Weekly Crypto Policy and Regulatory Roundup, March 27 2022

Indian Government Pass Unfair and Stifiling Tax Law

It was a catastrophic week for Indian crypto investors and exchanges. On Friday, the Indian government passed a new tax law that includes extremely unfavorable provisions for traders and the crypto industry at large.

As well as having to pay a 30% tax on profits, under the new law Indian cryptocurrency investors will:

• Not be able to offset losses against their profits (so for example, if a trader makes a loss of $1000 on Ethereum and a $500 gain on Bitcoin, he will have to pay 30% on his Bitcoin profit, even though he has made an overall loss).
• Have to pay a 1% tax deducted at source (TDS) any time they buy or sell cryptocurrency

Unsurprisingly, the reaction to the new law has been overwhelmingly negative. Nischal Shetty, founder of WaxirX exchange said that the latest move by the Indian government was unfair and would discourage innovation.

Discouraging Crypto = Discouraging Innovation

This is one of the top reason why countries around the world are taking cautious steps in Crypto taxation

Hope Indian Government hears the youth and ensures that Indian Crypto industry remains competitive ✌️#UnfairCryptoTax

— Nischal (Shardeum) ⚡️ (@NischalShetty) March 21, 2022

US Government Seek Info on Energy & Climate Implications of Digital Assets

On Friday, the US Office of Science and Technology Policy (OSTP) put out an official request for information (RFI) regarding the “energy and climate implications of digital assets”

The RFI is seeking information from individuals and organizations on “protocols, hardware, resources, economics, and other factors that shape the energy use and climate impacts of all types of digital assets“.

The request comes on foot of Biden’s executive order, issued earlier in March, which tasked the OSTP with preparing a report on the “potential for digital assets to impede or advance efforts to tackle climate change and the transition to a clean and reliable electricity grid”.

Change of Heart for Yellen?

Treasury Secretary Janet Yellen appears to have had a (bit of a) change of heart about crypto. In an interview with CNBC, which aired earlier this week, Yellen said that crypto has certain benefits and innovation in payment systems “can be a healthy thing”. Yellen previously admitted that she wasn’t “a fan” of Bitcoin when asked about the cryptocurrency while she was head of the Federal Reserve.

"I have a little bit of skepticism," says @SecYellen on #crypto. "On the other hand there are benefits from crypto and we recognize innovation in the payment systems can be a healthy thing," pic.twitter.com/7N1SYxICwq

— Squawk Box (@SquawkCNBC) March 25, 2022

The views of government officials on crypto are now more important than ever as the regulatory framework based on Biden’s executive order will be built out over the coming months.

Russia to accept Bitcoin for Oil and Gas?

Also, this week the head of Russia’s State Duma Committee on Energy, Pavel Zavalny, suggested that Russia may accept Bitcoin as payment for oil and gas from “friendly” countries, such as China and Turkey.

We have been proposing to China for a long time to switch to settlements in national currencies of rubles and yuan. With Turkey, it will be lira and rubles. The set of currencies can be different, and this is normal practice. If there are Bitcoins, we will trade Bitcoins.

Pavel Zavalny

Russia has said that it may require countries to pay for oil and gas in rubles or gold, instead of the US dollar.

International Organization of Securities Commissions Publishes DeFi Report

The International Organization of Securities Commissions (IOSCO) published a report setting out how it believes that DeFi (Decentralized Finance) is quickly evolving to “mirror conventional financial markets”, albiet with greater risks to investors.

The document is an interesting read and includes a comprehensive look at how Defi actually works. It also casts doubt on the claim that DeFi involves peer-to-peer transactions without the involvment of “centralized insiders”. One of the centralization risks it identifies is the use of “governance tokens”, a majority of which are often held by a small minority to retain control.

The full report can be read here.

Canadian Coinbase Customers Required to Comply with “Travel Rule” from April 4th

Starting on April 4th, Coinbase will require customers sending transactions of more than 1000 CAD to include the recipient’s name and address.

Coinbase is introducing this to comply with a specific requirement in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), namely the so-called “travel rule“. The travel rule requires anyone making electronic fund or virtual currency transfers to disclose certain information. Note that it only applies to transfers being made to financial entities, money service businesses, and crypto exchanges.