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As various U.S. agencies fill in, confirm nominations, and look at old topics with fresh eyes, there’s no doubt that change is in the air. When it comes to crypto, it’s still unclear where the winds will blow, but a few principles of engagement are coming into focus:
(1) Consultations are back in fashion
The industry’s unspoken outcry over the significantly shortened comment period for the Notice of Proposed Rulemaking (NPRM) on certain convertible virtual currency (CVC) and digital asset transactions, namely non-hosted wallets, has been heard loud and clear.
The Financial Crimes Enforcement Network (FinCEN) has announced a second extension of the NPRM’s comment period, which would require banks and money services businesses to report, record, and verify the identity of customers related to transactions above a certain threshold involving non-hosted wallets.
While the previous extension specified two separate comment dates for different parts of the NPRM, this latest Notice of Extension sets a single closing date for the comment period for both the cash transaction reporting entries and the second party components of the NPRM.
Reopening the comment period until March 2021 allows industry members to reconsider and further unpack the challenges and opportunities presented by the NPRM, and to comprehensively assess the technical and technological implications of the proposed rule.
At Elliptic, we welcome this change in approach and welcome the additional extension granted by FinCEN, primarily because it signals the agency’s intent to hold meaningful and thorough public-private sector consultations.
We look forward to working with industry partners, as well as FinCEN, to share our views and together arrive at a proportionate and reasonable resolution that supports regulatory goals and imposes minimal burden on crypto businesses.
(2) Rethink and review previous policies
The Office of the Comptroller of the Currency (OCC) has now put “fair access” banking rule.previously raised by former Acting Comptroller Brian Brooks waitpending further review by the new administration.
The rule was largely designed to address issues related to risk reduction and bank exclusion by prohibiting federally authorized banks from denial of financial services to clients based on political or ideological grounds.
Although the rule was finalized during President Donald Trump’s tenure, it was not published in the Federal Register and is now paused for review. It is still unclear whether future OKC leadership will withdraw other initiatives or reevaluate them.
Blake Paulson became Acting Comptroller of the Currency on January 14, 2021. President Biden intended choice for the head of the OCC is Michael Barr, a former adviser to the Treasury Department in both the Clinton and Obama administrations. Stay tuned!
🇰🇪 Kenya’s new finance law 2020 levies taxes on digital currencies
The Kenya Revenue Agency has now come into effect Finance Act 2020which also introduced a Digital Services Tax (DST) of 1.5% and is applicable to all digital markets and services, including crypto-asset exchanges. Although crypto-asset businesses can now be taxed in Kenya, they are yet to be legally recognized by regulators.
🇧🇭 Bahrain issues Sharia-compliant banking licenses for cryptocurrency exchanges
CoinMENA, a cryptocurrency exchange based in Bahrain has insured “Cryptocurrency Services Company License” by the Central Bank of Bahrain. CoinMENA has also been certified by Sharia Review Bureau as an official Sharia-compliant exchange. Although the exchange has not yet launched, CoinMENA is well positioned to achieve its ambitious rollout goals across the Middle East and North Africa and is set to list five cryptoassets: BTC, ETH, XRP, LTC and BCH.
🇨🇭Crypto assets are making global appearances on the World Economic Forum schedule in Davos
The World Economic Forum is an independent international organization based in Switzerland focused on public-private cooperation. Global leaders, influencers and business people meet each year in Davos to address key issues affecting global economies and societies. This year’s virtual Davos forum dedicated two sessions to crypto assets and blockchain technology. Resetting digital currencies These included Her Majesty Queen Maxima of the Netherlands and a renowned ambassador for financial inclusion, as well as speakers from the Bank of England, Western Union, the Government of Singapore and the National Institute of Financial Research, Beijing.
🇺🇸 Hawaii is opening the door to cryptoasset firms to join its regulatory sandbox
The state of Hawaii is accepting applications for its Digital Currency Innovation Lab (DCIL), a secure environment for license-free digital currency. By June 2022, cryptoasset businesses admitted to DCIL will be able to operate freely, without maintaining the required cash reserves equivalent to their digital currency, and will not need to obtain a money transfer license. The initial cohort, including 11 companies, had already worked in Hawaii as part of the program, and this second cohort open call builds on that success. Companies interested in entering the second round should apply via Hawaii Technology Development Corporation website until February 26, 2021, 5:00 PM (HST).
🇵🇭 Philippines regulator publishes new AML guidelines for crypto-asset businesses
Central Bank of the Philippines, Bangko Sentral ng Pilipinas (BSP). updated its anti-money laundering (AML) guidelines for crypto-asset businesses and is now drafting its 2017 regulation for virtual currency exchanges. The new frame aims to “promote financial innovation while remaining sensitive to the associated risks”. Key updates include an expanded licensing and registration regime for crypto companies operating as money service businesses, compliance with the BSP’s rules for financial service providers, including liquidity, operational risk, IT risk, internal controls, consumer protection and anti-money laundering controls .
Missed last week’s update? See here: Crypto regulatory affairs: The Biden administration’s cryptic start to crypto
