Global Crypto Roundup
Welcome to this month's global crypto round-up, summarising crypto regulatory developments that have happened around the world in June 2022 along with our Clifford Chance crypto publications and upcoming events.
You are welcome to share the round-up with colleagues who may like to subscribe.
CLIFFORD CHANCE PUBLICATIONS AND MATERIALS
The use of central bank digital currencies (CBDCs) in wholesale markets
What legislative and regulatory considerations should be there to enable a globally interoperable CBDC for cross-border payments in the wholesale space? In this report, the International Regulatory Strategy Group, in partnership with Clifford Chance, seeks to answer this question.
Distressed cryptoassets: enforcement of security interests, restructuring, and bankruptcy under US law
In recent months, cryptoasset investors have weathered losses that have been estimated to exceed USD 2 trillion. It is therefore timely for market participants and other stakeholders to assess the legal and practical concerns associated with the treatment of cryptoassets in a distressed scenario.
GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS
- (18 Jul 2022) Informal comments from the Chief Executive Officer of the International Swaps and Derivatives Association, Scott O'Malia, on the recent proposals from the Basel Committee on Banking Supervision regarding the prudential treatment of banks' cryptoasset exposures. Among other things, O'Malia supports the committee's move away from strict capital requirements but calls for the proposals regarding the limit on banks' exposure to cryptoassets to be reconsidered.
- (17 Jul 2022) Recording of a G20 panel discussion on CBDCs and cryptoassets. Participants included representatives from the Bank for International Settlements (BIS), the International Monetary Fund (IMF), and the central banks of Australia, Hong Kong, and Switzerland. They discussed recent events in the crypto-markets and their impact on financial stability, as well as the potential role of CBDCs, including as an alternative to private cryptoassets.
- (13 Jul 2022) Guidance jointly issued by the International Organization of Securities Commissions (IOSCO) and the Committee on Payments and Market Infrastructures on how their Principles for Financial Market Infrastructures apply to systemically important stablecoin arrangements. | Press release
- (12 Jul 2022) BIS and Bank Indonesia, under the Indonesian G20 Presidency, have announced the shortlisted finalists for the G20 TechSprint challenge on CBDCs. | Press release
- (11 Jul 2022) Report jointly issued by BIS, the IMF and the World Bank on the interoperability and cross-border issues that central banks should consider when developing their CBDCs. | Press release
- (11 Jul 2022) Financial Stability Board (FSB) statement on the international regulation and supervision of cryptoasset activities. The statement sets out the FSB's views of the key requirements for a global regulatory regime for cryptoassets and stablecoins, and the work the FSB is doing to support its development and implementation. | Press release
- (11 Jul 2022) IOSCO cryptoasset roadmap for 2022-23. The roadmap, which will be led by IOSCO's Fintech Task Force (FTF), will be split into two workstreams: cryptoassets and digital assets, led by the UK Financial Conduct Authority, and decentralised finance (DeFi), led by the US Securities and Exchange Commission. Both workstreams will primarily focus on analysing and responding to market integrity and investor protection concerns within the cryptoasset and DeFi spaces. | Launch speech by FTF Chair, Tuang Lee Lim | Press release
Central African Republic:
- (3 Jul 2022) Video from a presentation given at the launch of the Government-backed cryptocurrency initiative, Project Sango. The initiative is intended to promote the Central African Republic as a crypto-hub. Speaking at the event, President Faustin-Archange Touadéra set out his vision for the project, including the introduction of a common cryptocurrency easily accessible via a smartphone, which would seek to address financial exclusion issues in the country.
- (14 Jul 2022) Bill to regulate the industry and commercialisation of virtual assets and cryptoassets (in Spanish), which has been passed by the Senate. The bill establishes a legal framework for the mining, commercialisation, exchange, transfer, custody and administration of cryptoassets and instruments that provide control over cryptoassets, overseen by a newly created supervisory authority, the National Commission of Virtual Assets. The bill now needs to be signed by President Mario Abdo Benítez before it enters into force. | Press release (in Spanish)
- (15 Jul 2022) Office of Government Ethics (OGE) advisory notice, which sets out its recommendations regarding when senior government officials should be required to disclose their investments in non-fungible tokens.
- (15 Jul 2022) Letter from a group of US Senators and Members of Congress to the Department of Energy and the Environmental Protection Agency to inform them of their findings regarding the energy consumption of cryptocurrency mining and to ask them to introduce requirements that crypto-miners report their emissions and energy use.
- (8 Jul 2022) Department of the Treasury consultation on stakeholders' views on the implications of digital assets on financial markets and payment infrastructures, as well as the aspects that they wish the Treasury to consider when developing a framework to oversee the digital asset sector. Responses, which are due by 8 August 2022, will be used to inform the report that the Treasury must submit to the White House in September, as requested under President Biden's Executive Order on the responsible development of digital assets.
- (8 Jul 2022) Speech by Vice Chair of the Federal Reserve System Board of Governors, Lael Brainard, on the financial stability risks posed by cryptoassets and DeFi. Brainard calls for a 'same risks, same rules' approach to cryptoassets and urges financial regulators to cooperate on a global level to address the cross-border issues posed by the crypto-market.
- (5 Jul 2022) OGE advisory notice, which confirms that the de minimis exemption (which allows government officials who work on policy relating to a certain type of security to privately own those securities, provided their holdings do not exceed a defined threshold) does not apply to cryptocurrencies or stablecoins. As a result, US government officials who own cryptocurrencies are prohibited from working on regulations and policies in the cryptoasset space.
- (1 Jul 2022) US/UK Financial Innovation Partnership (FIP) joint statement, following its meeting on 29 June 2022. FIP was established in May 2019 to encourage further collaboration and engagement on financial services innovation in both jurisdictions. At the meeting, participants discussed the need to strengthen the governance and regulation of stablecoins, their respective CBDC plans, and the importance of global cooperation on cryptoassets.
- (18 Jul 2022) Ministry of Finance response to a Parliamentary question on the work the Government and the Reserve Bank of India have been doing to regulate the use of cryptocurrencies in India.
- (4 Jul 2022) Monetary Authority of Singapore (MAS) response to a Parliamentary question on whether MAS intends to implement further restrictions on cryptocurrency trading platforms. In its response, MAS notes that it is considering further measures, including limits on retail participation and rules on the use of leverage in cryptoasset transactions.
- (12 Jul 2022) The Securities and Exchange Commission (SEC) has announced it has finalised its proposed amendments to the capital requirements for digital asset operators. Under the new rules, firms that hold digital assets on behalf of customers must have a minimum capital of THB 100 million (up from THB 50 million), digital asset brokers must have a minimum of THB 50 million (up from THB 25 million), and digital asset traders must have a minimum of THB 50 million (up from THB 5 million). | Press release (in Thai)
- (4 Jul 2022) The SEC has announced it has introduced rules which requires digital asset operators to provide clients with training and/or tests to assess their understanding of digital assets before offering their services. | Press release (in Thai)
- (19 Jul 2022) EU Commission response to a question from the EU Parliament on whether it intends to introduce trade restrictions on cryptocurrencies.
- (14 Jul 2022) European Data Protection Board (EDPB) response to the EU Commission's consultation on a digital euro. EDPB argues that a high level of privacy and data protection is required to ensure consumers' trust in the project, and that, if full anonymity is ruled out, the digital euro should aim to allow a high degree of pseudonymisation. The European Central Bank (ECB) has also, on 13 July 2022, published a report and blogpost setting out its views on the key objectives and design considerations for the project.
- (11 Jul 2022) ECB macroprudential bulletin, which covers the ECB's recent work in the field of macroprudential policy. The bulletin contains articles on, among other things, the role of stablecoins in the crypto-ecosystem, whether climate risk is priced into cryptoassets, and DeFi.
- (8 Jul 2022) The ECB has announced it is inviting technical experts to contribute to discussions on the technical aspects of its digital euro initiative. The talks will focus, in particular, on the large-scale application of privacy-enhancing technologies in the settlement of retail payments using the CBDC. Interested parties were requested to respond by 20 July 2022. | Press release
- (6 Jul 2022) Financial Services and Markets Authority (FSMA) consultation on proposed guidance regarding when cryptoassets may be deemed to be securities, investment instruments or financial instruments. Among other things, FSMA is proposing to classify cryptoassets that are limited in number or tradable in expectation of profit as investment instruments, and therefore subject to EU prospectus regulations. Comments were due by 31 July 2022. | Press release
- (21 Jul 2022) The Autorité des Marchés Financiers (AMF) and the Autorité de Régulation Professionnelle de la Publicité (ARPP) have revised their partnership agreement on communication in the financial services sector, extending it to include cryptoassets for the first time. Under the revised agreement, the ARPP commits to creating a recommendation for its members on its expectations regarding any communications on cryptoassets and token offerings. | Press release | Joint AMF/ARPP work programme 2022-23 (in French)
- (12 Jul 2022) Speech by the Governor of the Banque de France (BdF), François Villeroy de Galhau on CBDCs and bank intermediation. Among other things, Villeroy de Galhau notes that the BdF has launched the second phase of its wholesale CBDC pilot and that it is seeking to have a viable product by 2023.
- (14 Jul 2022) Act on Banks and Banking Activities (in Russian), which has been signed into law by President Vladimir Putin. Among other things, the new act amends various pieces of legislation to prohibit the use of digital financial assets for payments for goods and services. | Act overview webpage (in Russian)
- (28 Jul 2022) Law Commission consultation on proposed law reforms intended to better recognise and protect digital assets by assigning them to a new category of personal property ('data objects'), which would be separate from the existing categories of 'things in possession' and 'things in action'. Responses are due by 4 November 2022. | Consultation webpage
- ·25 Jul 2022) Speech by the Master of the Rolls, Sir Geoffrey Vos, on the economic value of English law in relation to distributed ledger technology and digital assets.
- (21 Jul 2022) Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, which have been made and which will enter into force in stages. Among other things, the regulations introduce the Financial Action Task Force's 'travel rule', which requires cryptoasset businesses to include with the transfer of a cryptoasset to another cryptoasset business specified information about the originator and beneficiary of the transfer.
- (20 Jul 2022) Financial Services and Markets Bill, which has been introduced to Parliament. Among other things, the bill will amend the Banking Act of 2009 and Financial Services (Banking Reform) Act of 2013 and bring stablecoins into the scope of regulation by granting new powers to HM Treasury to regulate 'digital settlement assets' and their service providers.
- (20 Jul 2022) Speech by Judge Mark Pelling QC on the principal issues which arise in cryptocurrency fraud cases and the solutions available under the English legal system.
- (13 Jul 2022) Parliament Treasury Committee call for evidence as part of its inquiry into the role of cryptoassets in the UK. In particular, the committee is seeking feedback on whether cryptocurrencies are likely to replace traditional currencies, what opportunities and risks the use of cryptoassets pose for individuals and the economy, and their impact on social inclusion. | Press release
- (12 Jul 2022) Speech from the Deputy Governor for Financial Stability at the Bank of England (BoE), Sir Jon Cunliffe, on the lessons learnt from the recent instability and losses in the crypto-markets.
- (6 Jul 2022) Minutes from the BoE's CBDC Technology Forum, which was held on 9 June 2022. Participants discussed the need to build offline functionality into the design of CBDCs, and the relative importance and complexity of various potential CBDC functionalities, including payments in scope, interoperability considerations and innovation features.
- (5 Jul 2022) HM Revenue and Customs (HMRC) report on the UK crypto-market. The report contains the findings from a research project undertaken by Kantar UK, which looked specifically at the composition and size of individuals' cryptoasset holdings in the UK, as well as the platforms they used to purchase them. | Press release
- (5 Jul 2022) HMRC consultation on the taxation of DeFi activities. In particular, the consultation is seeking views on whether administrative burdens and costs should be reduced for taxpayers engaging in cryptoasset loans and staking. Responses are due by 31 August 2022.
- (1 Jul 2022) US/UK FIP joint statement, following its meeting on 29 June 2022. FIP was established in May 2019 to encourage further collaboration and engagement on financial services innovation in both jurisdictions. At the meeting, participant discussed the need to strengthen the governance and regulation of stablecoins, their respective CBDC plans, and the importance of global cooperation on cryptoassets.