Regulation Headlines: El Salvador Digital Assets Law, France AMF’s Haste on License Issuance, Proposed Crypto Tax Benefit in Argentina and More

El Salvador President Nayib Bukele took to Twitter on Wednesday to share news of the country’s legislative assembly approving new regulations on digital assets, with 62 in favor out of 84 who took part. The now-to-be law, after ratification, featured 47 articles seeking to protect transfers or debt issues with crypto. The vocal Bitcoin-proponent leader celebrated the win, specifically commenting on the ‘overwhelming majority’  in support.

El Salvador’s ‘landmark’ digital asset law activates launch of the bonds

Notably, implementing the law clears the way for issuing $1 billion in Bitcoin-backed bonds termed Volcano bonds. President Bukele has pursued the Bitcoin adoption strategy with unyielding grit, to say the least. In Mid-November 2022, the El Salvador leader announced his government’s commitment to buying 1 BTC daily but has yet to provide an update.

“Today El Salvador builds on our first-mover advantage by passing landmark legislation establishing a legal framework for all digital assets that are not bitcoin. As well as those issued on bitcoin. The law also paves the way for volcano bonds which we will soon begin issuing.” The National Bitcoin Office wrote on Wednesday pertaining to the new law.

Plans for these bitcoin-backed bonds surfaced in November 2021, along with those to build a Bitcoin City funded by $500 million obtained through the bonds. The issuance of these Bitcoin-backed bonds was scheduled for an earlier timeline, but economic uncertainty due to tensions in Europe saw the same shelved. Bukele’s leadership remains committed to raising another $500 million reserved to acquire more of the asset.

To learn more about Bitcoin, visit our Investing in Bitcoin guide.

Argentina’s economic ministry mulls discounted taxes to boost declaration of held crypto assets

Fellow Latin American nation Argentina is, on the other hand, looking to motivate its citizen to be more upfront on their digital asset holdings. A bill proposing to introduce a tax incentive was on Jan 6 tabled by Argentina’s Ministry of Economy as part of efforts to combat money laundering facilitated by digital assets. Local outlet Errepar reported that the Minister in charge, Sergio Massa, advanced policies which, if approved, will mandate crypto holders to provide the government with an affidavit identifying the location of their holdings.

The ‘Externalization of Argentine Savings’ draft explicitly outlines tax breaks for digital asset holders depending on the timing of their declaration. Holders who reveal their assets in the first 90 days of implementation would only be liable to a 2.5% tax on their holdings’ capital gains. This figure will increase after a 90-day cycle elapses until its evens with the 15% standard taxed rate. Beyond digital assets, the bill also urged citizens to declare holdings in other taxable investment avenues, including stocks and real estate. The next convening parliamentary session will review this draft.

France’s Financial Markets Authority calls for swift oversight action

Elsewhere, France regulators have accelerated the crypto regulation process as various jurisdictions around the world strive to either enforce digital assets restricting or favoring policies necessitated by unrest in the sector. Specifically, the regulators are lobbying for expedited licensing of crypto service providers and similar entities currently unregistered. The Financial Markets Authority chair Marie-Anne Barbat-Layani noted that the push for crypto service providers to seek licensing, which has not been compulsory before, will do good for the industry. A bill to make licensing a must as a requisite for operation is set to be reviewed by the Lower Chamber of Parliament.

In Italy, as part of the budget approved for the new year on Dec 29, the Italian parliament introduced a 26% tax on all capital gains from cryptocurrency trading totaling above €2,000 ($2,122.28 as of the time of writing). The bill provisioned a substitute income tax at 14% of the value of assets as of Jan 1 to incentivize Italian residents to comply with the new tax requirements and encourage full disclosure. The government now allows cryptocurrency investment losses above €2,000 in a given tax period to be carried over to the following tax period and offset against taxable profits.

Just as in Italy, Portuguese lawmakers recently established taxes on profits from cryptocurrencies. Its budget document from last October showed the government is imposing a 28% capital gains tax for all crypto assets held for less than a year. The nation’s budget plan specified that profits from crypto mining operations and issuance of crypto tokens would also be taxable. The government has implemented a 4% tax on free cryptocurrency transfers and even works out stamp duties in relevant cases. Portugal’s rejuvenated policy effectively terminated the country’s status as a tax haven for crypto within Europe and is forcing the many cryptocurrency enthusiasts who have only recently moved to the government to adjust their strategies.

Hong Kong sets out to revive its crypto hub status

Meanwhile, in Hong Kong, the government has ramped up its efforts to make the region a thriving landscape for firms operating in the sector by adopting a robust regulatory framework.

“As certain crypto exchanges collapsed one after another, Hong Kong became a quality standing point for digital asset corporates.” Paul Chan, the Financial Secretary of Hong Kong, observed, adding, “The city has a robust regulatory framework that matches international norms and standards while prohibiting free-riders.”

In line with measures to make the region more friendly to developing firms, the region’s financial authorities are reportedly open to allowing small-scale retail investors to participate in crypto trading. The current provision only provides for deep-pocketed retailers, demonstrated by a $1 million+ bankable assets requirement for participation.