bigX social post: global cryptocurrency and blockchain regulations: october 2020

Global

Central banks have set out to regulate cross-border stablecoins like Libra with a common approach, Reuters reports, adding that more rules may be needed to ensure global financial stability. In a statement the Financial Stability Board — which groups together central banks and financial regulators across the G20 — said that existing national rules do not fully cover stablecoins. 

While the FSB told G20 finance minister that “a widely-adopted stablecoin with a potential reach and use across multiple jurisdictions could become systemically important” and that the new technology could make cross-border payments much more efficient, it noted that authorities must apply supervision under the ‘same business, same risk, same rules’ principle. 

Regulators will report by December 2021 on whether rule changes are needed and a global review of stablecoin regulation will be completed by July 2022, the FSB said. 

Europe

Switzerland has started a mass consultation with industry ahead of instituting wider blockchain acceptance in 2021. The government wants to incorporate recent amendments to finance and corporate laws around DLTs and blockchain, said the Federal Department of Finance. The Federal Council will then aim to put the laws into force in August 2021.

The European Central Bank must be ready to release a digital euro CBDC alongside banknotes, according to an internal study. The inexorable rise of Bitcoin and private solutions like Libra has forced central banks to think more clearly about this issue, said board member Fabio Panetta. 

The study explained the precise details of a CBDC, saying holders would have a direct claim on the central bank, and deposits could be transferred directly between users, rather than going through the banking system. The study pointed out that digital euro deposits would likely be capped and subject to current negative interest rates, just like normal euro bank deposits. 

The ECB has given itself under mid-2021 to decide whether to proceed. 

Cash usage is more prevalent in the eurozone than elsewhere in the world, so the need for CBDCs is less urgent. 

But more countries are now investigating the CBDC trend, with Russia making a U-turn to say it will pilot a digital ruble in 2021. Central bank governor Elvira Nabiullina told national press that the main benefits of a Russian CBDC would be more convenient, faster settlement and the possibility for offline payments. 

Consensys announced this month it had partnered with Société Générale to test France’s version of the CBDC.

Elsewhere, Spain has put forward a bill that would force citizens to report cryptocurrency transactions in a bid to raise some 800m in taxes. And the UK’s tax authority, HMRC, has requested and received user data from US exchange Coinbase, it was reported this month. Although only UK accounts that have received more than £5,000 ($6,450) of cryptocurrency in the 2019/20 tax year are affected. 

Earlier in October the UK market regulator, the FCA, made a major move by officially banning cryptocurrency derivatives trading for retail investors. Futures, options and contracts for difference are often offered with very high levels of leverage, the FCA said, noting that inexperienced investors could face extreme losses. It makes no mention of a ban for institutional traders, hedge funds, or more sophisticated investors.

Americas

September 2020 was perhaps the most significant regulatory period of the last few years in the US. 

Last month US state regulators agreed a single set of supervisory rules for cryptoassets, while the Digital Commodity Exchange Act was revealed. 

But there was little let up in October. 

Headline news across the globe was that Paypal was to allow Bitcoin and crypto spending on its platform, sending the price of the world’s largest cryptocurrency soaring.  

And there was more administrative work going on in the background. The CFTC expanded reporting requirements for cryptocurrency deposits, while $10bn asset manager Stone Ridge turned to Bitcoin as its new reserve asset, with a BTC buy worth $100m, and the brain drain from equities to crypto continues as the former head of regulation for the New York Stock Exchange jumped ship for crypto fund Andressen Horowitz.

Somewhat sidelined among all the positivity this month was the fact that US prosecutors filed criminal charges against the four founders of BitMEX, one of the world’s largest derivatives exchanges. BitMEX failed to prevent money-laundering under the federal Bank Secrecy Act, and actively conspired to evade the law. In a separate case the CFTC filed a civil lawsuit to halt BitMEX’s exchange business. BitMEX, for its part, first denied the charges, saying trading would continue, then told markets that its founders would step down in the wake of the lawsuit. 

North of the border, there was more pain for Canadian messaging giant Kik after a federal judge ruled its 2017 ICO violated securities laws to side with the SEC. It’s perhaps the final nail in the coffin of the crypto ICO boom. 

Middle East & North Africa

No updates.

South Asia

Amid all the back and forth, confusion over bans on crypto trading, bank account freezing and exchange violations, India got a new plot twist in October. Britain’s Cashaa said it was launching crypto services at 34 physical locations, to allow Indian citizens to buy, store and save cryptocurrencies, as well as using their holdings as collateral for loans. Cashaa said its partnership with local outlet the United Multistate Credit Cooperative Society would yield 100 locations across the country by 2021. 

East Asia & Pacific

Australia’s national stock exchange has further delayed the launch of blockchain settlements. The ASX says the DLT framework for securities to replace its CHESS system will come into play in April 2023 at the earliest. 

China’s central bank laid further groundwork for the launch of its digital yuan CBDC, while Hong Kong’s central bank said it was willing to trial this new form of digital money for cross-border transactions. Crypto advocates got a boost in Japan as cryptoexchange Kraken became one of the first exchanges to resume trading since the mass exodus after the Coincheck hack of 2018.

In Singapore, Kucoin execs said they had discovered the identity of the hacker who stole $204m from the exchange and that all funds were now being returned to traders and investors. It prompted industry analysts to suggest that regulators at the Monetary Authority of Singapore may want to investigate this further. At the same time, Singapore’s largest bank, DBS, launched its own cryptoexchange, listing five major crypto coins. 

Malaysian cryptoexchange OKEx dropped a bombshell on investors this month, suspending all withdrawals after a private key holder was reportedly arrested by Chinese police. 

Then on 28 October new guidelines came into force from the Securities Commission regulator to tighten up rules around Initial Exchange Offerings and crypto custody.

Caribbean

The Bahamas central bank took the headlines this month by officially winning the race — and beating China, no less — to launch the world’s first CBDC. The so-called ‘Sand Dollar’ has now been made available to all its 393,000 residents, bank officials said. 

Elsewhere, Bittrex Global won clearance to operate a cryptoexchange from Bermuda as the island nation’s fintech sector heats up. 

Africa

Zimbabwe’s national stock exchange said its digital subsidiary VFEX was open to listing Bitcoin and other cryptocurrencies as its fiat currency continues to suffer from skyrocketing inflation. 

And Kenya’s central bank is another domino to fall in the CBDC race. Bank governor Dr Patrick Njoroge told a national fintech conference that his researchers are looking into the possibility of issuing a digital shilling as interest and usage of cryptocurrency is exploding.