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Regulatory Rewind #010 - Apr 9, '25
Recorded: April 9, 2025 Duration: 0:39:08Space Recording
Short Summary
In a dynamic discussion on the evolving crypto landscape, key topics included the regulatory advancements for DAOs in Europe, the implications of U.S. sanctions on crypto funding, and the growing emphasis on blockchain education for policymakers. Additionally, the conversation touched on the legal treatment of cryptocurrencies in Brazil and the shifting regulatory environment in the U.S., indicating both growth opportunities and challenges in the industry.
Full Transcription
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To our 10th Regulatory Rewind. It's the 9th of April and boy do we ever have a Regulatory
Rewind in store for you today. And I'm going to just quickly remind everyone of our usual disclaimer.
We are Parity's legal team. And although we are lawyers, we aren't your lawyers.
And we're not providing legal advice, investment advice.
But we are trying to provide you with a snapshot of regulatory innovations,
of regulatory innovations, regulatory rethinks, and just the general pace of regulatory change
around the world that our industry is watching at the moment. Of course, there are overarching
geopolitical issues that we're all attuned to as well, but I want to turn it over to Gustav
immediately to take us into some of the interesting things that are happening in Europe.
Gustav.
Thank you, Chrissy.
I would like to start with Russia.
The Office for Foreign Traffic Control, U.S. Treasury Department, has imposed sanctions on cryptocurrency addresses linked to Russia's grantantex to disrupt the funding of operations
of Houthi movement in Yemen. These sanctions target eight addresses that are associated with
Houthis and they seem to use them for arms procurement and sanction evasion. These addresses
have been facilitating nearly one billion illicit transactions recently,
and this is part of a broader effort to combat financial networks,
supporting Houthis and their activities in the Red Sea region.
In the EU, I would like to start with Malta,
where the Financial Intelligence Analysis Unit has fined OKEx European arm with 1.1
million euros, that's 1.2 million in US dollars, for past violations of anti-money laundering
laws in 2023 and despite these improvements, despite improvements in the last 18 months
they have been fined quite substantially. It seems that recently they might be
connected to facilitating also the laundering of 100 million US dollars connected to the Bybit hack.
But OKEx has denied these claims
and also denied the claims
that the EU authorities
were investigating about that.
So there's probably going to be more around that.
In the EU, I would like to report
on something I find rather positive.
There has been a policy paper published that was supported by the European Commission that
is addressing the potential regulation of decentralized autonomous organizations, DAOs,
and it targets EU policy makers and stakeholders offering recommendations for creating of a coherent
regulatory framework and it suggests that implementing tailored legal structures, models
and standardized processes to foster legal clarity and support for innovation.
We all know that a real DAO probably might not need that,
but we all are aware that a DAO doesn't just evaporate
in the first second.
So we need some kind of models for teams to start DAOs
and their regulatory clearance is of the essence.
They are basically claiming that a unified European approach would be something that they would wish for. Hello, Christy.
Hello, Gustav. I just wanted to mention that Polkadot is actually mentioned in that report, isn't it, Gustav,
the Polkadot Community Foundation. So as a wrapper for the world's largest DAO, or it could also be
called a DAO execution vehicle, what we do within the Polkadot ecosystem is actually being reported on and being used as an example.
So it's something that you, of course, are being very neutral in your relaying of the
news.
But I also wanted to drop that in because I think it's noteworthy.
and back to you and sorry for the interruption oh no back back to Jamil actually because uh
And back to you.
And sorry for the interruption.
Oh, no.
we are going over to UK thank you Gustav yes to the UK we go so the governor of the Bank of England
Andrew Bailey who is best known for his uh let's say skeptical views on cryptocurrencies, has been chosen to head a group, a global group of bank regulators.
And his leadership is seen as a signal that the traditional financial system remains quite cautious about the risks associated with digital assets.
You might remember last week and the week before we talked about the head of the FCA also having quite skeptical views of crypto.
we talked about the head of the FCA also having quite sceptical views of crypto. So this is a
quite traditional conservative line of thinking that kind of permeates throughout the regulatory
organisations in the UK and beyond. So the new role for Mr. Bailey will involve coordinating
and setting guidelines to ensure that emerging crypto risks are managed on an international scale,
reinforcing stability in the global financial environment while promoting tighter regulatory oversight.
And then from the UK, I'd like to hand it back to Chrissy.
I think I was muted. Thanks, Jamil. So me again, popping up unexpectedly, always keeping people on their toes. And this time we were in Switzerland this past couple days, actually delivering the first of its kind blockchain course for policymakers. And we had representatives from
not just the UK, but also Indonesia, Switzerland, and Argentina. If you check out our socials,
you'll see more information. I wanted to just thank Dr. Lisa Cameron in particular,
I wanted to just thank Dr. Lisa Cameron in particular and Pauline Cohen-Vorms, also from PBA, for their work.
And there's a whole team at the PBA who wanted to see this course come to life and be something very useful for policymakers.
this course come to life and be something very useful for policymakers. And I think it was so
successful that we will repeat this in other places around the world and for more policymakers
around the world. So it was an intense couple of days, a lot of information provided in terms of what the technology is and also use cases, particularly for those who look
at policy and regulation. So more to come on this, but I would say the first one is in the bag and
it was really successful. So excited to see what the next one brings. Right. So now enough for me. I believe we are speaking to Eva. Is that
right, Eva? Hi, yeah. It is Eva. It is Eva, who is back from two weeks off from Reg Rewind, but
still very much doing a lot of regulatory education. I've just come back from Thailand,
where I was meant to be on stage at Southeast Asia Blockchain Week,
talking about privacy, regulation and developer liability.
But as a lot of you know, sadly, there was an earthquake that happened in Myanmar, which affected Bangkok.
So the main conference was cancelled.
But the organisers of the side events still proceeded.
So I was able to talk about why regulations matter
in a decentralized Web3 world at the Polkadot side event.
And as Chrissy was saying,
it's actually quite nice not to be neutral at an event sometimes
because I got to talk about how Polkadot leads the way
in terms of education and decentralization.
And I thought that was a really fantastic event. And it also
shows the decentralization of the Polkadot ecosystem in action. There were ex-parity
people there. I met people who were grant recipients from the treasury. I met people who
were bounty recipients. So it was a very exciting place to be in Bangkok. And from that, I'm going to
springboard into talking about Asia, and some of the news stories that I picked up around Asia.
So the big one, I think this week is Hong Kong, and Hong Kong, where currently it's wrapping up
its Web3 Festival, the Web3 Festival with its keynote speaker,
the SFC Executive Director, Christina Choi,
her keynote speech announced a new framework
for staking services.
So I think most of you know what staking is
because if you're in the Populot ecosystem,
you know what staking is, I think.
And this is a new framework which follows hot off the
trails of a roadmap which was published in Hong Kong back in February. And this, it would appear
to create a more clear framework around how staking services would be provided. So it is important
because it talks about professional investors, it talks about professional investors, it talks about
retail investors, it talks about disclosure, risk management, custody standards. It's creating
this very strong regulatory framework as Hong Kong has been aiming to do over the last few
years. And I think this is significant because obviously Hong Kong and Singapore have been
in this sort of institutional monetary digital asset competition
to attract the industry and it would be seen to be a kicking the ball into Singapore's court again
to see how Singapore might respond with its currently slightly more conservative and cautious
approach about retail access. So that is not without good reason, because obviously there was terror and
there was Celsius. So Singapore, Hong Kong, the industry race continues. And the next slide is
actually a story that we picked up, but is it really a story or is it clickbait? I think this
is actually a little bit of clickbait, but it follows off of the Hong Kong story because this story continues.
There is still a lot of speculation about whether Hong Kong is being seen as a test bed for China
to lift its regulatory ban which was instituted in around 2021. I think there's a lot of commentators
and there's a lot of analysis, but not actually any real movements.
And should there be any real movements, there would still be a lag time between a policy
decision and a regulatory change, we believe, unless there are things happening that we're
not aware of and the regulation might take place a lot sooner than one might expect.
So watch this space around China. And on to the next news story, which is also an interesting one.
We previously talked about India and what India was,
what the Indian government announced it was doing in February,
a full review of its stance on cryptocurrencies,
which we thought, well, there's global regulatory shifts
in particularly the US but also
around the rest of the world so this is the industry race narrative that we have looking
at the different countries and how they're responding to a global industry change so India
was was doing this in February in Pakistan in in March in January there was a new virtual assets
bill that was put into the Senate.
And in March, they announced the formation of a Pakistan crypto council.
Now, this Monday, they announced that there would be a very special advisor to the new crypto council in the form of CZ from Binance,
which is quite a big news story, one might imagine.
And you would be interested to see who other countries might be able to appoint to their
crypto councils.
I think that is it on Asia.
So I'm going to hand it over to Jamil on Middle East and Africa.
Thank you, Eva, for the Runs from Asia.
And just very quickly, I can see we've got a few people joining us from Asia quite late
in the day there. So thank you for joining us on Africa. I wonder if anyone's joining us from Asia. And just very quickly, I can see we've got a few people joining us from Asia quite late in the day there. So thank you for joining us. On Africa, I wonder if anyone's joining us from there.
In Nigeria, the President of Nigeria has signed into law a groundbreaking regulation that classifies
cryptocurrencies as securities. So the classification here brings crypto assets under the purview of
national securities regulations. The aim with this is
to enhance investor protections and ensure greater market transparency, according to the government
there. And the law mandates that digital asset offerings adhere to strict compliance standards,
similar to those applied to traditional securities, positioning Nigeria's crypto
market within a regulated framework and potentially increasing investor confidence while mitigating risks.
So that's another story on Nigeria this week.
I think we've visited them quite a bit in recent times.
And again, over to South Africa, the South African Financial Sector Conduct Authority,
the FSCA, has issued a warning to the public regarding the investment platforms by the name of AfriInvest and Mutual Wealth.
The regulator advises extreme caution when dealing with these entities, indicating concerns when considering their services as protected consumers remains a top priority in South Africa.
And from the continent of Africa, we move on to Central and South America. Over in Brazil,
the Brazilian Superior Court of Justice, the STJ, has ruled that judges can seize crypto assets from debtors
to repay debts, and that means crypto will be treated similarly to bank accounts in the
context of legal disputes.
Brazil is the leading country in Latin America for crypto adoption, and while it lacks comprehensive
crypto regulation, major financial institutions like Itao and Unibanco are considering launching their own
stablecoins. Despite the regulatory gap present in Brazil, the country has emerged as one of the
leading countries in Latin America for crypto adoption. An October report from Chain Analysis
ranked Brazil second in the region based on the volume of crypto value received,
highlighting the nation's growing
engagement with digital assets. And in a notable move earlier this year, Binance received regulatory
approval to operate in Brazil after acquiring a Sao Paulo-based investment firm. At the time,
a Binance executive told Cointelegraph that Brazil was making significant strides towards
crypto regulation and predicted that a comprehensive
legal framework would be introduced by mid-year 2025. And from Central and South America over to
North America, Eva, what's going on in the US?
Very good question. The US, we do have a quick slide on this. I will just wait for the slide
to pop up because I think it says it all. The US of A, I think it would be remiss not
to talk about the markets and the tariffs. And this is a good headline. But we're lawyers,
we're not economists, we can't speculate on the market.
But we do know that there's some great phrases out there, such as Liberation Day and Orange Monday.
And we are here to keep our eye on lawmaking and regulation that affects blockchain and the digital assets industry.
And I think we are very conscious this is what's out there and what's happening at the moment, but we maintain
that hopefully through clearer regulation there will be greater innovations, greater security
for innovation and greater positive impact on the industry as a whole. My next story is actually
sort of related but it's also again I'm saying we're not economists. But there was an article about Bitcoin outlasting the US dollar,
which is quite interesting because if you look at it,
the story was around the fact that with the US dollar
uncertainty, there's less trust.
The trust in the US dollar is waning
and foreign currencies are seen as even weaker.
Investors
are left with fewer choices leading to investors to see Bitcoin as a better investment. Now this
is kind of to do with the fact that gold would have been seen as a safe investment during
uncertainty but it's heavy and you can't ship it and you can't store it so Bitcoin might be the
only option left. That is a news story that we're reporting on. And the reason why it caught my attention
because to quote Chain Analysis again, their global crypto adoption index shows that countries
with greater economic instability consistently rank higher in grassroots crypto adoption.
Now obviously that's when crypto is being used as a currency, not necessarily just as an investment.
But that is all I'm going to do in terms of any market or industry related news.
Going back to my comfort zone, which is enforcement agencies and enforcement agencies and regulation.
So this is my what I think is the biggest news story from the US
this week on terms of regulations. So the Department of Justice disbands the National
Cryptocurrency Enforcement Team ending regulations for enforcement. This was a memo that was circulated
on Monday night and on Tuesday it was reported in Forbes and then by the CLO of the Blockchain Association, I think,
one of the big blockchain groups in the US. And I think this is a really big one, especially for
me, because I've been following the Tornado Cash case quite closely. And this is a big shift in
policy because it is looking at cases where a criminal enterprise or state
enemy like North Korea uses a crypto service to loan the funds, the prosecutors will only pursue
the enemy group itself and will not pursue actions against the platforms that these enterprises
utilize to conduct their illegal activities. So this would have a big impact on privacy mixes,
such as Tornado Cash, and on developers
and founders such as Roman Storm.
So just to go on a little bit more about this,
I would say that there's a quote that I'm going to provide you,
which is, the prior administration used the Justice Department
to pursue a reckless strategy of regulation by prosecution, which was ill-conceived and poorly executed.
And this is by the Deputy Attorney General Blanche.
Chrissy?
Yes. I mean, Eva, you've to a number of different audiences on this topic and done some great research for parity and for Polkadot.
So you are definitely an authority in this area.
Is there anything that you wanted to contribute from that perspective to the audience?
Because I know you're watching this quite closely and you didn't get to give your speech last week.
I didn't and I even managed to get a developer to agree to come and ask me any question he wanted
to, within reason, on stage in Bangkok. But we've still got that talk, and that talk will morph as these news items come up.
I think there's probably a...
I think the various news sources have sought for comments
from the Roman Storm defence team.
I would imagine there's a big sigh of relief in his team
and also in Alexey Poetsev's team over in the Netherlands.
It is still watch this space, those are still the biggest cases around. I'm also curious,
obviously those are the biggest cases that we're aware of, I'm less certain about what's happening
in the rest of the world in terms of criminal actions against developers. So it is very much
watch this space and yes it And yes, it's fascinating.
It's fascinating because these are real people's lives.
And this is the intersection of innovation and blockchain
that we have to defend.
Absolutely.
And, you know, there's an argument about free speech here,
right, as well.
And I think that's something that's sometimes lost
in this discussion.
And that's something I know we all feel very strongly about.
And we are very mission driven in Polkadot and generally, which is part of the reason why we as lawyers are doing this work.
So I just want to take a moment to recognize all your hard work and your thoughts on this.
And thank you for that. And we'll be sharing more in the future. Now sorry to interrupt I was
popping up again and I'll go away. Well my next story is sort of a story about another agency
and deregulation possibly it's the Consumer Financial Protection Bureau just checking the
time I will be quick on this one because this is an ongoing story. This was created by Congress in the US to safeguard Americans against unfair
business practices in the wake of the 2008 financial crisis and it's been targeted by
the Trump administration as part of the efforts to slash federal government in effect deregulating consumer financial protection,
and along with it, some of the crypto enforcement that the CFPB would have been doing.
I'm going to just leave it there because this will be an ongoing story as to what is being deregulated
and what is the balance between deregulation and regulation in the US.
I'll pass it back over to Gustav.
Hello, thank you. We are staying in the US. I want to talk a bit about stablecoin regulation.
It seems the House of Financial Services Committee is
advancing regulation for that. And despite bipartisan support, Democrats raised
severe concerns about President Donald Trump's ties to the crypto industry and raising potential conflicts of interest as such legislative
efforts should be targeting illicit crypto use and banning central bank digital currencies.
But it's also about stablecoins and as we have heard in the last session already,
there's Trump's family stablecoin USD1 and other initiatives
that might be profiting from such regulation.
So there's a lot of worry around what purpose the regulation actually takes and if it is more of crypto's public perception
and political influence of certain members of the government or close to it or if it's
really in public interest. Commissioner Carolyn Crenshaw also is worried that the categorization of stablecoins
as non-security is actually downplaying the risk and misinterpreting the USD stablecoin market by
just not seeing the investment of money into an asset.
So she says it might be not true that they are non-securities.
Also, acting SEC chair, Mark Uyeda directed his staff to review various frameworks and statements related to cryptocurrencies with the aim to
create a regulatory environment that is more favorable towards digital assets.
And one of the key areas that this includes is the application of the Howey test.
We mentioned that quite often already, which is the test that was established to
determine if something was a security or not.
And the aim here is to have a less risk averse perception of digital assets as such.
So there's a lot of discussion going on around stablecoins and digital assets as such, and
we are very interested, watchers in that sphere.
And talking about discussion,
I also want to mention the upcoming round table discussions
at the SEC that are scheduled for April 11.
This event is titled
Between a Block and a Hard Place,
Tailoring Regulation for Crypto
Trading.
What is interesting about it is that there will be representatives of Uniswap and Coinbase,
for example, which are firms that have previously been scrutinized or sued by the SEC and will
now participate in the deliberation of crypto regulation in the US.
So this is also very interesting to watch.
And I guess we will report about the outcomes next time.
And with that, I would like to give over to Jamil for one other story from the US.
Thank you, Gustav.
Yes, we're staying in the US because there's so much
going on. We're dialing it down to the state level on the east coast so there's a new bill in New York
filed by the Democrat Assemblyman Clyde Vannel which proposes integrating blockchain technology
into the electoral process to safeguard the election results. A bit of interesting background,
Clyde Vannel is actually an intellectual property attorney, and this is not his first push for such legislation. Versions of this bill have appeared in legislative sessions since 2017, though none have actually made it to the governor's desk until now.
nationwide interest in the US in exploring blockchain's role in public infrastructure,
even as other states pursue very different use cases, such as crypto investment and regulatory
reform. For example, last month, Utah lawmakers approved HB 230, a blockchain-friendly bill that
protects crypto activities and infrastructure, but stripped language that would have allowed
the state to invest in Bitcoin directly. The legislation in Utah aims to record election, sorry, the legislation in New York aims to record
election outcomes on a blockchain ledger, creating a tamper-proof and immutable record
that could enhance transparency and protect against fraud. The bill defines blockchain as a
decentralized, cryptographically secured, immutable and auditable ledger capable of delivering an uncensored truth and calls for a comprehensive report within one year.
And proponents say that this technology can increase public trust in the election process by ensuring the integrity of vote counts,
while the proposal also invites discussions on how best to implement such a system within existing electoral frameworks.
And now back to Gustav for a noteworthy news story.
Thank you, Jamil.
So normally we have the fun story here, and I found a story that is appropriate for that
slot, but it's probably not really fun.
But I want to report on it. Approximately 400,000 users of the bankrupt cryptocurrency exchange FTX are still not going through their KYC and are potentially losing 2.5 billion US dollar in repayment unless they complete the KYC process in due time.
The original process was set out to begin at least at March 3rd,
but as so many people were still missing in that process,
the deadline was extended, and everyone who failed to complete the process
can now still try to get their documents in.
If people do not complete the process, their claims are being disqualified,
so the money is not going to be paid back to them.
There are claims under $50,000 that result in 655 million of payments.
And there's another portion of over 50,000 claims that also contribute to that 1.9 billion
that are potentially at risk.
So if you are out there, you have been using FTX, don't shy away.
Do your KYC. It's probably absolutely worth it and that's
um that was the end um i hope you had a good time um and see you around next time
thank you everyone see you around And. Thank you. so so so Thank you.
