Crypto regulation in the world: weekly digest #93

Venezuela

Venezuela's state-owned oil company PDVSA in it’s recent report has announced that is increasingly using the stablecoin Tether (USDT) to bypass new sanctions imposed by the United States on its oil exports. PDVSA is requiring prepayment in USDT for oil cargoes and mandating that new customers hold cryptocurrency in digital wallets to facilitate transactions.

This shift to USDT allowed PDVSA to avoid having oil sale proceeds frozen in foreign bank accounts due to the sanctions. However, the use of USDT for large oil transactions is still rare and faces skepticism, leading PDVSA to rely on intermediaries which could reduce the amount of proceeds reaching the company.

In response, Tether has announced it will freeze addresses associated with sanctioned entities in order to comply with OFAC sanctions and prevent the circumvention of the restrictions. Tether has previously frozen wallets tied to terrorism, warfare, and other illicit activities. The traceability of blockchain transactions also adds complexity that could expose any attempts to evade the sanctions.

We have already written, that Tether has applied a new policy to prevent sanctions circumvention and has established close partnerships with U.S. law enforcement agencies like the FBI, DOJ, and Secret Service, and has even brought on officials from these agencies to work within Tether's organization.

Moreover, on April 26th,Tether has announced a global recruitment drive to attract top talent to contribute to its new AI division. Tether is establishing a new unit focused on artificial intelligence and has started a recruitment drive to fill roles like a head of AI research and an AI engineer. This expansion into AI marks a strategic move by Tether to position itself at the forefront of AI innovation and development.

The EU

The European Parliament has adopted new Anti-Money Laundering package, which includes the sixth Anti-Money Laundering directive and the EU «single rulebook” regulation, aims to strengthen the detection of suspicious transactions and activities, close loopholes used for money laundering, and enhance the supervision of high-risk financial institutions. The package establishes the new EU Anti-Money Laundering Authority (AMLA) to directly supervise up to 40 financial institutions considered high-risk, coordinate supervision of other financial entities by national authorities, and oversee national Financial Intelligence Units (FIUs). Additionally, the package harmonizes AML/CFT rules across the EU, updates rules on national AML/CFT supervisors and Financial Intelligence Units, and extends regulations on traceability of transactions to crypto-assets.

The list of entities subject to AML/CFT obligations has been expanded to include crypto-asset service providers, traders of luxury goods, dealers in high-value vehicles/aircraft/yachts, traders of cultural goods, and professional football clubs and agents. The package introduces specific enhanced due diligence requirements for cross-border correspondent relationships with crypto-asset service providers, business relationships with high net-worth individuals, and transactions involving high-risk third countries. Moreover, an EU-wide limit of €10,000 has been introduced for cash payments, and obliged entities must identify and verify individuals making occasional cash transactions between €3,000 and €10,000.

The AMLA is expected to start operating in 2024, with direct supervision of high-risk institutions anticipated in 2026/2027. The package also emphasizes the importance of cooperation, data sharing, risk assessment, and the use of Artificial Intelligence to combat money laundering and terrorist financing effectively.

Earlier, the The European Commission has submitted Tax transparency rules for crypto-asset transactions that will oblige crypto companies to provide tax authorities with information about the balances of their clients.

The USA

The US Securities and Exchange Commission (SEC) has been actively involved in regulating the decentralized finance (DeFi) sector, particularly through legal actions against prominent platforms like Uniswap and Metamask. The SEC has issued a Wells Notice to Uniswap, indicating its intent to pursue an enforcement action against the company for allegedly acting as an unregistered securities broker and exchange. Similarly, Consensys, the developer of Metamask, has filed a lawsuit against the SEC, challenging the agency's claim that Ethereum's ETH token is a security.

These actions reflect the SEC's ongoing efforts to assert its regulatory authority over the DeFi space, raising significant legal challenges and uncertainties for these platforms amidst the evolving landscape of crypto regulations.

News from other countries:

• The new UK law empowers law enforcement agencies, such as the National Crime Agency and police, to seize, freeze, and destroy crypto assets used in criminal activities without the need for making an arrest first. This law allows police to confiscate crypto holdings from suspects even if they have not been arrested.

• Russia is planning to legalize cryptocurrency use within a so-called «experimental legal regimes», the regulatory sandboxes where crypto companies will operate, especially using digital assets in international settlements. The new law is expected to come into force by September, 1st.

• The FBI has issued a public service announcement warning Americans against using unregistered and non-compliant cryptocurrency money transmitting services that do not adhere to anti-money laundering (AML) regulations and KYC requirements. According to U.S. federal law, cryptocurrency money transmitting services are required to register as Money Services Businesses (MSBs) and comply with AML requirements. The FBI emphasizes that using services that do not meet these legal obligations may put users at risk of losing access to their funds during law enforcement action

We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!