Regulation

Fatemeh Fannizadeh on Crypto Law, Switzerland and How KYC Is Failing

Published

6 months ago

30 May, 2024

Fatemeh Fannizadeh, a Swiss lawyer specializing in the crypto industry since 2016, knows personally how the long arm of the U.S. financial laws can often sweep up innocent individuals. Born in Iran, raised in Switzerland, and now a resident of New York City, Fannizadeh said that in the past she had sometimes run into problems with banks and other financial institutions simply because of her name.

Apart from the inconvenience this causes to her personally, the topic of financial surveillance – often rolled out in the name of safety and to mitigate crimes like money laundering and terrorist financing – is something Fannizadeh questions. Tracking nearly all financial flows is simply “inefficient,” she said.

Not only that, the rich and powerful who need to find a way around the law are often sophisticated enough to do just that. And so modern finance is in a state where everyone’s personal privacy is sacrificed — and for what? “Privacy is a right. It’s unfortunate that we have to actually really fight for it nowadays, because technology is so overpowering,” she said.

“My hope is that DeFi, in conjunction with privacy technology, will come up with innovative solutions that would be more inclusive to good actors and more exclusive to bad actors than the current system,” Fannizadeh said.

CoinDesk caught up with Fannizadeh to talk about the state of crypto law (and why it’s now impossible to keep up with the regulatory changes), why Switzerland is losing its status as a crypto hub (and how it may bounce back) and what she’s most looking forward to at Consensus, now just a few weeks away.

Do you still think that Switzerland is a crypto hub?

It depends on how you define a crypto hub. I still think that there are good reasons to base a project out of Switzerland. But I would say that the Swiss authorities were previously more welcoming to crypto and that has changed since the ICO [initial coin offering] boom, when a lot of projects were established out of Crypto Valley. It’s not as attractive as before, but then again a lot of places are not as attractive as they once were.

Why do you think that is?

In general, we are seeing more and more regulation in the space. Whether a jurisdiction is welcoming depends on many factors, whether we are talking about a token lunch, where the project fits within the blockchain ecosystem, if and how it is permissioned or fully decentralized, etc. ? Depending on the needs of the project, the regulatory landscape it has to navigate changes a lot. If it’s a privacy project, or there’s no privacy element in it, then again, it changes a lot.

I remember when I started doing crypto law, it was way more straightforward. We would advise projects and we would know what to do. Today, I don’t think it’s even possible for a lawyer to be up to date on everything that’s happening anywhere in the world of crypto regulation. And it’s fragmented too.

Do you think one region in particular stands out? Or maybe a handful of regions that are maybe more inviting? I’m thinking of Hong Kong, the United Arab Emirates or maybe the Bahamas.

Each region can be attractive depending on what one wants to do. So if someone is more involved within DeFi or just trading in general, the Emirates is now where a concentration of these projects are. If someone is launching a token nowadays we see that happening more in the islands, like Cayman or the British Virgin Islands.

Before it was easier to just launch a token out of Switzerland. With privacy projects, we know where to avoid, but it is a bit more of a complicated topic — there is no “shoe that fits all.” There are other things to maneuver, like budget restrictions or timeline restrictions where a project may need something done fast or they have a lot of time and budget to have a more sophisticated set up. These are things to consider before we can find a solution that meets the project’s needs and risk profile.

Do you think the tide will change in Switzerland to become more regulatory friendly to crypto or get worse?

That’s a really good question. We see some evolution in Switzerland, especially within the tax realm that makes it more complicated than before to be a crypto project based there. But these are things that one can negotiate or structure around. Switzerland has always been a jurisdiction that had a very neutral and welcoming attitude to finance — particularly within its banking sector. Because it takes the position of being politically neutral,t carries trust from actors to establish there or open a bank account there.

This was historically largely supported by banking secrecy: the fact that banks have to keep their clientbase entirely confidential. Until the early 2000, Swiss banks would never disclose whether they have a relationship with you or how much money you have with them. Everything would remain confidential just as your relationship with your lawyer or doctor or priest is confidential. However, under U.S. pressure this policy of bank secrecy faded away. The U.S. tax administration, especially, wanted to know who had bank accounts there and was eventually not declaring their assets, to replenish their treasury after the 2008-2009 economic crisis. .

So Switzerland, after losing its banking confidentiality, became a less attractive sector for the banking sector. Blockchain naturally fits within this narrative of Switzerland being a financial hub, so Switzerland would pursue financial innovation and welcome that sector.

Ueli Maurer, Switzerland’s former finance minister and president, made few statements supporting blockchain innovation withinSwitzerland. Ethereum incorporated in Switzerland — a lot of other important projects went there. There is still this drive for Switzerland to be an attractive financial space that moves from the banking sector to the blockchain sector.

This has to tie in with the Bank Secrecy Act, which seems to me like a blessing and a curse, right? Because you want governments to have the power to go after wealthy individuals that dodge taxes, but the law is so overbroad that it ends up restrictive to businesses and individuals. That’s just my opinion.

I always find it amusing that banking secrecy in Switzerland means the opposite of the Bank Secrecy Act in the U.S, which is about surveillance and KYC. Surveillance is a social and political issue. I’m usually against surveillance in general and I believe that privacy is a right. It’s unfortunate that we have to actually really fight for it nowadays, because technology is so overpowering and it is only getting worse the more powerful our information technology becomes. I can foresee a form of surveillance that ends in a dystopian future. We need to make sure that we still have and keep control over our data now.

I do understand the arguments that tax evasion is bad and we need to find solutions against it. Obviously I believe that money laundering, terrorism financing and criminal activities are bad. But then I’m wondering whether the current way of tackling these issues, for instance by KYCing everyone, is actually constructive or productive. Did KYC stop money laundering or even lowered it? If you look at the state of the world, I think that the current ways are a very inefficient way to tackle these issues.

What I usually say is that KYC, which is just gathering information and tracking where money comes from and what it may be used for, is not preventing bad actors. Within the financial sector there are many sophisticated setups that can obfuscate where the money comes from or make it seem like somebody else is in possession of the money so that nothing flags in the KYC. Unfortunately, there are many wealthy and sophisticated bad actors that can do whatever they need to do to launder their money and use it in nefarious ways.

While normal people, people who don’t have this knowledge, they are the ones who are actually harmed by the system. For instance, sanctions regulation, which is the topic of my panel at Consensus, usually targets a whole population based on their nationality or their place of residence. These are just normal people without bad intentions. My hope is that DeFi, in conjunction with privacy technology, will come up with innovative solutions that would be more inclusive to good actors and more exclusive to bad actors than the current system.

It’s my passion and a topic I’ve been thinking a lot about lately. I’m originally from Iran and I lived most of my life in Switzerland. The question of sanctions and their impact is something I grew up with. My name is Iranian, so I sometimes ran into issues with financial institutions because my name flags in their system for example.

That’s bleak. To change this up a little bit, I sometimes talk to lawyers who work in the crypto space who take issue with the term “crypto law” because it’s overbroad. Do you think it’s a term that makes sense?

Interesting. I’m currently writing a chapter for a crypto law book, and the chapter is titled “The Madness of Crypto Law.” The title hints to the fact that crypto law is mad, meaning that there isn’t a common rational understanding of what it means and what it encompasses. It is both a term that makes sense and doesn’t make much sense. As I said before, crypto regulation has become so complex, there’s crypto legal news coming out everyday, it’s almost impossible to follow and map everything.

I also think that there’s an underlying philosophical discussion to this question. What do we mean by crypto law? Are we referring to state regulations relating to or impacting blockchain projects? Or is it relating to the normative realm of blockchain technology, i.e. the law of the code itself?

Well, in the U.S., it has to be the former, right? Even if there aren’t any specific crypto laws, no regulator is willing to consider crypto on its own merits.

There is this meme: “code is law,” meaning there are rules that are hardcoded and will be executed should the necessary preconditions be met, within decentralized, permissionless products or projects.Governance within DAOs, for instance, have their own set of rules. In order to interact with a DAO, one needs to get the token and vote through a certain process. These are all norms and rules. A postulate I have is that the main reason why no country has managed yet to really capture blockchain technology and regulate it in a satisfying manner is because these normative systems of state laws and crypto laws are so different. As if they speak two different languages.

One cannot understand crypto with the language of U.S. law or vice versa. Like two puzzles with very different pieces that cannot be put together without an absurd, nonsensical result. And this is actually a feature of blockchain. I cannot blame the regulatory ecosystems for trying to capture it, but I think instead of capturing it, they have to understand that they need to interface with it. It’s a very different approach.

Right. I’m not optimistic about it, to be honest.

More or less everything that you’ve already said, right? They’re not willing to meet the technology on the technology’s terms.

Yeah, sorry. I have a very U.S. focus.

I mean, I moved here – it’s great. But seriously, even if I didn’t live here, there is no way to avoid the U.S. in crypto law. It impacts any project, even if the project has no U.S. connections – nobody from the project is from the U.S. or resides there and all U.S. persons are excluded from token purchases, etc.– still, one needs to consider U.S. regulations.

Something to be optimistic about is that even if the U.S. fails in tackling crypto regulations constructively, there are tons of other jurisdictions. These projects live on the internet, so at least for the technology itself, there is a future. Whether this future is US or not, this is a valuable question.

Okay, last question is an easy one. What are you most looking forward to at Consensus?

Many things! It’ll actually be my first time and I’m very excited. We’re almost a month away and I’ve already heard of many interesting events lined up and have meetings organized – I can’t wait to just get together with the attendees, I heard the crowd is excellent. I usually go to very specific community centric or legal and policy conferences. But Consensus is so comprehensive, right? It seems like a platform where we can reach “consensus,” discuss things with very different actors all in one place.

And you tell me, you’ve been. Is there anything I need to keep in mind?

Actually, there’s this programming track called Consensus @ Consensus, which sort of like small breakout groups that focus on very narrow but consequential questions. Those tend to be pretty interesting. I’ve only attended in person twice, and basically work like a dog, but Austin is a fun city in general.

Yeah, that usually happens at conferences.

CORRECTION (MAY 14): Corrects Fannizadeh title.

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Regulation

Crypto community gets involved in anti-government protests in Nigeria

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Crypto Community Engages in Nigeria's Governance Protests

Amid the #EndBadGovernanceInNigeria protests in Nigeria, a notable shift is occurring within the country’s cryptocurrency sector. As the general public demands sweeping governance reforms, crypto community leaders are seizing the opportunity to advocate for specific regulatory changes.

Rume Ophi, former secretary of the Blockchain Stakeholders Association of Nigeria (SiBAN), stressed the critical need to integrate crypto-focused demands into the broader agenda of the protests.

Ophi explained the dual benefit of such requirements, noting that proper regulation can spur substantial economic growth by attracting investors and creating job opportunities. Ophi noted, “Including calls for favorable crypto regulations is not just about the crypto community; it’s about leveraging these technologies to foster broader economic prosperity.”

Existing government efforts

In opposition to Ophi’s call for action, Chimezie Chuta, chair of the National Blockchain Policy Steering Committee, presents a different view. He pointed out The Nigerian government continued efforts to nurture the blockchain and cryptocurrency industries.

According to Chuta, the creation of a steering committee was essential to effectively address the needs of the crypto community.

Chuta also highlighted the creation of a subcommittee to harmonize regulations for virtual asset service providers (VASPs). With the aim of streamlining operations and providing clear regulatory direction, the initiative involves cooperation with major organizations including the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN). “Our efforts should mitigate the need for protest as substantial progress is being made to address the needs of the crypto industry,” Chuta said.

A united call for support

The ongoing dialogue between the crypto community and government agencies reflects a complex landscape of negotiations and demands for progress.

While actors like Ophi are calling for more direct action and the inclusion of crypto demands in protest agendas, government figures like Chuta are advocating for recognition of the steps already taken.

As protests continue, the crypto community’s push for regulatory reform highlights a crucial aspect of Nigeria’s broader fight to improve governance and economic policies. Both sides agree that favorable regulations are critical to the successful adoption and implementation of blockchain technologies, signaling a potentially transformative era for Nigeria’s economic framework.

Read also : OKX Exchange Exits Nigerian Market Amid Regulatory Crackdown

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Regulation

Cryptocurrency Regulations in Slovenia 2024

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Cryptocurrency Regulations in Slovenia 2024

Slovenia, a small but highly developed European country with a population of 2.1 million, boasts a rich industrial history that has contributed greatly to its strong economy. As the most economically developed Slavic nation, Slovenia has grown steadily since adopting the euro in 2007. Its openness to innovation has been a key factor in its success in the industrial sector, making it a prime destination for cryptocurrency enthusiasts. Many believe that Slovenia is poised to become a powerful fintech hub in Europe. But does its current regulatory framework for cryptocurrencies support such aspirations?

Let’s explore Slovenia’s cryptocurrency regulations and see if they can propel the country to the forefront of the cryptocurrency landscape. My expectations are positive. What are yours? Before we answer, let’s dig a little deeper.

1. Cryptocurrency regulation in Slovenia: an overview

Slovenia is renowned for its innovation-friendly stance, providing a supportive environment for emerging technologies such as blockchain and cryptocurrencies. Under the Payment Services and Systems Act, cryptocurrencies are classified as virtual assets rather than financial or monetary instruments.

The regulation of the cryptocurrency sector in Slovenia is decentralized. Different authorities manage different aspects of the ecosystem. For example, the Bank of Slovenia and the Securities Market Agency oversee cryptocurrency transactions to ensure compliance with financial laws, including anti-money laundering (AML) and terrorist financing regulations. The Slovenian Act on the Prevention of Money Laundering and Terrorist Financing (ZPPDFT-2) incorporates the EU’s 5th Anti-Money Laundering Directive (5MLD) and aligns with the latest FATF recommendations. All virtual currency service providers must register with the Office of the Republic of Slovenia.

2. Cryptocurrency regulation in Slovenia: what’s new?

Several notable developments have taken place this year in the cryptocurrency sector in Slovenia:

July 25, 2024:Slovenia has issued a €30 million on-chain digital sovereign bond, the first of its kind in the EU, with a yield of 3.65%, maturing on 25 November 2024.

May 14, 2024:NiceHash has announced the first Slovenian Bitcoin-focused conference, NiceHashX, scheduled for November 8-9 in Maribor.

3. Explanation of the tax framework for cryptocurrencies in Slovenia

The Slovenian cryptocurrency tax framework provides clear guidelines for individuals and businesses. According to the Slovenian Financial Administration, the tax treatment depends on the status of the trader and the nature of the transaction.

People:Income earned from cryptocurrencies through employment or ongoing business activities is subject to personal income tax. However, capital gains from transactions or market fluctuations are exempt from tax.
Companies:Capital gains from cryptocurrency-related activities are subject to a 19% corporate tax. Value-added tax (VAT) generally applies at a rate of 22%, although cryptocurrency transactions that are considered as means of payment are exempt from VAT. Companies are not allowed to limit payment methods to cryptocurrencies alone. Tokens issued during ICOs must follow standard accounting rules and corporate tax law.

4. Cryptocurrency Mining in Slovenia: What You Need to Know

Cryptocurrency mining is not restricted in Slovenia, but income from mining is considered business income and is therefore taxable. This includes rewards from validating transactions and any additional income from mining operations. Both individuals and legal entities must comply with Slovenian tax regulations.

5. Timeline of the development of cryptocurrency regulation in Slovenia

Here is a timeline highlighting the evolution of cryptocurrency regulations in Slovenia:

2013:The Slovenian Financial Administration has issued guidelines stating that income from cryptocurrency transactions should be taxed.
2017:The Slovenian Financial Administration has provided more detailed guidelines on cryptocurrency taxation, depending on factors such as the status of the trader and the type of transaction.
2023:The EU adopted the Markets in Crypto-Assets (MiCA) Regulation, establishing a uniform regulatory framework for crypto-assets, their issuers and service providers across the EU.

Endnote

Slovenia’s approach to the cryptocurrency sector is commendable, reflecting its optimistic view of the future of cryptocurrencies. The country’s balanced regulatory framework supports cryptocurrency innovation while protecting users’ rights and preventing illegal activities. Recent developments demonstrate Slovenia’s commitment to continually improving its regulatory environment. Slovenia’s cryptocurrency regulatory framework sets a positive example for other nations navigating the evolving cryptocurrency landscape.

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Regulation

A Blank Sheet for Cryptocurrencies: Kamala Harris’ Regulatory Opportunity

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

A Blank Sheet for Cryptocurrencies: Kamala Harris' Regulatory Opportunity

photo by Shubham Dhage on Unsplash

As the cryptocurrency landscape continues to evolve, the need for clear regulation has never been more pressing.

With Vice President Kamala Harris now leading the charge on digital asset regulation in the United States, this represents a unique opportunity to start fresh. This fresh start can foster innovation and protect consumers. It can also pave the way for widespread adoption across industries, including real estate agencies, healthcare providers, and online gaming platforms like these. online casinos ukAccording to experts at SafestCasinoSites, these platforms come with benefits such as bonus offers, a wide selection of games, and various payment methods. Ultimately, all this increase in adoption could propel the cryptocurrency market forward.

With this in mind, let’s look at the current state of cryptocurrency regulation in the United States, a complex and confusing landscape. Multiple agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN), have overlapping jurisdictions, creating a fragmented regulatory environment. This lack of clarity has stifled innovation as companies are reluctant to invest in the United States, fearing regulatory repercussions. A coherent and clear regulatory framework is urgently needed to realize the full potential of cryptocurrencies in the United States.

While the US struggles to find its footing, other countries, such as Singapore and the UK, are actively looking into the cryptocurrency sector by adopting clear and supportive regulatory frameworks. This has led to a brain drain, with companies choosing to locate in more conducive environments.

Vice President Kamala Harris has a unique opportunity to change that narrative and start over. Regulation of cryptocurrencies. By taking a comprehensive and inclusive approach, it can help create a framework that balances consumer protection with innovation and growth. The time has come for clear and effective regulation of cryptocurrencies in the United States.

Effective regulation of digital assets is essential to foster a safe and innovative environment. The key principles guiding this regulation are clarity, innovation, global cooperation, consumer protection, and flexibility. Clear definitions and guidelines eliminate ambiguity while encouraging experimentation and development to ensure progress. Collaboration with international partners establishes consistent standards, preventing regulatory arbitrage. Strong safeguards protect consumers from fraud and market abuse, and adaptability allows for evolution in response to emerging trends and technologies, striking a balance between innovation and protection.

The benefits of effective cryptocurrency regulation are multiple and far-reaching. By establishing clear guidelines, governments can attract investors and mainstream users, driving growth and adoption. This can, in turn, position countries like the United States as global leaders in fintech and innovation. Strong safeguards will also increase consumer confidence in digital assets and related products, increasing economic activity.

A thriving crypto industry can contribute significantly to GDP and job creation, which has a positive impact on the overall economy. Furthermore, effective regulation has paved the way for the growth of many businesses such as tech startups, online casinos, and pharmaceutical companies, demonstrating that clear guidelines can open up new opportunities without stifling innovation. This is a great example of how regulation can allay fears of regressive policies, even if Kamala Harris does not repeal the current progressive approach. By adopting effective regulation, governments can create fertile ground for the crypto industry to thrive, thereby promoting progress and prosperity.

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Regulation

South Korea Imposes New ‘Monitoring’ Fees on Cryptocurrency Exchanges

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

South Korea Imposes New 'Monitoring' Fees on Cryptocurrency Exchanges

Big news! The latest regulatory changes in South Korea are expected to impact major cryptocurrency exchanges like Upbit and Bithumb. Under the updated regulations, these platforms will now have to pay monitoring fees, which could cause problems for some exchanges.

Overview of new fees

In the latest move to regulate cryptocurrencies, the Financial Services Commission announced on July 1 the revised “Enforcement Order of the Act on the Establishment of the Financial Services Commission, etc.” update “Regulations on the collection of contributions from financial institutions, etc.” According to local legislation newsThe regulations require virtual asset operators to pay supervisory fees for inspections conducted by the Financial Supervisory Service starting next year. The total fees for the four major exchanges are estimated at around 300 million won, or about $220,000.

Apportionment of costs

Upbit, which holds a dominant market share, is expected to bear more than 90% of the total fee, or about 272 million won ($199,592) based on its operating revenue. Bithumb will pay about 21.14 million won ($155,157), while Coinone and GOPAX will contribute about 6.03 million won ($4,422) and 830,000 won ($608), respectively. Korbit is excluded from this fee due to its lower operating revenue.

Impact on the industry

The supervision fee will function similarly to a quasi-tax for financial institutions subject to inspections by the Financial Supervisory Service. The new law requires any company with a turnover of 3 billion won or more to pay the fee.

In the past, fees for electronic financial companies and P2P investment firms were phased in over three years. However, the taxation of virtual asset operators has been accelerated, reflecting the rapid growth of the cryptocurrency market and increasing regulatory scrutiny.

Industry reactions

The rapid introduction of the fee was unexpected by some industry players, who had expected a delay. Financial Supervisory Service officials justified the decision by citing the creation of the body concerned and the costs already incurred.

While larger exchanges like Upbit and Bithumb can afford the cost, smaller exchanges like Coinone and GOPAX, which are currently operating at a loss, could face an additional financial burden. This is part of a broader trend of declining trading volumes for South Korean exchanges, which have seen a 30% drop since the new law went into effect.

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