Law Decoded: Crypto in times of war, Feb. 28–Mar. 7

Published at: March 7, 2022

A war rages on Europe’s eastern rim, having already left thousands of people dead and injured and millions more displaced. Digital assets have become so woven into the global financial system that a major political and economic crisis like the one unfolding right now has crypto inevitably involved on all levels: individual, institutional and national. From Russian nationals turning their burning passports into nonfungible tokens (NFTs) to refugees using crypto as a last financial resort, millions of dollars worth of crypto donations flowing to Ukraine, and both digital asset platforms and the United States government weighing crypto sanctions against Russia, cryptocurrencies play a significant role in the events surrounding the ongoing calamity. It is also evident at this point that the crisis, in turn, will massively affect crypto itself, accelerating its adoption and regulation globally.

No way around sanctions

One of the most conspicuous narratives picking up steam in the wake of the conflict’s escalation has been the notion that Russia could move fast toward embracing crypto as a potential tool for circumventing the unprecedented economic and financial sanctions it is now facing. This prospect has regulators in both the United States and European Union so uneasy that both Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde have called for lawmakers in their respective jurisdictions to ramp up work on regulatory frameworks for digital assets. Many industry experts, however, are skeptical of the idea that crypto offers a viable workaround for the increasingly isolated Russian state. The points most frequently invoked in support of this argument are distributed ledgers’ transparency and the notion that the bandwidth of the crypto payment rails is insufficient to supply an economy the size of Russia’s.

SEC goes nonfungible

It looks as if the explosion in the prices of certain nonfungible token collections and the popularity of so-called fractional NFTs are leading the U.S. Securities and Exchange Commission to take a closer look at NFT marketplaces. The regulator reportedly suspects that certain tokens could be used to raise money, much like traditional securities but without being regulated as such. SEC attorneys have been subpoenaing some participants of the NFT market to gather information about how the issuance and sales of certain tokens are structured. Chances are that the nonfungible token space will become the next target of the agency’s scrutiny following the recent clampdown on the crypto lending sector.

Separately, the agency’s enforcement director has reportedly stated that the SEC will not turn a blind eye to securities law violations by companies that preemptively turn themselves in. The move is unlikely to inspire firms that have doubts about the status of their offerings to seek advice directly from the SEC.

De facto legal tender

A partnership between the city of Lugano, Switzerland and the company behind Tether (USDT) will allow residents to use USDT, Bitcoin (BTC) and the Swiss stablecoin LVGA for a range of payments — including taxes, public services and tuition fees, in addition to goods and services from local businesses — essentially amounting to adopting crypto as legal tender within the municipal boundaries. Tether also pledged to create a fund of up to 100 million Swiss francs ($108 million) to support turning the city of 63,000 people into a European blockchain hub.

Tags
Regulation
Sec
Bitcoin Regulation
Cryptocurrencies
Law
Russia
Us Government
Sanctions
Bank Of Russia
Tether
Switzerland
Ukraine
Usa
Related Posts
How the Democratic Party didn’t stop worrying and fearing crypto in 2021
As 2022 is kicking off, America nears the first anniversary of Joe Biden’s presidency. Following the tenure’s ambitious start, the last few months witnessed some serious tumult around the overall health of the United States economy, the administration’s handling of the COVID-19 pandemic, and the tense debate around Biden’s opus magnum — the $1.7 trillion Build Back Better infrastructure legislation plan. But even as the Democrats’ ability to maintain undivided power after the 2022 midterm elections can raise doubts, the party’s prevailing view of crypto has become more consolidated than ever. The incumbent president’s party will be setting the tone …
Regulation / Jan. 1, 2022
Law Decoded: Russia flounders, America competes, IMF keeps fuming, Jan. 24–31
One of the most fascinating implications of the collision between traditional political institutions and the crypto space is how it can reveal the glaring lack of cohesion within power systems that otherwise look monolithic. Digital assets reside in a parallel policy dimension where neither a centralized consensus nor a clear rulebook exists, leading to a surprising variety of voices and opinions emerging in the absence of a politically coordinated course. Last week, a rare lively policy debate broke out in Russia in the aftermath of its central bank’s attempt to promote a hardline stance on crypto. One does not often …
Regulation / Jan. 31, 2022
Law Decoded: Tangible wins, new menaces and the global crypto taxation drive, Feb. 1–7
Every global event or major political crisis these days can trigger a digital asset-related conversation. As China welcomes the world’s top athletes to the Beijing 2022 Winter Olympics, showing off ultra-high-tech facilities and sports infrastructure, some United States politicians have raised concerns over the Games’ potential to act as a booster to the digital yuan’s adoption. In neighboring Myanmar, the military government that had overthrown the nation’s elected leadership a year ago is now looking into launching its own digital currency, not to project economic influence but to improve the domestic payments system and the struggling economy more broadly. Below …
Regulation / Feb. 7, 2022
Russian Parliament working group: There should be 'mechanisms to control crypto transactions'
Amid the ongoing discussion between the Central Bank of Russia (CBR) and the nation’s Finance Ministry on the future of crypto, a State Duma (the lower chamber of Parliament) working group has voiced their support for regulating rather than banning digital assets. The working group called for the “clear regulation of the digital assets industry” as the most effective approach to lower the risks associated with crypto’s adoption in the country. As reported by local media, some 50 experts took part in the panel session called by the Duma’s working group “On the questions of the regulation of cryptocurrency”. The …
Regulation / March 10, 2022
Law Decoded: Competing narratives around crypto clash on the Earth Day, April 19-26
Regulation by enforcement, a fast and economical substitute for thorough rulemaking, is widely regarded as some of the U.S. executive agencies’ preeminent approach to crypto regulation. It could be summed up as letting crypto firms explore the boundaries of what is permissible by themselves and then punishing industry participants in case their exploratory actions come to look like a transgression. Others will take heed and learn from the explorer’s negative experience. While it is the United States Securities and Exchange Commission that gets accused of over-reliance on regulation by enforcement most frequently, other federal agencies do that as well. Last …
Regulation / April 25, 2022