The Breakdown - Will New Anti-Terrorism Rules Help Israeli Crypto Startups? A Global Regulatory Roundup

Starting point is 00:00:00 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, November 17th, and over the last few weeks, I've had a few people kind of note that there has been a lot of U.S.-centric focus on the breakdown lately. And there's some parts of that that are obvious. I'm in the U.S. so I think about that jurisdiction more than others, but there's also just been such a never-ending onslaught of regulatory news here in the U.S. with the machinations of the SEC,

Starting point is 00:00:49 and the CFTC, and the infrastructure bill, and you name it, it's just had a lot of focus there. But it's not like crypto is a U.S. only phenomenon. In fact, part of what makes crypto so interesting is the fact that it is growing up simultaneously around the world all at the same time. So, Today what we're going to do is a whistle stop tour around the world, a global regulatory roundup. I'm going to cover India, Russia, the UK, Sweden, Brazil, anywhere that there's been interesting regulatory news lately. So hopefully this gives a little bit broader of a picture about what's going on. And as always, if you have ideas for places or specific things that are local, but still really important for other people to know about, hit me up on Twitter at NLW. Join the Discord.

Starting point is 00:01:35 The Discord has been growing recently and is a really good place for these types of conversations. But with that, let's dig in and let's start with India. Now, the relationship between India and crypto has long been fraught. The Reserve Bank of India effectively banned crypto. Now, their mechanism for doing this was that they didn't allow banks in India to service the crypto industry and what that amounted to was a ban. That happened in 2018. But a couple years later, the Supreme Court in India overturned that ban.

Starting point is 00:02:04 Still, while overturning that ban did allow a new crop of Indian crypto startups to rise up, there have still been big, big regulatory questions about what the long-term status of crypto in India was going to be. There have been basically ever-present rumblings of a full-scale crypto ban in India. The Economic Times is now reporting that government sources are saying they're presenting a crypto regulation bill in the Parliament's winter session. And while the original bill had indeed planned to ban crypto as a whole, whole, it now seems there is a lot more nuance. CoinDesk's headline reads, India to ban

Starting point is 00:02:40 crypto as payment method, but regulate as asset. So the idea here is that they would say, you can't pay for things with crypto. That's not what crypto's job is, but it's fine as a digital asset. And this actually has some precedent around the world. Indonesia, for example, since about 2017, has had this sort of dichotomy. Now, in addition to regulating crypto as a digital asset, but preventing its use as a currency, the bill is also. looking to ban quote unquote active solicitation from crypto firms. And it seems like there's been a pretty large emphasis on issues around crypto advertising. In July, the High Court of Delhi called for standardized disclaimers on crypto-related ads on national TV. And in fact, the Securities and Exchange

Starting point is 00:03:21 Board of India, Sebi actually was looking to potentially have disclaimer texts cover 80% of the screen. Now, to get a sense of what all these things feel like to the Indian crypto community, they're actually seen as relatively positive steps, even though they seem potentially egregious to some of us and other regulatory regimes. There have recently been a series of closed-door discussions between the government and the RBI, the Reserve Bank of India, as well as the government and crypto representatives. Nishal Shetty from the exchange, Wazir X, really nails the tone tweeting this morning, regulations before meant trying to suppress or kill the crypto industry. Regulations today are directed at growing and winning the crypto industry. We've gone from

Starting point is 00:04:00 negative to positive outlook towards crypto. It's on us now to make India a crypto leader. And by the way, if you ever want to check out more about this, just look for the hashtag India wants crypto. You'll see a plethora of tweets which can bring you into that world. Now, of course, as they go about trying to actually regulate crypto as a new digital asset class, it still comes with a bunch of challenges. There is concern apparently about price arbitrage between exchanges, and there are questions of which regulator will actually have the authority in this space. but again, I understand where that community is coming from. It's a hell of a lot better to try to deal with those questions

Starting point is 00:04:34 than it is to have to think about whether your entire industry is going to be banned out of the country as a whole. NIDIG sponsors this podcast and they're integrating Bitcoin into everyday life, not only for Wall Street but also for Main Street, because NIDIG is built for Bitcoin and Bitcoin is built for everyone. Learn more at nidig.com slash NLW. That's nydig.com forward slash NLW. Speaking of banning in a country as a whole, let's pop over to China. China has obviously taken a truly anti-crypto turn this year.

Starting point is 00:05:16 First, in the beginning part of the year, we got reiterations of previous policies, and it just seemed like a big nothing burger. But then the anti-crypto rhetoric was upgraded to the Office of the Vice Premier, and as we all know now, the hash rate migration out of China really happened. That crypto mining ban was taken very seriously by not only the provincial government, who are in charge of putting that new policy into action, but of the miners themselves. This has been an ongoing topic. It will be looked at as one of the defining features and historical moments in the Bitcoin network in 2021. However, that was not where China was going to end things. On September 24th, the People's Bank of China and seven other top Chinese regulators banned trading outright. They issued their, quote, notice on further preventing and disposing of the risk of hype in virtual

Starting point is 00:06:04 currency trading. Now previously, Fiat to Crypto Trading had been banned. This had long been in practice. Now, crypto to crypto trading is banned as well. And this notice went farther, saying, for example, that staff for overseas exchanges, even those working in tech support, would be subject to investigation for knowingly participating in this industry. In addition, the new policy called for increased censorship of info related to crypto, and that seems to be coming to fruition. News outlets have been reporting that chain news, Odaily, and Block 123, all crypto news sites and info platforms have been inaccessible in China, while news site CoinWorld closed down their Beijing entity on November 15th. What's more, the Chinese government is now speaking about the next phases of the Bitcoin mining ban.

Starting point is 00:06:49 The National Development and Reform Commission, the NDRC, yesterday said that it was moving to its next stages of the crypto mining crackdown and looking to punitive electricity prices as a tool. What's more on Saturday, a top Communist Party member from Yang Shi was fired, expelled from the party, and will likely face criminal charges for support of crypto mining. So, yes, the ban is real and it keeps going on. But now let's head to the Middle East. Israel has announced new anti-money laundering and anti-terrorist rules for crypto service providers. And just like in India, where these new rules are being seen as a potential positive,

Starting point is 00:07:26 that's kind of the way that this is being reported out of Israel. as well. Basically, the idea here is that these new rules may clear the way for Israeli banks to actually accept crypto sector customers. As CoinDesk puts it, quote, local banks have so far taken an ad hoc approach to accepting deposits tied to crypto investments. Crypto advocates in Israel see the new AML regulations, which came into effect on Sunday, as a first step in setting up comprehensive guidelines at the national level for banks. The CEO of Israeli exchange bits of gold said, quote, we hope that this order will significantly reduce transfer blocks and the denial of banking services experienced by crypto users and investors and create a better atmosphere for

Starting point is 00:08:05 investors, users, and companies in the field. Another CEO, the founder of Israeli Exchange, Bit2C, said, it is a milestone in transforming crypto into a solid steel financial tool that can be used by citizens and businesses of all types. Once digital currencies become regulated, the opportunities will be endless. And just so it's clear that this is an only exchange owner optimism, this was also the reporting angle of a local news outlet called Globes, which ran with the lead. The new rules will enable Israeli banks to accept profits from digital currency trading without falling foul of anti-money laundering legislation. Now to the UK, just a quick hit. While regulations seem to be opening opportunities in some places, apparently according to the

Starting point is 00:08:47 block, lawyers are telling crypto clients to not establish operations in the UK, which suggests obviously a sense that the regulatory regime there is untenable for business. That said, yesterday we also learned that a Cracken subsidiary, Crypto Facilities, had received an MLR license with the FCA. That means it's compliant with money laundering regulations and that crypto facilities can continue to offer derivatives to its customers, although those don't include retail traders due to a blanket FCA ban on crypto derivatives for retail. Meanwhile, in mainland Europe, the ECB, the European Central Bank,

Starting point is 00:09:22 was back in the news for including crypto in its biannual financial stability review that was released today. The report acknowledged that the search for yield in the context of falling interest rates and growing inflation around the world was driving people to risky markets like crypto. But it also sounded the alarm on the growing connection between stablecoins and the traditional financial market, which I'm sure is completely unrelated to the fact that the EU is in the early stages of investigating its own digital euro. But to go along with a little nice stablecoin fund, let's add some climate fudge, shall we? Swedish authorities, including their financial supervision authority

Starting point is 00:09:58 and their environmental protection agency, are saying that crypto's rising energy usage is threatening the country's ability to meet their obligations under the Paris Climate Agreement. They wrote an open letter calling for an EU-wide ban on proof-of-work mining. However, it seems like they didn't get all their ducks in a row because even within the Swedish state apparatus,

Starting point is 00:10:18 as the state-owned power company Vattenfall has very publicly disagreed with this pronouncement. Vattenfall's head of physical power management argued that crypto mining could actually balance the load, especially when power supply varies, which it does a lot in countries like Sweden who have a heavy reliance on renewables like wind and solar. Vattenfall also pointed out that if clean power nations kick miners out, they're going to go to cheaper, dirtier sources of energy and other places. Now, Eric Wall, a crypto investor who's very prominent on Twitter and who is himself Swedish,

Starting point is 00:10:50 was just aghast at this whole thing in an almost laughing kind of way. He writes, LOL, Vattenfall, Sweden's own state-owned power company, Sweden's absolutely largest fossil-free energy producer, just completely rejected the notion put forth by our financial regulator and environmental protection agency two days ago of Bitcoin's mining wastefulness. Instead, they talked about how crypto mining was an excellent buffer in energy production that is highly useful for controllable load management and a way to monetize excess energy which would otherwise go to waste.

Starting point is 00:11:21 Eric Wall asks, do you have any idea how poorly researched this makes the article look? You did not even ask our own state-owned power company before issuing guidance on power production-related matters, and so on and so forth. But frankly, from our standpoint, it's great to see this sort of public debate and pushback. I think it's going to keep the energy discussion a lot more honest than it's sometimes been. over to Russia now where the leader of Russia's legislature is calling for a new working group that will focus on crypto with a special emphasis on mining. And there are a bunch of forces at work here. The Russian government wants tax revenues from miners.

Starting point is 00:11:56 They want to be able to take advantage of gas flaring to make money from mining. And they also have a long-term interest in oil being priced in not USD, which is one of the more interesting and less talked about game theory dynamics of Bitcoin in the global environment. Su-Zou says international oil and gas will be priced in Bitcoin within 24 months. This is my prediction. Willy Wu adds the petro-coin regimes, backed by electricity instead of oil and guns, would accelerate a global energy shift. People really don't understand how changing the currency of pricing has huge implications. This, to me, feels like it's going to be an episode that we have to dig into deeper. But a few more to wrap up. In Indonesia, the top Islamic scholarly body of that country has

Starting point is 00:12:39 found crypto to be haram forbidden. It's too close to wagering or betting in their estimation. Now, this is a government-funded organization, but is not legally binding. And there's actually a lot of fascinating things to discuss around how crypto might relate and fit into Islamic finance norms. And if that's something that people are interested in, I would love the excuse to dust off my old Islamic finance and Islamic jurisprudence hat from when I was in college and dig into it. But in the context of this show, at least, this is really relevant, right? There is a lot of crypto interest in Indonesia. A survey announced last month from an Australian blockchain

Starting point is 00:13:13 EDU startup called Coin Format, claimed that Indonesia has seen a more than 1,700% increase in crypto interest in 2021, including a 575% increase in annual search volume. In Brazil, a Brazilian congressman has proposed a bill to legalize crypto payments for public and private sector workers, making an argument effectively that this is just part of the future and should be officially enabled. In Peru, the central bank has started to develop their own

Starting point is 00:13:39 CBDC, saying, we have been working on a digital currency. We are not going to be the first because we do not have the resources to be the first or to face the risks, but we do not want to be left behind. I think the payment system we are going to have eight years from now in the world is going to be completely different from the current one. And lastly, an embassy in the metaverse? That is Barbados plan. The Barbados Ministry of Foreign Affairs and Foreign Trade has signed an agreement with Decentraland and is now looking to do the same with other Metaverse platforms. An official said embassies are the starting point to getting a visa to enter a country or visa-free travel. Can you imagine what that would look like virtually and where that e-visa could lead you?

Starting point is 00:14:19 So I think there's an obvious cynical take here, which is that this is just marketing. It's a way for them to be in the metaverse cycle as that term is bandied about, and people are excited to Google it and talk about it. But I think that would be underselling the interesting thing here. We're moving to a world where physical geography matters less than less, at least when it comes to certain parts of economic production and certainly of talent distribution, why wouldn't you want to be on the forefront of attracting new types of talent in new types of industries to your space, to your jurisdiction, whether that jurisdiction is physical and geographic

Starting point is 00:14:55 or something more virtual and metaversal? That's not to say that there won't be many cynical, money-capturing ploys around any sort of metaverse or virtual worlds, but I think that we can can't dismiss these types of efforts out of hand, and I believe that we're going to see a lot more of them going forward. All right, there we go. Around the world in a short period of time, I'm sure there's tons of other things that I missed. Please let me know about them, like I said, on Twitter or the Discord, but hopefully this gives you a bit of an overview around what's happening right now.

Starting point is 00:15:26 I appreciate you guys listening, and until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Will New Anti-Terrorism Rules Help Israeli Crypto Startups? A Global Regulatory Roundup

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