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Mar 19, 2018

The Global Blockchain and Crypto Regulatory Environment (March 19th Edition)

Hello Global Blockchain Team –

In order to stay ahead of the fast-paced crypto tax and regulatory environment, and in an effort to more effectively meet the needs of our international blockchain clients, please find a summary of the news articles related to government regulation in the blockchain and cryptocurrency space in the past couple of weeks.

If you want to subscribe to the email version with links, please email me.


• Tax blitz to hit Bitcoin investors: February 28 - The Australian government will use data-matching and identification checks to pursue bitcoin investors for their tax liabilities. Bilateral tax treaties and anti-money laundering powers will be used by the Australian Tax Office to try to ensure transparency in the crypto market, where the anonymity provided by the underlying blockchain technology is prized among some investors.

• BTC Markets is Australia’s first ADCA-certified crypto exchange: February 27 - BTC Markets has become Australia's first cryptocurrency exchange certified by the Australian Digital Commerce Association (ADCA), reports the Australian Financial Review. "Digital currency businesses that are certified by ADCA must prove to independent auditors that they meet the rigorous standards set by the Code. An external auditor confirms that each item in a checklist of code compliance obligations has been satisfied," explains a BTC Markets blog post.


• Austrian Bitcoin Brokers Propose “Gold Standard” in Response to Regulatory Pressure: March 14 - Demuth proposes a solution to the ongoing cryptocurrency debate that would place Bitcoin and other digital currencies in the same position as gold, which would potentially make cryptocurrency more attractive to retail investors. Under EU law, gold is not subject to any specific capital requirements — banks are able to account for gold in a similar manner to government bonds or cash. Retail sales of gold in the EU are also exempt from value-added tax.

• Austria Planning New Regulations for Cryptocurrency, ICOs: February 23 - Austria has joined the list of countries planning to regulate cryptocurrencies and will use as a model existing rules for the trading of gold and derivatives. The government's central concern is curbing the use of cryptocurrencies for money laundering. Likewise, it wishes to extend oversight measures for traditional financial products to crypto assets.


• Ontario regulator probes cryptocurrency use in real estate: February 22 - Ontario's real estate regulatory body, the Real Estate Council of Ontario (RECO), is raising serious concerns about whether brokerages should be allowed to facilitate transactions in cryptocurrencies such as bitcoin. "The decision to accept cryptocurrencies would be based solely on the law, our code of ethics and assurances that consumers will be safeguarded and no harm can come to people involved in buying and selling real estate in Ontario."


• French regulatory agency blacklists 15 cryptocurrency and crypto-asset websites: March 15 - “The investment proposals highlighting the possibility of financial returns or similar economic effects involve intermediation in miscellaneous assets and are now subject to ex ante control by the AMF. Consequently, no offer can be directly marketed in France without prior allocation by the AMF of a registration number.”

• French Watchdog Says ‘Crypto Derivatives’ Must Be Regulated, Can’t Be Advertised Online: February 22 - French stock market regulator Autorité des marchés financiers (AMF) released a statement Thursday, Feb. 22, that cryptocurrency derivatives must be regulated under the European Union’s new Jan. 2018 financial reforms. As derivatives cannot be legally advertised electronically, the AMF also states that online advertisements for cryptocurrency derivatives are not permitted. Although cryptocurrency derivatives are not included in the MiFID 2 regulation list, the AMF statement has concluded that “a cash-settled cryptocurrency contract may qualify as a derivative, irrespective of the legal qualification of a cryptocurrency.”


• Germany won’t tax you for buying coffee with Bitcoin: February 28 - The guidance, published Tuesday, sets Germany apart from the U.S., where the Internal Revenue Service treats bitcoin as property for tax purposes - which means that if an American buys a cup of coffee with bitcoin, it's technically considered a sale of property and potentially subject to capital gains tax. Instead, Germany will regard bitcoin as the equivalent to legal tender for tax purposes when used as a means of payment, according to a new document. The Bundesministerium der Finanzen based its guidance on a 2015 European Union Court of Justice ruling on value added taxes (VAT). The court ruling creates a precedent for European Union nations to tax bitcoin while providing exemptions for certain types of transactions.

• German Regulator Clarifies Obligations For ICO Operators Following Increased Interest: February 22 - Germany’s Federal Financial Supervisory Authority (BaFin) has clarified obligations for Initial Coin Offering (ICO) tokens after receiving “increased queries” about their legal status in a note issued Tuesday, Feb. 20. Under Germany’s jurisdiction, ICO operators “are required to check exactly whether a regulated instrument, [such as] a financial instrument… or a security, is being dealt with, in order to fulfil potential legal requirements without any gaps.”


• Gibraltar will regulate ICO tokens as commercial products: March 16 - In a whitepaper released this week, the country detailed that most tokens are not considered securities under law either in Gibraltar or the EU. So, while many other countries have classified these tokens as securities, Gibraltar has decided that “in many cases, [tokens] represent the advance sale of products that entitle holders to access future networks or consume future services,” and so they are commercial products.

• Gibraltar moves ahead with world's first initial coin offering rules: February 22 - Gibraltar will introduce the world’s first regulations for initial coin offerings with dedicated rules for the cryptocurrency sector whose fast growth has triggered concern among central bankers.


• Closer FinTech cooperation between Maharashtra State and Singapore: February 26 - The Monetary Authority of Singapore (MAS) and the Government of Maharashtra (GoM)1 signed a Memorandum of Understanding (MoU) on 18 February 2018 to strengthen cooperation in promoting FinTech innovation in the two markets. The agreement provides opportunities for FinTech start-ups in Singapore to set-up and build business relationships with FinTech companies at the Mumbai FinTech hub. As part of the agreement, the Government of Maharashtra and MAS will co-develop educational programmes on FinTech and explore potential joint innovation projects on the application of key technologies such as digital and mobile payments, blockchain, and big data.

• New Cabinet-Approved Bill May Tighten The Noose On Cryptocurrency Traders: February 21 - The Indian Union Cabinet chaired by PM Modi has approved to introduce the Banning of Unregulated Deposit Schemes Bill, 2018 in the parliament, which may include Bitcoin and cryptocurrencies that have been seen largely unregulated so far. The bill is aimed at “tackling the menace of illicit deposit-taking activities in the country. It will prohibit companies/ institutions running such schemes from exploiting existing regulatory gaps and lack of strict administrative measures which result in poor and gullible people being duped of their hard-earned savings.”


• The Next Petro? Iranian Minister Reveals Cryptocurrency Plans: February 22 - New statements suggest that Iran's central bank is developing a cryptocurrency that would be administered by the state government. Information and Communications Technology Minister MJ Azari Jahromi made the announcement on Twitter Wednesday, February 21st, following a meeting with the bank's board of directors. He described a meeting during which "digital currencies based on the [blockchain]" were discussed, adding that it was decided "to implement the country's first cloud-based digital currency using the capacity of the country's elite."


• Israeli Supreme Court Forces Banks to Allow Trading: February 26 - The Supreme court issued a temporary court order to prohibit Israel’s Leumi Bank from limiting in any capacity the bank account of Israeli crypto company Bits of Gold, which acts as a broker (exchange) in facilitating the buying and selling of digital assets.

• Israel Confirms Cryptocurrency Will Be Taxed As Property, Not Currency: February 20 - The Israeli Tax Authority (ITA) confirmed on Feb. 19, in a professional circular that the country will tax cryptocurrencies as property. The tax authority had released a draft of today’s circular on Jan. 12, which referred to virtual currencies as “unit[s] used for barter [that] can be used for investment purposes.” Per this definition: “these currencies will be considered as ‘assets’ and will be sold as a ‘sale’ and the proceeds from their sale will be classified as capital income.” The final version of the circular writes that crypto will be taxed by the capital gains tax, which in Israel will be 25 percent for private investors, with a 47 percent marginal rate for businesses, according to Israeli news outlet Haaretz.

• Israel to Tax Crypto Mining Operations as Factories: February 19 - As cryptocurrencies are regarded by the Israeli Tax Authority as financial assets and not a currency, Israel-based businesses that make use of digital coins in their daily operations will need to pay value-added tax (VAT) on their crypto-related activities, just as they would for any other product or service, according to a memo published by the authority Monday. The new regulations are effective immediately for the fiscal year 2018. Investors are subject to Israel’s 25% capital gains tax on their crypto trading.

• Would Israel’s ICO Tax Plan Retain Startups or Scare Them Off? January 24- The Israel Tax Authority's (ITA) draft circular detailing how domestic companies' ICO revenue could be taxed, is an effort by the Israeli government to entice token issuers to stay on the Middle Eastern soil. One of the main reasons the ITA's circular might be appealing to token issuers is that it describes deferrals on when ICO income would become taxable, plus it mentions the potential for crypto companies to earn special tax treatment.


• Japan to call for crypto rules at the G20 summit: March 14 - Japanese representatives will push for the adoption of global rules on cryptocurrencies at the upcoming G20 meeting in Argentina. Next week, the summit will gather finance ministers and central bankers in Buenos Aires. Other countries also want to put crypto matters on the table, with signals coming from key members of the European Union.

• Japan's Finance Watchdog Eyeing ICO Regulation: February 27 - According to Sankei Shimbun, the Financial Service Agency is considering the revision of relevant laws and regulations in an effort to regulate ICOs in Japan, amid the growing popularity of token sale activities within the territory. The report indicates that Japan currently has no clear regulations covering ICOs specifically, while the existing bitcoin payment law that went into effect last April is not sufficient to define the legal status of some ICO activities.

• Japan's cryptocurrency exchanges to form new self-regulating body: February 20 - Sixteen Japanese cryptocurrency exchanges will fix plans as early as next week to create a self-regulating body in a bid to better safeguard investors after a $530 million digital money heist last month, two source familiar with the plan said. A plan to merge two separate industry bodies, the Japan Cryptocurrency Business Association and Japan Blockchain Association, had been dropped after talks stalled in favor of the new body to regulate exchanges registered with Japan’s Financial Services Association, the sources said.


• Kenya is finally softening its stance on blockchain: March 6 - Kenya softened its stance last week, and announced that the government is setting up an 11-member task force that will study the benefits and challenges associated with blockchain technologies. The directive came days after President Uhuru Kenyatta said the nation needed to explore the opportunities in the new technology, especially in sectors such as land, where creating foolproof digital registries could forestall malpractice and parallel ownership.


• Malaysia Central Bank to ”Let Public Decide” Crypto’s Fate: February 14 - Malaysia’s central bank, Bank Negara, is set to release a “concept paper,” calling for the public to decide the fate of cryptocurrencies in the country, according to a recent report. Bank Negara governor Muhammad Ibrahim is said to have assured the bank will neither ban nor recognize cryptocurrency, and that the paper will be finalized in February.


• Three Laws Would Regulate Malta’s Blockchain Space, Encourage Innovation: February 20 - On February 16, a three-week-long period of public consultation began for three blockchain-related bills in Malta. At the end of the period, the legislation is expected to be presented to Parliament. The three laws are the MDIA bill, which would establish the Malta Digital Innovation Authority (MDIA); the TAS bill, which would lay the groundwork for technology service providers to register with the government; and the VC bill, which would establish a framework for the regulation of ICOs and other cryptocurrency-related services.

• Malta to Give “Peace of Mind” to Crypto Companies: February 18 - The government of Malta has come up with an idea that businesses dealing with cryptocurrencies may find interesting. A new policy document seeks to set up a special agency which will “certify” blockchain platforms and “verify” crypto transactions. It is supposed to “bring peace of mind” to companies using these technologies to cut out central authorities and banks. Valletta also proposes legislation that will define the roles of intermediaries and regulate initial coin offerings.


• Mexican lawmakers pass cryptocurrency regulation bill: March 2 – Lawmakers in Mexico have advanced a bill that was drafted to regulate fintech, including cryptocurrencies, in the country. The bill was passed by Mexico’s Chamber of Deputies, the lower house of its legislature, on Thursday and currency is pending signature from Mexico’s President Enrique Pena Nieto before it goes into effect as law.

• Mexico’s Regulations for Crypto Exchanges Expected in ‘Weeks’: February 23 - Mexico’s Chamber of Deputies will soon vote on the bill to regulate the country’s fintech institutions including cryptocurrency exchanges, which the Senate has already approved. The bill “establishes a regulatory framework that regulates the platforms (called Financial Technology Institutions or ITFs)” which includes crypto exchanges, the document states. “The bill recognizes two types of ITFs: collective financing institutions and electronic payment fund institutions.”


• Panama’s Leading State-Owned Bank Warns of Risk of Cryptocurrencies: The general manager of Panama’s leading state-owned bank sought on Thursday, February 1st, to discourage people from putting money into cryptocurrencies, saying no government regulation exists to protect those who invest in those digital assets.


• Russian Blockchain Association To Launch ‘First’ Guarantee System For ICO Funding: February 20 - The “first” guarantee system for Initial Coin Offering (ICO) investments is set to launch in Russia in 2018, local media outlet Izvestia reported Feb. 19. The system, dubbed ICO-hub, is being developed by Globex Bank, which is a subsidiary of state-owned Vnesheconombank (VEB) bank, together with the Russian Association of Cryptocurrency and Blockchain (RACIB), and the CrowdHub platform. According to Alexander Mineev, Globex’s head of e-commerce and remote banking services development, the ICO-hub project is expected to be launched for testing in March, 2018.

• Russia’s Medvedev Calls For EAEU Coordination In Cryptocurrency Regulation: February 2 - Russian Prime Minister Dmitry Medvedev has said that rather than regulating cryptocurrencies at the national level, member states of the Eurasian Economic Union (EAEU) should implement a region-wide policy, according to a report by Russian state media outlet Tass. He made the remark on February 2 at the Digital Agenda in the Era of Globalization, a forum being held in Kazakhstan. The EAEU's members are Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.


• Singapore weighs need for new rules to protect crypto investors: March 1 – MAS, the de facto central bank, is reportedly looking at whether new rules are needed to protect cryptocurrency investors.

• Closer FinTech cooperation between Maharashtra State and Singapore: February 26 (see India).

South Korea

• South Korea regulator flags better deal for cryptocurrency industry: February 20 - A better deal for South Korea’s cryptocurrency industry might be in the offing as the market regulator changes tack from its tough stance on the virtual coin trade, promising instead to help promote blockchain technology. The regulator said on Tuesday that it hopes to see South Korea - which has become a hub for cryptocurrency trade - normalize the virtual coin business in a self-regulatory environment.


• Government of Spain Considers Blockchain-Friendly Regulations: February 20 - The government of Spain is preparing blockchain-friendly legislation including possible tax breaks to attract companies in the emerging blockchain technology sector


• Switzerland’s ‘E-Franc’ cryptocurrency: Head of Swiss stock exchange: February 26 - The head of Swiss stock exchange likes the sound of an ‘E-Franc’ and would like his country to introduce its own cryptocurrency. He reckons that there are tremendous benefits that come with having a cryptocurrency developed by the government for its people. The ‘E-Franc’ will give the country a competitive lead in the market; besides, he added, “I don’t like cash.”

• Swiss financial watchdog publishes ICO guidelines: February 16 - The Swiss financial watchdog has published guidelines on digital currency fundraisers - known as initial coin offerings - under which it will regulate some ICOs, either under anti-money laundering laws or as securities. The Financial Market Supervisory Authority (FINMA) says the guidelines “also define the information FINMA requires to deal with such enquiries and the principles upon which it will base its responses,” according to a press release posted on its website. (attached)


• Thailand’s Cabinet Moves to regulate and Tax Cryptocurrencies: March 14 – The Cabinet of Thailand, the executive branch of the country’s government, has provisionally passed two royal decree drafts aimed at regulating cryptocurrencies. The Deputy PM stressed that the intent is not to ban crypto activities, such as trading and ICOs, but to establish formal rules to protect investors. The second royal decree also aims to bring taxation on capital gains from cryptocurrency investments. The rate of the tax has yet to be confirmed, but is likely to range between 10 and 15%.

• Thai Crypto Exchange Pauses ICO Registrations, Awaits Release Of Regulatory Framework: February 26 - The privately owned Thai Digital Asset Exchange (TDAX) is deferring the trading and registration of Initial Coin Offerings (ICOs) for two weeks while awaiting a soon-to-be revealed regulatory framework from Thailand’s Securities and Exchange Commission (Thai SEC), the Bangkok Post reported Monday, Feb. 26. The decision to postpone the ICO trading, even though there are reportedly five or six ICOs already in development, comes after Bangkok Bank terminated TDAX’s account in order to stop crypto transactions over the weekend, citing the lack of an operating license.


• Turkish Lawmaker Proposes “TurkCoin” National Cryptocurrency: February 23 - According to a report by Al-Monitor, Ahmet Kenan Tanrikulu, the deputy chair of Turkey's Nationalist Movement Party and the country's former Industry Minister, has drafted a report to propose a state-backed cryptocurrency dubbed "Turkcoin." Though the technical specifics remain unclear, the lawmaker touts that Turkcoin would aim to tokenize asset-backed securities for the issuance, which he argued would yield lower risks than existing cryptocurrencies. The report said such asset basket would include large public companies in the country's


• Ukraine takes Position on Cryptocurrencies: March 4 - At a time when precisely Germany, Venezuela, Uzbekistan and other countries have issued official pronouncements that protect and promote economic activities related to cryptocurrencies, Ukraine’s position can be seen as innovative by joining a select group of countries that have ventured to initiate regulatory processes, giving blockchain a higher level of importance in their political priorities.

• Ukrainian Law may separate mining from cryptocurrencies: February 4 - Ukrainian deputy Olexandr Danchenko, head of the Committee for Informatization and Communications in the Rada, suggested that cryptocurrencies and crypto mining should be regulated separately. He condemned Ukraine’s security services for pressuring miners. Police confiscated mining equipment in a series of raids this week. Authorities claim that coins have been used to finance pro-Russian separatists.

United Arab Emirates

• Abu Dhabi: Financial Services Authority Is Working On Cryptocurrency and ICO Regulations: February 12 - The Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) is preparing a set of regulations for cryptocurrencies, Initial Coins Offerings (ICOs) and cryptocurrency exchanges, according to an official announcement published Sunday, Feb. 11. While developing the regulations, FSRA intends to cooperate with relevant qualified institutions and individuals involved in the cryptocurrency industry, according to the announcement. The financial regulator did not specify when the regulations are expected to be released.

• City of Dubai Issues License for Cryptocurrency Trading Firm: February 14 - The Dubai Multi Commodities Centre (DMCC) is attracting cryptocurrency investments to its free economic zone in the UAE. The DMCC is a government entity established in 2002 that aims to attract different enterprises and businesses to the city. Now, the DMCC has started issuing licenses that allow firms that trade cryptocurrencies to operate in this free zone. Regal RA is the first company in the Middle East to receive this license.

United Kingdom

• Carney calls for crackdown on crypto-currency 'mania': March 2 - Crypto-currencies such as Bitcoin should be regulated to crack down on illegal activities and protect the financial system, Mark Carney warned. “A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system," he said.

• UK Treasury Launches Inquiry Into Cryptocurrency: February 22 - The U.K. Treasury has today announced that it will conduct an inquiry into issues around cryptocurrencies and blockchain technology. Launched by the Treasury Committee, the investigation will take several angles including examining the role of cryptocurrencies in Britain, including potential "opportunities and risks" for consumers, the business community and government. In particular, the inquiry will "scrutinise the regulatory response" to cryptocurrencies from the government, the Financial Conduct Authority and the Bank of England.

• UK announces global sandbox: February 14.

United States

• Federal

‒ Trump Administration Working on 'Comprehensive Strategy' for Crypto: February 27 - The deputy attorney general of the U.S. said Tuesday that the government is working on a "comprehensive strategy" around cryptocurrencies. Rod Rosenstein spoke at the Financial Services Roundtable's spring conference this week and, during a question-and-answer session, he was asked about his views on cryptocurrency and cybercrime. Amid his remarks, he referred to a new cybercrime task force unveiled last week by the Justice Department that will develop a strategy around crimes involving the tech.

‒ US Court Freezes BitConnect Assets as Lawsuits Mount: A temporary restraining order (TRO) freezing BitConnect's assets has been granted in the U.S. after a second lawsuit was filed against the cryptocurrency exchange and lending platform on Monday. The order – granted by Chief District Judge Joseph McKinley, Jr. at the U.S. District Court, Western District of Kentucky – requires the parties to disclose cryptocurrency wallet and trading account addresses, as well as the identities of anyone to whom BitConnect has sent digital currencies within the last 90 days.

• Arizona: Bitcoin Tax Payments Bill Advances in Arizona: Lawmakers in Arizona have advanced a proposal that would allow residents in the state to pay their taxes in bitcoin. Public records show that last week, the Arizona Senate Finance Committee had given the thumbs-up to the measure by a 4-3 margin. The bill remains before the chamber's Rules Committee, though the endorsement of the Finance Committee – which encouraged that the bill is passed – increases the likelihood that the measure will succeed.

• Georgia: Georgia Becomes Latest State to Consider Bitcoin for Tax Payments: February 23 - Two state senators in Georgia have proposed a bill that would allow citizens to pay their tax obligations in bitcoin, marking the second legislative effort of its kind to emerge this year. Public records show that the measure submitted on Feb. 21 by senators Michael Williams and Joshua McKoon would, if passed, tweak the rules governing the state's Department of Revenue, letting it accept both bitcoin and other as-yet-to-be-defined cryptocurrencies.

• Hawaii: Hawaiian Bills would capture crypto under money transmission law: January 31 - Two bills introduced in the Hawaiian Senate last week are aiming to define and include virtual currencies within domain of the state's Money Transmitters Act. If passed, HI SB2853 and HI SB3082 would require those seeking to transmit virtual currencies in the state to have a license to do so. They would also mandate that these persons or businesses issue a warning to consumers prior to enabling such transactions.

• New York: New York Lawmakers Open to Revisiting the BitLicense: February 23 - A bill to reform the 2015 regulation, BitLicense, could be introduced "very soon," State Senator David Carlucci told CoinDesk. "That's why we wanted to do this hearing, to get some views before we propose legislation." Speaking after the two-hour event, Carlucci said that a report will be prepared cataloguing the problems identified during the roundtable he hosted with Jesse Hamilton, the New York State Senator, as well as some of the solutions that were proposed.

• Texas: Texas Issues Another Cease-and-Desist to February 27 - According to a document received and reviewed by CoinDesk, the Texas State Securities Board (TSSB) issued a new cease-and-desist order on Feb. 26 to a Panama-based cryptocurrency firm named The state regulator said it considers the firm's cryptocurrency mining and trading programs to be unregistered security offerings and, furthermore, that LeadInvest is also using fake stock images to portray its team members.

• Wyoming: U.S. State Of Wyoming Defines Cryptocurrency 'Utility Tokens' As New Asset Class: March 13 - Wyoming government officials believe that it is setting a strong example for the way in which the U.S. government will define cryptocurrencies with the passing of House Bill 70. Labeled the “Utility Token Bill,” Wyoming’s House Bill 70 was passed by the Wyoming State Senate on March 7th of last week. Governor Matt Mead just signed the bill into law this past weekend.


• Venezuelan lawmakers declare Petro crypto illegal: March 7 – One of Venezuela’s two opposing law-making bodies has ruled that the country’s issuance of a national cryptocurrency is illegal under domestic law.

• Venezuela's President Orders Companies to Accept Petro: Venezuela officially has its own cryptocurrency - and its president wants some of the country's state-owned businesses to use it. According to a recording posted on Twitter by television network VTV, Venezuelan President Nicolas Maduro has ordered several state-owned companies to convert a percentage of their sales and purchases into the petro. Furthermore, just one day after the commencement of the controversial petro pre-sale, Maduro made waves once again, announcing that he plans to unveil a second cryptocurrency next week: the petro gold.


• G20 reveals names and dates for next week’s crypto talks: March 15 – The G20 is set to hold two separate discussions on cryptocurrencies next week in an effort to seek what representatives call a “common response” on regulation.


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