Autor Cointelegraph By David Attlee

First US State where you can no longer mine crypto: Law Decoded, Nov. 21-28

The state of New York became the first one in the United States to impose a moratorium on proof-of-work (PoW) mining, albeit only for two years. Last week, New York governor Kathy Hochul signed the moratorium into a bill, prohibiting any new mining operations that aren’t based on 100% renewable energy. The renewal of licenses would also be frozen. In eight months, the anti-mining bill made its way from the first passing through the state Assembly to the governor’s pen. The statewide development seems unlucky for New York City mayor Eric Adams, who is focused on making the city a crypto hub. Commenting on the moratorium’s signing into law, Adams sounded more peaceful than he was in June when he promised to ask the governor of the state to veto the document. This time Adams pledged to work with the legislators “who are in support and those who have concerns” and come “to a great meeting place.”At the end of the day, the state of New York remains perhaps the least welcoming place for crypto due to its regulatory regime: Not only do the miners have to get a fully renewable power source now, but the trading platforms are struggling since the hard-to-get BitLicense introduction in 2015. However, some officials believe the national crypto laws should look more like New York’s. US senators urge Fidelity to reconsider its Bitcoin offeringsUnited States senators Elizabeth Warren, Tina Smith and Richard Durbin have renewed their calls for Fidelity Investments to reconsider offering a Bitcoin (BTC)-linked 401(k) retirement product. In a letter addressed to Fidelity Investments CEO Abigail Johnson, the three senators said the recent fall of FTX is more reason than any for the $4.5 trillion asset management firm to reconsider its Bitcoin offering to retirement savers. The senators also added that “charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors” have played a huge role in manipulating the price of Bitcoin, which in turn has impacted 401(k) retirement savings holders who have invested in Fidelity’s Bitcoin product.Continue readingThe Reserve Bank of India to launch a retail CBDC pilot in DecemberThe Reserve Bank of India (RBI) is in the final stage of preparing the rollout of the retail digital rupee pilot. Each bank participating in the trial will test the central bank digital currency (CBDC) among 10,000 to 50,000 users. To integrate the new payment option, the banks will collaborate with PayNearby and Bankit platforms. The CBDC infrastructure will be held by the National Payments Corporation of India (NPCI). Reportedly, at some point, the pilot is going to include all the commercial banks in the country. Earlier the RBI launched the wholesale segment pilot for the digital rupee, with the main use case being the settlement of secondary market transactions in government securities. Continue readingTornado Cash developer to stay detained until next year’s hearingA Dutch court hearing ruled that the Tornado Cash developer Alexey Pertsev would be held for another three months as the investigation continues. The prosecution outlined a broad overview of its investigation, painting Pertsev as a central figure in Tornado Cash’s operation before Advocate WK Cheng delivered his first defensive argument. The advocate confirmed that the first session has been postponed to Feb. 20, 2023, and reiterated his belief that the state had presented a one-sided interpretation of Pertsev’s involvement with Tornado Cash. Continue readingTurkey seizes FTX assets amid the ongoing investigationTurkey’s Financial Crimes Investigation Board (MASAK) has seized assets belonging to Sam Bankman-Fried after launching an investigation into FTX’s affairs in the country. The Turkish investigatory body found that FTX TR failed to safely store user funds, embezzled customer funds through shady transactions, and manipulated supply and demand in the market by having customers buy and sell listed cryptocurrencies that were not backed by actual cryptocurrency holdings.As a result of these findings, MASAK seized Bankman-Fried’s and affiliates’ assets after finding strong “criminal suspicion” on the above-mentioned points. A LinkedIn post from FTX TR noted that the exchange had over 110,000 users and processed an average monthly transaction volume of $500 million–$600 million since the launch of its mobile application earlier in 2022. Continue reading

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Canada crypto regulation: Bitcoin ETFs, strict licensing and a digital dollar

In October, Toronto-based Coinsquare became the first crypto trading business to get dealer registration from the Investment Industry Regulatory Organization of Canada (IIROC). That means a lot as now Coinsquare investors’ funds enjoy the security of the Canadian Investment Protection Fund in the event of insolvency, while the exchange is required to report its financial standing regularly. This news reminds us about the peculiarities of Canadian regulation of crypto. While the country still holds a rather tight process of licensing the virtual asset providers, it outpaces the neighboring United States in its experiments with crypto exchange-traded funds (ETFs), pension funds’ investments and central bank digital currency (CBDC) efforts. An era of restricted dealersCoinsquare, which happens to be Canada’s longest-operating crypto asset trading platform, benefits from its new legal status as none of its competitors can currently boast the same legal footing. By publishing time, all other local players must have the status of a “restricted dealer,” signaling that they’ve made their registration bid and now await IIROC’s decision. The Guidance for Crypto-Asset Trading Platforms was introduced by IIROC and the Canadian Securities Administrators (CSA) in 2021. It requires crypto businesses dealing with security tokens or crypto contracts to register as “investment dealers” or “regulated marketplaces.” All local companies have been given a two-year transitory period, during which they should start the registration process and, in some cases, obtain the “restricted dealer” temporary registration. The list of “restricted dealers” that have been granted a two-year relief period to operate amid the ongoing registration process is rather short and includes mainly local companies, such as Coinberry, BitBuy, Netcoins, Virgo CX and others. These companies still enjoy a right to facilitate buying, selling and holding of crypto assets, but what lies ahead of them is the stringent compliance procedure necessary to continue their operations after 2023. For example, Coinsquare had to obtain an insurance policy that includes an endorsement of losses of crypto assets and fund a trust account maintained at a Canadian bank. The prosecutors have been watching closely for any non-compliance. In June 2022, the Ontario Securities Commission (OSC) issued financial penalties against Bybit and KuCoin, claiming violation of securities laws and operating unregistered crypto asset trading platforms. It obtained orders banning KuCoin from participating in the province’s capital markets and fining the exchange for more than $1.6 million.The land of experiments At the same time, there are adoption cases in Canada that sound radical to the United States. For example, there are dozens of crypto ETFs to invest in the country, while Grayscale still has to lead the court battle with the U.S. Securities and Exchange Commission (SEC) for a right to launch its first ETF. The world’s first Bitcoin (BTC) ETF for individual investors was approved by the OSC for Purpose Investments back in 2021. Purpose Bitcoin ETF accumulates around 23,434 BTC, which is actually a prominent symptom of the bear market. In May 2022, it held around 41,620 BTC. The major outflow from the Purpose Bitcoin ETF occurred in June, when about 24,510 BTC, or around 51% of its asset under management, were withdrawn by investors in a single week. Recent: FTX’s collapse could change crypto industry governance standards for goodAnother breakthrough in Canadian crypto adoption erupted when the country’s largest pension funds started to invest in digital assets. In 2021, the Caisse de Depot et Placement du Québec — one of the largest pension funds in the French-speaking province of Quebec — invested $150 million into Celsius Network.The same month, the Ontario Teachers’ Pension Plan announced its $95-million investment in FTX. Unfortunately, this news didn’t age well as both companies have since collapsed and both pension funds had to write off their investments. Perhaps, in that light, the U.S. Department of Labor’s warning to employers against using pension funds that include Bitcoin or other cryptocurrencies now seems like a prudent precaution. Due to its cold climate, cheap electric supply and light regulation, Canada is among the world’s leading destinations for crypto mining. In May 2022, it accounted for 6.5% of the global BTC hash rate. However, this fall, the firm managing electricity across the Canadian province of Quebec, Hydro-Québec, requested the government to release the company from its obligation to power crypto miners in the province. As the reasoning goes, electricity demand in Québec is expected to grow to the point that powering crypto will put pressure on the energy supplier. The development of the CBDC is another direction where Canada has been moving faster than its neighbor to the south. In March 2022, the Bank of Canada launched a 12-month research project focused on the design of the Canadian digital dollar in collaboration with the Massachusetts Institute of Technology. In October, the Bank of Canada published a research report and proposed several particular archetypes of CBDC as useful for organizing “the possible CBDC designs.” While back in March, there was “no decision made on whether to introduce a CBDC in Canada,” the country’s recent budget amendment contains a small section on “Addressing the Digitalization of Money.” In the statement, the government said consultations with stakeholders on digital currencies, stablecoins and CBDCs are being launched on Nov. 3, although exactly which stakeholders will be engaged remains unclear.The partisan divide The discussion of what could have become Canada’s formal legal framework for crypto — bill C-249 — showed a sharp partisan divide around the topic. A bill for the “encouragement of the growth of the cryptoasset sector” was introduced to the House of Commons in February 2022 by a member of the Conservative party and ex-Minister Michelle Garner. The lawmaker proposed having Canada’s Minister of Finance consult with industry experts to develop a regulatory framework aimed at boosting innovation around crypto three years after the bill’s passage. Despite the voiced support from the local crypto community, the bill didn’t meet much approval among fellow lawmakers. During the second reading on Nov. 21–23, members of other political parties, including the ruling Liberal party, blasted both the proposition and the Conservative party with accusations of promoting the “dark money system,” and Ponzi scheme and bankrupting retirees and as a result, C-249 is now officially buried. While Michelle Garner introduced the bill, Conservative party leader Pierre Poilievre took most of the heat. A former Minister of Employment and Social Development, Poilievre has been advocating for more financial freedom through tokens, smart contracts and decentralized finance. Earlier this year, he urged the Canadian public to vote for him as their leader to “make Canada the blockchain capital of the world.”The next general elections in Canada are scheduled for 2025, and given C-249’s failure and the general condition of the market, it’s not likely that Poilievre and the Conservatives will get broad support in the Parliament for their pro-crypto efforts until that time. Currently, the Conservative party holds only 16 out of 105 seats in the Senate and 119 out of 338 in the House of Commons. What’s nextFrom a trading platform perspective, there are specific challenges that the industry strives to address, Julia Baranovskaya, chief compliance officer and co-founding team member at Calgary-based NDAX, told Cointelegraph. The majority of industry stakeholders would like to see “clear guidelines and a risk-based approach.” Currently, a majority of regulatory authorities in Canada have chosen to apply existing financial industry rules and regulations designed and implemented for the traditional financial industry.However, Baranovskaya highlighted that in recent years, regulators have been engaging in a closer dialogue with the crypto industry. The Securities Commission has created a sandbox and encouraged crypto asset trading platforms and innovative types of businesses offering alternative financial instruments to join. The IIROC has also been leading a dialogue with the industry participants to understand business models better and identify how the current framework can be applied to them.Recent: Bitcoin miners look to software to help balance the Texas gridBut, the challenges of the fragmented regulatory framework and the lack of crypto asset-specific regulations are still here. Most of the existing regulations are based on the product, but with the constantly evolving crypto space, the product-based approach “would always stay a few steps behind.” In Baranovskaya’s words: “Understanding the underlying technology behind crypto assets and De-Fi products that work out a flexible but robust regulatory regime that can adjust to the ever-changing crypto asset space is essential.” 

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Russia intends to launch a ‘national crypto exchange’

Russian lawmakers are working on amendments to launch a national crypto exchange. This effort is reportedly supported both by the Ministry of Finance and the Central Bank of Russia which have a long history of disagreement over crypto regulation in the country. As local media reported on Nov. 23, members of the lower chamber of the Russian parliament, the Duma, have been in discussions regarding amendments to the country’s existing cryptocurrency legislation “On digital financial assets” with market stakeholders. The amendments, which would lay down a legal framework for a national exchange, will first be presented to the central bank. Sergey Altuhov, a member of Duma’s Committee of Economic Policy, highlighted the fiscal sensibility of such measures:“It makes no sense to deny the existence of cryptocurrencies, the problem is they circulate in a large stream outside of state regulation. These are billions of tax rubles of lost tax revenues to the federal budget.“In June, the head of Duma’s Committee on Financial Market, Anatoly Aksakov, suggested that a national crypto exchange in Russia could be launched  as part of the Moscow Exchange, “a respectable organization with long traditions.” In September, the Moscow Exchange drafted a bill on behalf of the central bank to allow trading in digital financial assets. Related: Russia’s central bank report examines crypto’s place in the financial systemEarlier this month, a bill that would legalize cryptocurrency mining and the sale of the cryptocurrency mined, was introduced to Duma. The bill would form a Russian platform for cryptocurrency sales will be, but local miners will also be able to use foreign platforms. In the latter case, Russian currency controls and regulations would not apply to transactions, but they would have to be reported to the Russian tax service.

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Bukele's government introduced a bill to launch the 'Bitcoin bonds'

Amid the crypto market downturn, El Salvador finally makes a decisive step to the realization of its ambitious “Bitcoin bonds” project. The Minister of the Economy Maria Luisa Hayem Brevé introduced  a bill confirming the government’s plan to raise $1 billion and invest them into the construction of a “Bitcoin city.”A 33-page digital securities bill, dated Nov. 17, urges lawmakers to create a legal framework using the digital asses in public issuances by El Salvador. They should also consider all the requirements for this procedure and the obligations of issuers and asset providers. The “volcano bonds” or “Bitcoin bonds” were introduced by the government of Nayib Bukele back in 2021. The initial plan proposed issuing roughly $1 billion of those bonds and allocating the raised funds to the construction of a “Bitcoin city” at the base of the Colchagua volcano. Supposedly, the hydrothermal energy of the volcano would make the city a perfect crypto-mining facility. Half of the raised funds would still be invested directly into Bitcoin. Related: Nayib Bukele announces Bitcoin prescription for El Salvador: 1 BTC a dayDuring the last 12 months, the project has been repeatedly delayed — at some point, its launching phase was scheduled for the beginning of March, then it got postponed to September only to be put off one more time due to “security reasons.” According to some sources, the bill may be approved by legislators before Christmas. Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, which collaborates with the government of El Salvador on the bonds project, seems to be optimistic about that time: https://twitter.com/paoloardoino/status/1595246771097288705After making BTC a legal tender on Sept. 7, 2021, El Salvador accumulated over 2,301 BTC for roughly $103.9 million. During the bull market, the profit from the investment was even used to build schools and hospitals. However, as the country’s economy continues to struggle, 77.1% of citizens prefer the Salvadoran government to stop “spending public money on Bitcoin.”

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The Reserve Bank of India to launch a retail CBDC pilot in December

Having tested the wholesale usage of its central bank digital currency (CBDC), the Reserve Bank of India (RBI) is preparing to conduct the retail pilot of the “digital rupee.” The pilot should launch within a month.According to the Economic Times of India, the RBI is in the final stage of preparing the rollout of the retail digital rupee pilot. Among the participants are the State Bank of India, Bank of Baroda, ICICI Bank, Union Bank of India, HDFC Bank, Kotak Mahindra Bank, Yes Bank and IDFC First Bank. Reportedly, at some point, the pilot is going to include all the commercial banks in the country. Each bank participating in the trial will test the CBDC among 10,000 to 50,000 users. To integrate the new payment option, the banks will collaborate with PayNearby and Bankit platforms. The CBDC infrastructure will be held by the National Payments Corporation of India (NPCI). As the anonymous source specified to Indian journalists: “The e-rupee will be stored in a wallet, the denominations will be available as per the customer’s request, just like you request cash from an ATM. Banks are launching this only in select cities.”Related: Crypto regulation is 1 of 8 planned priorities under India’s G20 presidency — Finance MinisterBoth customers and merchants will have to download the special wallets for the CBDC, although later the RBI plans to fully integrate it with existing digital banking services. Reportedly, the digital rupee is intended as a supplement to the current payment system and not its replacement. The wholesale segment pilot for the digital rupee was launched by RBI on Nov. 1. Its main use case has been the settlement of secondary market transactions in government securities. However, no information on the successful ending of the wholesale pilot is available at the time of writing.

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