Global Digital Assets Digest: January 2023

1. EBA: Letter from the European Commission concerning the call for advice to the EBA regarding delegated acts under MiCA

On 4 January 2023, the EBA published a letter it received from the European Commission and accompanying call for advice seeking technical advice on certain criteria for classifying asset-referenced tokens and e-money tokens as significant, as well as a delegated act on supervisory fees to be charged by EBA to the issuers of significant asset-referenced tokens or e-money tokens. The request for technical advice is provisional since MiCA has not yet entered into force. The EBA states it may amend the technical advice should the text of MICA published in the Official Journal differ from the text on which the provisional technical advice is based.

2. European Economic and Social Committee: Challenges and opportunities in relation to cryptoassets (own-initiative opinion)

On 21 December 2022, the European Economic and Social Committee issued its own initiative opinion on cryptoassets. The Committee states that the rapid growth of cryptoassets has been marked by poor operational set-up, weak cyber risk management and weak governance frameworks. It refers to security concerns and operational resilience concerns, adding that EU DORA (see our briefing here) should address some of the concerns in this regard. It also notes concentration risk in the cryptoassets sector, adding that trading is dominated by a small number of entities. The EESC also outlines its concerns in relation to misleading information.

Notable points

• EESC strongly supports MiCA.
• The EESC strongly recommends that authorities abide by the "same activity, same risks, same rules" principle.
• A regulatory framework for cryptoassets needs to be consistent across jurisdictions and not just within the EU. Standards based on a level playing field should be set within and outside the EU to protect customers.
• EESC considers that benefits of blockchain range from real-time transactions allowing risk reduction and better capital management to improved regulatory effectiveness (e.g. the use of blockchain for Know-your-Customer or anti-money-laundering checks).

3. FSB: Report on non-bank financial intermediation

On 20 December 2022, the FSB issued its report on non-bank financial intermediation (NFBI). The report contains a section on innovation. The report states that innovations related to cryptoasset markets are being covered by other FSB work streams. It notes that recent turmoil in the cryptoassets sector have raised issues concerning business models, conduct issues, and financial stability implications.

The report notes some examples of NBFI entities in cryptoassets (such as equity/venture capital investments in cryptoasset related firms; high-return saving accounts used by funds facilitating credit in DeFi platforms; and traditional brokerage firms facilitating access to cryptoasset markets in their product offerings through non broker-dealer affiliates/subsidiaries).

The report also contains discussion of the practice of lending collateralised with cryptoassets and cryptoasset-based exchange-traded products.

The report also includes a discussion of BigTech engagement in novel forms of credit intermediation.

4. BCBS: Finalised standard in relation to prudential treatment of cryptoasset exposures

On 16 December 2022, the BCBS published its final standard on the prudential treatment of banks' cryptoasset exposures. This follows an initial consultation (see our briefing here), followed by a second consultation in June 2022 (see our briefing here). The prudential standard will be implemented by 1 January 2025 and takes the form of a new chapter of the consolidated Basel Framework (SCO60: Cryptoasset exposures). The BCBS also sets out stakeholders’ feedback on the proposed standard and market developments in cryptoassets, as well as changes to the standard. The Committee states that it will continue to collaborate with other standard-setting bodies and the FSB to ensure a consistent global regulatory treatment of stablecoins.

5. BCBS: Basel Committee work programme and strategic priorities for 2023/24

On 16 December 2022, the BCBS issued its work programme and strategic priorities for 2023/24. In respect of digitalisation of finance, the BCBS confirms that it will continue to review bank-related developments in cryptoasset markets, including the role of banks as stablecoin issuers, custodians of cryptoassets, and broader potential channels of interconnections with the cryptoasset ecosystem. The BCBS will also look at the implementation of its prudential treatment of banks' cryptoasset exposures. It also confirms that it plans to review, by the end of 2023, the treatment of permissionless blockchains.

6. OECD: G20/OECD High-Level Principles on Financial Consumer Protection 2022

On 12 December 2022, the OECD published High-Level Principles on Financial Consumer Protection 2022. This follows a public consultation. The Principles were originally developed by the G20/OECD Task Force on Financial Consumer Protection (Task Force) in response to the call from G20 Leaders to enhance financial consumer protection. The Principles are intended to serve as the primary international standard for effective and comprehensive financial consumer protection frameworks. Two new Principles to cover "Access and Inclusion" and "Quality Financial Products", have been added. A cross-cutting theme on digitalisation has been added and this covers how consumers increasingly interact with digital financial products and services including cryptoassets.

7. Council of the EU: Letter from the Commission on MiCA and revised WTR

On 12 December 2022, the Council of the EU published a letter from the European Commission in relation to MiCA and the revised Wire Transfer Regulation. The letter refers to recent turmoil in the cryptoassets sector and argues that this underscores the importance of finalising the two pieces of EU legislation. It adds that the legislation should enter into force latest by Spring 2023.

8. European Parliament (ECON): Minutes: 10th Meeting of the Fintech Working Group 29 November 2022

On 12 December 2022, the Economic and Committee of the European Parliament published minutes in relation to the 10th Meeting of the Fintech Working Group held in November 2022. MEP Stasys Jakeliūnas, Chair of the FinTech Working Group, with the meeting also involving contributions from the EBA.

Issues covered include the following:

•  retail CBDCs and privately issued cryptoassets;
• the activities carried out by EBA in relation to cryptoassets and the digital euro project (monitoring market developments, and contributing to international work streams and to EU discussions on the digital euro); and
• Europe's concerning the future of banking, payments market and digitalisation of financial services.
  During the Q&A session, the adequacy of MiCA regulation in preventing future collapses of crypto exchanges was discussed.

9. EPC: Report: 2022 Payment Threats and Fraud Trends Report

On 8 December 2022, the EPC issued its annual update of the “Payment Threats and Fraud Trends Report”. The report summarises the latest trends in security threats impacting payments, how these could lead to payment fraud and how to reduce related risks. Areas covered include social engineering and phishing, malware, Advanced Persistent Threats (APTs), (Distributed) Denial of Service ((D)DoS), botnets and monetisation channels. For each threat, an analysis is made on the impact and context, and suggested controls and mitigations are described.

10. ECB: Speech by Fabio Panetta: Crypto dominos: the bursting crypto bubbles and the destiny of digital finance

On 7 December 2022, the ECB published a speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Insight Summit held at the London Business School. The speech provides an overview of the turmoil in the cryptoassets sector, beginning with the crash of TerraUSD, and the collapse of cryptoassets exchanges. Mr Panetta call for global for regulation to: protect consumers from the risks of cryptoassets; define minimum requirements for crypto firms’ risk management and corporate governance; and reduce the run and contagion risks of stablecoins. He also called for cryptoassets to be taxed according to their social costs.

11. ECB: Letter from Fabio Panetta to Irene Tinagli on technical onboarding package for digital euro prototyping

On 7 December 2022, the ECB issued a number of documents in relation to technical onboarding package for digital euro prototyping. The aim of the exercise is to allow market participants to develop front-end prototypes that can be integrated with the back-end infrastructure developed by the Eurosystem.

The documents were provided to the five companies that were selected, following the public call for expression of interest in April 2022, to carry out the experimental work. The companies each worked on a specific use case (peer-to-peer, point of sale initiated by the payer, point of sale initiated by the payee, ecommerce and offline payments). The ECB also published a letter it had issued to Irene Tinagli, Chair of the Committee on Economic and Monetary Affairs at the European Parliament. The ECB states that the prototyping experiments aim to increase the Eurosystem’s knowledge surrounding the technological possibilities for the digital euro. It confirms that Christian Schäfer will lead the work on the digital euro rulebook, which is expected to commence in January 2023.

12. European Commission: Speech by Commissioner McGuinness

On 5 December 2022, the European Commission issued a speech by European Commissioner, Mairead McGuiness, at EU Delegation in London on the EU Cryptoasset Strategy. The speech notes the huge potential for technology underpinning crypto, adding that distributed ledger technology could make trading and settlement of securities more efficient and that tokenised electronic money could make payments more efficient and increase competition. She also refers to projects at EU level involving both fintechs and longer-established companies. She refers to EU Digital Finance Strategy (see our briefing here) as well as the EU DLT pilot regime, which will come into application in March 2023 (see our briefing here). She argues that cryptoassets required global regulation, adding that the EU supports international initiatives such as those spearheaded by the FSB and the Basel Committee on Banking Supervision.

13. EU DLT Pilot Regime: Documents published

In December 2022, ESMA published a Q&A on the implementation of EU DLT Pilot Regime. The DLT Pilot Regime is applicable from 23 March 2023. The Q&A covers the application of the EU DLT Pilot Regime with respect to regulatory data reporting, trading and settlement.

In December 2022, ESMA published its Draft Final Report including guidelines on standard forms, formats and templates to apply for permission to operate a DLT market infrastructure. Key features of the guidelines include templates to be used by market participants to apply for specific permission to operate any type of DLT market infrastructure; and templates to be used for DLT market infrastructures to request limited exemptions from specific requirements under MiFIR, MiFID II or CSDR, provided that they comply with certain conditions. The guidelines will be published on the ESMA website in the EU official languages in the coming weeks. The Guidelines will enter into force on 23 March 2023.

14. Bank of England: Minutes of UK Money Markets Committee meeting – October 2022

On 22 December 2022, the Bank of England published minutes of the UK Money Markets Committee meeting held in October 2022. The meeting included a discussion on the RTGS Renewal Programme. It was noted that the ECB’s decision to delay its ISO 20022 transition would impact the Bank of England's own RTGS Renewal programme. It was also noted that discussions were ongoing as to what, if any, revisions to the timeline would be needed.

15. HM Treasury: Report: Financial Inclusion Report 2021-22

On 19 December 2022, HM Treasury issued the fourth annual report on financial inclusion. The report contains a foreword by Andrew Griffiths MP, Economic Secretary & City Minister. The report provides an overview of progress made in terms of ensuring access to useful and affordable financial services and refers to the introduction of the Financial Services and Markets Bill 2022-23 (see our briefing here). The report states that Fintech firms provide a number of benefits to consumers, including those who may be financially excluded, by providing them with greater choice and enabling them to access financial services in new ways. The report notes that HM Treasury and the Bank of England will be issuing a consultation on the case for a UK CBDC and that the consultation will include consideration of the potential inclusion implications and objectives of any UK CBDC.

16. House of Commons (Treasury Committee): Written evidence: The cryptoasset industry

On 14 December 2022, the Treasury Committee of the House of Commons published a transcript of written evidence in relation to its inquiry on cryptoassets. The witnesses included representatives from the Financial Services Consumer Panel, Payment Systems Regulator, and the FCA. Matters discussed include the following topics: consumers' awareness of the risks involved in engaging in borrowing and lending of cryptoassets; available consumer protection; the impact of the collapse of cryptoasset exchanges on the sector; how bringing cryptoassets within the financial promotions regime will enhance consumer protection; nature of NFTs and regulation; whether the Government's views on cryptoassets are aligned with that of the FCA; and whether greater regulation of cryptoassets will create a "halo effect".

17. FCA/CMA/ICO/Ofcom: Call for input: Digital Regulation Cooperation Forum (DRCF) workplan 2023 to 2024

On 7 December 2022, the Digital Regulation Cooperation Forum published a call for input in relation to its workplan. The Digital Regulation Cooperation Forum (DRCF) brings four UK regulators (CMA, Ofcom, ICO and the FCA) together to address challenges posed by digital services and technologies. The call for input is eliciting views from stakeholders about issues that the DRCF should take into consideration as it develops its plan of work for 2023 to 2024.

Views are sought on whether:

• there are any policy interactions or technologies the DRCF should take into consideration as it develops its workplan for 2023/24; and
• there any particular stakeholder groups (e.g. end users such as vulnerable consumers, children, businesses) that the DRCF should be particularly mindful of when prioritising areas of focus for the DRCF.

18. HM Treasury: Policy paper: Accelerated Settlement Taskforce – Terms of Reference

On 9 December 2022, HM Treasury issued a policy paper containing terms of reference in relation to the Taskforce on Accelerated Settlement. The Government notes that the settlement period has shortened in recent decades, in line with the capabilities of modern technology and that the most common standard at present is "T+2" (this requires most trades to be settled two days after trade date, with some exceptions). It notes that there is some discussion as to whether a further shortening to "same-day" settlement is possible or desirable in the future (potentially with the aid of new innovations such as distributed ledger technology). The Chair of the taskforce is to provide an interim public report on the taskforce’s initial findings by December 2023.

News of this development was published alongside details of other plans in relation to technology and innovation in a statement provided by Chancellor of the Exchequer, Jeremy Hunt, covering the future UK financial regulatory framework (the Edinburgh reforms).

19. Bank of England: Annual report on the Bank of England’s supervision of financial market infrastructures

In December 2022, the Bank of England issued its annual report on its supervision of financial market infrastructures. The report refers to the importance of the domestic and international regulatory frameworks keeping pace with an ever changing payments landscape. It refers to the entry of non-bank payment service providers with varied business models and innovative technology. The report states that the formal recognition of the Sterling Fnality Payment System by HM Treasury is the first recognition of a payment system that will enable wholesale payments using Distributed Ledger Technology. The report confirms that the Bank is working with HMT and the FCA to design an FMI Sandbox, expected to be up and running by the end of 2023. It states that the Sandbox will initially explore the application of new technologies such as DLT to securities settlement activity.

20. Germany: Speech by Joachim Wuermeling on the digital Bundesbank and its technical platform

On 8 December 2022, a speech given by Joachim Wuermeling, member of the Board of Managing Directors of Deutsche Bundesbank, was published. In the speech, Mr Wuermeling presented the three visions of the digital Bundesbank: digital products; development of analysis capability; and fully digitalized processes. He emphasized that the prerequisite for the implementation of these visions are cloud services. For this purpose, Deutsche Bundesbank started a project called "Journey to Cloud", which aims to establish a hybrid cloud architecture of public cloud services and private cloud technologies.

21. Germany: Position paper on the digital euro of the German Banking Industry Committee

On 9 December 2022, the German Banking Industry Committee (Die Deutsche Kreditwirtschaft, "DK") published a position paper on the digital euro. In the paper, DK highlights the key issues and risks to the banking industry and real economy from introducing a digital euro and presents appropriate options for its design.

22. Hong Kong Statement on virtual asset arrangements claiming to offer returns to investors

In December 2022, Hong Kong's Securities and Future's Commission issued a statement on virtual asset arrangements claiming to offer returns to investors. Investors are reminded of the risks associated with virtual asset (VA) platforms offering VA “deposits”, “savings”, “earnings” or “staking” services (VA Arrangements) to investors in Hong Kong. The statement refers to legal requirements for firms offering VA Arrangements to investors in Hong Kong. Investors are reminded of the risk of experiencing significant loss, especially in the event of fraud or collapse of a VA platform.

23. Department of Treasury: Modernising Australia's financial system

On 14 December 2022, the Department of Treasury issued a press release detailing its plans for 2023. Among other things, the press release confirms that the next steps in the Australian government’s ongoing "token mapping" work will include the publication of a consultation paper in early 2023 concerning the types of digital assets to be regulated by financial services laws, and the development of appropriate custody and licensing settings. It also confirms that the government will consult on a custody and licensing framework in 2023 before introducing legislation.

24. Joint Statement by US agencies concerning cryptoasset risks to banking organisations

On 3 January 2023, the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a statement highlighting key risks for banking organizations associated with cryptoassets and the cryptoasset sector. The refers to the ongoing turmoil and adds that the agencies are accordingly taking a careful and cautious approach related to current or proposed cryptoasset-related activities and exposures at each banking organisation.

The statement confirms that the agencies continue to assess whether or how current and proposed cryptoasset-related activities by banking organizations can be carried out in a way that is safe and sound, legally permissible, and in compliance with applicable laws and regulations.

25. CFTC: Civil proceedings in relation to collapse of a cryptoasset exchange

On 21 December 2022, the CFTC announced that it had filed fraud charges against Caroline Ellison, Alameda CEO, and Gary Wang, FTX Co-Founder, in an amended complaint filed in the U.S. District Court for the Southern District of New York. The CFTC initially filed a fraud action on 13 December 2022 against Samuel Bankman-Fried, FTX Trading Ltd, and Alameda Research LLC.

The amended complaint charges defendants with engaging in a fraudulent scheme. The amended complaint also alleges that Alameda was directed to use billions of dollars of FTX funds, including FTX customer funds, to trade on other digital asset exchanges and to fund a number of high-risk digital asset industry investments. It is further alleged that deceptive statements were made in relation to the supposed separation between the operations of Alameda and FTX.

26. SEC: Guidance on disclosures in relation to cryptoasset exposures

The SEC has issued guidance to companies in relation to cryptoasset exposures. Companies may have disclosure obligations under the federal securities laws related to the direct or indirect impact that these events and collateral events have had or may have on their business. The Division of Corporation Finance believes that companies should evaluate their disclosures with a view towards providing investors with specific, tailored disclosure about market events and conditions, the company’s situation in relation to those events and conditions, and the potential impact on investors. Companies with ongoing reporting obligations should consider whether their existing disclosures should be updated. The guidance also includes a sample letter that the SEC is might send to companies.

27. Financial Stability Oversight Council Releases 2022 Annual Report

On 16 December 2022, the Financial Stability Oversight Council (Council) published its annual report. The Council was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and is charged with a number of responsibilities. The report provides an overview of financial market developments and describes potential emerging threats to US financial stability. The report refers to the Council’s Report on Digital Asset Financial Stability Risks and Regulation, published in October 2022, which argued that cryptoasset activities could pose risks to the stability of the U.S. (see Global Digital Assets Digest: November 2022 edition).

The report identifies three gaps in the regulation of cryptoasset activities in the United States and outlines proposals in relation to these:

• Congress should pass legislation that provides for explicit rulemaking authority for federal financial regulators over the spot market for cryptoassets that are not securities. The rulemaking authority should not interfere with or weaken market regulators’ current jurisdictional remits.
• The Council recommends continued coordination, legislation addressing the risks posed by stablecoins. Legislation should be considered relating to regulators’ authorities to have visibility into and supervise the activities of all affiliates and subsidiaries of cryptoasset entities.
• Financial stability and investor protection risks may arise from cryptoasset trading platforms offering retail investor direct access to markets by vertically integrating the services provided by intermediaries (e.g. broker-dealers or futures commission merchants). Member agencies should assess the impact of potential vertical integration by cryptoasset firms.

28. New York State Department of Financial Service: Guidance for Covered Institutions’ Virtual Currency

On 15 December 2022, the New York State Department of Financial Services issued guidance to all New York banking organizations, as well as all branches and agencies of foreign banking organizations licensed by the Department (together, “Covered Institutions”), to convey the Department’s expectations for Covered Institutions that wish to engage in virtual currency-related activity.

The guidance is in effect as of its release date and applies to all Covered Institutions for all virtual currency-related activities undertaken as of that release date or to be undertaken going forward.

29. U.S. Senators: Bipartisan legislation to crack down on cryptocurrency money laundering, financing of terrorists and rogue nations

On 14 December 2022, U.S. Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.) introduced the Digital Asset Anti-Money Laundering Act of 2022, bipartisan legislation that would mitigate the risks that cryptocurrency and other digital assets pose to the United States’s national security by closing loopholes in the existing anti-money laundering and countering of the financing of terrorism (AML/CFT) framework.

The Digital Asset Anti-Money Laundering Act would:

• Extend Bank Secrecy Act (BSA) responsibilities, including Know-Your-Customer requirements, to digital asset wallet providers, miners, validators, and other network participants that may act to validate, secure, or facilitate digital asset transactions by directing FinCEN to designate these actors as money service businesses (MSBs).
• Address a major gap with respect to “unhosted” digital wallets – which allow individuals to bypass AML and sanctions checks – by directing FinCEN to finalize and implement its December 2020 proposed rule, which would require banks and MSBs to verify customer and counterparty identities, keep records, and file reports in relation to certain digital asset transactions involving unhosted wallets or wallets hosted in non-BSA compliant jurisdictions.
• Prohibit financial institutions from using or transacting with digital asset mixers and other anonymity-enhancing technologies and from handling, using, or transacting with digital assets that have been anonymized using these technologies.
• Strengthen enforcement of BSA compliance by directing the Treasury Department to establish an AML/CFT compliance examination and review process for MSBs and directing the SEC and CFTC to establish AML/CFT compliance examination and review processes for the entities regulated.
• Mitigate the illicit finance risks of digital asset ATMs by directing FinCEN to ensure that digital asset ATM owners and administrators regularly submit and update the physical addresses of the kiosks they own or operate and verify customer identity.

30. United States House of Representatives Committee on Financial Services: Hearing on the collapse of an exchange

On 13 December 2022, the House Financial Services Committee held a bipartisan hearing to investigate the events surrounding the collapse of a digital asset trading platform. This was led by Ranking Member of the House Financial Services Committee, Congressman Patrick McHenry (R-NC), and the Chairwoman of the House Financial Services Committee, Congresswoman Maxine Waters (D-CA). Committee Members questioned current FTX CEO John Ray and the hearing looked into use of customer assets, risk management failures, investigations and lawsuits and regulatory structure.

31. United States Senate Committee on Banking, Housing, and Urban Affairs: Committee hearing on cryptocrash - Opening statements

On 14 December 2022, the Committee on Banking, Housing, and Urban Affairs published opening statements in respect of a hearing it conducted in relation to the turmoil in the cryptoassets sector.

In his opening statement at the U.S. Senate Banking Committee hearing, Ranking Member Pat Toomey (R-Pa.) stressed the need to distinguish between an individual’s misconduct and lawful and innovative cryptocurrencies. He also argued that the "complete indifference to an appropriate regulatory regime by both Congress and the SEC" may have been a contributory factor to recent high profile scandals. He stated that any regulatory framework should start with stablecoins, and he calls for Congress to determine the criteria for regulating the issuance of digital assets.

The Senate Committee also published an opening statement by Sherrod Brown.

Key points

• Stablecoins are tools for speculation.
• Parallels can be observed in the championing of poorly understood exotic financial products in the lead up to the 2008 financial crisis and the current situation. Objects that things behave like securities, commodities, or banking products need appropriate supervision and regulation.
• Cryptoassets sector can enable financial crime and, in some cases, undermine national security.
• The focus should be on protecting consumers and the financial system from unregulated crypto products. An appropriate regulatory framework would consider prevention of conflicts of interests at cryptoplatforms performing multiple functions, as well as an appropriate disclosure framework for consumers.

32. SEC: SBF charged with violation of securities law

On 13 December 2022, the Securities and Exchange Commission announced that it was charging Samuel Bankman-Fried with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s complaint seeks injunctions against future securities law violations; an injunction that prohibits Bankman-Fried from participating in the issuance, purchase, offer, or sale of any securities, except for his own personal account; disgorgement of gains; a civil penalty; and an officer and director bar. The complaint alleges fraud was carried out to conceal from investors the undisclosed diversion of customers’ funds to a privately-held crypto hedge fund; and undisclosed special treatment afforded to the hedge fund on the FTX platform, including providing a virtually unlimited “line of credit” funded by the platform’s customers.

33. Department of Justice: Indictment in relation to collapse of an exchange

On 13 December 2022 a statement was issued confirming that Damian Williams, the United States Attorney for the Southern District of New York; Merrick B. Garland, the United States Attorney General; and Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI) had announced an indictment charging Samuel Bankman-Fried with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to defraud the Federal Election Commission and commit campaign finance violations. It was confirmed that the case was being handled by the Office’s Securities and Commodities Fraud Task Force.

34. OCC: Semi-annual risk perspective

On 8 December 2022, the Office of the Comptroller of the Currency (OCC) issued its semi-annual risk perspective. This sets out the key issues facing the federal banking system.

Among other topics, the report contains a discussion of OCC’s approach to cryptoassets and cites reasons for the OCC's cautious approach cryptoasset products, services, and activities: high volatility among cryptoassets; high-risk lending and leverage within cryptoasset markets; high interconnectedness and concentration within the crypto industry; and a lack of consistent or comprehensive regulation for certain cryptoasset entities. It notes that cryptoasset products and services may share some risks with traditional products and services. It refers to the recent turmoil and argues that the risk management practices of crypto industry lack maturity, with market participants seeming unprepared for stresses. It also argues that governance practices are not yet robust and that scalability and efficiencies yet to be obtained.

35. SEC Releases Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets

On 8 December 2022, the Division of Corporation Finance of the Securities and Exchange Commission posted a sample letter to companies regarding recent developments in cryptoasset markets. The letter contains sample comments that the Division may issue to companies depending on their particular facts and circumstances. The Division urges companies to take these sample comments into consideration as they prepare disclosure documents that may not typically be subject to review by the Division before their use, such as automatically effective registration statements and prospectus supplements for takedowns from existing shelf registration statements.

No updates in this month's edition.

36. FT: Caveat emptor does not apply to crypto

This FT article is an Opinion piece by Fabio Panetta, member of the executive board of the ECB. In the piece, Mr Panetta argues that trading in unbacked digital assets should be treated by like gambling. The piece looks back at turmoil in the cryptoassets sector and argues for guardrails to address regulatory gaps and arbitrage. The article calls for the FSB's recommendations on the regulation and oversight of cryptoasset activities and markets to be implemented (see Global Digital Assets Digest: November 2022 edition).