Značka: UK Government

Law Decoded: When central banks seek public discussion, Jan. 17–24

Last week, two central banks dropped public reports that can have a sizable impact on the crypto landscape in their respective countries and beyond. The U.S. Federal Reserve published a discussion paper entitled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation,” which summarizes years of the Fed’s research on CBDCs. Meanwhile, the Central Bank of Russia released a report that called for a blanket ban on domestic cryptocurrency operations and mining. Both documents are framed as an invitation for public discussion, but the kinds of discussions that they will trigger are likely to be very different.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.The Fed: Not advancing particular policyThe authors of the Fed’s much-anticipated report make a point to note on several occasions that the paper “is not intended to advance any specific policy outcome.” Indeed, the report gives off a vibe of open-endedness and covers both risks and benefits of a potential U.S. CBDC. Specifically, it acknowledges user privacy concerns that some crypto advocates have previously voiced in the context of the potential digital dollar’s design.On Twitter, crypto-friendly members of the U.S. Senate sounded content with the document’s findings and framing. Senator Cynthia Lummis welcomed the report’s concession that the ultimate fate of the U.S. CBDC project rests with Congress:I’m pleased the Federal Reserve released their long-awaited report on central bank digital currencies this afternoon. Here’s a quick thread of my thoughts.https://t.co/UAJFIPwiqG— Senator Cynthia Lummis (@SenLummis) January 20, 2022Senator Pat Toomey called the paper a constructive contribution to the public discussion around the issuance of a CBDC.Cryptocurrencies, digital assets, and their underlying technologies offer tremendous potential benefits. As such, I’m glad the @federalreserve has constructively contributed to the necessary ongoing public discussion regarding the issuance of a CBDC. https://t.co/10ld3lfXt6— Senator Pat Toomey (@SenToomey) January 20, 2022

CBR: Ban domestic operationsIn contrast to their U.S. counterparts, Russian central bankers are very much advocating for a particular policy. They’ve suggested that investor safety and financial stability risks that cryptocurrencies pose warrant a complete ban of domestic crypto operations and mining activity, as well as introducing punishments for individuals breaching these rules. Notably, the proposed ban specifically concerns the usage of domestic financial infrastructure for crypto transactions, and during a press conference that followed the report’s publication, a Central Bank of Russia official suggested that Russian citizens would still be allowed to engage with crypto using overseas rails.The report is remarkable for making some candid points as to why the ban is needed. For one, the authors recognize that emerging economies, including Russia’s, are more susceptible to the adverse effects of crypto compared to those of developed nations. Furthermore, it states that wide adoption of crypto could undermine Russia’s monetary sovereignty and be at odds with a potential sovereign CBDC that the report passingly praises.Crypto ads: Second phase of regulation?In a series of moves that almost looked coordinated, regulators in the United Kingdom, Spain and Singapore took on cryptocurrency promotions and ads last week. While the first two mainly focused on ensuring appropriate risk disclosures, Singapore opted for a stricter stance of outlawing any and all crypto-related advertisements in public spaces. Binance CEO Changpeng Zhao questioned the capacity of these measures to limit crypto demand because of the prevalence of word-of-mouth marketing in the digital asset space.Such a shift of focus could mark the next step in the evolution of crypto regulation. Jurisdictions that have put comprehensive AML and CFT rules in place are now turning to consumer protection measures as the rapid mainstreaming of digital assets gives rise to marketing strategies that target mass audiences far beyond the tech-savvy core of early crypto adopters.

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UK Treasury wants to remove blockchain reference from crypto definition

The United Kingdom is actively looking to regulate the crypto market and has proposed many new policies to bring various crypto markets under the rule of law. However, among the various newly proposed suggestions, what turned many heads is the request to remove blockchain and Distributed Ledger Technology (DLT) references from the definition of crypto assets.BRITAIN SETS OUT PLANS FOR REGULATING CRYPTO ASSETS, PROPOSES TO REMOVE REFERENCE TO BLOCKCHAIN FROM THE DEFINITION OF CRYPTO ASSETS— *Walter Bloomberg (@DeItaone) January 18, 2022A new crypto report titled “Cryptoasset promotions: Consultation response” from the Her Majesty’s (HM) Treasury noted that, while most crypto assets use DLT or blockchain as an underlying technology, it might change over time the industry evolves. Thus, crypto assets must be exempt from the reference of DLT to “future-proof the definition for innovations.” The official statement said:“Most crypto assets currently use distributed ledger technology (DLT), it might be that this changes as the technology and industry evolve. Therefore, the government proposes to remove the reference to DLT from the definition of qualifying crypto assets. “Related: UK 3rd for ETH ownership as crypto adoption grows 1% in December: SurveyApart from the controversial crypto-asset definition change, the HM Treasury paper also discussed bringing decentralized finance (DeFi) under the scope of regulation on a case-to-case basis and said the government would closely monitor the fast-growing industry. The official paper read:”Whether certain crypto assets lending activities or decentralized finance platforms are within the scope of the regime ultimately depends on the activities being carried out and promoted. As such, this will need to be considered on a case-by-case basis.”Many crypto proponents believe the removal of blockchain and DLT reference as proposed by the committee could cast a danger on the decentralized nature of the crypto market. For example, Chinese CBDC e-CNY or digital yuan is said to be based on blockchain technology, however, it’s more of a private blockchain and highly centralized, controlled by the government. The British government seems to be following a similar path with a definition change.

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Law Decoded: Looking ahead to 2022, Jan. 3–10

As Alex Tapscott put it, 2021 was the year when many governments and lawmakers began to finally wake up to the transformational potential of blockchain technology. Indeed, crypto’s global mainstreaming and growing market capitalization have made it difficult for the agents of power to ignore it and have rendered it a salient economic, social and political issue across many key jurisdictions. By all appearances, we are in for a busy year in crypto regulation and policymaking.Stablecoins, an asset class that attracted a fair amount of regulatory attention in 2021, will surely remain in the hot seat this year. For most nations, stable-value crypto assets will represent competition to their sovereign digital currencies. For the United States, a key question is whether Congress will come forward with the legislation around stablecoins that the President’s Working Group on Financial Markets is calling for.It will also be exciting to watch how far the crypto industry’s political mobilization and lobbying efforts — something that became a prominent feature of the crypto policy landscape in 2021 — will be able to reach this year. A major test of the sector’s newfound political clout will be the struggle to amend the crypto-related provisions of the recently passed infrastructure bill.Many industry experts surveyed by Cointelegraph expect major policy advancements to come from the European Union in 2022. The European Commission is currently reviewing the proposed Markets in Crypto-Assets regulation, a wide-reaching framework that is mainly focused on mitigating consumer and financial stability risks associated with the adoption of digital assets. Combined with digital euro trials being well underway, this suggests that the EU could soon articulate its stances on various interconnected parts of the digital asset ecosystem — CBDCs, private stablecoins and decentralized cryptocurrencies — in a more definitive fashion.Elsewhere in the world, El Salvador maintains the perception that it is all in on Bitcoin (BTC) as a nation-state. One of many points of contention related to this great experiment has been, and will continue to be, the Central American nation’s spat with global financial organizations such as the International Monetary Fund. Speaking of the global watchdogs, it is reasonable to expect that these guardians of the incumbent financial order will start delving deeper into specific sectors of the crypto space, much like the Bank of International Settlements’ recent foray into decentralized finance. The hope is that the resulting alarmist narrative will not become global regulators’ dominant approach to the sprawling domain of DeFi.The first days of 2022 also brought a reminder that regulatory clarity is not the only way in which politics can massively affect the crypto space. Following days of civil unrest in Kazakhstan — a nation that had climbed to the No. 2 spot in the world’s Bitcoin hash rate rankings following China’s mining ban — the government’s decision to cut off the entire population’s internet access resulted in an unprecedented hash rate drop on the Bitcoin network. The geopolitics of BTC mining, which came into motion last year with China’s abrupt exit, seem poised to continue on the path of volatility.All in all, this year is shaping up to be a rollercoaster of Bitcoin politics, crypto regulation and digital currency adoption.  Let’s buckle up and see what else 2022 has in store.

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