Hash Notes

1. Current Events

o Notable Recent News

§ Thailand – April 1, 2022 banning cryptocurrency for payment of goods and services. Investing is ok. The Securities and Exchange Commission said it was taking action in order to protect the stability of the country’s financial and monetary systems from threats including money laundering and other cybercrimes.

§ United States - Executive order, “Ensuring Responsible Development of Digital Assets”. Aiming to balance from the positives of crypto—financial efficiency, inclusion, American leadership in global finance— with its negatives: potential illicit financing, consumer and business abuse, and regulatory arbitrage. The Executive Order accounts for national security objectives and encourages the Fed to report on a possible central bank digital currency (CBDC).

· BlockFi will pay 100mill in a settlement with sec and 32 states over its interest accounts. Operating as an unregistered investment company and labelling these lending products are securities. SEC also targeting Celsius, Gemini, Coinbase. Will file lawsuit if they dont cancel their lending products. New assets will not pay out interest for US citizens. New accounts will not be eligible to earn interest. When SEC approves BlockFis registration, interest accounts will operate normally again.

§ Ukraine: Crypto donations to Ukraine since the invasion total almost $100 million. Blockchain networks are global and settle transactions in minutes, while the legacy banking system takes three days to settle a cross-border transaction. Many crypto donations went directly to wallets held by the Ukrainian government via the Ministry of Digital Transformation. Deputy Minister Alex Bornyakov said last week that 40% of the vendors Kyiv is working with have accepted payment in cryptocurrency.

§ South Korea incoming president Yoon intends to allow initial coin offerings (ICOs) and change the threshold for paying taxes on crypto from $2,000 per year to $40,000 per year.

§ Salvador: The International Monetary Fund (IMF) has urged El Salvador to reverse its decision to make Bitcoin legal tender. In September, El Salvador became the first country to allow consumers to use the cryptocurrency in all transactions, alongside the US dollar. Businesses would be required to accept bitcoin for all payments. The decision led to large-scale protests over fears it would bring instability and inflation to the impoverished Latin American country. Bitcoin has lost about half its value since November. The IMF has warned President Nayib Bukele of the risks the cryptocurrency poses to the country, stressing that it would be difficult to get a loan from the institution.

2. Crypto and Russia

o What is the role of Cryptocurrency in Russia and Ukraine?

§ Ukraine benefits more from cryptocurrency than Rusia

§ Cryptocurrencies act as an alternative to the Russian Ruble, helping the flight of capital from the country.

§ Crypto can reduce the humanitarian impact of the war by acting as a medium of exchange to access goods when fiat currencies get devalued or froze. It also helps lessen the impact of sanctions for regular people. It is used extensively by Ukraine to solicit donations. However, it can also be used for illicit means as well.

· Ukraine ranked fourth globally for crypto adoption

· In September 2021, Ukraine formally legalized crypto

· February 26, 2022 – Ukraine starting asking for crypto donations. Initially started with only bitcoin and tether, the Ukrainian government now accepts over 70 forms of crypto. Ukraine’s largest crypto exchange, Kuna, helped organize. By March 9, raised nearly $100 million from crypto donation.

§ Russia is newly facing sanctions. Russia has been intertwined with the global financial system for decades. Other sanctioned countries, such as North Korea and Iran, have been decoupled for decades and are not as reliant.

o Is it serving the original purpose of Cryptocurrency (ex. Decentralization/store of value/etc.)

§ Most crypto is traded on centralized exchanges such as Binance and Coinbase due to convenience and custodial services. These exchanges must follow know your customer, anti-money laundering, and countering the financing of terrorism (KYC/AML/CFT) laws to do business in/with the United States. Therefore, the users of these exchanges are identifiable and certain entities accounts can be suspended or frozen.

§ As a result, one can argue that decentralization is not actually occurring.

o What are some obstacles in using cryptocurrency?

§ Instability, forcing businesses to accept crypto. See Salvador above.

3. Other Countries Cryptocurrency Policies

o Regulatory status

§ What is the impact on the economy?

§ What is the impact on the company?

§ What is the motive of the regulator?

§ Public and personal opinion of regulations

· Countries That Have Banned Crypto

o China

§ China cracked down on cryptocurrency for two factors – an obstruction to the plans of the party to float its own own e-currency and fears that not taking steps to regulate crypto would undermine the influence of the party on economic activity.

o Nepal

§ Trading or any form of crypto transactions are banned in Nepal as well, but the government is reportedly open to the idea of a state regulated digital currency in the country. Motive of the regulator, in this case the Nepal government, seems to be that they want to control it on their own. Public not happy, as it takes away from the purpose of crypto via its decentralization.

o Bangladesh

§ The central bank of Bangladesh does not even allow trading in cryptocurrencies as it violates the Money Laundering Prevention Act of trading in foreign currencies, according to Business Today. Motives of the Bangladesh government seem to be to prevent fraud and money laundering. Lack of openness in this country is perceived to be due to a lack of knowledge of crypto currency within the government and fear of not being able to control trading/transactions.

· Countries That Have Strong Regulations on Crypto

o Russia

§ Russia passed the Digital Financial Assets and Digital Currencies Law to regulate cryptos in July 2020, which did not totally ban their use but disallowed it for exchange of goods and services. The law puts forth taxation guidelines for crypto transactions and the Russian civil servants were banned from owning it. Russian President Vladimir Putin has repeatedly insisted that cryptocurrency promotes criminal activity, especially with respect to cross-border transactions. This affects the economy regarding a lack of general use of crypto currency. Public opinion of this has grown negative due to the Russia-Ukraine conflict, with more civilians favoring the use of crypto to get around sanctions and safeguard their money.

o Turkey

§ Turkey is another country that is not at all pleased with the boom in the crypto market. Its central bank banned the use of cryptocurrencies and crypto assets for purchases due to the likelihood of "irreparable" damage, Reuters reported. The central bank ruled, like the Russian government, that digital currencies based on a system of distributed ledgers could not be used in any manner to transact in goods and services. Therefore, as of now, Turkey's rules say that the only way to deal in crypto is through banks or the postal office. Due to the small number of ways to use crypto, it has not impacted the economy much. The public is mixed in their views of this, with some wanting less regulation by the central bank, and others accepting the current ban due to beliefs of instability and a high likelihood of fraud.

· Countries That Permit Crypto Trading

o United States

§ While the Internal Revenue Service (IRS) of the US does not recognize crypto as legal tender, it does define it as "a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value."

§ Since crypto can be legally used for retail transactions, like the exchange of goods and services, American taxpayers must report their crypto transactions to be taxed as per the guidelines issued by the IRS.

o United Kingdom

§ According to the Bank of England, because they lack orthodox defining characteristics, cryptocurrencies are not considered as money per se and therefore don't really challenge the stability of the UK banking system, according to ComplyAdvantage, an anti-money laundering technology headquartered in London. This has led to virtually no regulation on the governments part. The public has taken a liking to crypto, with the UK being one of the more frugal markets. Nonetheless, some people have been wearying of crypto due to the lack of regulations.

§ The UK's central bank has, issued guidelines warning about the dangers of crypto such as the lack of regulatory protection and the risks of speculative trading and price volatility.