Matrixport View_Regulation #5

Most of the western world, in particular the western Europe, is entering into a two months’ holiday season. Business is visibly advancing at a slower pace. On the crypto side, however, two noticeable good news arrived in the month of July. First, the US finally allows its banks to accept client’s cryptocurrencies. Second, the Russian lawmakers passed country’s major crypto bill which provides a legal status to cryptocurrencies. Two very encouraging news which will certainly help to democratise further BTC, ETH, or LTC alike. Here below is a snapshot of the regulatory landscape in the crypto world in July 2020:

Policies and regulations around the globe:


Per a July 22 announcement, the Office of the Comptroller of the Currency (OCC) is granting permission to federally chartered banks to custody cryptocurrency. This issue has seen much skepticism, given that crypto wallets do not resemble the custody requirements of other sorts of assets. Nonetheless, in its interpretive letter on the subject, the OCC wrote: “The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers.” In the words of the announcement, the new opinion “applies to national banks and federal savings associations of all sizes.”

US State of Texas saddles up to become the next blockchain capital. Everything is bigger in Texas, and now the state with the second-largest geographical area in the United States is aiming to prove that it can lead the way in blockchain innovation. While well-known companies like Hedera Hashgraph and Bitmain have already established a strong presence in Texas, the state has recently formed its own blockchain committee. Known as the Texas Blockchain Council, the organization was established as a trade association, or business league, serving as a non profit intended to make Texas a leader in national blockchain growth, education and business development.


Russia passed a major bill today related to cryptocurrencies like Bitcoin (BTC). The State Duma — Russia’s legislative body — has passed a bill titled “On Digital Financial Assets” in its final third reading, local news agency Regnum reports July 22. After initiating the bill back in 2018, Russian authorities have finally agreed to provide a legal status to cryptocurrencies, preparing to adopt the first major part of legislation for the industry. Following the latest Duma’s decision, the bill “On Digital Financial Assets,” or DFA, is expected to be officially adopted in Russia on Jan. 1, 2021. The bill provides a legal definition to digital assets and legitimizes cryptocurrency trading in Russia. However, the bill prohibits the use of cryptocurrencies like Bitcoin as a payment method.

South Korea

The South Korean government has announced a 20% tax rate for income generated from cryptocurrency trading. Following a Tax Development Review Committee meeting on July 22, the Ministry of Economy and Finance published its revised tax code detailing the new rules. In a section headed, “Taxation on Virtual Asset Transaction Income,” the ministry introduced the new rules with a note that at present, both personal (resident and non-resident) and foreign corporations’ virtual assets are non-taxable. The government states that introducing taxation for virtual assets is now necessary, pointing to the approach taken by other countries, where cryptocurrencies are already taxed under similar regimes for income from stocks and derivatives trading.

The lack of regulatory uncertainty in South Korea is causing major Korean cryptocurrency exchanges to lose international traders and turn their focus on the domestic audience. Speaking to Cointelegraph, a spokesperson of the South Korean exchange Upbit expressed his concern about their platform facing issues with providing fiat to crypto trading to its users: “Providing fiat trading via authenticated banking accounts has been a key issue for us as we were unable to provide the service for over two years.”

Andong, a city in the Gyeongbuk province of South Korea, announced on July 7 that they’ve been granted a permit to operate a free trade zone for industrial hemp. They additionally announced that they will manage their operations through a blockchain-based platform. According to Newspim, Gyeongbuk’s governor, Lee Chul-woo, held a press conference to reveal the permit granted to the city, allowing them to run the “Special Industrial Hemp Free Zone.” This zone aims to present a new model of regional specialized industries by implementing smart farming and high-tech bioindustry solutions.


The Chinese Supreme Court believes that cryptocurrency property rights should be strengthened. In a document published on July 22, China’s Supreme Court calls for strengthening the protection of property rights pertaining to — among other things — “digital currency, network virtual property, and data.” The official court opinion aims to “promote the improvement of a modern property rights system with clear ownership.” The document also mentions the intention to strike against the “use of public power to infringe private property rights, illegal seizure […] and freezing of private enterprise property.“ Furthermore, the court’s statement calls for the punishment of all types of infringement on property rights, including embezzlement and sale of state-owned and public assets. It also promotes the improvement of asset management and supervision.

The People’s Bank of China (PBoC) is planning to add the Tencent-backed food delivery giant Meituan Dianping to its list of platforms that will test real-world use cases of the digital yuan. Meituan Dianping is a Beijing-based food delivery platform that currently boasts of more than 435 million active users and billions of dollars of daily transactions. This creates a huge opportunity for the mass adoption of the digital yuan, which is also referred to as the Digital Currency Electronic Payment or DCEP. Unnamed sources told Bloomberg that Meituan had been in talks with the research arm of China’s central bank — the Digital Currency Research Institute — regarding the use-cases for its central bank digital currency (CBDC). However, both parties are yet to specify the details about their partnership. The Tencent-backed video streaming platform Bilibili is also reportedly in discussions with the PBoC to test the digital yuan. Recently, one of the largest ride-hailing applications DiDi also joined the project.


In a landmark announcement, Securities Commission Malaysia’s Shariah Advisory Council declared that digital assets trading was permissible. The Malaysian Shariah Advisory Council is the authority that oversees the implementation of Islamic laws in the operation of Islamic Financial Institutions. Securities Commission chairman Datuk Syed Zaid Albar made the announcement during an online conference Invest Malaysia 2020 on July 7, stating: “The SC Shariah Advisory Council has resolved that in principle, it is permissible to invest and trade in digital currencies and tokens on registered digital asset exchanges.”


Monaco is one of the most exceptional countries on the planet. Its unique mix of scenery and history creates a blend that attracts tourists from all over the world. Anyone who has ever visited falls swiftly in love with its charm. The Monacan government demonstrated its commitment to keeping the nation at the forefront of financial advancements on June 16 when the National Council passed Bill No. 1009 — proposed by National Council Member Franck Julien — which encompasses new security token offering laws. A basic translation of the law itself shows us that it lays out a “legal framework for token offerings, which are a form of fundraising carried out by a digital record using a decentralized register, allowing the creation of tokens [to be sold] in return for payments made by investors.” Essentially, the new bill allows companies based in Monaco to undertake a fully legal STO. The final elements of this are being hashed out now.


Switzerland’s existing tax law is applicable to developments in the blockchain industry, the Swiss Federal Council said. According to the federal authority, Switzerland does not need to amend its existing tax legislation in regard to blockchain and distributed ledger technology.

Updates and news on the most important players/topics in the industry:


Thomas Lambert, Daniel Liebau, and Peter Roosenboom from the Rotterdam School of Management suggest that Security Token Offerings are better at financing start-ups than Initial Coin Offerings. Their research was published on July 14 via the University of Oxford Business Law blog. The research paper pointed out that although ICOs and STOs are both issued on distributed ledgers, the idea behind an ICO is “value creation for a community. Utility tokens in ICOs can only grant holders with consumptive rights on services or products and can not be seen as a “financing mechanism”. However, STOs can. Researchers explained that:
“Tokens issued in a STO are investment products which usually confer cash flow rights to investors and, in some cases, also voting rights. A STO is thus specifically designed to finance start ups, whereas an ICO aims at funding an organization but does not include its financing.”


Tether (USDT) has blacklisted 39 Ethereum addresses worth $46 million in USDT, with 24 holding a total of over 5.5 million USDT being blacklisted this year. This revelation comes on the back of Centre’s first blacklisting of an Ethereum address holding $100,000 USDC. Ethereum researcher at Horizon Games Philippe Castonguay used Dune Analytics to create a dashboard that tracks the number of addresses blacklisted by both Centre and Tether. The largest address holds over 4.5 million USDT and was only recently blacklisted on April 5.


In recent months, a number of class-action lawsuits have been filed against Ripple for selling its XRP token in an unregistered securities offering. So far, the United States Securities and Exchange Commission has not published any official statement on this, which has kept everyone guessing. To help put an end to the uncertainty, Chris Giancarlo, former chairman of the Commodity Futures Trading Commission, published a paper last week arguing that Ripple’s XRP is not a security. Giancarlo is famous for helping establish the CFTC’s stance that Bitcoin (BTC) and Ether (ETH) are not securities. So, it would seem that he is the right person to be making this case. The only trouble is that Giancarlo is no longer working for the CFTC — he is now in private practice. Not only that, but he is also currently working for a law firm that is on Ripple’s payroll. Story to be continued.


The Tezos (XTZ) class-action lawsuit from law firm Block & Leviton will likely conclude in a $25-million settlement on August 27. Tezos, like many initial coin offerings (ICO) from 2017, has come under scrutiny from both investors and regulators alike alleging that its token sale constituted an illegal offering of securities. Indeed, the U.S. Securities and Exchange Commission (SEC) has come down hard on numerous 2017-era ICOs demanding penalties for securities violation. Even distributions to non-U.S. citizens have also come under the SEC’s radar, as was the case with Telegram. The SEC has consistently maintained that most ICOs are indeed unlicensed securities offerings despite pushback from stakeholders in the country to exempt a wider range of tokens from securities regulation. With more jurisdictions paying greater attention to crypto-based fundraising, the ICO model appears to be a thing of the past with more focus on regulated token sales.



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