Clarity brought to digital assets through the development of regulations

Since our last look around the world at regulatory developments involving digital assets, several countries have joined the fray, bringing more clarity on where each stands. Here are a few examples, ranging from the United States to Argentina and beyond.

California Governor Signs Executive Order on Blockchain

When President Biden issued an executive order regarding digital assets in March, it was made clear that regulators must work together with the goal of nurturing and growing the young and promising sector. This week saw a prime example when California Governor Gavin Newsom announcement signing his own ‘Blockchain Executive Order’. This decision has been described as an attempt to ‘…stimulating responsible Web3 innovation, developing jobs and protecting consumers’.

Governor Newsom says, “California is a global hub for innovation, and we’re setting the state for success with this emerging technology — driving responsible innovation, protecting consumers, and leveraging this technology for the public good. Too often, government lags behind technological advancements, so we’re getting a head start on this, laying the groundwork for consumers and businesses to thrive.

In this executive order, California has set out various clear points that it intends to address. They are the following,

  • Create a transparent and consistent business environment for businesses operating on the blockchain
  • Collect feedback from a wide range of stakeholders, create a regulatory approach
  • Collect feedback from a wide range of stakeholders for potential blockchain applications and businesses
  • Participate in a public process and exercise legal authority to develop a comprehensive regulatory approach
  • Engage and encourage regulatory clarity
  • Explore opportunities for deploying blockchain technologies to meet the needs of public and emerging services
  • Identify opportunities to create a research and workforce environment

While these are a broad and expansive set of goals for the state to achieve, each of them are steps that must be taken if digital assets are to continue their foray into the mainstream.

The Securities and Exchange Commission strengthens its task force on digital assets

Much like the Governor of California, the Securities and Exchange Commission (SEC) recognizes the growth occurring within digital assets and has recently responded with the announcement of a significant expansion of the team. The SEC has officially opened 20 new positions within its “Crypto Assets and Cyber ​​​​Unit (CACU)”, essentially doubling the staff at its disposal.

Gurbir S. Grewal, Director of the SEC’s Enforcement Division, says: “Crypto markets have exploded in recent years, with retail investors bearing the brunt of the abuses in this space. Meanwhile, cyber threats continue to pose existential risks to our financial markets and participants…The strengthened Crypto Assets and Cyber ​​Unit will be at the forefront of protecting investors and ensuring fair markets and orderly in the face of these critical challenges.

These new positions, which range from fraud analysts to investigative attorneys, will see CACU focus its regulatory and enforcement efforts in the following areas.

  • Digital Asset Offerings (ICO, IEO, STO, etc.)
  • Exchanges
  • Lending and staking products
  • Decentralized finance (DeFi)
  • Non-fungible tokens (NFT)
  • Stable Coins

With such a broad scope of oversight, it is clear that the SEC is committed to regulating the entire digital asset industry, rather than ceding some responsibilities to the CFTC and other similar agencies.

Uzbekistan creates “NAPP” and legalizes renewable mining

Meanwhile, in Uzbekistan, a new government agency has been shape. Known as the “National Agency for Prospect Projects (NAPP)”, it is now responsible for regulating, guiding and licensing the burgeoning digital asset industry.

Along with the formation of the NAPP, Uzbekistan has officially legalized renewable mining – meaning that crypto miners sourcing solar, wind, etc., will not be required to obtain a prior license to operate. It’s a fantastic way to ensure Bitcoin and similar networks minimize their environmental impact, without stifling the mining industry.

Kazakhstan applies new reporting requirements

When China announced it was banning digital asset mining, a steady exodus of industry players to Kazakhstan began. Unfortunately, the nation was not ready for this due to a lack of proper regulation surrounding the sector. As a result, there were discussions about proposed power limits, tax increases, etc. Now a amendment was the subject of an order first issued in 2020. This recently announced surveillance requires miners to submit comprehensive information packets about their operations within 30 days of commencing activity, and in a manner continues quarterly.

The information to be included in these packets ranges from,

  • Mining Farm Specifications
  • Proof of equipment purchase
  • Expected electrical requirements
  • Planned investments

Argentina’s Central Bank Cancels Crypto Offerings

Less than a week ago, two of Argentina’s largest banks announced that each would soon support the buying/selling of digital assets. Although this decision was greeted with enthusiasm by market participants, the Argentinian Central Bank (BCRA) quickly dashed any hopes of this happening. In its own Communicationthe BCRA clarified that it “discourages the supply of crypto assets through the financial system”. The BCRA cites the following reasons for this decision.

  • Risks for users
  • Risks for the financial system as a whole

The BCRA states, “Financial entities cannot perform or facilitate their clients to perform transactions with digital assets, including cryptographic assets and those whose returns are determined according to the variations they record, which are not regulated by a national authority and authorized by the Central Bank of the Argentine Republic (BCRA).

In addition, the BRCA indicates that companies offering such services may, ‘… not to be established in the country’.

Market activity

Unfortunately, despite the growing regulatory clarity provided in recent days, digital asset markets have not held up well during this period. Many believe that a period of stagflation or even a full recession is imminent and have begun to act accordingly. This, combined with efforts by governments around the world to get inflation under control – mostly through rate hikes – has not only led to a sharp drop in digital assets, but also in traditional markets.

Despite this, regulatory clarity is always a good thing, and even if it doesn’t translate into a booming market right now, it should pave the way for an even more impressive uptick in the years to come. coming.

Sylvia B. Polson