GOP senators argue that Fed-backed digital currencies could provide the government with transaction-level data on individual users, compromising privacy. Senator Ted Cruz described CBDCs as “programmable money” that, if not designed to emulate cash, could give the federal government significant insight into users’ financial activities.
The Biden administration has been studying the use of cryptocurrencies since 2022, with reports outlining their potential benefits and risks. While the administration supports ongoing research and evaluation of CBDCs, it has not explicitly endorsed their creation without an act of Congress.
Both the Federal Reserve and the Treasury Department have explored the potential uses and structures of CBDCs. They believe that CBDCs could lead to a more efficient and inclusive payment system. The Federal Reserve highlights the safety of CBDCs, as they are liabilities of the central bank without associated credit or liquidity risks.
The Republican legislation would prevent the Federal Reserve from authorizing the use of Fed-backed stablecoins by individuals and third-party institutions such as banks and credit unions.
Central bank digital currencies have gained international attention, with advocates touting their benefits and authorities raising concerns about operational consequences. The Bank for International Settlements (BIS) warns about the potential risks associated with providing the general public access to central bank money through CBDCs.
China’s Supreme People’s Procuratorate (SPP) is ramping up efforts to combat cybercrime by targeting criminals who use blockchain and metaverse projects for illegal activities. The SPP is alarmed by the recent surge in online fraud, cyber violence, and personal information infringement. Notably, the SPP has observed a significant rise in cybercrimes committed on blockchains and within the metaverse, with criminals increasingly relying on cryptocurrencies for money laundering, making it challenging to trace their illicit wealth.
Ge Xiaoyan, the Deputy Prosecutor-General of the SPP, highlights a 64% year-on-year increase in charges related to cybercrime-related telecom fraud, while charges linked to internet theft have risen nearly 23%, and those related to online counterfeiting and sales of inferior goods have surged by almost 86%. Procuratorates have pressed charges against 280,000 individuals involved in cybercrime cases between January and November, reflecting a 36% year-on-year increase and constituting 19% of all criminal offenses.
The People’s Bank of China (PBoC) acknowledges the importance of regulating cryptocurrency and decentralized finance in its latest financial stability report. The PBoC emphasizes the necessity of international cooperation in regulating the industry.
Despite the ban on most crypto transactions and cryptocurrency mining, mainland China remains a significant hub for crypto-mining activities.
During a crypto event in London, the UK’s Economic Secretary to the Treasury Bim Afolami stated that the government is working intensively to ensure the new legislation regulating stablecoins and crypto staking. However, no specific details about the regulations were provided due to the ongoing developments in the field.
In 2022, UK Prime Minister Rishi Sunak pledged to establish the country as a global crypto hub, emphasizing the need for crypto firms to be able to invest, innovate, and scale up within the UK. Progress on implementing clearer regulations has been slow, despite calls from cryptocurrency firms for more concise rules.
The UK Law Commission published recommendations in July 2023 suggesting conducting a common law analysis of crypto assets and establishing an industry-specific panel consisting of technical experts, academics, and legal practitioners to advise courts on crypto-related legal matters.
On October 30, 2023, the UK government announced plans to introduce more crypto-specific regulations in 2024. This includes bringing the regulation of fiat-backed stablecoins under the purview of the Financial Conduct Authority (FCA).
Crypto transactions in Indonesia are under the dual taxation, including a 0.1% income tax and a 0.11% value-added tax (VAT), imposing a significant burden on users. Additionally, local crypto exchanges are required to contribute around 0.04% of their revenue to the national crypto stock market. Despite the overall growth of the cryptocurrency market, Indonesia’s crypto tax revenue experienced a downturn primarily due to a notable 51% decrease in crypto transaction volumes during 2023 compared to the previous year.
Local exchanges are also unsatisfied with the high tax rates and believe they are responsible for resulting in thinner revenues, as users seek out alternative platforms. The suggestions made by local exchanges, particularly the proposal to subject crypto transactions solely to income tax, underscore the need to foster growth and stability in the Indonesian cryptocurrency market.
In its statement, the SEC stated that the granting of the bitcoin ETF does not mean that the SEC is promoting the cryptocurrency and called for individual investors to be cautious when they invest in digital assets.
What is the exchange-traded fund?
Invented back in the 1990s, exchange-traded funds are baskets of bonds or other assets that are usually managed by the leading financial investment firms. They can be traded on the stock exchanges and, therefore, realise gains and losses from trading. They are invented as a platform for the individual investors to participate. By investing in several assets and diversifying its portfolio, individual investors reduce the chance for significant losses.
Why is the bitcoin exchange-traded fund important for digital assets?
Considering that cryptocurrency use and safe storage still require certain technical knowledge, the ETF offers the opportunity for individual investors to invest directly in the cryptocurrency markets without the risk associated with cybersecurity. The bitcoin exchange-traded fund opens the way to invest in digital assets managed by professionals. From eleven companies that applied for the SEC approval, there are some Wall Street financial giants such as BlackRock or Van Eck but also a new wing of the crypto and innovative tech industry such as Fidelity or Ark Investments. Together, they manage hundreds of billions of dollars that will now be exposed to the cryptocurrency market. The ETF will follow the spot price of the bitcoin cryptocurrency, and may benefit the price stability of bitcoin. It will also serve as a safeguard for individual investors from the industry known for its many blunders
The SEC announcement comes one day after the security incident related to their X account. In the alleged hack, shared content was news that the SEC approved spot bitcoin exchange-traded fund. Was this a message that went public by accident or mistake from the account holders? Or was it a malicious act from the third party to undermine the government agency? Answering this question will be the primary purpose of the FBI investigation announced yesterday by the Securities and Exchange Commission
The Australian Treasury has initiated efforts to further fine tune regulation around cryptocurrency. It has published a consultation paper titled “Regulating digital asset platforms” to outline its approach. Instead of creating new rules specifically for cryptocurrencies, the regulation of crypto exchanges will be carried out under existing financial services laws.
The main focus of this regulatory framework is to oversee and regulate cryptocurrency exchanges and service providers, rather than individual cryptocurrencies or tokens. The Australian Treasury is considering making it mandatory for crypto exchanges to obtain a financial services license from the local financial regulator. These proposed rules will only apply to crypto exchanges holding more than $3.2 million ($5 million AUD) or more than $946 ($1,500 AUD) per individual.
Why does it matter?
With a quarter of Australians owning some sort of cryptocurrency, the treasurer, Jim Chalmers, stated that they are taking swift and systematic action to create a regulatory framework that balances consumer protection with the promotion of innovation in the digital asset industry.
Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending regulations. The EU market rules for crypto-assets
Crypto-assets are one of the main applications of distributed ledger technology. Crypto-assets are digital representations of value or of rights that have the potential to bring significant benefits to market participants, including retail holders of crypto-assets. Representations of value include external, non-intrinsic value attributed to a crypto-asset by the parties concerned or by market participants, meaning the value is subjective and based only on the interest of the purchaser of the crypto-asset.
In light of the recent legal cases and lawsuits against companies from the cryptocurrency industry, the US Commodity Futures Trading Commission (CFTC) filed a suit against world’s biggest cryptocurrency exchange Binance. The Binance exchange, and the company CEO Changpeng Zhao are accused of trading violation, by not registering with the US regulatory body.
Binance
The commission has been investigating the online exchange since 2021 and this is a final step in their investigation. The CFTC claims that Binance also allowed US citizens to buy and trade cryptocurrency on its platform, back in 2017. Currently, the US citizens are not allowed to trade on the exchange which implements Know Your Customer (KYC) procedure. The companies CEO Changpeng Zhao is accused of having numerous accounts on the exchange which he used to trade against their customers.
The Binance exchange started in Shanghai and it now holds companies in a couple of world jurisdictions, with a yearly revenue of $20 billion. Mr Changpeng Zhao has Canadian and Chinese passports, while living in Dubai.
The new 2024 Revenue Proposal in the US will consider the progressive tax on electricity that is used for cryptocurrency mining. The US Department of the Treasure proposed a tax for energy used in mining of any digital asset, and defines digital assets as: ‘any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology (blockchain)’
Cryptocurrency mining is seen as a wasteful use of energy and the proposed tax would start from 10% in year one (2024), increasing to 30% in the two-year time. The environmental impact is the main reason behind the proposal as the document suggest that: ‘the increase in energy consumption attributable to the growth of digital asset mining has negative environmental effects and can have environmental justice implications as well as increase energy prices’
The instability of the mining operations is also stated as one of the reasons, as the mining industry follows the cheapest energy sources. ‘Digital asset mining also creates uncertainty and risks to local utilities and communities, as mining activity is highly variable and highly mobile.’
Private US company Chainalysis is a leading company in collecting and analyzing data used on cryptocurrency blockchains. In its annual report on cryptocurrency-related crime, they point out that illicit cryptocurrency volumes reach all-time highs amid a surge in sanctions and hacking.
‘Overall, the share of all cryptocurrency activity associated with illicit activity has risen for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022.’ The company assesses that an equivalent of $20.6B is used for illicit activities.
A big part of that sum comes from the offenses related to the economic sanctions on Russia. This shows that a strict regime of sanctions is efficiently imposed on cryptocurrency exchanges, by the US department of the treasury, and international financial institutions. The report describes methods that are used for money laundering and fund transfers. As a key takeaway, Chainalisys points out that the impact of crypto sanctions depends on the jurisdiction and technical constraints.
Ransomware crypto payments
The report shows a decline in ransomware from 2021. Chainalisys claims that ransomware victims increasingly refuse to pay the ransom money hence pushing the criminals out of this scheme. The report is stating that “meaningful disruptions against ransomware actor groups are driving lower than expected successful extortion attempts” In 2021, the US Office of Foreign Assets Control (OFAC) issued an advisory document about the risk of ‘sanction crimes’ that can rise from ransomware payments. OFAC advises all US companies to report ransomware to the FBI prior to any action. This is also considered to be one of the factors for the drop in ransomware payments. In addition, ransomware lifespan is significantly shorter. From 470 days in 2019, it is down to 70 days in 2022.
Money laundering
The report is stating a rise in money laundering activities from $14.2B in 2021 to $23.8B in 2022. The report is stating ‘underground money laundering services’ are a growing concern. Such groups use private channels on messaging apps to set and organise private transactions that are hard to track.
Cryptocurrency scams
Cryptocurrency scams and the use of cryptocurrency on darknet markets are on the decline compared to previous years.
