Published Apr 8, 2022
By Qredo Team
Ben's Regulatory Radar - March Highlights
Ben Whitby
VP Strategic Partnerships and Regulatory Affairs
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Ben grew up coding and exploring computers, and went on to build the world’s first interest rate swap trading platform in 2001. He later led regulatory teams at Accenture and PwC, before spending eight years with HSBC as a Regulatory Conduct and Financial Crime Specialist — a role that involved writing the bank’s first policy on Bitcoin in 2013.
Welcome to the newest edition of the Regulatory Radar!
This month I share some personal insights and commentary on several of the most interesting things going on in crypto regulation & compliance.
Here are my highlights from March activity:
The White House sets course
The administration of US President Joe Biden unveiled its long-awaited strategy for digital assets in March, with an executive order outlining its expectations for how cryptocurrencies should be regulated, consumers protected from risks in the market, and plans for a national central bank digital currency (CBDC).
The document clearly states the need for a unified regulatory approach to crypto, while calling the industry “an opportunity to reinforce American leadership in the global financial system and at the technological frontier, but also has substantial implications for consumer protection, financial stability, national security, and climate risk.”
“The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate,” it said.
“And, it must play a leading role in international engagement and global governance of digital assets consistent with democratic values and U.S. global competitiveness.”
The clarity from the White House was long anticipated and broadly welcomed by the cryptoasset market, and marks the first time that the US government has set out a firm course for its approach to working with the industry to create a healthy ecosystem in the years to come.
SEC floats CFTC tie up
The US Securities and Exchange Commission and its Chair Gary Gensler have consistently argued for the digital asset market to fall within the agency’s jurisdiction over the past few years, contending that the securities-like features of many cryptos naturally bring the sector within its purview.
However, last week the SEC announced that it was open to working with its sister regulator, the Commodity Futures Trading Commission, to craft a joint approach to regulating the industry.
Gensler said at a conference that he believed a combined approach would be necessary to address “such platforms that might trade both crypto-based security tokens and some commodity tokens.”
Meanwhile, the SEC has also floated a new requirement for firms under its jurisdiction to publish information on cryptocurrencies held with custody providers for accounting purposes.
The agency’s proposal would affect all companies listed in the US which hold cryptoassets on behalf of others, and it also issued guidance warning custodians of the specific technological, legal and regulatory risks stemming from custodying digital assets.
UK goes all in on crypto and plans a national NFT
The UK has attracted criticism from some quarters of the crypto world for a lack of regulatory clarity for the sector, but that could all be about to change after Chancellor Rishi Sunak announced plans to turn the country into a “global cryptoasset hub”.
The government will kick off the strategy with legal recognition for stablecoins, and has plans to issue its own NFT created and managed by the Royal Mint, as well as potential changes to the tax code to accommodate digital assets.
"We want to see the businesses of tomorrow – and the jobs they create - here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term,” Sunak said.
"This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation."
In another more encouraging move in the country, the Financial Conduct Authority also extended its April 1 deadline for a temporary licensing programme for cryptocurrency firms.
The programme was initially scheduled to run only until the end of December 2021, but the regulator has added more time for firms, which are reported to include the likes of UK fintech Revolut, currently in the process to complete their applications.
All the signals point to a change of direction for crypto regulation in the UK, which has attracted criticism from some quarters for scaring off innovative companies,
Rio can now pay taxes using crypto
Qredo takes a bullish view of the potential for Latin America to emerge as a major global crypto hub, and so I was happy to see one of the world’s most iconic cities Rio de Janeiro has announced that residents of the municipality will be able to pay their personal income taxes using digital assets from next year.
Brazil has seen a surge in crypto investment over the last year, and there are reported plans for the national government to implement crypto regulations at some point in the near future.
Back in January, Rio de Janeiro Mayor Eduardo Paes said that the city plans to allocate 1% of its treasury reserves to digital assets, and is seeking to become a hub for the industry within Brazil.
Latin America as a whole has embraced crypto, with multiple friendly regulatory regimes established and El Salvador becoming the first country in the world to make Bitcoin official legal tender.
Korean exchanges get Travel Rule compliance
The US Financial Action Task Force’s Travel Rule is set to become a major issue for virtual asset service providers (VASPs), and South Korea has become one of the first countries to implement compliance with the rule across its domestic industry.
The Travel Rule requires all VASPs to share identifying information — including names, physical addresses, and national ID numbers — for the originators and beneficiaries of digital asset transfers.
The South Korean government had set a deadline of April 1 to bring all local exchanges in line with the regulations.
Among the country’s 4 largest exchanges- Upbit, Bithumb, Coinone, and Korbit- there are 2 distinct systems being used, with concerns raised by some operators about the potential for confusion with clients and international exchanges.
Qredo has already released a Travel Rule solution for the network which considerably reduces the compliance burden for VASPs operating under the regime.
🙋 Are there any aspects of crypto regulation that you'd like me to unpack? A lot of you have asked for more explainer content in this area. Let me know what topics you're curious about!