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Regulation needed to prevent crypto from moving abroa

Turner Wright, 12-8, 21,, Crypto CEOs request Congress provide regulatory clarity at hearing on digital assets

The House Committee on Financial Services heard from several CEOs of major crypto firms in the United States, some of whom seemed to present a united front in urging lawmakers to provide a clear regulatory framework for crypto. Speaking at a Wednesday hearing titled “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States,” Circle CEO Jeremy Allaire, FTX CEO Sam Bankman-Fried, Bitfury CEO Brian Brooks, Paxos CEO Chad Cascarilla, Stellar Development Foundation CEO Denelle Dixon and Alesia Haas, chief financial officer of Coinbase and CEO of its U.S. subsidiary, told U.S. lawmakers about the challenges their companies faced as both stablecoin issuers and digital asset exchanges. In a written statement released prior to the hearing, Allaire said Circle supported Congress’ efforts for “national licensing and Federal supervision” of stablecoin issuers, given many were now “too big to ignore.” Cascarilla seemed to echo this sentiment, describing the U.S. financial system as “inadequate” for handling the emerging digital economy, but blockchain technology may offer a possible solution: “A blockchain-based financial architecture could settle trades on the same day, mitigate counterparty risk and eliminate the costly central clearinghouse,” said the Paxos CEO. “This would enable market participants and regulators to monitor and correct settlement and margin shortfalls in real time. We agree that shortening the trade settlement cycle should be a high priority for the SEC, and we are working aggressively to make that possible.” Circle CEO Jeremy Allaire addressing the House Committee on Financial Services on Wednesday Brooks added that there were already examples of companies involved in the digital asset space finding a more regulatory-friendly environment in other countries, such as Fidelity launching a Bitcoin (BTC) exchange-traded fund in Canada in the absence of the U.S. Securities and Exchange Commission’s approval of one. “There is a reason why crypto talent is no longer concentrated in Silicon Valley, the birthplace of the original commercial Internet,” said Brooks. “Sure, some talent has merely moved from Silicon Valley to Miami — but a surprising number of talented founders have left for Portugal, Dubai, Abu Dhabi, Singapore, and other jurisdictions that are not at all unregulated but that have a more positive posture toward innovation and growth.” Related: US lawmaker urges congressional action on crypto as government avoids shutdown Addressing the panel of crypto CEOs, Representative Patrick McHenry argued the technology in the crypto space was “already regulated” but acknowledged that any existing framework could be “clunky” and “not up to date.” According to the North Carolina congressperson, a lack of understanding among his fellow committee members could risk overregulating crypto and blockchain: “We need reasonable rules of the road, we know that. We don’t need knee-jerk reactions by lawmakers to regulate out of fear of the unknown rather than seeking to understand. And that fear of the unknown in the move to regulate before understanding will only stifle American ingenuity and put us at a competitive disadvantage.” Still ongoing at the time of publication, the House committee hearing seeks to discuss four key aspects of the crypto space: exchanges, stablecoin offerings, regulatory concerns in digital assets, and federal regulatory responses. Lawmakers will also likely discuss decentralized finance, given its potential to “replicate and replace conventional delivery of financial services such as loans, asset trading, insurance, and other services.”

Crypto benefits communities of color and remittances

evin Dugn, 12-8, 21, Intellgencer, Crypto Gets Its Day With Congress,

Despite the popular image of crypto being a plaything of the rich white tech class, the hearing hit repeatedly on how it can be used by minority-owned financial institutions. “Communities of color often rely on minority depository institutions and community-development financial institutions to safely do business and get access to crucial banking needs,” said New York congressman Gregory Meeks. “Just in the past several weeks, Circle has signed on institutional customers who are using these services for small-business payments, international remittances, and efficient payments for remote workers,” said Jeremy Allaire, the founder and CEO of Circle, a mobile-payment company. “Soon, we believe that dollars on the internet will be as efficient and widely available as text messages and email.”

Crime answer – crypto is traceable through digital wallets and is better than cash

Kei Dugan, 12-8, 21, Intellgencer, Crypto Gets Its Day With Congress,

Pushing back on crypto’s reputation as a way to launder money, Sam Bankman-Fried, the CEO of the crypto exchange FTX — the company that bought naming rights for the Miami Heat’s arena and signed up Tom Brady and Steph Curry as brand ambassadors — pointed out that trades of, say, bitcoin are traceable through digital wallets. “If you compare that to, for instance, physical cash,” he said, “already the digital-asset industry has set a very strong standard on that front.” In this sense, he’s right: The IRS has seized more than $1 billion in digital money this year, and the DOJ has seized millions too.

Stable coin regulation not needed, as other similar financial institutions are not regulated

Sam Kazemian, the co-founder of the Frax stablecoin protocol, 12-8, 21, Frax co-founder Sam Kazemian believes stablecoin regulations are currently too harsh,

SK: There are two parts to this. I don't know if I would call it a crackdown, but I do see a lot of regulation coming for at least the fiat coins, which have traditional financial assets that back them; like cash equivalents, or actual cash in depository accounts. I don't know that this affects truly decentralized stablecoins though. I believe that Frax is not only compliant, but it will keep complying with all requirements just by existing and being fully decentralized. The second part to your question is interesting because I think the current stablecoin regulation they're proposing is a little bit reactionary. What's currently going on is that people are saying that stablecoin issuers like a Circle and Tether need to have banking licenses. That's the conversation. But that doesn't make sense if you think about it, because there's a lot of experimentation allowed in even the traditional financial space. Things like money market funds don't have a banking charter. It's not a bank. It's not FDIC [Federal Deposit Insurance Corporation] insured. People either don't realize this or they're not informed. Money market funds are regulated in the sense that you need to have [and disclose] cash equivalents. But they are not regulated with the same harshness that they're currently proposing [for] stablecoins. This doesn't apply to fully decentralized ones like Frax that have absolutely no claims on real-world assets, or even advertise any form of redeemability. The whole point of Frax is that our protocol works by targeting the open market exchange. I think I'm pretty open to the belief that the regulation portion will work itself out.

Regulation needed for US leadership in crypto and to protect against hacking and other criminal activity

Gahyun Helen You, 12-7, 21, Gahyun Helen You is a policy analyst with FP Analytics, the independent research and advisory arm of Foreign Policy. Her research focuses on international security, economics, technology policy, and governance. She is a graduate of New York University, Foreign Policy,, Why Congress Should Regulate Cryptocurrency Now

When Bitcoin was first introduced in 2008, few lawmakers could have predicted that cryptocurrencies would grow into a $2.5 trillion asset class. The potential of cryptocurrencies to create a more efficient and inclusive financial system has captured investors’ attention. But the rise of stablecoins, which are largely backed by fiat currencies, poses regulatory hurdles and could destabilize the global monetary system. Future of Money A three-part series breaking down the rapid transformation of the global financial landscape. READ THE POWER MAP On Wednesday, the U.S. House Committee on Financial Services hosts a hearing on cryptocurrencies and financial technology, on the heels of a Treasury Department report on stablecoins published last month. Executives at key industry players—Bitfury, Circle, Coinbase, FTX, Paxos, and Stellar—will address the risks that stablecoins and other cryptocurrency technologies pose, and they will identify opportunities to improve consumer protection and prevent illicit activity, such as ransomware targeting, money laundering, and terrorism financing. The U.S. dollar remains the world’s reserve currency, and Congress’s approach to the cryptocurrency industry could inform that of other countries—making the United States a standard-bearer. In addition to wrapping their heads around the fast-moving world of cryptocurrency, regulators must now create clear rules of the road to balance innovation with mitigating risks. The ability of these digital currencies to undermine control of the monetary system and thus erode sanctions power presents a particular risk to the United States. Absent decisive action, the U.S. market may instead be governed by foreign frameworks. Stablecoins aim to address the notorious price volatility of cryptocurrencies by backing digital tokens with price-stable assets, primarily fiat currencies. The most popular stablecoins by market capitalization—Tether, USD Coin, and Binance USD—are backed by the U.S. dollar. Stablecoins are now used for trading, lending, and borrowing, but their proponents hope they will soon be used for payments, too. Demand for digital currencies and payments has grown rapidly as consumers seek convenience and enhanced security in financial services. Prominent companies, including Meta (formerly Facebook), have developed their own stablecoins to compete with native cryptocurrencies such as Bitcoin, central bank digital currencies, and fiat currencies. The coronavirus pandemic has accelerated the adoption of digital payment technology and blockchain due to an increase in the overall digitization of goods and services. Cash use has declined significantly in recent years, although cryptocurrency use as a form of payment is still minimal compared to other digital payment options. Stablecoins are still in the nascent stages of development, but their market value is around $150 billion, and they hold promise in facilitating cross-border payments with lower transaction fees. However, private control of stablecoin issuance and oversight has raised concerns that they will undermine fiat currencies and weaken global monetary policy. Critics have also raised questions about stablecoins’ backing, which could pose risks if consumers are unable to exchange their tokens for cash. In October, for example, Tether was fined $41 million by the Commodity Futures Trading Commission for lying about its reserves. The United States doesn’t yet have a comprehensive regulatory framework for stablecoins. Cryptocurrencies fall under multiple legal definitions depending on their use, leaving federal agencies jostling for authority over the industry. The Biden administration’s $1 trillion infrastructure deal signed into law last month contains provisions for cryptocurrency taxes, but their implementation remains unclear. Other legislation regarding cryptocurrency regulation has stalled in Congress. Meanwhile, some industry leaders have described the most prominent proposal to date, the known as the STABLE Act, as a “disaster,” arguing that it would stifle innovation and prevent individuals from participating in cryptocurrency networks. Congress won’t have all the answers regarding stablecoin regulation in the short term, but Wednesday’s hearing appears to be a step in the right direction toward finally addressing cryptocurrencies’ legal gray zones. It also suggests that stablecoins are becoming mainstream, with policy discussions slowly expanding beyond individual companies to focus on the whole sector. One key thing to watch: if the hearing dives into the technical aspects of cryptocurrencies’ underlying technology and what, if any, opportunities exist for regulators to work with the cryptocurrency industry to develop a robust policy framework. Potential areas for collaboration could include enhancing cybersecurity standards across the cryptocurrency ecosystem to protect the integrity of digital transactions and prevent malicious hacking attempts, addressing the growing ransomware risk, and reducing the environmental impact of cryptocurrency mining and transactions. The Treasury Department offered several recommendations in its report, notably that stablecoin issuers be treated as banks, subjecting them to federal oversight. However, it did not provide clarity on whether stablecoins fall under federal commodities and securities laws. This suggests that the Securities and Exchange Commission and the Commodity Futures Trading Commission may not be best positioned to address the systemic risks posed by stablecoins, although they could still play a vital role concerning other cryptocurrency assets, such as nonfungible tokens. Regulators can no longer ignore the potential transformative role cryptocurrencies will play in the future financial system. With competition over digital currencies among private companies and governments ramping up, the regulations established today will set the path for the future of global finance.

Irrevoverable crypto fraud and scams

Andrew Chow, 12-7, 21, Time, Crypto CEOs Head to Congress to Push Back on Looming Regulations. Here's What to Expect,

But while crypto’s lack of connection to formal institutions is a key part of its appeal, its lack of a central authority has also made it susceptible to theft, fraud and hacks. In June, a cyberattack on the oil company Colonial Pipeline led to a massive shutdown that caused a spike in gas prices and panic buying; the company paid out a $2.3 million ransom that was later recovered by authorities. More recently, a hack of the decentralized finance platform BadgerDAO led to the loss of $120 million. Because transactions on the blockchain are largely irreversible, victims of crypto scams usually have little recourse to recover their money.

Crypto boosts remittances

PYMNTS, 10-26, 21, New Study: Crypto Emerging as a Favored Form for Cross-Border Remittances,

PYMNTS research finds that nearly 60% of consumers making cross-border remittances in the past year increased such payments under the pandemic, and, with U.S. consumers sending some $76 billion annually in remittances to people in other countries, the potential to reduce the cost of these payments while increasing their speed is too tempting to ignore. With more people now looking to blockchain and cryptocurrencies to dramatically improve the cost and speed of cross-border payments, PYMNTS researchers surveyed nearly 2,100 consumers on the subject and found significant interest in adopting crypto remittances. For example, The Digital Currency Shift: The Cross-Border Remittances Report, done in collaboration with Stellar Development Foundation and PYMNTS, found that 70% of consumers pay a fee to send money overseas, “with 41 percent paying a percentage fee averaging 6.2 percent, and 28 percent paying a fixed fee that averages $14.80. In aggregate, the cost to U.S. consumers is $3.5 billion. While 30 percent of respondents stated that they do not pay a fee, they may be paying exchange rate costs.” Those embracing cryptocurrencies for remittances are reporting a different experience. Per the study findings, “23 percent of respondents — representing 8 million adults — who made online payments to friends or family in other countries used at least one kind of cryptocurrency. In fact, 13 percent of consumers surveyed say cryptocurrencies were their most used payment method for online cross-border remittances.” Table 2 Read: The Digital Currency Shift: The Cross-Border Remittances Report Crypto Holders Like It for Remittances While PayPal, credit cards and bank transfers are used most often for sending remittances, cryptocurrency usage is increasing due to its unique attributes for cross-border uses. Owning cryptocurrency increases the likelihood of using it for cross-border payments, as one would expect, and the growing population of crypto holders are driving the trend. According to the study, “Fifty-one percent of consumers making cross-border P2P payments currently hold cryptocurrency, compared with approximately 12 percent of the general U.S. population. Nearly half of these consumers have purchased cryptocurrency for transactions of any kind. This is unsurprising, as consumers with a need to send funds quickly will likely favor options that allow them to transfer money instantly and fund their payments in a variety of ways convenient to them.” Figure 6 See more: The Digital Currency Shift: The Cross-Border Remittances Report Trust and Choice Influencing Cross-Border Crypto Use Trust underpins the entire financial system, and cryptocurrency is no different. Trust is the deciding factor in how consumers send peer-to-peer (P2P) funds. As the study states, “Among consumers who make remittance payments using cryptocurrency, trust in the brand name of their PSP matters. Nearly two-thirds of cryptocurrency holders see a significant increase in their level of trust in their cross-border payments because of the remittance service’s brand name, compared with 52 percent among non-users of cryptocurrency.” However, up to 24% of consumers said they would be “choose a specific provider if receiving payments in cryptocurrency were available, and 22 percent would if making payments in cryptocurrency were available. These percentages go up to 45 percent (receiving payments in cryptocurrency) and 50 percent (making payments in cryptocurrency) among those who already make cryptocurrency cross-border P2P payments.”

Crypto investor protection is needed

Gary Gensler, Chair of the Securities and Exchange Commission, 12-2, 21, Remarks before the Investor Advisory Committee,

As to the crypto markets, I’d like to share a few thoughts. First, Satoshi Nakamoto’s “Bitcoin Whitepaper”[1] and the crypto markets that followed have been catalysts for change. This innovation challenged some early financial technologies: money and ledgers. It also has challenged incumbent business models of trading, lending, and collectibles, as well as the official sector. Second, with a $2.6 trillion aggregate market capitalization and more than 100 tokens purportedly with market capitalizations each more than $1 billion,[2] this is an asset class that belongs inside public policy frameworks of looking after investors, guarding against illicit activity, and protecting our financial stability. Third, unfortunately, this asset class is rife with fraud, scams, and abuse in certain applications. There’s a great deal of hype and spin about crypto assets and crypto projects. In many cases, investors aren’t able to get rigorous, balanced, and complete information on tokens or trading and lending platforms. Fourth, right now, we just don’t have enough investor protection in crypto. The American public is buying, selling, and lending crypto on trading, lending, and decentralized finance (DeFi) platforms, where there are significant gaps in investor protection. This leaves markets open to manipulation. This leaves investors vulnerable. If we don’t address these issues, I worry a lot of people will be hurt. Fifth, many of these tokens are offered and sold as securities. There’s actually a lot of clarity on that front. In the 1930s, Congress established the definition of a security, which included about 20 items, like stock, bonds, and notes. One of the items is an investment contract. I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight. A typical trading platform has more than 50 tokens on it. While each token’s legal status depends on its own facts and circumstances, the probability is quite remote, with 50 or 100 tokens, that any given platform has zero securities. Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they meet an exemption. Make no mistake: If a lending platform is offering securities, it also falls into SEC jurisdiction. Sixth, it’s best not to wait for a big spill on aisle three — the crypto aisle, with all its tokens, trading and lending going on — to clean up the investor protection issues. Thus, I’d like to ask anybody who may be operating crypto platforms or issuing crypto tokens, please, come in and talk to the staff at the SEC. To the extent there are challenges about how to register or come into compliance, we’d like to hear what those are. The staff is standing by, ready to better understand if any bespoke adjustments may be appropriate. At the same time, investors should receive the same protections they receive in other asset classes. For those who want to encourage innovations in crypto, I’d like to note that financial innovations throughout history don’t long thrive outside of our public policy frameworks. If this field is going to continue, or reach any of its potential to be a catalyst for change, we’d better bring it into public policy frameworks.

Regulation needed to move crypto into the mainstream and to make remittances quick and inexpensive, 12-1, 21, Crypto Experts Next Congressional Close-Up Is Coming; Here’s What to Expect,

Now parse that speakers list a little, and Hass’ Coinbase is a public company and Allaire’s Circle is a soon-to-be-public company. They are jointly behind No. 2 stablecoin USD Coin (USDC). Cascarilla’s Paxos issues the smaller — just under $1 billion — Pax Dollar (USDP). By and large, they have advocated to bring crypto into the financial system, and they want the blessing of lawmakers and regulators. FTX’s Bankman-Fried has called over-regulation a huge threat that can only be overcome by the industry working to build trust. He is also in favor of regulation that is “done properly,” saying “it’s a long time coming, and it’s completely necessary.” (Also, he gave $5 million to the President Joe Biden campaign, making him one of the Biden’s biggest donors). Then you’ve got Brooks, formerly acting comptroller of the currency — a position he used to allow banks to make payments in stablecoins, a move whose importance, Allaire said, could not be overstated. It was a big step in bringing crypto into the banking system, and one that requires a sound regulatory framework. Stellar’s Dixon is focused on making local and international payments, notably remittances, quick and inexpensive. She has called regulation “necessary” to make that happen. Back in mid-June, Allaire added that crypto is approaching a tipping point that will match the societal changes that came with the broadband revolution that brought about a connected economy. “There are key pieces of infrastructure that have to fall into place that kind of light this up around the world,” he said, that are necessary for this crypto economy to have its “broadband moment.” See more: The Crypto Economy Prepares for Its Broadband Moment And, he added, this will require innovation that can only come from the private sector. Pointing to the changes in payments ranging from credit and debit cards to PayPal and Apple Pay, he said, “they didn’t come from the federal government. They came from private sector actors. And it’s likely to be no different in the age of internet money.” But this tech revolution must beand is being — accompanied by a regulatory infrastructure. “Policy structures are taking shape all around the world that acknowledge this as a legitimate, fundamental infrastructure,” he said. However, “the exam manuals don’t exist for these new technologies” as of now. Those two infrastructure changes are driving innovations like stablecoins and nonfungible tokens (NFTs), Allaire told Webster. “You’re seeing the birth of interest rate markets where people can borrow and lend through a machine on the internet,” he said. “And that’s really dramatic … it opens up access to financial services, potentially, to far more people than have had access before.” Talking about stablecoins in late June, he added, “there’s wide recognition that stablecoins running on public blockchain infrastructure are here to stay.” Building a regulatory framework that allows them to be compliant without sacrificing innovation requires a recognition that it must leave governments in charge of the things they really care about: firm control of the money supply and monetary policy. This means charters, licenses and being clear that crypto cares “about safety and soundness,” he said. “You want well-supervised, well-risk-managed, with capital preservation and liquidity.” For all that to happen, at least some of the intermediaries blockchain technology was supposed to eliminate will still be needed — particularly in DeFi — as regulators will require them, he warned. But, he told Webster in March, that will require an intermediary innovation, building a regulator-friendly structure on top of the new payments and financial services model that is emerging See more: Decentralized Finance Drives Birth of New Internet Credit Markets “The role of intermediaries will be key,” he said. “In particular, as [DeFi] becomes more mature as an infrastructure for financial market activity and payments activity, the regulators will want firms that are intermediaries to cover consumer protection and monitoring for financial crimes.” Brooks’ letter when he ran the Office of the Comptroller of the Currency was a powerful success that “speaks to the need for banks and other financial institutions to try and participate in standards” that govern the creation, issuance and use of stablecoins, Allaire said earlier in the year.

DOJ already acting to prevent crime in crypto

JD Supra, 12-1, 21, Unpacking the Government’s Cryptocurrency Regulatory and Enforcement Agenda,

The DOJ has also increased its enforcement efforts in the cryptocurrency space. This fall, the DOJ announced the creation of the National Cryptocurrency Enforcement Team (NCET), an enforcement team dedicated to investigating and prosecuting criminal misuses of cryptocurrency. In its announcement, the DOJ noted that cryptocurrency has increasingly been used for money laundering and the operation of illegal or unregistered money services businesses. Cryptocurrency has even become the preferred payment option for illegal drugs, weapons, malware and hacking. To combat this activity, the NCET will initially focus on infrastructure providers that enable the misuse of cryptocurrency or facilitate criminal activity, including cryptocurrency exchanges and cryptocurrency mixers and tumblers (i.e., third-party services that comingle cryptocurrency funds before redistributing the funds, making it difficult to trace the source of the funds and obscuring the connection between the transacting parties). The DOJ stated that another focus of NCET will be the “tracing and recovery of assets lost to fraud and extortion, including cryptocurrency payments to ransomware groups.” The NCET will include experts from the DOJ criminal division’s money-laundering and asset recovery section and its computer crime and intellectual property section, as well as from U.S. Attorneys’ Offices across the country. The NCET announcement came on the same day that DOJ launched its civil Cyber-Fraud Initiative, which will leverage civil enforcement tools like the False Claims Act (FCA), to pursue government contractors, who fail to follow required cybersecurity standards. Traditionally, the FCA’s aggressive whistleblower provision incentivizes private parties to assist the government in identifying and pursing misconduct to which they are privy (in exchange for a share in any recovery). The FCA also protects whistleblowers from retaliation. The Cyber-Fraud Initiative will examine entities or individuals, who receive federal funds and yet “put U.S. information or systems at risk” by offering deficient cybersecurity products or services, misrepresenting their cybersecurity practices, or violating obligations to monitor and report cybersecurity incidents and breaches. On October 27, 2021, Bryan M. Boynton, the acting assistant attorney general of the DOJ’s Civil Division, clarified that the division will be specifically “focusing on government contractors and grantees who provide cyber services to the government.”

206-Crypto key to science and information technology advancement

Blockonomist Staff, 11-29, 21, Should Cryptocurrencies Be Regulated, Banned or Promoted?,

Dodging is the easy way out as we would not need to understand and know the details of the thing, while to accommodate we need to know the basic working of the technology and also the pros and cons it brings along but to accumulate we need to have expert knowledge and ability to analyze and apply the new technology to extract great results. It has been more than a decade now since the introduction of Bitcoin in 2009, and there are now thousands of such cryptocurrencies in the world market. Still, various nations struggle to come to terms with these currencies as it gets more complicated with too many coins and extreme dynamism in the field. It gets tough to arrive at a consolidated idea of what is happening and how it is happening. Few nations like China, Turkey and Saudi Arabia banned cryptocurrencies. The US, Canada and South Korea regulate them while El Salvador and Cuba go one step ahead by promoting Bitcoin and cryptocurrency as legal tender, respectively. The main advantage of banning cryptocurrency is that it gives the nations lesser headache and allows them to maintain their financial policies. Cryptocurrency is not just a currency or financial instrument, but it is also a growing futuristic financial database management technology. Hence banning them won’t help these nations in the long run. Regulating these currencies seems to be the right step forward, as it will place the nations in a ready-for-future mode, but promoting them will allow technology-based companies to grow and innovate in the field. The primary significance of cryptocurrency is that they are truly international currency, and by allowing the citizens to accumulate the suitable coins, the nations do a massive favour to themselves and their citizens. Moreover, by promoting innovative usages of cryptocurrencies or blockchain programming, the country can tap substantial financial resources into their place and bringingbring riches to the nation. Non Fungible Tokens (NFTs) are a good example. NFTs are an application of blockchain & cryptocurrencies in a different form, and they helped hundreds of artists to sell their art at a premium price. If nations promote such activities, the artists from the countries will prosper and contribute to the nation’s welfare. There is no doubt that cryptocurrencies are trading with colossal volatility and at high risks. When the financial risk involved is too high, it will largely fall on any country’s central bank’s shoulders. But that is normal for any product or company in the growth phase to go through. South Korea established Korea Financial Intelligence Unit to regulate trading in digital assets, including cryptocurrencies. Similar efforts are needed to be taken by the central banks of each nation, and also need to establish a technological wing to formulate a strong growth chart for the future through digital assets and management. Banning and repelling the new technology will prove costly to any country that depends on Information technology and science. In short, banning is not the right solution to a growing technology that brings power to people. Hence regulations should be made to stop people from abusing the technology for the sake of themselves.

205-Regulation best supports capital investment

CNBC, 11-26, 21,, Kevin O’Leary: ‘I have no interest in being a crypto cowboy’

Celebrity investor Kevin O’Leary is investing in digital currencies, but he hasn’t done so lightly, telling CNBC that he’d prefer to consult with regulators on this space rather than be a “crypto cowboy.” O’Leary told CNBC’s “Capital Connection” on Tuesday that he preferred to consult with regulators before investing in cryptocurrency, in order to see “what is possible and what isn’t” in terms of their stance on the space. “I have zero interest in investing in litigation against the SEC [U.S. Securities and Exchange Commission], that is a very bad idea,” he said, in a discussion around the U.S. regulator’s case with fintech company Ripple. The SEC’s case against Ripple is centered on its concerns about the fintech firm’s ties to XRP, the world’s seventh-biggest cryptocurrency. The SEC alleged that Ripple and its executives sold $1.3 billion worth of the tokens in an unregistered securities offering. O’Leary, who is an investor on “Shark Tank” and chairman of O’Shares ETF, said that he preferred to accommodate and comply with regulators “because that’s where the real capital is.” “I have no interest in being a crypto cowboy and getting anybody unhappy with me because … I have so many assets in the real world that I’ve invested in already that I have to be compliant,” he added. Stablecoin In terms of investing in digital cash pegged to national currencies, also known as “stablecoins,” O’Leary said he had no interest in holding the digital Russian ruble or Chinese yuan because he didn’t know enough about the country’s blockchain or how they were monitoring ownership of the money. Instead, O’Leary believed the biggest opportunity for stablecoins remained with a currency tied to the U.S. dollar. He acknowledged how that may sound “counterintuitive” considering the rise in inflation, as this decreases the buying power of the dollar. WATCH NOW VIDEO04:11 Kevin O’Leary says inflation will cost the Democrats votes in U.S. midterms However, O’Leary explained that he had been sitting on a “large amount of cash,” after selling a lot of his commercial property investments over the last couple of years, which would lose buying power because of inflation. By comparison, O’Leary said that he could make a potential 6% return by buying into the USD Coin, which is the world’s second-largest stablecoin run by digital currency company Circle and is pegged to the U.S. dollar. Although O’Leary clarified that he could currently only invest up to 5% of his cash in USDC. But he added that there was an opportunity for the U.S. to “lead the charge” with stablecoins. Crypto as ‘software development’ O’Leary said that he was in United Arab Emirates capital of Abu Dhabi, attending the city’s annual fintech festival, to also speak to the government and regulators to understand more about where the country stands on its rules for blockchain in finance. He said that he didn’t consider cryptocurrencies, like bitcoin, “in the same way that other people do.” O’Leary said he viewed it as “software development” and so, when he was looking to invest in the space, he wanted to understand which blockchain platform would “win long term.” He named Solana, Polygon and HBAR as a few examples. “I need to invest in all of those, not just one of them because I don’t know who the winner’s going to be,” he explained, adding that he was looking for which markets offered the best engineering talent and policy in the process. O’Leary said that the U.S. currently didn’t have an exchange-traded fund that held bitcoin because the regulator was “taking its time” on blockchain regulation. “That’s why I came here, I wanna hear from the regulator what the plan is so that I can be involved in this because I am going to every jurisdiction that is forward thinking about decentralized finance,” he said.

204-Know Your Customer (KYC) laws prevent criminal activity, fraud, and money laundering in crypto

Francisco Rodriguez, 11-24, 21, Coin Telegraph, Deterring adoption? Balancing security and innovation in crypto,

The cryptocurrency space moves rapidly, so much so that every year, there’s a new trend: from initial coin offerings (ICOs) to nonfungible tokens (NFTs) only a few years have passed. In the face of such astounding innovation, crypto companies and regulators face a growing challenge: balancing security practices with new products and features. Some companies’ approach is to move fast and adopt new innovations as they become available, leaving security processes such as Know Your Customer (KYC) and Anti-Money Laundering (AML) checks as a secondary objective. Popular cryptocurrency exchange Binance seemingly used this strategy up until this year when regulators started cracking down. Binance‘s KYC policies initially allowed users who did not fully verify their identities to withdraw up to 2 BTC per day. The exchange listed margin trading pairs with major fiat currencies and allowed leverage up to 125x from its futures trading platform, but had to reduce available leverage and delist margin trading pairs when it reportedly started being investigated by the United States Internal Revenue Service and Justice Department. The exchange has since taken a compliance-friendly approach to its business and has implemented mandatory KYC processes for “global users, for every feature.” The move saw it lose around 3% of its total user count. While Binance was forced to remove some of its offerings and scale down leverage on its platform, other exchanges are still providing users with these same products. Speaking to Cointelegraph, Yuriy Kovalev, CEO of crypto trading platform Zenfuse, noted finding regulations that allow compliant companies to compete is a challenge that needs to be addressed: “Finding a way to balance regulation that protects investors and innovation is hard, especially in a space where new financial offerings appear every few months.” Speaking to Cointelegraph, CEO of cryptocurrency exchange Bittrex Stephen Stonberg pointed out that cryptocurrency regulations are now “quite complex” and are being handled differently in different jurisdictions Stonberg implied that customer safety should nevertheless remain a priority as “more robust and clear-cut regulation — like in the traditional financial sector — is needed to really ensure client assets and data are safe and secure.” As an example, Stonberg pointed to Liechtenstein’s Blockchain Act, which “provides a lot more certainty and clarity around how an exchange needs to onboard new clients and protects a clients’ assets.” Regulatory clarity is seen as a necessity by some players in the industry, as without it, innovation may be left behind. In a recent blog post, Nasdaq-listed crypto exchange Coinbase noted that its plans to launch a lending program were halted by the U.S. Securities and Exchange Commission (SEC), which threatened to sue it “without ever telling [them] why.” Coinbase said it attempted to “engage productively” with the SEC but never received clarification on the SEC’s reasoning or on how it could alter the product for it to be compliant. A proposed alternative has involved leaving regulators out of the picture. The Commissioner of the Commodity Futures Trading Commission (CFTC) Brian Quintenz has championed this alternative, at one point calling for cryptocurrency exchanges to regulate themselves, echoing the sentiment of many in the industry. Is self-regulation a viable alternative? The concept isn’t new: Organizations like the Financial Industry Regulatory Authority (FINRA) have helped enforce initiatives meant to protect securities investors with brokers and broker-dealer firms. In Japan, a self-regulatory body for the country’s crypto exchange sector, the Japanese Cryptocurrency Exchange Association (JCEA), has been formed. Stonberg does not believe the answer is down the self-regulatory path, as the “complex nature of this digital ecosystem makes regulation tricky.” To him, self-regulation would mean “unwinding” all of the hard work achieved on the regulatory front for crypto and “re-complicating the regulatory environment, putting a block in progress.” The pseudonymous founder of Flare Network-based decentralized finance (DeFi) platform Flare finance CryptoFrenchie told Cointelegraph that he believes in the “abilities of decentralized platforms and centralized platforms alike to deliver a self-regulated environment that reacts effectively to meet (or exceed) the needs of modern-day regulatory requirements.” The DeFi project founder added that current systems have “proven to be incapable of meeting the needs of the current financial system,” and added: “To apply these same systems to an even more fast-paced environment like crypto could prove to be more stifling to its potential than supportive.” Founder and CEO of crypto exchange CEX.IO Oleksandr Lutskevych suggested self-regulation may be an option, saying that in the firm’s experience, self-regulation is the answer “when there is an absence of an applicable regulatory framework.” Speaking to Cointelegraph on his firm’s path, Lutskevych said: “Until a framework for cryptocurrencies was formalized in certain countries, we adopted a self-regulation approach, implementing best practices from other leading financial organizations.” Cryptocurrency platforms, both centralized and decentralized, should “seek to analyze their own systems and develop modules specifically designed to deliver the needs of current regulatory systems,” said CryptoFrenchie. Do decentralized exchanges pose a threat? While the debate on self-regulation continues, another one has grown over decentralized trading platforms and their impact on the market. Non-custodial decentralized exchanges allow users to trade directly from their wallets, often without even registering with an email address. Some critics have argued that decentralized exchanges (DEXs) make centralized platforms’ KYC and AML efforts worthless, as bad actors can carry out their illicit activities through these platforms. Others suggest DEXs, even those run through decentralized autonomous organizations (DAOs), can improve their transparency to help blockchain sleuths and law enforcement organizations find illicit transactions. To chief investment officer of digital asset investment firm Arca Jeff Dorman, decentralized applications (DApps) and other projects can contribute to the safety of the cryptocurrency space. Speaking to Cointelegraph, Dorman said the industry needs to set standards, adding: “Companies and projects need to recognize the importance of setting up transparency dashboards, and analysts across the industry need to roll up their sleeves and do the dirty work of bringing transparency to projects that are not doing it themselves.” Bittrex’s Stonberg pointed out that the “best way to conceal illicit activity isn’t cryptocurrencies, but old-fashioned money.” The CEO added that blockchain-based transactions are “more traceable than any other financial activity.” Stonberg told Cointelegraph that he believes decentralized exchanges should build AML and KYC policies that they can implement, but added that the industry is “still in the early stages of seeing how decentralized exchanges will play out.” Lutskevych suggested that tools that can track the origin and previous history of crypto assets could one day be used in decentralized exchanges to keep illicit funds out of their platforms. He noted that “basic information can be traced” on the blockchain, although that data is “far afield from what the Financial Action Task Force guidance requires of centralized exchanges to gather.” Lutskevych added: “Decentralized mechanisms that can prevent funds of illegal origin (money laundering, ransomware, hack) from entering a DEX with a protocol’s smart contract are currently being explored and developed.” Lutskevych concluded that it is possible for decentralized platforms to leverage KYC and AML procedures to address regulators’ concerns. He noted that implementing KYC by itself may not be enough to deter illicit activities and protect users. Raj Bagadi, founder and CEO of DeFi and traditional banking services bridge Scallop, told Cointelegraph that the growth of the decentralized finance industry poses a challenge for regulations, but suggested that a solution could be a “regulated blockchain.” Referring to products in development, Bagadi said: “We can ensure that wallets on a blockchain undergo a KYC/KYB process. This means that the account holder is identified and that all funds on the chain can be traced — ultimately creating an inhospitable environment for illicit activities and deters it right from the beginning.”

203-New crypto technologies funds support clean energy use

ESG Investor, 11-24, 21, Can Crypto be Green?,'s%20not%20used%20when%20generated.&text=But%20some%20see%20a%20way,asset%20with%20unlimited%20shelf%20life.

The phenomenal growth of cryptocurrencies means the sector already offers considerable choice. Bitcoin is far from the only crypto out there, and risk-averse investors don’t have to involve themselves in the asset class so directly. Funds are already offering investors exposure to sustainability-focused crypto miners and infrastructure. Crypto miners create new crypto coins by solving complex mathematical equations. The first to solve the specific problem is paid a fraction of the transaction as a fee for their efforts and gets to keep those coins. Investing in miners means that investors can buy into the rapidly growing asset class, which now exceeds US$3 trillion, while ensuring they are funding sustainable operations and reducing their exposure to potential market volatility. One such example is the Viridi Cleaner Energy Crypto-Mining and Semiconductor ETF (RIGZ), launched by ethical investment advisor Viridi Funds in July. “The ETF was launched in order to introduce investors to crypto through a more environmental lens,” says David Khalif, Head of Operations at Viridi Funds. It invests in crypto miners and semiconductor companies that already use clean energy sources or have pledged to transition in the near future. Khalif and his fellow co-founders – Ethan Vera and Wes Fulford – recognised that crypto mining companies implementing clean energy solutions and operations will be more attractive to responsible investors. “They both previously worked in the crypto mining space, so have a deep understanding of how these companies operate, including their energy requirements and how they can be improved through renewable alternatives,” Khalif tells ESG Investor. Khalif himself worked in investor relations at Microsoft. RIGZ has 19 holdings, many of which are also held by the Amplify Transformational Data Sharing ETF (BLOK), which has over US$1 billion in AUM. But by holding only clean energy-focused or transitioning companies in the crypto space, RIGZ has almost doubled the returns of BLOK, helping it to surpass US$10 million in AUM last month. For example, Hut 8 Mining, one of RIGZ’s main holdings, gained 124% over a three-month period.

202-Crypto banking regulations coming, regulations needed to reduce volatility and attract larger investors

Paul Vigna, 11-23, 21, WSJ, Federal Agencies Crafting Rules Around Banks and Cryptocurrencies,

A group of U.S. federal agencies on Tuesday said they plan next year to begin delineating how banks can legally get involved in the growing field of cryptocurrencies. The agencies will focus on what activities banks can legally participate in, and outline rules to ensure safety, consumer protection and compliance with existing laws, said the joint statement from the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. Cryptocurrencies have become a popular and potentially lucrative but volatile investment, the legality of which isn’t always clear. With about $2.5 trillion of cryptocurrencies in circulation, they are attracting institutions and investors from traditional financial markets. The lack of regulatory clarity has posed a challenge for larger investors. As cryptocurrency has become increasingly more mainstream, federal agencies have been working to regulate the market. The agencies involved undertook what the statement called a “policy sprint,” in which they brought together staff with different backgrounds to broadly assess the field. A particular focus was around traditional banks that could start getting involved in crypto markets, and what might be involved in legally allowing that. The agencies worked on addressing issues within three broad areas: developing a standard vocabulary, identifying risks around safety and compliance and analyzing the application of existing laws. Beginning next year, staff from the agencies will address the possibility of banks acting as custodians, facilitating consumer purchases and sales, making loans collateralized by cryptocurrencies and processing payments using cryptocurrencies such as stablecoins, according to the statement. The agencies also reaffirmed previous guidance that said banks wanting to get involved in cryptocurrencies would have to notify their regulator of their intent and show they are doing it in a safe and sound manner. The agencies plan to continue developing new standards throughout 2022, they said.

201-Regulation needed before crypto super funds can develop

The Australian, November 22, 2021, Crypto too big to ignore

Cryptocurrency as an investment has become too big to ignore, with it only a matter of time before the digital assets are held by the -nation's superannuation funds. That is the view of Hostplus chief investment officer Sam -Sicilia, who says it is no longer possible to dismiss the booming crypto market simply because of regulatory headwinds. "Hostplus does not have crypto investments, but I do see the day where it becomes mainstream for institutional super funds," Mr Sicilia said in an interview with The Australian. "It's not just about a return for us. We need a governance structure, we need safekeeping of the assets and there are regulatory -requirements." Super funds needed to do a lot of work before they were "crypto-ready", and the headwinds, such as regulatory challenges, had to be fixed before there could be any move, he said. Mr Sicilia's comments come after Bank of America last month put out a research paper on crypto with the same sentiment and as institutional investors around the globe mull crypto's investment prospects. "With a $US2 trillion ($2.76 trillion)-plus market value and more than 200 million users, the digital asset universe is too large to ignore," BoA crypto and digital assets strategy analysts Alkesh Shah and Andrew Moss wrote, as they predicted crypto-based digital assets could form an entirely new asset class. "Bitcoin is important with a market value of $US900bn, but the digital asset ecosystem is so much more: tokens that act like operating systems, decentralised applications without middlemen, stablecoins pegged to fiat currencies, central bank digital currencies to replace national curren-cies, and non-fungible tokens enabling connections between creators and fans. "It's difficult to overstate how transformative blockchain technology, digital assets and the thousands of decentralised apps that have yet to be created could potentially be." The Reserve Bank this month cautioned on the "fervour" and "speculative demand" for crypto, warning of the potential for a -severe price decline. Cryptocurrencies had "no intrinsic value, typically do not have any issuer standing behind them, and rely on users' trust in the software protocol that controls the system", the RBA's head of payments policy, Tony Richards, said on Thursday. "There are plausible scenarios where a range of factors could come together to significantly challenge the current fervour for cryptocurrencies." If global policy action to deal with particular concerns about the use of cryptocurrencies was taken, along with the arrival of new stablecoins and central bank digital currencies, then existing cryptocurrencies might, at best, have only niche use cases, he warned. Mr Sicilia, who oversees Hostplus's $75bn in assets under management, still believes stocks will deliver the best returns for retail investors for the foreseeable -future, even as he predicted volatility in bitcoin would open up buying opportunities well below its current $US60,000 price tag. "I think we can get 10 per cent or more out of equity markets each year until people have a choice to put their money somewhere else. And that could be a long time from now," he said. "People will keep putting their money into equity markets to get dividends. That's the driving force powering markets. And there will be volatility, of course, but so be it. Where else are they going to put their money?" Institutional investors had more choice, with infrastructure, property and other unlisted assets all providing attractive returns, he said. Hostplus has been pumping money into venture capital and is now one of Australia's largest institutional investors with more than $2.2bn committed to the sector, of which $1.5bn has been -invested. The fund last week announced a $6.8m investment in South Australian satellite start-up Fleet Space. The investment represented a strategic opportunity for the fund to add to its private equity portfolio while supporting an emerging business, Mr Sicilia said.

200-US crypto regulations will be modeled globally

CE Noticias Financieras English, November 21, 2021, The regulatory challenge of cryptocurrency LN, Full article here)

In the debate over cryptocurrencies, little seems to generate more confusion than their regulatory classification. Similar to the development of the internet in the 1990s, their accelerated development and adoption makes it difficult to automatically apply existing regulatory frameworks. Currently, there is no uniform definition of cryptocurrencies. Some countries have identified them as a new asset class, but the vast majority have chosen not to define them yet through clear regulatory frameworks. According to legal scholar Joe Dewey, the latter approach seems to be the preferred option for regulators internationally to position themselves and apply appropriate regulations as the technology advances. As far as Panama is concerned, we currently have two bills under discussion. However, we must keep an eye on developments at the international level and, in particular, the United States, because the way in which they are regulated and supervised in this country will probably determine how they will be regulated elsewhere. In the United States, various authorities have warned about the risk of over-regulating the development of cryptocurrencies early on. This does not mean that they are not subject to any regulation. Federal agencies, including the Securities & Exchange Commission (SEC) and the Commodity Futures & Trading Commission (CFTC), have issued oversight criteria to identify whether cryptocurrencies constitute securities or commodities, respectively; while the Internal Revenue Service (IRS) has determined the applicable taxes. Starting with the SEC, the mechanism used to determine whether cryptocurrencies constitute a security is provided by the Howey test, named after the SEC v. W.J. Howey Co. case decided by the U.S. Supreme Court in 1946. The test applies to any contract or transaction and asks four questions: 1. Is there an investment of money? 2. Is the investment made with the expectation of future profits? 3. 3. Is the investment of money in a common enterprise? 4. Do the benefits come from the efforts of others? It is precisely this last question that poses the biggest problems for cryptocurrencies. It is appropriate to distinguish that cryptocurrencies can be decentralized when there is no control over the money supply or centralized when there is. The case of bitcoin is among the most representative, because due to its decentralized nature, no public funds have ever been raised for its development and the network is maintained by a dispersed community of unaffiliated users. As a result, the SEC has clearly indicated that bitcoin is not a security. Conversely, centralized cryptocurrencies such as tokens issued to raise funds for a company or project are considered securities and are subject to SEC jurisdiction. For its part, the CFTC has defined "commodities" as any service, right or interest for which a futures contract exists or could exist. In a proceeding against Coinflip (2015), the CFTC first made the determination that decentralized cryptocurrencies like bitcoin are commodities. But it wasn't until 2018, with the CFTC v McDonnell ruling by a New York federal court, that that standard was upheld, giving the CFTC jurisdiction over cryptocurrencies. Additionally, according to the criteria set forth by the IRS, cryptocurrencies have been classified as property, giving U.S. taxpayers a tax obligation to report transactions made with them. As we have seen, cryptocurrencies do not fit integrally into any of the above categories. And while they have to operate and comply with existing legal frameworks, their regulation remains weak compared to that imposed on the traditional financial system. This has served to generate the perception that cryptocurrencies are a vehicle for illicit activities. However, data published by the World Economic Forum seems to indicate otherwise. In this regard, industry experts have argued that the introduction of regulations would result in greater trust and security, leading to greater adoption. The potential of cryptocurrencies to transform the functioning of traditional financial systems is clear. The position of some countries to ban them will not prevent their adoption, it will only limit the ability of regulators to guide activity and address potential risks. In Panama, we must be attentive to take advantage and timely adapt our legal framework in line with the standards achieved, to put us in a position to take advantage of the opportunities generated by this new technology.

The author is a lawyer and business consultant

199-Cryptocurrency enables ransomware attacks and support organized crime

STUFF.COM, November 21, 2021, Ransomware might not exist without cryptocurrencies, top cop tells MPs,

Ransomware attacks that have plagued hospitals, businesses and consumers around the world might well not happen if cryptocurrencies were not available, a senior policeman has advised MPs. A parliamentary select committee is currently investigating cryptocurrencies, raising the prospect of some form of extra controls. Detective Inspector Craig Hamilton, national manager of New Zealand Police’s financial crime group, said some crimes facilitated by cryptocurrency would not occur in their absence, with ransomware being a “classic†example. “In the absence of cryptocurrency, we potentially wouldn’t have the ransomware attacks that we are experiencing around the world,†he told the committee. Hamilton gave his evidence by video link from Waikato, whose district health board is still recovering from a crippling ransomware attack in May. Insurance broking giant Marsh McLennan has estimated 98 per cent of ransomware demands were made in bitcoin​ last year because it allowed cyber criminals to receive funds with “a high degree of anonymityâ€. This week, the GCSB’s National Cyber Security Centre (NCSC) said criminal attacks on significant national organisations had more than doubled in the year to June, singling out ransomware as one of the key threats. Access to cryptocurrency exchanges provided the infrastructure behind criminal ransomware activity, it said. “A growing cyber insurance market and larger ransom payments contribute to higher revenues for ransomware actors, who reinvest their earnings to develop new malware and research new targets,†the NCSC said. The increased use of cryptocurrencies also enabled cyber criminals to launder their proceeds of crime, often without detection,†it said. Californian Research firm Cybersecurity Ventures estimated in June that the global cost of ransomware would spiral from US$20 billion (NZ$28.5b) this year US$256b by 2031. Hamilton also told MPs the world would probably see more ransomware-type attacks. One of the reasons was that regulatory oversight of crypto exchanges was “very patchy around the world,†he said. “Although cryptocurrency can leave New Zealand with ease, it often ends up in places where it is hard to track and if an exchange ... is criminally inclined, it is near impossible. “We will see more of this sort of thing as it is the future of a lot of organised crime,†he said. Cryptocurrencies have also attracted criticism because of the electricity involved in their “miningâ€, which often involves the use of huge numbers of computer servers to plough through mathematical calculations. Britain’s Cambridge University estimated in February that bitcoin consumed 113 terawatt-hours of electricity last year, which is more than 2½ times all the electricity used in New Zealand last year. But Thorsten Albers, Auckland-based chief innovation officer of cryptocurrency company Citibase, told the select committee that New Zealand should make “gains and profits†from cryptocurrencies tax-free, because they were hard to tax. “That would make a lot of headlines around the world,†he told MPs. Such a move would bring a lot of blockchain developers to the country, he said. “New Zealand could be a crypto hub.†The Reserve Bank told the committee in September that cryptocurrencies were rarely used as a form of payment by businesses. But BlockchainNZ, an association of organisations and individuals involved in the Blockchain technology that underpins cryptocurrencies, told the committee that they were a source of innovation. It has appealed to the committee and government agencies to work with the industry before imposing any new regulations, “particularly in respect of tax law, securities law, anti-money laundering and countering financing of terrorism law and financial service provider lawâ€. Adam Dodds, who sits on the board of a number of cryptocurrency companies, said the horse had bolted on crypto and New Zealand risked being left behind. Benefits of crypto included the ability to pre-program rules into payments, so for example if someone died, their wealth could be automatically distributed according to their wishes, he said. “I take on board the fact that at the moment, people are trying to figure out exactly how or why they might spend bitcoin,†Dodds said. “But you think about the ‘metaverse’, and where that's going. It's all going to be digitised value and you're not going to pull out your Visa card in the middle of a metaverse and swipe it.†The metaverse is a broad term generally used to describe an environment in which people are able to navigate through a number of more immersive and interconnected augmented-reality applications. “What in reality the police are trying to say at the moment, is they're struggling operationally and technically, to keep up with the pace of change,†Dodds said. It might not be “fairâ€, but organisations that wanted to protect themselves from threats such as ransomware needed to improve their security, he said. “What needs to happen is there needs to be a focus in terms of investment for making that happen.â€

198-No regulation now

The Daily Oklahoman, November 21, 2021, A few things to consider about cryptocurrency,

The surging value of cryptocurrencies, such as Bitcoin, are creating a lot of attention from investors these days. It's so hot right now that there are reports of 10-year-olds buying it and advising their parents to get in on the craze. Despite the emergence of cryptocurrency only in the past decade, many investors are wondering if the exploding prices in crypto should change how they invest their money. What is cryptocurrency? Unlike traditional currency, there is no central bank issuing cryptocurrency, and there is virtually no regulation. Cryptocurrencies are unique in that they are made by computers and then stored in a digital wallet. All transactions are made online and recorded on a blockchain, a public ledger that requires no intermediary such as a bank. Bitcoin was the first and most widely recognized cryptocurrency. As opposed to currencies such as the U.S. dollar, it has a finite supply of 21 million tokens, with more than 18.5 million in circulation. Bitcoin has been on a wild ride since launching in 2009, dropping as low as $13.40 in 2013 to surpassing $60,000 in 2021. Is it smart to invest in cryptocurrency? There is not enough data or history to determine whether Bitcoin and other cryptocurrencies are viable to hold as a long-term asset. And, unlike stocks, owning cryptocurrency doesn't give you a right to share in the income of an underlying business. However, investors who enjoy the thrill of speculation may find these investments hold some appeal. Certainly, watching an asset go from a few dollars to over $60,000, as Bitcoin did, will grab investors' attention. The mania is reminiscent of the craze in the late 1990s when stocks were doubling or more on the day of their Initial Public Offering. For instance, Akamai Technologies' stock price rose over 400% on the first day of trading in 1999! Before diving into investing in crypto, you should understand the risks and costs. First, you should prepare for much wider fluctuations in priced than stocks or most other investments. Just in the last 12 months, Bitcoin has traded between $13,556 and $66,923 which makes stock investing look like =

197-Crypto threatens dollar dominance and risks nation-state collapse

Kelvin Helmes, 11-20, 21,, Hillary Clinton Warns Cryptocurrency Could Destabilize Nations, Undermine Dollar as World's Reserve Currency

Hillary Clinton Warns Cryptocurrency Poses Risk to US Dollar and Nations’ Stability Former Democratic presidential candidate Hillary Clinton talked about cryptocurrency Friday during a panel discussion at the Bloomberg New Economy Forum in Singapore. While addressing a range of new challenges, including disinformation and artificial intelligence (AI), Clinton said, “One more area that I hope nation-states start paying greater attention to is the rise of cryptocurrency.” The former Secretary of State added: What looks like a very interesting and somewhat exotic effort to literally mine new coins in order to trade with them has the potential for undermining currencies, for undermining the role of the dollar as the reserve currency, for destabilizing nations, perhaps starting with small ones but going much larger. Clinton is not the only one seeing that the rise in popularity of cryptocurrency could hurt the U.S. dollar. Former President Donald Trump has said on several occasions that he does not like cryptocurrency because it competes against the U.S. dollar. “I don’t want to have other currencies coming out and hurting or demeaning the dollar in any way,” he stressed. In July last year, global investment bank Goldman Sachs warned that the “Real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge.” Legendary fund manager Stanley Druckenmiller said in May: “I’m worried now for the first time that within 15 years we lose reserve currency status and of course all the unbelievable benefits that have accrued with it.”

196-Regulatory clarity and certainty needed for crypto to thrive


BINANCE, the world's largest cryptocurrency exchange, has published a list of 'fundamental crypto rights' as it faces increased regulatory pressure. Binance's chief executive Changpeng Zhao, who goes by the moniker 'CZ', is signalling his support for greater crypto regulation with the publication of a list of guidelines which he hopes will underpin a global regulatory framework He explained that, while the crypto industry had hitherto thrived in a lax regulatory environment, the need for clarity and security was becoming ever more necessary as investors pour in. Regulatory scrutiny has increased this year while crypto's market value has skyrocketed, topping $3tn last week as Bitcoin and Ethereum touched new alltime highs.

195-Regulatory clarity and certainty needed for crypto to thrive


BINANCE, the world's largest cryptocurrency exchange, has published a list of 'fundamental crypto rights' as it faces increased regulatory pressure. Binance's chief executive Changpeng Zhao, who goes by the moniker 'CZ', is signalling his support for greater crypto regulation with the publication of a list of guidelines which he hopes will underpin a global regulatory framework He explained that, while the crypto industry had hitherto thrived in a lax regulatory environment, the need for clarity and security was becoming ever more necessary as investors pour in. Regulatory scrutiny has increased this year while crypto's market value has skyrocketed, topping $3tn last week as Bitcoin and Ethereum touched new alltime highs.

194-New IRS reporting requirements undermine crypto

JD Supra, November 19, 2021, The Infrastructure Investment and Jobs Act: Building A Road to Liability For Cryptocurrency Industry?

The newly signed the bi-partisan Infrastructure Investment and Jobs Act ('IIJA') includes new regulations aimed directly at cryptocurrency oversight. Unlike more traditional asset classes, cryptocurrencies are not governed by a single agency, nor are they overseen by a centralized, regulated exchange, with different regulators treating cryptocurrency in different ways. For example, the SEC applies the Howey principle to determine whether cryptocurrencies qualify as a regulated security; the Commodity Futures Trading Commission argues that cryptocurrency should be regulated like a commodity; the Internal Revenue Service taxes cryptocurrency like property; many in FinTech argue it is simply a form of payment. Accordingly, cryptocurrency regulation is an ever-evolving area, with multiple agencies trying to determine how to regulate this new asset class.

The IIJA starts the process of addressing this confusion and regulatory competition. Under the IIJA, the IRS will grow its regulatory power over cryptocurrencies by increasing the reporting requirements surrounding digital assets. The bill will require 'brokers' to report transactions for cryptocurrencies and other digital assets to the IRS on a 1099 form. The expansive definition of the term 'broker' may be controversial because a broker is any person who regularly provides a service that executes transfers of digital assets, like cryptocurrencies. Anyone acting as a broker will be required to report those transactions to the IRS in the same manner that securities brokers must do for stock and bond trades today. Industry advocates warn that such a broad definition will potentially implicate cryptocurrency miners, validators, and developers as brokers who must now report information to the IRS that they may not have access to. Additionally, the IIJA will require businesses to report digital-asset transactions of more than $10,000.

Opponents of these new regulations argue they could threaten the growing cryptocurrency market by enforcing reporting requirements and additional burdens on an unsuspecting and perhaps unintended group of individuals and entities that may not have familiarity with or the sophistication of entities traditionally required to report, such as SEC-regulated brokers. Indeed, these new reporting requirements potentially fall on participants in the market, and not just those performing traditional brokerage services.

193-Crypto regulation needed to prevent organized criminals and terrorists from undermining democracy

Hindustan Times Lucknow, November 19, 2021, Modi calls on nations to regulate cryptocurrency,

NEW DELHI, Nov. 19 -- Modern technologies have the potential to be used as instruments of conflict and domination and democratic nations should work together to ensure cryptocurrency does not fall in the wrong hands, Prime Minister Narendra Modi said on Thursday. India has created a "robust framework of data protection, privacy and security", and is using data to empower people within a democratic framework with strong guarantees of individual rights, he said in a virtual keynote address at the Sydney Dialogue organised by the Australian Strategic Policy Institute. Describing technology and data as "new weapons", Modi said: "Technology has already become a major instrument of global competition and key to shaping the future international order...The biggest strength of democracy is openness. At the same time, we should not allow a few vested interests to misuse this openness." While it is essential for democracies to work together to develop technical standards and norms consistent with democratic values, this process should recognise national rights and promote trade, investment and the larger public good, he said. "Take crypto-currency or bitcoin for example. It is important that all democratic nations work together on this and ensure it does not end up in wrong hands, which can spoil our youth," he said. Modi added, "We are at a historic moment of choice - whether all the wonderful powers of technology of our age will be instruments of cooperation or conflict, coercion or choice, domination or development, oppression or opportunity. India, Australia and our partners in the Indo-Pacific region and beyond hear the call of our times." The Prime Minister's remarks came five days after he chaired a meeting on the way forward on cryptocurrency, during which the issue of misleading non-transparent advertising on cryptocurrency was flagged. Officials had also warned such unregulated markets cannot be allowed to become avenues for money laundering and terror financing. The government is considering strong regulatory steps on cryptocurrency and planning to forge global partnerships and collective strategies since the issue cuts across geographical borders. Describing data as the "greatest product of technology", Modi said India has "created a robust framework of data protection, privacy and security", and also has unmatched experience in using data to empower people within a democratic framework with strong guarantees of individual rights. He suggested democracies should come together to build a future that reflects democratic values by investing in research and development of future technology, developing a trusted manufacturing base and trusted supply chains, and deepening intelligence and operational cooperation on cyber-security and protection of critical information infrastructure. Democracies should also work jointly to prevent manipulation of public opinions, develop technical and governance standards and norms consistent with democratic values, and create standards and norms for data governance and for cross-border flow that protect and secure data, he said. Modi also listed five important transitions taking place in India in areas related to technology. The country, he said, is building the world's most extensive public information infrastructure, and more than 1.3 billion Indians have a unique digital identity. "We are on our way to connect 600,000 villages with broadband. We have built the world's most efficient payment infrastructure, the UPI. Over 800 million Indians use internet, 750 million are on smartphones," he added. Secondly, India is transforming the lives of people by using digital technology for governance, inclusion, empowerment, connectivity, delivery of benefits and welfare. "Recently, we have used technology to deliver over 1.1 billion doses of vaccines, across India's vast geography using Arogya Setu and Cowin platforms," he said. Third, India has the world's third largest and fastest growing startup eco-system that is providing solutions to everything from health to national security, and fourth, industry, services and agriculture are undergoing a "massive digital transformation". The fifth key area listed by Modi was preparing India for the future by investing in indigenous capabilities in telecom technology such as 5G and 6G. "India is one of the leading nations in artificial intelligence and machine learning, especially in human-centred and ethical use of artificial intelligence. We are developing strong capabilities in cloud platforms and cloud computing," he said. All of this is key to resilience and digital sovereignty, and India's space programme is now open to innovation and investment from the private sector. "India is already a major centre for providing cyber-security solutions and services to corporates around the world. We have set up a task force with our industry to make India a global hub for cyber security," he said. Published by HT Digital Content Services with permission from HT Lucknow. For any query with respect to this article or any other content requirement, please contact Editor at

192-Binance working to develop global regulation now

CE Noticias Financieras English, November 19, 2021, Binance suggests deposit insurance and KYC processes in cryptocurrency trading, copy available at FULL ARTICLE IS HERE


The cryptocurrency exchange platform, Binance, published the fundamental rights that, from its perspective, should protect users; however, in them it suggests Know Your Customer (KYC) processes and having a deposit insurance against the risk in such instruments.

A few days ago, the platform created by Changpeng Zhao, published the document that integrates the 10 fundamental rights of cryptocurrency users, in order to trace a regulatory path for the protection and security of individuals who move resources through these assets.

"Amid recent market surges, the arrival of new investors and the consolidation of the crypto industry, Binance is working with regulators and policymakers to develop regulatory frameworks globally that achieve the common goal of protecting users, while allowing innovation to continue in a responsible manner that ensures the healthy advancement of the industry," the platform said in a statement.

Binance is present in 180 countries around the world, giving it the global perspective on how these instruments are attempted to be regulated globally.

"Regulation and innovation are not mutually exclusive. We want to do everything we can as an industry to work hand-in-hand with regulators and global leaders to identify regulatory policy that is effective and, more importantly, protects users and drives innovation.

"At Binance, we look forward to working closely with regulators to help them increase their understanding of the industry and the possibilities it offers," commented CZ (Changpeng Zhao), CEO of Binance.

According to the platform, these should be the 10 rights of cryptocurrency users:

  • Every human being should have access to financial tools, such as cryptocurrencies, that enable greater economic independence.
  • Industry participants have a responsibility to work with regulators and lawmakers to shape new standards for crypto assets. Smart regulation encourages innovation and helps keep users safe.
  • Responsible crypto platforms have an obligation to protect users from bad actors and implement know-your-customer processes to prevent financial crime.
  • Privacy is a human right, and personally identifiable information (PII) data should be subject to strict levels of protection.
  • Cryptocurrency users have the right to access exchanges that keep their funds safe, in secure custody with comprehensive deposit insurance.
  • Healthy markets must maintain a robust level of liquidity to ensure a stable and frictionless trading environment.
  • Regulation and innovation are not mutually exclusive. Cryptocurrency users deserve secure access to emerging technologies and practices, including NFTs, stable coins, staking, yield farming and more.
  • Closing the knowledge gap is essential when it comes to crypto. Users have the right to obtain accurate information about crypto assets, without fear of falling victim to unfair or misleading advertising.
  • Markets offering derivative instruments must be subject to appropriate regulations. This ensures that all users meet eligibility requirements and that their transactions are settled fairly.
  • Crypto regulation is inevitable. Users have the right to share their voice on how the industry should evolve with the blockchain platform of their choice.

Currently the cryptocurrency market is worth $2.4 trilli

191-Without regulation, crypto could collapse, threatening global financial staiblity

The Times of India (TOI), November 19, 2021, Crypto's rapid growth poses risk to global financial stability: Bank of England Deputy Governor,

Bank of England's (BOE) deputy governor for financial stability, Sir Jon Cunliffe, spoke about Bitcoin and cryptocurrencies on BBC Radio's Today program on November 15. He shed light on the following aspects regarding the crypto regulation: He warned that due to the cryptocurrency sector's rapid growth it has come closer to posing a threat to global financial stability .Besides, the crypto industry is also being integrated into the traditional financial system at a rapid rate. He urged regulators and legislators to take prompt action and establish rules for crypto assets.He opined that the BOE is not lagging behind as much because new players and social media companies like Meta who plan to issue their own stablecoins and money haven't launched it yet. The deputy governor for financial stability also said that the reason for exploring digital pound is because the way we live and the way we transact is changing Cunliffe emphasized clearly though that cryptocurrencies are not a threat yet, but their unprecedented growth and integration with the traditional financial system is worrisome.

He said that the volatility of crypto assets could soon start showing up in traditional markets, reported. He said that the taskforce between the Treasury and BOE will explore next year whether public, large businesses and households should really have the option of using and holding the safest form of money, which is the money backed by BOE in their everyday lives. He had warned earlier in October as well that owing to its extreme volatility and lack of intrinsic value, crypto could collapse. In the same month, BOE had issued a report stating crypto assets pose limited direct risks to the financial stability of UK's financial system.For the latest crypto news and investment tips, follow our Cryptocurrency page and for live cryptocurrency price updates, click here. For Reprint Rights:

190-Lack of regulation means market manipulation and pricing

Thai News Service. November 19, 2021, World: Bitcoin and other cryptos have slumped after record highs. Is market manipulation, the reason why? Bitcoin and other cryptocurrencies have fallen sharply after seeing record-highs just last week. Bitcoin's price plunged to $58,400 (51,000) on Tuesday and hovered just under the $60,000 (53,000) threshold on Wednesday as the crypto market is again becoming a sea of red. It marks a 12 per cent drop from the record high of $69,000 (61,000) set on November 10. The second-largest crypto Ether meanwhile plunged more than 14 per cent since its record last week to reach $4,244 (3,7500). The reasons why cryptos have been so volatile of late is unclear but there are a number of factors at play. One reason may be due to market manipulation, argues David Gerard, the author of the book Attack of the 50 Foot Blockchain. And it is all to do with Tether, a blockchain-based cryptocurrency whose tokens are backed by an equivalent amount of US dollars. Tether pumping up prices "Tethers are supposed to be all backed by dollars. There's a lot of reasons like settlements with the authorities that suggest this has not been the case in the past, and we shouldn't presume it's the case now," Gerard told Euronews Next. "So it looks like three billion Tethers, backed by nothing, were used to pump the Bitcoin price up at this particular time. "When they stopped, the Bitcoin price dropped. That's basically the story of the shenanigans that went on in the last week or two". Gerard argues this kind of market manipulation and fake liquidity happens all the time. "The basic thing that happened was the Bitcoin price, we know it's highly manipulated because this is an unregulated pool for sharks," he said. "I think some fake liquidity was deployed. About $3 billion (2.6 million) worth of questionable liquidity was deployed, which was used to pump the price up. "That's the sort of manipulation that goes on in the Bitcoin markets all the time," Gerard added. "Normal people look at this stuff (the crypto market) and think, 'Oh, that's a good market,' but they're the meat, they're the suckers, and the money comes from. "This is a big boys game. And you'd better be prepared to be eaten alive," Gerard warned.

189-Crypto doesn’t threaten the US dollars

CE Noticias Financieras English. November 19, 2021, U.S. Treasury recognizes the "opportunities" the crypto market presents  Lexis-Nexis FULL AETICLE HERE

The Deputy Secretary of the US Treasury, Adewale "Wally" Adeyemo, recognized the potential of cryptocurrencies globally and suggested that they have the conditions to be part of the financial system, but assured that none will replace the US dollar as a reference currency. The official remarked that the emerging marketpresents a wide range of "opportunities" for millions of investors, but warned that it also has "challenges". In that sense, he questioned the link of cryptocurrencies to illicit trade. However, Adeyemo seems to ignore that fiat currencies are currently the most adopted method of payment on the black market. On the other hand, "Wally" stressed the importance of regulations in the market and publicly urged the U.S. government to collaborate with other nationals to draw common guidelines against money laundering. "One of the things we know is that digital assets present an opportunity in many ways for the economy, but potentially present challenges," Adeyemo said in a conversation with CNBC. Read more: ? exchanges propose suggestions to U.S. government to regulate crypto markets In recent months, the U.S. dollar has seen record inflation figures, boosting the image of cryptocurrencies as a store of value. The Treasury undersecretary, however, is convinced that the hegemony of his currency is not under threat and even spoke of the latest federal stimulus will boost the domestic economy. "What's going to boost the dollar's position in the world are the decisions we make in the United States about investing in our economy," Adeyemo completed.

188-Massive fraud and theft in crypto, regulation needed

Michelle Lim, Forkast.Neww, 11-18, 21, DeFi fraud and thefts rose 600% in 2021 to reach $10.5B,

Decentralized finance (DeFi) has seen explosive growth this year. DeFi protocols - which run the gamut of financial services from asset management, borrowing and lending, decentralized exchanges, derivatives, and stablecoins - have flourished, rising from US$22 billion at the start of 2021 to over US$260 billion now locked across DeFi protocols, according to DeFi Llama data. DeFi, where users engage in financial transactions directly with one another using smart contracts, without the need for financial intermediaries like banks, has the potential to redefine existing financial systems by bringing about greater financial inclusion to the unbanked and lowering the cost of transactions. But the nascent DeFi industry also has risks and is "a tempting honeypot for hackers and a deep pool of liquidity that can be taken advantage of by money launderers," according to blockchain data analytics firm Elliptic in a new report "DeFi: Regulation, Compliance and the Growth of DeCrime." Alongside DeFi's growing popularity, exploitation and illicit use of decentralized technologies like decentralized applications (dApps) are also on the rise - or what Elliptic refers to as "DeCrime." Losses due to theft and crime across DeFi platforms amounted to over US$10.5 billion year-to-date (as of Nov. 9), an increase of 600% from US$1.5 billion in 2020, according to Elliptic. DApps on Ethereum bore the brunt of the losses at US$8.6 billion, reflecting its current status as the blockchain of choice for DeFi. The Binance Smart Chain (BSC) was next, with US$2.5 billion of losses. See related article:Ethereum's Web 3.0 ecosystem expands, 3.4 million now into DeFi "The DeFi ecosystem is an incredibly exciting and fast-moving space, with financial services innovation happening at light speed," said Tom Robinson, chief scientist at Elliptic, in a statement. "This is attracting large amounts of capital to projects that are not always robust or well-tested. Criminal actors have seen the opportunity to exploit this." According to Elliptic, the losses are magnified by the relatively untested and immature nature of decentralized technologies. The majority of DeFi losses were attributed to bug and code exploits, where hackers exploit errors in the smart contract code, and economic exploits, where the attacker exploits loopholes in how the DeFi service operates. An example of an economic exploit is where an attacker manipulates asset prices in order to take advantage of arbitrage opportunities on DeFi services that would otherwise not exist such as through a flash loan. "Decentralized apps are designed to be trustless in that they eliminate any third-party control of users' funds," Robinson said. "But you must still trust that the creators of the protocol have not made a coding or design mistake that could lead to a loss of funds." "Admin key" exploits, where the access to manage a smart contract is used to steal funds from the dApp, and exit scams or rug pulls, where the creator or operator of the dApp disappears with users' funds, are other ways funds have been stolen. DApps like decentralized exchanges (DEXs), decentralized mixers and cross-chain bridges can also be used by criminals to hide their blockchain money trail and launder ill-gotten gains, without using centralized services that could alert law enforcement. "DeFi has become an important tool for money launderers, including those looking to cash-out proceeds of thefts from exchanges based in Asia," Robinson told Forkast.News in a follow-up email. "The recent hacks suffered by KuCoin and Liquid resulted in stolen funds being funneled through various dApps, which is a potent reminder of the international need for regulators to pay due attention to DeFi." See related article:What are the challenges to regulating DeFi? With the rise of cryptocurrencies including stablecoins and DeFi, regulators around the world are grappling with how they support the innovation to flourish, while managing the associated risks. The Financial Action Task Force - the global anti-money laundering and counter-terrorist financing (AML/CTF) standards-setter - has said in its updated guidance published in October that a DeFi application is not a virtual asset service provider (VASP), but creators, owners, operators or persons who hold control or sufficient influence over the DeFi arrangement will be considered a VASP and be subject to AML regulations. Consumer protection is also foremost in the minds of many regulators. "Regulatory sentiment in Hong Kong indicates that, while large institutional investors may remain free to interact with DeFi platforms and the crypto ecosystem more generally, retail investors may face significant restrictions," Chris DePow, senior adviser for financial institution regulation and compliance at Elliptic, told Forkast.News in an email. "The HKMA and other local regulatory authorities have made clear that consumer protection remains crucial and as a result the growing DeFi sector will need to be well regulated in order to thrive in the Hong Kong market." "Regulators in Hong Kong are acutely aware of the need for regulatory innovation to keep pace with technological innovation. Traditionally, the HKMA has long-standing principles of financial crime mitigation which will likely be reflected in any crypto regulation it has planned," DePow added. "The HKMA could well look to develop a framework that promotes Hong Kong as a central DeFi hub in the region precisely by reassuring businesses and individuals that it is safe and secure to do business there." Singapore, another financial and fintech hub in Asia, is also paying close attention to developments in DeFi. "Regulations crafted to manage risks in a world of intermediaries are ill-suited where intermediaries are replaced by smart contracts," said Ravi Menon, managing director of the Monetary Authority of Singapore, in a recent speech at the Singapore FinTech Festival 2021. "Enforcement is more challenging when control or governance is dispersed across the blockchain." DePow says Singapore has taken a firm approach, expecting crypto businesses to operate within the established regulatory and licensing framework. "Regulators that take an active role in shaping regimes to accommodate new technologies will likely be a positive force in establishing their markets as hubs for secure DeFi activity, globally, and helping to reduce rates of crime," DePow said. "Currently, Singapore is ahead of the curve in embracing its role as an enabler of the future of finance." See related article: How Singapore is looking at Web 3.0 and DeFi as it prepares for a digital Singapore dollar

187-One Bitcoin TRANSACTION requires a month’s worth of household energy

Katherine Gammon, 11-18, 21, The Guardian, Environmentalists sound alarm at US politicians’ embrace of cryptocurrency,

According to Digiconomist, a single bitcoin transaction uses the same amount of power that the average American household consumes in a month – which equals roughly a million times more in carbon emissions than a single credit card transaction. And globally, the carbon footprint of bitcoin mining is greater than that of the United Arab Emirates and falls just below the Netherlands’. People should be concerned about the environmental and climate impacts of “proof-of-work” cryptocurrency mining such as bitcoin, said Benjamin A Jones, an economist at the University of New Mexico. Such currencies require miners to compete to validate transactions on their blockchains, and that takes enormous, power-hungry servers. Bitcoin mining uses energy predominantly generated from fossil fuels, which creates air pollution and carbon emissions, said Jones. “These pollution emissions are harmful to human health outcomes and the carbon emissions lead to climate damages,” he added. Jones recently co-authored a paper that estimated that in 2018 each $1 of bitcoin value created was associated with $0.49 in health and climate damages in the US – meaning that the negative human health costs and climate impacts of bitcoin mining in the US were roughly half as large as the per-coin value. “This is a tremendous negative externality of bitcoin mining that is imposing significant societal costs on all of us,” he said, “even on those who do not use bitcoin or cryptocurrencies.” Since mining crypto requires so much power, it is often situated near the cheapest, least-regulated sources of energy. The damages Jones and his colleagues pinpointed arise from increased pollutants generated from the burning of fossil fuels used to produce energy. Exposure to pollutants such as fine particulate matter has been linked to increased risk of premature death. CONTINUES Cryptocurrency’s destructive impact on the environment is just another example of how corporations in a financialized economy will stop at nothing to create profits for investors, and how communities of color will ultimately pay the price,” Erika Thi Patterson of the Action Center on Race and the Economy wrote in the letter. “Cryptocurrencies and their miners rely on harmful fuels like coal that produce toxic emissions linked to asthma, cancer, acid rain, and climate change. In doing so, cryptocurrency is exacerbating decades of environmental racism and fueling climate chaos.” The deputy legislative director of the Sierra Club, Patrick Drupp, said: “It is beyond absurd that, as we speak and as the climate crisis only deepens, fossil fuel power plants are having their lives extended and even reopened in order to virtually ‘mine’ cryptocurrency. At a time when financial regulators ought to be doing everything possible to help tackle the climate crisis, it’s clear that the status quo of letting bitcoin and other cryptocurrency miners pollute our climate and communities at an exponential rate is unsustainable, unwise and in need of urgent action.” Embracing cryptocurrencies means that America’s political leaders and policymakers must confront the environmental and climate damages generated through mining operations, says Jones. “For bitcoin in particular, one cannot embrace the coin without also acknowledging its impacts on the environment.”

186-Bitcoin mining threatens Texas’ electric grid

Katherine Gammon, 11-18, 21, The Guardian, Environmentalists sound alarm at US politicians’ embrace of cryptocurrency,

Texas has a problem too. After China’s crackdown on bitcoin mining, many miners moved to Texas, where the electrical grid is deregulated. Environmental groups say the extra pressure on Texas’s grid could cause more blackouts of the sort that happened in February, when households were plunged into dark and freezing circumstances.

185-Regulatory proposals

House Joint Economic Committee Hearing; "Demystifying Crypto: Digital Assets and the Role of Government."; Testimony by Peter Valkenburgh, Director of Research, Coin Center, Washington, DC Congressional Documents and Publications. November 17, 2021


All I'm going to tell you is that we've finally built a tool that can make money work without banks, n8 make organizations work without corporations and courts, n9 make sharing and transacting online work without Big Tech, n10 and that because of that change there's a better chance that tomorrow's misfits will be able to speak, share, and innovate.

This truly American ideal, however, isn't about anarchy. It's about opportunity and equality under the law. Bitcoin and follow-on cryptocurrencies are not unregulated. n11 Sensible, technology-neutral regulations have protected consumers n12 and investors, n13 and prevented money laundering and illicit finance. n14 The American approach is to regulate activities, not to ban or blacklist the publishing of new ideas and tools.

Anyone can freely write and share the open source software that makes these technologies work, and any prior restraint on sharing that expressive content violates our First Amendment rights. n15 However, if you promise an investor you'll invent and build them a new, future cryptocurrency, we expect you to register as the issuer of a security. n16

No one is made to open their homes and private bitcoin wallets to a search by the police without a warrant. n17 But if you provide a service to help people buy and sell bitcoin as a third party, you are expected to know your customers and apply anti-money laundering controls. n18

There are some gaps in America's crypto public policy. The gaps are not, contrary to popular belief, a central bank digital currency gap with China. The CCP is more interested in banning permissionless tools like Bitcoin n19 and substituting a surveillance tool n20 that will give them even more control over the misfits within their borders. We should not emulate that policy.

The gaps are much more mundane; they deal with securities and commodities futures policies and tax issues. Below we will discuss them in turn by category.

  1. Securities and commodities futures policy

On the margin, securities and commodities futures laws can be improved and there are well-drafted bills in the House that address those issues. They fall into two major baskets: clarity for the developers of new cryptocurrencies and cryptocurrency secondary market oversight.

  1. Clarity for developers of new cryptocurrencies.

First, pre-sales of future cryptocurrencies, often called "initial coin offerings" or "ICOs", already meet the definition of securities and, indeed, investors protections and disclosures afforded by the securities laws are sensible and should be fairly applied in the context of promises of future cryptocurrencies. However, once a cryptocurrency has launched, the application of securities laws is no longer appropriate. n21 Once the network has launched, anyone can participate in maintaining the ledger and anyone can see and propose changes to the cryptocurrency's protocol software. n22 As such, information asymmetries meant to be addressed by securities laws disclosures are no longer present and no person or persons is in a position to make disclosures on behalf of the open network. While other investor protection measures may continue to apply and remain relevant and appropriate, the disclosure regime inherent in securities issuance regulation is a poor fit. n23

Nonetheless, there can be some ambiguity regarding whether a newly developed cryptocurrency continues to meet the flexible definition of a security even after the software has been developed and the network is live. We believe that the SEC has avoided overbroad interpretation of this ambiguity thus far but prefer a legislative solution for the long term.

Chairman McHenry has introduced a safe harbor for developers of new cryptocurrencies n24 based on an earlier proposal from SEC Commissioner Hester Peirce. n25 Under the proposal, if developers pre-sold a new cryptocurrency in a manner compliant with securities laws n26 and if they register under the safe harbor provisions, which require sensible, technology-appropriate disclosures, n27 then the SEC will commit to forbearance for three years. This approach has the advantage of not altering the necessarily flexible n28 definition of a security in the law while also providing some assurance that innovators acting in good faith will not be the target of a surprise enforcement action. Congressman Emmer has introduced a bill that would subtly alter the definition of securities to limit its applicability such that it could not include truly open source, open network cryptocurrencies. n29

  1. Secondary market supervision.

While cryptocurrency exchanges here in the U.S. are currently regulated as state money transmitters n30 or state chartered banks or trust companies, n31 these regulatory forms focus primarily on prudential and consumer protection controls (e.g. minimum capital and permissible investment requirements) rather than market integrity (e.g. prevention of market manipulation and systemic risk). The SEC and CFTC both have competency supervising trading venues for market integrity but neither has jurisdiction over trading venues dealing exclusively in cryptocurrencies (the CFTC supervises commodities derivatives markets while the SEC supervises securities markets; cryptocurrency exchanges are typically commodities spot markets only n32). Last session, Chairman Conoway introduced legislation that would grant the

CFTC authority to supervise cryptocurrency spot markets. n33 It provides a flexible approach that would make CFTC regulation optional but would require that newly launched cryptocurrencies (where early investors may exert outsized market power) must initially be traded to the retail public only on CFTC supervised exchanges. n34

  1. The Infrastructure Investment and Jobs Act

The recently passed infrastructure bill included rushed language that could unintentionally stifle innovation and invade personal privacy. In the Senate there was a bipartisan solution with widespread support but procedurally it was impossible to implement before the bill's passage. n35 Ideally, new legislation would address two problems:

  1. "Broker" definition and third party reporting.

The infrastructure package amended the definition of "broker" in the tax code. n36 This definition determines who must perform third party reporting of capital gains. n37 The new definition should be tightened so that it could not inadvertently place reporting obligations on persons within the cryptocurrency ecosystem who have neither customers nor any reason to obtain private information about other cryptocurrency users. It is entirely reasonable to expect custodial cryptocurrency exchanges to do third party tax reporting. However, it is inappropriate to ask non-custodial persons such as cryptocurrency miners and software developers to surveil persons who are not their customers. n38

  1. 6050I reporting.

The 6050I provision of the U.S. tax code obligates businesses to file reports (including names and Social Security numbers) about their counterparties whenever they receive more than $10,000 in cash. n39 Amendments in the infrastructure package will require similar reporting when businesses receive more than $10,000 in cryptocurrencies. n40 Typically Coin Center does not object to equal treatment of cash and cryptocurrencies, but the [Sec.]6050I reporting provision is a draconian surveillance rule that should have been ruled unconstitutional long ago.

Warrantless private data collection is tolerated under the fourth amendment when it is performed by third parties (e.g. banks or money transmitters) who have obtained that information from their customers voluntarily and retained that information for a legitimate business purpose. n41 6050I reports are just as intrusive of personal privacy as the warrantless data collection performed by banks and other third parties but, in the case of a 6050I report, there is no third party and therefore the third party doctrine of the 4th Amendment could not possibly exempt the search from a warrant requirement. Under 6050I, one person to a two person transaction is obligated to collect sensitive information from her counterparty and hand that to government officials without any warrant or reasonable suspicion of wrongdoing. In the case of two persons exchanging two different cryptocurrencies, they each would have to report on the other. The law literally asks one American citizen to inform on another if the transactions in which the two are engaged are "business" and if they take place using cash or cryptocurrencies. We believe that a constitutional challenge to 6050I will eventually succeed in overturning the requirement, however we prefer a legislative fix.

  1. Other issues

Existing IRS policy leaves taxpayers uncertain of their obligations with regard to cryptocurrency transactions. Three common sense measures can be taken by congress to address this issue.

  1. De minimis tax exemption from capital gains treatment.

Every time a cryptocurrency user purchases a good or a service using cryptocurrency she will have a taxable event. She must account for any capital gains or losses in cryptocurrency from the time she first purchased the cryptocurrency to the time she used it to purchase a good or service. While this is reasonable for large purchases with substantial gains, it imposes unreasonably high transaction and accounting costs for small transactions. A similar problem existed for purchases made using foreign currency and Congress passed a de minimis exemption from capital gains treatment for transactions where the gain is less than $300. n42 A similar exemption should exist for cryptocurrency transactions. In the House, Representatives DelBene and Schweikert have introduced legislation that would create that exemption. n43

  1. Clarity for assets derived from cryptocurrency forks

Cryptocurrency networks can fork when disparate factions of network participants cease to agree regarding the foundational rules of the cryptocurrency protocol's software. n44 After a fork occurs, users who had cryptocurrency before now may have access to cryptocurrency on both sides of the fork. If they had previously held their cryptocurrency directly (by personally controlling the private keys that correspond to addresses on the cryptocurrency network) they would be able to use these keys to spend cryptocurrency on both sides of the fork. If, on the other hand, a user has entrusted a company to secure their cryptocurrency, then they will have access to cryptocurrency on both sides of the fork if, and only if, their service-provider chooses to support both forks. In either case, spending cryptocurrency on one side of the fork does not spend cryptocurrency on the other side. Therefore, the taxpayer will have obtained access to new assets more akin to a stock split than a trade. However, the open nature of cryptocurrency networks and network software means that this split could occur by virtue of the actions of anyone on the network with sufficient followers to go their own way. Moreover, the user may be unaware of the split and may have no knowledge that their private keys can access a new forked asset.

If a cryptocurrency user sells some of their forked assets they likely owe capital gains, that much is clear and uncontroversial. However, there are several additional questions: did the fork itself create an income event for cryptocurrency users or is it more like a stock split which is not treated as income? What is the basis for the forked asset; is it a zero-basis windfall or a division of the asset's previous value like a stock split? Representative Emmer has introduced legislation that would create a safe harbor from penalties for taxpayers who made a good faith effort to pay taxes related to forked assets in the past, despite the lack of clarity. n45 It would also instruct the IRS to not treat forks as income events in and of themselves because that policy would create unreasonable liabilities for taxpayers. n46 As mentioned, a taxpayer may not even be aware that a fork has occurred and may take no action to claim newly forked assets. No tax should be owed under those circumstances and liabilities should apply later, when the taxpayer exercises dominion and control over the assets by selling them.

  1. Taxation of mining and staking rewards

The IRS has determined that cryptocurrency mining and staking rewards should be taxed as income when they are generated. n47 For the reasons below, this is a bad policy and should be corrected by Congress.

Cryptocurrency stakers and miners dedicate costly computing resources to securing and sharing the public data that makes these technologies work, the public blockchains of Bitcoin, Ethereum, and other permissionless networks. In return, the protocols are designed to allow these participants to create new units of cryptocurrency according to set release schedules. This is the incentive that makes an open network viable; if there was no reward to honest participation, then some other mechanism, like permissioning which computers can and cannot have access, would be required to secure the data.

These rewards are not, however, equivalent to being paid wages for labor. There's no person or company that is making a payment, the "payment" is the creation of new property by mixing one's own labor with one's own property. The better metaphor for these rewards would be to liken them to crops growing on one's property. Every additional ear of corn in one's field is a windfall to be certain, but taxing them at the moment of their creation would be an absurdity and an accounting nightmare. In that context we tax the farmer when she sells her corn at market for a profit. Cryptocurrency rewards from staking and mining should be treated the same. Treating them like income creates perverse incentives to sell the new cryptocurrency immediately as it is produced in order to cover tax liabilities. Any delay could risk a decline in the market price and an inability to cover past nominal income tax obligations. Moreover, some cryptocurrency networks afford several thousand small rewards every day; taxing each at its moment of creation with its own unique accounting basis is a recipe for complexity and poor compliance.

The simple solution is simply to tax the sale of mining and staking rewards rather than taxing their creation as income. If the early Internet is any indication, simplified tax regimes do not mean less revenue for governments. Quite the opposite, as clear rules lead to better compliance and the growth of profitable industry here in America rather than abroad.

  1. Safe harbor for non-custodial uses

State money transmission licensing laws are broadly drafted and carry harsh penalties for failure to comply. There is no reason for these laws to ever apply to persons who facilitate cryptocurrency use but who do not hold other people's coins. Only custodians present a risk of loss that would be sensibly addressed through licensing. n48

But clarifying this particular interpretation of each state's unique money transmission statute is a slow and inconsistent process, even with great model legislation from the ULC available. n49 A federal safe harbor would instantly make the entire U.S. a welcoming home for developers and technologists who are designing, building, and operating the fundamental infrastructure behind cryptocurrency and open blockchain networks. n50 To that end, the Blockchain Regulatory Certainty Act sponsored by Reps. Emmer and Soto would create a safe harbor from state licensing requirements for non-custodial entities in the cryptocurrency space. n51

There's no reason why America can't continue to be a home for permissionless innovation while also enriching its treasury. We did it with the early internet and we will do it again with cryptocurrency networks.

n1 Coin Center is an independent nonprofit research and advocacy center focused on the public policy issues facing cryptocurrency technologies such as Bitcoin. Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using open blockchain technologies.We do this by producing and publishing policy research from respected academics and experts, educating policymakers and the media about blockchain technology, and by engaging in advocacy for sound public policy.

US needs to regulate cryptocurrency to prevent fraud

The Race to the Bottom. November 16, 2021 , Regulatory Gap Provides Opportunity for Crypto Fraud,

Is the Virgil Sigma litigation a harbinger of cryptocurrency fraud to come in the United States? Critics agree that the United States lags far behind the rest of the global markets in crypto-assets regulation. (Timothy Massad, Brookings Institute[8]). According to Timothy G. Massad, a Senior Fellow at the John F. Kennedy School of Government at Harvard, the regulatory gaps are 'contributing to fraud and weak investor protection in the distribution and trading of crypto-assets.' Id. In terms of financial intermediaries, Massad asserts that the lack in standards for trade executions, fraud prevention, and conflicts of interest exemplifies the lack of regulation and fails to protect investors. Id.

Most crypto-assets are not currently considered securities and are therefore not under the jurisdiction of the Securities and Exchange Counsel ('SEC'). Id. The authority to regulate cryptocurrency is instead with the Commodity Futures Trading Commission ('CTFC'). Id. The CFTC has declared that crypto-currencies are commodities and are therefore subject to regulation by their agency. Id. However, this regulatory authority is limited because the CFTC only oversees the derivatives which are priced off commodities like cryptocurrency and the agency has only limited authority to regulate those underlying commodities. (Paul Kiernan, Wall Street Journal[9]). Therefore, the CTFC has no authority to regulate the derivative markets where most of the fraud occurs. Id.

Massad suggests that Congress should give the SEC or the CFTC authority to regulate the buying and selling of crypto-assets by including provisions in any proposed regulatory scheme for recordkeeping, disclosures to investors, and prevention of fraud. (Massad, Brookings Institute[10]) Such proposed provisions for increased agency regulation, as suggested by Massad, could have prevented the fraud perpetuated by Qin's fund and protected his investors. Id.

Other countries have established regulatory environments that outpace the United States but still provide progressive approaches to crypto-assets. (Laura Shin, The New York Times[11]). For example, Switzerland has released 'principles-based guidelines that would be applied case by case as opposed to prescriptive rules.' Id. This relaxed regulation has made Switzerland a leading cryptocurrency hub because companies are able to experiment instead of adhering to prescriptive rules. Id. Additionally, the crypto community favors Britain and Singapore because of their casual regulation. Id. On the other hand, China is known to have the strictest regulatory environment which has banned crypto-exchanges in their entirety. Id.

It is hard to say what direction the United States will take in regulating cryptocurrency. The United States may move to a middle ground between the strict enforcement proposed by Massad, as exemplified by China, and the principles-based guidelines from Switzerland. (Timothy Massad, Brookings Institute[12]; Laura Shin, The New York Times[13]). With Gary Gensler at the helm of the SEC, the regulatory environment is bound to change, because Mr. Gensler is the first SEC chairman well-versed in crypto-currency. (Matthew Goldstein, et. al., The New York Times[14]). Gensler believes crypto-assets should be treated like securities and thus fall under the regulation of the SEC. (Ephrat Livni, The New York Times[15]).

Janet Yellen, the United States Secretary of the Treasury, also addressed cryptocurrency in her Nomination Hearing. (Senate Committee Hearing[16]). Yellen asserted that while there are benefits to the crypto industry, she aims to 'work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations.' Id. Due to the strong leadership at the SEC and increase in cryptocurrency fraud, the United States will certainly increase regulation of cryptocurrency to protect investors.


184-A Central Bank currency is not a cryptocurrency

Taylor Locke, 11-11, 21, From cryptocurrencies to central bank digital currencies, here’s what will ‘lead to the demise of cash,’ economist says,

Central bank digital currencies (CBDCs) A CBDC is a digital form of central bank-issued money. Those in trials are backed by a central bank and represent money that’s a direct liability of the central bank. Several central banks are experimenting with CBDCs, though most are in very early stages, Prasad says. China, Japan, Sweden and Nigeria have commenced CBDC trials, and the Bank of England and the European Central Bank are preparing their own trials. The Bahamas rolled out the world’s first CBDC, the sand dollar. The U.S. Federal Reserve remains hesitant to begin the potential development of a CBDC, but chair Jerome Powell has said the central bank is thoroughly researching the possibility. The technology behind each CBDC depends on the preferences of the country and its central bank. In some cases, CBDCs are run on distributed ledger technology, which is a type of database that can store multiple copies of financial records, like transaction history, across multiple entities. These entities can be managed overall by a central bank. This differs from the blockchain behind popular decentralized cryptocurrencies like bitcoin, since a CBDC would be controlled by one entity, a central bank. That’s also why a CBDC wouldn’t be considered a cryptocurrency. There would be several potential upsides if the U.S. Federal Reserve issued a CBDC, Prasad says. It would “give even the poor and unbanked easy access to a digital payment system and a portal for basic banking services.” Prasad also predicts that it could hinder illegal activities that rely on anonymous cash transactions, such as drug deals and money laundering. But there are potential costs too, he says. A big concern of a CBDC is the loss of privacy. “Even with protections in place to ensure confidentiality, no central bank would forgo audiability and traceability of transactions necessary to limit use of its digital currency to legitimate purposes,” he says.

183-Fraud and abuse in crypto

Michael Blankenshiip, partner, Winston & Strawn, LLP, 11-10, 21,, SEC Chair Warns of Increased Enforcement and Oversight of Crypto Assets

Chair Gensler’s November comments follow his statements in August 2021 when he addressed the SEC’s jurisdiction over crypto assets and technology in prepared remarks before the Aspen Security Forum. Chair Gensler called for increased investor protection with regards to crypto assets, which he described as “like the Wild West” in the potential for fraud and abuse in certain applications, the aggressive marketing and spin with respect to how crypto-based assets work, and the lack of “rigorous balanced and complete information” for investors. Chair Gensler’s November statements come in the wake of the recently speculated “rug pull” scandal that saw more than 40,000 investors in a Squid Game–inspired cryptocurrency (but which had no actual affiliation with the series of the same name) left holding the bag after the token soared 23 million percent before becoming worthless in a matter of minutes. Between October 26 and November 1, the popularized token rose in value from a mere cent to almost $2,900. However, in a ten-minute span on November 1, investors saw the token’s value crash from nearly $2,900 to $0.0007 as the cryptocurrency’s anonymous founders cashed-out their holdings of the token rendering it worthless—all before seemingly vanishing into the ether. Many commentators are alleging that this was a “rug pull” scam as the token’s website and social media channels were mysteriously taken down and emails to its developers bounced back as undeliverable once the crash occurred. The Squid Game token crash brings attention to the kind of regulatory gaps that Chair Gensler hopes the Enforcement Division will be able to fill-in in the name of protecting investors.

182-Regulatory safety net needed before institutional investment in crypto

Stacy Elliott, 11-10, 21, Regulations Are Keeping Institutions Out of Crypto: Aurox, Copper Execs,

Institutional inflows to digital assets are at an all-time high. But it’s still really, really hard to get holdouts off the bench. Giorgi Khazaradze, the CEO and founder of crypto trading terminal Aurox, and Glenn Barber, head of sales at institutional crypto trading platform Copper, talked about what’s keeping institutions out of crypto markets at the Decrypt and Yahoo Finance Crypto Goes Mainstream event yesterday in Brooklyn. One thing they agree on: Regulations, or a lack thereof, remain a huge issue for firms watching from the sidelines. “It would be nice if the United States government, or anyone in that regulatory capacity, would come out and establish a framework, which, in our minds, should be unique and different, in that we’re talking about an asset class that is global, permissionless, borderless, 24/7, 365,” Barber said. “I think that if we took a much more open-architecture approach to the regulatory framework and didn’t try to put a round peg through a square hole, we’d be in better shape. But we have to live with the rules that are given to us." It’s something Copper, based in London, has been watching closely. The firm has been publishing monthly roundups on its blog to cover developments in every region. “It is really about the regulation. I mean, taking a risk and investing in tokens on decentralized exchanges—there is no safety net,” said Aurox’s Khazaradze. “And an institution is not going to take that risk.” It’s an issue that’s come up for other firms. Earlier in the day, FTX CEO Sam Bankman-Fried said the onboarding process for institutions can be lengthy as they decide how to participate without running afoul of regulators. “It’s going to take a year for many of these places. Sometimes multiple years,” he said. “The amount of work a compliance department has to do to become acquainted with the cryptocurrency ecosystem and get comfortable is fairly significant for a lot of these players.” Another reason firms have stayed out is the knowledge gap, said Khazaradze. That’s something Aurox has tried to address with its retail users through deals like a $200,000 “Learn & Earn” campaign running on CoinMarketCap until November 24. The company is betting that building a reputation with retail traders will translate into more name recognition with institutional clients. “Retail investors can’t drive this market by themselves,” Khazaradze said. “Institutions can speed up the adoption and everything, but they need to have some kind of safety before they want to get involved.”

181-No cryptocurrency regulation coming

Benjamin F. Gould Masuda, Funai, Eifert & Mitchell, Ltd, 11-10, 21, United States: Cryptocurrency Regulation Remains Hazy,

Experienced investors in cryptocurrencies have become accustomed to dramatic fluctuations in the value of their investments, particularly when U.S. government representatives make public statements about their views on the comprehensive regulation of cryptocurrencies. While certain activities related to the issuing and trading of cryptocurrencies, such as taxation and money laundering, are regulated by various agencies within the U.S. government, there is currently no comprehensive regulatory framework in existence for the regulation of cryptocurrencies. Several events in the last month would seem to indicate that the path to comprehensive cryptocurrency regulation by the United States government is anything but clear. Based on the lack of consensus amongst regulators and policymakers in the United States government, it would also appear that the development and implementation of a regulatory framework for cryptocurrencies is not imminently achievable.

In the United States, the regulatory bodies which would seem most likely to regulate cryptocurrency in the future would be the Federal Reserve, which regulates private banks, the Securities and Exchange Commission (SEC), which regulates the issuance and trading of securities, and the Commodity Futures Trading Commission (CFTC), charged with the regulation of derivatives and commodities. Despite having publicly commented in recent years about the risks to financial stability posed by cryptocurrencies, the chairman of the Board of Governors of the Federal Reserve System stated in a congressional hearing on September 30, 2021 that the Federal Reserve has no intention to ban or limit cryptocurrencies. Similarly, the chairman of the SEC, Gary Gensler, has repeatedly stated that he believes the cryptocurrency markets need regulation to ensure "full and fair disclosure" for investors, but also recently opined to a congressional committee that the SEC does not have the legal authority to ban cryptocurrencies.                The CFTC clearly views itself as a key regulator of cryptocurrency markets based on a recent increase in high profile regulatory actions by the CFTC, and the current chairman of the CFTC has gone on record with his opinion that bitcoin and ether are clearly commodities subject to regulation by the CFTC. However, the CFTC's authority is limited only to the regulation of commodities and derivatives, which would preclude its ability to enact more broad-based regulatory measures. With a number of legislators in the U.S. Congress making public statements that the authority for comprehensive regulation of cryptocurrencies rests only with Congress, but no such legislation having been introduced, it appears that the consensus required within the U.S. government for comprehensive action is nowhere near being reached.

New Book: Cryptocurrencies and the Regulatory Challenge

180-Lack of regulation undermines US crypto development and leadership

Yahoo Finance, 11-9, 21, RippleNet GM on crypto regulation: U.S. regulators need to 'get with the program,

In this article: BTC-USD -2.51% In an interview with Yahoo Finance's Brian Sozzi, RippleNet General Manager Asheesh Birla discusses the future of crypto regulation. Video Transcript BRIAN SOZZI: It's still a little bit of a wild west out there in crypto land. Do you wake up every morning fearful of potential regulation, and what do you think that looks like? Stay ahead of the market ASHEESH BIRLA: Well, I wake up every morning with my kids screaming at me. But then, you know, I don't wake up in the morning and think about financial regulation. But it is-- BRIAN SOZZI: Maybe it's just me. Maybe it's just me. ASHEESH BIRLA: [LAUGHS] I promise you, I do not think about regulators in the morning. But I do think that the US regulators in particular need to get with the program and come up with more proactive regulation. You know, most of our business isn't in the United States. We're a San Francisco company. We have a big office in Chelsea. You know, New York City. But most of our transactions are overseas, and that's because the overseas countries like Singapore, Asia, Europe, they've come up with crypto regulation. The US did that with the Telecommunications Act for the internet and we saw the benefits of that, and internet companies being built in the United States. You look at the NASDAQ. So many of the top market cap companies are internet companies. We created early regulation. We led that around the world. And I think we're falling behind with crypto regulation. And, you know, we grew 20x international with ODL, our on-demand liquidity product. We couldn't grow the same way in the United States, because I think there is still some hesitancy with financial institutions adopting crypto until the regulators come up with a clear framework. And I'm looking forward to that in 2022, for sure. BRIAN SOZZI: So you think regulation is next year. This is a thing for next year. ASHEESH BIRLA: Hey, man, I thought it was last year and the year before and the year before. I mean, I'm hoping it's next year. And listen, like, the United States can absolutely catch up and do the right thing in creating a clear framework. And no doubt we will be the epicenter of this future crypto world and building new kinds of products that are more accessible and revolutionary. But, you know, we've got to come up with a clear framework first.

179-Impossible for stable coins to threaten the financial system; even if all of crypto went away the financial system would still be standing

Nate DiCamillo, 11-8, 21, Quartz, The US is dragging its heels on critical stablecoin regulations,

There isn’t an immediate systemic risk tied to stablecoins, said Steven Kelly, a research associate at the Yale Program on Financial Stability, which is focused on understanding financial crises. “The entire crypto universe could go to zero tomorrow, and the financial system would stay standing,” Kelly said. But issues would arise if stablecoins—as one part of the crypto ecosystem—become the primary link between traditional markets and crypto markets, Kelly added. The risks in the crypto markets are myriad: They can include anything from Elon Musk (or Snoop Dogg or Gene Simmons) tweeting about a specific crypto asset to hacks of various crypto protocols, the basic set of rules underpinning blockchains. “If crypto investors get unwound and stablecoins are forced to dump their investments, that to me is a bigger risk than a stablecoin holder parsing the balance sheet of Tether’s bank in the Bahamas and deciding that they don’t like what they see,” Kelly said. “That to me is not really a risk.” Plus, unlike a run on a bank, in which depositors would have trouble getting their money out, crypto traders can easily move into other stablecoins or even other cryptocurrencies if investors lose confidence in one coin or another. “The big danger that the regulators seem to be worried about is if the stable coin in question is not backed sufficiently to be able to realize that level of liquidity,” Acheson said, adding that “there’s no sign that it wouldn’t be able to realize that level of liquidity.”

Lack of regulation undermines US crypto development and leadership

Yahoo Finance, 11-9, 21, RippleNet GM on crypto regulation: U.S. regulators need to 'get with the program,

In this article: BTC-USD -2.51% In an interview with Yahoo Finance's Brian Sozzi, RippleNet General Manager Asheesh Birla discusses the future of crypto regulation. Video Transcript BRIAN SOZZI: It's still a little bit of a wild west out there in crypto land. Do you wake up every morning fearful of potential regulation, and what do you think that looks like? Stay ahead of the market ASHEESH BIRLA: Well, I wake up every morning with my kids screaming at me. But then, you know, I don't wake up in the morning and think about financial regulation. But it is-- BRIAN SOZZI: Maybe it's just me. Maybe it's just me. ASHEESH BIRLA: [LAUGHS] I promise you, I do not think about regulators in the morning. But I do think that the US regulators in particular need to get with the program and come up with more proactive regulation. You know, most of our business isn't in the United States. We're a San Francisco company. We have a big office in Chelsea. You know, New York City. But most of our transactions are overseas, and that's because the overseas countries like Singapore, Asia, Europe, they've come up with crypto regulation. The US did that with the Telecommunications Act for the internet and we saw the benefits of that, and internet companies being built in the United States. You look at the NASDAQ. So many of the top market cap companies are internet companies. We created early regulation. We led that around the world. And I think we're falling behind with crypto regulation. And, you know, we grew 20x international with ODL, our on-demand liquidity product. We couldn't grow the same way in the United States, because I think there is still some hesitancy with financial institutions adopting crypto until the regulators come up with a clear framework. And I'm looking forward to that in 2022, for sure. BRIAN SOZZI: So you think regulation is next year. This is a thing for next year. ASHEESH BIRLA: Hey, man, I thought it was last year and the year before and the year before. I mean, I'm hoping it's next year. And listen, like, the United States can absolutely catch up and do the right thing in creating a clear framework. And no doubt we will be the epicenter of this future crypto world and building new kinds of products that are more accessible and revolutionary. But, you know, we've got to come up with a clear framework first.

178-Asset backing of stable coins is protected,  need regulation to ensure stability

Washington Post Editorial Board, 11-8, 21, pinion: Stablecoins may not be stable. That’s a problem.,

A stablecoin is a coin traded on the blockchain pegged to a traditional currency, such as the U.S. dollar or gold. The setup allows these tokens to retain a relatively steady worth rather than fluctuating as wildly as mercurial cryptocurrencies. Traders give their dollars to a stablecoin issuer, the issuer gives them stablecoins in exchange, and they use those stablecoins to invest in (or, better put, bet on) bitcoin and the like. Theoretically, a stablecoin’s value is ensured by a bundle of assets including cash, treasuries and commercial paper. The trouble is, there is no guarantee that the issuers have on hand the assets they say they do. Tether Holdings’ story is the prime example: The company once claimed to have $69 billion in real currency to support that amount of its coin in circulation. Yet no one who went looking for the money was able to find any evidence of it. After being sued by the state of New York, the company revealed it had been loaning money from its reserves to prop up an affiliated cryptocurrency exchange that was hundreds of millions of dollars in the hole. Tether and stablecoins represent only one corner of a much more volatile world: Last week, a cryptocurrency inspired by the Netflix survival series “Squid Game” started at a penny a token traded, and in a 10-minute span, rocketed to $628.33, then $2,856.65, before plummeting to $0.0007 and disappearing from the Web. The backers, by the looks of things, took at least $3.38 million of investors’ funds with them. The government, obviously, doesn’t want this phenomenon to grow more out of control. Authorities could, as a report by a presidential working group proposed this month, wait for Congress to legislate stringent special rules that basically force issuers to operate like banks — or the Treasury Department’s Financial Stability Oversight Council could designate stablecoins as “systemically important,” making them subject to supervision by the Federal Reserve. Alternatively, the various financial regulators could use the authorities they already have to deal with different versions of stablecoins according to their different functions: some as securities, for instance, and some as commodities. The object must be to ensure that credulous investors don’t end up holding a bag of supposedly guaranteed but actually worthless non-dollars. The risk, and the challenge for the regulators, is that belatedly policing stablecoins now that so many are in circulation could prompt the type of run on their issuers that the government wants to guard against. Cryptocurrency lobbyists have come to Washington to ask Congress for “guidance.” New laws, however, should not be permission to evade old ones that apply to banking and other traditional financial operations. Meanwhile, federal regulators already can guide the industry by letting it know they’re prepared to enforce the laws that currently exist.

177-Coordinated US-EU crypto regulation now

Reid, 11-6, 21, Bob Reid is the CEO and co-founder of Everest, a fintech company that leverages blockchain technologies for a more secure and inclusive multi-currency account, digital/biometric identity, payment platform and e-money platform. As a licensed and registered financial institution, Everest supplies end-to-end financial solutions, facilitating eKYC/AML, digital identity and regulatory compliance associated with money movement. He was an advisor to Kai Labs, the general manager of Licensing at Bittorrent and vice president of Strategy and Business Development at Neulion and DivX,  Regulators are coming for stablecoins, but what should they start with?

The word “stablecoin” may have a pleasant ring to it — isn’t it nice to have something stable in the volatile cryptoverse? — but for critics, they are nothing short of a ticking time bomb. Whether that’s true or not, the push for regulating stablecoins is gaining momentum. The United States and the European Union are getting closer to formalizing their playbooks, and given the history of financial regulation emanating from Washington and Brussels, as well as the Financial Action Task Force’s guidelines on crypto over the past few years, it’s safe to say that the rest of the world will be following suit.

176-Consumer regulatory protection is needed

Reid, 11-6, 21, Bob Reid is the CEO and co-founder of Everest, a fintech company that leverages blockchain technologies for a more secure and inclusive multi-currency account, digital/biometric identity, payment platform and e-money platform. As a licensed and registered financial institution, Everest supplies end-to-end financial solutions, facilitating eKYC/AML, digital identity and regulatory compliance associated with money movement. He was an advisor to Kai Labs, the general manager of Licensing at Bittorrent and vice president of Strategy and Business Development at Neulion and DivX,  Regulators are coming for stablecoins, but what should they start with?

Of course, some might say that regulation will only slow down innovation, so governments should stay out of the crypto lane, but this argument is missing historical context. Way earlier, in the wildcat banking era, private currencies issued by rogue banks would often leave people buying in with worthless papers, so the greenback was enshrined as the only national currency of the United States. The same logic applies to the 2008 money market fund crisis when the federal authorities put new rules in place to protect the Regular Joe from big-time investors pulling in large sums from those. Time and time again, we, as a society, determined that consumers need protection from scams or simply bad judgment by those who custody, transfer value or provide similar services. We implemented rules and regulations to govern who can issue and redeem what we consider money, we wrote the playbook for those handling money in amounts that can send shockwaves across the economy if mishandled. Why shouldn’t we do the same with stablecoins, a market with a total cap of over $133 billion? There is simply no point in keeping the Damocles sword of a crypto bank run hanging over the heads of investors and traders. So where do we start?

175-Potential stablecoin regulations

Reid, 11-6, 21, Bob Reid is the CEO and co-founder of Everest, a fintech company that leverages blockchain technologies for a more secure and inclusive multi-currency account, digital/biometric identity, payment platform and e-money platform. As a licensed and registered financial institution, Everest supplies end-to-end financial solutions, facilitating eKYC/AML, digital identity and regulatory compliance associated with money movement. He was an advisor to Kai Labs, the general manager of Licensing at Bittorrent and vice president of Strategy and Business Development at Neulion and DivX,  Regulators are coming for stablecoins, but what should they start with?

The best way to begin regulating stablecoins is to set up the rules and protocols that ensure they live up to their claims. Christine Lagarde, the European Central Bank chief, said in a recent interview that stablecoins must be backed with fiat 1:1, adding that projects behind issuing any stablecoins should: “[...] be checked, supervised, regulated so that consumers and users of those devices can actually be guaranteed against eventual misrepresentation.” The EU has a long history of Electronic Money Institutions (EMIs), which can issue and redeem digital euros, and those institutions back their digital euros with real euros held in a bank, or in some cases, the central bank. This could set the example for regulators in other jurisdictions, who seem to be heading in the same direction. Here, we could draw a parallel with capital requirements for banks or payment companies, like EMIs, to ensure that stablecoin users can trade their coins for fiat at any given moment via the company that minted those. For reference, one of the key ways banks make money is by lending the money deposited by others. The process needs regulation simply to make sure the bank has enough in its stash to pay off clients who may want to withdraw their money, but not necessarily a 1:1 ratio for every active deposit. For a stablecoin issuer, selling its coins for fiat may be technically akin to taking in a deposit, but the question is what does it do with the money next? If it lends, then it is engaging in banking activities. If it processes a transaction, then it’s handling payment activities. If it puts the money into high-yield assets, then it is technically transmitting orders to a brokerage or working as a broker, itself. Again, for context, we, as a society, granted governance of these activities to regulators. Related: Stablecoins under scrutiny: USDT stands by ‘commercial paper’ tether Appropriately, with stablecoins, regulators must first establish the transparency standards for the issuers, who must identify the financial activities they are engaged in, much the same way banks and payment companies do. Money market funds could be a good benchmark here. It is only reasonable to expect every stablecoin issuer to issue reports on their holdings, including, whenever appropriate, entities that issued specific securities and the amounts thereof. Without this, there is simply no way for stablecoin users to be sure that their assets hold the actual value. For stablecoins pegged against more exotic assets, the fundamental rule must be the same: They must be able to prove that whatever assets they claim are behind the coin are there. But that’s where we jump right into a deep, deep rabbit hole. A commodity-backed stablecoin, for example, is, de-jure, a commodity-based investment contract, and needs to be regulated as such, not as “money” in any sense. And algorithmic stablecoins have an even harder time fitting into the regulated world. From a regulatory standpoint, algorithmic and crypto-backed stablecoins are not currently as closely intertwined with the traditional financial system as those that hold conventional financial instruments in their reserve. Such coins are usually fully plugged into the larger crypto ecosystem or their networks. That said, given the size and activities of these organizations — effectuating the transfer of value, in essence, not always in line with jurisdictional laws—they are as worthy of regulators’ crosshairs as other stablecoins. As an open and immutable ledger, blockchain is open for auditing, and so, more often than not, are the smart contracts powering such projects. Assuming identity can be attached to wallets, transparency is not necessarily an issue. What is an issue, though, at least potentially, is firing up the imagination of entities used to dealing with traditional finance and simultaneously encouraging crypto projects to find solutions for complying with the regulations that govern our society. In theory, regulators could go all the way to establishing a standard for incorporating automated reports and audits into the code powering the coins. In practice, doing something like that begs the question of a larger regulatory framework for cryptocurrencies as such. Multiple regulators are working on this playbook too, but there is still a way to go before it is completed. Related: Stablecoins present new dilemmas for regulators as mass adoption looms Given the apparent focus on the fiat-collateralized giants like Tether, the first order of business will be to categorize them according to activities (payment, banking, investment) and apply the requisite licensing requirements accordingly. The algorithmic stablecoins will most likely be put into regulatory limbo until the powers that be determine whether they are commodities or not, or even get outright banned—either of which will force them into a choice between adapting to regulations or being marginalized. Whichever way things go, it is clear that stablecoins are in for a rude awakening from regulators across the world, and rightfully so. With their market cap soaring, stablecoins are now one of the key pillars for the crypto ecosystem as such. By embracing regulation, the crypto community will simply make sure that this colossus does not have feet of clay.

174-New tax regulations that are part of the cryptocurrency bill are coming

Nikhilesh De, 11-5, 21 Con Desk, ouse Sends Infrastructure Bill With Crypto Tax Provision to US President,

The U.S. House of Representatives voted to pass a bipartisan infrastructure bill that contains a controversial cryptocurrency tax reporting requirement. The House voted in favor of the bill with at least 218 ayes late Friday night, fulfilling a key priority for the Biden administration amid controversy over whether an accompanying Democrat-led bill would also move forward. The Senate originally passed the bill in August after lawmakers shot down any attempts at amending the crypto provision. The bill now goes to U.S. President Joe Biden for his signature. The crypto industry was concerned about a tax reporting requirement within the bill that sought to expand the definition of a broker for IRS purposes. The reporting requirement would see all brokers report transactions under the current tax code. Industry proponents worried that the definition would be too broad, capturing entities like miners and other parties that don’t actually facilitate transactions. Another provision included in the bill to amend Tax code section 6050I has also stoked fear in the crypto industry. The law, written nearly 40 years ago to apply to in-person cash transactions over $10,000, essentially requires recipients to verify the sender’s personal information and record their Social Security number, the nature of the transaction and other information, and report the transaction to the government within 15 days. Unlike other tax code violations, violations of 6050I are a felony, and some lawyers have pointed out that, applied to cryptocurrencies and other digital assets like non-fungible tokens (NFTs), the law could be nearly impossible to comply with. Pushback against the provision held up the bill’s passage in the Senate, where the infrastructure bill originated, giving the industry a chance to push for an amendment to modify the language. Ultimately, however, the Senate passed the bill without adopting any amendments, despite an 11th-hour effort to secure a change. The Treasury Department still has to explain how it plans to interpret the bill, and publish guidance spelling out how businesses or other entities will have to comply with it

173-Proposed Biden stable coin regulations undermine stable coins and innovation in the space

Norbert Michel and Jennifer J. Schulp, 11-5, 21, A Simple Proposal for Regulating Stablecoins,

Rather than acknowledge these possible benefits, the Biden administration’s new report endorses several ideas that proponents of strict stablecoin regulations have been promoting for years. The report’s main recommendation—that only federally insured depository institutions be allowed to issue stablecoins—is profoundly anti‐​competitive and in direct conflict with the administration’s stated goal of guarding against an “excessive concentration of economic power.”11 Recommending that the FSOC review whether stablecoins threaten financial stability is both misguided and, at best, delays providing a clear regulatory framework.12 These and other ideas promoted by advocates for strict stablecoin regulations are ill‐​advised. Some proposals fail to provide the much‐​needed clarity that the cryptocurrency industry needs, and others are based on a fundamentally flawed concept of stablecoins. Some share both of these weaknesses. For example, regulating stablecoins like bank accounts is not a good solution because unlike bank deposits, stablecoins serve a niche payment function for transferring funds between crypto exchanges without having to transfer back and forth into a national fiat currency. The stability of a stablecoin’s value is tied to other assets, and stablecoin holders know that they can only convert into a national fiat currency by selling their coins. Moreover, there is no readily apparent justification for forcing federal taxpayers to back firms that issue stablecoins. Some have suggested regulating stablecoins like money market mutual funds, but that solution is no better. Unlike money market mutual funds, stablecoins are not investments and are designed to maintain a stable value without offering the traditional principal‐​interest component of a capital market investment. Former Commodity Futures Trading Commission (CFTC) chairman Timothy Massad has suggested that the FSOC require the Federal Reserve to regulate stablecoins as a systemically important payment activity.13 But such an approach merely assumes that these coins pose systemic risks to financial stability—an assumption that is not warranted.14 Similarly, all the proposals that the administration has endorsed appear to be driven by the desire to prevent stablecoin use from growing and to isolate the banking industry from competition. The proposals go much farther than needed, thus threatening to inhibit beneficial innovations in the payments system.

172-Proposed stablecoin regulation

Norbert Michel and Jennifer J. Schulp, 11-5, 21, A Simple Proposal for Regulating Stablecoins,

Superior Alternative Proposal

The greatest risk for most stablecoin holders is whether the issuing entity has the reserves that it claims to have. A lack of transparency about the reserves that are used to stabilize the coin’s value prevents a holder from evaluating the issuer’s claims about stability and does little to protect holders from fraudulent misconduct.  A good regulatory framework addresses this issue by providing basic collateral requirements and requiring a baseline for transparency. While state laws generally provide protection against deceptive or unfair practices (and the state of New York did sue Tether for deceptive trading practices), dealing with up to 50 separate state laws is cumbersome and costly for both issuers and holders.15 Therefore, it makes sense to have a streamlined federal regulatory framework for stablecoin issuers.16

This briefing paper suggests creating such a proper federal framework by requiring a stablecoin issuer to be regulated as a newly created “limited purpose investment company.” A limited purpose investment company would be subject to basic reserve requirements and mandatory disclosure of relevant information about reserve holdings. This framework would be designed to regulate the reserves that stablecoin issuers claim to hold and, therefore, the actions that issuers undertake to maintain a stable coin value.

Congress could create such a framework, for example, by amending the Investment Company Act,17 which would give the Securities and Exchange Commission (SEC) unambiguous regulatory authority over most stablecoin issuers, that is, those that collateralize with cash and securities.18 First, Congress would need to add a new § 80a‑3(a)(2) (renumbering the current § 80a‑3(a)(2) to § 80a‑3(a)(3)) to the Investment Company Act, defining a limited purpose investment company as follows:

A limited purpose investment company engages in the business of issuing digital tokens, with a value anchored, pegged, or otherwise tied to the price of national currencies, such as the United States dollar. The value of the digital token is maintained through assets, including national currencies and short‐​term investment‐​grade securities, held in reserve by the limited purpose investment company. Only the provisions of section 80a–65 of this subchapter, for the purposes of regulatory oversight over the establishment and maintenance of reserves, shall apply to such a limited purpose company.

Second, Congress would add the following language to create § 80a–65:

A limited purpose investment company must adhere to the following requirements for assets held in reserve:

Average reserve portfolio maturity may not exceed 90 days;

Reserves may not consist of assets with maturities greater than one year;

Not less than 10 percent of the reserve assets must be held in cash or securities accessible in one day;

Not less than 20 percent of the reserve assets must be held in cash or securities accessible in seven days or less;

Reserve assets must consist of only investment grade securities; and

Not more than 5 percent of securities held as reserve assets may be from a single issuer.

A limited purpose investment company must disclose in a publicly accessible manner, such as a website, a detailed explanation of its reserve holdings no more than five business days after the end of each month. The detailed explanation must include the value of the holdings and the percentage of total assets for each reserve asset category as defined in (a)(2)–(4) and cash.

In accord with its advertised policies, a limited purpose investment company may suspend conversion of its digital tokens to cash for the purpose of maintaining the token’s stable value, without notice and for any length of time.

171-Crypto triggering a mental health crisis

Katy Lee, 11-4, 21, Crypto addiction: a hidden epidemic?,

When Matt Danzico began seeing cryptocurrency logos in the packaging of grocery store items, he knew he had a problem. Danzico had been swept up in the global craze for trading digital currencies during the pandemic, and very quickly it had grown into an obsession. "I would have these sleepless nights where I'd be tossing and turning, trying to get these charts out of my head," said the Barcelona-based designer and visual journalist. "I thought I was losing my mind." Cryptocurrencies like bitcoin and ethereum are notorious for their volatility, and the 39-year-old saw "years worth of money won and lost in a very short amount of time". His emotions went on a similar rollercoaster, not helped by the fact that he was speculating in the depths of a Covid-19 lockdown. His wife noticed him becoming anxious and angry. Danzico declines to specify the damage the experiment did to his finances—suffice to say that "for our bank account, it was bad". Reflecting months later during a trip home to the United States, the cheerful American mostly feels relieved that he nipped his addiction in the bud fairly quickly. But as cryptocurrencies have grown from being a niche interest to a more mainstream one, Danzico says experiences much darker than his own are unfolding worldwide. "We're talking tens of millions of people who are trading cryptocurrencies," he said. "If one small fraction of those people are becoming hooked, we're talking about a burgeoning potential mental health crisis on a scale that I don't think that the world has ever seen." Danzico is grateful that he nipped his crypto addiction in the bud, but warns that many people are having much more damaging experiences. The darkness of crypto Twitter Danzico points out that you need look no further than Twitter, where crypto enthusiasts congregate, for a sense of the mental health consequences of the tokens' chronic instability. Tweets by "people discussing deep depression, really extreme thoughts of isolation and suicide" often accompany plunges in value. In September, a Czech man's tale of his disastrous attempt to get rich from crypto—taking on spiraling debts as he attempted to claw back his losses—went viral on Twitter. Depressed and homeless, he was too ashamed to ask for help. "When I called my mom I just said it's all ok, I have (a) good job, place to sleep etc. In reality I was starving," wrote the user named Jirka, who has since started rebuilding his life. Disturbed by his own experience and others described online, Danzico began researching crypto addiction, writing up his findings in an article for crypto news site Cointelegraph. He found just one small-scale study into crypto addiction in Turkey, and a few therapists offering professional help, from Thailand to the US. Experts regard the phenomenon as a form of gambling addiction, noting similarities with Wall Street traders whose investments have spun out of control. Castle Craig, a Scottish rehab clinic, describes crypto addiction as a "modern day epidemic". The problem is more common in men, the clinic notes on its website, "but this might just be because women trade cryptocurrencies less than men". Danzico, a designer and visual artist, used projections to capture how crypto trading was taking over his life. Art as therapy For Danzico, it's "alarming" that more specialised help isn't available. Part of the problem, he suspects, is that people don't realise quite how mainstream crypto speculation has become. Trading platform estimated in July that 221 million people were now trading worldwide. That figure had more than doubled in six months as millions began dabbling while stuck at home during the pandemic. It was only after Danzico began trading himself that he began noticing signs that fellow traders were everywhere. A neighbor would whoop every time ethereum spiked; he'd see young men in the street fretting over a crypto chart on a phone screen. Danzico kicked his own habit by pouring his obsession into photography, using a light projector to superimpose images of crypto logos and charts onto the world around him. Finding a way to express how all-consuming trading had become "somehow allowed me to move past it", he said. He is now, with self-confessed irony, selling digital versions of the images as NFTs—non-fungible tokens, for which he is paid in ethereum. Danzico still has some crypto assets, and believes that decentralised finance has a bright future. But he wants society to face up to what he regards as "an enormous mental health crisis". "You have kids who are literally becoming millionaires in their parents' basements and then losing it all before they run up for dinner," he said.

170-The US is the number one crypto miner

PRABHJOTE GILL, 11-3, 21, Illegal mining for cryptocurrencies remains rampant as miners look to maximise profits with cheap electricity,

The Asian Dragon’s ban has also resulted in the US becoming the top destination for Bitcoin miners, according to the Cambridge Bitcoin Electricity Consumption Index ( CBEC). As of September 2021, Bitcoin miners in the US accounted for one-third of the cryptocurrency’s hashrate — the amount of computational power going into mining for Bitcoin.

169-More bitcoin mining increases electricity prices and grid pressure

PRABHJOTE GILL, 11-3, 21, Illegal mining for cryptocurrencies remains rampant as miners look to maximise profits with cheap electricity,

With the US fast becoming a hub for cryptocurrency mining, the states of Texas and Washington are in high demand with the lower electricity rates in the country. While a huge chunk of their power generation is done using renewable resources, thus reducing the toll on the environment, concerns remain over supply and demand in the world’s largest economy as well. Texas, for instance, was a victim of a huge power outage crisis earlier this year. In February, more than 10 million people within the state were left without any electricity amid freezing temperatures resulting in the death of at least 111 people And, with more Bitcoin miners coming on board, experts are vary that only only will the prices of electricity increase as a result, but winter shortages could worsen.

168-Proof of stake reduces electricity consumption

PRABHJOTE GILL, 11-3, 21, Illegal mining for cryptocurrencies remains rampant as miners look to maximise profits with cheap electricity,

The more people there are mining for Bitcoin, the more difficult its algorithms are going to become to solve, which means validating transactions — or mining — will lead to the consumption of even more power. It’s one of the primary reasons why Ethereum, the second largest cryptocurrency in the market, is currently moving to the proof-of-stake (PoS) consensus method rather than proof-of-work (PoW). The shift, dubbed as Ethereum 2.0, is expected to reduce mining for Ether (ETH) by 99%.

167-Regulation will strengthen the legitimacy of Blockchain

Ranica Arrowsmith, 11-3, 2021, Ask not what blockchain can do for you,

One of the key factors that will continue to legitimize blockchain technology and cryptocurrencies is regulation and legislation. Just this year, Congress has introduced 19 bills (so far) that impact blockchain or crypto, ranging from legislation seeking to define and promote blockchain (the Blockchain Promotion Act of 2021) to proposals to make the U.S. competitive in cryptocurrencies on the global market (the U.S. Virtual Currency Market and Regulatory Competitiveness Act of 2021). The ramping up of regulatory interest and activity makes it all the more clear that in the near future, cryptocurrency won't be the uncertain, volatile investment that it can be today, and blockchain technology will touch almost every industry. "President Biden's infrastructure bill says the expected tax revenue from cryptocurrency investments could be up to $28 billion," said Kell Canty, CEO of Verady, which makes Ledgible, a crypto tax and accounting platform. "That tells me that, one, crypto is not going away, even though some practitioners have said that it's too complex; and two, the taxation and accounting of it is of the utmost priority. Tax is a huge priority for government and for the profession. This is building a new asset class that the Fed is saying is not going away. The professionals that recognize that and dig in will be rewarded. Still, Canty said, some of those in the accounting profession he has spoken to see crypto as a problem and not an opportunity. Those accountants are happy to be retiring before they have to make crypto their problem, but crypto remains as an inevitably emerging revenue source for firms, should they embrace it. While the U.S. government is taking taxation of cryptocurrencies seriously, Canty pointed out a potential concern - namely, excessive regulation driving crypto companies out of the U.S. Another Senate bill proposed rules for crypto trading firms and brokers (as well as banks and other financial institutions) having to report additional information about some transactions, including any over $10,000. "Yes, increased taxation and regulation may mean an increased use of our software, which can help companies generate tax info like 1099s," Canty said. "But if you do thoughtful analysis, what if the bill takes those companies outside the U.S.? It could reduce the ecosystem we're part of by having unrealistic demands on industry that impedes growth or makes some of these companies consider leaving. We've seen a little of that from crypto companies. If people are going to invest in and grow a company, they'd like to know the rules of the road with some certainty - that they are stable and that they can grow around them."

166-Proposed stablecoin regulations

The President's Working Group on Financial Markets, November, 2021, Report on Stablaecoins,

Legislation To address prudential risks associated with the use of stablecoins as a means of payment, the agencies recommend that Congress act promptly to ensure that payment stablecoins are subject to appropriate federal prudential oversight on a consistent and comprehensive basis. Because payment stablecoins are an emerging and rapidly developing type of financial asset, legislation should provide regulators flexibility to respond to future developments and adequately address risks across a variety of organizational structures. Legislation should address the risks outlined in this report by establishing an appropriate federal prudential framework for payment stablecoin arrangements.29 In particular, with respect to stablecoin issuers, legislation should provide for supervision on a consolidated basis; prudential standards; and, potentially, access to appropriate components of the federal safety net. To accomplish these objectives, legislation should limit stablecoin issuance, and related activities of redemption and maintenance of reserve assets, to entities that are insured depository institutions. The legislation would prohibit other entities from issuing payment stablecoins. Legislation should also ensure that supervisors have authority to implement standards to promote interoperability among stablecoins. Insured depository institutions include both state and federally chartered banks and savings associations, the deposits of which are covered, subject to legal limits, by deposit insurance, and which have access to emergency liquidity and Federal Reserve services.30 Like other insured depository institutions, insured depository institutions that issue stablecoins would be subject to supervision and regulation at the depository institution level by a federal banking agency and consolidated supervision and regulation by the Federal Reserve at the holding company level.31 The standards to which these institutions are subject include capital and liquidity standards that are designed to address safety and soundness and, for the largest banking organizations, also include enhanced prudential standards that address financial stability concerns. Under the Federal Deposit Insurance Act, insured depository institutions also are subject to a special resolution regime that enables the orderly resolution of failed insured depository institutions by, among other mechanisms, protecting customers’ insured deposits, and according priority to deposit claims over those of general creditors, and limits any potential negative systemic impacts in the event of bank failure. As discussed above, apart from a stablecoin issuer, other key entities in the stablecoin arrangement may be critical to a stablecoin’s ability to function as a means of payment and may help a stablecoin to scale (See Part I, Activities and Participants in Stablecoin Arrangements). As noted above, the core functions of a stablecoin arrangement – (1) creation of the stablecoin, (2) its transfer between parties, and (3) storage of the stablecoin by end users, as described in Part I (See Part I, Creation of Stablecoins, and Transfer and Storage of Stablecoin) – can be carried out by the activities of separate entities, within an arrangement that may be highly distributed and complex. Because the activities and functions in a stablecoin arrangement may be distributed across different parties, a prudential 29 Given the global nature of stablecoins and other digital assets, legislation should apply to stablecoin issuers, custodial wallet providers, and other key entities that are domiciled in the United States, offer products that are accessible to U.S. persons, or that otherwise have a significant U.S. nexus. 30 The term “insured depository institution” is defined in the Federal Deposit Insurance Act. See 12 U.S.C. § 1813(c)(2). 31 See 12 U.S.C. § 1841, et seq. 17 framework that is exclusively focused on stablecoin issuers is likely to leave certain payment system risks inadequately or inconsistently addressed. Given the central role that custodial wallet providers play within a stablecoin arrangement, and the risks attendant to the relationship between custodial wallet providers and stablecoin users, Congress should require custodial wallet providers to be subject to appropriate federal oversight. Such oversight should include authority to restrict these service providers from lending customer stablecoins, and to require compliance with appropriate risk-management, liquidity, and capital requirements. In addition, to address concerns about concentration of economic power, Congress should consider other standards for custodial wallet providers, such as limits on affiliation with commercial entities or on use of users’ transaction data. In addition to stablecoin issuers and custodial wallet providers, other entities may perform activities that are critical to the functioning of the stablecoin arrangement (See Part I, Activities and Participants in Stablecoin Arrangements). To ensure that stablecoin arrangements are subject to a comprehensive regulatory framework, Congress should provide the federal supervisor of a stablecoin issuer with the authority to require any entity that performs activities critical to the functioning of the stablecoin arrangement to meet appropriate risk-management standards, such as the Principles for Financial Market Infrastructures32 as adapted to stablecoin arrangements.33 Legislation should also provide appropriate agencies with examination and enforcement authority with respect to the stablecoin activities of these entities. Finally, supervisors should have the ability to adopt standards to promote interoperability among stablecoins, or between stablecoins and other payment instruments. Taken together, legislation along these lines would address the prudential risks described in Part II of this report on a comprehensive and consistent basis: • User Protection and Run Risk: Require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level. • Payment System Risk: Require custodial wallet providers to be subject to appropriate federal oversight. In addition, provide the supervisor of a stablecoin issuer with authority to require any entity that performs activities critical to the functioning of the stablecoin arrangement to meet appropriate risk-management standards. • Systemic Risk and Concentration of Economic Power: Require stablecoin issuers to comply with activities restrictions that limit affiliation with commercial entities. Supervisors also should have the authority to implement standards to promote interoperability among stablecoins. Limits on custodial wallet providers’ affiliation with commercial entities or on custodial wallet providers use of user transaction data may also help address these issues. 32 Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions, see supra note 24. 33 The authority to establish risk-management standards for entities that perform activities that are critical to the functioning of the stablecoin arrangement is in addition to, and does not affect, other existing regulatory or supervisory authorities that may apply to these entities. 18 Interim Measures The agencies believe that legislation is urgently needed to comprehensively address the prudential risks posed by payment stablecoin arrangements. While Congress considers how to address risks associated with payment stablecoin arrangements, the agencies will continue to use their existing authorities to address these prudential risks to the extent possible. In the absence of Congressional action, the Council may consider steps available to it to address the risks outlined in this report. A. Regulatory Agencies Given the significant and growing risks posed by stablecoins, the agencies are committed to taking action to address risks falling within each agency’s jurisdiction and to continued coordination and collaboration on issues of common interest across the federal financial agencies. For example, in evaluating a charter application, the banking agencies will seek to ensure that applicants address the risks outlined by this report, including risks associated with stablecoin issuance and other related services conducted by the banking organization or third-party service providers. In the context of those stablecoins that are securities, commodities, and/or derivatives, application of the federal securities laws and/or the CEA would provide important investor and market protections, as well as transparency benefits. Relevant authorities, including the Department of Justice, may consider whether or how section 21(a)(2) of the Glass-Steagall Act may apply to certain stablecoin arrangements.34 In addition, the Consumer Financial Protection Bureau (CFPB) and consumer financial protection laws also provide a number of safeguards in the payments sector, including but not limited to the Electronic Fund Transfer Act, the Gramm-Leach-Bliley Act, and the Consumer Financial Protection Act.35 Finally, a stablecoin arrangement may also offer “money transmission services,” triggering federal AML/ CFT obligations under the Bank Secrecy Act (BSA), supervised and enforced by the Financial Crimes Enforcement Network (FinCEN). B. Council In the absence of Congressional action, the agencies recommend that the Council consider steps available to it to address the risks outlined in this report. Such steps may include the designation of certain activities conducted within stablecoin arrangements as, or as likely to become, systemically important payment, clearing, and settlement (PCS) activities.36 Designation would permit the appropriate agency to establish risk-management standards for financial institutions that engage in designated PCS activities, including requirements in relation to the assets backing the stablecoin, requirements related to the operation of the stablecoin arrangement, and other prudential standards.37 Financial institutions that engage in designated PCS activities also would be subject to an examination and enforcement framework. Any designation would follow a transparent process. 34 12 U.S.C. § 378(a)(2). 35 See, e.g., 15 U.S.C. § 1693 et seq., Gramm-Leach-Bliley Act, Pub. L. No. 106-102, 113 Stat. 1338 (1999); Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). 36 In addition, the Council potentially could address stablecoin arrangements using its authority to designate systemically important financial market utilities (FMUs), subjecting those arrangements to consolidated supervision. See 12 U.S.C. §§ 5462, 5463. The council also has authority to designate nonbank financial institutions as “systemically important financial institutions” (SIFIs), pursuant to its authority in Title I of the Dodd-Frank Act. See 12 U.S.C. § 5323. PCS activities may be designated to the extent that such activities do not involve the offer or sale of a security or any quotation, order entry, negotiation, or other pre-trade activity or execution activity. 37 The financial stability risks of a stablecoin run would be greater in the context of stablecoins backed by potentially volatile and illiquid assets than in the context of stablecoins backed one-for-one by high quality liquid assets, see supra note 23.

165-Stablecoin activity could be criminal

The President's Working Group on Financial Markets, November, 2021, Report on Stablaecoins,

Illicit Finance Risk As with all digital assets, stablecoins can present money laundering and terrorist financing (ML/TF) risks. The magnitude of these risks depends on various factors, including the application of antimoney laundering and countering the financing of terrorism (AML/CFT) controls, the degree to which it is adopted by the public, and the design of the stablecoin arrangement. To further prevent misuse of stablecoins and other digital assets by illicit actors, Treasury will continue leading efforts at the FATF to encourage countries to implement international AML/CFT standards and pursue additional resources to support supervision of domestic AML/CFT regulations. Treasury will also continue to assess the illicit financing risks to the United States associated with stablecoins and other digital assets, including through the forthcoming National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing, and Illicit Finance Strategy. A critical factor for illicit finance risk mitigation, regardless of the features of a stablecoin’s design, is that international standards for the regulation and supervision of service providers associated with stablecoins and other digital assets are effectively implemented worldwide. Stablecoins and other digital assets can be used to transfer large amounts of value across borders very quickly. A rapid increase in cross-border payments could amplify ML/TF risks due to the uneven implementation of global international AML/CFT standards developed by the FATF.38 While the United States regulates and enforces AML/CFT obligations for covered service providers, most countries have either not put these standards into their regulatory frameworks or are failing to supervise them, leading to gaps in AML/CFT regulation and supervision for stablecoins and other digital assets. Illicit actors can exploit these gaps by using services in countries with weak regulatory and supervisory regimes to launder funds, store proceeds of crime, or evade sanctions in stablecoins or other digital assets. The promise of a stable value can, particularly when paired with the reach of commercial firms such as telecommunications or technology providers, increase the potential that stablecoins scale rapidly. Criminals often use the most common and liquid forms of value for ML and TF, and mass-adopted stablecoins or other digital assets may be attractive to illicit actors, which could heighten ML/TF risks. Conversely, mass adoption of a well-regulated and supervised stablecoin with strong AML/CFT protections built into the stablecoin could provide greater transparency into illicit financial activity and could mitigate ML/TF risks, especially if the stablecoin takes market share away from riskier alternatives. Like other digital assets, stablecoins may be used to transact pseudonymously, depending on the underlying architecture.39 However, in certain instances, stablecoin addresses and transactions on public blockchains can be paired with information, if available, that can enable regulators and law enforcement to identify address owners.40 Users of some stablecoins can transact without the exchangers, including administrators of stablecoin arrangements and the exchanges on which they are offered, since 2014. These examinations have also included foreign-located MSBs doing business in the United States in whole or substantial part.43 FinCEN has taken decisive action when it identifies financial institutions that fail to comply with these obligations. For example, in 2017 FinCEN assessed a $110 million civil money penalty against the foreign-located CVC exchanger BTC-e for failure to comply with the BSA’s registration, AML program, reporting, and recordkeeping requirements.44 More recently, FinCEN assessed a $100 million civil money penalty against the foreign-located, non-compliant futures commission merchant BitMEX for failing to maintain an AML Program and a Customer Identification Program, and failure to file SARs.45 That penalty was concurrent with the CFTC’s $100 million civil money penalty.46 Treasury in January will report to Congress the National Money Laundering and Terrorist Financing Risk Assessments, which assess the illicit financing risk landscape for digital assets, among other financial products and activities. The Risk Assessments are developed with input from U.S. government stakeholders, including law enforcement, the federal functional regulators, and the intelligence community, and use public or adjudicated case studies to demonstrate how illicit actors are misusing financial assets. The Risk Assessments inform the Illicit Finance Strategy, which is designed to identify goals, objectives, and priorities for disrupting and preventing illicit finance activities within and transiting the U.S. financial system.

164-Blockchain can replace traditional banking and improve its efficiency

Arun Padmanabhan, November 4, 2021, Economic Times, Explained: How DeFi could one day liberate finance,

Evolution is the answer to everything that exists, and finance is no exception.Since the financial crisis of 2008, many practices of governments, central banks and entrenched players in the sector have been called into question. The birth of Bitcoin in 2009 gave the world -- or at least a part of it -- the tools needed to establish another kind of financial system, one based on decentralised consensus, not centralised fiat.Decentralised finance, or DeFi for short, is a system in which customers can access financial products directly on a decentralised blockchain network, without the need for middlemen such as banks and brokerages. The aim is to democratise finance by replacing centralised institutions such as banks with direct, peer-to-peer relationships. Every financial service we use today -- savings, loans, insurance and much more -- could one day exist on a blockchain, not in a bank.Also read: Neobanks, the next evolution of bankingThat's because decentralised finance platforms offer an alternative system, not simply a plug-in to the existing banking and finance systems. These platforms are structured to become independent from their developers and backers over time and to ultimately be governed by a community of users whose power comes from holding the protocol's tokens.According to a 2020 report in the Journal of Business Venturing Insights by Elsevier, "Blockchain technology can substantially increase the scope and efficiency of peer-to-peer transactions, turning previously infeasible business models into viable ones. Empowered by blockchain technology, financial services can become more decentralised, innovative, interoperable, borderless, and transparent."Tools of DeFi: smart contracts and dapps'Smart contracts' are programmes that run on blockchains and can be triggered automatically when certain conditions are met. These smart contracts help developers build far more sophisticated functionality than merely sending and receiving cryptocurrency. For example, a smart contract could be used to establish a loan agreement between two people. If certain terms are not met, the collateral could be liquidated. All of this would happen automatically through computer code, doing away with the need for a bank or any other middleman.Smart contacts such as these are used to build decentralised apps, or dapps for short. Dapps are like normal apps and offer similar functions. The key difference is that they are run on a peer-to-peer network, such as a blockchain, which means no single entity has control of the network.The risks of DeFiDecentralised finance, like Bitcoin itself, is still at a nascent stage. The total value currently (as of November 3) locked in DeFi contracts worldwide is about $107 billion, according to DeFi Pulse.Being a recent innovation, DeFi comes with its share of risks and downsides.Hacks and scams: DeFi is still riddled with hacks and scams such as DeFi "rug pulls," in which hackers drain a protocol of funds. That's because many DeFi platforms run on open-source smart contracts, which gives hackers the chance to probe these networks for weaknesses.In July, DeFI platform Poly Network was hit by hackers, who pulled off the biggest ever cryptocurrency heist. They stole $613 million in digital coins, only to return tokens worth $260 million less than a day later.No backup: Just like your bank account, DeFi and cryptocurrency wallets must be secured with private keys. A private key is a long, unique code known only to the wallet's owner. Good thing, right? The problem is that if you lose your private key, there's no way to recover your funds. Ever.DeFi in IndiaIn October, ET reported that the Reserve Bank of India is looking to red-flag DeFi platforms as India does not have any regulation to deal with cryptocurrencies, let alone DeFi. "There is no clarity around regulations on cryptocurrencies so platforms offering decentralised financing or crypto banking are operating in a regulatory vacuum. Also, which regulator should monitor these platforms that offer cryptocurrency-based banking is also a question," Rashmi Deshpande, partner at law firm Khaitan & Co, told ET. For Reprint Rights:

163-Stable coins explained

The President's Working Group on Financial Markets, November, 2021, Report on Stablaecoins,

Stablecoins are digital assets that are designed to maintain a stable value relative to a national currency or other reference assets. Today, stablecoins are primarily used in the United States to facilitate trading, lending, or borrowing of other digital assets, predominantly on or through digital asset trading platforms. Proponents believe stablecoins could become widely used by households and businesses as a means of payment. If well-designed and appropriately regulated, stablecoins could support faster, more efficient, and more inclusive payments options. Moreover, the transition to broader use of stablecoins as a means of payment could occur rapidly due to network effects or relationships between stablecoins and existing user bases or platforms

162-Stablecoins threaten financial stability

The President's Working Group on Financial Markets, November, 2021, Report on Stablaecoins,

Stablecoins and stablecoin-related activities present a variety of risks. Speculative digital asset trading,1 which may involve the use of stablecoins to move easily between digital asset platforms or in decentralized finance (DeFi) arrangements, presents risks related to market integrity and investor protection. These market integrity and investor protection risks encompass possible fraud and misconduct in digital asset trading, including market manipulation, insider trading, and front running, as well as a lack of trading or price transparency. Where these activities involve complex relationships or significant amounts of leverage, there may also be risks to the broader financial system. In addition, digital asset trading platforms and other market participants play a key role in providing access to stablecoins and liquidity in the market for stablecoins. To the extent activity related to digital assets falls under the jurisdiction of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), the SEC and CFTC have broad enforcement, rulemaking, and oversight authorities that may address certain of these concerns (for more detail, see Digital Asset Trading Platforms and DeFi). Stablecoins also pose illicit finance concerns and risks to financial integrity, including concerns related to compliance with rules governing anti-money laundering (AML) and countering the financing of terrorism (CFT) and proliferation. To prevent misuse of stablecoins and other digital assets by illicit actors, Treasury will continue leading efforts at the Financial Action Task Force (FATF) to encourage countries to implement international AML/CFT standards and pursue additional resources to support supervision of domestic AML/CFT regulations. Illicit finance concerns, and recommendations to mitigate illicit finance risks, are discussed in more detail in Illicit Finance Risk. In addition to market integrity, investor protection, and illicit finance concerns, the potential for the increased use of stablecoins as a means of payment raises a range of prudential concerns. If stablecoin issuers do not honor a request to redeem a stablecoin, or if users lose confidence in a stablecoin issuer’s ability to honor such a request, runs on the arrangement could occur that may result in harm to users and the broader financial system. Further, to the extent stablecoins are widely used to facilitate payments, disruptions to the payment chain that allows stablecoins to be transferred among users could lead to a loss of payments efficiency and safety and undermine the functioning of the 1 In general, references in this document to “digital asset trading” include trading, lending, or borrowing transactions that involve digital assets. 2 broader economy. The potential for stablecoin arrangements to scale rapidly raises additional issues related to systemic risk and concentration of economic power.

161-Stablecoin regulatory proposal

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