Law Decoded: Russia flounders, America competes, IMF keeps fuming, Jan. 24–31

Published at: Jan. 31, 2022

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 see such a public interagency disagreement on substantive issues.

Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

Russia: Competing visions clash

Following the central bank’s blanket ban proposal, it emergedthat the Ministry of Finance had been working on its own crypto regulatory framework all along, whose tenets are fundamentally opposed to the Central Bank of Russia’s prohibitive drive. In all, the ministry proposes using the traditional banking system’s rails to facilitate crypto payments all the while categorizing investors as qualified or unqualified and introducing strong financial surveillance mechanisms. Even former President and Prime Minister Dmitry Medvedev came out of the woodwork to offer comments in support of regulation, rather than a blanket ban on cryptocurrency operations.

Apparently, the narrative battle over how to deal with the power of the digital asset space is underway within the halls of the Russian government, and its ultimate outcome is anyone’s guess.

Tagging along with omnibus bills

First tested with the inclusion of the problematic digital asset broker definition into the infrastructure bill last year, the tactic of stealthily appending crypto-hostile provisions to gigantic must-pass bills could be crypto opponents’ new weapon of choice. Having examined almost 3,000 pages of the recently introduced America COMPETES Act, crypto advocates found a clause that could empower the Treasury Department to bypass existing checks and the logic of due process to order “special measures” against certain financial transactions, including those executed using cryptocurrency. Such measures could include imposing surveillance or outright prohibition to financial institutions to offer certain services or products.

Spot BTC ETF shall not pass

The U.S. Securities and Exchange Commission’s principled stance against exchange-traded funds that offer direct exposure to cryptocurrencies is well-known, so its rejection of yet another spot ETF last week is not a shocker for anyone who follows this space. Neither is the extension of the review period of another BTC-related product, ARK 21Shares Bitcoin ETF: Pushing such deadlines as far back as the existing rules allow is the regulator’s preferred strategy.

Some analysts, however, begin to see this pattern as part of the executive branch’s broader crypto regulatory strategy rather than a single agency’s policy. Bloomberg senior ETF analyst Eric Balchunas opined on Twitter that the SEC’s stance on spot Bitcoin ETF jibes well with the rumors of the Biden administration’s upcoming executive order that would cast cryptocurrencies as a national security threat.

Tags
Law
Related Posts
Law Decoded: States’ crypto rights and the influx of digital money into analog politics, Feb. 7–14.
Several storylines that had been long in the making dominated last week’s news cycle in the cryptocurrency policy and enforcement department. The Russian government has made another huge step on the path toward creating a tailored regulatory framework for digital assets, unveiling its consolidated view that crypto is to be treated as currency rather than swept under the rug of a blanket ban. While this movement in the direction of crypto’s formal legitimization is a welcomed development, a host of questions persists related to both the exact shape of the new regime and its enforcement. The biggest enforcement story of …
Regulation / Feb. 14, 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
Unqualified investors can buy up to $8K of crypto, says Bank of Russia
The central bank of Russia proposed to set limits on annual cryptocurrency investments by non-professional investors. The Bank of Russia suggested that unqualified investors in Russia should not be allowed to invest more than 600,000 Russian rubles ($7,800) in digital assets per year. The authority laid out the new proposal in an explanatory note referring to Russia’s newly passed crypto law, “On Digital Financial Assets,” or DFA. The official statement stipulates that the new regulatory restriction will involve not only digital financial assets but also “other digital rights”: “Individuals representing unqualified investors will have a limit on the amount of …
Regulation / Oct. 14, 2020
Law Decoded: Three regulatory trends of 2021, Dec. 20–27
It is that time of the year: Singular events must be abandoned in favor of end-of-year, big-picture narratives and yearly lessons learned. As many governments across the globe finally had to face the rapidly mainstreaming realm of digital finance, the year is packed with developments in crypto policy and regulation that are impossible to fit into a neat little summary. However, it is possible to try and distill several major trends that have come to the fore during the past 12 months, and that will keep shaping the relationship among societies, state power and the crypto space as we roll …
Regulation / Dec. 27, 2021
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