On October 4, 2022, the European Parliament published a notice on the vote in favor of simplified tax treatment for crypto users. According to the legislative body, the resolution recommended authorities in its 27 member states consider a “simplified tax treatment” for crypto users involved in occasional or minor transactions and have national tax administrations use blockchain technology “to facilitate efficient tax collection.” It sets out a framework through which both goals of using blockchain in taxation and uniformly taxing crypto assets can be achieved.
According to the resolution:
On October 10, 2022, the Organization for Economic Co-operation and Development (OECD) published the final guidance for the Crypto-Asset Reporting Framework (CARF or the “Framework”). In April 2021, the G20 mandated the OECD to develop a framework to exchange tax-relevant information on Crypto-Assets automatically In August 2022, the OECD approved the Crypto-Asset Reporting Framework (CARF), which provides the reporting framework of tax information on transactions in Crypto-Assets in a standardized and automatically exchangeable manner.
The CARF sets rules that Crypto-Asset Service Providers (CASP) must report in the country where they conduct business. Exchanges between relevant crypto assets and fiat currencies and interactions between one or more types of crypto and crypto transfers (including retail payment transactions) will need to be reported.
The framework’s due diligence process requires obtaining know-your-customer (KYC) information. These requirements are intended to ensure that reporting businesses have a user’s correct name and taxpayer identification number (TIN) and can identify the proper tax jurisdiction for that user. Amendments were also made to include central bank digital currencies in Common Reporting Standard (“CRS”), rather than in the CARF.
The framework contains a set of amendments to the CRS. The CRS sets out the financial account information to be exchanged and reported, plus due diligence procedures. The amendments to the CRS, bring in its scope to certain electronic money products and Central Bank Digital Currencies.
On October 11, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and Financial Crimes Enforcement Network (“FinCEN”) announced settlements for over $24 million and $29 million, respectively, with Bittrex, Inc. (“Bittrex”), a virtual currency exchange based in Bellevue, Washington, for violations of the Bank Secrecy Act/AML laws and OFAC sanctions.
The combined penalties represent the largest fine yet levied by the U.S. government against a crypto business for violating sanctions.
According to OFAC, the exchange maintained accounts for individuals in sanctioned jurisdictions, including the Crimea region of Ukraine, Cuba, Iran, Sudan and Syria. OFAC said that despite possessing physical and IP-related information collected during the onboarding process that would have located the individual account holders in sanctioned jurisdictions, the exchange was not screening customer registrations to determine if a registrant was located in a sanctioned jurisdiction. To settle this matter, the exchange agreed to remit $24,280,829.
FinCEN found that the exchange failed to implement a proper AML compliance program. In the case of the $29 million FinCEN penalty, the settlement cites issues related to insufficient transaction monitoring and failure to file suspicious activity reports (SARs) for three years, from 2014 to 2017.
On September 16, 2022, the U.S. Department of Justice (“DoJ”) issued a report on The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets, which will have a significant and wide-ranging impact on the U.S. government’s ability to investigate, prosecute, and disrupt crimes involving digital assets.
DoJ announced that its Criminal Division had launched the Digital Asset Coordinator (“DAC”) Network, which will serve as the centralized forum for prosecutors to receive training and guidance on investigating and prosecuting criminal activity related to digital assets. The Justice Department has recruited more than 150 federal prosecutors across the country, who will be the members of the National Cryptocurrency Enforcement Team (“NCET”) by whom DAC Network will be led. To bolster law enforcement’s efforts to combat the rise in crime linked to using cryptocurrencies such as bitcoin. Each DAC member will:
The U.S. Securities and Exchange Commission (SEC) has launched a probe into the activities of Yuga Labs, creators of the Bored Ape Yacht Club (BAYC), over the sale of its non-fungible tokens (NFTs) and digital tokens. The investigation aims to determine if Yuga Labs’ digital assets should be subject to the same disclosure and registration rules as stocks and other securities.
The SEC has only started an investigation. The new reports claim that the regulatory commission has dived deeper to explore whether the crypto startup violated federal laws by issuing NFTs that serve as stocks and digital assets. According to Yuga Labs, SEC has not accused them of breaking federal law.
On October 25, 2022, UK lawmakers in the House of Commons voted in favor of a proposal, Financial Services and Markets Bill to recognize crypto assets as regulated financial instruments. The proposal brings crypto alongside payment stablecoins under the same regulatory provision as other financial assets contained in the Financial Services and Markets Act 2022. The crypto measure, if executed, will provide regulatory oversight for crypto promotions and impact unauthorized crypto firms.
The bill has quite a way to go before becoming law. Next, the bill has to go through the House of Lords, the upper house of the Parliament, before the amendments are given a final consideration followed by royal approval by King Charles III.
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