Hello Fintech Friends,

We are thrilled to return after a brief hiatus. We are back with fresh insights, ready to delve into the ever-evolving world of fintech policy. This week, we will cover major updates in crypto regulation, enforcement, and the latest in payments. Let's dive in!

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1. Crypto Regulation

Last week, seven Democrat and independent Senators, namely Angus King (I-ME), Bernie Sanders (I-VT), Richard Blumenthal (D-CT), Sheldon Whitehouse (D-RI), Brian Schatz (D-HI), Gary Peters (D-MI), and Elizabeth Warren (D-MA), called upon the Treasury Department and the Internal Revenue Service (IRS) to expedite the implementation of new tax reporting requirements for crypto brokers. These rules, proposed by the IRS in August, are currently open for public comments until October 30 and are expected to become effective in 2026. The Senators argued that until the new rules are enforced, the IRS stands to lose potential annual tax revenue of around $50B.

In other news, the Director of the Consumer Financial Protection Bureau, Rohit Chopra, revealed that his agency is contemplating the application of the Electronic Fund Transfer Act (EFTA) to safeguard investors and users in the crypto realm. The EFTA, originally designed for traditional finance, protects consumers from financial losses incurred during electronic transfers via debit cards, ATMs, mobile devices, and various other channels. Under EFTA guidelines, entities facilitating electronic fund transfers are obliged to apprise users of their liability regarding unauthorized transactions.

At the state level, California Governor Gavin Newsom has signed into law a new crypto bill. Set to take effect in 2025, this legislation institutes a compulsory licensing framework for crypto companies operating within the state. It also addresses stablecoins, requiring that they either be issued by a bank or an entity licensed by the California Department of Financial Protection and Innovation. Additionally, the new law states that the valuation of stablecoins will be determined in accordance with the Generally Accepted Accounting Principles (GAAP) of the United States.

Turning to international developments, the G20 members gathered in Marrakech, Morocco last week and delivered a unanimous endorsement of the “G20 Finance Ministers and Central Bank Governors Communique.” The focal point of this communique was the regulatory roadmap delineated in the collaborative report titled “IMF-FSB Synthesis Paper: Policies for Crypto-Assets,” jointly presented by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) this September. This landmark report advocates for a comprehensive oversight approach towards crypto assets, eschewing the notion of outright bans. Noteworthy recommendations include the promotion of outreach programs extending beyond G20 jurisdictions, facilitation of cross-border cooperation and regulatory information sharing, insistence on robust governance and risk management frameworks for crypto enterprises, and ensuring regulatory authorities have unimpeded access to pertinent data provided by these companies.

2. Enforcement

The global troubles facing Binance, the world's largest cryptocurrency exchange, seem far from over. Last week, in Brazil, a congressional committee officially recommended the indictment of Binance CEO Changpeng Zhao (CZ) alongside three other high-ranking executives of the company. The committee's released report makes grave allegations, asserting that CZ and fellow Binance leaders established an intricate network of legal entities, all ultimately under CZ's control, lacking any discernible business purpose other than evading legal compliance—mirroring the allegations the company faces in the U.S. Furthermore, the report contends that Binance operated within Brazil, engaging in securities trading activities without the requisite authorization.

3. Payments

Last week, the Australian government unveiled plans to empower the central bank with regulatory authority over digital wallet providers, encompassing major players like Apple Pay, Google Pay, and WeChat Pay. Despite their widespread adoption, these payment methods have not received official recognition as payment systems in Australia. The forthcoming regulations seek to subject digital wallet payments to the same level of scrutiny and oversight as established methods like credit card networks. Stakeholders are invited to offer their input on the draft rules until November 1st.

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See you next week!