a16z: A Roundup of the Latest Major Crypto Regulatory Events Worldwide

2024.02.15

a16z: A Roundup of the Latest Major Crypto Regulatory Events Worldwide

"Stablecoin legislation could happen in the first half of 2024."

2024.02.15 - 02:29:29

Navigating Web3 tides with focused insights

"Stablecoin legislation could happen in the first half of 2024."

Written by: a16z crypto Regulatory Team

Translated by: DAOSquare

Editor’s note: The a16z Crypto Regulatory Update is a series highlighting the latest regulatory and policy developments relevant to web3 and crypto builders, tracked and curated by the a16z crypto regulatory team. These summaries are based on recent news, updates, new guidelines, ongoing legislation, and frameworks issued by regulators/entities, industry coalitions, professional associations, banks, governments, and other bodies as they impact the global crypto industry (or applications). We occasionally also include selected additional resources in our updates, such as speeches, posts, or commentary from ourselves or others.

Quick Preview

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) announced that businesses do not need to report digital asset income in the same way as cash receipts until relevant regulations are issued and take effect.
The U.S. Securities and Exchange Commission (SEC) expanded the definition of “dealer” to include market participants who regularly provide significant liquidity in trading and market activities—including those involving digital asset securities. The new definition may cover certain crypto firms, requiring them to register with the SEC, become members of a self-regulatory organization, and comply with federal securities laws.
The U.S. Energy Information Administration (EIA) has received emergency clearance to conduct a temporary survey on electricity consumption data from certain identified cryptocurrency mining companies operating in the United States. The EIA plans to begin collecting monthly data from February through July 2024.

U.S. Commodity Futures Trading Commission (CFTC)

The CFTC charged the digital asset platform Debiex with fraudulently misappropriating $2.3 million in customer funds for commodity trading in digital assets, allegedly using a popular romance scam (“pig butchering”) strategy.
The CFTC’s Office of Customer Education and Outreach issued a customer advisory warning the public about artificial intelligence scams, some of which involve fraudulent crypto asset arbitrage algorithms.
The CFTC’s Office of Customer Education and Outreach released another customer advisory alerting users of dating apps, messaging services, and social media platforms to scams demanding financial support or offering investment advice—sometimes tied to crypto investments.
CFTC Chair Rostin Behnam stated that “lack of legislation has not dampened enthusiasm for digital assets,” while emphasizing that federal legislative action on spot-market digital assets “has never been more important.”

U.S. Congress

Senator Bill Hagerty (R-TN) and Senator Cynthia Lummis (R-WY) introduced the Combating Illicit Financial Activities Through Partnerships Act of 2024, which would establish a program enabling certain government agencies and designated private-sector entities to share information about potential illicit financial violations, threats, and emerging risks.
Senator Cynthia Lummis (R-WY), Representative Wiley Nickel (D-NC), and Representative Mike Flood (R-NE) introduced a Congressional Review Act resolution to overturn SEC Staff Accounting Bulletin (SAB) 121, which requires firms providing custodial services for consumer-held crypto assets to record those assets on their balance sheets.
Representative Patrick McHenry (R-NC), Chairman of the House Financial Services Committee, and others sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra urging him to reopen and extend the recently closed public comment period on CFPB’s proposal to define “large participants” in the general-purpose digital consumer payment application market.
Representative Patrick McHenry (R-NC) and others wrote to Treasury Secretary Janet Yellen, requesting clarification—as Chair of the Financial Stability Oversight Council (FSOC)—on FSOC’s call to address existing regulatory gaps in non-security digital asset spot markets.
Senators JD Vance (R-OH), Thom Tillis (R-NC), Bill Hagerty (R-TN), Cynthia Lummis (R-WY), and Katie Boyd Britt (R-AL) sent a letter to SEC Chair Gary Gensler expressing concern over developments in the SEC’s enforcement proceedings against Digital Licensing Inc. (also known as “DEBT Box”).
Senator Cynthia Lummis (R-WY) told CoinDesk TV she remains optimistic about stablecoin legislation passing this year, possibly even in the first half.

U.S. Department of Justice (DOJ)

The DOJ unsealed an indictment charging a Belarusian and Cypriot national in connection with BTC-e, a now-defunct cryptocurrency exchange that facilitated transactions for global cybercriminals.
The DOJ charged three individuals in connection with a SIM-swapping scam that stole over $400 million. Media reports suggest FTX may have been a victim shortly after declaring bankruptcy.
The DOJ recently charged two suspects and secured a guilty plea from a third in connection with HyperFund, a global crypto Ponzi scheme involving up to $1.89 billion. The SEC filed related civil charges against two of the individuals.
A federal jury found the former head of financial engineering at Hydrogen Technology guilty of manipulating securities prices and scheming to defraud investors when purchasing the company’s cryptocurrency HYDRO.
A commodity trading advisor was sentenced to two years in prison and home confinement after admitting to cherry-picking profits from client accounts in two commodity pools he established for trading crypto and forex futures.
An Indian national pleaded guilty to selling controlled substances on darknet markets and agreed to forfeit $150 million in cryptocurrency.
A federal grand jury indicted a Texas man for filing false tax returns that underreported or failed to report $4 million in Bitcoin sales, resulting in substantial tax losses.

U.S. Department of the Treasury

The U.S. Department of the Treasury and IRS announced that businesses are not required to report digital asset income like cash receipts until applicable regulations are issued and become effective.
The Treasury released the 2024 National Money Laundering, Terrorist Financing, and Proliferation Financing Risk Assessment, highlighting risks related to illicit fundraising and virtual assets.
Since the October 7 terrorist attacks on Israel, the Treasury’s Office of Foreign Assets Control (OFAC) has imposed its fifth round of sanctions on Hamas. The sanctions target a network of Gaza-based financial exchanges linked to Hamas that played key roles in fund transfers, including via cryptocurrency.
Treasury Secretary Janet Yellen testified before Congress that risks related to digital assets, including runs on crypto platforms and stablecoins, are one of five key focus areas for the Financial Stability Oversight Council (FSOC). She also urged Congress to pass legislation regulating stablecoins and non-security crypto spot markets.
Graham Steele, Assistant Secretary for Financial Institutions at the Treasury, called on policymakers to “adopt higher standards” to support “credible innovation” in crypto assets.
The IRS reminded taxpayers that they must answer the digital asset question and report all digital asset-related income when filing their 2023 federal income tax returns, just as they did on their 2022 returns.

U.S. Energy Information Administration (EIA)

As noted in the Quick Preview, the EIA received emergency clearance to temporarily survey electricity consumption data from identified cryptocurrency mining companies operating in the U.S. The EIA plans to collect data monthly from February through July 2024.

Federal Deposit Insurance Corporation (FDIC)

The FDIC sent letters to five entities—including at least one so-called cryptocurrency exchange—demanding they cease making false and misleading claims regarding FDIC deposit insurance.

U.S. Securities and Exchange Commission (SEC)

As noted in the Quick Preview, the SEC expanded the definition of “dealer” to include market participants who frequently provide significant liquidity in trading and market activities, including those involving digital asset securities. The revised definition could apply to certain crypto firms, obligating them to register with the SEC, join a self-regulatory organization, and comply with federal securities laws.
The SEC delayed its decision deadlines for Ethereum ETF proposals submitted by Fidelity, BlackRock, Grayscale, and the joint Invesco-Galaxy Digital filing.
TradeStation Crypto, Inc. agreed to pay a $1.5 million penalty to settle SEC allegations that it failed to register the offer and sale of a crypto lending product that allowed U.S. investors to deposit or purchase crypto assets in exchange for interest payments from the company.
The founder of American Bitcoin Academy settled with the SEC, which had accused him of deceiving students into buying online crypto trading courses through a series of lies about a purported crypto hedge fund investment opportunity, earning over $1 million in proceeds.
The SEC asked a federal court to dismiss its lawsuit against the crypto project Digital Licensing Inc. (also known as “DEBT Box”), stating its officials “have taken and are taking broader corrective measures,” including allegedly making false statements to the court.
Genesis Global Capital agreed to pay an $21 million penalty to settle with the SEC over its now-defunct Gemini Earn Lending Program, contingent on full repayment to customers during bankruptcy proceedings. The settlement is subject to approval by the bankruptcy court.
FINRA released an update on its targeted examination initiative launched in November 2022 to review member firms’ communications with retail customers about crypto assets. FINRA identified potentially material violations in approximately 70% of the communications reviewed.

International

European Union

The European Council and Parliament reached a provisional agreement on a new anti-money laundering package, requiring crypto asset service providers to conduct customer due diligence for transactions of €1,000 or more and introducing measures to mitigate risks associated with self-hosted wallet transactions.
The European Banking Authority expanded its guidance on money laundering and terrorist financing risk factors to include crypto asset service providers.

Germany

German authorities announced the seizure of 50,000 bitcoins—worth $2.17 billion—in what they described as the largest-ever cryptocurrency seizure.

Luxembourg

Crypto liquidity provider B2C2 announced it has obtained regulatory approval to operate in Luxembourg.

South Korea

South Korean authorities arrested three executives of the crypto yield platform Haru Invest, suspected of stealing approximately $828 million worth of cryptocurrency.

Thailand

Thailand’s Securities and Exchange Commission ordered cryptocurrency exchange Zipmex to suspend its digital asset trading and brokerage services for 15 days, during which it can “rectify financial and operational deficiencies.” The commission also brought charges against Zipmex Thailand’s former CEO.

United Arab Emirates

OKX’s Dubai subsidiary announced it has obtained a Virtual Asset Service Provider (VASP) license from the Dubai Virtual Assets Regulatory Authority.

United Kingdom

The Bank of England and HM Treasury published responses to their consultation paper on a digital pound. While no decision has been made to issue a digital pound, both institutions remain committed to ongoing research and design work, with privacy emphasized as a “core design feature.”

United Nations

A United Nations report discussed the use of cryptocurrency in casinos, money laundering, underground banking, and transnational organized crime across East and Southeast Asia.

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a16z: A Roundup of the Latest Major Crypto Regulatory Events Worldwide

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