Regulations Round-Up – February 2021

January was a mixed month for top global assets. After soaring to an all-time high of $42,000, the price of Bitcoin fell by more than 20% as fears of more regulations and demand rose. Other cryptocurrencies like ETH, LTC, and BCH also pulled-back after reaching their multi-year highs. Meanwhile, DeFi projects continued to flourish as the total value locked, rose to more than $26 billion. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in January, and now we’re looking at what’s coming up in February.

Janet Yellen and Christine Lagarde warning on crypto

In January, Christine Lagarde of the European Central Bank (ECB) president told a parliamentary committee to press for more regulations on cryptocurrencies. During her congressional testimony, Janet Yellen, the new Treasury Secretary said that the government should curtail the use of cryptocurrencies to prevent cybercrime.

Therefore, it is possible that the new administration will abandon Trump’s soft-touch regulations on crypto. It could do this by outright banning cryptocurrencies or adding more regulations on exchanges.

Germany changes CFD taxing system

Contracts for Difference (CFD) traders were targeted by a new tax system in Germany. After being introduced in 2019, the parliament passed the law in December 20. In general, the new law changes how traders account for their losses when paying their taxes. Before, a trader was able to offset any losses when paying taxes. The new law puts a limit to the amount they can offset to 20,000 euros. As a result, in most cases, a trader will pay higher taxes than their net profit, which will see many of them avoiding trading.

DEFSA plans cryptocurrency regulations

The Dubai Financial Services Authority (DEFSA) said that it will deliver its broad regulations on cryptocurrencies later this year or early 2022. DEFSA said this after Ripple said it would consider moving its headquarters there as it continues to battle with US regulators. The company is also considering moving to the UK. The report said:

“We will build upon recent achievements in this space over the business planning period through developing a regulatory regime for digital assets, having already implemented regulations supporting various innovative business models.”

CySEC updates on cryptocurrencies

The Cyprus Securities and Exchange Commission (CySEC) released Circular C417 that explained its view on crypto assets. The update was about establishing common grounds for Cyprus Investment Firms (CIF) dealing with cryptocurrencies on how to calculate their capital adequacy ratio. It also mentioned about risks management when using these crypto assets. The report said:

“CIFs must have in place sound, effective and complete strategies and processes to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed to. These strategies and processes are subject to regular internal review.”

New SEC head to oversee regulations

The Securities and Exchange Commission (SEC), the most powerful regulator in the world, got a new chairman. In an announcement, Joe Biden mentioned Gary Gensler to be the new chair and Rohit Chopra to be the Consumer Financial Protection Bureau (CFPB).

Gary was the head of CFTC during the Obama administration and previously worked at Goldman Sachs. Gary previously favoured financial deregulation a decade ago but he will be under pressure from liberals to add more regulations.

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