What would the crypto regulatory landscape look like in 2024?
No one knows, with the world spinning in several directions! Meanwhile, as we look back at 2023 in Part 2 of our year in review on all things DeFi, more events unfolded that will impact the New Year. As a refresher, here’s Part 1 of our 2023 DeFi Diaries retrospective, once again.
- A global think tank indicated that a CBDC could emerge in the next decade.
- Proof-of-Reserves may not hold sway this year.
- Crypto taxes might be different in 2025.
- ETF approvals may come (Bitcoin is up, but the SEC may pull a
few surprises). - Our friends in the UK will fully enter tokenization in 2024.
- American crypto legislation efforts are ongoing.
These are your decentralized diaries!
Bitcoin is Bullish at $45k
Amid ETF approval expectations, Bitcoin hit a $45.899.71 high from a $41,424.06 low. Bitcoin prices are currently at $45,430.38 (as of 2/1/2024).
The altcoins are also something else as well. Ethereum (ETH) is currently at $2,394.31, Solana (SOL) at $113.79, Avalanche (AVAX) at $42.02, Polkadot (DOT) at $8.68 and Chainlink (LINK) at $15.86.
The White House Unveiled its Digital Asset Roadmap and Changed Sides
The White House started last year with its digital asset roadmap and framework. The document proposed a three-pronged approach that involved improved regulatory oversight, increased R&D, and congressional cooperation to introduce laws for the sector.
Additionally, the report highlighted the various security issues that allowed criminals to do bad things using the underlying industry technologies.
In March, the Economic Report of the President, authored by the Council of Economic Advisers, went after digital assets, asserting that many of them have zero underlying economic values, with no benefits for the token holders.
The White House’s budget proposal from May included a Digital Asset Mining Energy (DAME) excise tax. Congress overturned it.
A Global Think Tank Predicted CBDC Implementation in Ten Years
In February, the Official Monetary and Financial Institutions Forum (OMFIF) annual report indicated positive growth for the Distributed Ledger Technology (DLT) industry. Additionally, two-thirds of Central Bank survey respondents expect the issuance of a CBDC within a decade.
The United Nations was Deeply Interested in All Things Crypto
UN agencies indicated a deep interest in the cryptospace with several activities. In March, the United Nations Agency for Children (UNICEF) introduced a Decentralized Autonomous Organization (DAO) prototype that enables the transfer of digital goods.
Also, the United Nations Internet Governance Forum (UN-IGF) created the blockchain standards group in July in partnership with the Government Blockchain Association (GBA), an industry advocacy organization.
Additionally, a November study by the United Nations University (UNU) unveiled the hidden environmental effects of Bitcoin mining, with coal taking center stage (at 45%) followed by natural gas (at 21%).
The US Public Company Accounting Oversight Board (PCAOB) Warned Against Proof-of-Reserves
Things may not be easy for Proof-of-Reserves (PoR) in 2024 with a March 2023 warning from America’s top public accounting organization.
An advisory from the Public Company Accounting Oversight Board (PCAOB) cautioned investors that Proof-of-Reserves did not prove that crypto companies were solvent or had internal controls that worked.
The IMF Remained Neutral on Crypto Issues
The IMF decided to sit out the global crypto debate, with multiple angles to the crypto issue. At the February G20 meeting, the agency called for regulating digital assets rather than an outright ban.
In June, the IMF unveiled a CBDC prototype with several use cases, including token transfers and asset tokenization.
Additionally, in July, the IMF identified digital taxation opportunities.
The IRS Unveiled a New Tax Proposal
Besides the continuing legal drama with Kraken, America’s taxman proposed that crypto and digital asset trading entities and intermediaries be called “brokers” in the 2025 tax year. Also, the IRS could require brokers to share information and introduce a new form (1099-DA).
The IRS also sent a crypto crime specialist squad to several countries, including Colombia, Australia, Germany, and Singapore, to help catch criminals as part of ongoing cooperation efforts.
The BIS was Busy with All Kinds of Experiments
The Bank for International Settlements (BIS) was busy in the space with many experiments. Most of them were CBDC-focused.
The June early release of the BIS annual report unveiled the concept of a unified ledger that allows for direct API communications. Additionally, the BIS created a cross-border payments interoperability and extension taskforce in August.
In October, Agustin Carstens, the BIS General Manager, iterated that Countries needed to create legal mechanisms that enable CBDC functionality. Additionally, central banks now have access to a Bitcoin transaction tracking tool unveiled by the organization in the same month.
The BIS also rounded off the year with two working CBDC models (ECash1 and ECash2), which worked successfully within its cloud environment.
The IOSCO Published Digital Asset Recommendations
In November, the International Organization of Securities Commissions (IOSCO) published a paper that made several recommendations for regulating digital assets. Areas covered included asset custody and client protection, compliance, retail distribution, risks, and market manipulation.
The FASB Published Fair Value Guidelines for Digital Assets
Things took a turn for the better accounting-wise for digital assets with new FASB rules (unveiled last month) that enable companies to disclose them at fair value on their balance sheets. The rules allow for the accounting of the price movements of crypto tokens in both directions.
The UK IA Launched a Tokenization Blueprint
Across the pond, in November, the UK Investment Association published its tokenization blueprint. The document’s first phase addresses several issues (regulatory, technical, and legal).
