Global Digital Assets Digest December 2022
08 December 2022
IN THIS EDITION we will cover: |
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UPDATES AND GUIDANCE: INTERNATIONAL BODIES 1. ESMA: Speech by Steffen Kern: Opening statement at ECON hearing 2. BIS: Speech by Pablo Hernández de Cos, Chair of the Basel Committee and Governor of the Bank of Spain 3. HM Treasury/Monetary Authority Singapore: Joint statement on UK and Singapore deepening collaboration in FinTech and strengthen financial cooperation 4. IOSCO: Speech by Tuang Lee, IOSCO Fintech Task Force Chair 5. IOSCO: Speech by Tajinder Singh, Deputy Secretary General: 6. IMF Blog: Africa’s Growing Crypto Market Needs Better Regulations 7. Speech by Mr Steven Maijoor, Executive Director of Supervision of the Netherlands Bank, at the Institutional Digital Assets and Crypto Regulation Symposium 8. FSB: Final report: Developing the Implementation Approach for the Cross-Border Payments Targets 9. FSB: Report: Promoting Global Financial Stability 10. ISDA: Japan Derivatives Forum: Scott O’Malia Opening Remarks 11. European Parliament: MICA and revised WTR to be considered at 13 to 16 February plenary session 12. ECB: Speech By Christine Lagarde, President of the ECB on the digital euro 13. EESC: Opinion on the digital euro |
UPDATES AND GUIDANCE: UK 14. FCA: Speech by Emily Shepperd: From Zeroes to Heroes: How culture in financial services can change for everyone’s benefit 15. House of Commons (Treasury Committee): Written evidence: The crypto-asset industry: Circle Internet Financial LLC 16. UK Finance: Speech by Bob Wigley, Chair of UK Finance at the UK Finance annual dinner 2022 17. Bank of England: Speech by Jon Cunliffe, Deputy Governor, Financial Stability: Reflections on DeFi, digital currencies and regulation 18. Law Commission Digital Assets Consultation Paper: a summary of Ashurst's response 19. House of Lords (Fraud Act 2006 and Digital Fraud Committee): Report: Fighting Fraud: Breaking the Chain 20. DCMS Committee: Inquiry into the future of the NFT market |
UPDATES AND GUIDANCE: EUROPE 21. Germany: BMF publishes Ordinance on requirements on Electronic Securities Registers 22. Belgium: FSMA Communication on cryptoassets |
UPDATES AND GUIDANCE: APAC 23. Singapore: Ongoing cases and disputes 24. Singapore: Responses to Parliamentary Questions in light of cryptoasset turmoil 25. Singapore: Responses to Parliamentary Question on the proposed trial of a digital Singapore dollar 26. Singapore: Responses to Parliamentary Question on prudential treatment of Singapore banks' crypto asset exposure 27. Temasek: Statement and FAQs in light of cryptoasset turmoil 28. MAS Launch of Ubin 29. MAS First Industry Pilot for Digital Asset and Decentralised Finance Goes Live |
UPDATES AND GUIDANCE: AUSTRALIA 30. Australian Law Reform Commission Background Paper on regulatory reform and the emergence of new business models |
UPDATES AND GUIDANCE: NORTH AMERICA 31. CFTC: Testimony at the United States Senate Committee on Agriculture, Nutrition and Forestry 32. OCC: Speech by Acting Comptroller of the Currency, Michael J. Hsu at the Financial Literacy and Education Commission’s Public Meeting “Careful and Cautious with Crypto” 33. Senate Committee on Banking, Housing and Urban Affairs: Written testimonies from regulators 34. Warren, Ocasio-Cortez, Lawmakers: Questions concerning "revolving door" between regulatory agencies and crypto industry 35. Statement by Secretary of the Treasury, Janet L. Yellen, on recent crypto market developments 36. CFTC: Affiliate withdraws CFTC application to offer disintermediated retail crypto derivatives 37. Federal Reserve Bank of New York: Report on first phase of US Wholesale Central Bank Digital Currency (wCBDC) |
PRESS/ARTICLES 38. FT article: Blockchain may have a green future regardless of crypto 39. FT article: UK high street lenders toughen crypto stance on fraud concerns 40. Guardian China circles El Salvador’s economy as country edges toward crypto plunge 41. Arabian Business: Abu Dhabi launches a crypto and blockchain body |
1. ESMA: Opening statement by Steffen Kern at ECON hearingOn 30 November 2022, ESMA published the opening statement by Steffen Kern at the hearing of the European Parliament's Economic and Monetary Affairs Committee on developments in the cryptoassets sector. Mr Kern comments that ESMA has issued warnings to investors on the risks associated with cryptoassets. Mr Kern argues that the segregation of client assets is a crucial safeguard in traditional finance and that the lack of safeguards in place at many entities active in crypto markets was one of the drivers for warnings issued by the ESAs to investors. Key points
2. BIS: Speech by Pablo Hernández de Cos, Chair of the Basel Committee and Governor of the Bank of SpainOn 29 November 2022, BIS issued a speech by Speech by Pablo Hernández de Cos, Chair of the Basel Committee and Governor of the Bank of Spain. The speech covers the potential impact of digitalisation on banks’ business models and the recent turmoil in the cryptoassets sector. Key points
3. HM Treasury/Monetary Authority Singapore: Joint statement on UK and Singapore deepening collaboration in FinTech and strengthen financial cooperationOn 25 November 2022, HM Treasury and the Monetary Authority of Singapore issued a statement on collaboration in Fin Tech. In the statement, the parties confirmed that the UK and Singapore had agreed a Memorandum of Understanding (MoU) on the UK-Singapore FinTech Bridge to remove barriers to fintech trade and boost cooperation. This follows the 7th UK-Singapore Financial Dialogue in Singapore The statement notes that a variety of topics were discussed during the Dialogue, including cryptoassets, with both regulators sharing views on market developments, opportunities, trends, and longer-term expectations. The statement notes that there was also discussion in relation to strengthening rules on consumer protection and developing the regulation of stablecoins. 4. IOSCO: Speech by Tuang Lee, IOSCO Fintech Task Force Chair On 21 November 2022, IOSCO issued a speech given by Tuang Lee, IOSCO Fintech Task Force Chair, on 2 November 2022 at the Singapore Fintech Festival. The speech contained an overview of the remit of IOSCO's Fintech Task Force and also key risks posed by the digital assets sector. The speech stressed the importance of separating technology from its use case, noting that DLT has many applications and benefits beyond cryptocurrencies. Notable points
5. IOSCO: Speech by Tajinder Singh, Deputy Secretary General: IOSCO Targets Crypto-Asset RegulationIn November 2022, IOSCO issued a speech by Tajinder Singh, Deputy Secretary General of IOSCO, on cryptoasset regulation at the World Federation of Exchanges 61st General Assembly & Annual Meeting. The speech referred to IOSCO's Fintech Taskforce and its Crypto-Asset Roadmap for 2022-2023, as well as IOSCO's report into decentralised finance in March 2022. Key points
6. IMF Blog: Africa’s Growing Crypto Market Needs Better RegulationsOn 22 November 2022, an IMF blog was published in relation to the regulation of cryptoassets in Africa, in conjunction with the IMF's period regional outlook on Africa (which also contains an analytical note on digital currency innovations in Africa). Key points
7. Speech by Mr Steven Maijoor, Executive Director of Supervision of the Netherlands Bank, at the Institutional Digital Assets and Crypto Regulation SymposiumOn 17 November 2022, BIS issued a speech by Steven Maijoor, Executive Director of Supervision of the Netherlands Bank, at the Institutional Digital Assets and Crypto Regulation Symposium in London. Notable points
8. FSB: Final report: Developing the Implementation Approach for the Cross-Border Payments TargetsOn 17 November 2022, the FSB issued a report on cross-border payments. In November 2020, the G20 endorsed the roadmap for enhancing cross-border payments developed by the FSB and other international organisations and standard-setting bodies in the form of 19 Building Blocks and related actions to address the four challenges of cross-border payments: high costs, low speed, limited access and limited transparency. In 2021, the G20 Leaders endorsed the Targets Report, which established 11 targets at the global level to provide a common vision for the improvements sought under the Roadmap. The report provides an update on the FSB’s development of this framework, initially set out in an interim report, published in July 2022. 9. ISDA: Japan Derivatives Forum: Scott O’Malia Opening RemarksOn 15 November 2022, ISDA published opening remarks at the Japan Derivatives Forum made by Scott O’Malia. The speech looks at the growth of crypto derivatives, ISDA’s digital regulatory reporting (DRR) initiative and environmental, social and governance (ESG) Key points
10. European Parliament: MICA and revised WTR to be considered at 13 to 16 February plenary sessionOn 14 November 2022, the European Parliament announced it had updated its procedures files in relation to the proposed Regulation on information accompanying transfers of funds and certain cryptoassets, as well as the proposed Regulation on markets in cryptoassets (MiCA). The procedure files suggest that the Parliament will consider the proposed Regulations during its plenary session to be held 13 to 16 February 2023. 11. ECB: Speech By Christine Lagarde, President of the ECB: Digital euro: a common European projectOn 7 November 2022, the European Central Bank issued the transcript of a video address by Christine Lagarde, President of the ECB, in relation to the digital euro. The address covers the following areas: disruptive transformation; designing digital public money; and privacy and legal tender status. Key issues
12. EESC: Opinion: A digital EuroOn 3 November 2022, the European Economic and Social Committee (EESC) published its own-initiative Opinion on the ECB's assessment of the risks and benefits of introducing a digital euro. The ECB is currently exploring and reviewing various design options for a digital euro and will take a final decision on whether to introduce a digital euro. In the Opinion, the EESC notes that many central banks around the world are considering and developing their own digital currencies.Among other things, the EESC:
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Updates and Guidance: UK |
14. FCA: Speech by Emily Shepperd: From Zeroes to Heroes: How culture in financial services can change for everyone’s benefitOn 28 November 2022, the FCA published a speech by Emily Shepperd, Chief Operating Officer and Executive Director of Authorisations, in relation to culture. In the speech, Ms Shepperd notes that the FCA Consumer Duty will encourage firms to analyse the impact of their culture on conduct.. Referring to the cryptoassets sector, Ms Shepperd comments that oversight of entities operating in this sector chiefly consists of AML rules, adding that high FCA standards have meant that few firms have been authorised. She adds that recent FCA cryptosprints revealed a cultural clash between crypto entrepreneurs and regulators about the importance of regulation and its role in financial services. 15. House of Commons (Treasury Committee): Written evidence: The crypto-asset industry: Circle Internet Financial LLCOn 21 November 2022, written evidence from Circle LLC in response to the inquiry on cryptoassets was published. In the response, Circle welcomes initiatives to regulate cryptoassets. Key points
16. UK Finance: Speech by Bob Wigley, Chair of UK Finance at the UK Finance annual dinner 2022In November 2022, UK Finance published a speech by Bob Wigley, Chair of UK Finance, at the UK Finance annual dinner 2022. The speech provided an overview of key regulatory themes, as well as developments in 2022. Mr Wigley argues that that the Government and regulators have been reactive rather than proactive in relation to cryptoassets and calls for the creation of a Digital Tokenisation Taskforce. The Taskforce would include UK Finance, the Investment Association, Association of British Insurers, the Law Society, HM Treasury, the FCA, PRA and key market participants. 17. Bank of England: Speech by Jon Cunliffe, Deputy Governor, Financial Stability: Reflections on DeFi, digital currencies and regulationOn 21 November 2022, the Bank of England issued a speech by Jon Cunliffe, Deputy Governor, providing an overview of the regulation of the digital assets sector and his views on the ongoing turmoil in the cryptoassets sector. Key points
18. Law Commission Digital Assets Consultation Paper: a summary of Ashurst's responseAshurst has published a summary of its response to the Law Commission's July 2022 consultation paper on the legal treatment of digital assets (see our briefing here). The response to the Consultation Paper consists of overarching considerations and observations, as well as direct responses to specific issues and questions raised by the Consultation Paper. Areas covered include the following: statutory reform (including whether to introduce a statutory codification of digital assets as property under the law of England); international harmonisation; co-ordination of digital assets initiatives in the UK; recognising digital assets as "data objects" under the law of England and Wales; and custody of crypto tokens. Ashurst supports a statutory codification of digital assets as property and advises against an overly prescriptive approach. 19. House of Lords (Fraud Act 2006 and Digital Fraud Committee): ReportThe House of Lords has issued a report on digital fraud. Drawing on input from academics, experts, industry leaders and government representatives, the report explores the role digitalisation has played in the fraud chain (the fraud train tracks the development of fraud from the first approach by the fraudster through to the point when a criminal "cashes out"). The report argues that the UK’s position as a digitalised, global financial hub, the enthusiastic adoption of the Faster Payments system and the emergence of cryptoassets has meant an increase in digital fraud. The report identifies ways in which crypto-fraud can be committed, including "rug pull" scams, whereby scammers persuade investors to put money into a new crypto token before disappearing with their money. It also notes that a similar process can be followed during an Initial Coin Offering scam in which the "latest" token is promoted by someone offering an investment that is essentially worthless. Key points made by the report include the following:
20. DCMS Committee: Inquiry into the future of the NFT marketOn 4 November 2022, the DCMS Committee launched an inquiry into the operation, risks, and benefits of NFTs and the wider blockchain. The Committee notes that the NFT regulation in the UK is largely non-existent and that the inquiry into NFTs and the Blockchain is likely to explore whether more regulation is needed, ahead of a Treasury review. Views are sought on the following questions:
The closing date for comments is 6 January 2023. |
21. Belgium: FSMA Communication on plan on crytpoassetsOn 22 November 2022, Belgium's Financial Services and Markets Authority (FSMA) issued a Communication outlining when cryptoassets fall within the scope of the prospectus rules and/or the MiFID conduct of business rules. The Communication comes with a stepwise plan. The Communication outlines the various steps that may aid the classification of cryptoassets, as well as the consequences of a classification. FSMA states that the documents have been published in response to queries it received seeking clarity. 22. Germany: BMF publishes Ordinance on requirements on Electronic Securities RegistersOn October 28, 2022, the Federal Ministry of Finance (Bundesministerium der Finanzen, "BMF") published an Ordinance on requirements of electronic securities registers (Verordnung über An-forderungen an elektronische Wertpapiere, "eWpRV"). The eWpRV specifies the requirements of the Electronic Securities Act (Gesetz über elektronische Wertpapiere, "eWpG"), in particular the general requirements of the establishment and maintenance of electronic securities registers, documentation obligations, participation and inspection conditions and regulations on the types of entries for registrars. |
23. Singapore: Ongoing cases and disputesZipmex On 2 December 2022, it was announced that cryptocurrency exchange Zipmex (which has been undergoing restructuring in Singapore since August) would be getting a $100 million venture capital buyout. According to reports, V Ventures, a Thailand-based venture capital firm and a subsidiary of Thoresen Thai Agencies Pcl, is offering $30 million in cash and the remainder in crypto tokens. A share sale agreement detailing the deal terms was presented, according to a court hearing on 2 December 2022 in Singapore. The purchaser has however not been identified. The crypto received from the deal will be used to gradually unlock Zipmex customers’ frozen wallets. Three Arrows Capital On 2 December 2022, the liquidators for Three Arrows Capital (3AC) managed to seize $35.6 million from the collapsed crypto hedge fund's bank accounts in Singapore, three months after obtaining approval from the Singapore High Court to begin investigating and probing 3AC's assets in the jurisdiction. According to a presentation used in the court hearing, liquidators have also recovered $2.8 million from forced redemptions of investments, as well as an unspecified number of crypto tokens and non-fungible tokens. 24. Singapore: Responses to Parliamentary Questions in light of cryptoasset turmoilOn 30 November 2022, the responses to parliamentary questions were published in relation to the impact of the turmoil in the cryptoassets sector on regulatory measures and the Singaporean financial system. The responses were provided by Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance and Deputy Chairman of MAS, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS. Notable points
25. Singapore: Responses to Parliamentary Question on the proposed trial of a digital Singapore dollarOn 28 November 2022, the responses to parliamentary questions were published in relation to the proposed trial of a digital Singapore dollar. The responses were provided by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS. Notable points
26. Singapore: Responses to Parliamentary Question on prudential treatment of Singapore banks' crypto asset exposure On 28 November 2022, the responses to parliamentary questions were published in relation to: the MAS' requirements as to the prudential treatment of Singapore banks’ crypto asset exposure; and the risk-weighting requirements applicable to crypto asset exposures in assessing Singapore banks’ capital adequacy. The responses were provided by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS. Notable points
27. Temasek: Statement and FAQs in light of cryptoasset turmoilOn 17 November 2022, Singaporean state holding company, Temasek Holdings, published a webpage in relation to the impact of the collapse of a cryptocurrency exchange. Temasek later published frequently asked questions in light of additional queries. The webpage states that Temasek does not have direct exposure to cryptocurrencies and also details Temasek's approach to due diligence and its risk return framework. Whilst noting the impact of the ongoing turmoil, Temasek stresses the transformative potential of blockchain applications and decentralised technologies. 28. MAS Launch of UbinOn 3 November 2022, the MAS announced the launch of Ubin+, an expanded collaboration with international partners on cross-border foreign exchange (FX) settlement using wholesale central bank digital currency ("CBDC"). While the MAS has assessed that there is no urgent need for a retail CBDC in Singapore at this juncture, it has expressed its hopes of strengthening the nation's capabilities to use digital currency-based infrastructure for cross-border transactions. As part of Ubin+, therefore, the following projects will be undertaken with international partners:
29. MAS First Industry Pilot for Digital Asset and Decentralised Finance Goes LiveOn 2 November 2022, the MAS announced that the first industry pilot under the MAS' Project Guardian (that explores potential decentralised finance (DeFi) applications in wholesale funding markets) has completed its first live trades. Foreign exchange and government bond transactions against liquidity pools comprising of tokenised Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY) and Singapore Dollar (SGD) were conducted. Notably, a live cross-currency transaction involving tokenised JPY and SGD took place successfully. A simulated exercise involving the buying and selling of tokenised government bonds was also conducted. More industry pilots have been launched to test the application of asset tokenisation and DeFi across a broader range of use cases in the financial sector. In particular, the MAS is launching two new industry pilots – one in trade finance and another in wealth management. |
30. AISC: Suspension of financial services licence of cryptoassets firmOn 15 November 2022, the Australian Securities & Investments Commission (ASIC) announced that it had suspended the Australian financial services licence of FTX Australia Pty Ltd until 15 May 2023 after it was placed into voluntary administration on 11 November 2022. The statement confirms that FTX Australia can continue to provide limited financial services that relate to the termination of existing derivatives with clients until 19 December 2022. FTX Australia’s licence had permitted it to deal in, make a market for and provide general advice relating to derivatives and foreign exchange contracts to retail and wholesale clients. |
31. CFTC: Testimony at the United States Senate Committee on Agriculture, Nutrition and ForestryOn 1 December 2022, the United States Senate Committee on Agriculture, Nutrition and Forestry published the testimony of Rostin Behnam, Chairman Commodity Futures Trading Commission, at a hearing. Key points made in the speech include the following:
32. OCC: Acting Comptroller of the Currency, Michael J. Hsu, Remarks at the Financial Literacy and Education Commission’s Public Meeting “Careful and Cautious with Crypto”On 17 November 2022, the OCC published a speech given by Acting Comptroller of the Currency, Michael J. Hsu, at the Financial Literacy and Education Commission’s Public Meeting urging consumers to exercise caution in relation to cryptoassets. In the speech, Mr Hsu notes that the rise in cryptoassets has been driven by retail customers and facilitated by a robust online community, adding that community pressure to “holdl,” to “buy the dip,” to “not give in to FUD” can make rational decisions difficult. He comments that the OCC adopted a “careful and cautious” approach to crypto activities by national banks and adds that this helped lessen the risk of contagion from crypto to the banking system. 33. Senate Committee on Banking, Housing and Urban Affairs: Written testimonies from regulatorsOn 17 November 2022, Senate Committee on Banking, Housing and Urban Affairs published the written testimonies of officials at various US regulators for the Committee Hearing "Oversight of Financial Regulators: A Strong Banking and Credit Union System for Main Street".
34. Warren, Ocasio-Cortez, Lawmakers: Questions concerning "revolving door" between regulatory agencies and crypto industryThis statement reports that U.S. Senators Elizabeth Warren and Sheldon Whitehouse and U.S. Representatives Alexandria Ocasio-Cortez, Jesús “Chuy” García, and Rashida Tlaib have sent letters to several US regulatory authorities (including the SEC and the CFTC) seeking information about "the revolving door between financial regulatory agencies and the cryptocurrency industry". The statement notes that over 200 government officials have moved between public service and crypto firms in recent years. 35. Statement by Secretary of the Treasury, Janet L. Yellen on recent crypto market developmentsOn 16 November 2022, a statement by Secretary of the Treasury, Janet L. Yellen, in relation to cryptoassets sector was published. The statement calls for more effective oversight of the cryptocurrency markets, adding that the Treasury Department has been working with its regulatory partners to identify risks in cryptoassets. The statement notes that risks identified include comingling of customer assets, lack of transparency, and conflicts of interest. Whilst noting that the spill over from the current turmoil has been limited, the statement warns against complacence, arguing that a recent report by the Financial Stability Oversight Council warned that further interconnections of the traditional financial system and crypto markets could raise broader financial stability concerns. 36. CFTC: Affiliate withdraws CFTC application to offer disintermediated retail crypto derivativesOn 14 November 2022, the CFTC confirmed that LedgerXLLC, d/b/a FTX US Derivatives had withdrawn its application with the CFTC to offer clearing of margined crypto derivatives products directly to participants (as opposed to clearing through a futures commission merchant). The request had been originally submitted in December 2021. 37. Federal Reserve Bank: Report on first phase of US Wholesale Central Bank Digital Currency (wCBDC)In November 2022, the Federal Reserve Bank of New York issued a report on the first phase of Project Cedar, a multi-phase research initiative for a theoretical US Wholesale Central Bank Digital Currency (wCBDC) led by the New York Innovation Center (NYIC). The NYIC was established in partnership with the Bank for International Settlements Innovation Hub (BISIH) and looks into central bank-related opportunities through technical research, experimentation, and prototyping, to drive advancements in central banking and enhance the functioning of the global financial system. Project Cedar Phase I involved the simulation of a foreign exchange spot trade and introduced a wholesale central bank digital currency prototype to test whether using blockchain technology could improve speed, cost, and access to cross-border wholesale payments. |
No updates in this month's edition. |
38. FT article: Blockchain may have a green future regardless of cryptoThis article in the Financial Times argues that despite the recent turmoil in the cryptoassets sector, the benefits of underlying technology should not be overlooked. The article cites initiatives such as Project Genesis - an initiative involving Goldman Sachs, the Hong Kong Monetary Authority and the Banks of International Settlements - involving the use blockchain and digital tokenisation to assist investors purchasing climate related bonds monitor carbon credits. The article argues that many stakeholders consider initiatives such as Project Genesis as an example of deploying blockchain to solve real world problems and revolutionising capital markets. 39. FT article: UK high street lenders toughen crypto stance on fraud concernsThis article in the Financial Times states that UK high street lenders are toughening their stance in relation to cryptocurrencies, adding that a number of taken action to limit customers from purchasing cryptocurrencies and restricting payments to exchanges in some cases. 40. Guardian China circles El Salvador’s economy as country edges toward crypto plungeThis article published in the Guardian provides an update on El Salvador and its decision to adopt Bitcoin as legal tender. The article notes that in January 2023, El Salvador will have to pay $688 million as part of a Eurobond amortization and notes that earlier in 2022, President Bukele had suggested that the country would issue bitcoin-denominated bonds to pay off national debts. 41. Arabian Business: Abu Dhabi launches a crypto and blockchain bodyThis article reports that Abu Dhabi has launched a crypto and blockhain association called Middle East, Africa & Asia & Blockchain Association (MEAACBA). The body, a not-for-profit organisation, is supported by the Abu Dhabi Global market (ADGM). |
Contributors: Qiqing Goh and Gréta Muller and Cornelius Hille.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.