rise even after the announcement of the tax increase.

Several EU countries have recently increased or are planning to increase their cryptocurrency taxes in response to growing adoption and regulatory frameworks. Portugal, for example, previously had a favorable tax regime for cryptocurrencies, but it introduced a 28% tax on capital gains last year, marking a significant shift from its earlier status as a tax haven for crypto holders. Denmark and Belgium have one of the highest tax rates on cryptocurrency, ranging from 37% to 52.06%, which align them with such Asian countries as Japan or South Korea. In Germany, which allows tax-free capital gains for amounts under €600 or for assets held for more than a year, there have also been discussions about tightening regulations in line with EU standards.

These developments indicate a trend among EU countries toward stricter taxation of cryptocurrencies, influenced by both domestic fiscal needs and broader EU regulatory initiatives.

USA

The U.S. Securities and Exchange Commission has given a green light options trading on Bitcoin exchange-traded funds representing another significant milestone for the cryptocurrency market.

The SEC granted permission for Nasdaq to list and trade options tied to BlackRock's spot Bitcoin ETF, known as the iShares Bitcoin Trust (IBIT). This approval extends to other exchanges like the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE), which can now offer options for various Bitcoin ETFs, including those from Grayscale and Fidelity.

The introduction of options trading is expected to enhance liquidity in the Bitcoin ETF market. This could attract more capital inflow, making these investment products more appealing to both retail and institutional investors.

Options provide investors with the right, but not the obligation, to buy or sell an ETF at a predetermined price. This feature allows investors to hedge against potential price fluctuations in Bitcoin, thereby managing risk more effectively.

The approval is seen as a step towards mainstream acceptance of Bitcoin as an investment asset. It allows investors to gain exposure to Bitcoin without directly holding the cryptocurrency, thus simplifying the investment process.

Analysts predict that this development could lead to increased demand for Bitcoin, potentially driving its price higher. Some estimates suggest that inflows into these ETFs could reach between $50 billion and $100 billion within a year, which might push Bitcoin prices significantly upwards.

The approval comes at a time when interest in cryptocurrencies is resurging, particularly among institutional investors. This sentiment is further bolstered by upcoming events like the U.S. presidential elections, which may encourage risk-taking in financial markets.

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