October 7, 2023

Welcome to the Global Crypto News hub! Articles by Killerwhale go over the news you may have missed that involves crypto, but had a real world effect. Sit back, relax, and enjoy! News is gathered throughout the week and posted every Saturday!

The Bank for International Settlements (BIS) and its partner central banks never run out of strategies for safeguarding fiat currencies against competition from cryptocurrencies.

As a matter of fact, BIS and its partners within the Eurosystem have created a new data platform named Project Atlas to investigate the macroeconomic significance of crypto asset markets and decentralized finance (DeFi). The platform combines precise on-chain data with information acquired from cryptocurrency exchanges (off-chain data).

Project Atlas offers various data types that can be used to recognize and quantify risks, such as:

However, this legalized monitoring of crypto markets by central banks is accompanied by a constellation of potential drawbacks meriting meticulous consideration.

Foremost among these concerns is the ominous prospect of market manipulation by banks. Given the substantial influence these institutions possess within the financial sphere, there exists a tangible risk that they may orchestrate favorable conditions or distort market dynamics for their own benefit thanks to their surveillance capabilities and strategic utilization of insider knowledge.

Furthermore, the threat of hypercentralization looms large as central banks, inherently governmental institutions, insert themselves into the equation. This centralization, coupled with excessive regulations, especially in Europe, upon the ecosystem, could potentially lead to a real disinterest from the crypto realm, as it deviates from its own intrinsic values.

These cogent drawbacks underscore the imperative for a judicious and calibrated approach to regulatory engagement by central banks in the rapidly evolving landscape of cryptocurrencies.

Source: bis.org

Brazil's central bank, Banco Central do Brasil (BCB), is tightening regulations on the country's rapidly growing cryptocurrency market. This comes after Brazil's cryptocurrency inflow increased by an astonishing 44.2% between January and August 2023, totaling more than $35.9 billion BRL (about $7.4 billion USD).

The BCB's regulatory efforts are led by Governor Roberto Campos Neto, who, ahead of a meeting of the Finance and Taxation Commission of the Brazilian parliament, has expressed concern about the rapid growth of cryptocurrencies. He has emphasized the critical need for more regulatory monitoring, especially given the increasing popularity of stablecoins, which are now predominantly used for everyday transactions rather than investments.

Governor Campos Neto has also warned of the potential hazards “connected to tax evasion or linked to illicit activities”, as address these concerns, the BCB is seeking to increase surveillance over cryptocurrency exchanges and platforms.

In June 2023, the BCB officially established its position in defining Brazil's cryptocurrency environment. The Comisso de Valores Mobiliários (CVM), Brazil's equivalent of the United States Securities and Exchange Commission (SEC), was granted primary responsibility for regulating securities, including cryptocurrencies.

The BCB is also making progress on its “Drex” central bank digital currency (CBDC) project, in line with the central bank's goal of improving the stability and efficiency of Brazil's financial system.

Brazil's regulatory journey began on June 13, 2023, when the government formally gave the BCB control over the country's cryptocurrency sector. This law, numbered 14478, was passed in December 2022 and is currently in effect.

The new legislation defines virtual assets and outlines how they should be regulated. It also gives the President the power to choose the regulatory body. The law and its implementing rules stipulate that the BCB will grant licenses and supervise the activities of virtual asset service providers.

A month later, the BCB announced that it would hold a public consultation on regulating cryptocurrencies later that year. The central bank stated that it would collect feedback and suggestions from business leaders and the general public before enforcing the final regulations. Businesses currently operating in the market will be given a minimum of six months to comply.

In mid-August, local media sources reported that a legislative committee had approved changes to a law that would designate cryptocurrencies as financial assets for tax purposes when making international investments. Under the proposed legislation, profits attributable to volatility in foreign exchange rates and profits deriving from shifts in the value of cryptocurrency assets relative to the local fiat currency would both be taxed.

The new legislation seeks to level the playing field by addressing the difference between Brazilian investors who make domestic investments and those who make foreign investments. The new law would exclude the first USD 1,200 of foreign income from taxation, tax income between USD 1,200 and USD 10,000 at a rate of 15%, and tax income beyond USD 10,000 at a rate of 22.5%.

In response to the country's rapidly increasing cryptocurrency usage, Brazil's central bank is proactively putting steps in place to tighten cryptocurrency rules and encourage CBDC growth. These initiatives aim to promote innovation, uphold responsibility, and lessen risks like tax fraud and illegal activity.

Brazil is striving to strike a balance between nurturing the growth of its cryptocurrency market and maintaining a robust regulatory framework. The country's regulatory journey is still in its early stages, but the BCB's proactive approach is a positive sign.

Source: bitcoinist.com

We’ve already written about a recently introduced European crypto regulation known as DAC8, which carries significant implications for users and businesses within its jurisdiction.

DAC8's primary objective is to monitor all cryptocurrency transactions conducted by organizations operating in EU member states. This regulation mandates that companies report detailed user information, including names, addresses, dates of birth, tax ID numbers, and transaction data to their respective tax authorities. The outcome of this new regulatory is in reality nothing other than the continuation of all the European directives on administrative cooperation and crypto repression and regulation.

Scheduled to take effect in 2026, DAC8 applies broadly, encompassing various crypto assets such as payment tokens, stablecoins, and NFTs. Furthermore, it extends its reach to all legal entities offering crypto-related services, including exchanges, custodians, and trading platforms.

As with any regulation, DAC8 has generated both support and criticism. Supporters argue that it is a necessary measure to combat fraud, tax evasion, and money laundering while providing tax authorities with improved oversight of users' financial activities.

Critics, on the other hand, express concerns about its intrusiveness, administrative burdens for small businesses, and potential for misinterpretation due to unclear lesgilation.

As a matter of fact, the EU's MiCA regulation, introduced in 2022, is designed to establish a consistent and comprehensive regulatory framework for the cryptocurrency sector in Europe. However, MiCA, though well-intentioned, currently suffers from unclear wording of the law regarding crypto asset categorization which are classified into three potentially ambiguous categories, deemed unclear in terms of the current reality of the crypto industry.

Additionally, MiCA doesn't really seem to recognize the innovation brought about by the industry, as restrictions imposed on token issuers are excessively restrictive, making it harder to undertake business in the European jurisdiction .

As an example; the head of legal affairs at Binance France was lamenting the fact that Europe was heading for an outright deregistration of all stablecoin by next year. In short, that's where we're at.

EU member states must adopt these regulations by December 31, 2025, with enforcement beginning in 2026. Attempting to circumvent the rules using foreign platforms is unlikely to succeed, given the prevalence of identity verification procedures. Some anticipate the emergence of a new era in decentralized finance (DeFi) along with alternative options, operating outside the scope of traditional legislation and offering potential escape routes from such surveillance, even though these alternative may not offer the same level of reliability and security as established financial institutions.

Source: