Some major regulatory developments in the crypto space have transpired this week. Not only has Germany passed a bill allowing banks to sell and store cryptocurrencies, but South Korea and Thailand are also amending their laws to better regulate the crypto industry. We also cover crypto news involving the governments of China, Japan, and the U.S., including the arrest of an Ethereum Foundation member.
German Bill Authorizes Banks to Deal in Crypto
A bill has reportedly been passed in Germany allowing banks to sell and store cryptocurrencies for customers. Starting in 2020, financial institutions in Germany will be able to offer cryptocurrencies, including bitcoin, alongside traditional investments such as stocks and bonds. They can also provide crypto custody services to customers. The bill proposes eliminating the requirement for banks to use third-party custodians to manage cryptocurrencies. Banks are currently required to use “external custodians or special subsidiaries” to store cryptocurrencies. They will need to procure a license to offer crypto services.
Meanwhile, banks in Germany have increasingly been passing on the burden of negative interest rates to their retail and corporate clients. A recent survey by the country’s central bank, the Deutsche Bundesbank, shows that 58% of surveyed banks are already charging some clients negative interest rates.
South Korea Creating Legal Framework for Crypto
Cryptocurrency businesses will also soon be directly regulated in South Korea. A new bill passed by the South Korean National Assembly’s national policy committee will bring crypto exchanges directly under the supervision of the Financial Services Commission’s Financial Intelligence Unit (FIU).
The bill amends the Act on Reporting and Using Specified Financial Transaction Information to establish a legal framework for cryptocurrencies, classifying them as digital assets. Among other obligations, the bill requires crypto exchanges to register with the FIU and establish a system that complies with the standards set by the Financial Action Task Force (FATF).
Thailand Seeks to Become More Crypto-Friendly
Another Asian country that is planning to amend its cryptocurrency regulation is Thailand. The existing Thai crypto regulation went into effect in May 2018, installing the Securities and Exchange Commission (SEC) as the main regulator of the industry. SEC Secretary-General Ruenvadee Suwanmongkol reportedly said on Nov. 25 that the regulator is studying whether the current regulation has any areas impeding the growth of the digital asset industry. She was quoted by the Bangkok Post as saying, “The regulator must be flexible to apply the rules and regulations in line with the market environment,” adding:
Laws should not be outdated and should serve market needs, especially for new digital asset products, and be competitive with the global market. We need to explore any possible obstacles.
Under current laws, sellers and promoters of unauthorized digital tokens will be fined up to twice the value of the transactions or at least 500,000 baht ($16,534). They could also face a jail term of up to two years. Further, crypto traders will be liable for a 7% value-added tax (VAT) and 15% withholding tax on capital gains, the news outlet detailed. Retail investors, however, will be exempt from VAT if they trade crypto assets through authorized exchanges.
US Arrests Ethereum Foundation Member
This week the U.S. government has taken two notable actions affecting the crypto industry. The first action, which has resulted in outrage across the crypto community, is the arrest of 36-year-old Virgil Griffith, a well-known member of the crypto community who worked with the Ethereum Foundation. The Federal Bureau of Investigation (FBI) alleges that the American citizen, who is a resident of Singapore, violated the International Emergency Economic Powers Act (IEEPA) by teaching North Koreans to evade sanctions. He is charged with conspiring to violate the IEEPA, which carries a maximum term of 20 years in prison.
Secondly, the Western District of Washington court has denied a motion to quash an IRS summons for a crypto trader’s Bitstsamp transaction data. The judge ruled that “the IRS’ request for those records does not infringe upon the petitioner’s Fourth Amendment rights.”
China’s Report and Japan’s Tax Law
Following the blockchain hype initiated by President Xi Jinping and a subsequent announcement by the central bank’s Shanghai Head Office, the People’s Bank of China (PBOC) published a financial stability report for 2019. It reveals that 173 domestic crypto trading and digital token platforms have “exited without risk” after the cleanup announcement issued in September 2017 by seven Chinese regulators.
Over in Japan, the Cabinet has answered a question regarding the use of cryptocurrency for tax payments. While the Japanese inheritance tax law allows real estate and properties to be used to pay taxes, the answer explains that crypto assets cannot be used for this purpose.
What do you think of the regulatory developments in Germany and other countries featured in this regulatory roundup? Let us know in the comments section below.
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