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Law Decoded

GOVERNMENTS AROUND THE WORLD
COZY UP TO CRYPTO, SORT OF

May 16–22

Crypto has been at the center of a great deal of new legislation and declarations throughout the world this week. Some countries are looking to establish more comprehensive frameworks for digital assets, while others look to blockchain to solve problems, both technological and economic, that have emerged as nations work toward recovery from COVID-19.

Indeed, enough has happened this week that exciting developments like the first successful test of a wholesale digital euro and startlingly comprehensive crypto framework passing into law in Albania must get short shrift.

In terms of broad trends, this week has seen a great deal of adaptation from governments around the world — specifically Ukraine, Iran and the United States — who are clearly interested in incorporating crypto into national strategies amid turmoil. In other words, necessity giving rise to invention.

Kollen Post, Policy Editor

A Tale of Two Gorods

Moscow recently saw the return of long-standing legislation with new amendments looking to outlaw more or less all fiat-to-crypto transactions in the Russian Federation. The amendments add punishments of up to two million rubles ($28,000) and seven years in jail. Considering how long the Duma, Russia's parliament, has been toying with the law at the core of these amendments, the news is more cause for unease than immediate alarm.

As commentators suggested, however, the Duma's posture could accelerate an exodus of crypto companies from the country. Conversely, the Rada, the legislative body in neighboring Ukraine, welcomed a new bill early this week looking to establish comprehensive guidelines for registration of crypto businesses.

The Ukrainian bill looks to enforce FATF guidelines on anti-money laundering provisions and would require firms offering digital asset services to register with the Ministry of Digital Transformation. The new measures would provide a pathway forward.

The two approaches could not be more different. Even though both Russia and Ukraine are still waiting for any of this legislation to pass into law, they are clearly adopting distinct postures.

The Russian economy has been savaged by the one-two punch of a major COVID-19 outbreak centered on Moscow and a historic collapse in oil prices. It nonetheless dwarfs Ukraine's. In the crypto realm, however, Ukraine may well be setting itself up to be the more nimble player, laying the groundwork to become the industry hub of Eastern Europe.

How Iran Learned to Stop Worrying
and Love the Mine

Earlier today, reports indicated that Iranian President Hassan Rouhani had asked an array of relevant ministries to put together a national strategy on cryptocurrency mining — the latest in a series of recent moves to incorporate crypto into a national strategy.

The Iranian government's war on its massive underground mining industry stole headlines last summer. Energy in the Islamic Republic is cheap, both due to its massive oil reserves and heavy government subsidies. However, as renewed sanctions kicked in last year, the energy ministry sought to stamp out aberrant electricity flows.

Today's announcement is hardly a green light to all mining farms in the country. But as hyperinflation has led to such solutions as a new currency to replace the rial at 10,000 times its value, the regime looks more willing to get creative in harnessing what resources it has — in this case, Bitcoin.

Public and Private Sector Players Trade Places in U.S. Crypto

When it announced its plans for managed stablecoin Libra last year, Facebook met concerted and determined regulatory resistance in the U.S. Over the past month, the firm's strategy of smoothing the feathers of U.S. regulators has picked up.

Facebook first announced a new whitepaper largely aimed at keeping Libra from the status of security within the U.S. Then the Libra Association appointed a former FinCEN anti-money laundering whiz as CEO. This week, the association added another FinCEN and Treasury lawyer as general legal counsel.

But while Facebook and co. headhunt former officials capable of making crypto palatable to the government, the U.S. seems keen on bringing crypto into the fold.

Yesterday, the Treasury announced the appointment of Coinbase's former legal chief as head of the Office of the Comptroller of the Currency, the bureau responsible for regulating banks. After a whirlwind seven weeks as second-in-command, Brian P. Brooks will take over at the OCC next Friday.

Overall dissatisfaction with the speed and agility of the federal COVID-19 response, particularly in direct aid and subsidized small business loans, seems to have the U.S. government looking to onboard crypto expertise. Make no mistake, many regulators are still suspicious of the industry, but they can't deny certain capabilities.

Encounters between traditional policymakers and crypto professionals are regularly clunky, with the two camps seemingly hailing from different worlds. The more people at the top of crypto firms and government agencies who can translate, the better for everyone.