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Turkey Regulating Crypto Assets To Shed “Grey List” Tag

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Turkey is swiftly advancing its efforts to regulate cryptocurrency assets, according to the country’s Finance Minister, Mehmet Şimşek. In his address to the nation’s planning and budget commission on October 31st, Şimşek revealed the government’s determination to formalize crypto assets within the national financial framework. This move comes after the nation found itself on the Financial Action Task Force [FATF] grey list in 2021, subjecting the nation to heightened scrutiny. Being on this list has posed significant challenges for Turkey, hindering its ability to attract foreign investments, especially during a period of existing economic difficulties.

The FATF had criticized Turkey for its failure to implement effective measures to combat money laundering and terrorist financing, resulting in the exploitation of the country’s financial system by various criminal entities, including mafia groups, drug traffickers, organized crime syndicates, and terrorist organizations, over the past decade. A report issued by the global agency in July 2023 highlighted Turkey’s continued strategic deficiencies in meeting the FATF’s recommendations.

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Turkey Regulating Crypto Assets To Shed "Grey List" Tag 2

To address these concerns and enhance its anti-money laundering and counter-terrorist financing efforts, Turkey has decided to incorporate digital assets into its tax framework. This decision, outlined in the 2024 Presidential Annual Program, signifies a significant shift in the government’s approach to cryptocurrencies. After years of deliberation, this move is poised to bring about substantial changes in the country’s economic policies.

Turkey Minister Says Crypto Laws On The Final Stages

According to Şimşek, Turkey has successfully adhered to “39 out of 40 FATF standards.” He stated, “Regarding technical compliance, the only ongoing preparations are related to work on crypto assets. Our necessary efforts in this regard have reached the final stage.” He further added, “We will submit a law proposal on crypto-assets to the parliament as soon as possible. After that, there will be no reason for Turkey to remain on the grey list, provided there are no other political considerations.”

This proactive approach by the Turkish government signals its commitment to addressing the challenges posed by unregulated cryptocurrency activities. By integrating digital assets into the tax framework and preparing a comprehensive legislation proposal, Turkey aims to bolster its financial system’s integrity, attract investments, and strengthen its position on the global economic stage.

SEC New Guidance: Companies Should Disclose Their Exposure To Crypto Assets

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In light of recent events in the market, the Securities and Exchange Commission (SEC) has released new guidance related to crypto assets. The Division of Corporation Finance believes that every company should disclose its exposure to crypto assets, including risks and developments.

Participants in the crypto asset market are now facing bankruptcy and economic instability, which has significantly disrupted it. Companies may be required to disclose information about how this event and other associated events will affect them economically.

These disclosures will give investors detailed information on market “events and conditions,” the company’s position regarding it, and any future effects on investors. Additionally, “companies with ongoing reporting obligations should consider whether their existing disclosures should be updated.”

However, a sample letter that the Division may issue to a company, based on the facts and circumstances specific to that company, is also provided by the SEC as an example in the press release.

According to the statement:

In meeting their disclosure obligations, companies should consider the need to address crypto asset market developments in their filings generally, including in their business descriptions, risk factors, and management’s discussion and analysis. 

SEC Points Out Clear Disclosure In Sample Letter

To help companies meet these compliance obligations, the example of comments focuses on the necessity for “clear disclosure” about essential changes in crypto-asset markets.

It includes how the company’s exposure to counterparties and other market players could change. Additionally, what risks it may face because of its lack of liquidity or access to debt financing, and any risks from being involved with lawsuits or investigations in this field.

The sample letter is divided into four sections and includes a total of 16 comments. Sections include “General,” which discloses any noteworthy developments in the market for crypto assets that are relevant to the understanding or evaluating of the firm, among other things.

Other sections are “Description of Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors.” 

The SEC said:

The Division urges companies to take these sample comments into consideration as they prepare disclosure documents that may not typically be subject to review by the Division before their use.” 

Moreover, if a company has any inquiries about its proposed disclosure, the Division strongly advises contacting the industry office in charge of the company’s filings.

Related Reading | Kevin O’Leary Says He Lost $15 Million That FTX Paid Him as a Spokesman

Here’s what Celsius’ Ex-CEO has been doing with $10M withdrawn before bankruptcy

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Customer withdrawals were previously blocked by cryptocurrency lender Celsius in June. The company declared bankruptcy the next month, with a $1.2 billion hole in its balance sheet. According to newly revealed information, the founder of Celsius Network allegedly withdrew money in May before the alleged events took place.

A recent Financial Times article claims,

“Celsius Network founder Alex Mashinsky withdrew $10mn from the crypto lender just weeks before the company froze customer accounts as it spiralled towards bankruptcy, according to people familiar with the matter.”

The Celsius executive left the company only last week. The Financial Times reported that because Mashinsky was aware that the company would not be able to restore customer assets, the withdrawal discoveries at this point “would deepen scrutiny” of him and “raise issues.”

It is important to note that Celsius will likely provide information about Mashinsky’s transactions in court in the upcoming days as part of a “broader disclosure” of its financial affairs.

Celsius founder’s $44M crypto assets still frozen

A representative for Mashinsky revealed that after the withdrawals, he and his family still have $44 million in crypto assets frozen with Celsius. According to reports, the executive told the UCC (unsecured creditors committee) about the information during the bankruptcy procedures. Regarding the purpose of the funds, the spokeswoman stated,

“In mid to late May 2022, Mr Mashinsky withdrew a percentage of cryptocurrency in his account, much of which was used to pay state and federal taxes. In the nine months leading up to that withdrawal, he consistently deposited cryptocurrency in amounts that totalled what he withdrew in May.”

The representative went on to say,

“He continues to be committed to working with and uniting the community around a recovery plan that will maximise coin and liquidity for all,” they added.

The executive had promised in his note that he would still endeavor to “deliver the best solution for all creditors” despite his resignation.

Gunnercooke joins the crypto party by accepting BTC and other assets

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Gunnercooke is the first UK legal firm in the top 200 to accept crypto payments, according to the firm. The renowned law firm took to its Twitter handle to announce the ground-breaking news.

The Urban legal firm announced that it has teamed with Coinpass, a cryptocurrency exchange regulated with the UK’s Financial Conduct Authority, to make the exchanges, which will accept Ethereum (ETH) and Bitcoin (BTC) as well as other crypto-assets.

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Coinpass expressed acceptance for Dogecoin, Cardano, Tezos, UniSwap, and EOS on its platforms in November. Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash, Polkadot, Chainlink, and Stellar are among the other crypto assets enabled.

Naseer Patel, Finance Director at Gunnercooke added,

“We will now be able to work with a wider variety of clients across different jurisdictions, plus offer our partners the flexibility to be paid securely in the way they choose.”

So far, there have been a few law firms from the U.S. that accept crypto-asset payments, with this move, Gunnercooke becomes the first law firm to be at the forefront of innovation, according to Patel.

Among the legal firms in the U.S., big law companies like Perkins Coie, Steptoe & Johnson, and Quinn Emanuel Urquhart & Sullivan, along with regional firms Frost Brown Todd and McLaughlin & Stern, have all embraced cryptocurrency as payment.

Gunnercooke’s move to help push for growth in crypto practices

Since its founding in 2010, Gunnercooke has pushed for expansion in its fintech and crypto practices, having created a client base of around 100 crypto developers, platforms, and exchanges.

Additionally, Attestant, a crypto-staking firm, compensated Gunnercooke for its legal consulting services using Ethereum through the new mode of payment this week. Gunnercooke financial services and fintech partner Jamie Burnie predicted that over the next decade, Bitcoin will gradually gain acceptance as a mode of payment in general.

While crypto is gaining traction as a payment method among law firms, just a small percentage accept it, and then only for a small number of clients, but this is changing.

With the world evolving, it is essential for a firm to accept payment in crypto. This development could help improve any firm’s outlook by building a large client base that would cover the entire blockchain and crypto-asset ecosystem.

FDIC highlights crypto risk evaluation in 2022 priority list

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The Federal Deposit Insurance Corporation (FDIC) has given importance to the evaluation of crypto-asset risks in its agenda for the year, 2022.

The new acting chairman of the corporation has announced that organizations like the FDIC must provide strong guidance to financial institutions on encountering risks posed by crypto-assets to its consumers.

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FDIC Acting Chairman Martin Gruenberg

In a statement released Monday, Acting Federal Deposit Insurance Corporation Chair Martin Gruenberg mentioned assessing crypto risks as one of the agency’s top priorities for 2022.

Further, in a statement, Gruenberg unveiled the regulator’s 2022 goals, noting that each will necessitate tight association among federal financial agencies. In addition to examining crypto-threats, the objectives of the corporation include enhancing the Community Reinvestment Act, tackling financial risks presented by climate change, assessing the bank merger process, and finishing the Basel III Capital Rule.

According to the corporate body, the fast integration of digital assets into the present financial system could pose huge amounts of danger to its safety and soundness. It stated,

“To the extent such activities can be conducted in a safe and sound manner, the agencies will need to provide robust guidance to the banking industry on the management of prudential and consumer protection risks raised by crypto-asset activities.”

Federal banking officials must assess the dangers presented by these products and evaluate how well banking companies can properly handle them, according to Gruenberg.

FDIC to tackle an array of concerns on the priority list

Strengthening the Community Reinvestment Act (CRA), tackling financial risks posed by climate change, examining the bank merger process, and implementing the Basel III Capital Rule were among the other goals for 2022.

Former FDIC chair Jelena McWilliams stated in October of last year that the agency was focused on developing “clear guidance” for the interplay of crypto and banking. She praised the FDIC’s, the Office of the Comptroller of the Currency’s (OCC), and the Federal Reserve’s cooperation on crypto regulation, citing a so-called “sprint” between the FDIC, the OCC, and the Federal Reserve.

Following the retirement of Jelena McWilliams, Gruenberg was named acting chair on Feb. 5. Gruenberg had been a member of the FDIC board since mid-2018, and he had previously served as the agency’s chairman for five years beginning in 2012.

DeFi and crypto stance of the UK more strenuous after HMRC update

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The guidance for the treatment of crypto assets, including the lending and staking of decentralized finance (DeFi) has been updated, on 2 February 2022, by UK’s tax regulator, Her Majesty’s Revenue and Customs (HMRC). This is the first time the tax regulator has forayed into the budding industry.

The renovated guidelines aim at the treatment of crypto assets, particularly on the lending and staking of DeFi in the UK, also, if the returns or rewards from these services are regarded as capital or revenue for tax function. With the tax authorities being indecisive of the application of the existing rules, it seems like the DeFi services have fallen in a grey area.

HMRC stated that, since the loaning and staking of tokens through decentralized finance is a continuously evolving field, setting out all the instances in which the lenders or liquidity providers earn a return from their activities and the nature of that return is impossible. As an alternative, the tax regulator set up a few guiding principles.

 In perspective, Ian Taylor, Executive Director of CryptoUK, the trusted voice of the UK crypto industry, said,

“HMRC treats crypto assets as property for tax purposes. However, this is inconsistent with the approach currently being adopted by Government and other regulatory bodies in the UK, including the Treasury and the FCA, who regard crypto assets as financial instruments and regulate them as in line with other financial services and products.”

Security risks in DeFi

With huge amounts of money at stake throughout various DeFi protocols, it is always important to identify its security risks. The identification of these risks in the domain of decentralized finance could help in predicting profitable protection for the humungous investments made in these protocols.

Some of the notable risks include, rug pulls and Ponzi schemes, compromised private keys, front-running attacks, wrong liquidity pools estimate, inefficient access control, so on and so forth.

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Decentralized finance has captivated hordes of digital asset holders as a result of increasing returns. Nonetheless, this field’s inadequacy of required documentation to counter money laundering and clear governance framework has left regulators on the edge, globally.