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Regulatory Rewind #010 - Apr 9, '25
Recorded: April 9, 2025 Duration: 0:39:10Space Recording
Short Summary
The latest discussions in the crypto space reveal significant trends in regulatory developments, partnerships, and growth opportunities across various regions, including new frameworks for DAOs in Europe, Nigeria's classification of cryptocurrencies as securities, and Brazil's legal recognition of crypto assets. As the industry navigates these changes, the focus remains on fostering innovation while ensuring compliance and investor protection.
Full Transcription
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I'm going to go ahead and get a look at the top of the top.
I'm going to go ahead and get a look at the top of the top.
I'm going to go ahead the next episode of the show. Thank you. I'm going to go ahead and get some more of the details.
I'm going to go ahead and get some more of the details.
I'm going to go ahead and get some more of the details.
I'm going to go ahead and get started. Thank you. I'm out. Bye. Oh Hey! Bye. I'm going to go. you are 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, 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 Grantex
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 1 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 that'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 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.
And hello, Christy.
Hello, Gustav.
Hello.
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 um being reported on and being used as
an example so it's something that uh 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 to Jamil, actually, because we are going over to the 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, 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 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 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.
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 a earthquake that happened in Myanmar, which
affected Bangkok. So the main conference was cancelled. But the organis organizers of the side events still proceeded so I was
able to talk about why regulations matter in the 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 polka dot 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.
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 pop-up 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 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 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 testbed 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 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 doing this in February. In Pakistan, 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 finance, which is quite a big news story, one might
imagine. And you would be interested to
see what 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 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 Afri Invest and Mutual Wealth. The regulator advises extreme caution
when dealing with these entities, indicating concerns over potential risks or non-compliance
with regulatory standards in South Africa. And the FSCA is urging investors to carry out thorough
due diligence and to be allowed for any red flags 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 a 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 stable coins. 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?
A 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
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, I'm saying mum we're not we're not economists but there was a
article about bitcoin outlasting the US dollar which is quite interesting because if you if you
look at it the story was around the fact that with the US dollar uncertainty there's less trust
there's 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 uh to quote chain analysis again um they their global crypto adoption index shows
that countries with greater economic instability consistently rank higher in grassroots crypto
adoption now obviously that's when it's'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 regulation.
So the Department of Justice disbands the National Cryptocurrency Enforcement Team, ending regulation through enforcement.
This was a memo that was circulated on Monday night.
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 quite 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 done a ton of work on
developer liability. And I just wanted to recognize that because you have spoken
externally 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 Poitsev'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'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 as well.
And I think that's something that uh sometimes lost in this
discussion and it's something i know we all feel very strongly about um and we are very mission
driven in polka dot 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 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.
Starting 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 stable coins and as we have heard
currencies but it's also about stable coins and as we have heard in the last session already there's
Trump's family stable coin USD1 and other initiatives that might be profiting from
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 Ulleda 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 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 stable coins 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 roundtable 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 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.
This year's version, however, arrives amid growing nationwide interest in the U.S. 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 our noteworthy news story thank you jamil um 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 uh 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 their 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 pay 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 was the end.
I hope you had a good time and see you around next time.
Thank you everyone.
See you around. Thank you. I'm going to go ahead and get started. Thank you. .
