Weekly Wrap Up

(25 Nov - 01 Dec 2023) BlockReg Advisors team presents a weekly wrap-up of the key news concerning digital assets in the prominent business press and governmental information services.
Category Weekly Wrap up

Regulatory News

European Union (EU)

EBA initiates consultation on guidelines to prevent money laundering and terrorist financing in crypto-asset transfers - The European Banking Authority (EBA) has opened a public consultation on new guidelines addressing the prevention of money laundering and terrorist financing in funds and certain crypto-assets transfers. The proposed guidelines, commonly referred to as 'travel rule' guidelines, outline steps for Payment Service Providers (PSPs), Intermediary PSPs (IPSPs), crypto-asset service providers (CASPs), and Intermediary CASPs (ICASPs) to detect missing or incomplete information during transfers. The objective is to establish a common understanding and ensure consistent application of EU law for a more robust anti-money laundering and countering the financing of terrorism (AML/CFT) regime. The consultation period extends until February 26, 2024, and the EBA will conduct a virtual public hearing on January 17, 2024. These guidelines are in response to the EU's legislative package issued in July 2021, aiming to align with the Financial Action Task Force (FATF) standards.

Former ECB leader warns of dangers without a Digital Euro - Former European Central Bank (ECB) leader, Fabio Panetta, emphasizes the risks of not issuing a retail central bank digital currency (CBDC). In a persuasive speech, he highlights the growing dependence on non-EU card networks like Visa and Mastercard and points out the challenges of competing with their dominance. Panetta also raises concerns about the increasing influence of BigTech in finance, citing issues of dominance, privacy, and the potential launch of their own digital currencies. He warns that these developments could pose risks to the payment system, monetary sovereignty, and financial stability. Panetta's speech underscores the urgent need for a digital euro to address these challenges and maintain central bank influence in the evolving financial landscape.

Spain requires declaration of foreign crypto holdings by March 2024  - Spanish citizens must declare their foreign crypto holdings by March 31, 2024, according to new taxation laws. The Agencia Tributaria has introduced form 721 for this purpose, and the submission period runs from January 1 to the end of March 2024. Only individuals with crypto assets exceeding 50,000 euros must declare their foreign holdings. Those using self-custodied wallets need to report holdings through wealth tax form 714. 

United Kingdom (UK)

UK Tax Authority warns crypto holders to pay up or face consequences - His Majesty’s Revenue and Customs (HMRC) has issued a warning to crypto, NFT, and utility token holders, instructing them to declare and pay taxes on digital assets within a specified timeframe or face penalties and interest. The HMRC guidance outlines consequences for different scenarios, with penalties ranging from four to 20 years for unpaid taxes. Interest is charged daily until the payment is made. HMRC treats crypto like other financial assets, subjecting it to Capital Gains Tax (CGT), with rates ranging from 10% to 20%. Noncompliance may result in rejection of disclosure.

LATAM

Brazil approves tax on crypto income held abroad, sets 15% rate - On November 29, the Federal Senate of Brazil has approved new income tax rules that could require Brazilians to pay up to 15% tax on income derived from cryptocurrencies held on exchanges outside the country. The bill, expected to be approved by President Luiz Inácio Lula da Silva, imposes the tax on earnings exceeding 6,000 Brazilian reals ($1,200) on foreign exchanges, starting from January 1, 2024. Funds earned before this date will be taxed upon access, with a rate of 8%. The government aims to generate 20.3 billion Brazilian reals ($4 billion) from this tax in 2024, facing opposition from some senators.

MENA

Paxos granted approval for stablecoin issuance in Abu Dhabi - Paxos has secured in-principle approval from Abu Dhabi's regulator to issue US dollar-backed stablecoins and offer crypto-brokerage and custody services in the emirate. Paxos emphasizes its commitment to international growth through regulated frameworks, aiming to expand the use of its stablecoins upon full approval. The move aligns with Abu Dhabi's efforts to regulate cryptocurrency, with comprehensive regulations introduced on November 1.

Global News

Swiss National Bank and BIS trial anonymous CBDC, Project Tourbillon - The Swiss National Bank (SNB) and BIS Innovation Hub have successfully trialed Project Tourbillon, an anonymous retail central bank digital currency (CBDC). The solution, based on eCash and using quantum-proof encryption, ensures privacy for payers while complying with anti-money laundering measures through blind signatures. The trials explored security and anonymity trade-offs, with IBM as the technology partner. While the SNB is advanced in wholesale CBDC, retail CBDC issuance is not imminent.

Financial Stability Board underscores risks of multifunction crypto-asset intermediaries - Released on November 28, 2023, a report explores the financial stability risks associated with multifunction crypto-asset intermediaries (MCIs) following the 2022 market turmoil and FTX collapse. MCIs, comprising individual or affiliated firms, provide diverse crypto-asset services, often focused on trading platforms. Their vulnerabilities parallel traditional finance, including leverage and operational issues. The report highlights that specific combinations of MCI functions may amplify risks due to insufficient controls, transparency, and conflicts of interest. While evidence currently indicates a limited threat to financial stability and the real economy, the report stresses the need for effective global regulations and continuous monitoring of MCI developments to address potential risks.

BIS and World Bank collaborate to tokenize development funds through BIS Innovation Hub - The BIS Innovation Hub and Swiss National Bank are partnering with the World Bank to explore the tokenization of development funds for emerging economies, currently managed through paper-based promissory notes stored in vaults. The initiative, discussed by Cecilia Skingsley, Head of the BIS Innovation Hub, at a CBDC event, aims to digitize and automate the funding process, reducing reliance on a few knowledgeable individuals. While specific details are scarce due to the early stage of the project, the move represents a practical application of technology in an area still dependent on paper. 

Industry News

European Union (EU)

SIX Digital Exchange and DLT Finance collaborate for institutional crypto trading and custody - SIX Digital Exchange (SDX), a prominent crypto service provider, partners with DLT Finance, a BaFin-licensed trading firm, to enhance institutional crypto services. SDX will serve as custodian and staking provider, while DLT Finance's subsidiary, DLT Securities GmbH, acts as an embedded counterparty for brokerage and trading. This collaboration offers an end-to-end solution for institutional clients, meeting the regulatory, security, and reliability needs of institutional investors in the crypto market. The joint effort by SDX and DLT Finance streamlines regulated trading, brokerage, and custody services for banks and institutions. The partnership aims to contribute to a secure and regulated pan-European ecosystem for cryptocurrencies and digital securities.

United Kingdom (UK)

UK fashion retailer New Look adopts blockchain traceability for sustainability - UK fashion retailer New Look has teamed up with blockchain traceability startup TrusTrace for its 'Kind to Our Core' mission, focusing on responsible sourcing. The collaboration aims to reduce carbon emissions, with New Look targeting a 46% cut by 2031 and net zero by 2040. TrusTrace's platform will offer detailed supply chain insights, integrating with various systems and supporting sustainability goals. New Look has already reduced emissions from suppliers by 22%. TrusTrace, which counts major sports clients like Adidas, participated in a blockchain textile traceability project with H&M and Next in 2021.

MENA

Crypto investment platform Fasset receives VASP license for legal operations in Dubai - Digital asset investment platform Fasset has obtained a Virtual Asset Service Provider (VASP) license from Dubai regulators, allowing it to legally perform broker-dealer services in the emirate. The license permits Fasset to serve local institutional investors, qualified investors, and retail investors. The company, initially based in London, now operates in Indonesia and Dubai, offering services in multiple countries. 

Global News

Fireblocks unveils off exchange to mitigate exchange counterparty risks - On November 28, 2023, Fireblocks introduced "Off Exchange," a revolutionary solution enabling trading firms to execute trades on centralized exchanges directly from an on-chain MPC shared wallet. This innovation eliminates various exchange counterparty risks, such as hacks and fraud, safeguarding traders' assets. Fireblocks Off Exchange, initially supporting Deribit, presents a technology-first approach, leveraging MPC-based shared wallets to programmatically secure funds and settle trades in real-time. This blockchain-native solution enhances transparency, liquidity, and risk management for both traders and exchanges. Fireblocks' commitment to eliminating counterparty risk in the digital asset ecosystem is further exemplified through its innovative Off Exchange model, promising a transformative impact on the evolving landscape of digital financial markets.

Nomura’s Laser Digital integrates Talos Tech for crypto liquidity - Nomura's digital asset arm, Laser Digital, is set to become a liquidity provider and is integrating with Talos, a technology trading platform connecting cryptocurrency liquidity providers. Talos, backed by institutions like BNY Mellon, Citi, and Wells Fargo, facilitates institutional access to digital assets. Laser Digital, with divisions in venture funding, asset management, and digital assets trading, aims to simplify digital asset trading for institutions. Talos operates as a platform enabling institutions to connect with multiple liquidity providers without direct regulation. 

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