Matrixport View_Regulation #9

November is an important month from the world’s political perspective: there will be a new US President from January 2021 on. How will this impact on the crypto world? One would speculate – not much! Indeed, no matter which US administration is in charge, regulatory and compliance issues will always be their priorities when it comes to cryptocurrency industry. There are even rumours saying the current US administration will be issuing new rules in regard to self-hosted private wallets before its leaving the office. Despite all the above, Bitcoin’s price again touched the milestone of USD 20’000. The bull run seems to be unstoppable. Now let’s have a look at the big regulatory stories in the month of November:

Policies and regulations around the globe:


Chinese blockchain infrastructure provider Blockchain-Based Service Network (BSN) has integrated cross-chain protocol Polkadot, cloud computing startup Oasis and China-based public chain project Bityuan into its network.

The additions are part of BSN’s effort to bring a variety of blockchain projects under one standardized development environment within its own technical framework. It also aims to provide data processing and storage services to the in-network projects. This is just the latest sign of China’s ambitions to become a blockchain superpower, by creating an infrastructure that is used by projects and developers world-wide. The state-sanctioned network, which aims to be the internet of blockchains, launched the global version of its network in July, allowing developers to access public chains to build or operate their decentralized applications (dapps). BSN later announced it would make 24 public chains permissioned and add them to its domestic version in China by the end of November.

Chinese police seized crypto assets worth $4.2B today from PlusToken Ponzi

The PlusToken controversy, which has led to the arrest of 109 individuals so far, has also reportedly resulted in a titanic seizure of crypto assets by Chinese authorities worth $4.2 billion at today’s prices. According to court filings released publicly on Nov. 19 and posted by The Block, authorities seized a staggering 194,775 Bitcoin (BTC), 833,083 Ether (ETH), 1.4 million Litecoin (LTC), 27.6 million EOS, 74,167 Dash, 487 million XRP, 6 billion Dogecoin (DOGE), 79,581 Bitcoin Cash (BCH) and 213,724 Tether (USDT) from seven individuals convicted in the case. According to the ruling from the Yancheng Intermediate People’s Court, gains from the seized crypto assets will be forfeited to the national treasury. The precise details of how the assets will be dealt with and processed in accordance with national laws have not been fully spelled out. The PlusToken scheme, which first released its white paper back in Feb. 2018, had presented itself as a South Korean crypto exchange and wallet provider that could provide users with interest-bearing accounts capable of generating between 8% and 16% returns monthly, with a minimum deposit of $500 in crypto assets. According to local reports in Sept. 2020, PlusToken drew in 2 million members between May 2018 and June 2019.

World’s dominant crypto futures market could face regulatory shake-up

Proposed regulations targeting Hong Kong’s blockchain industry could have far-reaching consequences for the crypto derivatives market, according to new research from In a report published recently, researcher Mira Christanto said the Special Administrative Region of Hong Kong, which happens to be the dominant market for crypto futures trading, could be clamping down on unregulated exchanges as part of a broader push for more governance. The researcher cited a recent proposal from the Hong Kong Securities and Futures Commission, or SFC, that would require all crypto businesses to fall under anti-money laundering rules. This is a significant departure from just one year ago when the SFC announced it would only regulate companies in the ‘securities’ space. Previously, the SFC only regulated assets that meet the legal definition of securities or futures – a definition that excluded cryptocurrencies. As Cointelegraph reported earlier this month, the Hong Kong government has proposed to bring all cryptoassets under the oversight of its securities regulator. The regulatory push appears to be part of a worldwide initiative to rein in cryptocurrency exchanges, possibly under the guise of money laundering concerns.


Majority of Indian investors see “no easy way to enter “ crypto

A comprehensive survey from India’s CoinDCX exchange has found that most local investors don’t see an “easy way” to access exposure to crypto assets. That’s despite the country reversing a ban on financial institutions providing services to digital asset businesses earlier this year. According to the exchange’s findings, 56% of respondents under the age of 40 assert there is stil “no easy way to enter” the markets. This sentiment is also shared by 60% of respondents earning less than 500,000 Indian Rupees ($6,700) per year. Many segments of India’s population also cite a lack of “legal & regulatory clarity” as the largest barrier to entering the crypto sector, including 22% of respondents aged 40 or above, 32% of undergraduates, and 23% of real estate investors. Graduates and respondents aged from 20 to 30 identified “knowledge & education” regarding crypto as the biggest challenge to its adoption.


Russian prime minister proposes legal steps to bring order to crypto market

Russian prime minister Mikhail Mishustin has appeared to express support for the further development of the local cryptocurrency market. At a recent governmental meeting held on Nov. 26, Mishustin proposed the introduction of legal protections for crypto holders in the country in order to contribute to the growth of the new industry. According to Mishustin, such a framework would develop the industry in a “civilized way so that the owners of such assets can protect their rights and interests,” while at the same time preventing “shadow schemes.” As part of the plan, Mishustin proposed amending the Russian Tax Code to recognize cryptocurrencies like Bitcoin (BTC) as property.

Russia’s proposed crypto amendments have a major blind spot

Russia’s vast oversight of cryptocurrency transactions appears to have one crucial blindspot: There doesn’t seem to be any liability for criminals who use digital assets to conduct illegal transactions. On Thursday, Russia’s Ministry of Finance proposed new amendments to the country’s cryptocurrency laws that seek to clarify rules around tax evasion. Under the proposed guidelines, Russians can face up to three years in prison for failing to report transactions of 45 million rubles ($583,000) or more at least twice in three years. An earlier ministry proposal recommended three-year prison sentences for anyone who fails to report transactions of over 1 million rubles ($13,000). Citizens must also report transactions and wallet amounts that exceed 600,000 rubles ($7,700) in a calendar year. A failure to report on time could result in a fine of 50,000 rubles ($640). Strangely absent from the new guidelines is any liability for criminals who continue to use cryptocurrency for illicit transactions.


Australian government embraces blockchain with new trial and public servants’ network

The Australian government is trialing the use of blockchain technology for intergovernmental document exchanges with Singapore as the latest action in a series of pro-blockchain efforts. It follows hot on the heels of the establishment of a new network promoting blockchain to public servants. On Nov. 23, the Australia Border Force launched a blockchain trade trial in collaboration with Singapore Customs and Singapore Infocomm Media Development Authority to test digital verification systems. ABF Commissioner Michael Outram explained that the trial will help digitize trade and compliance records.


Brian Armstrong is worried the Trump Administration is about to send the cryptocurrency industry a parting gift.

The Coinbase CEO took to Twitter Wednesday night to blast the U.S. Treasury Department’s rumored plans to attempt to track owners of self-hosted cryptocurrency wallets with an onerous set of data-collection requirements. If the whispers are to be believed, outgoing Treasury Secretary Steven Mnuchin is preparing to tamp down on one of the fundamental tenets of the cryptocurrency ethos: the ability of the individual to hold their crypto (unmolested) themselves.

US intelligence is looking at Chinese CBDC as national security threat

The United States national security apparatus is warning other agencies about China’s upcoming digital currency. On Wednesday, news outlet the Washington Examiner reported on a letter that National Intelligence Director John Ratcliffe had sent Securities and Exchange Commission Chairman Jay Clayton earlier in the month. According to the report, Ratcliffe offered to have staff brief Clayton on the security issues that derive from China’s dominance in crypto mining as well as the country’s progress in digitizing the yuan. Ratcliffe’s letter also apparently pushed Clayton to ensure that U.S. crypto firms remain competitive.

The long arm of justice: How far can the DoJ really go in prosecuting foreign actors?

In early October, the U.S. Department of Justice revealed its Cryptocurrency Enforcement Framework, a report laying bare the government’s vision for emerging threats and enforcement strategies in the cryptocurrency space. The document is an important source of insight into how the laws governing digital finance will be soon implemented on the ground. One of the fundamental principles that the government asserts in the document is its broad extraterritorial jurisdiction over foreign-based actors who use virtual assets in ways that harm U.S. residents or businesses. The guidance sets an extremely low bar for perpetrators of cross-border crime to clear before they face prosecution. According to the framework, it can be enough for a crypto transaction to “touch financial, data storage, or other computer systems within the United States” to provoke enforcement action. Is the stringency of this approach unprecedented across other domains of financial crimes enforcement? What actual tools does the U.S. government have to counter criminals acting from overseas?

US regulator wants to stop banks from blacklisting legal businesses, crypto included

Per a recent announcement, the Office of the Comptroller of the Currency, or OCC, is looking for public comments on rule-making that would stop banks from denying services to businesses based on sector. In the words of Comptroller Brian Brooks, “Blanket boycotts of entire industry sectors have to stop.” The OCC’s announcement points to political hot-button issues that banks have systematically denied services to, including oil and gas companies in Alaska as well as Planned Parenthood. Speaking to the media, Brooks noted the bipartisan nature of many of these bans: “These things are not politically partisan, but there are all kinds of attempts that we’ve seen to politically weaponize the banking system.” He continued: “There is a creeping politicization of the banking industry that has the potential to be very dangerous.”

SEC gives OK to social media platform to issue stablecoin without registering as a security

The U.S. Securities and Exchange Commission, or SEC, has issued a rare no-action letter in response to a request from a blockchain-backed platform over the issuance of a digital asset. The SEC letter issued on Nov. 19 says that its Division of Corporation Finance would “not recommend enforcement action” against avatar social platform IMVU issuing its VCOIN digital asset under certain conditions. The commission will allow the firm to offer the token without registering it as a security. Crypto firms issuing their own tokens often have to abide by the SEC’s regulatory framework, which has proved contentious. The classification of a “security” is for assets dependent on the work of a third party to gain profit. To abide by the no-action letter, IMVU needs to keep its new stablecoin from looking like an investment opportunity, which, for example, Facebook got tripped up doing with its Libra stablecoin.

U.S. law firm sys IRS is coming after Coinbase users who evade taxes

The Tax Law Office of David W. Klasing, a boutique Californian tax firm, has issued a public release warning investors that the United States Internal Revenue Service is getting serious with Coinbase users. The firm’s dual-licensed tax lawyers and capital allowance specialists say they have been tracking an increase in IRS enforcement activity against Coinbase users who fail to comply with their tax and reporting requirements. Coinbase released a transparency report this October, which the law firm says should “serve as a major wake-up call” to the exchange’s users. That report showed clearly that both the IRS and its Criminal Investigation Unit, as well as the FBI and CIA, were filing information requests with the exchange.

South Korea

South Korean government to delay crypto tax rules by three months

The South Korean National Assembly is planning to delay the implementation of new income tax laws on cryptocurrency gains following appeals from industry bodies. According to a Nov. 25 report on Korean-language news site DongA, the 20% tax, originally due to be imposed from October 2021, will now not come into force until Jan. 1, 2022. The delay is intended to give digital currency exchanges time to implement the changes required to incorporate the new tax infrastructure. As Cointelegraph reported, the new tax structure for cryptocurrencies was announced in July this year and amounts to a 20% tax on any gains over a threshold level of 2.5 million won ($2,260) per year. The rules were originally planned to come into force on Oct. 1, 2021, which led to complaints from the Korean Blockchain Association.

South Korean financial watchdog will ban privacy coins from exchanges

According to a Nov. 3 announcement from South Korea’s Financial Services Commission, or FSC, virtual asset service providers within the country will no longer be able to handle any digital assets that present a high money laundering risk. These updates were made as part of the guidelines under the Special Payment Act — regulation which specifically covers the legality of cryptocurrencies in South Korea. The FIU specifically called out “dark coins”, which are privacy-oriented cryptocurrencies, for having transaction records that are reportedly difficult for the group to trace. This could potentially affect the usage of privacy coins such as Zcash (ZEC), Monero (XMR), and Dash (DASH).


Nigeria is establishing a framework for widescale crypto adoption

Nigeria’s Federal Ministry of Finance is reportedly in talks with the country’s securities regulator to develop a new framework for blockchain and cryptocurrencies — a move that could accelerate adoption in Africa’s largest economy. Business Day, a Nigerian market intelligence publication, reported Tuesday that the Ministry of Finance is working with the Abuja-based Securities and Exchange Commission, or SEC, to “provide a regulatory environment for blockchain” and digital assets. The publication cites Ministry adviser Amstrong Takang speaking at an industry event in Lagos on Tuesday. Digital assets are recognized as commodities and governed by appropriate securities law in Nigeria following the SEC’s stunning edict on the matter back in September. At the time, the SEC said its role was to regulate this new asset class, not hinder adoption or innovation.


Kyrgyzstan’s central bank developing draft law for cryptocurrency industry

The central bank for the Central Asian country of Kyrgyzstan is working on a draft law to regulate the cryptocurrency industry in the country. According to an announcement on Nov. 13, the National Bank of the Kyrgyz Republic is developing a draft law that would regulate cryptocurrency exchanges in consultation with industry stakeholders. The bank stated that the draft law would regulate the sale and purchase of cryptocurrencies with the aim of tackling fraudulent cryptocurrency schemes and financial crimes, as well as safeguarding consumer and investor rights. Among the expected benefits of the forthcoming regulations, the bank notes the improved development of digital financial products, favourable conditions for the business community and even the possible introduction of a formal tax regime for digital assets. However, the bank also expects crypto legislation to come with its own share of obstacles, stating that the cross-border nature of many private cryptocurrencies will make the law difficult to enforce without the proper infrastructure for monitoring and implementation. Indeed, the bank states that due to the “lack of regulation and the chaotic nature of the cryptocurrency market,” there is no hard data on the number of businesses that would be subject to the new law.


Pakistan’s securities regulator mulls new legal framework for crypto

Pakistan’s government is working on a framework for regulating cryptocurrencies like Bitcoin (BTC). The Securities and Exchange Commission of Pakistan, or SECP, has published a consultation paper on regulating digital assets. Issued on Nov. 6, the paper outlines major concepts for the growing digital finance market in Pakistan and examines the existing regulatory frameworks developed by other global jurisdictions. In the document, the SECP emphasizes that digital assets are the “start of a new era of digital finance.” According to the regulator, the new era of digital finance “could only be possible by initiation of a new era that re-invents regulatory regime [or] measures as they are known to the regulators globally today.” The SECP noted that the consultation paper focuses exclusively on private crypto assets and does not include remarks on a central bank digital currency, or CBDC.


UK drafting stablecoin regulations and researching a CBDC

The Treasury Department of the United Kingdom has revealed it is drafting proposals to regulate private stablecoins while also researching central bank digital currencies, or CBDCs, as an alternative to cash. In an announcement published on Nov. 9, U.K. Treasury Chancellor Rishi Sunak noted the forthcoming regulatory proposals alongside other goals for the country’s financial services industry — including a review of the U.K.’s listings regime and support for green finance.

Cayman Islands

Cayman Islands introduce regulations for virtual assets service providers

The Ministry of Financial Services of the Cayman Islands Government announced that it has commenced a regulatory framework for virtual asset service providers, or VASPs. In an Oct. 31 press release, the ministry claimed that the move had strengthened the country’s “ability to regulate and attract persons and entities that deal with virtual assets as a business.” The first phase of the implementation, which is already underway, focuses on compliance with and enforcement of Anti-Money Laundering and Countering the Financing of Terrorism rules. The new framework incorporates the updated recommendations which the Financial Action Task Force adopted in 2019. As Cointelegraph reported at the time, these recommendations included the controversial “travel rule”, which requires VASPs to collect and share personal data on the originator and beneficiary of transactions. Existing VASPs and newcomers to the market will need to register with the Cayman Islands Monetary Authority in order to demonstrate their compliance with global AML/CFT standards. Cayman’s AML/CFT regime is currently under review by both the FATF and the Caribbean Financial Action Task Force following a recent Mutual Evaluation Report.

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


Facebook’s Libra to reportedly launch in January 2021 as USD stablecoin

The long-awaited digital currency Libra could finally see the light of day as soon as January 2021, according to a new report. Following more than a year of scrutiny from global financial regulators, Libra will launch in the form of a U.S. dollar-backed digital currency, the Financial Times reported on Nov. 27. Citing three people involved in the Libra project, the Financial Times wrote that the Libra Association plans will eventually add more fiat currencies to the basket of assets that back Libra’s value. Expected in January, the exact launch date is still not known and would depend on when the Libra Association receives regulatory approval by the Swiss Financial Market Supervisory Authority, or FINMA, to operate as a payments service.

Tax standard

OECD tax director says international crypto tax standards are coming in 2021

Pascal Saint-Amans, the director of the OECD’s Centre for Tax Policy and Administration, has asserted that the 37-nation organization will introduce a common reporting standard, or CRS, for crypto assets in 2021. According to Law360, Amans stated that the crypto tax standard “would be roughly equivalent to the CRS” developed by the Organisation for Economic Co-operation and Development to combat tax evasion. The director attributed the likely development of the crypto tax CRS to a desire to introduce stronger standards surrounding crypto regulations among its member-countries: “The timeline to deliver is probably ’21, sometime in ’21, because there is an appetite by all countries now.” Amans’ comments come days after the European Commission launched a process to amend and extend its tax evasion laws pertinent to crypto assets. The proposal was published on Nov. 23, with the commission set to receive public feedback on the initiative until Dec. 21. The new laws are expected to be introduced during the third quarter of 2021.



Matrixport provides this analysis as general information only. Matrixport accepts no responsibility for the accuracy or completeness of any information herein contained and Matrixport shall not be responsible for any loss arising from any investment based on any forecast or other information herein contained. The contents of this materials should not be construed as an express or implied promise, guarantee or implication by Matrixport that the forecast information will eventuate. The cryptocurrency market is highly volatile. Buying, selling, holding, or investing in cryptocurrencies or related product carries various risks and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before participating in the cryptocurrency market. Matrixport is not acting as a financial adviser, consultant or fiduciary to you with respect to any information provided. Any information available here is “general” in nature and for informational purposes only.