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Law Firm Perkins Coie Adds Ex-CFTC Counsel to Dedicated Crypto, Blockchain Group

Law firm Perkins Coie has hired Kari Larsen after identifying her “understanding of the impact that blockchain and crypto will have” on the legal sector.

U.S. international law firm Perkins Coie (PC) announced it had hired a former counsel for the country’s commodities regulator to work in its blockchain practice in a press release Nov. 6.

Kari Larsen, who previously worked at the Division of Enforcement of the Commodity Futures Trading Commission (CFTC), will now be based at PC’s Blockchain Technology & Digital Currency industry group.

The group originally formed in 2013, with PC keen to gain an understanding of the complex legal landscape which continues to evolve around cryptocurrency and related tokens in the U.S.

“I’m confident that Kari has a true understanding of the impact that blockchain and crypto will have on our industry,” Molly Moynihan, co-chair of the firm’s investment management practice and member of the firm’s management committee commented in the release, adding:

“Her extensive experience representing clients in a wide range of commodity and transactional matters, and regularly providing counsel on global matters related to U.S., U.K. and E.U. commodity laws and regulations, will be a significant advantage to our national practice.”

The move comes as legal advice concerning cryptocurrency handling remains highly sought-after in the weeks leading up to the emergence of fresh offerings targeting institutional investors.

As Cointelegraph reported, Dec. 12 should see the launch of the Intercontinental Exchange’s Bakkt platform, which will offer one-day physical Bitcoin futures. Earlier this week, the  U.S. Chicago Board Options Exchange (CBOE) noted that their BTC futures offering hit record volatility lows in October.

The path to regulatory certainty for Bakkt is complex, commentators have noted this week, some seeing the launch as a crucible for what is possible under the current U.S. climate.

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Taiwanese Lawmaker Proposes New Business Category for Crypto Startups

Taiwan’s “Crypto Congressman” continued his push for more modernized regulation around the tech by proposing new rules for token sales.

On Friday, Taiwanese legislator Jason Hsu published a list of policy recommendations aimed at aiding cryptocurrency startups, including one that would see the Ministry of Economic Affairs (MOEA) create a new business category, as well as a new legal framework for security tokens.

Hsu also called for the Taiwanese legislature’s Finance Committee to issue guidelines for initial coin offerings (ICOs) with a focus on consumer protection. His proposal comes just days after the nation’s financial regulator announced it would set up ICO regulations within the next eight months.

The Taipei Times reported last week that Financial Supervisory Commission chairman Wellington Koo has told the committee that “national standards” for how ICOs should be conducted would be completed by June of next year.

He announced that these standards would likely outline how tokens may be classified as securities, but notably added that cryptocurrencies being used to purchase goods or act in a manner unrelated to securities offering would not fall under the new regulations.

Hsu’s proposed framework would go further, requiring the MOEA to develop new consumer protection and taxation guidelines, according to Friday’s press release.

He also suggested a specific proposal for security token offerings (STOs) based on the French Commercial Growth and Transformation Act and the U.S. Howey Test. If signed into law, his proposal would clarify which token sales would fall under the nation’s Securities and Exchange Act. STOs could also fall under equity crowd-funding rules and related laws, Hsu’s release noted.

Jason Hsu image courtesy Jason Hsu

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Crypto Firms to Congress: We Need Clarity on Blockchain Token Rules

Some 80 representatives from the cryptocurrency and traditional finance industries trekked to Washington, D.C. on Tuesday with a singular message for U.S. lawmakers: we need regulatory clarity on cryptocurrencies and initial coin offerings (ICOs).

That message was fully on display during the “Legislating Certainty for Cryptocurrencies” event held this week at the Library of Congress. Over the course of the morning and early afternoon, stakeholders outlined the difficulties they face when launching projects and products in the U.S.

The culprit behind their woes: uncertainty as to when cryptocurrencies are treated as securities and how startups should approach compliance more broadly.

Members of Congress, it would seem, are receptive to their complaints. Congressman Warren Davidson, who hosted the event, positioned the forum as a round-table discussion to solicit input from the industry on these very points. A spokesperson for the lawmaker told CoinDesk that Warren intends to introduce “light touch” legislation sometime within the next three weeks.

“Your input is critical to helping us preempt a heavy-handed regulatory approach that could stall innovation and kill the U.S. ICO market,” Davidson told attendees during his prepared remarks.

He added:

“With a thoughtful, bipartisan approach that protects consumers, advances free market solutions and defines safe-harbors for the early stage innovators, Congress can send a powerful message around the world that the U.S. is the best destination for ICO markets.”

The issues at hand

At the heart of these debates is a desire to advance cryptocurrency adoption within the U.S. However, as CoinList general counsel Georgia Quinn noted on Tuesday, there is a dearth of clarity guiding these developers.

The issues range from how cryptocurrency gains are taxed to whether someone crypto startups qualify as money transmitters. What’s more, there’s a question as to the U.S. government itself can take advantage of the nascent technology.

Blockchain president and chief legal officer Marco Santori explained the backstory behind treating token sales as securities offerings, in particular highlighting the development of the Simple Agreement for Future Tokens (SAFT) framework.

The SAFT framework, he said, was an attempt at finding a way to conduct token sales without running afoul of securities laws.

He went on to explain:

“The SAFT project was launched around this time last year. We did not invent it by any stretch … for those of us who were involved in the early project, I think we all realized it was not an ideal solution. As Coin Center put it, it was the symptom of regulatory uncertainty. It was not the best we can do. It was the best we could do.”

Lawmaker ‘ignorance’

An acknowledged barrier to positive action was once again highlighted during the event: the need for lawmaker education.

As Representative Darren Soto put it, most lawmakers in Congress aren’t exactly opposed to the technology – they’re just very unfamiliar with it.

Indeed, Davidson joins a growing group of U.S. lawmakers who believe that some form of accommodative legislation is necessary to spur development around cryptocurrencies.

He’s not alone. Just last week, Representative Tom Emmer, one of the guests at the forum and the newly-named co-chair of the Congressional Blockchain Caucus, proposed a trio of bills aimed at encouraging innovation without unfairly penalizing those who seek to launch token sales or otherwise transact with cryptocurrencies.

While one of Emmer’s bills focuses on the taxation of cryptocurrency investment gains, Representative Kevin Brady and the House of Representatives’ Ways and Means Committee sent a letter to the Internal Revenue Service last week requesting that the nation’s tax agency publish comprehensive guidance for U.S. residents – something the IRS hasn’t done to date.

Quinn told CoinDesk that she was unsure what sort of legislation may be required in the end. Her goal at the forum, she explained, was to advocate for “thoughtful” legislation that may apply to a variety of tokens, rather than just adding a number of new regulations which may lead to further confusion and uncertainty.

“This concept of regulation by enforcement is really not helping us. When you look at the cases being brought, they are the low-hanging fruit, it’s the scammers, the liars … It’s not giving me any primers on how to operate a business,” Quinn explained during the forum.

Providing this clarity can help the U.S. as well as startups, ConsenSys’s Joyce Lai said, explaining that many startups may choose to set up shop in a friendlier country to avoid facing penalties for potential legal violations.

She concluded:

“If we have a lot more clarity, you’ll see a lot more projects.”

DC forum image by Nikhilesh De for CoinDesk

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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WeChat, Alipay to Block Crypto Transactions on Payment Platforms

Chinese mobile payment platforms WeChat Pay and Alipay are scrambling to keep up with regulators after recent announcements regarding initial coin offerings (ICOs) and cryptocurrencies.

Both payment giants have said that they will work with the government agencies closely to monitor cryptocurrency transactions, according to news releases on August 24.

As CoinDesk reported on Friday, five high-level regulatory agencies in China – including the People’s Bank of China and the Banking Regulatory Commission – issued a warning against any cryptocurrency-related fundraising and trading activities.

In a release published by Tencent, the parent company of WeChat Pay, not long after the news came out, the company said that it has come up with three main measures to regulate any “problematic” platforms related to ICOs and cryptocurrencies.

Specifically, the tech giant said that it will prohibit users from using WeChat payments to make any virtual currency-related transactions. Moreover, it will conduct both real-time monitoring of daily transactions and risk assessment of any suspicious transactions.

At the same time, in an exclusive interview with BJ News, a local news outlet based in Beijing, Alibaba Group affiliate Ant Financial, which owns Alipay, said that depending on the situation, it will restrict or permanently ban any personal Alipay accounts that are involved in cryptocurrency transactions.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Hungary Does Not Consider Cryptocurrency Legal Tender Yet

Hungary is reportedly working on a regulatory framework for cryptocurrencies but doesn’t consider them a legal tender yet. The country’s current legislation imposes steep taxes, making it a fairly unwelcoming territory for cryptocurrency investors.

Not Legal Tender

Citing a written statement of the country’s Finance Ministry, local Hungarian media Portfolio reports that Bitcoin and other cryptocurrencies do not qualify as legal tender.

However, the country is purportedly working actively on a regulatory framework to address all aspects of cryptocurrencies. The statement reads:

Hungary is currently looking into regulating crypto instruments, and the central bank, the tax authority, the finance ministry and other authorities have set up a joint workgroup to evaluate legal, economic, law enforcement, money laundering and other aspects of cryptocurrencies with an eye to introducing more detailed regulation.

Unfavorable Taxation

Hungary’s taxation is infamously hostile towards the retail cryptocurrency investor. According to local tax experts, the country’s Personal Income Tax law considers proceedings from Bitcoin and other cryptocurrencies to be “other income.” As such, it is subjected to 15 percent Personal Income Tax as well as with 22 percent Health Contribution.

However, if the activity is carried out by a business and not by a private individual, the tax burden would be essentially smaller – 9 percent corporate income tax as well as another 2 percent local business tax which is not always applicable.

A recent report by Deloitte Private outlines that the heavy tax burden is forcing people into investment schemes which entail even more risks:

Many people try to escape the infamous Hungarian taxes and additional administrative obligations (i.e. tax advance assessment, or preparation of tax returns and continuous keeping of tax records) through the increasing number of investment schemes. However, the level of reliability and sophistication of these is quite low in most cases, which often entails further taxation and legal risks.

What is more, as it currently stands, the legislation of Hungary considers selling or exchanging cryptocurrency to be a taxable event.

However, one potential loophole for holders of cryptocurrency may be to use it as collateral for a loan. Doing so is not considered a taxable event in Hungary, therefore it could be a better option compared to simply selling and paying the given tax.

“According to current law in Hungary, as a consequence of selling or exchanging cryptocurrencies is considered a taxable event,” Csaba Csabai, CEO of INLOCK explained. “However using these digital assets as collateral for a loan to finance a temporary liquidity problem is not. The platform we are building is working towards this concept enabling cryptocurrency holders to access the purchasing power of their holdings without being punished by the extremely high tax rates.”

What do you think of Hungary’s position on cryptocurrencies? Don’t hesitate to let us know in the comments below!

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