Published Nov 2, 2022
By Qredo Team
Ben’s Regulatory Radar – October Highlights
Ben Whitby
VP Strategic Partnerships and Regulatory Affairs
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 latest 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 October’s activity.
Sunak Returns
The narrative around the dramatic shifts in UK politics last month mostly centered around the country’s debt and currency, but the resignation of Liz Truss and her replacement by former chancellor Rishi Sunak as Prime Minister was welcomed in the crypto world.
As UK finance chief, Sunak backed legislation to make the country a hub for cryptoasset innovation, and his unexpected sudden ascension to Prime Minister has been accompanied by a raft of new crypto rules he previously set in motion.
In October, Parliament passed into law a bill which recognizes digital assets as regulated financial instruments, with proposals to bring the sector into the fold of the current regulatory framework.
"The substance here is to treat them [crypto] like other forms of financial assets and not to prefer them, but also to bring them within the scope of regulation for the first time," Andrew Griffith, the financial services and city minister, said during the parliamentary meeting.
Then, in a subsequent committee hearing, lawmakers agreed on a framework of rules governing stablecoins, with Griffith saying that the Sunak government wanted to “tentatively seize” the opportunities presented by crypto.
The developments were welcomed by the country’s crypto industry, with market participants voicing support for the progress made in regulating the sector after years of uncertainty which some say has prompted firms to set up shop in other, more welcoming jurisdictions.
Hong Kong Opens Up
While the UK has attracted attention from the crypto community for recent developments, over in Hong Kong there are signs that the city’s once vibrant industry may have some cause for optimism.
Hong Kong’s digital asset market, once one of the largest in the world, has lost momentum as a combination of the city’s tight coronavirus restrictions and a regulatory crackdown took the wind out of its sails.
However, with the territory now looking to recover from the long hit dealt by the pandemic, Hong Kong’s Financial Services and Treasury Bureau has issued a policy statement on virtual assets saying it wants to work more closely with firms in the market.
That position, published ahead of the flagship Hong Kong FinTech Week, marks a significant change of direction and offers a glimpse into how the local sector could be revived.
In addition to considering allowing retail involvement in crypto trading, the regulators are also reviewing the new VASP licensing regime as part of proposed amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
CFTC : Same Rules Still Apply
The US Commodity Futures Trading Commission has been vocal about why it believes it is the right regulator to have oversight of large portions of the crypto market.
Given the uncertainty about exactly how crypto should or already can be regulated in the US, the CFTC and Securities and Exchange Commission have engaged in a healthy public debate about which parts of crypto should fall under their purview.
While SEC chair Gary Gensler has recently said he believes the CFTC should be given more authority to handle stablecoins, the regulator’s commissioner Christy Goldsmith Romero believes that the current regulatory framework means that, to an extent, they already can.
Goldsmith Romero said that “we have to be a little careful about going to bespoke treatments because we don’t know the consequences of doing so," when regulating crypto, with a better approach perhaps being to update current guidelines rather than drawing up new ones.
Given the overall uncertainty in the market, she added that the best thing for all parties would be for Congress to legislate on the matter directly and bring some clarity to the industry and regulators.
“The best thing that can happen is some clarity from Congress,” Goldsmith Romero said.
FSB Calls for Global Regulation
The G20-backed Financial Stability Board has recommended a global regulatory framework for crypto and warned of the dangers of fragmentation and patchy enforcement.
In a recent paper, the FSB said that crypto regulation should be implemented based on a “same activity, same risk, same regulation” approach, with some aspects of traditional financial rules also applicable to digital assets.
“The proposed recommendations seek to promote the comprehensiveness and greater international consistency of regulatory and supervisory approaches to crypto-asset activities and markets,” the FSB said.
“These recommendations apply to any type of crypto-assets in any jurisdiction and should inform the regulation of any type of crypto-asset activities, including those conducted through DeFi protocols, that pose, or potentially pose, risks to financial stability, both individually and collectively.”
Vietnam Leader Wants Crypto Rules
Vietnam ranks among the top nations for crypto adoption, but despite the enthusiastic embrace of the market, the country does not have a unified framework for governing digital assets.
In a discussion group, Vietnam’s Prime Minister Pham Minh Chinh said he was “impatient that virtual assets are not recognized, yet people continue to trade” them, calling for changes to the country’s anti-money laundering laws.
Other lawmakers have called on the government to act given the high uptake of crypto among the population, and industry organization the Vietnam Blockchain Association is working with the National Assembly on laws recognizing crypto as property for tax purposes.