Welcome to Law Decoded, your weekly digest of all the major developments in the field of regulation.
There was some substantial good news for crypto last week, but the prevailing storyline is still the unfolding of FTX. While the extradition of the failed exchange’s founder Sam Bankman-Fried seemed pretty logical from the beginning of the saga, last week, the 30-year-old got the first official call: The Texas State Securities Board (SSB) invited the former CEO to attend the hearing on the alleged sale of unregistered securities on Feb. 2. SSB’s director of enforcement Joe Rotunda hopes to get a Cease and Desist order from the judge during the hearing.
However, the man himself doesn’t rush to get back to America, even for the Congress invitation. Bankman-Fried has signaled he’s unwilling to testify before the United States Congress until he’s “finished learning and reviewing what happened.”
Meanwhile, the FTX crush continues to cause a ripple effect all over the world. In Singapore, Prime Minister Lee Hsien Loong and Deputy Prime Minister Lawrence Wong are set to face grilling questions for their failure to protect retail investors. As Singaporean state-backed investor Temasek was one of 69 investors to invest in the FTX crypto exchange’s $420 million funding round in October 2021, opposition MPs have recommended a bipartisan committee to question Temasek on its investment strategies.
In Europe, the president of the European Central Bank, Christine Lagarde, highlighted the FTX failure stating the necessity of the second package of crypto regulations after the Markets in Crypto-Assets (MiCa) would come into law. Her United States House Financial Services Committee colleagues will also pay closer attention to the FTX case during the special hearing scheduled for Dec. 13. And the Commodity Futures Trading Commission (CFTC) already held one — answering the “How did it happen?” questions its Chairman Rostin Behnam predictably asked for more power to the Commission.
Brazil passes law to legalize crypto as a payment method
And now for the good news! The Chamber of Deputies of Brazil, a federal legislative body, has passed a regulatory framework that legalizes the use of cryptocurrencies as a payment method within the country. While the document won’t make Bitcoin (BTC) a legal tender as in El Salvador, it still will include digital currencies and air mileage programs in the definition of payment methods that are under the supervision of the country’s central bank.
Apart from designating crypto as a payment method, the law enables the creation of licenses for crypto exchange platforms and for custody and management of crypto by third parties. In addition to this, the law will require exchanges to make a clear distinction between company and user funds, to avoid another incident like the FTX collapse.
Italy to impose 26% capital gains tax on crypto profits
Italy is planning to tighten regulations on digital currencies in 2023 by expanding its tax laws to include cryptocurrency trading. Included in its 2023 budget are plans to impose a 26% levy on profits larger than 2,000 euros ($2,062) made on cryptocurrency trading. Historically, digital currencies have had lower tax rates because they have been considered “foreign currency.” If the proposed bill is signed into law, taxpayers will have the option to declare the value of their digital asset holdings as of Jan. 1 and pay a 14% tax. This is intended to incentivize Italians to declare their digital assets on their tax returns.
South Korean judge dismisses arrest warrants for Do Kwon’s former associates
A judge with the Seoul Southern District Court has reportedly set aside arrest warrants for Terra co-founder Shin Hyun-seong along with three Terra investors and four developers. Judge Hong Jin-Pyo said there was little risk of Shin or the Terra associates destroying evidence related to the case against the crypto firm. Do Kwon, who’s also facing legal action in South Korea for his role in the firm’s collapse, is still unlikely to return to the country, according to the local press.