Weekly Crypto Policy Update, April 4, 2022

EU Vote to apply transfer of funds rules to crypto

This week the Economic and Monetary Affairs Committee (ECON) of the European Union voted in favor of extending the Transfer of Funds Regulation (TFR) to cryptocurrencies.

This means that crypto transfers would have to include specific information about the recipient of the funds. While the TFR applies to fiat transfers of over 1000 EUR, the proposed rule would cover crypto transfers of any amount.

“The revised Regulation will extend the obligation of payment service providers to accompany transfers of funds with information on the payer and payee to crypto assets, giving effect to the Financial Action Taskforce (FATF)’s recommendation 16 on wire transfers and Recommendation 15 on virtual assets.”

The vote was met with criticism from the blockchain and crypto industry, as many believe the law would stifle innovation in the European Union.

Overall, this will lead to insufficient consumer protection, huge privacy concerns, a reduction of Europe’s competitiveness and a missed opportunity for better law enforcement at European level.

Blockchain for Europe

Read our full coverage here.

A Privacy-Focused Alternative to the Digital Dollar?

Also this week, US Congressman Stephen Lynch introduced a bill for the development of an “electronic dollar”. The Electronic Currency and Secure Hardware (ECASH) Act would task the US Treasury (rather than the Federal Reserve) with developing and issuing an electronic version of the US dollar.

This is a different concept from CBDCs (Central Bank Digitial Currency), and would be much more akin to an analog version of cash rather than a programmable, DLT-based, digital dollar.

Lynch said that the intent of the bill is to try to replicate as much as possible the fungibility and anonymity of cash and that he is opposed to the “full-scale surveillance of every transaction” that would be possible with account-based CBDCs.

The electronic dollar proposed in the ECASH bill would be deployed on the hardware device itself, and would not be based on a distributed or centralized ledger.

Elizabeth Warren thinks its time to “go in the direction” of a CBDC

Another week, more cryptocurrency bashing from Elizabeth Warren. This week in an interview with CNBC Warren said buying Bitcoin was like “buying air”. The US Senator said that “instead of bitcoin, we could be talking about digital currency” – that is a CBDC issued by the Federal Reserve.

Unpopular Indian Crypto Tax Law Goes Live

Last week we reported that the Indian government voted in favor of a new law that would impose a 30% tax on crypto investors and traders. Bizarrely, the new law doesn’t allow Indians to offset their losses on different cryptos.

The law was overwhelmingly unpopular, with many believing that it will stifle innovation in India. Despite the uproar, the law came into force on April 1st.

MIT and the Digital Pound

Last Friday, the Bank of England announced they would be collaborating with the Digital Currency Initiative (DCI) at MIT to research solutions for a digital pound. While the Bank of England reiterated that no decision has yet been made on whether to introduce a CBDC in the UK, the partnership will focus on exploring “potential technical challenges, trade-offs, opportunities and risks involved in designing a CBDC system“.

The Bank of Canada also recently announced they are partnering with the DCI for a similar exploratory exercise on CBDCs.