After the FTX Fraud, It’s Time to Be Even More Bullish on Crypto

When the Securities and Exchange Commission announced charges against FTX CEO Sam Bankman-Fried this week, it ended a nearly 2-month-long drama.

Bankman-Fried’s unethical business setup between his hedge fund Alameda Research and crypto exchange FTX (including the 130 related companies now in bankruptcy) were enough of a worry for the broader cryptocurrency economy and devotees of decentralization. But as we’ve come to learn, the abuse of customer money was far worse.

There were billion-dollar loans to Alameda Research and FTX executives and staff, comingling of customer and company assets between the various entities, and seemingly invisible liquidity printed up on one company’s balance sheet while it was actually on another. These meet the classic definitions of fraudulent behavior.

Many perceive the FTX collapse as a novel crypto affair, dealing with digital assets and cryptocurrencies. But FTX’s downfall is best described as a typical financial fraud found on Wall Street.

FTX ran a fractional reserve bank using printed money as collateral, gambling away customer money in risky products while paying out clients using money from other investors.

Bernie Madoff could not have designed it better.

While many will claim that more regulation or oversight is necessary for the crypto industry in the aftermath, the case of FTX seems more like a failure of existing systems than a loophole.

Regulators at the Securities and Exchange Commission, the Commodity Futures Trading Commission and members of Congress regularly met with FTX’s team, lavishing praise on their meteoric rise.

Celebrity endorsements, Super Bowl ads and stadium sponsorship deals gave the offshore exchange clout with mega investors such as Kevin O’Leary and Bill Ackman, who still defend Bankman-Fried. Highly regarded banks and investment funds similarly poured billions of dollars into the company’s pockets while doing limited due diligence.

Whatever failure that may be, it is not one of unclear regulation or the speculative nature of digital currencies.

Bitcoin — as a decentralized digital currency — did not cause each of the player in the FTX saga to look the other way.

A prudent approach would be to apply cautious regulation that recognizes the revolution of cryptocurrencies and enforces existing laws.

The answer to preventing the next FTX lies less in creating convoluted regulatory environments stricter than the banking system, as some propose, and more in applying existing laws while promoting a pathway for legitimate entrepreneurship.

Self-dealing, fraud and market manipulation remain illegal and should be prosecuted.

These are basic principles that we have all agreed to follow, and one we hope our public officials recognize, no matter the asset.

Originally published here

Les vrais progressistes soutiendraient le Bitcoin et l’économie de la cryptographie, et non la réglementeraient

Lorsque les progressistes politiques abordent des sujets tels que l’inflation, les impôts ou les méfaits des entreprises, ils prétendent parler au nom du peuple. Qu’il s’agisse de la classe ouvrière ou des minorités, les progressistes visent à façonner la politique gouvernementale pour protéger ceux qui risquent constamment d’être exploités.

Mais lorsque ces mêmes personnes, comme la sénatrice américaine Elizabeth Warren (D-MA), se tournent vers des technologies innovantes comme Bitcoin et sa progéniture crypto (crypto-monnaies avec un immense potentiel pour autonomiser les Américains des classes moyennes et inférieures), ils préfèrent le rouleau compresseur à la Coup de main.

De nombreux idéaux progressistes pourraient être atteints avec les crypto-monnaies : non détenues par les banques, pas d’intermédiaires, des frais peu élevés, des transactions rapides et une bouée de sauvetage contre une vie piégée de dettes et de pauvreté.

N’importe qui peut télécharger un portefeuille mobile à partir de sa boutique d’applications pour smartphone, générer une adresse Bitcoin et recevoir immédiatement de petites portions de la crypto-monnaie d’une manière sécurisée et sans confiance, quels que soient sa race, son sexe, son orientation, son statut économique ou même son emplacement.

L’auteur Alex Gladstein a fourni de nombreuses histoires sur le Bitcoin offrant une véritable alternative, donnant aux citoyens les moyens d’agir dans les pays où les devises gonflent rapidement ou dans les pays autoritaires avec des contrôles de capitaux.

Pour les près de 6 millions d’Américains qui ne sont pas bancarisés (sans compte bancaire), l’utilisation de crypto-monnaies comme Bitcoin pourrait être une aubaine. Il n’y a aucune exigence de revenu pour utiliser Bitcoin, pas besoin d’une adresse physique et pas besoin d’utiliser une pièce d’identité. 

Pour les millions d’Américains qui envoient des fonds à l’étranger, un nombre croissant d’entre eux utilisent des transactions Bitcoin à faible coût au lieu des services de virement bancaire traditionnels, qui s’accompagnent souvent de frais à deux chiffres.

Cash App, l’une des applications financières les plus populaires, a entièrement Bitcoin intégré pour envoyer et recevoir des fonds entre amis et famille, et un nombre croissant de marchands en ligne et en personne acceptent désormais Bitcoin.

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Real Progressives Would Support Bitcoin and the Crypto Economy, Not Regulate It Away

When political progressives address topics like inflation, taxes, or corporate wrongdoing, they claim to speak for the people. Whether it’s the working class or minorities, progressives aim to shape government policy to protect those at constant risk for exploitation.

But when these same individuals, such as U.S. Senator Elizabeth Warren (D-MA), turn their focus to innovative technologies like Bitcoin and its crypto offspring (cryptocurrencies with immense potential to empower middle and lower-class Americans) they prefer the steamroller to the helping hand.

Many progressive ideals could be achieved with cryptocurrencies: not owned by banks, no middlemen, low fees, fast transactions, and a lifeline from a trapped life of debt and poverty. 

Anyone can download a mobile wallet from their smartphone app store, generate a Bitcoin address, and immediately receive small portions of the cryptocurrency in a trustless, cryptographically secure manner regardless of their race, gender, orientation, economic status, or even location. 

Author Alex Gladstein has provided plenty of stories of Bitcoin providing a real alternative,  empowering citizens in countries with rapidly inflating currencies, or in authoritarian nations with capital controls.

For the close to 6 million Americans who are unbanked (without bank accounts)  using cryptocurrencies like Bitcoin could be a godsend. There are no income requirements to use Bitcoin, no need for a physical address, and no need to use an ID. 

For the millions of Americans who send remittance payments abroad, a growing numberuse low-fee Bitcoin transactions instead of traditional wire transfer services, which often come with double-digit-percentage fees.

Cash App, one of the most popular finance apps, has fully integrated Bitcoin for sending and receiving funds among friends and family, and a growing number of both online and in-person merchants are now accepting Bitcoin.

While there will inevitably be some technical challenges, especially for senior citizens not enamored by technology, the experience of growing adoption in developing countries gives hope to the idea that cryptocurrencies could be a progressive triumph.

The disintermediation from corporations or politically connected entities should thrill a populist champion like Senator Warren, who has made her reputation fighting banker-bailouts and criticizing cozy relationships between financial institutions and the Federal Reserve.

Unfortunately, in the wake of the collapse of FTX, one of the world’s largest cryptocurrency exchanges, progressives like Senator Warren want to completely snuff out the crypto ecosystem, rather than simply enforce the laws to rid it of bad actors.

The actions of FTX CEO Sam Bankman-Fried, the crypto wunderkind and once-second-largest political donor to Democrats, now alleged to be the kingpin of an $8 billion fraud or Ponzi scheme, have brought us to this moment. The allegations include blurry accounting silos between customer and company accounts, missing funds, and billions of dollars’ worth of tokens given to his own hedge fund Alameda Research to leverage economic power in the crypto markets.

Senator Warren has a right to be outraged, as do millions of FTX customers with funds either missing or locked up in bankruptcy, and millions more crypto-holders are now dealing with the price fallout.

But as the Senator states in a recent op-ed, these alleged crimes are addressed by existing law enforcement and regulatory agencies, whether the FBI or SEC. Fraud, insider dealing, and market manipulation aren’t suddenly different because they occur with crypto tokens.

Where the Senator strays too far is in seeking to completely dismantle crypto alternatives and the economy supporting them.

One of her objections is the industry of proof-of-work mining that uses electricity and computing power to confirm new blocks and protect the Bitcoin blockchain. In her view, these firms are “polluters,” straining electricity grids. In any other progressive era of economic growth, these firms would be championed as innovative upstarts charting the American dream. 

The growing share of miners using renewable energy and repurposing methane pollutionfrom gas and oil wells to fuel machines, thereby capping greenhouse gas emissions, would be enough to headline any global climate change conference. But in progressive states like New York, lawmakers have all but killed this.

That same mentality drives Senator Warren’s desire to ramp up surveillance on each and every crypto transaction. This would also be a dangerous precedent.

Donating crypto to a pro-choice charity or an environmental activist group could make someone a target of figures who oppose these causes. Tech-savvy grandmothers sending crypto payments to their grandchildren, or workers who opt to receive their payments in Bitcoin, would effectively be treated as criminals. Elevating government power to this degree, while reducing our individual liberties, is far from progressive.

While it is nowhere near as mainstream as its proponents would hope, Bitcoin was created because of the flaws of the traditional banking system. Using regulations and laws to strangle it down into Banking 2.0 not only misses the point, but it erases the opportunity for millions of Americans who want an alternative.

Our political officials should moderate their knee-jerk instinct to regulate a new technology like Bitcoin into oblivion. Technological progress should be an inevitable part of a pro-growth agenda in political capitals, and Bitcoin is only one example. Cryptocurrencies may achieve broader adoption, or they may fail, but we deserve an opportunity to try. The government should in all circumstances be tech-neutral: it shouldn’t try to pick the winners or losers of any nascent industry.

Wealthy progressive legislators may not need Bitcoin on a daily basis, but there are millions of others who would greatly benefit from the option of being able to use it. 

Using the failures and crimes of politically connected crypto-exchanges like FTX to effectively chill innovation in this sector and regulate it away would deprive many Americans of new economic technology that could change lives for the better. That’s the furthest thing from progressive, and would severely restrict our capacity for entrepreneurship, innovation, and human flourishing.

Originally published here

Kryptospenden für beide Kriegsparteien

Wer Spenden für ukrainische Organisationen sammelt, kann diese in Kryptowährung umgewandelt und so sehr viel schneller und unkomplizierter als beim klassischen Geldtransfern versenden: In wenigen Minuten sind sie in der Ukraine angekommen. Über ein normales Bankkonto kann eine Überweisung schon mal drei bis zehn Tage dauern. Dazu kommen Transaktionsgebühren und möglicherweise ein schlechter Wechselkurs der Bank.

Spenden für die ukrainische Regierung

Aber nicht nur Nichtregierungsorganisationen nutzen Kryptowährungen für ihre Spenden in die Ukraine, sondern auch die Regierung des Landes selbst. „Wir bekamen Anfragen von unserem Militär, dass sie verschiedene Dinge bräuchten. Die Kosten dafür konnte die ukrainische Nationalbank am zweiten Kriegstag nur in sehr geringem Maße über klassische Geldtransfers zahlen“, so der stellvertretende ukrainische Minister für digitale Transformation im Oktober im Podcast Public Key.

Daher hätten Kryptowährungen in den ersten Kriegstagen sehr dabei geholfen, nötige militärische Ausrüstung zu besorgen. Bisher hat so der ukrainische Staat allein mehr als 60 Millionen Dollar gesammelt. Einen Großteil davon in den ersten Wochen.

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What the collapse of FTX means for crypto in Europe

Just a few days ago, FTX was the second-largest crypto exchange in the world with a significant user base across the European Union. Now, after revelations of the company’s finances and opaque dealings by CEO Sam Bankman-Fried, the company faces a collapse causing contagion across the cryptocurrency economy. This will likely have a large impact on how crypto is both viewed and regulated here in Europe.

Bankman-Fried, the Bahamas-based American billionaire entrepreneur, was a primary protagonist in the folding of crypto platforms and hedge funds like Celsius Network, Voyager, and Three Arrows Capital earlier this year, offering nearly $1 billion to buy or bail out firms, prop up those facing insolvency and eye acquisitions worth hundreds of millions.

Much of this was carried out by FTX, but also its sister hedge fund Alameda Research, owned by Bankman-Fried and also headquartered in the Caribbean, whose balance sheets were likely propped up with FTX customer funds.

In September, FTX’s European office, called FTX EU and headquartered in Switzerland, won approval from EU member state Crypus to operate as an investment firm following a local acquisition.

In a press release, Bankman-Fried said the license was “an important step in achieving our goal of becoming one of the most regulated exchanges in the world,” and was the final step to offering its crypto services to all citizens of the European Economic Area.

At least in the United States, Bankman-Fried used both his money and influence to have a say in how cryptocurrency regulation. He revealed he was willing to spend up to $1 billionto fund the Democratic Party in the 2024 election. That plan has now evaporated.

Whether his influence was as powerful or significant in the EU remains to be seen, but the broader lesson hinges on what the collapse means for consumers and the future of crypto regulation in Europe, which is currently being shaped.

German MEP Stefan Berger, a leader negotiator on the Markets in Crypto-Assets framework many European officials hope will become a global standard on cryptocurrency regulation, tweeted that this scenario would effectively have been addressed by MiCA. “MiCA is the bulwark against Lehman Brothers moments such as the FTX case,” he told the crypto news site The Block.

And while that claim is a big one, it should be noted that MiCA rules, as they stand, have the strongest requirements for tokens such as stablecoins and their reserves — cryptocurrencies pegged to the Euro or US dollar — rather than exchanges. It also contains more provisions on financial surveillance and stopping “money laundering” (which appears 16 times in the document) than segregation of customer funds.

The latest available text on MiCA requires that “Crypto Asset Service Providers” (exchanges) have “sufficient capacity to ensure orderly trading” and “shall segregate holdings on behalf of their clients from their own holdings”

That remains the most pointed part of the publicly available text when it comes to exchange reserves and segregation of funds, but the events of the last week could continue to change the text before it is formally introduced next year.

For those of us with a significant interest in Bitcoin and other cryptocurrencies — protocols designed to be decentralized — it was always understood that the future of cryptographic digital assets relies on people learning about self-custody, holding their own cryptocurrencies in a wallet protected with private keys. That is what sets cryptocurrencies like Bitcoin apart from the traditional banking system. That, above any European legislation or good-natured incentive, is what will protect consumers.

With so much crypto value tied up on exchanges and lending platforms rather than people’s own wallets, there are hundreds of billions of euros at risk for consumers. As we now see with FTX’s collapse, it only takes one liquidity event to send shockwaves.

It would benefit us all if rules help bring regulatory clarity, keep shady actors at bay and provide financial transparency. If we want to craft the future of decentralized digital money, it will mean smarter rules that punish bad actors while promoting financial sovereignty. That’s what consumers deserve.

Originally published here

Our Well-Timed Warning on FTX, Bankman-Fried and Future Cryptocurrency Regulations

This letter was sent to Senators, Congressmen of relevant committees, and regulators in the Consumer Financial Protection Bureau, Securities and Exchange Commission, and Commodity Futures Trading Commission in the aftermath of the FTX collapse. The previous letter can be viewed here.

Referring to the previous letter we sent to lawmakers and regulators on October 26, 2022, warning of the influence and inherent financial risks posed by then FTX CEO Sam Bankman-Fried and his related companies, here we offer our thoughts on what you should consider for future regulation on digital assets, cryptocurrencies, and the platforms that use them.

As you will have read by now, the alleged criminal actions of Mr. Bankman-Fried and his affiliated companies (FTX International, FTX Europe, Alameda Research, etc.), have led to several bankruptcy filings, will likely lead to expensive lawsuits, and, without a doubt, will invite investigations and questions from your colleagues and committees in Congress. All of these are necessary and prudent.

The halting of withdrawals for billions of dollars of customer funds, the intermingling of company and customer assets, the collateralization of new crypto tokens backed by nothing, and the unsustainable leverage conspired to create one of the most calamitous events in recent financial history. It is a stain on the reputation of creative entrepreneurs and builders providing value in the cryptocurrency space. This is made all the more troubling by the influence of this company and its leaders in our nation’s capital.

The significant influence of Mr. Bankman-Fried and his companies among Congressional members and staff, donations to political campaigns, and the close relationship with regulators present a damning case of what happens when politically connected firms aim to control and shape legislation without input from consumers and citizens.

While decision-makers were eager to meet with Mr. Bankman-Fried and mirror his biased suggestions on cryptocurrency policy in legislation and enforcement actions, consumer groups like ours sounded the alarm about the conflicts of interest detrimental to sound and principled policy for the millions of Americans who use and invest in cryptocurrencies like Bitcoin.

The Consumer Choice Center began writing publicly about the conflicts of interest and risky financial dealings of these companies and Mr. Bankman-Fried in September 2022, and how they would pose a considerable risk both to the legitimate cryptocurrency industry and to the savings and investments of millions of consumers. We remain steadfast in our conviction.

That said, as consumer advocates, we remain optimistic about the promises of Bitcoin, its cryptocurrency offspring, and the innovative blockchains, decentralized technologies, and crypto services that have evolved around them.

Users of decentralized technologies, however, do not need an industry approach to regulation. Regulations exist to set the rules of the game, not to chart the leaders of the game. This previous approach gave cover to FTX and its affiliated companies and has led to the disaster we see today.

The main caution we invoke, therefore, is that many proposed regulations aim to cement existing industry players and lockout innovative upstarts, while at the same time requiring the same restrictive rules that caused many people to explore cryptocurrencies in the first place.

As we have stated, if rules on crypto and its customers help solidify the financial portfolios, positions, and stock prices of only a select few companies, this will drive innovation away from our shores.

The bad actions of this particular company, while shocking and injurious to many, reflect the mistakes and alleged crimes of those involved. They do not, in any certain terms, condemn the wonderful possibilities of a crypto future nor the millions of consumers who responsibly use these technologies.

The frauds allegedly perpetrated are not too far removed from those of regulated financial firms that have deservedly reaped the consequences of misbehavior, either by the market or law enforcement. That the end product was cryptocurrencies instead of credit default swaps or mortgages makes no difference.

Fraud is fraud and remains illegal no matter what product a company is selling.

This is a stark contrast to the system of fractional-reserve banking that now underlies much of the American financial system and creates the incentives of malfeasance aided by loose monetary policy.

We should not mistake the ills of the current system for those of cryptographically secure digital assets.

With that in mind, rather than the approaches of several self-interested industry leaders, consumers deserve regulation on cryptocurrencies and digital firms that enforce existing rules on fraud (known as “rug pulls”), remain technologically neutral, offer reasonable and minimal taxation, and provide legal transparency. Punishing fraud and abuse, insider trading, and self-dealing should remain the focus.

As consumer advocates, we promote the principle of “self-custody” for crypto consumers, holding private keys to digital assets. This is a cryptographically secure method of controlling cryptocurrencies as originally intended, and one that should be an industry standard. This is the strongest method by which exchanges, brokerages, and those who regulate them can protect consumers. 

The aim of cryptographic digital assets and decentralized digital cash, since the founding of Bitcoin in 2008 by Satoshi Nakamoto, has centered on creating permissionless, peer-to-peer transactions offering a final settlement in a decentralized manner. That should be the guiding principle rather than temporary self-interest.

The whims of a select few industry players, however successful they may be, cannot be the guiding light for the future of decentralized digital money, as the saga of FTX has proven.

The Consumer Choice Center created a policy primer on Principles for Smart Cryptocurrency Regulations in September 2021 to highlight these concerns and we hope you will apply them.

We remain at your disposal for any further exploration of how best to craft rules, guidance, and regulation on the future of cryptocurrencies in our country, so that all society may benefit.

Sincerely yours,

Yaël Ossowski

Deputy Director

Consumer Choice Center

Aleksandar Kokotovic

Crypto Fellow

Consumer Choice Center

Democrats’ ‘newest megadonor’ plummets on Election Day, forced to sell crypto company to biggest rival

Sam Bankman-Fried, the CEO of crypto exchange FTX and considered the Democrats’ “newest megadonor” ahead of the 2022 midterm elections, reportedly saw around $6 billion of withdrawals within 72 hours before Tuesday morning, forcing him to sell the company to its biggest rival on Election Day. 

Reuters reported that Changpeng Zhao, the leader of competitor Binance, said the company signed a nonbinding agreement on Tuesday to buy FTX’s non-U.S. unit to help cover a “liquidity crunch” at the rival exchange. The stunning bailout came about as American voters simultaneously went to the polls. 

“This is a truly crazy event in startup world. Dot-com bust level event,” tech reporter Eric Newcomer tweeted of the sale. 

Bankman-Fried, 30, was the second-biggest individual Democratic donor this election cycle behind top-ranking liberal billionaire contributor George Soros. He ranked sixth on the overall list of individual donors for the 2022 midterms regarding federal contributions. 

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Les cryptomonnaies, NFT et autres tokens divers et variés attirent toute l’attention des législateurs européens. 

Le règlement de l’Union européenne sur les marchés de crypto-actifs (MiCA), en chantier depuis début 2018, est enfin finalisé. Cette législation vise à « harmoniser le cadre européen pour l’émission et la négociation de divers types de tokens cryptographiques dans le cadre de la stratégie de l’Europe en matière de finance numérique ».

Depuis sa première annonce, il a suscité de nombreuses discussions et quelques controverses. Il a longtemps été redouté – mais aussi salué – par l’industrie des cryptomonnaies.

Examinons pourquoi ce texte de loi pourrait être l’un des plus importants que nous ayons vus pour le marché des cryptos jusqu’à présent.

Le MiCA sera applicable dans tous les États membres de l’UE, ainsi qu’avec toutes les entreprises opérant dans l’UE. Il a d’abord été discuté suite au marché haussier de 2017, une période enivrante où le Bitcoin atteignait de nouveaux sommets. A l’époque, plus d’un millier de tokens ont commencé à fleurir au milieu d’Initial Coin Offerings (ICOs, l’équivalent des introductions en Bourse pour les actions), et plus de la moitié avaient disparu moins de quatre mois après leur création.

Un marché plus rapide que la loi

La Commission européenne a publié son plan d’action fintech en mars 2018 et a demandé à l’Autorité bancaire européenne (ABE) et à l’Autorité européenne des marchés financiers (AEMF) d’examiner si le cadre réglementaire européen existant en matière de services financiers s’appliquait aux crypto-actifs. Après avoir décidé que la plupart des crypto-actifs n’entraient pas dans le champ d’application de la réglementation financière actuelle, les régulateurs ont commencé à travailler sur un nouveau cadre législatif dans le cadre du « Digital Finance Package », qui est finalement devenu le MiCA.

Depuis le début de ces discussions, le marché des cryptomonnaies a connu un marché baissier, atteignant son point le plus bas dans les premiers jours suivant les annonces de la pandémie. Un autre marché haussier a suivi, avant que la tendance à la baisse reprenne le dessus, fin 2021.

De nouvelles craintes réglementaires sont apparues au cours des deux premiers trimestres de 2022. Puis des événements tels que l’effondrement du stablecoin Terra et les faillites de Three Arrows Capital et Celsisus ont suivi.

Dans un environnement aussi changeant, il n’est pas difficile de comprendre que le champ d’application du MiCA a dû évoluer par rapport à sa conception initiale. Les NFT n’existaient pratiquement pas à l’époque de la conception de la législation ; le « DeFi Summer » n’était pas d’actualité ; Meta s’appelait encore Facebook, et travaillait à ce moment-là sur son « Libra », un projet fort méprisé (vous en souvenez-vous ?).

Il n’a pas été facile de créer un cadre juridique offrant une sécurité juridique à la fois aux investisseurs et aux émetteurs de cryptomonnaies dans ce type d’environnement, et les régulateurs sont retournés à la table à dessin à plusieurs reprises. Ce que nous avons devant nous aujourd’hui sera le texte de loi le plus important pour les cryptomonnaies jusqu’à maintenant.

De nouvelles règles pour tout le monde

L’une des principales règles qui affectera le secteur est l’obligation à laquelle devront se soumettre les Crypto Asset Service Providers (CASP), c’est-à-dire les entreprises d’investissement et toute personne fournissant des services de garde (« staking »). Ils seront responsables de toute perte de fonds de clients, sauf s’ils sont en mesure de prouver qu’elle résulte d’événements indépendants de leur volonté. Un certain nombre de mesures visent à prévenir les délits d’initiés et les manipulations de marché.

Au cours du processus d’élaboration du MiCA, plusieurs discussions animées ont eu lieu sur la preuve de travail (« proof of work »), ce que l’on appelle le « minage », et les effets potentiels de cette pratique sur l’environnement. Malgré la pression importante exercée par certains groupes, les législateurs ont, à juste titre, évité toute interdiction potentielle de la preuve de travail, qui est l’une des méthodes utilisées pour vérifier les transactions sur la blockchain (par exemple celle de Bitcoin). Toutefois, les acteurs du marché des cryptomonnaies seront tenus de déclarer des informations sur leur empreinte climatique.

Quant aux protocoles financiers décentralisés, ils n’entrent pas dans le champ d’application du MiCA et la Commission européenne publiera un rapport distinct à leur sujet en 2023.

Les cryptomonnaies stables, ou stablecoins, ont fait l’objet d’une grande préoccupation et de nombreux débats lors du processus de rédaction du MiCA. Suite aux préoccupations exprimées par le Conseil européen, des restrictions supplémentaires sur l’émission et l’utilisation de ces monnaies ont été ajoutées à la législation. Les stablecoinspourraient selon eux constituer une menace pour la souveraineté monétaire et « les banques centrales devraient pouvoir demander à l’autorité compétente de retirer l’autorisation d’émettre des tokens référencés par des actifs en cas de menaces sérieuses ».

Comme indiqué dans le texte, les tokens référencés par des actifs (ART) doivent pouvoir être rachetés à tout moment au prix d’achat, ce qui rend plus ou moins impossible le lancement de tout stablecoin non libellé en devises. Cela rend presque impossible l’innovation dans ce domaine et prive les consommateurs européens de la possibilité de participer à de tels investissements potentiels. Avec les plafonds d’émission et les limites sur les paiements à grande échelle pour les stablecoins non libellés en euros, cela crée un environnement confus et peu convivial pour les consommateurs lorsqu’il s’agit de ces tokens.

Et pour les NFT ?

Même avec toutes les mises à jour et la volonté de suivre les évolutions du secteur du crypto, le MiCA ne couvre pas certains éléments très importants de la crypto-économie actuelle.

Les NFT sont pour la plupart hors du champ d’application de cette législation. Cependant, les membres du Parlement européen ont fait valoir que de nombreux NFT sont en fait utilisés comme des instruments financiers et pourraient être soumis à des normes différentes.

En revanche, les NFT fractionnés, ainsi que les « tokens non fongibles dans une grande série ou une collection doivent être considérés comme un indicateur de leur fongibilité » et seront traités non pas comme des crypto-actifs uniques, similaires à l’art numérique ou aux objets de collection.

Les actifs ou les droits représentés par les NFT doivent également être uniques et non fongibles pour qu’un actif soit considéré comme tel. Le fait que les autorités nationales chargées de l’application de la loi puissent adopter des points de vue divergents sur la question de savoir si un actif peut être considéré comme non fongible ou non, s’il nécessite un livre blanc (whitepaper) ou comment il sera réglementé, est quelque chose qui devrait être préoccupant. Cela pourrait en effet potentiellement créer de nombreuses incohérences et préoccupations tant pour les émetteurs que pour les consommateurs. L’UE devrait publier un autre rapport sur les NFT afin d’apporter plus de clarté dans ce domaine.

Une fois que les traducteurs en auront terminé avec la version finale du texte, on s’attend à ce que le MiCA soit publié officiellement aux alentours d’avril 2023, ce qui signifierait que les règles relatives aux cryptomonnaies stables commenceront à être appliquées en avril 2024 et que les règles du CASP seront appliquées à partir d’octobre 2024.

L’Union européenne étant la troisième économie mondiale, les effets de cette législation auront un large impact sur le secteur, sur les consommateurs et les investisseurs, et auront certainement une certaine influence sur les autres régulateurs dans le monde.

Le fait que l’UE soit à l’avant-garde de la réglementation de l’innovation technologique est quelque chose que nous n’avons pas souvent vu dans le passé.

Avec l’adoption du MiCA, il appartiendra aux acteurs du secteur et aux consommateurs de s’assurer que les mesures introduisent la certitude et permettent à l’innovation de se développer. Et, si ces priorités sont maintenues, que ces mesures soient copiées et appliquées ailleurs. Quoi qu’il en soit, un long et passionnant voyage nous attend dans le domaine.

Originally published here

Consumer Group Warns Regulators of FTX CEO’s influence on Upcoming Cryptocurrency Regulations

Washington, D.C. – Today the Consumer Choice Center sent a letter to Senators and Representatives involved in crafting and approving future cryptocurrency regulations, warning them of the substance of regulatory recommendations made by FTX CEO Sam Bankman-Fried, which he made in a recent company blog post.

Bankman-Fried has, in recent years, become a primary player in American domestic politics, pledging to spend up to $1 billion to fund the Democratic Party’s 2024 efforts, and a notable figure promoting cryptocurrency regulatory policy — much of which would benefit his company and properties.

Yaël Ossowski, deputy director of the consumer advocacy group Consumer Choice Center, said “The reason for cautioning lawmakers is that the decentralization that powers the entire crypto ecosystem is at stake if they only hear from vested interests from oscillating agendas that won’t necessarily favor consumers.

“For those of us with a significant consumer interest in Bitcoin and other cryptocurrencies — protocols designed to be decentralized — to see so much capital and control vested in one person who has a major influence in crafting legislation to impact millions is a warning sign,” added Ossowski.

“Users of decentralized technologies do not need an industry approach to regulation. Regulations exist to set the rules of the game, not to chart the leaders of the game. The main caution we invoke is that many proposed regulations aim to cement existing industry players and lockout innovative upstarts, while at the same time requiring the same restrictive rules that caused many people to explore cryptocurrencies in the first place.

“Recent comments and suggestions by FTX CEO and noted Democratic Party fundraiser Sam Bankman-Fried, especially, leave us concerned. If rules on crypto and its customers help solidify the financial portfolios, positions, and stock prices of only a select few companies, this will drive innovation away from American shores. While many proposals laid out by Mr. Bankman-Fried do address consumer needs — especially as it relates to hacks, scams, and protection of funds — his recommendations for a highly licensed regime on all sides of digital transactions, especially Decentralized Finance (DeFi), go against the spirit of why cryptocurrencies were created in the first place,” he said.

“Last year, my colleagues and I at the Consumer Choice Center released our Principles for Smart Crypto Regulationunderscoring the need for preventing fraud, pursuing technological neutrality, reasonably low taxation, and legal certainty and transparency, which we believe will be a better framework for future regulation.

“It would benefit us all if future rules help empower consumers and the firms they interact with, punish fraud, abuse, and insider trading, and provide financial transparency.  The whims of a select few industry players, however successful they may be, cannot be the guiding light for the future of decentralized digital money,” concluded Ossowski.

***CCC Deputy Director Yaël Ossowski is available to speak with accredited media on consumer regulations and consumer choice issues. Please send media inquiries to yael@consumerchoicecenter.org.***

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Washington, Ottawa, Brussels, Geneva, and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org.

Europe’s comprehensive crypto legislation is being adopted. Here’s what you need to know.

The European Union’s Markets in Crypto Assets Regulation (MiCA), a legislation that aims to “harmonize the European framework for the issuance and trading of various types of crypto tokens as part of Europe’s Digital Finance Strategy,” which has been in the works for years, is finally ready. It has caused plenty of discussions, some controversy and has been feared — but also welcomed — by the crypto industry. Let us look into the process that led us here, what is still to come, and why this piece of legislation might be one of the most significant and comprehensive that we have seen in crypto yet.

MiCA, which will be applicable across all the member states in the European Union as well as with all businesses operating in the EU, has been in the works since early 2018. It first came into discussion following the bull market of 2017, a heady time where Bitcoin was making its new highs, a thousand tokens started flourishing amid Initial Coin Offerings (ICOs) out of which more than half failed less than 4 months after the offering. 

The European Commission published its Fintech Action Plan in March 2018 and gave the mandate to the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) to review if the existing EU financial services regulatory framework applied to crypto assets. After deciding that most crypto assets are outside of the scope of current financial regulations, regulators began working on a new framework under the Digital Finance Package which eventually became MiCA. Since its initial inception, the crypto market went through a bear market, reaching its bottom in the early days of the pandemic followed by another bull market before taking a downward trend again in late 2021. New regulatory fears were ignited in the first two quarters of 2022 followed by events such as the Terra Luna stablecoin collapse and Three Arrows Capital and Celsisus bankruptcies. 

In such a fast-paced environment, it is not difficult to understand that MiCA’s scope had to evolve from its original conception. NFTs barely existed when the legislation was first being conceived, DeFi summer was nowhere in sight and Meta was still called Facebook and working on its much scorned Libra project (remember that one?). Creating a legal framework that would provide legal certainty for both investors and issuers in that sort of fast pace environment was not easy, and the regulators have been back to the drawing board a few times. What we have in front of us now will be the largest piece of legislation around crypto thus far. 

One of the major rules that will affect the industry is the requirements set for Crypto Asset Service Providers (CASPs) and investment firms and anyone providing custodial services. They will be liable for any loss of customer funds unless they are able to prove it was a result of events beyond their control. A number of measures deal with preventing insider trading and market manipulation. 

In the process of formulating MiCA, a number of heated discussions were held on proof-of-work, so called ‘mining’, and potential environmental effects of this practice. Even with significant pressure coming from certain groups, the legislators rightfully steered away from any potential bans on proof-of-work. However, actors in the crypto market will be required to declare information on their climate footprint. 

When it comes to decentralized financial protocols, they are not in the scope of MiCA and the European Commission will be publishing a separate report on them in 2023.

A large concern and a great deal of debate during the process of writing MiCA was focused on stablecoins. Following concerns expressed by the Council, additional restrictions on the issuance and use of stablecoins have been added to the legislation. Notably, MiCA has expressed the view that stablecoins could pose a threat to monetary sovereignty and opined that “central banks should be able to request the competent authority to withdraw the authorisation to issue asset-referenced tokens in the case of serious threats”. 

Asset referenced tokens (ARTs) as noted in the legislation should be redeemable at purchased price at all times, which more or less makes any non-fiat denominated stablecoins not viable to launch, making it almost impossible for innovation in that field to take place and stripping away European consumers from participating in such potential investments. Together with issuance caps and limits on large scale payments for non-euro denominated stablecoins, this creates a confusing and not consumer-friendly environment when it comes to these tokens.

Even with all the updates and desire to keep up with the developments in the crypto industry, MiCA does not cover some very important parts of the crypto economy today. NFTs are mostly outside of the scope of this legislation. However, EU parliament members argued that many NFTs are actually used as financial instruments and could be subject to different standards. Fractionalized NFTs on the other hand, as well as “non-fungible tokens in a large series

or collection should be considered as an indicator of their fungibility” and will be treated not as unique crypto assets similar to digital art or collectibles. 

The assets or rights represented by the NFT should also be unique and non-fungible for the asset to be considered as such. The fact that national enforcers could take inconsistent views on whether an asset can be considered non-fungible or not, if it requires a whitepaper or how exactly will it be regulated is something that should be of concern as it could potentially create many inconsistencies and concerns both for issuers and consumers. The EU is expected to publish another report on NFTs bringing more clarity to this area.

After the linguists are done with the final version of the text, the expectations are that MiCA will appear in the official journal sometime around April 2023, which would mean that stablecoin rules will start applying in April 2024 and CASP rules will be applied starting from October 2024. Considering the European Union is the third largest world economy, the effects of this legislation will have a broad impact on the industry, on retail consumers and investors, and definitely have some swway on other regulators around the world.

Having the European Union on the forefront of regulation of tech innovation is something that we have not seen much in the past. With MiCA being adopted, it will be up to the industry and consumers to make sure that the measures introduce certainty and allow for more innovation to flourish. Also, if those priorities stick, that these measures are copied and applied elsewhere. Either way, a long and exciting journey is ahead for everyone — regulators, investors and the broader crypto community.

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