EU, US, UK crypto regulations tighten

Crypto is getting reined in around the world

It’s been a rough few weeks for crypto on the regulatory front. The EU wants information on all transactions. The U.K. is pushing companies to register — while being stingy on licenses. And the SEC is expanding the meaning of “securities dealer” as it tries to set stricter accounting standards for crypto exchanges. The bottom line: Crypto’s growing fast, but so is the push for greater accountability.

The EU says no more anonymous transactions. The European Union rattled the crypto world with a new requirement for all crypto transactions to include information on the parties involved.

• It essentially outlaws anonymous crypto transactions, and means greater transparency for transactions involving unhosted wallets.
• The EU said the new rules are aimed at curbing financial crimes. “Illicit flows in crypto assets move largely undetected across Europe and the world, which makes them an ideal instrument for ensuring anonymity,” Ernest Urtasun, co-rapporteur for the EU’s Committee on Economic and Monetary Affairs, said in a statement.
• Crypto leaders were quick to denounce the new rules, which still have further to go in the EU’s complex policy machine, as counterproductive. “This regulation harms crypto innovation without a commensurate anti-money laundering benefit,” Cameron Winklevoss, co-founder and president of Gemini, said in a statement emailed to Protocol.
• Coinbase CEO Brian Armstrong blasted the proposal as “anti-innovation, anti-privacy, and anti-law enforcement.” Coinbase Chief Policy Officer Faryar Shirzad warned it could mean recording and reporting transactions through self-hosted wallets “even if there is no reason to suspect wrongdoing.”

The rules are getting stricter everywhere you look. The EU news broke as crypto reeled from new guidelines in the U.S. and the U.K.

• The SEC posted a new guideline recommending that crypto exchanges record the digital assets of customers on their balance sheets as assets and liabilities. Crypto companies must also disclose the “nature and amount of crypto assets” they are holding for customers.
• SEC Commissioner Hester Peirce, who has been critical of the regulator’s stance on the crypto market, said the decision underscored its “scattershot and inefficient approach to crypto.”
• Crypto is also under pressure in the U.K. The Financial Conduct Authority has ordered companies offering crypto products and services to register with the British regulator. Some companies, like Revolut, got a break when the FCA extended the deadline. But the FCA has seen “too many financial crime red flags missed by the crypto asset businesses seeking registration,” a spokesperson told Bloomberg. Few licenses have been granted.

The wave of new government rules is clearly roiling crypto. Is this really just about accountability? Cathy Yoon, chief legal officer of Fraction, isn’t sure. “I think it’s more like trying to control something that’s not understood and feared for an irrational reason,” she told Protocol. Fear is the mind-killer, but crypto worries it could also be a market-killer.

— Benjamin Pimentel (email | twitter)

A version of this story first appeared on Protocol.com. Read it here.

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On the money

Bored Ape Yacht Club’s Discord channel was hacked. The BAYC’s messaging service was breached by hackers who sought to trick users into minting fake NFTs. The Discords of two other NFT projects, Nyoki and Shamanz, were also hacked.

Russia has a SWIFT alternative for India. Russia is offering an alternative payments system that would enable India to buy oil and weapons from the country, which is reeling from sanctions related to the Ukraine war. The plan would involve rupee-ruble-denominated payments using a Russian messaging system.

The Bank of Italy banned N26. The Italian central bank told the digital bank it could not recruit new customers after an on-site inspection revealed that N26 had inadequate anti-money laundering controls.

Prime Blockchain is going public. The bitcoin mining and infrastructure company, also known as PrimeBlock, plans to go public via a SPAC merger with 10X Capital Venture Acquisition Corp II. The merger, which is expected to close by the second half of the year, would value the company at $1.25 billion including debt.

Indonesia plans to impose a crypto value-added tax. The Southeast Asian nation will charge tax on crypto asset transactions and an income tax on capital gains from such investments starting May 1.

I Hate Receipts launched a merchants network. The contactless receipts app company said it has formed the Merchant Alliance Network to give retailers and technology partners a better way to engage with their customers.

Overheard

Last Thursday was the deadline for crypto firms to register with the U.K.’s Financial Conduct Authority. That could cause some companies to bolt, according to Christian Faes, executive chairman and co-founder of LendInvest. “The reality is that people are withdrawing their applications to do business here,” Faes said. “And they just go elsewhere, it’s a global marketplace.”

Sen. Cynthia Lummis told Chuck Todd on Peacock’s “Meet The Press Reports” that the U.S. should have a digital currency, but that it shouldn’t replace crypto: “We absolutely should. But there’s still an important role for bitcoin and other cryptocurrencies in that they are not created by any government. They’re completely decentralized. No one government or group of people controls them. They’re very transparent in that they’re on the blockchain.”

Citi says the metaverse is coming — and it could be worth $13 trillion — but computing power needs to catch up, the authors of its new report wrote: “We believe the metaverse is the next generation of the internet — combining the physical and digital world in a persistent and immersive manner — and not purely a virtual reality world.”

Coming up

Tuesday is the 10th anniversary of the Jobs Act. The 2012 law allows companies to file confidentially for an IPO, even though most of them seem to announce that they’re doing it anyway.

Treasury Secretary Janet Yellen is testifying at a House hearing Wednesday. It’s her annual chat with the Financial Services Committee about the state of the international financial system.

Bitcoin 2022 opens Wednesday. The crypto conference in Miami Beach runs through Saturday. El Salvador’s president, Nayib Bukele, is speaking, as are Peter Thiel, Sen. Cynthia Lummis, Cathie Wood, Michael Saylor and Block TBD lead Mike Brock.

Later this month: Protocol Climate is hosting an event on April 19 that looks at tech companies’ climate goals. Suzanne DiBianca from Salesforce is a speaker.

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Get ready to live stream Plaid Forum 2022 on May 19. Join the world’s leading companies and build the future of digital finance. Registration is now open!

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