Legal Round-Up (09/08-13/08)

Adam Berker

The 3rd issue of our legal round-up.

The 3rd issue of our legal round-up.

We continue with a series of weekly round-ups prepared by Mercuryo Legal Counsel Adam Berker to keep you updated on cryptocurrency rules.

Can Poly Network Attackers Be Held Accountable?

Last week, hackers stole over $600 million in crypto from Poly Network, a cross-chain token swap platform. Eventually, the attackers started returning the money, but the incident will hardly be forgotten. The main problem here is that since Poly Network is a DeFi platform, it does not have a legal entity in any jurisdiction. For that reason, Poly cannot be protected by authorities. 

There is a theoretical possibility to bring the hackers to justice in case Poly can identify them. In that case, Poly may press charges in their country of residence, for example, for Illegal interference in the operation of systems and computer networks if the local legislation provides this type of crime. Additionally, even though the hackers have compensated almost all the losses, and it is considered a mitigating circumstance in the imposition of punishment in most countries, it does not exempt from liability.

SEC Tightens the Grip, Targeting DeFi

The SEC plans to start controlling lending and DeFi platforms, which may lead to establishing an obligation for such platforms to incorporate legal entities in the US, obtain special federal authorizations, report on the users’ transactions, and conduct customer identification procedures. 

Also, these changes may affect DeFis worldwide since even foreign crypto platforms that provide services to US residents should fulfill the US regulators’ reporting and licensing requirements.

Iran Plans On Legalizing Crypto Exchanges

Iran’s tax authority wants to legalize crypto exchanges. So far, this initiative will be more focused on controlling the domestic market and collecting taxes from local exchanges. One of the circumstances that will prevent the influx of foreign exchanges to Iran is the inclusion of Iran in the High-Risk Jurisdictions List of the Financial Action Task Force. 

Due to this, foreign partners and banks will most likely not cooperate with an Iran-based crypto company. They will watch out for receiving a warning from their regulators and terminating business relations with other partners.

Messi Signs a New Contract and Joins Crypto Gaze  

Soccer star Lionel Messi signed a contract with Paris St Germain, and his welcome package includes some of the French club’s cryptocurrency fan tokens. But can this cause damage to the soccer player later? It depends on what he decided to do with the digital funds.

In general, most countries do not oblige to report on the ownership of cryptocurrencies. At the same time, if Messi wants to exchange tokens into fiat, he will have to file income reports and pay correspondent taxes in the country of income generation, even if there is no special regulation of cryptocurrencies.

Taxing Crypto Assets at 45% in South Africa 

South Africa plans to introduce an advanced crypto taxation system, obliging users to report on the income received from the sale of crypto to fiat and also from the possession of crypto, the exchange of one crypto for another, receiving crypto from staking, mining, forks, and airdrops. 

At the same time, it can be assumed that legislators will also need to establish the obligation of local exchanges for the full implementation of this initiative. For example, the businesses could be asked to report on large crypto amounts on customer accounts and provide all the information about customer accounts upon request of the authorities. In addition, the question remains open: how will the regulator control customer accounts on foreign exchanges and unidentified wallets?

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