A fake letter from Senator Elizabeth Warren in the U.S. proposing a cryptocurrency wealth tax caused a great deal of confusion within the crypto community. As the U.S. Recently, Senators Gillibrand & Lummis introduced legislation aimed at payment stablecoins. Canada will adopt the Crypto-Asset Reporting Framework (CAF) by 2026 in order to increase transparency of crypto transactions. Hong Kong is exploring industry-led supervision to balance market growth with regulation.
Tax proposal by Senator Warren is a bogus tax.
A fake letter sent by Senator Elizabeth Warren, to Joe Biden on Facebook, misled many users. This letter proposed that cryptocurrency holders with more than $500k in holdings would be subject to a wealth tax of 1%. Even though Warren’s spelling was incorrect, the letter still appeared to be authentic and caused quite a stir with crypto enthusiasts. The letter urged President Biden to support crypto-related legislation spearheaded Senator Warren in order to tackle issues within the U.S. Financial System.
The tense relations between Senator Warren, the crypto-community, and others were not helped by the fact that some social media users pointed out the errors in the letter. Warren has a reputation for being very critical of digital assets and frequently links these to illegal activities such as terrorism funding. Crypto advocates, as well as some legislators, are opposed to her genuine legislative proposals like the Digital Asset Anti-Money Laundering Act.
This controversy occurs as Warren is preparing for her November reelection campaign against Republican candidate and crypto lawyer John Deaton. Deaton is also involved in cryptocurrency’s legal fights and was recently asked to be a friend in Coinbase’s case with the SEC.
Senators push for Stablecoin Regulation
The crypto industry is being regulated. Kirsten Gilibrand and Cynthia Lummis, two United States senators, recently presented new legislation to create a regulatory framework that will cover payment stablecoins. The move is a response to instability in algorithmic stablecoins like TerraUSD, which depreciated dramatically from the U.S. Dollar in 2022. This proposed legislation wants to explicitly ban “unbacked algorithmic stablecoins”, and requires that issuers keep one-to-1 reserves in order to support the stablecoins they have issued.
According to the bill, state-chartered institutions that have a restricted-purpose charter can issue unlimited stablecoins. The bill also seeks to maintain the dual banking system by allowing stablecoin issuesrs to be regulated both at federal and state levels.
The bill was criticized by advocacy groups such as Coin Center who deemed the algorithmic stabilitycoins ban to be potentially unconstitutional. The groups claim that such a restriction on code would violate the First Amendment. Coin Center compares this bill to the Clarity for Payment Stablecoins Act which, while still pending a floor vote by the U.S. House of Representatives, offers a two-year moratorium rather than a ban on algorithmic stabilcoins.
Arkansas takes steps to address crypto mining concerns
Arkansas also takes crypto regulation very seriously. Arkansas State House passed recently two bills which aim to introduce regulations for cryptocurrency mining. The bills have not become law yet, but they’ve sparked a number of debates about noise, foreign ownership and proximity to residential areas. One of these bills was approved by the Senate, but ongoing discussions are focused on whether any further changes are needed.
Arkansas Data Centers Act of 2030 proposes to create a framework of regulation for Bitcoin mining in Arkansas, providing guidelines as well as protection from discriminatory taxes and regulations. The environmental impact of the Bitcoin mining is being scrutinized. In fact, an Investopedia report found that Bitcoin mining generates over 77 kilotons electrical waste each year.
Similar challenges also appear internationally. Paraguay legislators, for instance, proposed a law to ban crypto mining temporarily amid fears over illegal operations. The proposal is intended to stop the creation of new crypto mining operations and limit various crypto related activities. The mining ban is still not moving forward. Paraguayan officials are looking at alternative ways to use excess power from the Itaipu Hydropower Plant, including supplying it directly to the miners.
Canada adopts new reporting standards for crypto transactions
Canada, meanwhile, is prepared to adopt the International Crypto-Asset Reporting Framework by 2026. Canada is now one of the first countries to adopt a standard that will be adopted by 47 other nations by 2027. The CARF, developed by the Organisation for Economic Cooperation and Development(OECD), aims to increase transparency in cryptocurrency transactions through strict reporting requirements for Crypto Asset Service Providers (CASPs).
The CARF will impose new requirements on entities such as crypto exchanges and brokers. The Canada Revenue Agency will be required to report transactions involving crypto-assets and fiat currency, as well exchanges of crypto assets. The CASPs must also report all crypto assets transfers that exceed $50,000 USD.
The CASPs must also collect and provide detailed information about their customers, such as names, addresses and dates of birth. They will have to report these details to the CRA. Both CASPs who are Canadian residents or doing business there will be subject to the reporting requirements.
Nevertheless, some digital representations such as central bank digital currency and stablecoins are excluded from the CARF due to their inclusion in existing amendments of the OECD Common Reporting Standard(CRS), which facilitates international sharing of financial data. CARF fills in the gaps that were left by CRS which did not include transactions that bypassed traditional financial intermediaries.
During a G20 meeting in October 2022 with finance ministers, central bankers and other officials from the G20 countries, the OECD launched its CARF. In November 2023 47 nations agreed to adopt this framework before 2027.
Hong Kong will consider industry-led crypto oversight
Hong Kong Securities & Futures Professionals Association’s (HKSFPA), has proposed Hong Kong crypto companies form a self regulation committee that will oversee compliance. This recommendation was published in an April letter. The letter, dated 22 April 2012, suggested that Hong Kong’s financial markets have been too focused on regulation without encouraging industry development. The HKSFPA is concerned about maintaining Hong Kong’s position as a global financial centre and competitiveness in the global market for securities.
In order to achieve this goal, the HKSFPA recommended that, while the Securities & Futures Commission should retain its authority over market conduct, licensing power should be decentralized to specific industry bodies within the asset management, virtual assets, securities and futures industries. The HKSFPA made a similar recommendation in August last year, calling for a balanced approach to regulation that avoided excessively strict regulatory measures.
Other countries tighten their regulations on crypto, in contrast with Hong Kong. Lithuania is planning to upgrade its crypto regulatory framework by 2025 due to issues of compliance and embezzlement. This is despite the fact that it has licensed more than 580 crypto firms.
Hong Kong is also continuing to make progress in the crypto-integration. In April, the SFC approved the issuance of spot Bitcoin and Ether exchange-traded funds (ETFs) by major firms including Harvest Fund Management, Bosera Asset Management and China Asset Manager (ChinaAMC). The SFC has approved the issue of exchange-traded fund (ETF) spot Bitcoin and Ether by major companies including Harvest Fund Management Bosera Asset Management and China Asset Management. The SFC approved the issuance of spot Bitcoin and Ether exchange-traded funds (ETFs) by major firms including Harvest Fund Management, Bosera Asset Management, and China Asset management (ChinaAMC).
The U.S. Securities and Exchange Commission, on the other hand, hasn’t yet issued a license for crypto exchanges or approved an Ether ETF.
