Crypto was supposed to transcend borders. Try telling regulators that.
Good morning, and welcome to Protocol Fintech. This Tuesday: the global regulation morass, Elon Musk reveals ether holdings, and cartel crypto.
Off the chain
Crypto donations are benefiting Ukraine, it’s true — but it seems like fiat is the key to making those funds available for warfighting and relief efforts. Kuna founder Michael Chobanian recently claimed that his exchange was helping the country spend the donations directly with crypto-friendly suppliers. But Ukraine has now tapped FTX to convert crypto to fiat. A Ukrainian official credited crypto with raising awareness for the country’s fundraising efforts. But you can’t buy ammunition with awareness.— Owen Thomas (email | twitter)
Crypto vs. the world
Crypto won a significant victory in Europe on Monday. The European Parliament voted to advance a regulatory proposal without a controversial provision that would ban proof-of-work-based cryptocurrencies like bitcoin.
But the debate in Europe is far from over. And it highlights a major challenge for the industry: The battle over how crypto should be regulated is playing out in different ways in major geographies.
The EU’s approach on crypto regulation is slow but steady. The proposed regulatory framework in the Markets in Crypto Assets bill could set the stage for the digital asset industry on an international level if adopted into law.
- First introduced in 2020, the the Markets in Crypto Assets proposal went through a number of revisions and delays due to controversial language requiring environmental sustainability standards for proof-of-work-based cryptocurrencies like bitcoin and the initial version of ether. While some EU leaders have called for a proof-of-work ban since November, the EU vote ultimately excluded the language.
- “Many countries around the world will now take a close look at MiCA," Stefan Berger, the European Parliament member spearheading the legislation, said in a press release. He called it “pioneering” in its establishment of “reliable supervisory structures” — something crypto companies in the U.S. have called for.
- While many in the crypto industry saw Monday’s vote as a win, the industry is set to see more legislation proposed to combat crypto’s negative environmental impact, in line with European Green Deal goals.
- The European Commission will present a proposal to amend the MiCA bill to include language for “the EU sustainable finance taxonomy [of] any crypto asset mining activities that contribute substantially to climate-change mitigation and adaptation” by January 2025.
The U.K., meanwhile, is cracking down on crypto, with an emphasis on stablecoins. The U.K., which has forged a separate regulatory path since Brexit, is working through getting the industry properly licensed and registered.
- The Financial Conduct Authority announced this month that it had 50 live investigations into unauthorized crypto firms after opening over 300 cases related to unregistered crypto businesses.
- The Treasury has also revealed plans to specifically regulate stablecoins, as they were deemed an immediate risk to traditional payment methods.
- But while it’s forging its own path on enforcement, Britain is expected to be “largely consistent” with the EU’s approach to crypto regulation, said ComplyAdvantage, a London-based provider of financial-compliance software and data.
Crypto is grappling with bigger regulatory problems in the U.S. The country’s fragmented financial regulatory scheme, including multiple agencies jockeying for a role in crypto and 50 states exercising some level of financial oversight, is a headache.
- Crypto is under fire on multiple fronts. The SEC is arguing that many cryptocurrencies are actually securities that must be subject to strict regulations. The Treasury Department is concerned with financial stability as well as money laundering and other crimes.
- The U.S. has “separate securities laws and separate derivatives or commodities laws” as well as “very broad concepts of what constitutes a security,” Michael Philipp, partner at Morgan, Lewis & Bockius, told Protocol.
- That makes the U.S. the “most complex” and the “most difficult place to do business” for crypto companies, he added. Philipp’s advice for crypto entrepreneurs: “Unless you’re able to commit to the regulatory [process], start somewhere overseas.”
“Sanity and logic” prevailed in Europe, Anchorage Digital President Diogo Mónica said of the EU vote. But there are many other fights ahead for crypto on battlefields over potentially much tougher rules. If you’re planning to operate globally, prepare to rack up some miles. The only good news may be that Brussels Airlines is resuming its Dulles nonstop this month.
A version of this story first appeared on Protocol.com. Read it here.
A MESSAGE FROM FIREBLOCKS
As one of the top super apps in the world, Revolut is always looking to launch new products and improve their existing offerings. Revolut used Fireblocks to handle the heavy lifting on the tech side so they could focus on shipping new products for their 15.5 million users.
On the money
On Protocol: Block is planning to use a fingerprint sensor for its new bitcoin hardware wallet to “achieve seamless authentication,” but it also acknowledged that it might not work for, say, people who wanted to share a wallet with family members.
Sen. Joe Manchin came out against Sarah Bloom Raskin’s Fed confirmation. The Democratic senator has likely made Raskin’s Fed confirmation almost impossible after saying that he couldn’t support her because of her views on climate risks.
TikTok might allow crypto ads soon. The social media app is reportedly running beta tests for crypto ads in the U.S. and Canada, and if successful, will allow crypto companies registered with an approved regulatory body to run paid ads.
Ukraine partnered with FTX and Everstake to launch a crypto donation website. Along with its Kuna exchange, Ukraine’s new crypto donation site, Aid for Ukraine, will convert donated crypto to fiat and send it to the National Bank of Ukraine.
Japan asked crypto exchanges to comply with Russian sanctions. Japanese authorities have ordered crypto exchanges not to process transactions subject to asset-freeze sanctions imposed against Russia and Belarus.
A U.N. report said that Mexican cartels have laundered $25 billion a year in bitcoin. The Jalisco New Generation Cartel and the Sinaloa Cartel are increasingly using small online purchases of bitcoin to avoid money-laundering controls, said the International Narcotics Control Board.
Elon Musk thinks it’s better to invest in physical things rather than dollars, and also thinks that people get investment advice on Twitter. “As a general principle, for those looking for advice from this thread, it is generally better to own physical things like a home or stock in companies you think make good products, than dollars when inflation is high. I still own and won’t sell my bitcoin, [ether] or doge fwiw,” he tweeted. People got excited about Musk’s admission that he owns ether.
Current PayPal CEO Dan Schulman is more keen on crypto’s use in payments. “I think the initial things that everyone thinks about crypto, buying and selling it, and what the price of bitcoin is going to be tomorrow, that’s the least interesting part about digital currencies to me,” he said in an interview with CTech.
Crypto miners are moving on from Kazakhstan following infighting and government pressure, after moving there only six months ago. “It’s a mess, essentially, a big mess,” Alejandro De La Torre, former vice president at bitcoin mining pool Poolin, said.
Acorns is valued at $1.9 billion after raising $300 million. The investing app’s series F round was led by TPG, with participation from Bain Capital Ventures, BlackRock, Galaxy Digital and Thirty Five Ventures.
Lendable is worth $4.5 billion after raising $275 million. The British consumer-loans company’s fundraising round was led by the Ontario Teachers’ Pension Plan Board.
Alfred raised $125 million and acquired RKW Residential. The residential technology company’s latest round was led by Rialto Capital, with participation from NEA, 166 2nd Financial Services, Holland Management and others.
Lunar raised $76 million. The digital bank’s series D-2 round was led by Heartland, with participation from existing investors Kinnevik, Tencent and IDC Ventures.
Branch raised $75 million. The workforce payments service’s series C round was led by Addition, with participation from new and returning investors like General Atlantic, Drive Capital, Crosscut Ventures and Indeed.
Gauntlet achieved unicorn status after raising $23.8 million. The blockchain financial modeling service’s series B round was led by Ribbit Capital, with participation from existing investors Paradigm and Polychain Capital.PPRO acquired Alpha Fintech. With the acquisition, the digital payments company hopes to boost its presence in the Asia-Pacific region and improve its services and products.
A MESSAGE FROM FIREBLOCKS
Over 1,000 institutions have enabled crypto and digital assets for their customers with Fireblocks. Help your team accelerate time to market, minimize tech maintenance, and provide an easy to use crypto treasury system. Fireblocks is quickly becoming the go-to platform for the most innovative organizations.
Thanks for reading — see you tomorrow!