El Salvador’s introduction of bitcoin as legal tender
Gherson’s white-collar crime and regulatory team recently wrote a blog following reports that El Salvador was the first country to introduce a law making bitcoin a legal tender there. On Tuesday, 7 September 2021, bitcoin actually became legal tender there. The introduction was not without incident, as it was accompanied by a crypto price crash. Further, popular platforms initially refused to host the government-backed digital wallet. However, as time passed, it was reported that the government-backed digital wallet became accepted by more platforms. There have been numerous positives put forward, not least that the adoption could save the country hundreds of millions of dollars in transaction fees previously used to remit funds abroad. However, this move is not without its critics, including those who claim that the law was rushed through, and that bitcoin is too volatile to act as legal tender.
More countries introduce specific crypto legislation
Gherson Solicitors have previously argued for the need for bespoke regulatory regime in the UK. In fact, more and more countries now seem to be implementing just that. Specifically, the Ukrainian Parliament has adopted a law that both legalises and regulates cryptocurrency. Interestingly, this legislation is reported to have specific provisions to protect owners of virtual assets and exchange platforms from fraud. In addition, it is also reported that the country is modernising its payment market so that the National Bank could issue a digital currency. Gherson’s white-collar crime team have previously written about the introduction of CBDC.
Panama is reported to be the next country to be introducing a law to regulate crypto.
Coinbase and the Securities and Exchange Commission
Sticking with the theme of regulation, one of the benefits of providing specific crypto rules is that key crypto definitions and products in this still-new area can be described and designated. This may also assist with guidance, so that they can more easily accord with previously defined legal terms.
With this is mind, it is reported that Coinbase is currently in a dispute with the Securities and Exchange Commission (“SEC”) as to the extent a new crypto product falls into previously defined legal terms. The dispute appears to hinge on whether a crypto lending product falls under the definition of the term “security” under US law.
This comes in light of Coinbase’s plans to allow investors to lend out their crypto and, in return, receive interest. The SEC has claimed that this product would be a security, and hence comes under its regulation. Coinbase claim otherwise and are seeking regulatory clarity from the SEC (which has apparently not been forthcoming). With regards to the general US crypto rules, Recode reports that “Those rules might be bulked up in the near future as the Biden administration and lawmakers work to address the regulatory gaps cryptocurrency falls into”
However this resolves, this is surely a basis for the need for more clarity in this area, which can, again, probably only come through specific crypto legislation. The signs that some countries are doing just that is arguably very positive.
Do you need assistance with the regulations and/or the registration process?
To operate in the UK, cryptoasset businesses need to have applied to register with the FCA and they need to adhere to a number of compliance rules. Given that breaches of the AML regulations can attract potential civil or criminal liability and penalties, it is important that firms seeking regulatory approval are aware of all the requirements and have in place robust policies to ensure compliance.
For those who would like advice on this issue, including those who have had issues with the registration process, our specialist regulatory and compliance team can guide individuals and companies through the process.
If you have any questions arising from this blog, please do not hesitate to contact us for advice, send us an e-mail, or alternatively, follow us on Twitter, Facebook, or LinkedIn to stay-up-to-date.
The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.
©Gherson 2021