Crypto regulation in the world: weekly digest #72

USA

Bittrex Global, a Liechtenstein-based cryptocurrency exchange, has announced that it will gradually cease operations, starting with the suspension of trading activities on December 4, 2023. The company did not give a reason for the decision, but it follows the shutdown of its US arm, Bittrex.US, earlier this year after it filed for bankruptcy in May. Bittrex.US reached a $24 million settlement with the US Securities and Exchange Commission (SEC) in August after being charged with operating an unregistered securities exchange.

Bittrex Global is urging customers to complete all necessary transactions by December 4, after which only withdrawals will be available. The company has emphasized that the decision to wind down operations was made after careful consideration and has advised against making new deposits as the safety of such transactions cannot be guaranteed.

Same time, just after Binance’s defeat, SEC has charged Payward Inc. and Payward Ventures Inc., known as Kraken, with operating Kraken's crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency. The SEC alleges that Kraken has made hundreds of millions of dollars unlawfully facilitating the buying and selling of crypto asset securities since at least September 2018. The complaint also alleges that Kraken's business practices, deficient internal controls, and poor recordkeeping practices present a range of risks for its customers, including commingling customers' money and crypto assets with its own.

The SEC seeks injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains plus interest, and penalties. Kraken intends to defend itself, saying Congress should decide how to regulate cryptocurrency exchanges and calling the SEC view of digital assets «incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy».

It seems that American regulators have taken the crypto market seriously.

Canada

Canada's financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), has proposed new guidelines for bank and insurance sector crypto-asset exposure. The guidelines advise banks and insurers on capital and liquidity risks when dealing with crypto-assets, and they reflect an evolving risk environment and international developments. The OSFI has said that banks must disclose any exposure to crypto and has proposed the highest possible risk weight of 1250% for volatile assets. The proposed guidelines categorize crypto-assets into two broad groups, with an exposure limit of no more than 1% for unbacked crypto assets.

The guidelines will replace the interim advisory on the regulatory treatment of crypto-asset exposures, published in August 2022, and are open for public consultation until September 20, 2024.

The Basel Committee on Banking Supervision has also published a consultative document on the disclosure of banks' cryptoasset exposures, with a proposed implementation date of January 1, 2025.

Australia

The Australian Taxation Office (ATO) has recently provided guidance on the tax treatment of decentralized finance (DeFi) transactions. The ATO's new rules on DeFi indicate that DeFi transactions may be subject to either Capital Gains Tax (CGT) or Income Tax.

The tax treatment depends on the specific transaction and how the protocol works, as well as whether the individual is considered a trader or an investor. The ATO's guidance includes wrapped tokens and token interaction with decentralized lending protocols, stating that when wrapping or unwrapping a crypto asset, a CGT event occurs, and the capital proceeds for the event equal the market value of the wrapped token at the time of the exchange.

It is important for individuals involved in DeFi transactions to keep detailed records and seek guidance from a qualified accountant to ensure compliance with the tax rules. The ATO's guidance is non-binding and represents the tax office's interpretation of the law, and the tax treatment of digital assets is currently under review by Australia’s Board of Taxation.

News from other countries:

• Sam Altman, the CEO of OpenAI and Worldcoin’s creator, has been retired and reinstated as the CEO of the company during this week. He was removed from the role but has now returned, along with a new board. This development has sparked discussions about the future of AI and the implications of Altman's firing and quick reinstatement for the industry.

• FTX has filed a lawsuit against Bybit and its affiliates to recover $953 million in assets that were withdrawn shortly before FTX's collapse in November 2022. The lawsuit alleges that Bybit's investment arm, Mirana, used its VIP status to withdraw funds and exerted pressure on FTX employees to prioritize its withdrawal requests.