Editor’s note: The a16z crypto Regulatory Update is a series that highlights the latest crypto regulation and policy happenings relevant to builders in web3 and crypto, as tracked and curated by the a16z crypto regulatory team. The roundups are based on recent news, the latest updates, new guidance, ongoing legislation, and frameworks released by regulatory agencies/bodies, industry consortia and professional associations, banks, governments, and other entities as they impact the crypto industry (or applications) around the world. We also occasionally include select other resources such as talks, posts, or other commentary – from us or from others – with the updates.
- The Internal Revenue Service (IRS) released guidance on how the U.S. federal income tax will treat staking rewards, which states that taxpayers must include the fair market value of rewards in their calculation of gross income.
- The Federal Reserve announced a new program to oversee crypto activities conducted by banks, and provided additional information on the process for state banks (supervised by the Federal Reserve) to follow before engaging in certain dollar token or stablecoin activity.
- The Securities and Exchange Commission (SEC) announced that crypto asset trading platform Bittrex Inc. and its co-founder and former CEO agreed to pay $24 million to settle charges that they operated an unregistered national securities exchange, broker, and clearing agency.
🌽 Commodity Futures Trading Commission
- Coinbase Financial Markets, Inc. secured regulatory approval from the National Futures Association – a self-regulatory organization designated by the Commodity Futures Trading Commission (CFTC) – to operate a Futures Commission Merchant and offer eligible U.S. customers access to crypto futures.
- The CFTC charged four individuals and their unincorporated entity, Fundsz, alleging fraudulent solicitation from clients to trade in cryptocurrencies and precious metals.
- Chair Rostin Behnam appeared on the “Inside the ICE House” podcast to discuss a regulatory framework for crypto.
- U.S. Senators Elizabeth Warren (D-Mass.), Robert P. Casey, Jr. (D-Pa.), Richard Blumenthal (D-Conn.), and Bernie Sanders (I-Vt.) sent a letter to the Department of the Treasury and the IRS, urging them to swiftly “implement strong tax reporting rules for cryptocurrency brokers.”
- U.S. House Representative Maxine Waters (D-Cal.) released a statement expressing concern about PayPal’s launch of a new dollar-backed stablecoin, PYUSD, while there is still “no federal framework for regulation, oversight, and enforcement” of such assets.
- U.S. House Representative and Chair of the House Financial Services Committee (HFSC) Patrick McHenry (R-N.C.) and other Republicans on the HFSC sent letters to the Financial Industry Regulatory Authority (FINRA) and the SEC requesting information about the approval of Prometheum as the first and only special purpose broker-dealer for digital assets.
⚖️ Department of Justice
- A married couple from New York City pleaded guilty to money laundering conspiracies in connection with the the hack and theft of approximately 120,000 bitcoins from global cryptocurrency exchange Bitfinex.
💵 Department of the Treasury
- As mentioned in the “tl;dr”, the IRS released guidance on U.S. federal income tax treatment of staking rewards, which provides that taxpayers must include the fair market value of rewards in their calculation of gross income.
- A federal court in Texas ruled that the Department of the Treasury’s Office of Foreign Assets Control did not exceed its authority when it sanctioned Tornado Cash last year. A separate but similar case is still pending in a federal court in Florida.
🔐 Federal Deposit Insurance Corporation
- The Federal Deposit Insurance Corporation (FDIC) released its 2023 “Risk Review” report. For the first time, the report dedicated a full section to crypto, including an overview of the FDIC’s approach to understanding and evaluating crypto markets and activities.
- The FDIC sent a cease-and-desist letter to defunct crypto firm Unbanked, Inc. demanding that it take immediate corrective action with respect to its false and misleading statements relating to deposit insurance.
💰 Federal Reserve
- As mentioned in the “tl;dr”, the Federal Reserve announced a new program to oversee crypto activities conducted by banks and provided additional information on the process for state banks (supervised by the Federal Reserve) to follow before engaging in certain dollar token or stablecoin activity.
📈 Securities and Exchange Commission
- Also noted above, the SEC announced that crypto asset trading platform Bittrex Inc. and its co-founder and former CEO agreed to pay $24 million to settle charges that they operated an unregistered national securities exchange, broker, and clearing agency.
- The SEC charged Richard Heart (aka Richard Schueler) and three unincorporated entities that he controls – Hex, PulseChain, and PulseX – with conducting unregistered offerings of crypto asset securities that raised more than $1 billion in crypto assets from investors.
- The SEC announced that it obtained emergency relief against Digital Licensing Inc. (aka “DEBT Box”) and other individuals in connection with a fraudulent scheme to sell crypto asset securities to hundreds of U.S. investors that raised approximately $50 million and unspecified amounts of bitcoin and ether.
- California’s Department of Financial Protection and Innovation announced desist and refrain orders against three different entities – CloudFi, CoinMarketBull, and Vortic United – for allegedly offering and selling unqualified securities and making material misrepresentations and omissions to investors related to crypto asset investments.
- Australia’s Securities and Investments Commission sued social investing platform eToro’s Australian entity for alleged breaches of “design and distribution obligations and of eToro’s licence obligations to act efficiently, honestly and fairly.”
🇸🇻 El Salvador
- Binance received a Bitcoin Services Provider license and a Digital Asset Services Provider license from El Salvadoran regulators.
- Crypto custodian Hex Trust registered in France to offer digital asset custody, buying, selling, and trading.
- The Autorité des Marchés Financiers announced amendments to local crypto regulations in anticipation of the European Union’s implementation of the Markets in Crypto-Assets (MiCA) regime.
🇭🇰 Hong Kong
- The Hong Kong Securities and Futures Commission warned virtual asset service providers of the potential legal and regulatory consequences of “improper practices” and reminded investors to be “wary” of the risks of trading virtual assets on unregulated exchanges.
- Kenya’s Ministry of the Interior announced that it has suspended the operations of Worldcoin.
- Crypto.com announced that it has been approved for registration with the central bank of the Netherlands, De Nederlandsche Bank, as a provider of crypto services.
- Nigeria’s Securities and Exchange Commission announced that Binance’s activities are illegal in Nigeria.
- The Monetary Authority of Singapore (MAS) announced a commitment of up to S$150 million over three years under the Financial Sector Technology and Innovation Scheme, which includes support for web3 technologies.
- The MAS released a regulatory framework for stablecoins that includes, among other things, reserve requirements and disclosure requirements.
🇦🇪 United Arab Emirates
- Binance announced that it has secured a license in Dubai to provide exchange and broker-dealer services for institutional clients and “qualified retail investors.”
- Laser Digital, the digital asset subsidiary of global financial services group Nomura, announced that it completed the final stage of Dubai’s Virtual Asset Regulatory Authority (VARA) licensing process.
- VARA fined OPNX, a bankruptcy claims exchange set up by the founders of collapsed hedge fund Three Arrows Capital, nearly $2.8 million.
🇬🇧 United Kingdom
- The U.K.’s Financial Conduct Authority (FCA) published new guidance that will require “cryptoasset businesses” to comply with the “Travel Rule,” a rule that obligates certain businesses to collect and share customer information when making certain transfers of funds.
- The FCA sent a request for information to major banks, seeking data on the number of customers (both personal and business) who have experienced account denials, suspensions, or terminations in connection with digital asset business.
- The Bank of England published the results of a consultation on stablecoins.
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