Značka: government

U.S. Congressman calls for ‘Broad, bipartisan consensus’ on important issues of digital asset policy

In a letter to the leadership of the United States House Financial Services Committee, ranking member Patrick McHenry took a jab at “inconsistent treatment and jurisdictional uncertainty” inherent in U.S. crypto regulation and called for the Committee to take on its critical issues.McHenry, a Republican representing North Carolina, opened by mentioning that the Committee’s Democrat Chairwoman Maxine Waters is looking to schedule additional hearings addressing matters pertinent to the digital asset industry. He further stressed the need for identifying and prioritizing the key issues and achieving a “broad, bipartisan consensus” on the matters affecting the industry that holds immense promise for the financial system and broader economy.Citing the confusion that the industry faces due to the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission’s (SEC) competing claims for jurisdiction over digital assets, McHenry noted that neither of their positions is grounded in statute. Congress, he maintained, should not hand digital asset regulation over to regulatory agencies or courts, but rather step in to categorize the new asset class and lay down the rules governing it.Furthermore, Congressman McHenry suggested that the Financial Services Committee take a close look at the stablecoin report drafted by the President’s Working Group on Financial Markets (PWG) and examine the Federal Reserve’s position and future steps with regard to a U.S. central bank digital currency (CBDC).In December last year, the U.S. House Financial Services Committee hosted a crypto-focused hearing that featured a strong lineup of industry executives and was widely lauded as a massively productive exchange between policymakers and digital asset stakeholders.

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Indonesia's Crypto Industry in 2021: A Kaleidoscope

In 2021, the number of global crypto holders has been estimated to have increased by 3.9% to more than 300 million crypto users worldwide, with more than 18,000 businesses already accepting cryptocurrencies as payment. India is currently in the lead with 100 million users, followed by the United States with 27 million users and Russia with 17 million users.According to data from Triple A, Indonesia has the seventh-largest crypto user base, below Brazil and Pakistan. It is estimated that there are 7.2 million Indonesians who own cryptocurrencies, while according to the Indonesian Blockchain Association, as of July 2021, the number of crypto owners in Indonesia is 7.4 million people, an increase of 85% from 2020. This number is significantly more than the number of stock investors in Indonesia with only 2.7 million investors, based on data from the Indonesia Stock Exchange.The total population of Indonesia in June was 272 million people, which means that only 2.7% of the Indonesian population owns crypto. This shows that there is still room for the crypto industry to grow, develop and reach more corners of Indonesian society.The rapid growth of crypto investors in Indonesia is partly the result of Indonesian regulators that have welcomed crypto and blockchain developments with open arms. Throughout 2021, there have been many discussions with officials, new crypto regulations and developments in the sector. According to Dhila Rizqia, head of growth at local industry media firm Coinvestasi, the growing number of Indonesian crypto investors is also reflected in the rise of the crypto media. “In 2021, Coinvestasi has gained a lot of new audiences across our channels, including Instagram and YouTube which have grown over 1,787% and 1,388%, respectively.”2021 has been an incredible ride for cryptocurrencies, in this article we’ll take a look at the hottest trends in the Indonesian crypto industry last year.Whitelist of legal digital assetsBitcoin (BTC) is legal in Indonesia as a commodity and can be traded on crypto exchanges. Early this year, the Commodity Futures Trading Regulatory Agency (BAPPEBTI) issued a whitelist of legal crypto assets for trading in Indonesia. This whitelist consists of 229 crypto assets, including Bitcoin, Ether (ETH), Polkadot (DOT), Cardano (ADA) and the popular memecoin Dogecoin (DOGE), that are allowed for trading on registered exchanges. These crypto assets are selected by two approaches: The first is a juridical approach which looks at the top 500 coins based on market cap in accordance with the provisions in regulation Number 5 of 2019. The second is through a process of hierarchy analysis, wherein BAPPEBTI assesses the security aspects, profiles of the founders and developer team, blockchain system governance, blockchain system scalability, roadmap and its verifiable progress. Crypto taxationWith the growth of crypto users and investors in Indonesia, the government, through BAPPEBTI and the Director General of Taxes, is also considering imposing taxes on crypto trading. For now, crypto taxation is still under discussion with several market players such as exchanges and industry associations. BAPPEBTI stated that the crypto tax in Indonesia could be around 0.05%, lower than the 0.1% tax imposed on stock trades.Meanwhile, the government has reportedly begun to discuss an income tax for investors in crypto assets of 0.03%. Crypto is haramThe question of Bitcoin and crypto assets being halal (permissible) or haram (forbidden) under Islamic law has been a long and heated debate. As a country with a majority Muslim population, the topic is of particular importance for Indonesia.In October, the East Java branch of one of Indonesia’s largest Islamic organizations ruled that while the government may approve of cryptocurrencies, they cannot be considered halal “based on several considerations, including the prevalence of fraud, it is considered unlawful.”Less than one month later, the National Ulema Council (MUI) — Indonesia’s top Islamic scholarly body — found cryptocurrencies to be haram due to alleged elements of “uncertainty, wagering and harm.”Furthermore, the trading of crypto as a digital commodity/asset did not meet other requirements of Islamic financial law because, according to the MIU, it lacked necessary elements such as having a physical form, having value, being proprietary and able to be handed over to the buyer. NFTs find support from celebrities to the governor The development of nonfungible tokens (NFTs) in Indonesia took off in 2021, especially after Ridwan Kamil, the Governor of West Java, jumped on this trend by inviting artists from West Java to create and promote their art as NFTs to be traded on NFT platforms such as OpenSea. NFT: A NEWMIND ECONOMYSeiring dgn logika2 baru ekonomi digital. Saya akan memulai transformasi kesejahteraan baru newmind economy utk para pelaku ekonomi kreatif.Yaitu bantu menjualkan karya2 seniman jalanan di bursa aset digital dunia yaitu NFT via pasar marketplace Opensea. pic.twitter.com/p91VlRBtZI— ridwan kamil (@ridwankamil) November 25, 2021Indonesian singer Syahrini sold 17,800 NFTs for 20 Binance USD (BUSD) or around 286,300 rupiahs per NFT on the Binance NFT exchange, netting the singer a total income of around 5.1 billion rupiahs, or $356,000.There is also chef Arnold Poernomo, a celebrity chef who also created his own NFT and promoted it on Twitter.Exchange tokensExchange-issued tokens such as Binance Coin (BNB) and FTX Token (FTT) can be used by holders to get benefits provided by the exchange such as discounts on deposits, no withdrawal fees, opportunities to participate in promotional activities and so on. Indonesian local exchanges began to issue their own such tokens in 2021, with Tokocrypto releasing Toko Token (TKO) in collaboration with Binance on Binance Launchpad. From the beginning of this year’s listing, TKO has increased by over 1,000%.Domestic crypto exchange PINTU launched its Pintu Token (PTU) in November, which is now available on various exchanges such as Bybit and FTX and is also supported by leading investors like Lightspeed, Coinbase and Pantera.With two local exchanges launching their own native tokens in 2021, it will be interesting to see if other exchanges such as Indodax, Rekeningku or Triv follow suit in 2022.Binance partners with largest Indonesian telcoTo cap off the year Binance partnered with a subsidiary of Telkom Indonesia, MDI Ventures, to create a new exchange.Within the collaboration, Binance will provide infrastructure and asset management technology to support the development of a crypto-asset exchange platform, which will be a joint venture between the two firms.Donald Wihardja, the CEO of MDI, said that the partnership will help advance crypto and blockchain, which he believes are the financial systems of the figure.With a friendly regulatory atmosphere, support and partnerships from global cryptocurrency firms, and growing interest in digital asset trading, it will be interesting to see how the industry continues to develop in 2022.

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How should DeFi be regulated? A European approach to decentralization

Decentralized finance, known as DeFi, is a new use of blockchain technology that is growing rapidly, with over $237 billion in value locked up in DeFi projects as of January 2022. Regulators are aware of this phenomenon and are beginning to act to regulate it. In this article, we briefly review the fundamentals and risks of DeFi before presenting the regulatory context.The fundamentals of DeFiDeFi is a set of alternative financial systems based on the blockchain that allows for more advanced financial operations than the simple transfer of value, such as currency exchange, lending or borrowing, in a decentralized manner, i.e., directly between peers, without going through a financial intermediary (a centralized exchange, for example).Schematically, a protocol called a DApp (for decentralized application), such as Uniswap or Aave, is developed in open source code on a public blockchain such as Ethereum. This protocol is powered by smart contracts, i.e., contracts that are executed automatically when certain conditions are met. For example, on the Uniswap DApp, it is possible to exchange money between two cryptocurrencies in the Ethereum ecosystem, thanks to the smart contracts designed to perform this operation automatically.Users are incentivized to bring in liquidity, as they receive a portion of the transaction fee. As for lending and borrowing, smart contracts allow those who want to lend their funds to make them available to borrowers and borrowers to directly borrow the money made available by guaranteeing the loan with collateral (or not). The exchange and interest rates are determined by supply and demand and arbitrated between the DApps.The great particularity of DeFi protocols is that there is no centralized institution in charge of verifying and carrying out the transactions. All transactions are performed on the blockchain and are irreversible. Smart contracts replace the intermediary role of centralized financial institutions. The code of DeFi applications is open source, which allows users to verify the protocols, build on them and make copies.The risks of DeFiBlockchain gives more power to the individual. But with more power comes more responsibility. The risks DeFi are of several kinds: Technological risks. DeFi protocols are dependent on the blockchains on which they are built, and blockchains can experience attacks (known as “51% attacks”), bugs and network congestion problems that slow down transactions, making them more costly or even impossible. The DeFi protocols, themselves, are also the target of cyberattacks, such as the exploitation of a protocol-specific bug. Some attacks are at the intersection of technology and finance. These attacks are carried out through “flash loans.” These are loans of tokens without collateral that can then be used to influence the price of the tokens and make a profit, before quickly repaying the loan.Financial risks. The cryptocurrency market is very volatile and a rapid price drop can occur. Liquidity can run out if everyone withdraws their cryptocurrencies from liquidity pools at the same time (a “bank run” scenario). Some malicious developers of DeFi protocols have “back doors” that allow them to appropriate the tokens locked in the smart contracts and thus steal from users (this phenomenon is called “rug-pull”).Regulatory risks. Regulatory risks are even greater because the reach of DeFi is global, peer-to-peer transactions are generally anonymous, and there are no identified intermediaries (most often). As we will see below, two topics are particularly important for the regulator: the fight against money laundering and terrorist financing, on the one hand, and consumer protection, on the other.The FATF “test”: Truly decentralized?As of Oct. 28, 2021, the Financial Action Task Force (FATF) issued its latest guidance on digital assets. This international organization sought to define rules for identifying responsible actors in DeFi projects by proposing a test to determine whether DeFi operators should be subject to the Virtual Asset Service Provider or “VASP” regime. This regime imposes, among other things, Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) obligations.The FATF had initially considered, last March, that if the decentralized application (the DApp) is not a VASP, the entities “involved” in the application may be, which is the case when “the entities engage as a business to facilitate or conduct activities” on the DApp.The new FATF guidance drops the term “facilitate” and instead adopts a more functional “owner/operator” criterion, whereby “creators, owners, and operators … who retain control or influence” over the DApp may be VASPs even though the project may appear decentralized.Related: FATF guidance on virtual assets: NFTs win, DeFi loses, rest remains unchangedFATF, under the new “owner/operator” test, states that indicia of control include exercising control over the project or maintaining an ongoing relationship with users. The test is this:Does a person or entity have control over the assets or the protocol itself?Does a person or entity have “a commercial relationship between it and customers, even if exercised through a smart contract”?Does a person or entity profit from the service provided to customers?Are there other indications of an owner/operator?FATF makes clear that a state must interpret the test broadly. It adds:”Owners/operators should undertake ML/TF [money laundering and terrorist financing] risk assessments prior to the launch or use of the software or platform and take appropriate measures to manage and mitigate these risks in an ongoing and forward-looking manner.”The FATF even states that, if there is no “owner/operator,” states may require a regulated VASP to be “involved” in DeFi project-related activities… Only if a DeFi project is completely decentralized, i.e., fully automated and outside the control of an owner/operator, is it not a VASP under the latest FATF guidance.It is regrettable that a principle of neutrality of blockchain networks has not been established, similar to the principle of neutrality of networks and technical intermediaries of the internet (established by the European directive on electronic commerce more than 20 ago).Indeed, the purely technical developers of DeFi solutions often do not have the physical possibility to perform the checks imposed by the AML/CFT procedures in the design of current DApps. The new FATF guidance will likely require DApp developers to put in Know Your Customer (KYC) portals before users can use the DApps.Application of security law?We are all familiar with the legal debate that has become classic when it comes to qualifying a token: Is it a utility token, now subject to the regulation of digital assets (ICOs and VASPs), or is it a security token that is likely to be governed by financial law?We know that the approach is very different in the United States where the Securities Exchange Commission (by applying the famous “Howey Test”) qualifies tokens as securities that would be seen as digital assets in Europe. Their approach is, therefore, more severe, and this will certainly result in more prosecutions of “owners” of DeFi platforms in the U.S. than in Europe.Thus, if DeFi services do not involve digital assets, but tokenized financial securities as defined by the European Markets in Financial Instruments Directive (MiFID Directive), the rules for investment services providers (ISPs) will have to be applied. In Europe, this will be a rare case as the tokens traded would have to be actual financial securities (company shares, debt or investment fund units).Related: Collateral damage: DeFi’s ticking time bombHowever, national regulations are likely to apply. For example, in France, it will be necessary to determine whether the regulation on intermediaries in various goods (Article L551-1 of the Monetary Code and following) applies to liquidity pools.Indeed, pools allow clients to acquire rights on intangible assets and put forward a financial return. Theoretically, it would no longer be excluded that the Autorité des marchés financiers (AMF) decides to apply this regime. As a consequence, an information document will have to be approved by the AMF before any marketing.However, in practice, there is not one person who proposes the investment, but a multitude of users of the DApp who bring their liquidity in a smart contract coded in open source. This brings us back to the test proposed by the FATF: Is there an “owner” of the platform who can be held accountable for compliance with the regulations?The MiCA regulationOn November 24, the European Council decided its position on the “Regulation on Cryptoasset Markets” (MiCA), before submitting it to the European Parliament. It is expected that this fundamental text for the cryptosphere will be adopted by the end of 2022 (if all goes well…).The draft EU regulation is based on a centralized approach by identifying a provider responsible for operations for each service, which does not work for a decentralized exchange platform (like Uniswap) or a decentralized stablecoin.Related: Europe awaits implementation of regulatory framework for crypto assetsWe should think about a legal system that takes into account the automated and decentralized nature of systems based on blockchain, so as not to impose obligations on operators who do not have the material possibility of respecting them or who run the risk of hindering innovation by removing the reason for progress: decentralization.Europe has already shown itself capable of subtle arbitration in matters of technological regulation if we refer in particular to the proposal for a European Union regulation on artificial intelligence. This approach could serve as a source of inspiration.Regardless of the balance chosen by the regulator, investors should become as informed as possible and pay attention to the technological, financial and compliance risks before undertaking a DeFi transaction.As for DeFi application developers and service providers in this field, they must remain attentive to regulatory developments and cultivate a culture of transparency in their operations to anticipate regulatory risk as much as possible.This article was co-authored by Thibault Verbiest and Jérémy Fluxman.This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.Thibault Verbiest, an attorney in Paris and Brussels since 1993, is a partner with Metalaw, where he heads the department dedicated to fintech, digital banking and crypto finance. He is the co-author of several books, including the first book on blockchain in French. He acts as an expert with the European Blockchain Observatory and Forum and the World Bank. Thibault is also an entrepreneur, as he co-founded CopyrightCoins and Parabolic Digital. In 2020, he became chairman of the IOUR Foundation, a public utility foundation aimed at promoting the adoption of a new internet, merging TCP/IP and blockchain. Jérémy Fluxman has been an associate at international law firms in Paris and Luxembourg in the fields of private equity and investment funds, as well as at a Monaco law firm since 2017. He holds a master II in international business law and is currently an associate at the Metalaw firm in Paris, France where he advises on fintech, blockchain and crypto-finance.

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El Salvador buys its cheapest 410 Bitcoin as prices reach $36k

The Central American country of El Salvador has added 410 Bitcoin (BTC) to its central reserve as BTC prices trade below $37,000, a price last seen on July 26th, 2021. The fresh addition to El Salvador’s BTC reserve was announced by President Nayib Bukele, who confirmed that the purchase of 410 BTC was made against $15 million, placing the price at approximately $36,585 per BTC.Nope, I was wrong, didn’t miss it.El Salvador just bought 410 #bitcoin for only 15 million dollars Some guys are selling really cheap ‍♂️ https://t.co/vEUEzp5UdU— Nayib Bukele (@nayibbukele) January 21, 2022El Salvador adopted BTC as a legal tender on Sept. 7, 2021, as a means to overcome catastrophic inflation amid the weakening spending power of the nation. Fast forward to today, the country has strategically accumulated 1,801 BTC over the past four months, especially when the market sees a momentary price fall.The latest purchase is currently the cheapest acquisition for El Salvador ever since the country adopted BTC as a legal tender.With BTC trading just above the $36,000 mark and the resultant sell-off, Bukele believes that “some guys are selling really cheap,” supporting his long-term vision of mainstream Bitcoin adoption.Bitcoin price movement. Source: TradingView.As evidenced above by data from Cointelegraph Markets Pro and TradingView, BTC experienced a steady rise in prices from mid-July, which resulted in an all-time high of almost $69k in the first week of November. However, the next three months saw a steep decline in market prices as investors redirected BTC profits into buying other tokens.Related: Nations to adopt Bitcoin, crypto users to reach 1B by 2023: ReportA new report from Crypto.com predicts that the global crypto market will host one billion users by the end of 2022 as more developing nations mimic El Salvador’s move to mainstream BTC adoption.Monthly growth of crypto owners. Source: Crypto.com.As Cointelegraph reported, Crypto.com estimates that “If we extrapolate a similar rate of increase in 2022, we are on track to reach 1 billion crypto users by the end of 2022.” The report concludes that a combination of developing nations following El Salvador and a “friendlier stance” towards the crypto industry means that “nations can no longer afford to ignore the growing push towards crypto by the public.”

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Reuters: Binance was withholding information from regulators, repeatedly shunned own compliance department

In a report published on Friday, Reuters laid out the findings of its investigation into the regulatory compliance practices of Binance, the world’s largest cryptocurrency exchange by trading volume.The authors suggest the existence of a recurring pattern whereby the company’s CEO Changpeng Zhao, while proclaiming its openness to government oversight, ran an organization that systematically denied regulators’ requests for financial and corporate structure information and shirked proper client background checks.The reported findings are based on the accounts of Binance’s former senior employees and advisers, as well as the review of documents such as internal correspondence and confidential messages between several national regulators and the company. According to the document, several high-ranking employees have repeatedly raised concerns of weak Know Your Customer/Anti-Money Laundering (KYC/AML) standards at the company but were ignored by the CEO.Additionally, the company reportedly acted against the recommendations of its own compliance department when it continued onboarding new customers from seven countries designated to be of extreme money-laundering risk.The big-picture takeaway that the authors of the report offered is that the described pattern of behavior allowed Binance to maintain ambiguous jurisdictional affiliation and opaque corporate structure while offering financial products that would normally require regulatory approval or licensing in many of its countries of operation.In response to Reuters’ inquiry, the company spokesperson said that the report’s findings were based on outdated or outright incorrect information. Binance CEO Changpeng Zhao later commented via Twitter saying:FUD. Journalists talking to people who were let go from Binance and partners that didn’t work out trying to smear us. We are focused on anti-money laundering, transparent and welcome regulation. Action speaks louder than words. Thank you for your unwavering support! — CZ Binance (@cz_binance) January 21, 2022As Cointelegraph reported, despite ongoing investigations into suspicious activity on its platform in several jurisdictions, Binance continues expanding into new markets, with the most recent move tied to a possible deployment in Thailand.

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Witnesses address energy impacts of crypto mining during House hearing

Five industry experts appearing before the United States House Energy and Commerce Oversight Subcommittee had different views on how lawmakers should address the energy consumption of cryptocurrencies.In written testimony released before a Thursday hearing on “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains,” former Comptroller of the Currency Brian Brooks argued that the energy consumption of Bitcoin (BTC) mining was “economically productive,” given other assets including gold required roughly the same amount of energy for mining, with the “a host of other environmental concerns.” In addition, Brooks said that the traditional global banking system consumed roughly 2.5 times the amount of power to produce the same amount of value BTC does at its current market capitalization.John Belizaire, the founder and CEO of Soluna Computing and another witness appearing at the hearing, said that from an energy perspective, the miners and computers needed to power crypto are “not a waste” and could encourage the development of renewable energy sources. The CEO said that, unlike other banking systems, Bitcoin mining included the option of turning the systems off when necessary, giving miners the ability to absorb excess energy from an area’s electrical grid rather than straining it.Cornell Tech professor Ari Juels, who has often been a critic of crypto mining as it currently stands, was supportive of the crypto space as a whole but argued in favor of “energy-efficient alternatives” rather than the proof-of-work (PoW) common for mining. He added that the Ethereum blockchain’s transition to proof-of-stake (PoS) would likely consume “far less electricity” and have features including smart contracts and nonfungible tokens — unlike Bitcoin.“Bitcoin does not equal blockchain,” said Juels. “The tremendous promise of blockchain technology does not require Bitcoin or its energy-intensive component called proof-of-work.”Steve Wright, a recently retired former general manager of the Chelan County in Washington, similarly hinted that mining firms should consider “mechanisms to assure cryptocurrency production is encouraged toward efficient outcomes as early as possible.” Wright noted that the high value of clean energy costs in the area seems to be pushing many crypto miners towards carbon-emitting, fossil-fired sources of power for “at least the near term.”Related: Bitcoin mining becomes more sustainable: Mining Council’s Q4 surveyU.S. lawmakers seem to be giving crypto and blockchain a great deal of attention as the space grows. In December, the Senate Banking Committee held a hearing on stablecoins and how the U.S. might participate in the race to adopt digital currencies. Brooks also testified at a House committee hearing that same month on digital assets’ role in the future of finance.“Although digital tokens are a highly speculative and volatile asset class, they also represent the promise of a more open, more widely shared internet,” said Gregory Zerzan, a shareholder at business law firm Jordan Ramis. “If policymakers take a cautious approach and foster a pro-innovation environment, the rewards for consumers, investors and all Americans are likely to be great.”

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SEC Advisory Committee member calls agency to open for public comment on crypto regulation

Associate law professor and member of the Securities and Exchange Commission’s Investor Advisory Committee J.W. Verret is calling for the government agency to open for public comment in regards to digital asset regulation.In a petition addressed to SEC Secretary Vanessa Countryman, Verret said opening the floor to comments on digital assets could function as a Genesis Block for the SEC to reform its regulations on digital assets. Verret said he was a holder of Bitcoin (BTC), Ether (ETH), and “a number of layer 1 and layer 2 tokens readily available on top tier exchanges,” and was concerned how the SEC could potentially crack down on tokens it currently does not consider securities.“Under the SEC’s ‘strategically ambiguous’ interpretation of the Howey test regarding classification of investment contracts, I cannot be certain that the SEC will not in the future target one of my token holdings, under the guise of the Commission’s investor protection mission, in a manner that would ultimately cause me significant losses as a property owner,” said Verret. “This open call for comment is the only way to appropriately crowd source this issue and appropriately develop a digital asset regulation Genesis Block.”I filed a reg petition with the SEC to open a call for public comment re: digital asset regulation. There are nuances that SEC ignores in their speeches and “Howey” threats. Let’s crowd source this and start a genesis block for 21st century reg. https://t.co/lZQXPeqq93— Prof. J.W. Verret, JD, CPA/CFF, CVA, CFE (@JWVerret) January 18, 2022Since the 1940s, the SEC has used the Howey Test to determine whether certain assets qualify as “investment contracts” and are considered securities. Many experts consider the SEC’s 2017 DAO Report, in which it said that digital assets could indeed qualify, as one of the most significant regulatory moments for cryptocurrencies in the United States.Citing his experience as a law professor, Verret implied that the SEC’s application of the Howey Test on digital assets was inconsistent from the language used in the Supreme Court decision, potentially leading to cases that could result in the highest court overturning the 1946 case: “The SEC’s present course appears to be one designed to strategically bring cases using the Howey test as a weapon against tokens (and token trading services and technologies) which cannot reasonably be registered as securities (or securities exchanges) under the regulations promulgated pursuant to the ‘33 and ‘34 Acts, even if they wanted to and were required to do so (despite neither necessarily being true). I believe this is ultimately a losing strategy for the SEC as an institution.”According to Verret, the current regulatory path the SEC is taking seems not to recognize that “digital assets, by their very design, do not fit within the classic framework of regulations designed for equity investments in firms led by boards of directors.” The law professor also criticized SEC chair Gary Gensler’s approach of asking crypto projects to “come in and talk to us,” saying many could be concerned that “engaging with the SEC may make their project the next enforcement target of the SEC.”In his call for the SEC to open for public comment “to establish a core Digital Asset Regulation Genesis Block,” Verret suggested having the agency address investor protections around crypto, where blockchain-based tokens in decentralized projects could fall within current securities regulations, how federal securities laws might take into account “unique aspects of token offerings,” and Commissioner Hester Peirce’s proposal for a three-year safe harbor for certain crypto projects. In addition, he called for a question on what requirements the SEC will consider in approving a Bitcoin spot exchange-traded fund. Related: US lawmaker proposes safe harbor for digital tokens in new billWhile the agency has given the green light to BTC futures-linked ETFs, it has repeatedly rejected applications from companies seeking ETFs with direct exposure to crypto. ProShares launched the first BTC futures-linked ETF in the United States on the New York Stock Exchange in October, with a similar crypto investment product from Valkyrie later launching on the Nasdaq.“All five SEC Commissioners have a unique opportunity to stake this development with their own priorities via the design of the call for comment,” said Verret. “This Digital Asset Reg Genesis Block can commence an interactive process that can make securities regulation more flexible, more robust, and ultimately better protect investors.”

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Bitcoin miners’ resilience to geopolitics — A healthy sign for the network

Considering that Bitcoin (BTC) is a blockchain network that uses a proof-of-work (PoW) consensus mechanism, miners are a highly significant part of the market dynamics of the network and the community itself. On Jan. 5, it was revealed that Kazakhstan shut down its internet services due to unprecedented political unrest sparked by rising fuel prices in the country.The protests in Kazakhstan began on Jan. 2 in the town of Zhanaozen to fight against the government doubling the price of liquefied petroleum gas (LPG), which is widely used as car fuel in the country. This change in pricing came as a result of the gradual transition to the use of electronic trading of LPG in order to abolish the existing state subsidies for fuel and allow the market to discover the price of the asset.However, protests in the region soon snowballed, gaining more momentum and continued despite the country’s government announcing that the prices of LPG would be brought down to a level lower than before the increase. Soon, this led to the country’s presiding cabinet resigning and the state-owned telecom company, Kazakhtelecom, shutting off the country’s internet services. Network data provider Netblocks reported that the normalized network connectivity fell down to 2%, with the government attempting to limit coverage on the escalating anti-government protests.As a result, the Bitcoin network’s mining hash rate declined over 13% in the hours after the shutdown in the country from 205,000 petahash per second (PH/s) to 177,330 PH/s. Over the past year, the country grew to account for 18% of Bitcoin’s mining activity. A report from the Data Center Industry & Blockchain Association of Kazakhstan estimated that cryptocurrency mining would bring in $1.5 billion in revenue for the country in the next five years.This is not the first time that Bitcoin mining in the region has received the spotlight. Despite being an energy-rich country, the Kazakh government announced last year that it planned to crack down on unregistered miners that were straining the country’s energy supply after the mining migration from China.Kazakhstan’s mining market shareThe Central Asian country became a hub for Bitcoin mining after the Chinese government banned mining operations and cryptocurrency services in 2021. This led to the migration of mining companies like BIT Mining to relocate their operations from China to Kazakhstan. BIT Mining is one of the largest BTC mining companies in the world. The mining company has indicated that it is unlikely to flee Kazakhstan to relocate to North America amid the political upheaval. The firm is closely monitoring and evaluating the situation in order to decide its next move with respect to mining. However, countries like Spain have had their eyes on Kazakhstan’s mining market share. The Deputy for the Spanish Ciudadanos political party, María Muñoz, proposed to make the country a mining hotspot amid the current situation, stating in a tweet, “The protests in Kazakhstan have repercussions all around the world but also for Bitcoin. We propose that Spain positions itself as a safe destination for investments in cryptocurrencies to develop a flexible, efficient, and safe sector.”Rob Chang, the CEO and director of Gryphon Digital Mining, a digital assets mining company, told Cointelegraph:“Bitcoin mining will continue to grow and the need for viable locations will always be necessary. Countries with the foresight to make themselves Bitcoin-friendly will stand to do quite well as Bitcoin continues to establish itself as a legitimate alternative to fiat.”As a result of China’s mining ban, the mining dynamics have shifted globally, with the United States leading the charge with over a third of the mining rate. Chang said that one benefit of this migration includes rehomed miners’ shift to a larger mix of carbon-free energy sources.Additionally, some of the hash rates has gone to more transparent entities operating the mining machines, leading to increased security for the network and a higher level of public trust in Bitcoin miners.Illia Polosukhin, the co-founder of the NEAR Protocol, a decentralized development platform, told Cointelegraph that in addition to China’s ban leading to a loss of investment, the loss of talent is another major factor:“Chinese citizens living on the mainland and abroad are banned from working in the crypto sector, and that’s a big loss for the blockchain industry as a whole. It will stifle innovation and, eventually, leave Chinese citizens behind as more users begin to adopt Open Web technologies. It’s possible that more mining operations shifting to the United States could push the issue of blockchain and sustainability more fully into the public eye.”Thriving amid geopolitical risks is rare for financial assetsThe mining hash rate for the Bitcoin network recovered quickly from the drop to 168 million TH/s, according to data from YCharts. In fact, the network has taken a step forward with the hash rate hitting a new all-time high of 215 million TH/s on Jan. 13.We’re officially building an open bitcoin mining system ✨ https://t.co/PaNc7gXS48— jack⚡️ (@jack) January 13, 2022This new all-time high was driven by the statement from ex-Twitter CEO Jack Dorsey, announcing the creation of an open Bitcoin mining system. Thomas Templeton, the general manager of hardware at Square, said, “We want to make mining more distributed and efficient in every way, from buying, to set up, to maintenance, to mining. We’re interested because mining goes far beyond creating new bitcoin. We see it as a long-term need for a future that is fully decentralized and permissionless.”This new all-time high is evidence of how resilient the Bitcoin network and its community are to ensure that the network thrives at all costs. However, it’s important to remember that such risks are not exclusive to Bitcoin. Chang said, “Geopolitical risk is a common issue for many industries, and Bitcoin mining is not immune. While there will be some that will take the risk and operate in these countries for the sake of lower costs, they do run the risk, such as those experienced in Kazakhstan or others such as the government deciding one day to take all of your machines. Operators will need to understand the risk/reward tradeoff.”Related: A new intro to Bitcoin: The 9-minute read that could change your lifePolosukhin explained that no matter how distributed or decentralized a blockchain network is — Bitcoin or any other — it’s still intertwined with many legacy systems: energy grids, energy prices, regulation and the laws of nations. Bitcoin mining has either been banned or is facing uncertainty in many countries including Iran, Lebanon, Iceland and Sweden.Being an energy-intensive PoW network, the Bitcoin network is expected to continue to thrive as long as miners are incentivized economically to continue to remain miners. A report from Fidelity Digital Assets, the crypto wing of Fidelity Investments, indicated that the Bitcoin cycle is far from over, and with the high financial incentives for miners, they are in it for the long haul. While Bitcoin is in a price slump, currently trading around the $42,000 range with a market capitalization of $791 billion, the fact that miners — the core aspect of the network — have shown resilience to adverse situations over the 13-year history of the network reinforces the belief and trust the community puts on the flagship blockchain network.

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Law Decoded: First-mover advantage in a CBDC conversation, Jan. 10–17

Last week saw an unlikely first move in the opening narrative battle around a prospective U.S. central bank digital currency: Congressperson Tom Emmer came forward with an initiative to legally restrict the Federal Reserve’s capacity to issue a retail CBDC and take on the role of a retail bank. This could be massively consequential as we are yet to see a similarly sharp-cut expression of an opposing stance. As a matter of fact, it is not even clear whether other U.S. lawmakers have strong opinions on the matter other than, perhaps, condemning privately issued stablecoins as a digital alternative to the dollar. By framing a potential Fed CBDC as a privacy threat first, Emmer could tilt the conversation in the direction that is friendly to less centralized designs of digital money.Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.U.S. representative vs. U.S. CBDCThe tension between decentralized digital money and state-issued CBDCs is at the heart of the ongoing global shift toward digital payment rails. Last week marked the first-ever instance of a sitting U.S. member of Congress taking a formal stance against the Federal Reserve’s potential retail CBDC move.Sovereign digital fiat will undoubtedly be more convenient than its analog predecessor, yet the privacy costs of such convenience might be enormous. If all money is CBDC, the government’s financial surveillance capacity will become virtually unlimited, denying people the anonymity that cash transactions once afforded. Representative Emmer cited these privacy concerns as a rationale for introducing the bill that would ban the Fed from issuing a CBDC directly to consumers and acting as a retail bank.While it may take a long time before Emmer’s initiative reaches the House floor, the mere articulation of such a position by a member of Congress can have a significant impact on the course of the policy conversation around a potential CBDC. This is especially true in the light of some top Fed officials’ stated willingness to defer to Congress on the issue.Another ban scare, another El SalvadorElsewhere in the world, the signals that various regulators have been sending over the past week ran the gamut from potentially banning crypto transactions in Pakistan to considering the replication of El Salvador’s Bitcoin-as-legal-tender move in Tonga. Pakistan’s drive toward a blanket ban follows a familiar scenario where it is the nation’s central bank that is actively committed to outlawing crypto transactions and penalizing crypto exchanges. The task of determining the legal status of cryptocurrencies fell to the High Court of the province of Sindh, yet the judges refrained from making the final call and passed the issue on to the specialized government ministries. On the opposite side of the regulatory spectrum, the island nation of Tonga could be embarking on the Bitcoin adoption trail soon. An announcement by Lord Fusitu’a, a former member of the Tongan parliament and chairman of several regional interparliamentary groups, suggested that the country could make Bitcoin legal tender as soon as late 2022. Given Tongans’ heavy reliance on remittances, replicating El Salvador’s move almost identically seems logical.IMF sees the demise of crypto’s hedge roleAmong many risk factors that analysts ascribed to digital assets over the years, the financial stability risk that stems from crypto’s growing correlation with equity markets comes across as a novel talking point. Yet this is what a group of the International Monetary Fund researchers concluded upon examining the dynamics of Bitcoin to S&P 500 index correlation. The authors argued that the growing interconnectedness between the two asset classes defeats crypto’s hedge function, as it no longer serves to diversify investors’ risks. The IMF analysts’ conclusions come down to a reasonable notion that there should be a global, coordinated approach to crypto regulation.

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Pakistan's president calls for more training in blockchain technology

Arif Alvi, currently serving as the president of Pakistan, called for additional training in emerging technologies including blockchain, artificial intelligence, and cybersecurity while meeting with a delegation of blockchain technology experts.In a Monday announcement, Alvi said Pakistan’s talent pool should be ready to meet the needs of the Fourth Industrial Revolution, which included utilizing blockchain technology in the public and private sectors. According to the Pakistan president, the technology could be used as a government tool to track transactions, reduce corruption, and increase transparency. Among the panel of experts was Bitcoin SV advocate Jimmy Nguyen, founding president of the Bitcoin Association.President Dr. Arif Alvi had a meeting with an international delegation of blockchain experts, led by the Founding President of BSV Blockchain Association, Mr. James Nguyen, that called on him, at Aiwan-e-Sadr. pic.twitter.com/G4m4fRpJJy— The President of Pakistan (@PresOfPakistan) January 17, 2022The meeting came shortly before the Pakistan president announced he would be appointing Noor Muhammad Dummar as the senior minister of finance for the country’s Balochistan province. Pakistan’s federal ministries of finance and law have not legislated on a potential blanket ban of cryptocurrencies in the country, but the State Bank of Pakistan has reportedly argued cryptocurrencies like Bitcoin (BTC) are illegal and cannot be used for trading.A report released by crypto analytics firm Chainalysis in October 2021 showed that Pakistan had the third highest rate of crypto adoption behind Vietnam and India, with transfers of more than $10 million in the country representing 28% of transactions. The country’s central bank also said in 2021 it was studying the possible rollout of a Pakistan central bank digital currency. Related: Pakistanis have $20B in crypto assets, says head of local associationHowever, some officials within Pakistan seem to continue to associate digital assets with fraud following a multi-million dollar crypto scam in which investors were misled into sending funds from Binance wallets to unknown third-party wallets — some reports suggest investors lost as much as $100 million. The Pakistan Telecommunication Authority has also reportedly blocked websites dealing in cryptocurrencies in an effort to prevent fraud and money laundering.

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2021: A year of mass adoption for cryptocurrencies in Brazil

Throughout 2021, the Brazilian cryptocurrency market managed to distance itself from the police pages and finally win acceptance with the general public, whether in the financial market or even in the greatest national passion: soccer.Last year, Bitcoin (BTC) acted as a strong alternative to the Brazilian real that ended 2021 by breaking negative records and reaching a devaluation of 6.5% by December, making it the 38th worst currency in the world.In a year of ups and downs for Bitcoin, the biggest cryptocurrency hit a bottom of 167,000 real in January and soared along with global markets to 355,000 real in May. Faced with Bitcoin’s dip, the BRL/BTC pair was stuck below 200,000 reals until August, when it began to rise to a new historic high of 367,000 real on Nov. 8.Faced with the need for economic protection, Brazilians turned to crypto. 10 million Brazilians now participate in the crypto market, according to CoinMarketCap.In traditional financial markets, the Brazilian Stock Exchange debuted exchange-traded funds (ETFs) linked to Bitcoin and Ether (ETH). There are already five ETFs listed on B3, some of them positioned among the most profitable in the entire Brazilian stock market in 2021.The Central Bank of Brazil also announced new developments in the digital real, a central bank digital currency (CBDC), which could be launched as early as 2023. The Brazilian Central Bank also announced that it will continue working to incorporate blockchain technology into its services by carrying out a series of tests through a dedicated team at the monetary authority.In the Federal Congress, discussions on the regulation of cryptocurrencies in Brazil dragged on throughout the year, until in December, federal deputies approved Bill 2303/15, which establishes criteria for the regulation of cryptocurrencies in the country. The bill will be further discussed in 2022 in the House’s plenary session and later in the Federal Senate.There was tension among major players in the cryptocurrency market in Brazil in 2021, but also some good news. Brazilian exchanges went head-to-head with major crypto exchange Binance. Exchanges around the country worked with the Brazilian Cryptoeconomy Association to comply Binance to follow rules established by the Brazilian Securities and Exchange Commission, Federal Revenue Service and the central bank. The global exchange is still negotiating with Brazilian market regulators and the country’s financial authorities.Related: ‘Mecca of mining’: Brazil considers zero tax on green Bitcoin miningOn the other hand, Brazil’s largest exchange, Mercado Bitcoin (MB) — today one of Latin America’s crypto unicorns — expanded its operations in the country, entering the sporting world once and for all. MB also worked alongside Chiliz to make fan tokens more accessible to Brazilian fans, a novelty that was adopted by national football giants such as Corinthians, São Paulo, Internacional, Atlético-MG and Flamengo.The nonfungible token (NFT) market also reached Brazil with wide adoption and presence of Brazilian players in play-to-earn games, collectible platforms and even in the arts, being adopted by visual artists and renowned names in Brazilian music such as André Abujamra and Zeca Baleiro.For the next year, we can expect even more major Brazilian and Latin American firms to enter the cryptocurrency market. The Brazilian Stock Exchange hopes to expand its offering of cryptocurrency-linked investments, with experts targeting decentralized finance (DeFi), NFTs and the Metaverse.It’s also worth remembering that 2022 is an election year in a country that has been polarized since 2016, with the Bolsonaro government suffering from low popularity and being defined by social tension. The elections could affect not only the direction of the digital real but also the future of the Brazilian economy, including cryptocurrency markets.

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President Biden taps economists for Fed governors’ seats, Sarah Bloom Raskin as vice chair for supervision

The White House has officially tapped former Fed governor Sarah Bloom Raskin to serve as the vice chair for supervision for the Federal Reserve, as well as economists Lisa Cook and Philip Jefferson to fill two empty seats on its board of governors.In a Friday announcement, U.S. President Joe Biden said he had nominated Cook, an Obama-era economic adviser and Michigan State University faculty member, as well as Jefferson, a former research economist for the Fed, to the board of governors in addition to Raskin. Jefferson and Cook will take two of the vacant seats in the group of seven governors, with Jerome Powell and Lael Brainard nominated to serve as chair and vice-chair, respectively.According to the president, the three nominees have the “experience, judgment and integrity to lead the Federal Reserve and to help build our economy back better for working families.” He cited Jefferson’s and Cook’s decades of experience working on economic issues while saying Raskin was “among the most qualified nominees ever” for vice-chair for supervision. The vice-chair for supervision, as opposed to the vice-chair of the Federal Reserve’s board of governors, is a relatively new role within the government agency. Randal Quarles was the first to hold the position for the full four-term year from 2017 to 2021, shortly before resigning as a Fed board member in December. According to the Dodd–Frank Wall Street Reform and Consumer Protection Act, passed in 2010, the vice-chair for supervision “shall develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the Board and shall oversee the supervision and regulation of such firms.”Many vacancies at the Federal Reserve, the result of terms expiring and board members resigning, have given President Biden the opportunity to shake up the agency’s leadership. This week, his picks for the Fed chair and vice-chair — Jerome Powell and Lael Brainard, respectively — testified before the Senate Banking Committee in advance of a vote before the full Senate. Should they receive more than 50 votes, Powell, Brainard and Raskin would serve as the Fed board’s leadership until 2026, with Cook and Jefferson serving 14-year terms.Related: US lawmaker hints at upcoming crypto legislation as Jerome Powell says Fed will release report on digital currency soonA significant change in leadership of some of the top financial regulators in the United States could have an impact on how the government looks at both crypto and blockchain. Both the Securities and Exchange Commission and the Commodity Futures Trading Commission will likely see a shakeup in 2022, with the expected departure of SEC commissioners Elad Roisman this month and Allison Lee in June. In addition, President Biden has not suggested he intends to re-nominate CFTC commissioner Dawn Stump prior to her term expiring in April.

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