Global crypto roundup december 2023

Monthly Crypto Round-up

December 2023

Welcome to this month's global crypto round-up, summarising crypto regulatory developments that have happened around the world in December 2023 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.

If you would like to receive future Round-ups directly to your inbox, please complete this preferences form. You can sign up for the Global Crypto Round-up under the 'Briefings and regular newsletters' heading.

CLIFFORD CHANCE PUBLICATIONS

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

(29 Nov 2023) Bank for International Settlements (BIS) Consultative Group on Risk Management report on central bank digital currency (CBDC) information security and operational risks to central banks, which analyses the operating, technology, third-party and business continuity risks for a central bank issuing CBDC. | Webpage
(29 Nov 2023) BIS Innovation Hub report on Project Tourbillon, which explored concerns about the potential erosion of privacy in relation to retail CBDCs and tested the concept of payer anonymity, which provides cash-like anonymity to payers, although not for payees. | Webpage
(28 Nov 2023) Financial Stability Board (FSB) report on the financial stability implications of multifunction cryptoasset intermediaries (MCIs). The report warns that combining different activities within MCIs, many of which are typically restricted or separated in traditional finance, could exacerbate MCI vulnerabilities and suggests that further work may be needed to enhance cross-border cooperation and information sharing and to address information gaps. | Press release
(27 Nov 2023) Global Legal Entity Identifier Foundation (GLEIF) blog post on increasing transparency in crypto and digital asset trading markets with the Legal Entity Identifier (LEI)
(21 Nov 2023) International Capital Market Association (ICMA) paper which offers further insight into legal aspects of distributed ledger technology (DLT) and blockchain relating to the issuance of debt securities. Clifford Chance were delighted to support ICMA with this important project. | Press release
(20 Nov 2023) International Monetary Fund (IMF) blog post entitled ‘Central Bank Digital Currency Development Enters the Next Phase’
(17 Nov 2023) Bank for International Settlements (BIS) working paper on CBDC and privacy, which presents the results of a randomised survey experiment to show that privacy protection is among the key features to consider in the design of CBDC. | Webpage
(15 Nov 2023) International Organization of Securities Commissions (IOSCO) final report on policy recommendations for crypto and digital asset markets, which cover: (i) conflicts of interest arising from vertical integration of activities and functions; (ii) market manipulation, insider trading and fraud; (iii) custody and client asset protection; (iv) cross-border risks and regulatory cooperation; (v) operational and technological risk; and (vi) retail distribution. | Press release
(15 Nov 2023) IMF CBDC Virtual Handbook, which is intended to collect and share knowledge, lessons, empirical findings, and frameworks to address policymakers’ most frequently asked questions on CBDCs. The IMF intends to add new chapters every year as its body of knowledge and analysis in this area grows, aiming to provide about twenty chapters by 2026. Chapters will also be periodically updated, reflecting evolving views. | Launch event webpage: CBDC - Emerging Good Practices | Speech by IMF Managing Director Kristalina Georgieva | IMF staff report on initial considerations for CBDC
(14 Nov 2023) The FSB Plenary has met in Basel to discuss the outlook for global financial stability. Amongst other things, Members stressed the importance of global and consistent implementation of the FSB’s high-level recommendations for the regulation, supervision and oversight of cryptoasset markets and activities and of global stablecoin arrangements, including in non-FSB jurisdictions, and of actions to guard against the risk of regulatory arbitrage, in cooperation with the standard-setting bodies and relevant international organisations. Members also discussed the FSB’s work programme for 2024, the priorities of which include (i) advancing work on the global regulatory and supervisory framework for cryptoasset markets and activities; (ii) enhancing cross-border payments; (iii) strengthening cyber and operational resilience; and (vi) financial innovation. | Press release
(10 Nov 2023) Joint statement by countries including the UK, Australia, Belgium, Brazil, Canada, France, Germany, Italy, Japan, Korea, Luxembourg, Netherlands, Singapore, Spain and the US, on their collective engagement to implement the Organisation for Economic Co-operation and Development (OECD) Crypto-Asset Reporting Framework (CARF). The CARF provides for the automatic exchange of information between tax authorities on crypto exchanges for the purpose of combating offshore tax avoidance and evasion. The joint statement announces the signatory jurisdictions’ intention to implement the framework in time to commence exchanges by 2027.
(8 Nov 2023) BIS paper (No. 141), entitled ‘Will the real stablecoin please stand up?’, which provides an overview of the evolution of the stablecoin market over the past decade and examines whether stablecoins have stayed true to their name in terms of being ‘stable’. | Webpage
(8 Nov 2023) Speech by Agustín Carstens, General Manager of the BIS, on securing the future monetary system, in which he noted that CBDCs, whether in wholesale form as a type of digital central bank reserve or in retail form as a digital banknote, will sit at the core of the future financial system

Americas

(29 Nov 2023) Speech by Deputy Secretary of the Treasury Wally Adeyemo on the steps that need to be taken in order to prevent bad actors from using the digital asset ecosystem for illicit activity. Adeyemo indicated that the Treasury has provided Congress with a set of recommendations to expand its authorities and broaden its tools and resources to go after illicit actors in the digital asset space, including a new sanctions tool targeted towards actors in the digital asset ecosystem that allow terrorist groups and other illicit actors to move their assets
(21 Nov 2023) Binance has pleaded guilty and agreed to pay over USD 4 billion to resolve the US Justice Department’s investigation into violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act. Binance’s CEO, Changpeng Zhao, has also pleaded guilty to failing to maintain an effective anti-money laundering programme, in violation of the BSA, and has resigned as CEO of Binance. | Press release
(20 Nov 2023) The Securities and Exchange Commission (SEC) has filed a complaint against the crypto exchange Kraken, alleging that it has acted as an unregistered broker, dealer, exchange, and clearing agency with respect to cryptoasset securities.
(15 Nov 2023) New York State Department of Financial Services (NYDFS) industry letter setting out final guidance regarding the listing of virtual currencies, which is effective immediately and entirely supersedes the prior guidance.
(7 Nov 2023) The Consumer Financial Protection Bureau (CFPB) has proposed a rule to define a market for general-use digital consumer payment applications. The proposed market would cover providers of funds transfer and wallet functionalities through digital applications for consumers’ general use in making payments to other persons for personal, family, or household purposes. Deadline for comments: 8 January 2024 or 30 days after publication of the proposed rule in the Federal Register, whichever is later. | Press release

Canada

(29 Nov 2023) Bank of Canada report summarising the feedback it has received to date about a potential digital Canadian dollar and its intended next steps. Financial sector stakeholders generally wanted more concrete details about how a digital dollar would work so they could better understand the potential impacts on their business models and overall financial stability. Respondents to the public questionnaire were largely opposed to a digital dollar and to the Bank of Canada researching it. | Digital Canadian Dollar Public Consultation Report (prepared by Forum Research) | Press release
(20 Nov 2023) Office of the Superintendent of Financial Institutions (OSFI) consultation on the public disclosure of cryptoasset exposures by federally regulated financial institutions in Canada. The consultation is being run in parallel to the Basel Committee on Banking Supervision (BCBS) consultation on disclosure of cryptoasset exposures for internationally active banks. OSFI will issue draft guidelines on public disclosures by autumn 2024. Final guidelines will be communicated by winter 2025, taking effect in Q4 2025. Deadline for comments: 31 January 2024. | Press release

APAC

Australia

(9 Nov 2023) Australian Taxation Office guidance on the capital gains tax (CGT) treatment of decentralised finance (DeFi) and wrapping crypto tokens.

Hong Kong

(2 Nov 2023) Securities and Futures Commission (SFC) circular on tokenisation of SFC-authorised investment products, which sets out the requirements under which the SFC would consider allowing tokenisation of investment products authorised by the SFC under Part IV of the Securities and Futures Ordinance for offering to the public in Hong Kong. The SFC has also issued an accompanying circular on intermediaries engaging in tokenised securities-related activities.

Philippines

(16 Nov 2023) Bureau of the Treasury Notice of Offering announcing that the Philippines intends to issue Tokenised Treasury Bonds due in 2024 in the form of one-year Tokenised Treasury Bonds denominated in Philippine Peso

Singapore

(23 Nov 2023) The Monetary Authority of Singapore (MAS) has published the final tranche of responses to feedback received on its October 2022 consultation on proposed regulatory measures for digital payment token services. The proposals are aimed at licensed and exempt payment service providers that carry on a business of providing a digital payment token (DPT) service under the Payment Services Act 2019 (PS Act) (DPTSPs). In July 2023, the MAS published Part 1 of the consultation response, which focused on the requirements for segregation and custody of customers’ assets, as well as draft legislative amendments to the Payment Services Regulations 2019 to safeguard customer assets under a statutory trust. Part 2 of the consultation response covers business conduct, consumer access measures, and technology and cyber risk management requirements. | Press release
(16 Nov 2023) The Monetary Authority of Singapore (MAS) has announced three initiatives intended to ensure the safe and innovative use of digital money in Singapore, namely: (i) a blueprint outlining the infrastructure required for a digital Singapore dollar; (ii) expanding digital money trials; and (iii) a plan to issue a live CBDC for wholesale settlement. | Press release
(15 Nov 2023) MAS press release on its work with the financial industry to expand asset tokenisation initiatives and develop foundational capabilities to scale tokenised markets as part of Project Guardian.

South Korea

(23 Nov 2023) The Bank of Korea, the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) have announce a detailed implementation plan for their CBDC usability test. | Press release (in Korean)

EUROPE

(29 Nov 2023) Interview with Andrea Enria, Chair of the Supervisory Board of the European Central Bank (ECB), in which he discussed the digital euro, big tech, and the need for crypto firms that conduct banking activity to be brought under the remit of banking regulation and supervision, amongst other things.
(27 Nov 2023) European Banking Authority (EBA) amending guidelines on the characteristics of a risk-based approach to anti‐money laundering and terrorist financing (ML/TF) supervision, which extend the risk-based supervision guidelines to AML/CFT supervisors of cryptoasset service providers (CASPs). | Press release
(24 Nov 2023) EBA consultation on draft 'travel rule' guidelines on preventing the abuse of funds and certain cryptoassets transfers for (ML/TF) purposes under Regulation (EU) 2023/1113 on information accompanying transfers of funds and certain cryptoassets. The EBA will hold a virtual public hearing on 17 January 2024 from 14:00 to 16:00 Paris time. Deadline for comments: 26 February 2024 | Press release
(22 Nov 2023) EU Parliament briefing on the digital euro, which summarises the conclusions of the European Central Bank (ECB)’s investigation phase and gives an overview of the recent legislative proposals from the EU Commission.
(17 Nov 2023) ECB presentation slides on ‘The digital euro: a digital form of cash’
(16 Nov 2023) The EU Commission has published for consultation two draft Delegated Regulations setting out certain criteria and fees relating to critical ICT third-party service providers (CTPPs) under the Digital Operational Resilience Act (DORA). The first Delegated Regulation specifies the criteria for the designation of ICT third-party service providers as critical. The second Delegated Regulation specifies the amount of the oversight fees that can be charged by the European Supervisory Authority that is acting as Lead Overseer to CTPPs and the way in which those fees are to be paid. Deadline for comments: 14 December 2023.
(16 Nov 2023) Speech by European Securities and Markets Authority (ESMA) Chair Verena Ross on the next steps on the MiCA journey. Amongst other things, Ross discussed some of the key features of ESMA’s second consultation paper on Level 2 measures under MiCA, how ESMA is preparing for the transition to the new MiCA regime and fostering supervisory convergence among national competent authorities
(14 Nov 2023) Speech by Andrea Enria, Chair of the Supervisory Board of the ECB on the MiCA and its coordination with EU financial markets legislation. Enria argued that recent developments have strengthened the case for directly regulating cryptoasset activities, highlighted certain problematic aspects of MiCA, and set out his view of how the most advanced forms of DeFi pose a fundamental challenge to the very application of financial regulation and supervision. He concluded by outlining what he believes are the basic elements of a regulatory and supervisory framework which sets the boundaries and polices interactions between the crypto industry and the banking sector.
(9 Nov 2023) The ESMA has announced that it is changing its Union Strategic Supervisory Priorities (USSPs) to focus on cyber risk and digital resilience. The new USSP will come into force in 2025, at the same time as DORA. | Press release
(8 Nov 2023) The EU Commission has published for consultation four Delegated Regulations setting out additional criteria on the supervision of cryptoassets under MiCA. The draft Delegated Regulations cover:
- the procedural rules for the exercise by the EBA of its power to impose fines or periodic penalty payments on issuers of significant asset-referenced tokens (ARTs) and e-money tokens (EMTs);
- the criteria and factors to be taken into account by the EBA, ESMA and competent authorities when exercising their product intervention powers under MiCA (i.e. their powers to restrict or ban the sale of cryptoassets or related activities);
- the criteria for classifying ARTs and EMTs as significant; and
- the supervisory fees that can be charged by the EBA to issuers of significant ARTs and EMTs. Deadline for comments: 6 December 2023.
(8 Nov 2023) ECB working paper on global and local drivers of Bitcoin trading vis-à-vis fiat currencies
(8 Nov 2023) The EBA has launched a set of consultations on various draft regulatory technical standards (RTS), implementing technical standards (ITS), and guidelines under MiCA. In particular, the EBA is consulting on:
(7 Nov 2023) The EU Council and Parliament have reached a political agreement on the proposed regulation on instant payments in euro, which amends and modernises the Single Euro Payments Area (SEPA) Regulation on standard credit transfers in euro by adding to it specific provisions for instant credit transfers in euro. The proposed regulation still needs to be formally approved by both the Parliament and the Council before it enters into force. | Press release
(6 Nov 2023) Speech by Dr Joachim Nagel, President of the Deutsche Bundesbank, in which he outlined three key reasons for introducing a digital euro: (i) the digital transition in the payments space; (ii) the protection of privacy; and (iii) sovereignty in payments. He also discussed some of the risks associated with the introduction of central bank digital currencies (CBDCs) and how the Eurosystem intends to address those risks.

France

(3 Nov 2023) Autorité des marchés financiers (AMF) form (in French) to be used to declare a change in the situation of registered or approved digital asset service providers (DASPs). DASPs are required to use the form to report changes, in particular to their governance, reference shareholders or programme of operations.

Germany

(23 Nov 2023) German Federal Financial Supervisory Authority (BaFin) guidance note (in German) on the operation of a crypto securities register pursuant to section 1 para 1a sentence 2 no 8 of the German Banking Act

Spain

(20 Nov 2023) Speech by Pablo Hernández de Cos, Governor of the Bank of Spain, on the digital euro.

(29 Nov 2023) HM Revenue & Customs (HMRC) guidance on how to make a voluntary disclosure of any unpaid tax on income or gains from cryptoassets, including exchange tokens, non-fungible tokens and utility tokens and related guidance on how to pay any unpaid tax as a result of income or gains from cryptoassets.
(24 Nov 2023) Technology Working Group interim report on its work on the implementation of fund tokenisation in the UK, setting out a recommended 'baseline approach' to implementing the tokenisation of UK investment funds, under which firms could develop and pilot models for fund tokenisation within the existing legal and regulatory framework. | FCA letter published alongside the report | Press release
(22 Nov 2023) Consultation outcome on the Digital Securities Sandbox (DSS), providing a summary of the feedback received and the Government's final approach to implementing the DSS, which is intended facilitate the use of digital assets in financial markets. Legislation implementing the DSS will be laid before Parliament in due course.
(6 Nov 2023) Financial Conduct Authority (FCA) discussion paper (DP23/4) on its proposed regulation around the issuing and holding of fiat-backed stablecoins, published alongside the Bank of England (BoE)’s discussion paper on systemic payment systems using stablecoins and related services providers, the Prudential Regulation Authority (PRA)’s Dear CEO letter on innovative uses of deposits, e-money and stablecoins, and a joint FCA/BoE/PRA roadmap paper which aims to explain how the regulators’ proposed regimes interact and their approach for dual regulation. These follow last week's publication of a HM Treasury policy statement providing an update on the Government's plans for the regulation of fiat-backed stablecoins, a HM Treasury paper summarising the feedback the Government received to its consultation on proposed amendments to the Financial Market Infrastructure Special Administration Regime to include provisions on the management of failures of non-bank systemic digital settlement asset firms and a HM Treasury paper summarising the feedback the Government received to its consultation on the future financial services regulatory regime for cryptoassets. Deadline for comments on DP23/4 and the BoE discussion paper: 6 February 2024
(2 Nov 2023) FCA finalised non-handbook guidance (FG23/3) on cryptoasset financial promotions, which provides information on and sets out the FCA’s expectations of the communication and approval of financial promotions for qualifying cryptoassets. | Webpage | Press release

MIDDLE EAST

UAE

(6 Nov 2023) Joint guidance on combating the use of unlicensed virtual asset providers in the United Arab Emirates, issued by the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee
(1 Nov 2023) Distributed Ledger Technology Foundations Regulations 2023, which make provision for the establishment and registration of foundations that facilitate DLT and token issuance in the Abu Dhabi Global Market. The Board of Directors of Abu Dhabi Global Market has also made the related Distributed Ledger Technology Foundations Regulations (Fees) Rules 2023 and Distributed Ledger Technology Foundations Regulations (International Accounting Standards) Rules 2023