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Kyrgyzstan’s central bank developing draft law for cryptocurrency industry

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The central bank for the Central Asian country of Kyrgyzstan is working on a draft law to regulate the cryptocurrency industry in the country.

According to an announcement on Nov. 13, the National Bank of the Kyrgyz Republic is developing a draft law that would regulate cryptocurrency exchanges in consultation with industry stakeholders.

The bank stated that the draft law would regulate the sale and purchase of cryptocurrencies with the aim of tackling fraudulent cryptocurrency schemes and financial crimes, as well as safeguarding consumer and investor rights.

Among the expected benefits of the forthcoming regulations, the bank notes the improved development of digital financial products, favorable conditions for the business community and even the possible introduction of a formal tax regime for digital assets.

However, the bank also expects crypto legislation to come with its own share of obstacles, stating that the cross-border nature of many private cryptocurrencies will make the law difficult to enforce without the proper infrastructure for monitoring and implementation.

Indeed, the bank states that due to the “lack of regulation and the chaotic nature of the cryptocurrency market,” there is no hard data on the number of businesses that would be subject to the new law. 

Per the announcement, the bank expects explicit crypto regulations to provide more certainty for crypto-related businesses and attract investment without a significant effect on the government budget.

The bank will accept proposals for the draft law until Nov. 27, after which they will be published on the official register by Dec. 4.

Solid crypto regulations would be a long time coming for the politically beleaguered nation. In August 2019 the parliament introduced a bill to tax cryptocurrency miners, only for authorities to cut off electricity to the industry a month later due to reported overconsumption. 

Last summer, the parliament was still deliberating on a tax regime for cryptocurrency miners, but civil unrest has since derailed previous political initiatives, with a rump parliament electing nationalist opposition leader and former member of parliament Sadyr Japarov as acting president and prime minister on Oct. 7.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.