Crypto regulation in the world: weekly digest #88

USA

The US Securities and Exchange Commission (SEC) is investigating Ethereum, the world's second-largest cryptocurrency, with the intention of potentially classifying it as a security. This investigation has raised concerns within the cryptocurrency industry, particularly regarding the approval of Ethereum-based Exchange-Traded Funds (ETFs). The SEC's probe targets the Ethereum Foundation, a Swiss-based nonprofit organization responsible for the governance and development of the Ethereum blockchain. The investigation began after Ethereum transitioned to a proof-of-stake governance model in September 2022, which provided a new basis for potentially classifying Ethereum as a security.

The SEC's move to investigate Ethereum has led to speculation about its impact on ETH ETF approval. If Ethereum is officially classified as a security, it could complicate the regulatory landscape and cast doubt on the Commodity Futures Trading Commission's (CFTC) jurisdiction over Ethereum futures markets. The SEC's scrutiny of Ethereum has been met with mixed reactions, with some viewing it as an attempt to deny spot Ether ETFs. The agency's classification of Ether as a security could serve as a basis for rejecting these ETF applications.

Despite the ongoing investigation and regulatory uncertainties surrounding Ethereum, the cryptocurrency market has shown resilience. Prices of Ether and nonfungible tokens have increased, indicating that market participants are largely shrugging off the SEC's probe. However, there are concerns within the industry about the potential implications of classifying Ethereum as a security and its broader impact on cryptocurrency regulations.

The EU

The European Union has recently implemented a ban on unverified self-hosted crypto wallets, as part of broader AML directives aimed at combating financial crimes. This ban specifically targets transactions through self-custody wallets that lack proper identification, covering those facilitated by mobile, desktop, or browser applications. The regulation aims to address the issue of anonymous movement of funds, often used for criminal activities.

The ban applies to cash transactions above €10,000 and anonymous cryptocurrency payments over €3,000. The legislation is expected to be fully enforced within three years of its official promulgation, with forecasts suggesting a faster implementation that could rapidly change the cryptocurrency market landscape.

Some members of the European Parliament have opposed the regulation, citing concerns about violations of financial privacy and autonomy. They argue that it undermines the right to engage in anonymous transactions. The crypto sector has also expressed significant concerns over the new regulatory measures, with fears that these laws may hinder personal financial privacy and limit the broader application of cryptocurrencies within the EU.

The ban on cold crypto wallets raises significant privacy concerns within the crypto community, highlighting a tension between regulatory efforts and individual liberties. The new regulations are expected to have a profound impact on the cryptocurrency market in the EU, potentially altering how transactions are conducted and increasing scrutiny on user identification.

News from other countries:

• The President of El Salvador, where bitcoin is recognized as a legal tender, announced a plan to buy one BTC every day. The daily purchase of Bitcoin was part of a broader strategy to increase the country's holdings of the cryptocurrency. This move by El Salvador's government aimed to bolster its Bitcoin reserves and support the adoption and use of Bitcoin within the country.

• The developer Alexey Pertsev, associated with Tornado Cash, is accused of laundering $1.2 billion worth of cryptocurrency through the anonymizing tool Tornado Cash. Dutch prosecutors detailed these allegations ahead of his trial on March 26. Pertsev, along with other developers, faces charges related to money laundering and sanctions violations in the U.S. Pertsev was jailed in the Netherlands in August 2022 on vague charges following Tornado Cash's blacklisting by a U.S. OFAC. The accusations against Pertsev have raised concerns within the developer community about the potential implications for software developers.

• Russia is planning to create a platform for the confiscation of cryptocurrencies seized in criminal cases. The Russian government intends to establish a system that will enable law enforcement agencies to seize and hold crypto confiscated from criminals, as reported by various sources. This initiative is part of efforts to enhance the effectiveness of combating offenses involving cryptocurrencies within the framework of criminal proceedings.