Crypto regulation in the world: weekly digest #97

USA

The U.S. House of Representatives has voted for the H.R. 4763 bill proposal, also known as the Financial Innovation and Technology for the 21st Century Act (FIT21) that aims to create a regulatory structure for the digital assets industry in the United States. This bill is significant for the crypto industry as it seeks to provide regulatory clarity and certainty, addressing the current fragmented and unclear regulatory framework for digital assets. If passed, the bill would assign regulatory authority to the Commodity Futures Trading Commission (CFTC) for decentralized digital assets and over the cash or spot market for digital commodities, while the Securities and Exchange Commission (SEC) would regulate digital securities that are not decentralized. The bill also includes provisions for joint rulemaking by the SEC and CFTC for digital assets. However, there are differing opinions on the bill, with some concerns raised about potential issues such as the SEC's staffing capacity to review digital assets and the possibility of false claims by crypto issuers to avoid regulation.

The impact of the H.R. 4763 bill on the crypto industry could be substantial. If passed, it could bring much-needed regulatory clarity, which is essential for fostering innovation and trust within the industry. By establishing a regulatory framework, the bill aims to protect investors, promote responsible innovation, and potentially attract more legitimate entrepreneurs and startups to the digital asset space. However, there are differing perspectives on the bill, with some critics highlighting concerns about its effectiveness in addressing illicit activities and the division of regulatory responsibilities between the SEC and CFTC. Ultimately, the passage of this bill could shape the future landscape of the crypto industry in the United States, impacting how digital assets are regulated and traded.

To become a law, the Bill has to pass the Senate and be signed by the president.

Turkey

Turkey’s Parliament is going to discuss a new comprehensive crypto law this week. The draft legislation aims to regulate crypto assets, crypto asset trading platforms, crypto wallets, crypto asset custody services and virtual asset service providers (VASPs) in Turkish legislation for the first time. VASPs will be required to obtain operating licenses issued by the Capital Markets Board of Turkey (CMB). They will be subject to the supervision of the CMB for compliance with the relevant regulations.

The draft law will also provide a legal definition of crypto assets, distinguishing them from capital markets instruments and subjecting them to a different legal regime. Crypto assets are defined as «an intangible asset representing a value or right that can be created and stored virtually through distributed ledger technology or any other similar technology and that can be distributed over digital networks». The crypto assets’ emission will be subject to an approval process by the Scientific and Technological Research Council of Turkey (TÜBİTAK) before being allowed.

The bill introduces a taxation regime for crypto related incomes. If a taxpayer is an individual trader, crypto assets are not taxed with income tax. However, if the taxpayer is an institution that serves as a crypto exchange in Turkey, it should be taxed with VAT and Corporate Tax.

The main intention of the bill proposal is to provide compliance of the capital markets system with Financial Action Task Force (FATF) standards and principles for prevention of money laundering and terrorist financing. Turkey is moving quickly to establish a regulatory framework for crypto assets that will require licensing, define crypto assets, implement an approval process, and clarify taxation. This is aimed at fostering innovation while ensuring compliance with international standards.

Venezuela

Venezuela, once a proponent of cryptocurrency, has recently implemented a ban on crypto mining within the country. This move is part of a broader effort to address corruption and power grid issues. The ban was initiated following a corruption investigation involving the state-run oil company Petróleos de Venezuela SA, where crypto wallets were allegedly used to redirect payments owed to the company. Additionally, the country's power grid has been strained by the high energy consumption of Bitcoin mining farms, leading to frequent blackouts since 2019.

The Venezuelan government has taken several actions to enforce the ban including disconnection of Bitcoin mining farms from the national power grid and seizure of over 11,000 Bitcoin miners as part of an anti-corruption drive.

The ban has significantly impacted the crypto mining industry in Venezuela, with cash-strapped miners potentially facing closure. The move is seen as a setback for an industry that President Nicolás Maduro had previously promoted.

Earlier we wrote about Venezuela’s efforts to circumvent sanctions using crypto.

Other news:

• The U.S. House of Representatives has passed a bill, the «Digital Dollar Pilot Prevention Act», to ban the Federal Reserve from creating a central bank digital currency (CBDC), often referred to as a «digital dollar». However, the bill still faces significant hurdles before becoming law. It must pass the Senate, where it is unlikely to gain traction due to the Democratic majority.

• The U.S. SEC has approved applications from Nasdaq, CBOE, and NYSE to list exchange-traded funds (ETFs) for Ethereum in the USA. The approval of ETH ETFs signals a potential shift in the SEC's stance on crypto and has led to a surge in the price of Ethereum. The approval process for these ETFs involves a two-step process, with the SEC granting the exchanges the green light to list new products.