Crypto Link – November 2022 | Akin Gump Strauss Hauer & Feld LLP

This edition of CryptoLink follows the 2022 US midterm elections and Congressional lawmakers are now outlining ambitious agenda priorities for the next Congress, putting digital assets at the top of the list. Following the collapse of FTX and other high-profile liquidity issues in the cryptocurrency markets, US investigators have doubled down on enforcement efforts, and several Congressional jurisdiction committees have scheduled or expressed interest in hearings to address the continued volatility and recent corporate bankruptcies. On the legislative front, the Stabenow-Boozman Digital Commodities Consumer Protection Act (DCCPA) is widely expected to serve as the primary basis for cryptocurrency legislation in the new Congress, which officially begins on January 3, 2023. The DCCPA identifies the Commodity Futures Trading Commission ( CFTC) as the primary regulator for the cryptocurrency space. The bill is likely to be changed significantly in the new Congress and may include key provisions of the Lummis-Gillibrand Responsible Financial Innovation Act (RFIA). The Senate Agriculture Committee is expected to be the lead committee on lawmaking in the 118th Congress, increasing the likelihood that the CFTC will be chosen as the lead regulator in any legislation. Additionally, both the House Financial Services Committee (HFSC) and Senate Banking Committee (SBC) may focus their legislative efforts on stablecoin regulations, following the announcement of bipartisan efforts by the Sens. Cynthia Lummis (R-WY), Kirsten Gillibrand (D-NY ), Pat Toomey (R-PA), outgoing SBC ranking member, Maxine Waters (D-CA), current HFSC president, and Patrick McHenry (R- NC), member of the ranking, to draw up such invoices by the end of the year.

Financial Stability Oversight Council publishes report on financial stability risks and regulations for digital assets

On October 3, 2022, the Financial Stability Oversight Council (FSOC) released its Report on Digital Asset Financial Stability Risks and Regulations (the Report), issued in response to Executive Order 14067 on Ensuring Responsible Development of Digital Assets. The report examines the risks to financial stability and regulatory gaps posed by different types of digital assets and also provides recommendations for addressing these risks. For example, in the Report, FSOC recommends passage of legislation providing regulatory authority for federal financial regulators over the spot market for cryptocurrencies that are not securities.

Statement by the chairman of the Securities and Exchange Commission on cryptocurrency markets

More information can be found here and here, and Binance’s blog post can be found here.

OECD Releases Cryptocurrency Reporting Framework

On October 10, 2022, the Organization for Economic Co-operation and Development (OECD) released the final Crypto Asset Reporting Framework (CARF) and amendments to the Common Reporting Standard. The CARF provides for the reporting of tax information on crypto asset transactions in a standardized manner, with the aim of automatically exchanging such information with taxpayer jurisdictions of residence on an annual basis. The CARF includes rules addressing the scope of cryptocurrencies covered, the entities, individuals and transactions subject to reporting obligations, and due diligence procedures to identify users of cryptocurrencies and the persons they control.

The CARF can be found here.

The Financial Stability Board proposes a framework for the international regulation of cryptocurrency activities

On October 11, 2022, the Financial Stability Board (FSB) published a proposed framework for the international regulation of cryptocurrency activities. The framework includes proposals on (i) recommendations promoting the consistency and comprehensiveness of regulatory, supervisory and supervisory approaches to cryptocurrency businesses and markets and (ii) high-level recommendations for regulation, supervision and oversight of global stablecoin deals. In its press release announcing the proposed framework, the FSB noted that high regulatory standards should be applied to cryptocurrencies that can be used as a means of payment due to potential financial stability risks.

The FSB press release is available here, and the proposed framework is available here.

European Commission calls for a reduction in electricity consumption by cryptocurrency players and a potential ban on cryptocurrency mining

On October 18, 2022, in its question and answer session on the EU action plan on the digitization of the energy system, the European Commission noted that the energy consumption of cryptocurrency mining has attracted considerable attention, increasing by 900% in the five years and equal to about 0.4 percent of world electricity consumption. The European Commission has urged EU member states to implement targeted and ambitious measures to reduce the electricity consumption of cryptocurrency players and further noted that in case there is a need to reduce the load in electricity systems, member states must ” be ready to stop cryptocurrency mining”. In the long term, the European Commission has noted that it is important to end the tax breaks and other tax measures that benefit crypto-miners currently in force in some Member States. The questions and answers of the European Commission are available here.

The CFTC publishes the results of the annual application

On October 20, 2022, the Commodity Futures Trading Commission (CFTC) released the agency’s annual application results for fiscal year 2022. Significantly, in fiscal year 2022, the CFTC:

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