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Can crypto mixers adapt to survive US authority prosecution?

Cryptocurrency mixers face a dilemma between preserving financial privacy freedom or embracing increased compliance measures to avoid U.S. scrutiny.

Tornado Cash — a cryptocurrency mixer service that can hide the origin of crypto transactions — hit the headlines after being sanctioned by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) in August 2022. 

The mixer opened Pandora’s box, igniting an open debate about the role of mixers in ensuring personal financial privacy when using cryptocurrencies.

U.S. authorities have continued sanctions against these services, with Sinbad.io being the most recent big player under OFAC sanction. Tornado Cash and Sinbad have been taken down by the FBI, with the U.S. Treasury accusing them of facilitating billions of dollars in illicit transactions, particularly those of North Korea-based hacking group Lazarus.

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Industry leaders and policymakers react to passage of MiCA in EU

Many lauded the bill’s approval, suggesting that its anticipated passage could leave the United States at a disadvantage for attracting crypto firms and investments.

Though a crypto-focused regulatory framework still needs approval from the European Council before final passage, many in the space have reacted positively to the Markets in Crypto Assets, or MiCA, bill moving forward.

On April 20, the European Parliament voted to pass MiCA after two delays starting in November 2022. The bill aims to create a consistent regulatory framework for crypto assets among the European Union member states.

Though EU lawmakers still need to conduct legal and linguistic checks for MiCA as well as publish the bill in the EU journal, the policy could go into effect as early as 2024, depending on the European Council vote. Many crypto industry leaders and policymakers largely lauded the bill’s approval.

Changpeng “CZ” Zhao, CEO of Binance, suggested he would begin implementing changes to the exchange in the next 12-to-18 months in order to be in compliance with the potential new framework. Others targeted the United States for seemingly falling behind in digital asset regulation — a move that could drive companies to the EU with the implementation of MiCA.

“Overall we think this is a pragmatic solution to the challenges we collectively face,” said CZ. “There are now clear rules of the game for crypto exchanges to operate in the EU.”

Prior to the European Parliament vote, EU Commissioner for Financial Stability Mairead McGuinness told lawmakers they were “ahead of many other jurisdictions” in regard to crypto regulation. More than 500 members of parliament ended up voting in favor of MiCA.

Related: Kraken receives virtual asset service provider authorization in Ireland ahead of MiCA vote

One of the key votes for the crypto framework followed a crypto market crash and the bankruptcies of high-profile firms that had many lawmakers across the globe calling for regulatory clarity. Christine Lagarde, president of the European Central Bank, also suggested that policymakers needed to implement a broader framework in response to the collapse of FTX, proposing a “MiCA II” in the future.

Magazine: Best and worst countries for crypto taxes

CFTC continues to explore digital asset policy considerations in MRAC meeting

Commissioner Kristin Johnson said in prepared remarks that the U.S. digital economy was “witnessing the deployment of Web 3.0”.

The United States Commodity Futures Trading Commission, or CFTC, was a part of discussions on a regulatory framework for digital assets as well as use cases for blockchain technology.

In a March 8 meeting of the CFTC’s Market Risk Advisory Committee, commissioners, regulators, and industry representatives were scheduled to discuss “critical policy considerations” as part of the commission’s efforts to develop a regulatory framework for digital assets. In addition, industry leaders including Uniswap Labs CEO Hayden Adams and Chainalysis’ global head of public policy Caroline Malcolm were part of a panel focused on use cases of DeFi, distributed ledgers, and blockchain.

“Consistent with the MRAC’s historic role in delivering first-of-its-kind or unprecedented reports and recommendations, we anticipate furthering the Commission’s focus on targeted recommendations to address climate-related risks in our markets and delivering recommendations for the regulation of digital asset markets,” said CFTC commissioner Kristin Johnson in prepared remarks.

Johnson added:

“Our economy is a digital economy. Global financial markets indisputably rely on the internet and the internet of things (IOT). We are now witnessing the deployment of Web 3.0.”

Along with the U.S. Securities and Exchange Commission, the CFTC has been behind some of the recent lawsuits against high-profile figures in the crypto space. The commission has charged former FTX executives Nishad Singh and Sam Bankman-Fried for allegations related to commodities fraud. Former Alameda Research CEO Caroline Ellison and former FTX chief technology officer Gary Wang face similar charges, but have consented to stays in the CFTC’s civil cases.

Related: CFTC head looks to new Congress for action on crypto regulation

Balancing the burden of digital asset regulation in the United States could be a point of contention among federal agencies and lawmakers in the current session of Congress. House Representative Tom Emmer introduced legislation aimed at limiting the Federal Reserve’s authority in issuing a central bank digital currency, while the SEC also has moved against Paxos over the Binance USD token.

Here’s how Kazakhstan aims to enhance its legacy crypto trading framework

The Astana Financial Services Authority, a Kazakh regulator, pointed out that the existing framework dates back to 2018 while proposing certain enhancements.

Kazakhstan, one of the world’s biggest Bitcoin (BTC) mining destinations, issued a consultation paper to gauge public interest in proposed amendments to improve the cryptocurrency trading framework.

The policy paper, released on Jan. 27, was laid down by the Astana Financial Services Authority (AFSA), a Kazakh regulator. The AFSA pointed out that the Astana International Financial Centre’s Digital Asset Trading Facility (DATF) regulatory framework dates back to 2018 and that the amendments seek to introduce certain enhancements.

AFSA’s analysis highlighted problems related to the ongoing supervision of crypto exchanges, revealing “contradictions, inefficient provisions and uncertain definitions within the regime.” It recommended introducing risk mitigation measures around several fronts, including governance, illicit activity, safekeeping of clients’ funds and settlement.

Regarding DATF framework restructuring, the paper recommended three options — keeping the existing framework form, developing a standalone DATF framework and treating crypto exchanges as a multilateral trading facility.

The AFSA believes that the policy recommendations will bring about several improvements, including risk mitigation related to crypto operations and the industry in general. In addition, the enhancements will address contradictions and unclear provisions of the existing framework. The final outcome, expected by AFSA, is to create a favorable regime for crypto exchanges while encouraging innovation.

According to the policy paper, the proposed measures will have a positive impact on crypto trading industry:

“This will collectively help to create more a clear, convenient, efficient, detailed and balanced AIFC DATF framework with high standards for consumer protection, without hindering development of crypto exchanges.”

On an end note, the paper revealed that the review of the DATF framework aligns with the “AFSA’s Strategy for 2022” initiative, where the development of “Digital Assets framework: Crypto exchanges, STO and DASP” is one of three key regulations development objectives.

Related: Kazakhstan ready to legalize crypto as Russians flock to the country

On the other end of the spectrum, Kazakhstan’s central bank recommended launching an in-house central bank digital currency (CBDC) in 2023, with a phased expansion of functionality and introduction into commercial operation until the end of 2025.

In October 2022, Binance CEO Changpeng “CZ” Zhao revealed that Kazakhstan’s CBDC would be integrated with BNB Chain, a blockchain built by the crypto exchange.

New Hampshire gov releases report on blockchain following executive order

According to the commission, New Hampshire should work toward building a legal framework “for sound development of blockchain technologies and its applications.”

The governor of New Hampshire has released the report of a ​​commission he formed by executive order last year to recommend legislation around digital assets and blockchain.

In a Jan. 19 announcement, Chris Sununu said the Commission on Cryptocurrencies and Digital Assets had reported that the legal and regulatory status of cryptocurrencies and digital assets was “highly uncertain,” stymying development and leading to less protection for investors and consumers. 

The group recommended New Hampshire establish a state legal regime aimed at drawing in blockchain firms and individuals. Specifically, it recommended establishing legal status for decentralized autonomous organizations, or DAOs; putting funds into the state’s court system for resolving disputes involving blockchain issues; and encouraging the government’s banking department to provide “clear, public and proactive guidance” on how financial institutions may handle digital assets.

According to the report, sent to the governor on Dec. 22, the commission considered the human factor in its recommendations, alluding to the collapse of FTX and the arrest of its former CEO Sam Bankman-Fried — i.e. “criminal fraud resulting in the loss of billions of dollars of customer assets”. 

“New Hampshire should take strong pro-active and public steps to build a better legal infrastructure for sound development of Blockchain technologies and its applications,” the report sai.

The report concluded with the following:

“The Commission expects that Blockchain technologies will continue to evolve and develop, and become more integrated into our society and economy […] this next phase of development should be accomplished not only through innovations in computer software protocols, but also should be accompanied by improvements in the legal infrastructure that necessarily operates in parallel with these activities.”

Related: Tennessee lawmaker introduces bill which would allow state to invest in crypto

Sununu referred to the report as “comprehensive and timely”. Other U.S. state governors have pushed efforts to establish regulatory clarity for crypto and blockchain, including California, while New York Governor Kathy Hochul has stood behind a proposal to ban crypto mining operations not based on 100% renewable energy.

Wyre imposes up to a 90% withdrawal limit for all users

Wyre has imposed a daily withdrawal limit on its platform, citing “the best interest of our community.”

Crypto payment platform Wyre modified its withdrawal policy to limit users from cashing out up to 90% of their assets, just days after two former employees allegedly hinted at the possibility of a shutdown.

On Jan. 7, Wyre imposed a withdrawal limit on its platform, citing “the best interest of our community.” Following the policy modification, Wyre users can withdraw up to 90% of their crypto funds as the company explores strategic options to circumvent the prolonged bear market.

In addition, the company appointed Yanni Giannaros, Wyre’s chief risk officer and compliance officer, as itsinterim CEO. Wyre users will be subject to changes in daily withdrawal limits as the platform entails new operational strategies.

Related: Bitcoin exchange withdrawals sink to 7-month low as users forget FTX

Reports suggest that Wyre’s issues have also resulted in a breakup of its partnership with crypto wallet MetaMask.

On Jan. 5, MetaMask announced the removal of Wyre from its mobile aggregator, which allows users to buy cryptocurrencies directly from the digital wallet.

“We’re currently working on extension removal and appreciate your patience,” MetaMask said, asking users not to use Wyre on the mobile aggregator.

Financial Stability Board aims to address crypto-related risks following FTX’s collapse

Though the international board can make recommendations to global policymakers, it largely acts as an advisory body with no enforcement authority.

The international monitoring body Financial Stability Board, or FSB, called for a global framework aimed at regulating and supervising crypto in the wake of FTX’s collapse, also saying it would assess vulnerabilities associated with decentralized finance.

In a Dec. 6 meeting in Basel, Switzerland, the FSB said it planned to “enhance its crypto-assets monitoring framework” to include “DeFi-specific vulnerability indicators” as well as address the potential impact of DeFi becoming more closely connected to traditional financial markets. The monitoring body says that crypto market turmoil such as the collapse of FTX currently poses limited risks, that’s increasing given the “growing linkages of crypto-asset firms with core financial markets and institutions.”

“Crypto trading platforms, combining multiple activities that are normally separated in traditional finance, can lead to concentrations of risk, conflicts of interest, and a misuse of client assets,” said the FSB. “The [FSB] emphasised the importance of ongoing vigilance and the urgency of advancing the policy work programme by the FSB and the standard-setting bodies to establish a global framework of regulation and supervision, including in non-FSB member jurisdictions.”

The FSB has previously proposed a comprehensive framework for crypto aimed at addressing potential risks while “harnessing potential benefits of the technology.” Members of the public also have until Dec. 15 to comment on the group’s recommendations regarding stablecoins.

Related: US Treasury recommends lawmakers decide which regulators will oversee crypto spot market

Established at a G20 summit in 2009, the FSB has members representing institutions such as financial regulators, central banks and ministries of finance from more than 20 jurisdictions. Though the board can make recommendations to global policymakers, it largely acts as an advisory body with no enforcement authority.

Shiba Inu developer says WEF wants to work with project to ‘help shape’ metaverse global policy

Shytoshi Kusama reported Shiba Inu could work alongside Facebook and Decentraland by working on metaverse global policy at the World Economic Forum.

The volunteer project lead and developer for Shiba Inu known only as ‘Shytoshi Kusama’ has reported on social media that the World Economic Forum, or WEF, wants to work with the meme-based cryptocurrency on global policy.

In a poll posted to Twitter on Nov. 22, Kusama said the WEF had “kindly invited” the Shiba Inu (SHIB) project to collaborate on “MV global policy.” The Shiba Inu developer seemed to be referring to policy on the metaverse. Crypto and blockchain have sometimes been under discussion at WEF events, but partnering with a popular meme token would seemingly be a first for the organization.

“Yes I am serious,” said Kusama. “We would be at the table with policy makers and would help shape global policy for the MV alongside other giants like FB (bye Zuck), Sand, Decentraland etc.”

Related: Shiba Inu founder deletes social media posts, steps down from community

At the time of publication, more than 65% of the roughly 9,500 respondents to Kusama’s poll voted in favor of Shiba Inu working with the WEF, with roughly 10% saying it didn’t matter one way or the other. Kusama has more than 861,000 Twitter followers.

The SHIB price has fallen roughly 80% in the last 12 months, reaching $0.000008727 at the time of publication according to data from Cointelegraph Markets Pro.

Cointelegraph reached out to the WEF, but did not receive a response at the time of publication.

Shiba Inu developer says WEF wants to work with project to ‘help shape’ metaverse global policy

Shytoshi Kusama reported Shiba Inu could work alongside Facebook and Decentraland by working on metaverse global policy at the World Economic Forum.

The volunteer project lead and developer for Shiba Inu known only as Shytoshi Kusama has reported on social media that the World Economic Forum, or WEF, wants to work with the meme-based cryptocurrency on global policy.

In a poll posted to Twitter on Nov. 22, Kusama said the WEF had “kindly invited” the Shiba Inu (SHIB) project to collaborate on “MV global policy.” The Shiba Inu developer seemed to be referring to policy on the metaverse. Crypto and blockchain have sometimes been under discussion at WEF events, but partnering with a popular meme token would seemingly be a first for the organization.

“Yes I am serious,” said Kusama. “We would be at the table with policy makers and would help shape global policy for the MV alongside other giants like FB (bye Zuck), Sand, Decentraland etc.”

Related: Shiba Inu founder deletes social media posts, steps down from community

At the time of publication, more than 65% of the roughly 9,500 respondents to Kusama’s poll voted in favor of Shiba Inu working with the WEF, with roughly 10% saying it didn’t matter one way or the other. Kusama has more than 861,000 Twitter followers.

The SHIB price has fallen roughly 80% in the last 12 months, reaching $0.000008727 at the time of publication according to data from Cointelegraph Markets Pro.

Cointelegraph reached out to the WEF, but did not receive a response at the time of publication.

IRS prepares for an increase in crypto cases in the upcoming tax season

The criminal investigation division of the IRS says it is preparing hundreds of crypto-related cases for the upcoming tax season.

The United States Internal Revenue Service (IRS) criminal investigation division is ramping up for tax season with its sights set on the crypto community.

According to a report from Bloomberg Law, the division chief Jim Lee said they are preparing “hundreds” of crypto-involved cases, many of which will soon be available to the public.

Lee said in the last three years, there has been a major shift in digital asset investigations conducted by the IRS. Previously these investigations were mostly money-laundering related, whereas now tax-related cases make up nearly half.

This includes what is often called “off-ramping” transactions where digital assets are exchanged for a fiat currency, along with not reporting crypto payments.

In a different report released by the agency on Nov. 3, the IRS reported that in 2022 the 2,077 special agents of the division spent nearly 70% of their time investigating tax-related crimes like tax evasion and tax fraud. While the other 30% was spent on money laundering and drug trafficking cases.

The division chief said following the money is nothing new and they’re ready to pivot into new realms, including Web3:

“We’ve been doing it for more than 100 years, and we’ve followed criminals into the dark web and now into the metaverse.”

The report cited a crypto-related case as an example, which involved tracing billions of dollars in Bitcoin stolen from Bitfinex after its 2016 hack and led to the arrest of two individuals.

Related: 74% of public agencies feel under-equipped for crypto investigations: Report

This comes after the IRS introduced a broader “Digital Assets” category ahead of the upcoming tax season. It grouped cryptocurrencies, stablecoins and nonfungible tokens (NFTs) all together under a new “Digital Asset” category.

As decentralized financial technologies and assets become more mainstream, regulators are reacting, therefore enforcing more reporting requirements.

Binance has been actively holding workshops for global regulators to better understand digital assets and their implications. These activities increased after the exchange hired a prominent IRS cybercrime investigator to lead its anti-crime unit.