Welcome to edition #18 of the Web3Blast!
In this edition, we delve into significant developments in the crypto world, including legal cases and political influence on crypto in the US, new DAO legislation in the UAE and activity in preparation for MiCA implementation in Europe.
We cover:
- Major tax reforms underway in Denmark, Italy, and Netherlands around crypto assets
- European nations, including Cyprus, prepare for MiCA while EU market watchdog urges changes to upcoming regulations
- Stablecoins grow in popularity, UAE greenlights first dirham-pegged stablecoin
- SEC push back: more crypto titans back Beba and DeFi Education Fund lawsuit against regulator
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Regulations across the globe
🇦🇪 UAE’s RAK DAO unveils groundbreaking ‘DARe’ regulations for DAOs
The Ras Al Khaimah Digital Assets Oasis (RAK DAO) in the United Arab Emirates has introduced a regulatory framework called the DAO Association Regime (DARe) for decentralized autonomous organizations (DAOs). Launched in October 2024, DARe aims to provide legal clarity and legitimacy for DAOs operating within the RAK DAO free zone. Key features include granting DAOs legal personality, limited liability protection for members, and the ability to interact with off-chain entities. This initiative aims to position RAK DAO as a global hub for blockchain and digital assets, offering DAOs a structured environment for growth and innovation while facilitating their integration into traditional financial and legal systems.
👉 Legal Nodes Team has prepared a comprehensive overview of the DARe regulation and how it compares to other DAO frameworks around the globe.
🇮🇪 Ireland prepares urgent crypto regulations ahead of EU’s impending AML/CFT Act
Ireland is swiftly drafting new cryptocurrency regulations to align with the European Union’s upcoming Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Act , set to take effect on December 30, 2024. The AML/CFT rules will significantly impact crypto businesses, imposing stricter reporting requirements on exchanges, limiting cash payments to €10,000, enhancing monitoring of large transactions and granting financial intelligence units increased powers to suspend suspicious transactions. While specific details of Ireland’s legislation are yet to be revealed, crypto companies operating in the country should prepare for more rigorous compliance measures, including enhanced KYC and AML protocols to be put in place by December 30, 2024.
Tax updates
🇩🇰 Denmark sets out 42% tax on unrealized crypto gains starting January 2026
Denmark’s Tax Law Council has proposed a groundbreaking 42% tax on unrealized capital gains for all crypto assets, effective January 1, 2026. This reform aims to align crypto taxation with traditional investments and will affect approximately 300,000 Danish crypto owners. The policy applies to assets not backed by physical assets or fiat currencies, including those acquired since Bitcoin’s inception.
To enhance oversight, Denmark also plans to exchange crypto investor data internationally from 2027 and require service providers to report transactions. The government will also allow offsetting losses from one crypto against gains in another. While addressing taxation complexities, this approach may significantly impact investment strategies and liquidity for Danish crypto holders.
🇮🇹 Italy scales back proposed crypto tax hike from 42% to 28%
In a significant policy shift, Italy’s government is reportedly considering a more modest increase in its cryptocurrency capital gains tax. In 2023, a tax rate of 26% was introduced for crypto trades over EUR 2000. Then in October 2024, reports of a steep hike from 26% to 42% emerged, however the government is now leaning towards a 2% hike, to 28%. The reasoning behind this new figure isn’t clear, but the US election and growing crypto adoption may be contributing factors. The proposal must go through parliamentary review and approval, so we’ll be keeping an eye on further changes.
🇳🇱 Netherlands proposes EU-aligned crypto tax monitoring law
The Netherlands is proposing new legislation to align its crypto tax monitoring with EU standards. The bill would require crypto service providers to share user data with Dutch tax authorities, which would then be shared with other EU nations and non-EU countries that have adopted the OECD’s Crypto-Asset Reporting Framework. The new bill aims to increase transparency and prevent tax evasion in the crypto space. It’s important to note that existing tax obligations for Dutch crypto owners remain unchanged. The government plans to submit the bill by mid-2025, with implementation targeted for January 1, 2026, and public feedback is being accepted until November 21, 2024.
🇪🇺 MiCA updates
“December 30, 2024 marks the day that the EU will transition from national laws governing crypto asset service providers (CASPs) to the Markets in Crypto-Assets (MiCA) regulations taking precedent. As a result, we’re monitoring updates from regulators and national bodies to see how different EU nations are handling the change. Despite the years of work that have gone into MiCA, there are still ongoing discussions about potential challenges in the regulation that CASPs should look out for.” - Nestor Dubnevych, Head of Web3 Legal @ Legal Nodes
🇪🇺 ESMA, EU markets watchdog, pushes for MiCA amendments
The European Securities and Markets Authority (ESMA) has recommended amendments to MiCA, focusing on data disclosures for crypto asset service providers (CASPs). Key proposals include external cybersecurity audits and more thorough background checks on CASP management. These changes aim to enhance market resilience and investor protection. The European Council has a three-month window to adopt or reject these amendments, as the EU approaches MiCA’s final implementation deadline on December 30, 2024.
🇨🇾 Cyprus prepares for MiCA by freezing CASP applications
As MiCA looms, the Cyprus Securities and Exchange Commission (CySEC) has frozen applications for crypto asset service providers (CASPs) and set key deadlines for the transition to MiCA regulation. CASPs registered before December 30, 2024, can operate under Cyprus law until July 1, 2026, unless they receive MiCA authorization earlier. CySEC has also stopped accepting notifications from European Economic Area entities intending to provide services in Cyprus under national rules. All CASPs potentially affected by MiCA are strongly encouraged to study the European Securities and Markets Authority (ESMA) draft standards in preparation for the transition.
🪙 Stablecoins
Stablecoin adoption and regulation are poised to be one of the main trends of 2025, which is why we’re adding this section to our newsletter. As these digital assets gain traction in various sectors, from remittances to decentralized finance, regulators worldwide are increasingly focusing on creating frameworks to govern their use and issuance.
🇦🇪 UAE Central Bank greenlights first regulated dirham-pegged stablecoin
The Central Bank of the United Arab Emirates (CBUAE) has granted in-principle approval to AED Stablecoin to issue AE Coin, potentially making it the first regulated dirham-pegged stablecoin in the UAE. This development aligns with the country’s Payment Token Service Regulation framework and eases concerns about crypto payment restrictions. If fully approved, AE Coin could serve as a local trading pair for cryptocurrencies and be accepted by merchants for goods and services. The CBUAE’s licensing framework requires stablecoins to be fully backed by cash or a combination of cash and government securities. This move positions the UAE as a crypto-friendly jurisdiction, attracting major players like Tether, OKX, and M2.
Legal Cases
🇫🇷 Polymarket under scrutiny after U.S. election betting frenzy
French gambling regulator ANJ is examining Polymarket, a crypto-based prediction market, following record betting volumes during the recent U.S. presidential election. This scrutiny was triggered by a French national’s reported $50 million profit from bets on Donald Trump’s victory. The ANJ is investigating Polymarket’s compliance with French gambling laws, with potential banning under consideration. Polymarket, inaccessible to U.S. users, allows cryptocurrency-based trading on future outcomes. While advocates claim prediction markets offer superior forecasting, election betting remains contentious globally, with U.S. regulators considering prohibitions.
🇺🇸 Immutable vows to defend digital property rights after receiving Wells Notice from SEC
Immutable, a leading blockchain gaming platform, recently received a Wells notice from the U.S. Securities and Exchange Commission (SEC), indicating potential legal action over alleged securities law violations related to its 2021 IMX token sales. The company has criticized this move as “regulation by enforcement,” echoing sentiments of other crypto firms facing similar scrutiny. Despite the limited details provided in the notice, which was issued just before the U.S. election, Immutable says it will continue operations and, if necessary, defend its rights and those of the broader industry.
🇺🇸 Crypto giants rally behind lawsuit challenging SEC’s “unwritten” crypto rules
“Earlier this year, we reported in the Web3Blast that the DeFI Education Fund and Beba, a Texas-based apparel company were suing the SEC. The plaintiffs wanted a pre-emptive declaration against the SEC’s “unwritten policy” of classifying most digital asset transactions as securities, specifically challenging the labeling of Beba’s token airdrop as an “investment contract” violating the 1933 Securities Act. In the latest turn of events, several major crypto and venture capital firms have filed an amicus brief in support of Beba’s lawsuit.” - Nestor Dubnevych, Head of Web3 Legal @ Legal Nodes
The brief, submitted on October 28, includes backing from industry giants such as Coinbase, Andreessen Horowitz, Multicoin Capital, Paradigm, Union Square Ventures, and Variant. This collective action by prominent players in the crypto space underscores the industry’s united stance against the SEC’s approach to regulation. While the SEC has moved to dismiss the lawsuit as premature, the amicus brief argues that the plaintiffs have demonstrated a “credible threat of enforcement and cognizable harm.” Other organizations, including the Texas Blockchain Council and Coin Center, have also filed briefs in support. This case shows a significant pushback against the SEC’s “regulation by enforcement” approach in the crypto space.
Great resources
Here are a handful of resources that can provide useful insights (we don’t endorse any, just sharing for info!).
🌐 a16z State of Crypto report highlights key trends in crypto
The State of Crypto report from a16z provides great insights into how the cryptocurrency sector in 2024 has undergone significant growth and evolution.
Of the 7 key trends highlighted, we were most interested to see that the EU and the UK have been at the forefront of engaging the public on crypto policy and regulation. European agencies have issued numerous calls for public input, surpassing efforts by entities like the U.S. Securities and Exchange Commission. The EU’s Markets in Crypto Act (MiCA), set to be fully implemented by the end of the year, represents the first comprehensive crypto policy framework to become law. This proactive approach in Europe contrasts with the ongoing policy discussions and emerging legislation in other regions, highlighting the EU and UK’s leadership in shaping the regulatory landscape for cryptocurrencies.
Source: a16z State of Crypto Report
🌐 Demystifying the "when, what, and why" of setting up web3 Foundations for token launches
Nestor has found a comprehensive thread by @wassielawyer about the intricacies of setting up Foundation structures for token launches.
🇺🇸 How will the Trump administration shape crypto policy?
It’s still early days for the new administration, but opinions are already flying and several prominent voices in the industry are feeling optimistic.
Make sure to keep your eyes out for updates on this in future Web3Blast editions. For now, dive into the conversation starting with this thread on X by Miles Jennings.
That’s all for this edition of the Web3Blast. We hope you’ve enjoyed it and found it useful. If you have any feedback you’d like to share, you can let us know by responding to this email or dropping us a message on X.
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Disclaimer: the information in this newsletter is provided for informational purposes only. You should not construe any such information as legal, tax, investment, trading, financial, or other advice.
Thanks and see you next time!
The Legal Nodes Team
