Biden Receives Crypto Regulation Framework from Treasury

The United States Treasury Department has delivered a crypto framework to President Joe Biden as instructed in the Executive Order (EO) issued back in March. 


The Treasury Department said the framework sent to the President was created in consultation with the Secretary of State, the Secretary of Commerce, the Administrator of the U.S. Agency for International Development (USAID), and the heads of other relevant agencies.

According to the Treasury, the framework calls on the United States’ core allies to collaborate on creating international standards for regulating crypto assets. 

Harmonizing Crypto Regulations Across Borders

The Treasury highlights the need to harmonize approaches that can help to nip in the board regulations in combating crimes emanating from the crypto ecosystem which often spills to foreign jurisdictions.

“Uneven regulation, supervision, and compliance across jurisdictions creates opportunities for arbitrage and raises risks to financial stability and the protection of consumers, investors, businesses, and markets,” the framework reads, adding, “Inadequate anti-money laundering and combating the financing of terrorism (AML/CFT) regulation, supervision, and enforcement by other countries challenge the ability of the United States to investigate illicit digital asset transaction flows that frequently jump overseas, as is often the case in ransomware payments and other cybercrime-related money laundering.”

Also, the Treasury wants the US to take the charge in leading talks with respect to the development of Central Bank Digital Currencies (CBDCs) frameworks. 

“Such international work should continue to address the full spectrum of issues and challenges raised by digital assets, including financial stability; consumer and investor protection, and business risks; and money laundering, terrorist financing, proliferation financing, sanctions evasion, and other illicit activities,” the Treasury noted.

While the United States is now doing all it can to focus on the nascent crypto industry, the European Union is already ahead. The EU agreed on its own comprehensive framework for Markets in Crypto Assets (MiCA) in the past week, with full implementation barely a few years away.

It is not immediately clear how the US and EU will harmonize strategies moving forward but on CBDCs, more work is still ahead and the collaboration may be more meaningful this way.

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Bank of England Outlines Framework for Regulating Crypto Assets

The Bank of England, the Central Bank of the United Kingdom, announced Thursday the first regulatory framework for crypto assets in the country. The UK Central Bank made a move as it admitted that though the crypto sector remained small, its rapid growth could pose risks to financial stability in future if it remains unregulated. - 2022-03-25T124139.489.jpg

Of late, crypto coins have come under the regulatory spotlight amid concerns they can be used to circumvent financial sanctions imposed on Russia since its invasion of Ukraine.

In a statement on Thursday, the Central Bank’s Financial Policy Committee (FPC) stated: “While crypto assets are unlikely to provide a feasible way to circumvent sanctions at scale currently, the possibility of such behaviour underscores the importance of ensuring innovation in crypto assets is accompanied by effective public policy frameworks to… maintain broader trust and integrity in the financial system.”

The Financial Policy Committee said that although direct risks to financial stability from cryptocurrency are currently limited, if the recent growth continues, there would be risks in the future. The committee admitted that crypto-assets like Bitcoin and Ether are largely unregulated as they fall outside the setout regulatory scope. However, the committee now considers a change of law to be made to bring cryptocurrencies inside the full scope of UK securities rules.

According to the FPC, regulation for the crypto sector should be based on “equivalence”. This means that crypto-related financial services that function similarly to the existing traditional financial services should be subjected to the same laws.

The FPC further stated that setting up such a regulatory framework would help mitigate risk associated with stablecoins that do not have a deposit guarantee scheme or regime for winding themselves down if in trouble.

The FPC disclosed that the Central Bank and Financial Conduct Authority (FCA) will conduct further tasks on rules for stablecoins and consult on a regulatory “model” for systemic stablecoins in 2023.

While the UK Central Bank is working on bringing cryptocurrencies fully under the regulatory framework, the regulator has been focusing on ensuring that risks from crypto-assets are controlled in the banking sector.

On Thursday, Sam Woods, the Deputy Governor at the Bank of England, wrote to local lenders about banks and investment firms’ rising interest in offering crypto trading services.

Woods told lenders that the boards of banks should fully consider risks from crypto-assets and therefore adapt their existing risk management strategies and systems. “We would also expect firms to discuss the proposed prudential treatment of crypto-asset exposures with their supervisors,” Woods said in reference to the amount of capital required to cover any losses.

The Central Bank considering CBDC

This is not the first time the UK Central Bank has warned on cryptocurrency risks. Late last year, a senior Bank of England official warned that fast-growing crypto-currency assets could pose a danger to the established financial system. In December, Sir Jon Cunliffe, the Deputy Bank Governor, said that although not much of UK households’ wealth is currently held in assets like Bitcoin, they are becoming more mainstream. The executive emphasized that cryptocurrencies had been “growing very fast”, with people like fund managers wanting to know whether they should hold part of their portfolios in crypto assets.

When cryptocurrency becomes integrated into the financial system, a major worry is that big price correction could significantly affect other markets and affect established financial market participants. Mr. Cunliffe, therefore, urged authorities to beef up measures and get a regulatory framework in place to contain the crypto risks.

One of the counters that the Bank of England has taken is to embark on research and exploration for a potential launch of its own cryptocurrency (a central bank-backed digital currency) to tackle some of the challenges posed by cryptocurrencies such as Bitcoin.

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Iran’s tax authority wants to legalize crypto exchanges

The Iranian National Tax Administration (INTA) is pushing to establish a legal framework for the taxation of crypto trading platforms operating in the country, according to a new proposal by the country’s tax authority.

Two months after Iranian President Hassan Rouhani’s call for a legal framework for crypto trading, INTA reportedly detailed the necessity of legalizing digital asset exchanges in a proposal quoted by the local media.

Reminding Iranian regulators that a legal framework is required for levying the tax, INTA said that the government should only allow authorized exchanges to convert currency while keeping track of transactions.

The tax authority urged to keep the legal framework on the broader side of the spectrum to avoid harsh conditions for crypto exchanges that could cause the proliferation of a black market.

Tax on capital gains, fixed base tax and occupational tax are the three tax regimes on crypto trading platforms proposed by the INTA, though the proposal does not specify the mechanisms for taxing crypto businesses.

Decentralized finance also made its way into the proposal, according to the sources. To comply with the Anti-Money Laundering regulations, the proposal wants to establish an upper limit on transactions occurring on decentralized exchanges.

As Cointelegraph reported in early July, the Iranian Parliament Commission on Economy drafted a new bill to restrict the use of cryptocurrencies within the country while providing a clearer legal framework for miners.

Related: Iran pauses electricity exports due to crypto mining and hot summer

Crypto mining is still legal for licensed miners operating in Iran, although it’s temporarily banned till September due to energy concerns during the hot summer months. Miners are recognized as owners of the digital assets they mint.

Converting one cryptocurrency to another is not illegal, either. But the current law only allows banks and licensed exchanges to use digital currencies mined in Iran to pay for imports while crypto can not be used for payment within the country.

Iran law enforcement spent the summer conducting raids on unlicensed crypto miners. Police seized as much as 7,000 mining rigs in several operations. Last month, the government asked the licensed crypto miners to halt production altogether until further notice.