  Examining the intersection of cryptocurrency and government By Nikhilesh De Managing Editor, Global Policy & Regulation December 28, 2021 If you were forwarded this newsletter and would like to receive it, sign up here. Sponsored by 
Hey folks,
Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De. You’re probably here because you signed up, but in case you’re not a fan, you can unsubscribe here.
The story of crypto is one of a global asset and technology class, and it’s one we intend to cover as comprehensively as possible. Here’s what CoinDesk’s new regulatory team is watching for next year.
—Nik
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2021 in review  It's going to be a weird year isn't it. (Rob Kim/Getty Images, modified by CoinDesk) The narrative Hey folks. Happy holidays and congratulations on getting through 2020-lite! Next year promises to be fairly significant in terms of how the regulatory environment around digital assets will develop. To that end, CoinDesk’s brand new regulatory team is up and running and looking forward. I asked the team to share what they’re expecting. Why it matters CoinDesk is ramping up its efforts to cover the regulatory world’s intersection with the digital asset sector. To that end, we now have a global team composed of existing and new reporters dedicated to this very specific industry. Here’s what we’ll be watching for next year. Breaking it down Nikhilesh De (U.S.): The big issues I’m looking at in the U.S. are stablecoin regulation and the infrastructure bill. The stablecoin issue is most interesting to me – administration officials have said on multiple occasions that they want Congress to act on the President’s Working Group report. While the report suggests that the Financial Stability Oversight Council could draft regulations, even this interagency group is asking Congress to set the rules for stablecoin oversight in the U.S. The question is whether Congress will, or what those rules will look like.
The infrastructure bill’s impact is likewise going to draw my attention, less for the tax provision itself and more as a symbol for when the industry started really getting politically engaged. We’ve had lobbyists and policy groups for years now, but this past August’s fight over a provision defining a “broker” really felt like a shift in terms of how the industry views D.C. We’re already seeing a greater number of congressional candidates who have ties to the crypto industry. I imagine we’ll soon start hearing more about political action committees (PACs) or other efforts to lobby candidates and bolster pro-crypto politicians.
What I’m very curious about is where things land up on the actual regulatory side. Will the SEC or CFTC take oversight of crypto spot markets? Will one of these agencies issue guidance for startups trying to launch in the U.S.? Or will 2022 be a repeat of 2021 and 2020 and 2019 and so on where we hear speeches and see enforcement actions but not much more.
On a personal note, thanks for sticking through the first year of this newsletter. More to come!
Sandali Handagama (EU): In 2022, we’re going to hear a lot more about the European Union’s (EU) proposed framework for regulating crypto assets as the European Council and Parliament start negotiating the rules. The Markets in Crypto Assets (MiCA) framework is broadly aimed at regulating virtual asset service providers and issuers. But there is an undeniable focus on policing the stablecoin sector, particularly ones that resemble Facebook (now Meta)’s proposed stablecoin libra (now diem).
EU regulators also proposed a regulatory sandbox for projects based on distributed ledger technology (DLT) in 2020 that’s currently awaiting parliamentary approval.
Meanwhile, the European Central Bank (ECB) is testing a digital euro for retail use. A number of European countries including Switzerland and France have also been part of experiments involving a wholesale digital euro as the Bank of International Settlements (BIS) continues to expand its work on central bank digital currencies around the world.
Cheyenne Ligon (U.S.): Virgil Griffith – the Ethereum developer who was charged with violating U.S. sanctions law after giving a talk on cryptocurrencies in North Korea – will be sentenced by a New York judge on Feb. 2. Griffith’s plea deal could see him serving between five and six and a half years in federal prison.
Griffith’s case is just one of many such court cases I expect to see play out next year. While the majority of them will not be as high profile as Griffith’s, the explosion of growth in the crypto industry means lawmakers and enforcement agencies are increasingly turning their attention to crypto crime.
In 2022, I expect to see an uptick in the number of criminal probes of crypto companies, charges brought against individual crypto scammers, and – as the SEC and other regulators continue to regulate through enforcement – an increase in enforcement actions and civil penalties from the SEC and CFTC.
Lavender Au (APAC): With South Korea’s presidential election happening in March, we are unlikely to see much regulatory action soon. But a new administration taking power could mean that the industry may finally see a promotion bill and investors may see the controversial crypto tax bill amended.
Japan launched a decentralized finance (DeFi) study group this year and we may see their findings next year. The country will also introduce legislation on stablecoins and wallet providers who engage in stablecoin transactions.
In China, the overall attitude toward cryptocurrency is now set, and it’s not friendly. Some founders will leave the country and those who choose to remain will keep a low profile. Next year, we’ll see more enforcement, as local governments draw up more detailed regulation on crypto in their jurisdictions.
Across the border, we may see Hong Kong’s Securities and Futures Commission release specific legislation aimed at cryptocurrency late next year, insiders say.
Amitoj Singh (India): In the new year, CoinDesk will be closely watching the uncertain state of India’s cryptoverse. The focus will be on a crypto bill that hasn't been introduced in parliament yet. Because the legislation is a work in progress, trying to align with the global regulatory framework, CoinDesk will be monitoring how the bill evolves.
Also on CoinDesk India’s priority list will be to identify what risks the government and its institutions are underlining around the crypto-verse and how it is framing the regulations to mitigate those risks.
Another topic will be whether the regulatory framework will be a retrofit around the existing capital market framework and the institutions that monitor those markets.
Simultaneously, as the bill will only be a point of departure for India, we will follow discovering how India’s taxman claims seigniorage, the regulatory framework the advertisement council adopts, gauging the size of India’s dark web activity and highlighting how India finds the balance between allowing for responsible advertising while also focusing on crypto literacy.
The Biden Bunch Changing of the guard  Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated) No more votes this year, happy holidays!
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