Global Regulatory Information Weekly | Brazil takes the first step in regulating Bitcoin

Cycle | 2.21~2.27

South Korea's major financial institution KB will launch South Korea's first crypto investment fund

One year after Singapore's DBS Bank launched its crypto exchange, South Korea's large financial institution KB Financial Group followed suit and showed great interest in the crypto asset custody business.

On Monday, KB announced in a press release on its official website that it has established a preparatory committee for digital asset management. Considering the speed at which other major countries are adopting cryptocurrencies, KB plans to prepare for the early launch of related products through domestic and foreign digital asset market research. Honggun Kim, head of KB Index Quantitative Management, said, "We will launch equity funds with cryptocurrency as the theme, hold virtual asset conferences for clients and publish journals." The current plan is to launch a crypto investment index fund and a fund that utilizes an outsourced chief investment officer (OCIO).

It is reported that the institution's competitor Shinhan Bank has begun managing NFTs for customers on Klaytn, a blockchain network owned by internet giant KaKao.

El Salvador President Plans to Offer Citizenship to Investors; Tourism Up 30% Since Bitcoin Adoption

El Salvador’s president and bitcoin enthusiast Nayib Bukele announced plans to offer citizenship to foreign investors, a move that could attract more investment projects to El Salvador, though he did not mention bitcoin-related investments. “I am submitting 52 legal reforms to Congress to eliminate red tape, reduce bureaucracy, create tax incentives, citizenship in exchange for investment, new securities laws, stable contracts, etc.”

The move comes as the U.S. Senate Foreign Relations Committee called on the State Department to investigate the legal status of Bitcoin in El Salvador. Senator Bill Cassidy believes that El Salvador’s adoption of Bitcoin “opens the door to money laundering and undermines U.S. interests.”

El Salvador made history last September by becoming the first country in the world to adopt Bitcoin as legal tender. Despite warnings from most international organizations, including the World Bank and the International Monetary Fund, El Salvador achieved a 10.3% GDP growth in 2021, the highest in history, Bukele said.

In addition, El Salvador’s Minister of Tourism, Morena Valdez, said in an interview this week that tourism has actually grown by more than 30% since the adoption of Bitcoin as legal tender. Previously, most tourists came from neighboring Central American countries; but now, 60% of tourists come from the United States.

Notably, El Salvador will launch its much-anticipated $1 billion Bitcoin Volcano Bond in March. The funds raised from the bond will be used to build the world’s first “Bitcoin City.”

California Senator Introduces Bill to Accept Cryptocurrency as Payment for Government Services

U.S. Senator Sydney Kamlager of California has introduced a bill that would amend the state’s laws to “accept cryptocurrency as a form of payment for the provision of government services,” allowing state agencies to provide services to residents who need to pay by adding cryptocurrency to the list of acceptable payment methods.

Other states have also recently been pushing for cryptocurrency adoption. Last week, Colorado Governor Jared Polis said he expects the state to accept cryptocurrency for tax payments by summer 2022. Additionally, Tennessee House Representative Jason Powell introduced a bill earlier this month that would allow the state to invest idle funds in cryptocurrencies and NFTs.

Japan exchange group warns of imposter projects

Recently, some newly launched cryptocurrency projects have used the name/logo/URL of Japan Exchange Group (JPX) to lure investors, such as JPEX, jpex, and Japan Exchange. JPX officials issued a warning:

“Please note that the above companies and industries are not affiliated with Japan Exchange Group, Inc. (JPX) or any other company affiliated with the JPX group.”

It is reported that recently there have been a variety of cryptocurrency projects imitating popular brands such as Tesla, Jurassic Park, Meta, etc. trying to lure investors to buy. Investors should be cautious and strictly abide by the laws and regulations of the region where they are located and do not participate in any illegal financial activities.

Amber Group receives $200 million investment led by Singapore state-owned enterprise Temasek Holdings

Singapore-based crypto financial services provider Amber Group has raised $200 million in its Series B+ round of funding led by Singapore state-owned enterprise Temasek Holdings, with other participants including Sequoia China, Pantera Capital, Tiger Global Management, Tru Arrow Partners, and Coinbase Ventures.

Amber Group said it plans to use the new investment to “recruit key personnel to support our institutional business in Europe and the Americas” and expand the global reach of its crypto investment platform WhaleFin.

New York Stock Exchange parent becomes major shareholder in tZero

Intercontinental Exchange Group (ICE), the parent company of the New York Stock Exchange, announced a strategic investment in tZero, a private digital securities market and crypto asset liquidity platform. As part of the investment, ICE’s Chief Strategy Officer David Goone will join tZero as its new CEO.

tZero is the blockchain subsidiary of e-commerce retail giant Overstock, which mainly operates a blockchain-based alternative trading system (ATS) on which companies can list tokenized versions of their stocks. The company is fully regulated by the U.S. Securities and Exchange Commission (SEC). As a broker-dealer in the crypto market, the platform also provides trading channels for a variety of cryptocurrencies, including BTC, ETH, LTC, Doge, etc.

“David’s leadership and mastery of trading, data and clearing technologies will be a great asset as tZero embarks on its next chapter and leads the growth and adoption of next-generation market infrastructure,” said Jeff Sprecher, founder, chairman and CEO of ICE.

Brazil takes first step towards regulating Bitcoin

Brazil’s Senate Committee on Economic Affairs (CAE) has approved a bill recognizing and regulating the Bitcoin and cryptocurrency market in the country, according to an official announcement.

The CAE unanimously approved PL 3825/19 – a bill drafted in 2019 by Senator Flavio Arns, in conjunction with the Central Bank, the Securities and Exchange Commission (CVM) and the Federal Tax Service (RFB). The bill seeks to establish basic rules for the everyday use of Bitcoin in financial transactions and as an investment asset.

The bill also provides tax incentives for bitcoin mining operations. Business entities that purchase hardware and software used to process, mine or save cryptocurrencies such as bitcoin will be exempt from import duties, as well as some transaction taxes that affect sales. However, only businesses that exclusively use renewable energy and are carbon neutral will be eligible for the tax incentives.

The bill aims to regulate the establishment and operation of Bitcoin service providers in Brazil, defining such entities as those that provide cryptocurrency trading, transfer, custody, management or sales on behalf of third parties. Cryptocurrency service providers can only operate in the country after receiving authorization from the government.

Senator Iraja Abreu, the bill’s rapporteur, said he expects the central bank to be responsible for regulating businesses that provide cryptocurrency-related services in Brazil, though the government still has the power to designate which agency has that responsibility.

The bill is expected to be processed at the next Senate meeting alongside a second Bitcoin-related bill. The proposal will then be voted on in the House of Representatives, after which Brazilian President Jair Bolsonaro will consider whether to sign it into law.

Mexican Senator Aims to Introduce Bitcoin Legal Tender Bill

Indira Kempis, a senator from the Mexican state of Nuevo León, wants to make her country the second in the world to adopt Bitcoin as legal tender and intends to present a proposal during a parliamentary session.

In an interview with El Salvador newspaper, the lawmaker praised Bitcoin's attributes as an inclusive currency that benefits the unbanked. She has been consulting crypto experts and wants to use her political influence to promote Bitcoin's availability throughout Mexico. "We need Bitcoin to become legal tender in Mexico because if it is not, if we don't make a decision like in El Salvador, it will be difficult to concretize further actions,"

However, getting Mexico to accept cryptocurrencies has not been smooth sailing. Last October, Mexican President Andres Manuel Lopez Obrador made it clear at a press conference that the government was not interested in adopting Bitcoin as a means of payment. Instead, he focused on strengthening the country’s financial system by combating tax evasion.

Some EU member states plan to have AML regulators oversee crypto firms by 2024

Germany, the Netherlands, Spain, Austria, Italy and Luxembourg are planning to bring cryptocurrency firms under the purview of an anti-money laundering (AML)-focused regulatory organization that would begin operating in 2024 and become “fully operational” by 2026.

An unnamed EU diplomat reportedly said that the agenda of including crypto companies in the anti-money laundering regulator is to provide clearer "standards" for cryptocurrency transactions around the EU's financial regulations. However, the proposed framework has not yet been discussed by EU member states. If the plan is passed, the anti-money laundering regulator will become one of the first regulators with the power to oversee money laundering activities in most of Europe.

Luis Garicano, a member of the European Parliament, said: “Given that the crypto market is one of the areas more prone to money laundering, the scope of the new EU authority does need to include crypto assets.”

China's Supreme People's Court includes virtual currency in its judicial interpretation of illegal fundraising

On February 24, the Supreme People's Court issued the "Decision on Amending the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Criminal Cases of Illegal Fund-raising", which amended Article 2, Item 8 to: "Illegally absorbing funds through online lending, investment in shares, virtual currency transactions, etc."

The relevant person in charge of the Third Criminal Tribunal of the Supreme People's Court explained: The revised "Interpretation" is based on the original provisions and combines new judicial practices and new forms of crime. It adds new types of illegal fund-raising behaviors such as online lending, virtual currency transactions, and financial leasing to the eighth and ninth items of this article respectively. At the same time, it adds an item "illegally absorbing funds by providing 'elderly care services', investing in 'elderly care projects', and selling 'elderly products'" as the tenth item, providing a basis for punishing illegal fund-raising crimes such as P2P, virtual currency, and elderly care in accordance with the law.

Do daily trading activities involve illegal fund-raising?

According to the interpretation of lawyer Liu Yang: In essence, the virtual currency transactions we usually understand refer to currency transactions, legal currency transactions, contract transactions, etc. These virtual currency transactions do not meet the constituent elements of illegal fund-raising crimes, so the judicial interpretation does not apply. Of course, not applying the judicial interpretation does not mean that it does not meet the constituent elements of other crimes. For example, OTC behavior is very likely to constitute the crime of aiding and abetting or concealing the proceeds of crime or the crime of profiting from the proceeds of crime.

The founder of the crypto exchange BitMEX admitted to violating the Bank Secrecy Act and accepted the penalty

After a lengthy legal process with the U.S. Department of Justice (DOJ), the founders of cryptocurrency exchange BitMEX, Arthur Hayes and Benjamin Delo, admitted to violating the Bank Secrecy Act. Crypto derivatives and futures exchange BitMEX “willfully failed to establish, implement, and maintain an anti-money laundering (AML) program” and agreed to pay a criminal fine of $10 million each.

BitMEX is a crypto trading platform based in Seychelles that offers crypto futures, derivatives, and margin trading with up to 100x margin. The exchange used to offer its services to US citizens without any Know Your Customer (KYC) or AML verification procedures.

The DOJ’s announcement on the case stated that BitMEX’s lack of regulatory compliance essentially made it a “money laundering platform.”

Bitcoin trading volume in Ukraine surges 200%

As the armed conflict with Russia began, the impact on the fiat currencies of both countries gradually became apparent.

While Russia’s ruble has suffered significantly more, Ukraine’s hryvnia has also fallen to a record low. Just this month, Ukrainian lawmakers approved a bill to legalize cryptocurrencies, and unsurprisingly, Ukrainians’ interest in Bitcoin has rapidly increased.

According to data from Kuna, a Ukrainian cryptocurrency exchange, its trading volume on February 21 was less than $1 million, but on the 24th it was close to $4.1 million. While Bitcoin was showing a price of $37,800 on crypto data site Coingecko, it was over $40,000 on Kuna.

The current “Bitcoin mania” in Kuna has subsided and the exchange rate remains stable.

The “encrypted voice” in the Russia-Ukraine conflict

The armed conflict between Russia and Ukraine has also caused a strong reaction in the crypto community.

Sam Bankman-Fried, CEO of crypto exchange FTX, decided to step up support for Ukrainian traders. SBF announced on his personal social media that every Ukrainian account registered on the FTX platform is eligible for $25 in free funds. "We just gave every Ukrainian on FTX $25 to do what you have to do."

Ethereum co-founder Vitalik Buterin, a Russian citizen, expressed strong opposition to Russia’s intrusion and said the country should not give up on the idea of ​​peaceful resolution of conflicts.

According to a report from blockchain analytics firm Elliptic, people have donated more than $400,000 worth of Bitcoin to Come Back Alive, a Ukrainian NGO that provides military equipment as well as medical and food supplies to local troops. In addition, a mysterious contributor recently donated 80 Bitcoins, worth about $3 million, to a charity supporting the Ukrainian military.

Pussy Riot, a Russian rock band known for protesting the government, has partnered with Trippy Labs and PleasrDAO to create the Ukraine DAO. The Ukraine DAO will sell NFTs to raise funds and donate them to the NGO Proliska and the Return Alive Foundation to help Ukrainians affected by the war.