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In the U.S. a fake letter by Senator Elizabeth Warren proposing a crypto wealth tax has stirred a lot of confusion in the crypto community. Crypto regulation is certainly a focus in the industry at the moment as U.S. Senators Gillibrand and Lummis also recently introduced legislation targeting payment stablecoins. Internationally, Canada is set to adopt the Crypto-Asset Reporting Framework by 2026 to boost transparency in crypto transactions, while Hong Kong explores industry-led oversight to balance regulation with market growth.
Bogus Senator Warren Tax Proposal
Many users on social media were misled by a fake letter from Senator Elizabeth Warren to President Joe Biden. In this letter, Warren proposed a 1% wealth tax on cryptocurrency holdings over $500,000. Although Warren’s name was spelled incorrectly in the letter, it still certainly appeared authentic enough to cause quite a stir among crypto enthusiasts. It advocated for President Biden’s support of crypto-related legislation spearheaded by Senator Warren to address issues in the U.S. financial system.
Despite the inaccuracies being pointed out by some on social media, a big part of the crypto community still believed in the authenticity of the letter, which did not do the tense relationship between Senator Warren and the crypto world any good at all. Warren is notorious for her very critical stance on digital assets, and she frequently links them to illegal activities, including terrorism financing. Her genuine legislative proposals, like the Digital Asset Anti-Money Laundering Act, have faced a lot of opposition from crypto advocates and some lawmakers who question their effectiveness.
The controversy comes as Warren prepares for her reelection bid in November against Republican challenger and crypto lawyer John Deaton. Deaton, also involved in the cryptocurrency industry’s legal battles, recently asked to serve as a friend of the court in Coinbase’s lawsuit with the SEC.
Senators Push for Stablecoin Regulation
There are some real efforts to regulate the crypto industry. United States Senators Kirsten Gillibrand and Cynthia Lummis recently introduced new legislation aimed at creating a comprehensive regulatory framework for payment stablecoins. This move comes in response to the instability experienced by algorithmic stablecoins, like TerraUSD (UST), which dramatically depegged from the U.S. dollar in 2022. The proposed legislation explicitly wants to ban these "unbacked, algorithmic stablecoins" and mandates that issuers maintain one-to-one reserves to back the issued stablecoins.
The bill outlines that state non-depository trust companies could issue up to $10 billion in payment stablecoins, while institutions with a limited-purpose state charter could issue stablecoins in unlimited amounts. It also aims to preserve the existing dual banking system, allowing both federal and state regulatory regimes for stablecoin issuers.
However, the bill has faced some criticism from advocacy groups like Coin Center, which has labeled the ban on algorithmic stablecoins as potentially unconstitutional. They argue that a ban like this on code could infringe on the First Amendment rights. Coin Center contrasts this bill with the Clarity for Payment Stablecoins Act, which is currently pending a full floor vote in the U.S. House of Representatives and offers a more lenient two-year moratorium on algorithmic stablecoins rather than an outright ban.
Arkansas Takes Steps to Address Crypto Mining Concerns
Arkansas is also taking crypto rulemaking very seriously. The Arkansas State House recently passed two bills that aim to introduce new regulations on cryptocurrency mining. These bills, which are still not yet law, have started a lot of discussions on concerns like noise levels, foreign ownership, and the proximity of crypto mining operations to residential areas. The Senate previously approved one of these bills, and ongoing debates are focusing on whether further amendments are necessary.
The proposed Arkansas Data Centers Act of 2023 wants to establish a regulatory framework for the Bitcoin mining industry in the state, offering guidelines and protection against discriminatory regulations and taxes. However, the Bitcoin mining process is under scrutiny for its environmental impact. In fact, a report by Investopedia found that the Bitcoin mining process generates more than 77 kilotons of electrical waste annually.
Internationally, similar challenges are popping up. In Paraguay, for example, legislators proposed a bill to temporarily ban crypto mining amid concerns over illegal operations and power theft. This proposal aims to halt the establishment of new mining facilities and restrict various crypto-related activities. Despite this, the progress on the mining ban has stalled, with Paraguayan officials considering alternative uses for excess energy from the Itaipu hydropower plant, potentially supplying it to miners.
New Reporting Standards for Crypto Transactions in Canada
Meanwhile, Canada is ready to adopt the international Crypto-Asset Reporting Framework (CARF) by 2026. This move positions Canada among the early adopters of a new standard set to be implemented by 47 countries by 2027. Developed by the Organisation for Economic Cooperation and Development (OECD), the CARF plans to enhance transparency in crypto transactions by introducing strict reporting requirements for crypto asset service providers (CASPs).
Under the CARF, entities like crypto exchanges, brokers, dealers, and operators of crypto-asset automated teller machines—whether individual or business—will face new obligations. These include reporting transactions between crypto assets and fiat currencies, as well as exchanges between different crypto assets, to the Canada Revenue Agency (CRA). CASPs also have to report any crypto asset transfers over the value of $50,000 USD.
Additionally, CASPs will need to collect detailed customer information, like names, addresses, dates of birth, jurisdictions of residence, and taxpayer identification numbers for each jurisdiction, and report this data to the CRA. The reporting requirements will apply to both CASPs that are residents of Canada or those doing business in the country.
However, certain digital representations like central bank digital currencies and stablecoins will be excluded from CARF reporting because of their inclusion in the existing amendments to the OECD's Common Reporting Standard (CRS), which facilitates the sharing of financial information internationally. The introduction of the CARF addresses gaps left by the CRS, which previously did not cover transactions bypassing traditional financial intermediaries.
The OECD initiated the CARF during a meeting with G20 finance ministers and central bank governors in October of 2022, leading to an agreement by 47 countries in November 2023 to implement this framework by 2027.
Hong Kong to Consider Industry-Led Crypto Oversight
The Hong Kong Securities & Futures Professionals Association (HKSFPA) proposed that Hong Kong's crypto firms form a self-regulatory committee to oversee industry compliance. The recommendation was made in an Apr. 22 letter and suggested that the financial market in Hong Kong has been overly focused on supervision without fostering industry development. The HKSFPA believes it is important to maintain Hong Kong's competitive edge in the global securities market and its status as an international financial center.
To achieve this, the HKSFPA suggested that while the Securities & Futures Commission (SFC) should keep its authority to oversee market conduct, licensing powers should be decentralized and handed over to industry-specific bodies in the securities, futures, asset management, and virtual asset industries. This recommendation comes after a very similar call by the HKSFPA in August of last year for a more balanced approach to supervision that avoids excessively stringent regulatory measures, especially when it comes to the virtual assets industry.
In contrast to Hong Kong's relatively positive stance towards virtual assets, other countries are tightening their crypto regulations. Lithuania plans to improve its regulatory framework for crypto firms by 2025 because of issues with compliance and embezzlement, despite having licensed over 580 crypto companies.
Meanwhile, Hong Kong continues to advance in crypto integration. On Apr. 15, the SFC approved the issuance of spot Bitcoin and Ether exchange-traded funds (ETFs) by major firms including Harvest Fund Management, Bosera Asset Management, and China Asset Management (ChinaAMC). This move comes after the SFC granted official virtual asset licenses to crypto exchanges like Hashkey and OSL last year.
In contrast, the U.S. Securities and Exchange Commission has not yet approved a spot Ether ETF or issued specific licenses for crypto exchanges.
