NYDFS Directing Banks & Crypto Companies to Address Risks of Climate Change

The New York Department of Financial Services (NYDFS) sent out a letter to banks, firms, and cryptocurrency businesses to pay attention to the financial risks associated with climate change, incorporate them into their business strategies, and develop ways to disclose and mitigate those risks.

This letter followed the same guidelines issued by the agency for the state’s insurance providers last month.

NYDFS is the only US member of the Network for Greening the Financial System, an international group of central banks and regulatory agencies that is focused on climate-related financial risks.

The letter noted that the US gross domestic product (GDP) sees damage of 1.2% with each rise of one-degree Celsius in global temperatures. As such, those communities that are hit harder by climate change can then lead to an increase in default rates, reduced lending activity, devaluations of assets, and losses.

As for the cryptocurrency businesses, it pointed out how studies suggest the environmental impact of mining digital currencies like Bitcoin can be substantial — annual consumption of energy is equivalent to Venezuela’s electricity usage, and carbon footprint is to that of New Zealand’s.

“The energy cost for mining virtual currencies is sizable compared to the value of the virtual currencies,” said Linda Lacewell, NYDFS Superintendent, in the letter.

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The agency wants digital currency firms to consider being more transparent about the location and equipment they use in Bitcoin mining, which is energy-intensive.

“DFS is developing a strategy for integrating climate-related risks into its supervisory mandate,” the letter concluded.

Ripple CEO Brad Garlinghouse called this step from NYDFS “pivotal” and said instead of exacerbating the problem; Bitcoin needs to use more energy-efficient assets as it gains the attention and support of big and mainstream companies.

“XRP was built specifically to use negligible amts of energy,” chimed in Ripple CTO David Schwartz.

“The less it costs to start and run a node, the less decentralized a system will be if you think people being able to use it trustlessly going forward is important to decentralization,” added Schwartz on XRP being hard to audit “because it’s too expensive and nobody cares.”

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Author: AnTy

SEC Takes a ‘Big Step Forward’ Regarding Broker-Dealers Trading Digital Asset Securities

In a no-action letter dated Sept. 25 from the US Securities and Exchange Commission (SEC), the agency has released guidance on the settlement of digital asset securities at alternative systems, which “could end up being significant news for exchanges, including DEXs.”

The SEC proposes a “three-step process” for ATS trading that might replace the previous four-step process that FINRA and the SEC instructed broker-dealers to follow. Dating back to the July 2019 statement from the SEC, the letter outlined the factors to be considered to allow ATS operators to facilitate the trade of digital securities.

In the latest process, The broker-dealer custodian can inform the customer about the execution of trades after the fact as such, customers can submit the trade orders and confirmation at the same time, which “doesn’t change much for trading in the industry,” said Brian Farber.

According to the letter, this three-step process would “reduce operational and settlement risk.” Lewis Cohen, founder of blockchain-focused law firm DLxLaw tweeted,

“In the 3-step approach, customers are never exposed to a BD/ATS, so CPR doesn’t apply. It may sound obvious, but still a big step forward.”

Moreover, enforcement action won’t be taken if the broker-dealer operator maintains a minimum of $250,000 in net capital, all applicable securities laws are followed, and an agreement between the broker and their customers states that “broker-dealer operator does not guarantee or otherwise have responsibility for settling the trades.”

This means custodial broker-dealers like Coinbase can legally exchange digital securities without the SEC pursuing enforcement action against them, provided the above-mentioned steps are followed.

According to Farber, it raises new questions such as the undefined term “custodian,” which not every holder uses. The mandate for $250k in net capital would require amending a membership agreement with FINRA. At the same time, the 2019 joint statement clearly prohibits those broker-dealers from custodial functions.

Comptroller Brian Brooks of the Office of the Comptroller of the Currency praised the move.

Drew Hinkes, an attorney at US law firm Carlton Fields also tweeted that the big picture is “It got easier to trade digital asset securities. BDs have certainty as to how to trade digital asset securities (and) Custodians are even MORE important.”

But still, there is no clear way to determine which cryptos are security and legal to trade. As such, more clarity and guidance is needed from the SEC.

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Author: AnTy

PayPal’s Letter to European Commission Confirms Its Plans to Develop Crypto Capabilities

In a letter to the European Commission published in March this year, the global payment service, PayPal, stated they are in works to enable cryptocurrency capabilities on the platform. The company has yet to disclose plans in the digital assets arena completely, but the addition of Bitcoin (BTC) to the platform could be on hand.

PayPal’s ambition in the cryptocurrency space has been clear since its entanglement with the Libra stablecoin project. In the letter to the European Commission responding to the consultation by the regulators on building an EU framework for markets in crypto assets, PayPal confirmed its interests in the digital asset space. The report reads,

“Since the project’s [joining the Libra Foundation] inception, PayPal has taken unilateral and tangible steps to further develop its capabilities in this area,” the report reads. “And to continue to focus on advancing our existing mission and business priorities to democratize access to financial services.”

PayPal’s entry into the cryptocurrency asset space will open up the crypto market to over 300 million global customers (95 million in the EU). In June, BEG reported the global online payment giant had started researching into integrating buying and selling crypto.

Read More: PayPal CEO Dan Schulman Reveals He Only Owns One Cryptocurrency, Bitcoin

A clear developmental EU framework

PayPal recommends a developmental framework that enables a well-regulated industry, promoting clarity to enable innovation and evolution of the industry. The letter recommends three fundamental principles that the EU could follow to ensure a stable developmental structure in crypto regulation.

First, the EU should subject cryptocurrency service providers to the same scope of applicable KYC/AML compliance rules as other financial institutions to prevent money laundering and other illicit online trading activities.

The EU should also set clear definitions and rules on licensing and regulation to avoid loopholes and uncertainty. Finally, the EU regulators should take a step back not to stifle innovation in the rapidly changing world of cryptocurrency. The letter reads,

“Any regulatory framework in Europe should strive to be technology-neutral to support innovation and competition in this fast-evolving space.”

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Author: Lujan Odera

Congressional Blockchain Caucus Members Ask IRS To Clarify Guidance on Airdrops And Forks

The US representatives involved in the letter include Tom Emmer, Bill Foster, David Schweikert, Darren Soto, Lance Gooden, French Hill, Matt Gaetz, and Warren Davidson.

These individuals pushed the IRS to clarify if any changes made would be applied retroactively or from the current date going forward.

The guidance and laws surrounding the cryptocurrency industry are still rather complicated in the United States. However, it is becoming more and more fundamentally clear that the industry needs more than some tax laws, as eight members of the US House of Representatives jointly issued a letter to the commissioner of the Internal Revenue Service.

According to reports from The Block, reps. Tom Emmer, Bill Foster, David Schweikert, Darren Soto, Lance Gooden, French Hill, Matt Gaetz, and Warren Davidson penned the joint letter on December 20th. In it, they voice their concern over the lack of guidance on token airdrops and blockchain network forks, specifically. The letter follows much of the same path of a request sent earlier this year that urged the IRS to offer more information to taxpayers regarding crypto-related obligations. Emmer filed a bill separately in July to request a “safe harbor” that would protect taxpayers in the event of a fork.

The letter states:

“We wrote in April of this year urging the issuance of guidance for taxpayers who use cryptocurrencies and we are pleased to see that you have issued guidance and addressed many questions we posed. We are, however, concerned that this recent guidance creates many new questions related to the topics it seeks to address, namely forks and airdrops. Moreover, the guidance appears inequitable as it comes almost two years after the Bitcoin and Bitcoin Cash fork and three years after the Ethereum fork.”

The letter also adds that the IRS needs to examine more of the cryptocurrency industry and products, which would help them “to provide guidance to taxpayers as to how income related to all crypto transactions will be treated for tax purposes.” The group also placed blame on the agency for their inability to offer “any clarity for withholding and tax information purposes.”

The letter asked a series of questions, aimed at helping the IRS to better work with the industry. The questions ask the IRS if and when the IRS will clarify the airdrop and fork policies, if and when the IRS plans to set a standard for establishing dominance. Furthermore, if new guidance is implemented, the representatives want to know if it will be applied retroactively or just from this point forward.

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Author: Krystle M

Bitfinex, Tether File A Motion to Dismiss NYAG’s ‘Frivolous’ $1.4 Trillion Class Action Lawsuit

  • Tether states that the claims against their platform by the plaintiff are “frivolous.”
  • The letter states that the causes of action states in the lawsuit don’t have the requirements to be considered.

Tether has been involved in a lawsuit recently in the U.S. District Court in the Southern District of New York, but the company clearly doesn’t want this lawsuit to go through. According to a press release on the official website, Tether explains that it has filed a motion to dismiss the class-action lawsuit, calling it “frivolous.” Furthermore, Tether explained, “The motion will allege that many of Plaintiffs’ causes of action lack the required legal basis to proceed past the very early stage of the case.”

There are multiple accusations that Tether makes against the claims, cautioning consumers to examine the statements of the Plaintiffs’ “with a jaundiced eye.” One of the first issues brought up is that the accusations primarily stem from “an unpublished academic paper,” which was written by Amin Shams and John M. Griffin. Adding that there are already several flaws in the paper, Tether points out that the document was recently edited in an effort “to walk back support for a core allegation of the Plaintiff’s’ complaint.”

The platform adds that the complaint doesn’t consider other factors that may have been part of Bitcoin’s spike in price in 2017 and that the plaintiff accuses Tether of “manipulating a market more than seven hundred times the side of total Tether USDT issuances in circulation” for the better part of that year. Aggressively, the platform tells consumers that this type of relationship between the numbers would typically be considered by “any sophisticated and rational observer of the digital token ecosystem.”

Now, Tether’s focus seems to be on (what they consider to be) “true facts” in court, adding that the Plaintiffs are undermining the proceedings and the consumers involved with the cryptocurrency industry. Going forward, the platform announced that it plans to “vigorously contest” the claims against them and defend their side of this narrative, along with the customers and stakeholders both within and outside of their community.

The text of the pre-motion letter to the court can be viewed below,

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Author: Krystle M