Regulatory News
European Union
ESMA evaluates DeFI risks and benefits - European Securities and Market Authority (ESMA) has released a report assessing the risks and advantages of decentralized finance (DeFi) in the European Union market. While acknowledging the potential benefits of DeFi, including greater financial inclusion and innovative financial products, the report also underscores significant risks. These risks include liquidity volatility, counterparty risks, vulnerability to scams and illicit activities due to the lack of KYC protocols, the absence of a responsible party, and a lack of recourse mechanisms. Despite these risks, the ESMA concludes that, for now, DeFi and the broader crypto market do not pose "meaningful risks" to financial stability in the EU due to their relatively small size and limited connection with traditional financial markets.
Piero Cipollone appointed to ECB's Executive Board - On October 9, the European Parliament's Committee on Economic and Monetary Affairs (ECON) approved the appointment of Piero Cipollone as a Member of the Executive Board of the European Central Bank (ECB). During discussions with MEPs, Cipollone expressed strong support for the digital euro project, emphasizing its inclusivity and public nature, but he did not mention any potential delays to the project's timeline.
Cyprus to enforce strict penalties on unregistered crypto service providers - According to an Oct. 10 report by the Cyprus Mail, the country is revising its crypto regulations to comply with global standards set by the Financial Action Task Force (FATF) and the recommendations of the MONEYVAL report from Nov 2022. The Ministry of Finance is amending anti-money laundering laws, requiring all crypto service providers to register with the Cyprus Securities and Exchange Commission (CySEC) or face penalties, including fines and imprisonment. While some concerns exist, crypto companies have generally reported a smooth registration process in Cyprus. Binance recently exited the Cyprus market to focus on larger EU markets due to increased regulatory pressure.
French Regulator's perspective on DeFi: 'Disintermediated,' not 'Decentralized' - The French regulator Autorité de Contrôle Prudentiel et de Résolution (ACPR) has concluded its summary of a consultation on the regulation of decentralized finance (DeFi). They have redefined DeFi as "disintermediated" rather than "decentralized" due to persistent centralization patterns. The main concern is the operational risk associated with a high concentration of blockchain nodes hosted by cloud service providers. Respondents largely support DeFi on public blockchains but stress the importance of regular audits. There is a consensus on the need to regulate intermediaries and certify smart contracts, with the ACPR recommending rule-making for smart contract certification, governance to protect DeFi users, and measures to support DeFi's blockchain infrastructure.
United Kingdom (UK)
UK MPs advocate action on NFT copyright infringement and fan tokens - A UK parliamentary committee has urged the government to protect artists' intellectual property rights in the NFT space and regulate fan tokens issued by sports teams. They are concerned about the ease of minting NFTs and the potential for fraudulent material. The committee recommended a code of conduct for NFT platforms. They also warned about the financial risks of fan tokens and recommended excluding them from fan engagement measurements.
FCA restricts Binance Partner's crypto ad approvals - The Financial Conduct Authority (FCA) has imposed restrictions on Rebuildingsociety, the peer-to-peer lending platform that partnered with Binance to comply with the FCA's marketing regulations. The FCA's notice states that Rebuildingsociety is not authorized to approve the content of financial promotions for qualifying crypto assets by unauthorized individuals and must withdraw existing approvals. According to Cointelegraph, this may indicate that Binance no longer has a UK partner complying with the FCA's marketing requirements. The FCA's marketing regime, effective from October 8, aims to ensure clear, fair, and non-misleading advertising, with the possibility of criminal charges for non-compliance. Binance's partnership with Rebuildingsociety was announced shortly before the FCA's restrictions came into effect.
UK Regulator adds 143 crypto exchanges to Warning List - The Financial Conduct Authority (FCA) expanded its warning list of non-authorized firms, adding 143 entities, including major exchanges like KuCoin. The FCA's list advises customers to avoid dealing with these entities. On the other hand, some leading cryptocurrency exchanges like Coinbase and Binance have updated their mobile and web applications to align with the FCA's new regulations. Changes include, e.g., the addition of "risk disclaimers" for crypto transactions. However, some exchanges like ByBit have suspended operations due to the new regulations. PayPal has also temporarily paused crypto purchases for UK users to comply with updated regulations.
LATAM
Brazil's CVM plans tokenization sandbox for 2024 - According to Cointelegraph, the Brazilian securities regulator, Comissão de Valores Mobiliários (CVM), intends to launch a second regulatory sandbox program in 2024. During Rio Innovation Week, CVM's Daniel Maeda mentioned plans to explore tokenization use cases in the sandbox. The regulator previously tokenized around $36 million in assets, and while specific cases have not been defined, areas like agribusiness and environmental, social, and governance are of interest. CVM is also waiting for developments in Brazil's crypto market and central bank digital currency, Drex, before proceeding. The goal is to enhance transparency, reduce costs, and democratize investments through tokenization.
Brazilian CPI proposes cryptocurrency regulation bills - Brazilian Congressional Committee: Brazil's Parliamentary Committee of Inquiry (CPI) on Pyramid Schemes has introduced three bills to enhance cryptocurrency market regulations, covering fraud penalties, crypto service provider requirements, and influencer advertising rules. Furthermore, the CPI is presenting the case of Binance and recommends the indictment of Binance's executives suggesting investigations into tax evasion and money laundering. Binance has pledged cooperation while denying the accusations, highlighting the mounting regulatory challenges faced by the exchange in various jurisdictions.
Global
G20 accepts IMF-FSB Synthesis Paper, embracing crypto regulation roadmap - In a recent meeting in Marrakesh, Morocco, the Group of Twenty (G20), accepted a regulatory roadmap proposed in a joint Synthesis Paper by the International Monetary Fund (IMF) and the Financial Stability Board (FSB). The G20 called for swift and coordinated action on this roadmap, advocating for comprehensive oversight of cryptocurrencies rather than an outright ban. The paper outlines recommendations for cross-border cooperation, risk management frameworks for crypto companies, and access to pertinent data for authorities. The first review of these measures is set to take place by the end of 2025, reflecting a growing global consensus on the need for a cohesive approach to crypto regulation.
Industry News
European Union
Bitstamp nears deals with European banks for crypto services - In an interview conducted by CoinDesk with a senior executive, Bitstamp is in advanced talks with three major European banks to support their cryptocurrency service launches, with announcements slated for Q1 next year. This reflects growing acceptance of digital assets in the European financial sector, aligned with the EU's MiCA regulatory framework. Bitstamp's "Bitstamp-as-a-service" solution, offering white-label technology for cryptocurrency services, has gained traction in Europe. The differing regulatory approaches in Europe and the U.S., emphasizing partnerships in Europe, were highlighted. Bitstamp's regulatory-compliant approach proves successful amid industry challenges.
Deribit Expands in the EU - Crypto News: Deribit, the leading crypto exchange, plans to apply for an EU brokerage license as part of its European expansion. Despite reduced market volatility, the exchange aims to strengthen its position as the top exchange. The expansion aligns with MiCA regulation. Deribit is also expanding options on more tokens such as Solana (SOL), Polygon (MATIC), and Ripple (XRP). This move is aimed at boosting liquidity and risk management.
Check hardware company Trezor launches wallet and metal backup solution - Trezor marks its 10th anniversary with three new self-custody products, including a versatile Trezor Safe 3 hardware wallet, a robust private key backup solution called Trezor Keep Metal, and a limited-edition Bitcoin-only wallet that supports the Trezor Academy for Bitcoin education in underprivileged communities. These offerings enhance cryptocurrency storage and accessibility for users, emphasizing Trezor's commitment to self-custody.
MENA
FAB successfully completes blockchain cross-border payments pilot with J.P. Morgan - First Abu Dhabi Bank (FAB), the UAE's largest bank, has announced the successful completion of pilot testing with J.P. Morgan's Coin Systems for blockchain-based cross-border payments. The pilot phase demonstrated the potential of blockchain technology to enhance cross-border payment solutions, with seamless execution and satisfactory response times. FAB's collaboration with J.P. Morgan's Onyx underscores its commitment to leveraging innovative technologies in the payments space, particularly in cross-border payments. FAB's Global Transaction Banking business plans to explore further opportunities using J.P. Morgan's Coin Systems in the future.
Global News
Mastercard demonstrates CBDC compatibility - Mastercard has successfully showcased a new solution in a pilot project enabling Central Bank Digital Currency (CBDC) in Australia to be tokenized and integrated with different blockchains, enhancing security and ease of use for consumers. This development allows CBDC to participate in commerce across various blockchains while maintaining strict controls for authorized parties. Compatibility is facilitated through Mastercard's Multi Token Network, which enhances the efficiency of blockchain-based payment and commerce applications. This aligns with Mastercard's broader strategy to expand the use of blockchain technology across various payment use cases.
JPMorgan launches tokenization platform, with BlackRock as major client - As per Bloomberg report, JPMorgan has introduced its Tokenized Collateral Network (TCN), a blockchain-based platform enabling investors to use traditional assets as collateral by converting them into digital tokens. In its initial trade, TCN tokenized money market fund shares for BlackRock, facilitating a derivatives exchange with Barclays. This enhances capital efficiency, streamlines traditional settlements, and offers intraday liquidity through secured repo transactions. JPMorgan is actively engaged in blockchain and crypto services to meet rising demand.
Japanese firms to launch DCJPY Digital Currency for clean energy certificates - Reuters: A consortium of Japanese companies plans to introduce "DCJPY," a digital currency, for clean energy certificate transactions by July 2024. GMO Aozora Net Bank will issue this yen-based digital currency, designed to streamline clean energy certificate settlements using blockchain technology. DCJPY will be backed by bank deposits, linked with bank accounts, and is expected to reduce settlement costs. This initiative aligns Japan with the growing trend of digital currencies backed by bank deposits and blockchain technology. It may coexist with the central bank's planned digital currency.
