Crypto news & regulatory update: April 7, 2023 – April 28, 2023

Editor’s note: The a16z crypto Regulatory Update is a series that highlights the latest regulatory 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.

 

🧠 tl;dr

1. The SEC charged Bittrex and its co-founder and former CEO William Shihara with operating an unregistered national securities exchange, broker, and clearing agency, while also alleging that the following tokens are securities: OMG, DASH, ALGO, TKN, NGC, and IHT.
2. SEC Chair Gary Gensler testified before the U.S. House of Representatives Committee on Financial Services.
3. The European Parliament passed the Markets in Crypto Assets (MiCA) regulation, making the European Union the first major market to regulate crypto asset transfers.

🏜️ Arizona

• Arizona Governor Katie Hobbs vetoed legislation that would have prevented municipalities from taxing residential cryptocurrency mining operations.

🏞️ Arkansas

• The Arkansas House of Representatives and Senate approved a bill to regulate bitcoin mining in Arkansas. The legislation will go into effect if the governor signs it.

🐻 California

• The California Department of Financial Protection and Innovation issued desist and refrain orders against five entities that solicited funds from investors by falsely claiming to offer high yield investment programs that use artificial intelligence to trade crypto assets.

🌽 Commodity Futures Trading Commission

• The CFTC filed a civil enforcement action against a New York resident, alleging that he fraudulently solicited retail investments in a digital asset trading fund and misappropriated at least $1 million in assets. The Department of Justice filed a parallel criminal action.
• The CFTC charged 14 entities, including crypto companies, for fraudulently claiming to be CFTC-registered futures commission merchants and retail foreign exchange dealers.

🦅 Congress

• SEC Chair Gary Gensler testified before the U.S. House of Representatives Committee on Financial Services. He faced questions about ether’s status as a security or commodity, the SEC’s fast-paced rulemaking agenda, and many other issues.
• The U.S. House of Representatives Committee on Financial Services published a draft stablecoin bill.
• Republican House Representatives sent a letter to SEC Chair Gary Gensler, calling his push to have crypto firms “come in and register” a “willful misrepresentation of the SEC’s non-existent registration process” and blaming the SEC for the lack of the crypto registrants.
• Senator Elizabeth Warren (D-Mass.) and House Representative Alexandria Ocasio-Cortez (D-N.Y.) sent letters to BlockFi, Circle, and twelve non-crypto firms, asking about their companies’ decisions to “bank with and maintain large, uninsured deposits at Silicon Valley Bank.”
• Discussing Operation Choke Point 2.0, House Representative Byron Donalds (R-Fla.) said that “nothing is a coincidence” with government agencies, and that agencies are “finding various ways to squeeze an outcome that they want.”
• House Representatives Patrick McHenry (R-N.C.) and Bill Huizenga (R-Mich.) wrote to SEC Chair Gary Gensler reiterating their request for documents relating to the SEC’s charges against SBF and noting the SEC’s failure to comply with previous requests.
• House Representative Patrick McHenry (R-N.C.) said that Europe is “ahead of the game” in terms of web3 regulation in light of the passage of the Markets in Crypto Assets Regulation, and the United States is “behind.”
• House Representative Warren Davidson (R-Ohio) released plans to introduce legislation that would remove SEC Chair Gary Gensler and replace his role with an Executive Director that reports to a board.

⚖️ Department of Justice

• An individual involved in unlawfully obtaining approximately 50,000 bitcoins from the Silk Road dark web internet marketplace was sentenced to one year and one day in prison for committing wire fraud.
• The DOJ charged two U.S. citizens and a South African national with conspiring to manipulate the market for HYDRO, a crypto asset issued by the Hydrogen Technology Corporation.
• An individual who led a scheme to defraud banks and a cryptocurrency exchange of more than $4 million pled guilty to one count of conspiracy to commit wire fraud.

💵 Department of the Treasury

• The Internal Revenue Service is sending four agents who specialize in investigating cybercrime to Australia, Singapore, Columbia, and Germany starting this summer as part of a pilot program “to help combat the use of cryptocurrency, decentralized finance and mixing services in international financial and tax crimes.”
• The Office of Foreign Assets Control sanctioned three individuals for providing support to North Korea through illicit financing and malicious cyber activity. Two of the sanctioned individuals assisted North Korea’s Lazarus Group in converting stolen crypto into fiat currency. The Department of Justice charged one of the sanctioned individuals as well.

🏦 Federal Reserve

• Federal Reserve Board Governor Michelle W. Bowman said that there could be “some promise for wholesale CBDCs” (central bank digital currencies), but that it would be “difficult to imagine a world” where the benefits of a direct access CBDC would outweigh the unintended consequences.
• Federal Reserve Board Governor Christopher J. Waller said that there is “considerable promise” associated with tokenization and the use of smart contracts.

🏔️ Montana

• Montana’s House of Representatives passed legislation that protects cryptocurrency mining operations from certain actions, such as prohibitions on at-home mining and discriminatory utility rates for miners. The legislation will go into effect if the governor signs it.

🗽 New York

• The New York Department of Financial Services adopted a final regulation establishing how companies holding a Bitlicense will be assessed for costs of their supervision and examination.

📈 Securities and Exchange Commission

• The SEC charged Bittrex and its co-founder and former CEO William Shihara with operating an unregistered national securities exchange, broker, and clearing agency, while also alleging that the following tokens are securities: OMG, DASH, ALGO, TKN, NGC, and IHT.
• Chair Gary Gensler released an investor-education video relating to digital assets.
• The SEC listed new job postings for its crypto enforcement unit in New York, San Francisco, and Washington D.C.

🌍 International

🇦🇷 Argentina

• Argentina’s National Securities Commission authorized the launch of a bitcoin index-based futures contract.

🇧🇲 Bermuda

• Coinbase received a regulatory license to operate in Bermuda.

🇸🇻 El Salvador

• Bitfinex announced that it has received El Salvador’s first license for digital asset service providers.

🇪🇺 European Union

• The European Parliament passed the Markets in Crypto Assets regulation, making the European Union the first major market to regulate crypto asset transfers.
• European Central Bank Board member Fabio Panetta said that a digital euro will aim to “complement” cash and mimic its best features, but that it may not afford the same level of privacy.
• European Banking Authority Chairman José Manuel Campa wrote that “the EBA will be paying special attention to diversification” of stablecoin reserves.

🇫🇷 France

• A French Central Bank report acknowledged that regulations must take into account the specific features of decentralized finance (DeFi) and not “replicate the systems that currently govern traditional finance.”
• The French Ministry of Economics and Finance published a public consultation regarding metaverse strategies, noting that its purpose is to “propose an alternative to the virtual online worlds today put forward by international giants.”

🇭🇰 Hong Kong

• Hong Kong’s Financial Secretary Paul Chan said that now is the “right time” to push web3 adoption forward, despite volatility in crypto markets.
• A Hong Kong court declared for the first time that cryptocurrencies are property and capable of being held in trust.

🇮🇳 India

• Indian Finance Minister Nirmala Sitharaman said that effective regulation of crypto assets would require every nation’s consent and global consensus.

💶 International Monetary Fund

• An IMF report said that the “collapse of multiple entities in the crypto asset ecosystem has again made the call more urgent for comprehensive and consistent regulation and adequate supervision.”

🇮🇪 Ireland

• Kraken received regulatory approval from the Central Bank of Ireland to operate as a virtual asset service provider in the country.

🇮🇱 Israel

• The Bank of Israel published a report outlining potential scenarios that would influence its decision on whether to issue a digital shekel. One such scenario involves a significant increase in stablecoin usage.

🇯🇵 Japan

• Japan’s ruling Liberal Democratic Party’s web3 project team published a white paper that sets forth recommendations for boosting the country’s crypto industry.

🇲🇪 Montenegro

• Ripple announced an agreement with the Central Bank of Montenegro to develop a pilot program for a CBDC.
• Montenegrin prosecutors submitted an indictment proposal against Kwon Do-Hyung (“Do Kwon”), co-founder of Terraform Labs, the company behind cryptocurrencies TerraUSD and Luna, for forging personal documents.

🇳🇱 Netherlands

• A Dutch court released, with electronic monitoring conditions, Alexey Pertsev, a Russian developer who worked on code for the Tornado Cash protocol, pending trial.

🇰🇷 South Korea

• South Korean prosecutors indicted Terra co-founder Daniel Shin and nine others in connection with the collapse of the TerraUSD and Luna cryptocurrencies.

🇦🇪 United Arab Emirates

• The UAE’s Securities and Commodities Authority announced that it will start accepting licensing applications from companies that wish to provide virtual asset services in the country.

🇬🇧 United Kingdom

• Bank of England Governor Andrew Bailey called for stablecoins to be regulated like commercial bank money, and he said that the U.K. will likely need a CBDC to “anchor the value of all forms of money, including new digital ones.”
• Bank of England Deputy Governor Jon Cunliffe said that the potential tokenization of money has “major implications” for the Bank of England, and that it should consider whether to put limits on stablecoins used for payments, among other things.
• The Bank of England successfully tested the use of distributed ledger technology to run interbank transactions through the Bank of International Settlements.
• Financial Conduct Authority (FCA) Executive Director Sarah Pritchard said that the FCA wants to work with crypto firms to shape regulation.

🇿🇲 Zambia

• Zambia’s Science and Technology Minister Felix Mutati told Reuters that Zambia plans on finishing tests that simulate real-world cryptocurrency usage by June.

🇿🇼 Zimbabwe

• Reserve Bank of Zimbabwe Governor Dr. John Magudya told the Sunday Mail that Zimbabwe plans to introduce gold-backed digital tokens.

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