Powers On… Top 5 Encryption Legal and Regulatory Developments in 2021 – Cointelegraph Magazine


While BakerHostetler, my last law firm, leads the securities litigation, hedge fund, and SEC defense national business, my business team members and I prepare an annual list of key developments and cases in this field every December.

It is usually the top 10 list, which is then published by Wolters Kluwer in one of its CCH publications and by BakerHostetler as a separate publication to our law firm clients. Now I officially “retire” from a law firm. These days I devote most of my professional attention to the field of blockchain and encryption. My editor, Max Jakubowski, I think it makes sense to do something similar for the readers of Cointelegraph.

Turn on the power… It is the monthly opinion column of Marc Powers. For most of his 40-year legal career, he has dealt with complex securities-related cases after working with the US Securities and Exchange Commission. He is now an adjunct professor at the Florida International University School of Law, where he teaches a course on “Blockchain, Encryption, and Regulatory Considerations.”

So, this is my top five in 2021. It comes with some warnings. On the one hand, the blockchain space has many dimensions, some involve finance, and some do not. The use cases for this ledger technology are expanding every year, limited only by human creativity. This list focuses on the development that affects financial transactions and systems this year. It also focuses on the key regulations, legislation and litigation that I believe affect the ecosystem. Next, this is the top five, not the top 10. Although yes, there are many issues and projects that are transformative, but this will be a longer article. Finally, I have written about some of the items in the list in the previous column, so ordinary readers will be familiar with them. Therefore, I feel that there is no need to provide a lengthy explanation of why an item is included in the list.

1. El Salvador adopts BTC as its national currency

Back in June, at 2021 Miami Bitcoin Conference, El Salvador’s President Naib Bukler announced that he will seek to allow El Salvador to adopt Bitcoin as its national currency. At that time, the country had used the U.S. dollar as its official currency since 2001 and abandoned the then local currency, Cologne.Soon, the country’s legislature passed a law stating that starting in September, all commercial organizations must Accept Bitcoin as legal tender, But there are some exceptions.Wallet containing 30 USD BTC Also provided Provided to citizens by banks in small countries. This is not a voluntary choice of the company; on the contrary, it is necessary, which makes this event so important.

For sovereign states, this is a watershed because other countries have already begun to work hard to do so, including Panama and Ukraine. Although other countries have used blockchain technology in some of their financial and government systems—for example, Georgia requires the government to conduct real estate auctions on the blockchain—but this is different and more important. This is for the economy of the entire country.

2. The U.S. “woke up” blockchain transaction legislation

In November, Congress finally passed the Biden administration’s 1.2 trillion dollars in infrastructure legislation-At least that part of the proposed legislation is actually aimed at building and rebuilding our bridges, roads, railways and telecommunications.As part of the bill formally known as the Infrastructure Investment and Employment Act, there is a Amendment to Article 6045 Tax laws require reporting to citizens engaged in securities transactions, and the definition of “broker” is too broad. It requires traditional brokerage companies to provide tax reporting information for their clients. However, the bill can be interpreted as imposing this important reporting requirement on blockchain miners and developers, and many in Congress believe this is detrimental to encryption and dominance.

The importance of this tax regulation is that it is one of the first efforts of the federal government to “better incorporate digital assets such as virtual currencies into our national tax laws.” according to On December 14, the six senators wrote to Treasury Secretary Janet Yellen (Janet Yellen), regardless of whether Yellen acted according to their requirements. These senators are Rob Portman, Mark Warner, Kyrsten Sinema, Cynthia Lummis, Pat Toomey and Mike Crapo-members of two major political parties. It is also important that not only the Senate supports this technology, but now there is also the Congressional Blockchain Caucus.

According to its mission statement, the core group is a bipartisan group composed of members of the House of Representatives dedicated to advancing technological development through “easy regulatory methods.”As early as August 2020, it wrote to the IRS seeking Clarify how the agency will levy taxes Generated block reward Proof of stock Verification process. At the time of writing, the core group website lists 35 members of the House of Representatives, which is a considerable number.

3. Fed Chairman Powell is open to the benefits of blockchain to the financial system

Last year, Fed Chairman Jerome Powell stated in public and congressional hearings more than once that he believed that the use of blockchain and digital assets would have certain benefits for the world and the US financial system.As early as March, he stated on CNBC that although Bitcoin Not a good way to preserve value Or currency, it is a speculative asset like gold.Since then, he made it clear that the Fed has Unintentionally prohibit encryption.

several days ago, Powell admits He did not imagine the end of the world seen by cryptocurrency haters. He made it clear that he currently does not believe that cryptocurrencies pose a threat to the financial system. Regarding stablecoins, he said that they “if they are properly regulated, they can certainly become useful and efficient consumer services in the financial system.”

If you think back a few years, cryptocurrencies – and the blockchain from where they came from – were banned in the federal government. No one is allowed to embrace them. Therefore, in my opinion, Powell’s thinking about these things and the useful aspects of digital assets for our economy and the world’s financial system has clearly evolved and matured. Given Powell’s huge impact on our economy and economic stability, and may even surpass our President, this is a very positive development. All these conversations seem to be a precursor to the Federal Reserve’s issuance of central bank digital currency.

4. SEC allows retail customers to use Bitcoin ETF

This Gary Gensler, the new chairman of the U.S. Securities and Exchange Commission, Has obvious prejudice against his former employer, the Commodity Futures Trading Commission, which he chaired from 2009 to 2014. However, he is still pushing the development of cryptocurrency, albeit at a slow pace.

For several years, various financial companies have sought to sell exchange-traded funds based on Bitcoin and other digital assets. An ETF holds a basket of securities or assets, such as the S&P 500 ETF, which holds all the securities in the S&P 500 index. For retail investors, ETFs are usually lower-cost investment products than mutual funds. However, during the former chairman of the US Securities and Exchange Commission Jay Clayton, every time it submitted one of more than ten ETFs to the US Securities and Exchange Commission, it failed to approve the validity of the public offering, effectively stifling Got it.

However, by October, the situation has changed.U.S. Securities and Exchange Commission Allow the first Bitcoin-based ETF traded on the US open market: ProShares Bitcoin Futures ETF. However, there is a problem. The approved ETF is based on Bitcoin futures, rather than the underlying BTC itself in the spot market, which reveals Gensler’s many years of bias in the CFTC. For me, there is no justification for allowing futures-based ETFs and disallowing spot-based ETFs. In fact, futures-based ETFs that require rollover of futures contracts are more expensive to manage.

In addition, according to the current CFTC position restriction rules, the number of contracts that can be purchased is limited. There are no similar restrictions for spot ETFs. It is nonsense to claim that the Bitcoin market has existed in regulated markets such as CME for many years, so the futures market is a more stable and orderly market for ETFs. Nevertheless, at some point, spot ETFs will be approved, and all retail investors can now buy Bitcoin, even derivatives, a fact that is a major advancement for technology and alternative assets.

5. Ripple confronts the SEC in court

In December 2020, during the decline of the U.S. Securities and Exchange Commission led by Lame Duck Clayton, the Commission authorized and File a lawsuit against Ripple As well as its two principals, accused the defendant of engaging in the issuance of unregistered public securities of XRP within a few years.As Discussed in one of my columns Earlier this year, this was an unwise and overly aggressive action that was unnecessary.

Among other reasons, it is questionable whether XRP tokens are “securities” under the federal securities laws. In addition, another government regulatory agency, a financial crime enforcement network, previously complained to Ripple in 2013 that its products constituted a “currency” transaction, so Ripple must be registered as a currency service business “dealer” with this agency. As a result, Ripple registered in 2015 and was fined $700,000 by FinCEN as a fine for registration and anti-money laundering violations. As a result, an independent federal agency-the US Securities and Exchange Commission-claimed that the same product was five years later. The public offering of “securities”. It is unfair and unnecessary for multiple US regulators to take repeated actions on similar underlying transactions.

If I were a gambler, I would say that the SEC would lose the fight-I mean either the court would decide that XRP is not a “securities” or the sales of XRP by Ripple’s clients are not publicly available here in the United States The product, or the injunction against the defendant was neither necessary nor granted. This fight and the subsequent decision of Judge Analisa Torres may be landmarks.

You have it, readers-my top five.

Enjoy the holidays and hope that we will defeat COVID-19 on a global scale soon. You will hear my contemplation again in 2022 soon!

Mark Bowles He is currently an adjunct professor at the Florida International University School of Law, teaching “Blockchain, Encryption and Regulatory Considerations” and “FinTech Law”. He recently retired from the Am Law 100 law firm, where he established a national securities litigation and regulatory enforcement practice team and hedge fund industry practice. Marc started his legal career in the law enforcement department of the SEC. During his 40-year legal career, he participated in lawsuits including the Bernie Madoff Ponzi scheme, the recent presidential pardon, and the Martha Stewart insider trading trial.

The views expressed are those of the author and do not necessarily reflect the views of Cointelegraph or the Florida International University School of Law or its affiliates. This article is for general reference only, and should not and should not be regarded as legal or investment advice.


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