Future of DAOs limited by lack of regulatory framework: ECB Occasional Paper
Decentralized autonomous organizations (DAOs) need a comprehensive regulatory framework if they are to make a place in the future of the financial sector, suggests the European Central Bank (ECB) occasional paper (OP).
The OP “The future of DAOs in finance – in need of legal status,” authored by Ellen Naudts, Market Infrastructure Expert Payments at ECB, highlighted how technology outpaced regulation in relation to DAOs — having a negative impact on the safety and sustainable growth of the ecosystem.
As DAOs continue to flood the market with unique offerings, enforcing a “registration framework that was built for a pen-and-paper era” fails to address the various liabilities they present to investors.
“Until DAOs are adequately regulated globally, in the sense that the abovementioned challenges have been solved so that they do not and will not in future pose a serious threat to financial stability, payments and securities systems operate smoothly and consumers are properly protected, the place for DAOs in the financial sector of the future will necessarily remain limited,” the paper concluded.
Related: ECB official labels crypto as ‘deleterious’ with ‘no societal benefits’ in scathing speech
Concurrent with calls to establish a regulatory framework, ECB executive board member Fabio Panetta recently said the digital euro could “put Europe at the forefront of advanced economies.”
A digital euro would be a new form of central bank money, says Executive Board member Fabio Panetta. It is now up to legislators to ensure it would replicate key characteristics of cash in the digital sphere, particularly its privacyhttps://t.co/nQJzYylwpV
1/3 pic.twitter.com/4XPlk83Lwj
— European Central Bank (@ecb) September 4, 2023
Panetta supported the European Commission’s legislative proposals for the digital euro, stating that it would ensure Europeans always have access to a public payment option, whether cash or digital, even as “closed-loop solutions are becoming increasingly prevalent” in private payment services.
Magazine: Beyond crypto: Zero-knowledge proofs show potential from voting to finance
The idea of a wealth tax has raised its head – yet again – as the government attempts to balance its books.
Downing Street refused to rule out a wealth tax after former Labour leader Lord Kinnock told Sky News he thinks the government should introduce one.
Please use Chrome browser for a more accessible video player
Lord Kinnock calls for ‘wealth tax’
Sir Keir Starmer’s spokesman said: “The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”
While there has never been a wealth tax in the UK, the notion was raised under Rishi Sunak after the COVID years – and rejected – and both Harold Wilson’s and James Callaghan’s Labour governments in the 1970s seriously considered implementing one.
Sky News looks at what a wealth tax is, how it could work in the UK, and which countries already have one.
Will Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer impose a wealth tax? Pic: PA
What is a wealth tax?
A wealth tax is aimed at reducing economic inequality to redistribute wealth and to raise revenue.
It is a direct levy on all, or most of, an individual’s, household’s or business’s total net wealth, rather than their income.
The tax typically includes the total market value of assets, including savings, investments, property and other forms of wealth – minus a person’s debts.
Unlike capital gains tax, which is paid when an asset is sold at a profit, a wealth tax is normally an annual charge based on the value of assets owned, even if they are not sold.
A one-off wealth tax, often used after major crises, could also be an option to raise a substantial amount of revenue in one go.
Read more:
No wealth tax under a Labour govt, Rachel Reeves said in 2023
UN criticises Starmer’s welfare reforms and warns measures will ‘increase poverty rates’
Please use Chrome browser for a more accessible video player
Wealth tax would be a ‘mistake’
How could it work in the UK?
Advocates of a UK wealth tax, including Lord Kinnock, have proposed an annual 2% tax on wealth above £10m.
Wealth tax campaign group Tax Justice UK has calculated this would affect about 20,000 people – fewer than 0.04% of the population – and raise £24bn a year.
Because of how few people would pay it, Tax Justice says that would make it easy for HMRC to collect the tax.
The group proposes people self-declare asset values, backed up by a compliance team at HMRC who could have a register of assets.
Which countries have or have had a wealth tax?
In 1990, 12 OECD (Organisation for Economic Co-operation and Development) countries had a net wealth tax, but just four have one now: Colombia, Norway, Spain and Switzerland.
France and Italy levy wealth taxes on selected assets.
Colombia
Since 2023, residents in the South American country are subject to tax on their worldwide wealth, but can exclude the value of their household up to 509m pesos (£92,500).
The tax is progressive, ranging from a 0.5% rate to 1.5% for the most wealthy until next year, then 1% for the wealthiest from 2027.
Bogota in Colombia, which has a wealth tax
Norway
There is a 0.525% municipal wealth tax for individuals with net wealth exceeding 1.7m kroner (about £125,000) or 3.52m kroner (£256,000) for spouses.
Norway also has a state wealth tax of 0.475% based on assets exceeding a net capital tax basis of 1.7m kroner (£125,000) or 3.52m kroner (£256,000) for spouses, and 0.575% for net wealth in excess of 20.7m kroner (£1.5m).
Norway has both a municipal and state wealth tax. Pic: Reuters
The maximum combined wealth tax rate is 1.1%.
The Norwegian Labour coalition government also increased dividend tax to 20% in 2023, and with the wealth tax, it prompted about 80 affluent business owners, with an estimated net worth of £40bn, to leave Norway.
Spain
Residents in Spain have to pay a progressive wealth tax on worldwide assets, with a €700,000 (£600,000) tax free allowance per person in most areas and homes up to €300,000 (£250,000) tax exempt.
Madrid in Spain. More than 12,000 multimillionaires have left the country since a wealth tax was increased in 2022. Pic: Reuters
The progressive rate goes from 0.2% for taxable income for assets of €167,129 (£144,000) up to 3.5% for taxable income of €10.6m (£9.146m) and above.
It has been reported that more than 12,000 multimillionaires have left Spain since the government introduced the higher levy at the end of 2022.
Switzerland
All of the country’s cantons (districts) have a net wealth tax based on a person’s taxable net worth – different to total net worth.
Zurich is Switzerland’s wealthiest city, and has its own wealth tax, as do other Swiss cantons. Pic: Reuters
It takes into account the balance of an individual’s worldwide gross assets, including bank account balances, bonds, shares, life insurances, cars, boats, properties, paintings, jewellery – minus debts.
Switzerland also works on a progressive rate, ranging from 0.3% to 0.5%, with a relatively low starting point at which people are taxed on their wealth, such as 50,000 CHF (£46,200) in several cantons.
The Chinese owner of British Steel has held fresh talks with government officials in a bid to break the impasse over ministers’ determination not to compensate it for seizing control of the company.
Sky News has learnt that executives from Jingye Group met senior civil servants from the Department for Business and Trade (DBT) late last week to discuss ways to resolve the standoff.
Whitehall sources said the talks had been cordial, but that no meaningful progress had been made towards a resolution.
Money blog: €1 home goes on sale – but there are T&Cs
Jingye wants the government to agree to pay it hundreds of millions of pounds for taking control of British Steel in April – a move triggered by the Chinese group’s preparations for the permanent closure of its blast furnaces in Scunthorpe.
Such a move would have cost thousands of jobs and ended Britain’s centuries-old ability to produce virgin steel.
Jingye had been in talks for months to seek £1bn in state aid to facilitate the Scunthorpe plant’s transition to greener steelmaking, but was offered just half that sum by ministers.
British Steel has not yet been formally nationalised, although that remains a probable outcome.
Jonathan Reynolds, the business secretary, has previously dismissed the idea of compensating Jingye, saying British Steel’s equity was essentially worthless.
Last month, he met his Chinese counterpart, where the issue of British Steel was discussed between the two governments in person for the first time.
Please use Chrome browser for a more accessible video player
Inside the UK’s last blast furnaces
Jingye has hired the leading City law firm Linklaters to explore the recovery of hundreds of millions of pounds it invested in the Scunthorpe-based company before the government seized control of it.
News of last week’s meeting comes as British steelmakers face an anxious wait to learn whether their exports to the US face swingeing tariffs as part of US President Donald Trump’s trade war.
Sky News’s economics and data editor, Ed Conway, revealed this week that the UK would miss a White House-imposed deadline to agree a trade deal on steel and aluminium this week.
Read more from Sky News:
Is Britain going bankrupt?
Public finances in ‘relatively vulnerable position’, OBR warns
Listen to The World with Richard Engel and Yalda Hakim every Wednesday
Jingye declined to comment, while a spokesman for the Department for Business and Trade said: “We acted quickly to ensure the continued operations of the blast furnaces but recognise that securing British Steel’s long-term future requires private sector investment.
“We have not nationalised British Steel and are working closely with Jingye on options for the future, and we will continue work on determining the best long-term sustainable future for the site.”
Ethereum co-founder Joseph Lubin said that corporate ETH treasuries are vital for driving ecosystem growth.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike