Clifford Chance

Welcome to this month's global crypto round-up, summarising crypto regulatory developments that have happened around the world in April 2022 along with our Clifford Chance crypto publications and upcoming events. 

Details of these and previous developments can also be found on our Fintech Topic Guide on the Clifford Chance Financial Markets Toolkit.

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CLIFFORD CHANCE BRIEFINGS AND MATERIALS

• (22 Apr 2022) Clifford Chance blogpost – Markets in Cryptoassets (MiCA): where are we now? | Trilogues relating to the proposed MiCA Regulation are underway between the EU Commission, Council and Parliament. We examine the overlaps and potential outcomes of these discussions.
• (21 Apr 2022) Clifford Chance briefing – A new type of quality control: the US Department of Labor warns fiduciaries against including cryptoassets in retirement plans | The US Department of Labor recently warned ERISA-plan fiduciaries to 'exercise extreme care' before including cryptocurrencies and crypto-based products as potential investment options in 401(k) retirement plans.
• (8 Apr 2022) Clifford Chance blogpost – Increased custody liability: proposed reforms to EU funds legislation and new rules for cryptoasset markets | Under the EU Commission's proposed reforms to AIFMD and UCITS V and the various drafts of the MiCA Regulation, depositaries and custodians of funds and custodians providing services regarding cryptoassets could become subject to increased liability and other obligations.

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (25 Apr 2022) The Bank for International Settlements' (BIS's) Innovation Hub and Bank Indonesia have announced the launch of the G20's third TechSprint. The 2022 TechSprint calls for innovative technological solutions to a range of challenges focusing on wholesale and retail central bank digital currencies (CBDCs). Registration closes on 20 May 2022. | Press release | TechSprint webpage
• (19 Apr 2022) Opinion article by the BIS General Manager, Agustín Carstens, and Queen Máxima of the Netherlands, the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development, on the financial inclusion implications of CBDCs.
• (19 Apr 2022) Financial Action Task Force (FATF) report on the state of the effectiveness of its anti-money laundering and counter terrorist financing (AML/CTF) standards. The report includes an update on the implementation of FATF's requirements regarding the AML/CTF treatment of virtual assets and their service providers.
• (19 Apr 2022) International Monetary Fund (IMF) report on global financial stability, which lists accelerated 'cryptoization' (i.e. the expansion of the crypto-ecosystem) in emerging market economies (EMEs) as a key area of concern. The IMF notes this expansion is partly due to a structural shift towards cryptoassets as a means of payment and/or store of value, and partly due to more temporary drivers, such as speculative interest during the pandemic and potential attempts to evade sanctions and use up excess energy through mining for energy-intensive blockchains like Bitcoin following the war in Ukraine. The IMF also states that regulation is not keeping pace with innovative technologies such as decentralised finance (DeFi), and recommends that regulators concentrate on related aspects of the crypto-ecosystem such as stablecoin issuers and centralised exchanges. | Press release
• (18 Apr 2022) Recording of an IMF event on public and private digital money. Panellists discussed the future of digital money, its use in EMEs, policy work on CBDCs, and plans to adapt the regulatory framework to address emerging innovative technologies.
• (14 Apr 2022) Collection of papers on CBDCs in EMEs, prepared for a meeting of EME central bank deputy governors, which was held in February 2022. The papers cover various topics relating to CBDCs, including the main objectives of introducing them, the guiding principles for their design and governance, the challenges they pose for monetary policy, financial intermediation and financial stability, and their impact on financial inclusion.
• (12 Apr 2022) BIS report on CBDCs and how they can be used to promote financial inclusion. | Press release

Africa

South Africa:  

• (6 Apr 2022) Report from the South African Reserve Bank and the Intergovernmental Fintech Working Group on the successful completion of the second phase of their CBDC initiative, Project Khokha. Phase Two trialled the use of distributed ledger technology for interbank payments settlement. | Press release

Americas

The Bahamas:            

• (20 Apr 2022) Government white paper on the future of digital assets in the Bahamas. The white paper sets out the government's vision and framework for the development of the Bahamian digital asset policy from 2022 to 2026. Key initiatives include permitting citizens to pay their taxes using digital assets and the promotion of the country's CBDC, the sand dollar.

Brazil:            

• (26 Apr 2022) A new bill, which incorporates proposals from bills 3825/2019, 3949/2019, 4207/2020 and 2201/2021 (in Portuguese), has been approved by the Senate. The bill, if enacted, would introduce a regulatory framework for virtual assets and their service providers. It will now need to be approved by the Chamber of Deputies before it can be signed into law by President Jair Bolsonaro. | Press release (in Portuguese)

Cuba:             

• (26 Apr 2022) Resolution 89/2022 (in Spanish), which introduces a licensing re·gime for virtual asset service providers wishing to operate in Cuba. The regime will enter into force on 16 May 2022 and will be overseen by the Banco Central de Cuba.

Panama:      

• (28 Apr 2022) Bills 696 and 697 have been passed by the Panamanian Legislative Assembly at their third reading. The bills seek to introduce a legal framework for cryptocurrencies in Panama, and to make the country a more attractive place for crypto-related businesses and investment. They must now be signed by President Laurentino Cortizo before entering into law. | Press release (in Spanish) | Tweet from Congressman Gabriel Silva (in Spanish) summarising the proposed legislation

US:  

• (20 Apr 2022) Letter from House of Representatives member, Jared Huffman, and twelve other Democratic House members to the Environmental Protection Agency (EPA). The letter requests that the EPA investigates crypto-mining firms that use the proof-of-work process to ensure they are in compliance with environmental statutes, such as the Clean Air Act and the Clean Water Act.
• (9 Apr 2022) New York state budget for the 2023 financial year, which includes a provision granting the New York Department of Financial Services the power to collect payments from virtual currency businesses to cover its supervisory expenses, in the same way as it does from traditional financial services firms. | Press release
• (8 Apr 2022) Speech by the Acting Comptroller of the Currency, Michael Hsu, on the architecture of stablecoins. Hsu sets out three considerations currently being discussed by policymakers: how stablecoins can be regulated in a way that mitigates run risk and promotes financial stability; how interoperable should stablecoins be; and how separable should stablecoin issuers be.
• (7 Apr 2022) Speech from Secretary of the Treasury, Janet Yellen, on digital assets. Yellen lists the key principles underpinning the Treasury's work on digital assets, namely that it should: encourage responsible innovation; keep pace with change; take a risk-based, technology-neutral approach; maintain the centrality of the US dollar; and seek input from a wide range of stakeholders.
• (7 Apr 2022) Federal Deposit Insurance Corporation (FDIC) letter to the financial institutions which it supervises, requesting that they notify FDIC if they intend to engage in, or are currently engaged in, any activities involving or related to cryptoassets. | Press release
• (6 Apr 2022) Discussion draft of the Stablecoin TRUST Act, which has been proposed by Senator Pat Toomey. The bill, if introduced, would establish a regulatory framework for stablecoins. Key features of the bill include exempting payment stablecoins from securities regulations and requiring their issuers to be licensed by the Office of the Comptroller of the Currency. | Press release
• (4 Apr 2022) Speech from the Chair of the Securities and Exchange Commission (SEC), Gary Gensler, on the SEC's activities around cryptoasset platforms, tokens and stablecoins. Gensler notes that he has advised SEC's staff to explore bringing crypto-platforms under the same regulatory framework as crypto-exchanges and to look into whether it would be appropriate to segregate out the custody functions of platforms for particular regulatory scrutiny.

APAC

Australia:     

• (21 Apr 2022) Australian Prudential Regulation Authority letter to regulated entities, setting out its expectations regarding the management of cryptoasset-related risks and its planned policy roadmap for cryptoassets and related activities. | Press release
• (21 Apr 2022) Australian Transaction Reports and Analysis Centre financial crime guide on digital currencies. The guide is intended to help financial service providers identify when customers are using digital currencies to conduct illicit activities. | Press release

China:     

• (13 Apr 2022) Joint statement (in Chinese) by the China Banking Association, the China Internet Finance Association and the Securities Association of China on non-fungible tokens (NFTs). The statement sets out guidance on ways to mitigate the potential risks of NFTs, such as prohibiting the use of cryptocurrencies for the pricing and settlement of NFT transactions, complying with AML requirements, verifying identities for the issuance, sale or purchase of NFTs, avoiding investment, or the provision of financing for investment, in NFTs, and preventing ownership division or batch creation, which may weaken NFTs' non-fungible nature.

Hong Kong:

• (27 Apr 2022) Hong Kong Monetary Authority (HKMA) discussion paper setting out the findings of the second phase of its CBDC project, which investigated potential policy and design approaches for a retail CBDC. The discussion paper seeks stakeholder feedback on potential use cases and design considerations, including issuance mechanisms, interoperability with other payment systems, privacy and data protection, and legal considerations. Responses are due by 27 May 2022. | Press release

India:             

• (28 Apr 2022) Directive from the Ministry of Electronics and Information Technology, which states that crypto-exchanges, virtual private network providers and data centres must store a wide range of user data for up to five years.
• (1 Apr 2022) Finance Act 2022, which has entered into force. Among other things, the act introduces a capital gains tax of 30% on cryptoasset transfers, and a 1% tax deducted at source on all payments towards cryptoassets above INR 10,000 a year. | Parliamentary bulletin

Singapore:   

•  (4 Apr 2022) Financial Services and Markets Act, which has been passed into law by Parliament. The act introduces various amendments to financial services law including new provisions applying licensing and AML/CTF requirements to virtual asset service providers based in Singapore even if they only conduct business overseas. | Press release
• (4 Apr 2022) Response to a Parliamentary question on cryptocurrencies and DeFi. The response clarifies how Singapore's existing regulations will help prevent sanctioned individuals and companies from using cryptocurrencies and DeFi to circumvent the restrictions placed upon them.

The Philippines:         

• (26 Apr 2022) The Bangko Sentral ng Pilipinas has announced it is launching a pilot project, Project CBDCPh, which will test the use of a wholesale CBDC for large-value financial transactions. | Press release

Europe

EU:  

• (28 Apr 2022) European Central Bank (ECB) call for expressions of interest for payment service providers, banks and other relevant companies to join an exercise to develop prototype user interfaces for a future digital euro payments system. Participants will be asked to collaborate with the ECB on the development of prototypes that address specific use cases for the payment process. Responses are due by 20 May 2022. | Press release
• (28 Apr 2022) European Banking Authority (EBA) response to the EU Commission's call for advice on the review of the existing macroprudential framework. Among other things, the EBA concludes that the crypto-market, and banks' exposure to it, are currently not large enough to warrant the introduction of new macroeconomic tools to address them. | Press release
• (25 Apr 2022) Speech from ECB Executive Board Member, Fabio Panetta, on the 'wild west' of cryptoassets. Panetta calls for a swifter and stricter response to the emerging challenges posed by cryptoassets, including strengthening the requirements around public disclosure, regulatory compliance reporting, transparency and standards of conduct.
• (8 Apr 2022) The Council of the EU has announced a fifth package of restrictive measures against Russia, which includes a prohibition on providing high-value cryptoasset services to Russia. | Press release
• (8 Apr 2022) Speech from ECB Executive Board Member, Fabio Panetta, on the monetary policy and financial stability implications of retail CBDCs. Panetta concludes that, while the risks posed by CBDCs are high, they could be mitigated with careful design.
• (5 Apr 2022) EU Commission targeted consultation on the digital euro. The consultation is intended to build upon the existing consultative work of the ECB and seeks to gain further information from relevant experts and authorities on: users' needs; the digital euro's role in the EU's retail payments and digital economy; its interaction with cash; its impact on the financial sector and financial stability; the application of AML/CTF rules; privacy and data protection considerations; and international payments. Responses are due by 14 June 2022. | Consultation webpage
• (1 Apr 2022) Council of the EU report which sets out, in three-column table format, the negotiating positions taken by itself, the EU Commission and the EU Parliament on the proposed MiCA regulation.
• (1 Apr 2022) EU Parliament's Committees on Economic and Monetary Affairs and Civil Liberties report containing its negotiating position on the EU Commission's proposal to extend the scope of rules on information accompanying transfers of funds to apply to certain cryptoassets. | Press release

Russia:          

• (8 Apr 2022) The Ministry of Finance has announced it has finalised its Bill on Digital Currency, following feedback from other government departments. The bill creates a regulatory framework for the crypto-market, including provisions on the circulation, issuance, trading and mining of cryptocurrencies. | Press release (in Russian)

Slovenia:       

• (7 Apr 2022) The Slovenian Government has adopted the Bill on the De-Bureaucratisation of the Taxation of the Redemption of Virtual Currencies, which introduces a tax of just under 5% on all virtual currency transactions. | Press release (in Slovenian)

Sweden:       

• (7 Apr 2022) Sveriges Riksbank request for information on potential technical solutions for its proposed e-krona project. Responses are due by 13 May 2022. | Press release
• (6 Apr 2022) Sveriges Riksbank report on the completion of the second phase of its e-krona pilot. Phase 2 considered the offline functionality of the e-krona and how banks and other payment service providers could be integrated into the e-krona network. | Press release

UK:

• (20 Apr 2022) Prudential Regulation Authority (PRA) business plan for 2022/23, which sets out the PRA's strategy, workplan and budget for the coming financial year. The plan notes the PRA will continue to monitor the risks emerging from increasing crypto-related activities, require firms to report their cryptoasset exposures, treatments and future investment plans, and engage in efforts to establish both national and international regulatory frameworks for the treatment of cryptoassets and other technological innovations.
• (7 Apr 2022) Financial Conduct Authority (FCA) strategy for 2022-2025, which includes plans to work with the government and other stakeholders to develop the regulatory approach to cryptoassets, continue supervision of cryptoasset firms' compliance with the Money Laundering Regulations, and set higher standards for cryptoasset promotions to ensure they are clear, fair and not misleading. | Press release
• (5 Apr 2022) HM Treasury (HMT) responses to questions on: its plans to identify crypto-exchanges serving sanctioned Russian individuals; and its progress in evaluating the benefits of a UK CBDC.
• (4 Apr 2022) HMT report summarising its findings and next steps following the consultation it launched in January 2021 on the Government's approach to regulating cryptoassets, and stablecoins in particular.
• (4 Apr 2022) Speech by the Economic Secretary to HMT, John Glen, on a package of measures intended to drive innovation and competition in the UK financial services sector. These include: an examination of the tax treatment of DeFi loans and cryptoasset staking; and the creation of an NFT through the Royal Mint. | Press release | CFIT webpage

Ukraine:       

• (21 Apr 2022) The National Bank of Ukraine has announced it is implementing additional measures under martial law intended to prevent capital outflows. The measures include a ban on individuals buying cryptocurrencies with the national fiat currency, although they can continue to be bought with foreign currency provided monthly purchases do not exceed UAH 100,000. | Press release (in Ukrainian)

 

EVENTS

Clifford Chance International Festival of Fintech (17-19 May 2022):

Clifford Chance is delighted to invite you to our virtual International Festival of Fintech. Join us for three days of insightful fintech webinars featuring expert panel discussions and fireside chats with industry leaders and rising stars. Each session will focus on the fast-changing world of financial technology and the key legal and regulatory issues, covering topics such as: the impact of accelerated growth in crypto and digital currencies; the benefits and risks of new technologies such as quantum computing and DLT; the development and regulation of digital assets; ESG topics including sustainable finance, carbon trading and sustainable bitcoin mining; and fintech in emerging markets. | For more information and to register, please see the event webpage.