Značka: law

US ethics advisory on federal employee's crypto has basis in legislation

When the United States Office of Government Ethics (OGE) released its Legal Advisory 22-04 on July 5, most attention was given to its conclusion that federal employees who own any amount of cryptocurrency or stablecoins whatsoever may not participate in regulation and policymaking that concerns crypto. The legal advisory (LA) raised some eyebrows, as de minimis exemptions, threshold amounts below which assets holdings are permissible, are common in the government. The LA is more comprehensible when seen in a larger context.What they were thinkingThe OGE does not grant interviews, so it was fortunate that a video of OGE Senior Associate Counsel Christopher Swartz discussing the LA appeared on the office’s YouTube channel the day after Cointelegraph made an inquiry. Swartz discussed several points in detail, emphasized that the LA is an interpretation of current law to aid in its application to federal employees and “understand the law as it exists.” The OGE has no position on digital assets in general.The OGE issued an advisory in 2018 on federal employees’ disclosure of crypto assets. In light of the growing adoption of cryptocurrency by the public and federal employees, Swartz explained:“We realized it was now ripe for us to revisit this area, make sure we have established ground rules particularly as it relates to the conflicts of interest law, which is a criminal law.”The law Swartz was referring to dates to 1962 and “prevents federal employees from participating in any particular matter in which they have a financial interest,” according to Swartz. It is intentionally broad and “agnostic” in regard to the details. There is no substantiality element in the law, that is, a de minimis exemption, to allow federal employees to hold small amounts of anything.Related: US Congressional hearing on digital asset regulation focuses on disclosureUnder the law, the OGE has the authority to waive the conflict of interest laws for all employees or classes of employees when the financial interest is too remote to affect the expected services of the employees. Agencies can provide exemptions on a case-by-case basis in consultation with the OGE.The OGE created some exemptions in 1996. Publicly traded equity in a company that engages in crypto services is already covered by an exemption, for example. The LA specifies that a registered mutual fund with exposure to crypto derivatives, such as futures, might have one of two exemptions: a per se exemption for diversified mutual funds or a de minimis exemption of $50,000 for sectoral funds. No OGE exemption covers crypto, the LA states, because crypto does not qualify as a publicly traded security. “This is true even if individual cryptocurrencies or stablecoins constitute securities for purposes of the Federal or state securities laws,” the LA states. Cryptocurrency is not a publicly traded securityThe definition of “publicly traded security” is narrower than that of “security,” the LA notes. The LA does not relate to the larger question of which cryptocurrencies or stablecoins are securities, nor does it address reasons for the lack of an exemption. Nonetheless, Aitan Goelman, partner at Zuckerman Spaeder and former director of the Commodity Futures Trading Commission (CFTC) enforcement division, told Cointelegraph:“If I were a lawyer representing Ripple, I think I would bring the OGE’s opinion up, even though the OGE take pains to distinguish its definition of publicly traded securities from the definition of securities under [the] Howey [test].”“The OGE’s opinions are very influential at the agencies,” Goelman continued. All the experts consulted by Cointelegraph agreed on the agency’s high moral authority and absence of political agenda. Philip Moustakis, counsel in the Seward & Kissel blockchain and cryptocurrency practice groups and a former member of the SEC asset management unit, told Cointelegraph in an email, “I don’t think there is any subtext to be read at all.”The experts also agreed that the LA would be observed throughout the government, even though the OGE has no enforcement powers to go with its regulatory authority. As a matter of fact, it seems that ethical standards are already widely observed. The LA’s interpretation and detailed commentary on how disclosure requirements apply to mutual funds may be new, but ethics requirements are not.“Employees of the Securities and Exchange Commission are already required to report their securities holdings,” Moustakis said.Elizabeth Boison, partner at Hogan Lovells and former Department of Justice (DOJ) prosecutor and member of the department’s National Cryptocurrency Enforcement Team, told Cointelegraph:“Before the regulators provided clarity on this rules, this is what the regulators were doing any way. […] Even absent guidance, we would talk about this issue [at the DOJ] and we were generally not holding it.”Goelman observed that the perception of corruption has been a political issue recently, and the LA contributes to a reduction in the perception of financial impropriety in government. The downside of the OGE LAWhen asked what it would take for the OGE to publish a regulation to create an exemption to allow de minimis cryptocurrency holding, Goelman replied simply “motivation.” Swartz dismissed the argument that the prohibition on owning crypto would discourage people from pursuing government careers, saying the OGE had developed ways to help “remove the financial entanglement” of new federal employees. Nonetheless, there are arguments in favor of policymakers holding crypto. “One of the things a regulator has to understand is how these things work,” Boison said. She named Know Your Customer procedures and setting up wallets as examples of activities where real-life experience is valuable to regulators. She suggested the creation of a “sterile, sanitized lab” setting where regulators could go through the motions of the procedures.Related: Know thy customer: The future of KYC in cryptoLA 22-04 was followed 10 days later by another crypto-related advisory, this time on disclosure of nonfungible token (NFT) holdings. Fractionalized and collectible NFTs worth $1,000 or more must be reported if “held for investment or production of income,” as well as NFT investments that produce over $200 in profits during a reporting period.

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New York AG calls for whistleblowers 'deceived or affected' by the crypto market crash

New York Attorney General Letitia James has opened the doors for investors who may have witnessed misconduct at a crypto firm amid the extreme market volatility to file a complaint as a whistleblower.In a Monday notice, James called on New York-based crypto users who have been locked out of accounts at exchanges or lending platforms, unable to access funds, or “deceived about their cryptocurrency investments” to contact the Office of the Attorney General. As a whistleblower, an individual filing a complaint with authorities could be kept anonymous — the New York Attorney General’s website already includes the option to submit relevant documents and information through a Tor Browser.“Investors were promised large returns on cryptocurrencies, but instead lost their hard-earned money,” said James. “I urge any New Yorker who believes they were deceived by crypto platforms to contact my office, and I encourage workers in crypto companies who may have witnessed misconduct to file a whistleblower complaint.”The AG specifically called for investors whose funds may have been affected by the Terra (LUNA) — now renamed Terra Classic (LUNC) — crash, as well as those whose withdrawals wepaused or accounts frozen on staking or yield generation platforms including Celsius, Voyager, Anchor and Stablegains. The New York AG’s Investor Protection Bureau will process any complaints received.The cryptocurrency market is extremely unpredictable. Just last month, the market reached record lows and investors lost hundreds of billions. New Yorkers should be cautious and think twice before putting their hard-earned money into this unstable market.— NY AG James (@NewYorkStateAG) June 2, 2022Related: Facebook whistleblower warns Metaverse will repeat ‘all the harms’In terms of enforcement among crypto firms, the New York Attorney General’s office has seemingly been at the forefront among state and federal authorities in the United States. In October 2021, the AG cracked down on two crypto lending platforms it alleged had been operating in the state illegally by selling and offering securities and commodities. James’ office also warned crypto users in June — amid the falling prices of major tokens — of the risks of the market, with investors losing “​​hundreds of billions.”

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FTC files lawsuit against Meta over attempted monopolization of metaverse

The United States Federal Trade Commission, or FTC, has filed a lawsuit against Meta and CEO Mark Zuckerberg in an attempt to stop the social media giant from “its ultimate goal of owning the entire ‘metaverse’.”In a complaint filed in the Northern District of California on Wednesday, the FTC alleged Meta’s and Zuckerberg’s potential acquisition of virtual reality firm Within and its fitness app Supernatural was illegal according to U.S. antitrust laws and a way for the social media firm to “buy its way to the top” as opposed to “competing on the merits.” The complaint alleged that under Zuckerberg, Meta was “a potential entrant in the virtual reality dedicated fitness app market” with the resources necessary to develop its own app, but instead chose to own Supernatural by purchasing Within. The move would allegedly hinder “future innovation and competitive rivalry” among companies in the United States.“As Meta fully recognizes, network effects on a digital platform can cause the platform to become more powerful — and its rivals weaker and less able to seriously compete — as it gains more users, content, and developers,” said the complaint. “The acquisition of new users, content, and developers each feed into one another, creating a self-reinforcing cycle that entrenches the company’s early lead. This market dynamic can spur companies to compete harder in beneficial ways by, for example, adding useful product features or hiring additional employees.”The FTC said it planned to block Meta’s acquisition of Within in an effort to promote competition and help consumers:“The mere possibility of Meta’s entry has likely influenced competition in the virtual reality dedicated fitness app market. If Meta is allowed to buy Within, that competitive pressure will slacken.”FTC seeks to block virtual reality giant Meta’s acquisition of popular app creator Within: https://t.co/b87juAolBw— FTC (@FTC) July 27, 2022Meta’s move toward allegedly acquiring any potential threats to its bottom line is nothing new. In 2020, the FTC filed a complaint against Facebook — before the firm rebranded to Meta — for “anticompetitive conduct” for its $19 billion acquisition of WhatsApp in 2014 and $1 billion purchase of Instagram in 2012, citing similar concerns around stifling innovation. Both apps, handling messaging services and photo sharing, respectively, were alleged rivals to Facebook’s Messenger app and main platform. “Facebook’s acquisition of Instagram for $1 billion in April 2012 allegedly both neutralizes the direct threat posed by Instagram and makes it more difficult for another personal social networking competitor to gain scale,” said the FTC at the time. “[Its] acquisition of WhatsApp allegedly both neutralizes the prospect that WhatsApp itself might threaten Facebook’s personal social networking monopoly and ensures that any future threat will have a more difficult time gaining scale in mobile messaging.”Related: Experts clash on where virtual reality sits in the MetaverseSince Facebook rebranded to Meta in October 2021, the social media firm has announced many initiatives focused on expanding into the metaverse, including potentially launching a payments platform with support for cryptocurrency. In May, Meta opened a brick-and-mortar store in the San Francisco Bay Area which sells hardware for the virtual reality space. Unless the court stops Meta from acquiring Within, the sale would likely go through on Aug. 1 according to the complaint.

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Cathie Wood sells Coinbase shares amid insider trading allegations

One of the largest stockholders of the Coinbase cryptocurrency exchange has dumped a massive amount of shares as regulators reportedly probe the firm for alleged insider trading.Cathie Wood’s investment firm Ark Investment Management has sold a total of more than 1.4 million Coinbase (COIN) shares, according to daily trade information from Ark on July 26.The sale involved three Ark exchange-traded funds (ETF), including Ark Innovation ETF (ARKK), which offloaded a total of 1,133,495 shares, or 0.6% of the ETF’s total assets. Ark Next Generation Internet ETF and Ark Fintech Innovation ETF sold 174,611 and 110,218 COIN shares, respectively. Based on Tuesday’s closing price, the value of the sold shares amounted to slightly more than $75 million.Coinbase stock closed at $52.9 on Tuesday, losing 21% of value amid the sale. After showing some signs of revival in mid-July, Coinbase stock has been tanking as United States authorities arrested a former Coinbase Global executive on July 21 for alleged insider trading. Since reaching $77.3 on Friday, the Coinbase stock lost about 32% at the time of writing, according to data from TradingView.COIN 30-day price chart. Source: TradingViewThe sale came after Ark was steadily beefing up its COIN stash this year, buying 546,579 shares in Coinbase in May despite a drop in Coinbase shares. The investment firm has been actively buying Coinbase shares shortly after Coinbase debuted its stock last year, accumulating about 750,000 shares in April 2022. The stock originally opened at $350.Related: Crypto firms facing insolvency ‘forgot the basics of risk management’ — CoinbaseAccording to a report by Bloomberg, Ark is the third-biggest shareholder of Coinbase, holding nearly 9 million shares by the end of June. The liquidation reportedly became Ark’s first sale of COIN this year.Coinbase is reportedly facing a probe from the U.S. Securities and Exchange Commission (SEC) over the company’s potential involvement in crypto insider trading. SEC commissioner Caroline Pham expressed concerns that Coinbase might have improperly let Americans trade digital assets that should have been registered as securities.

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Uncertainty around French laws prompted F1 racers to remove crypto branding: Report

Many Formula 1 international racing teams reportedly removed or covered branding and logos from crypto-related sponsors in response to uncertainty around France’s advertising regulations.According to a Tuesday report from RacingNews365, Crypto.com’s logos were not on display during the French Grand Prix on Sunday — the crypto exchange has been a global partner with the racing series starting in July 2021. The team behind the Alpine Formula 1 car also reportedly removed branding representing crypto exchange Binance from its cars, drivers’ clothing and letterhead.”Knowing about the regulations here in France as for cryptocurrency, after discussions with our partner, it was decided to avoid any advertising on French soil,” said a spokesperson for Italian F1 team AlphaTauri, which partnered with blockchain platform Fantom Foundation in January.Luxury car manufacturer Alfa Romeo, which participated in the French Grand Prix, reportedly removed branding related to crypto lender Vauld and meme cryptocurrency Floki Inu (FOLKI), citing possible legal concerns:”The team is complying with all French regulations with regard to crypto partner advertising on the car. We have been advised that, in order to display a cryptocurrency partner logo in France, the cryptocurrency brand must be registered at the AMF, which is not the case of two of our cryptocurrency partners.”The AMF, or the Autorité des Marchés Financiers, announced on July 21 that it would be working with France’s Professional Advertising Regulatory Authority to amend its existing regulatory framework to include crypto-related advertisements. The regulator called for recommendations on token offering ads, adding that digital asset service providers should include information about the possible risks of crypto investments. Due to the seeming vagueness of the AMF’s statement, many of the F1 teams still showed signs of their crypto sponsors at the event. Red Bull Racing, which was sponsored by Tezos and also received a $150-million sponsorship from Singapore-based crypto trading platform Bybit in February, reportedly had both firms’ logos on its car at the French Grand Prix, saying its legal team had discussed the matter. Related: Crypto ‘en français’: Cointelegraph France is now liveMcLaren Racing, partnered with crypto exchange OKX, took similar actions. Mercedes, sponsored by crypto exchange FTX, and Ferrari, by blockchain firm Velas, reportedly moved forward with showing branding and logos as well. A Ferrari spokesperson hinted that the AMF’s regulatory purview may not apply to Velas:”Velas Network AG informed us it does not provide services that would require registration […] therefore there is no advertisement prohibition with respect to the use of the Velas logo on the Scuderia Ferrari assets within the scope of the French GP.”P2 for #Charles16 closing his lap in 1:31.216. #Q2 is over. #FrenchGP pic.twitter.com/TPwtmwh6pi— Scuderia Ferrari (@ScuderiaFerrari) July 23, 2022Many global regulators have scrutinized ads for crypto products and services as the space grows. In January, Spain’s financial regulator announced it would be requiring ads to be “clear, balanced and fair,” while providing information on the risks around crypto investments. The United Kingdom’s Advertising Standards Authority also banned certain ads from firms including Coinbase, Kraken and Crypto.com for allegedly “failing to illustrate the risk of the investment.”

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SEC Philippines to investigate Binance over alleged illegal operations

Philippines’ think tank Infrawatch PH continues efforts to ban Binance in the country by asking more regulators to investigate the cryptocurrency exchange over alleged illegal operations.Infrawatch PH on Monday filed a twelve-page complaint calling on the Philippines’ Securities and Exchange Commission (SEC) to crack down on Binance’s activities in the Philippines.According to the think tank, Binance has been operating in the Philippines for several years without approval by appropriate authorities.Terry Ridon, the convenor for Infrawatch PH, claimed that Binance has no office in Manila and only uses “third-party companies that employ Filipinos for its technical and customer support services.” He also referred to former finance secretary Carlos Dominguez who publicly declared last month that Binance had no records with either the SEC or the Bangko Sentral ng Pilipinas (BSP).“The SEC has served the public well by banning unscrupulous online lending services. It should similarly do the same for unregistered and unregulated cryptocurrency exchanges in the country,” Ridon said. He added that Binance has been offering many types of crypto products, including spot trading, margin trading, futures contracts, options, crypto loans and peer-to-peer (P2P) trading, despite being unregistered with the SEC, adding:“We believe these products are in the nature of securities, which under SEC rules, may not be sold or offered for or distribution within the Philippines without a registration statement duly filed with and approved by the SEC.”The news comes shortly after the Philippines’ Department of Trade and Industry (DTI) waved off a Binance ban proposal in early July, citing a lack of regulatory clarity from the BSP. The DTI was the first destination for Binance complaints by ​​Infrawatch PH, with the think tank asking the authority to probe the exchange over illegal promotions.Related: Philippines’ digital transformation could make it a new crypto hubThe news comes amid a major spike in crypto trading activity in the Philippines. In July, weekly Bitcoin (BTC) trading volumes in the Philippines peso hit a historic high on the major P2P crypto exchange Paxful. The overall crypto adoption has also been rising in the country in recent years, with companies like PayMaya launching crypto trading features.BSP did not return Cointelegraph’s request to comment on the status of crypto regulation in the country. Binance did not immediately respond to Cointelegraph’s request for comment.

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Bill addressing stablecoins risks in US likely delayed until September: Report

Lawmakers in the United States House of Representatives have reportedly pushed back the timeline for considering a bill addressing the potential risks of stablecoins.According to a Monday report from the Wall Street Journal, people familiar with the matter said House members will likely delay voting on a stablecoin bill until September after being unable to complete a draft in time for a Wednesday committee meeting. The unresolved issues in the bill reportedly included provisions on custodial wallets from the Treasury Department and concerns from the Securities and Exchange Commission. Treasury Secretary Janet Yellen reportedly wanted to coordinate with the Biden administration for her response to the bill. Neither has publicly weighed in on the proposed legislation, but Yellen previously called for regulatory clarity in the crypto space around stablecoins, citing concerns around TerraUSD (formerly UST) depegging from the U.S. dollar. President Joe Biden’s executive order from March also aims to address gaps in regulatory oversight on digital assets.Glad to hear @SecYellen acknowledge the need for Congress to pass legislation that creates a sensible regulatory framework for stablecoins. pic.twitter.com/GXVvcKcKUb— Senator Pat Toomey (@SenToomey) May 10, 2022To date, lawmakers have deferred or otherwise been unable to come to an agreement on many of the bills proposing to regulate stablecoins in the United States. In February, New Jersey Representative Josh Gottheimer introduced a bill, the Stablecoin Innovation and Protection Act, that would allow the Federal Deposit Insurance Corporation to back stablecoins in a manner similar to fiat deposits. A bipartisan bill introduced in the Senate by Cynthia Lummis and Kirsten Gillibrand in June also proposed regulating stablecoins issued by financial institutions but may be delayed from consideration until 2023.Related: United States turns its attention to stablecoin regulationAcross the pond, lawmakers in the United Kingdom have continued to move forward with legislation on stablecoins amid a shakeup in government — many members resigned in July in response to soon-to-be former Prime Minister Boris Johnson’s response to a scandal. The country’s Department of Treasury also reportedly began considering legalizing stablecoins as a form of payment.

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US authorities arrest former Coinbase manager, alleging insider crypto trading

United States authorities have brought charges against three people for wire fraud conspiracy and wire fraud in connection with a scheme to commit insider trading using crypto, one of whom was a former product manager at Coinbase Global.In a Thursday announcement, the U.S. Attorney’s Office for the Southern District of New York said in conjunction with the New York Field Office of the Federal Bureau of Investigation it had filed an indictment against former Coinbase Global product manager Ishan Wahi as well as his brother Nikhil Wahi and associate Sameer Ramani. The trio allegedly used confidential information Ishan purportedly obtained from Coinbase in regards to which tokens would be listed on the exchange to make roughly $1.5 million in gains from trading 25 different cryptocurrencies.Three charged in first ever cryptocurrency insider trading tipping scheme https://t.co/cdTcwQQOau— US Attorney SDNY (@SDNYnews) July 21, 2022According to the authorities, Ishan was privy to certain information on listing cryptocurrencies on exchanges controlled by Coinbase in his position as a product manager from August 2021 to May 2022, including the launch dates of tokens. The U.S. Attorney’s Office alleged that from June 2021 to April 2022, Ishan passed on information related to the launch date of tokens to his brother or Ramani to invest in the cryptocurrencies before an anticipated price jump due to a major exchange like Coinbase listing the asset.The trio allegedly used the insider trading scheme on at least 14 separate Coinbase public listing announcements, using multiple Ethereum blockchain wallets to make and transfer the purchases, and accounts at centralized exchanges in others’ names. Before a major listing announcement by Coinbase on April 11, online sleuths discovered several Ethereum wallets had purchased large amounts of six tokens, prompting claims of insider trading. “Although the allegations in this case relate to transactions made in a crypto exchange — rather than a more traditional financial market — they still constitute insider trading,” said FBI assistant director Michael Driscoll.CEO Brian Armstrong said at the time that “there is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity” and the exchange would conduct investigations and coordinate with outside law firms if needed. “If these investigations find that any Coinbase employee somehow aided or abetted any nefarious activity, those employees are immediately terminated and referred to relevant authorities (potentially for criminal prosecution),” said Armstrong in April.Related: SEC reportedly launches investigation into insider trading on exchangesThe U.S. Attorney’s Office reported that Coinbase’s director of security operations contacted Ishan on May 11 to arrange a meeting related to the exchange’s asset listings. Ishan attempted to board a one-way flight to India in advance of the scheduled May 16 meeting, but was stopped by law enforcement. This story is developing and will be updated.

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Tech trade group calls for regulatory clarity, claiming crypto job losses threaten US interests

The tech trade group Chamber of Progress called on members of the United States Senate and House of Representatives for regulatory clarity in the crypto space in an effort to prevent firms from leaving the country.In a Wednesday letter addressed to eight committee chairs in the House and Senate, Chamber of Progress financial policy director Janay Eyo urged Congress to consider moving forward on “substantive legislation to ensure the future of our nation’s crypto industry,” citing concerns about jobs and the country’s position as a leader in global finance. According to the trade group, government leaders including those from the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Reserve and Biden administration have called for Congress to lead in establishing a regulatory framework for digital assets.“Without congressional action, a lack of clear rules and regulations has contributed to the current instability in crypto markets,” said Chamber of Progress. “Some of the companies that have failed took advantage of a lack of clear regulations in the market. Industry leaders have warned that smaller exchanges offering generous margin loans are quietly becoming insolvent.”The group added:“It is imperative that Congress act to ensure investor protection by providing rules of the road, which would, in turn, help weed out bad actors in the industry.”For the crypto industry, the combination of an unclear regulatory environment and a market downturn have resulted in layoffs, bankruptcies, and even the possibility of moving overseas. To save U.S. jobs, Congress needs to act.Read our full letter here: https://t.co/FUaS28KJNf pic.twitter.com/tXzJMwZrpy— Chamber of Progress (@ProgressChamber) July 20, 2022According to Chamber of Progress, the lack of regulatory clarity in the United State could cause companies “to seek greener pastures overseas,” potentially threatening the country’s interests by forcing many high-paying, remote-friendly jobs that largely survived the pandemic abroad. Crypto firms like Ripple have considered moving their headquarters outside of the United States, and others have expanded offerings to regions including the Middle East.“The increase of countries developing crypto regulatory policy should motivate the U.S. to act quickly to review relevant legislative proposals introduced this Congress,” said the group. “It’s time to move the crypto policy debate from “we need regulation” to ‘what are the impacts of specific regulatory proposals?’”Related: US Commerce Dept. asks digital asset industry for input on competitiveness frameworkIn contrast to the United States, the European Union passed legislation aimed at harmonizing regulations for cryptocurrencies among EU member states, called the Markets in Crypto-Assets Framework, or MiCA. On Wednesday, the government of the United Kingdom also introduced its financial services and markets bill that included regulations on stablecoins.

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South Korean authorities raid 15 entities linked to Terra collapse: Report

Prosecutors in South Korea behind the investigation of Terraform Labs have reportedly executed a search and seizure in 15 firms, including seve crypto exchanges.According to a Wednesday report from News1 Korea, the Joint Financial and Securities Crime Investigation Team of the Seoul Southern District Prosecutors Office raided the offices of Upbit, Bithumb, Coinone, Korbit and Copax as well as other businesses connected to the collapse of Terra. Authorities reportedly obtained data related to TerraUSD (formerly UST) and Terra (LUNA) — now Luna Classic (LUNC) — transactions, in which roughly 200,000 Korean investors suffered losses following the tokens’ severe price devaluation and subsequent collapse in May.Some of the victims of Terra’s collapse and UST’s depegging reportedly appointed local law firm L.K.B. & Partners to represent them in a suit against Terraform Labs and its co-founder Do Kwon, alleging that the company committed fraud. More than 100 people who filed complaints with the prosecutors’ office reportedly had losses totaling roughly $8 million.”The defendants did not properly inform about design errors and defects in the algorithm while designing and issuing Luna and Terra coins in a collusion to attract investors,” said a spokesperson from L.K.B. & Partners.Following the collapse of UST and LUNA, South Korea’s national tax agency reportedly hit Terraform Labs and Kwon with a $78 million penalty related to tax evasion. Lawmakers in the country also called Kwon to speak at a parliamentary hearing regarding the events around Terra’s collapse and UST’s depegging. Related: Korean exchanges agree on emergency system in case of Terra-style collapseThough headquartered in South Korea, Terraform Labs and the events surrounding its tokens’ collapse have had wide-ranging implications for the crypto space. In the United States, investors affected by the UST and LUNA fallout hinted at legal action against yield generation application Stablegains over allegedly losing $44 million worth of deposited funds.

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Demand for widely used euro stablecoin is huge, says DeFi expert

The market capitalization of Tether (USDT), a United States dollar-pegged stablecoin, is currently over $65 billion. USD Coin (USDC), another stablecoin backed by the U.S. dollar, clocks in near $55 billion. Some reports estimate that the total market cap of dollar-backed stablecoins is over $160 billion.Despite this success of dollar-based stablecoins, there has not been a euro stablecoin that is even remotely comparable in size. By the end of June, the U.S.-based company Circle announced that it will launch its own euro stablecoin, Euro Coin (EUROC), on the Ethereum blockchain. With a euro-based stablecoin, uncomplicated euro transfers will be possible worldwide in the future, as is currently the case with the U.S. dollar. Instead of the eurozone-based business, Circle has opted to issue the planned euro stablecoin via the U.S. bank Silvergate. But, is it permissible for a digital coin tied to the euro to be issued outside the eurozone? How will European regulators react? Can Circle simply ignore the upcoming Markets in Crypto-Assets Regulation (MiCA) and operate the stablecoin from outside the European Union? And, why is there still no major euro stablecoin?Cointelegraph auf Deutsch asked these questions to Patrick Hansen. The former head of blockchain at the German digital association Bitkom was, until recently, head of strategy and business development at wallet provider Unstoppable Finance. Now Hansen advises companies such as Presight Capital and the Blockchain Founders Group and has a hotline to the European Parliament.Euro stablecoin issued outside the EUThe European Central Bank (ECB) is keeping its options open on whether and when to launch a digital euro. However, it’s still not really clear to Patrick Hansen what exactly the ECB wants to achieve with a central bank-issued digital euro. “Whether it is to become a kind of digital cash or rather a new payment option. That’s why it’s so difficult to evaluate the project,” he said. Fundamentally, though, Hansen thinks that private companies, led and overseen by policymakers, are better suited to bring innovation to the current financial system. According to him, European banks will be much more active in the coming years: “Right now, I think two things, in particular, are holding them back. First, banks want to wait for MiCA regulation, and second, the ECB’s specific plans for a digital euro are still not clear.”Recent: Technicals suggest Bitcoin is still far from ideal for daily paymentsThat’s why Hansen is a big fan of Circle’s decision to launch a euro stablecoin. The euro accounts for almost 40% of global SWIFT payments, 20% of global foreign reserves, but only 0.2% of global stablecoin market capitalization. “It is in the EU’s and the eurozone’s interest to change that. EUROC is a promising step in that direction,” Hansen said.MiCA regulation is unavoidableIn Hansen’s opinion, MiCA automatically kicks in here since it’s a euro stablecoin. Circle cannot avoid applying for the appropriate licenses in the EU and having the EUROC supervised by EU authorities. But this is, Hansen thinks, also Circle’s intention.According to Hansen, Circle will probably set up a European legal entity and then apply for an e-money license, which is a prerequisite for issuing e-money tokens. Depending on how widely the coin is adopted, EUROC already falls into the category of “Significant e-money-tokens” in the MiCA, which again entails higher capital reserves, liquidity and interoperability requirements. “Circle could also theoretically use the liability umbrella of an existing e-money institution and cooperate with it. That would be a slightly more complex process operationally and legally,” Hansen explained, adding:Circle’s euro stablecoin is supposed to be backed one-to-one by euros deposited in bank accounts. However, the reserves are held by the U.S. bank Silvergate while Circle itself is based in the United States. How then can the new euro coin be regulated with the upcoming MiCA regulation? “In terms of USDC, Circle’s primary stablecoin pegged to the U.S. dollar, Circle could refrain from applying for a MiCA license. The pros and cons, for example, that unregulated stablecoins may no longer be listed by regulated crypto trading venues in the EU, need to be weighed here. However, I don’t see any way for EUROC to circumvent MiCA.”According to Hansen, regulation can promote legal certainty, trust and adoption, but on the other hand, it can create high barriers to market entry. In the area of stablecoins and nonfungible tokens (NFTs), MiCA goes a step too far and threatens to become a major hurdle for many companies, Hansen said.Still no significant euro stablecoinAlso playing a role are regulated challenges, the weakness of the euro and the first-mover advantage of U.S. dollar-based stablecoins like USDT and USDC. The network effects of stablecoins are so significant that many Europeans also use USD stablecoins for convenience. In addition, the volatility of crypto assets is usually high and many EU retail investors are comparatively unconcerned about the risk of U.S. dollar usage in the forex market. Hansen said:Existing euro stablecoins seem to be used less and, according to Hansen, there are several reasons for this. Negative interest rates on bank deposits in the eurozone have made reserve-backed stablecoin business models virtually impossible. “Fundamentally, however, the demand for a widely used euro stablecoin is huge and many of the points above will get better in the coming months.”Whether the EUROC will become a big seller similar to the USDC will be decided by the market. Demand, especially from larger financial institutions, for a trustworthy and regulatory-approved euro stablecoin is high, Hansen said. Recent: Blockchain without crypto: Adoption of decentralized techHowever, he is sure that euro stablecoins won’t be able to keep up with U.S. dollar stablecoins, stating the euro can’t do that even outside the crypto world for various reasons. But, those euro stablecoins that clear MiCA hurdles will see strong adoption and usage while increasing the overall market share of euro stablecoins, Hansen said, adding: “USDC is the undisputed number-one stablecoin in the decentralized finance market. Therefore, there is a good chance that EUROC will also play a good role there. Anyway, I would be happy to see more and more euro-based liquidity pools and euro investment opportunities in the DeFi space.”

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The regulatory implications of India’s crypto transactions tax

The Indian crypto landscape lost some momentum this year as the government introduced two laws demanding crippling taxes on crypto-related unrealized gains and transactions.India’s first crypto law, which requires its citizens to pay a 30% tax on unrealized crypto gains, came into effect on April 1. A commotion among the Indian crypto community followed as investors and entrepreneurs tried to decipher the impact of the vague announcement with little or no success.Knowing that India’s second crypto law — a 1% tax deduction at source (TDS) on every transaction — would translate into an even greater impact on trading activities, numerous crypto entrepreneurs from India considered moving bases to friendlier jurisdictions. Following the imposition of additional taxes, Indian crypto exchanges reported a massive drop in trading volumes. Data from CoinGecko confirmed that trading volumes on Indian crypto exchanges are down 56.8% on average as investors eye off-shore exchanges to cut their losses on unforgiving taxes. However, India’s finance minister Nirmala Sitharaman previously acknowledged the resultant backlash and revealed plans to reconsider amendments to crypto-related taxes upon careful consideration. Grassroot impact of crypto regulations in IndiaWithin just days of implementing India’s infamous crypto laws, crypto exchanges in the region reported a massive slump in trading volumes. Nihal Armaan, a small-time crypto investor from India, told Cointelegraph that taxation is not a deterrent when dealing with cryptocurrencies. Instead, he compared the imposition of a flat 1% tax as a way of capital lock-in, a feature used by corporates to prevent investors from taking away their funds, adding that “The TDS isn’t the issue, the amount of TDS is — since it evidently reduces the number of trades a person can carry out with their capital at hand.”The North Block of the Central Secretariat, the residence of the Chairperson of the Central Board of Direct Taxes, New Delhi. Source: Edmund Gall.Kashif Raza, founder of crypto education startup Bitinning, told Cointelegraph that implementing TDS is a good first step in ring-fencing the crypto industry in India. While Raza added that investors like himself who trade less might not feel the repercussions of such a law, he did acknowledge that “the amount of TDS is a topic of debate as there are many active traders in the crypto industry who have been affected by this decision.”Contrary to the popular belief of trade slowdowns, Om Malviya, president of Tezos India, told Cointelegraph that he envisions little to low disruption for long-term investors. Instead, he expects pro-crypto reforms in the current laws over the next three to five years. While awaiting friendlier tax reforms, he advised investors to gain a deeper understanding of the technology, adding, “Even the users from smaller cities will be forced to study the cryptocurrency, study about the team and technology and the fundamentals behind it, and then make any investment or trading decision.”Rajagopal Menon, vice president of crypto exchange WazirX, told Cointelegraph that despite falling trading volumes, the exchange continues to focus on complying with the new taxes rules and meeting the standards set by the local regulators, adding, “The TDS will not affect the serious crypto investors, a.k.a, hodlers, as they have a long-term horizon in mind.” In 2021, the exchange witnessed over 700% growth in signups from smaller cities such as Guwahati, Karnal and Bareilly.Recent: Crypto payments gain ground thanks to centralized payment processorsHowever, Anshul Dhir, chief operations officer and co-founder of EasyFi Network — a layer-2 decentralized finance (DeFi) lending protocol — told Cointelegraph that unless the Indian government introduces friendlier crypto regulations with prolonged exposure to taxes, passionate investors may join crypto entrepreneurs in the exodus away from India.Crypto taxes and the creation of long-term holders While the crypto trading volume has seen a drastic reduction across Indian exchanges, it indicates investors’ willingness to hold on to their assets until pro-crypto regulations kick in. In order to ensure profitable trades, Indian investors speaking to Cointelegraph revealed that they have been waiting for a bull market to sell a part of their holdings for profits. Concurring with this change in the present investor mindset, Malviya added that “if you want to pay this amount of high taxes, you have to be really sure that your investment is going to be worth more than what you’re more than today.” Armaan reiterated that the TDS itself is not a deterrent to crypto traders, but “the 30% tax on profits without the provision to set off losses is harsh and discourages any new trader even to try trading in the cryptocurrency industry.” Even though many Indians welcomed the tax regime, as it gives a sense of legitimacy to the crypto industry in the country, Dhir believes that “the tax rate is a deal-breaker and will cause a lot of prospective investors to hold their investments in virtual digital assets.”On this front, Menon warned investors against trying to find loopholes in the law by using foreign exchanges, peer-to-peer sites and decentralized exchanges. Regardless of the platforms used, all Indian citizens are liable to pay the TDS; failure to do so would result in non-compliance with the existing tax laws of the land. The slowdown in trade volumes was accompanied by a drop in liquidity, which also impacted the global liquidity for the overall crypto ecosystem. India’s interaction with CBDCsCentral banks worldwide seem to have unanimously agreed on either experimenting with or launching their own versions of central bank digital currencies (CBDC). India, on that front, is expected to introduce a digital rupee by 2022–23. According to the country’s finance minister, Nirmala Sitharaman, it is expected to provide a “big boost” to the digital economy.While CBDCs fundamentally differ from how cryptocurrencies operate, governments are in a race to create a fiat-based system that incorporates the best features offered by the crypto ecosystem. Raza added that a CBDC backed by the Indian rupee “will help in faster and cheaper inward remittances and global payments” but doubts its acceptance as a store of value by retail.As pointed out by Malviya, CBDCs are well suited to cater use cases that demand immediate issuance of funds, adding, “but it is not going to void the case for cryptocurrencies essentially.” Dhir, however, believes that CBDCs will complement the digital asset industry, particularly the DeFi projects. Moreover, India’s central bank, the Reserve Bank of India, needs to formulate policies conducive to innovation and growth and highlight the positives of the budding technology to the general public.For many, India’s crypto taxes seem like a proactive move to discourage trading. Still, speaking from an investor’s point of view, Armaan argued that the government did the best they could in terms of explaining the tax structure with the information they had at their disposal. The waiting gameFriendlier tax reforms are a waiting game for Indian entrepreneurs and inventors, but both communities have to be compliant while preparing for greener pastures. For investors, this means educating themselves about the ecosystem and best practices for trading. Armaan’s approach in the current scenario is to have low allocation and a systematic investment plan approach to investing. In addition to being watchful of the market developments, Dhir advises the community to engage with the government in their own capacities with a positive frame of mind and not engage in antagonistic banter on social media. “The new use cases, new projects and new products are only going to come out and this space is only going to get bigger. So if you do want to part or not, you have to do your own research, and you have to be committed,” added Malviya.Recent: Andorra green lights Bitcoin and blockchain with Digital Assets ActMenon recommended that entrepreneurs keep engaging with the government in the hopes that it will tweak its policies one day. “Parallelly, all the developments need to be shared with the government as well, so they are aware of the innovation happening in this space by the talent at home; this may have an overall positive impact on the industry at large,” added Raza.Furthermore, Malviya stated that entrepreneurs must be committed to the cause as they strive to build solutions catering to a growing number of use cases, adding that “you don’t necessarily have to focus on shifting out of India; I think the first focus should be what problem you’re trying to solve.”In the meantime, investors are hopeful for constructive frameworks around cryptocurrencies to help weed out bad actors from the equation.

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