September 11, 2023

Veriscope Regulatory Recap - 29th August to 11th September

Veriscope Regulatory Recap - 29th August to 11th September

Welcome to the latest edition of our Veriscope Crypto Regulatory Newsletter, your guide to the rapidly evolving rules and regulations shaping the crypto universe.

In this edition, we will start off with an update from the United States, where the CFTC is proposing a pilot program for more targeted crypto regulation. Then, we will swing down to Australia - the land down under - to discuss the Senate's recent actions on digital asset legislation.

We will also touch on Taiwan's fresh regulatory drafts and close with some global insights from the IMF and the Financial Stability Board.

Now, let’s dive straight into it.

The Global Crypto Regulatory Landscape

As the technology underpinning crypto and the industry continues to grow and mature, regulatory clarity has become increasingly important for mainstream adoption. This issue has even reached the halls of regulatory bodies, highlighting the urgency of setting guidelines for the crypto market.

The US: This week, in the United States, CFTC Commissioner Caroline Pham called for greater clarity on crypto regulation. She proposed a limited pilot program aimed at establishing compliant digital asset markets, with the goal of helping the country keep pace with advances in the field.

Australia: Moving our attention to the Pacific, in Australia, the Senate Committee on Economics Legislation has decided to reject the Digital Assets (Market Regulation) Bill and suggested the government continue to consult the industry on developing crypto regulation. In response, the bill's author, Senator Andrew Bragg, warned that this will leave investors exposed to unregulated markets and that investments will be driven away from the country. However, the Committee’s chair, Jess Walsh, said the bill “fails to interoperate with the established regulatory landscape, creating a genuine concern for regulatory arbitrage and adverse outcomes to the industry.” The Senate is expected to vote on the bill at its next sitting session.

Taiwan: In another part of the world, Taiwan's Financial Supervisory Commission (FSC) is taking steps to regulate local crypto exchanges and banning any offshore platforms that fail to comply. The Commission has drafted guiding principles to regulate crypto, which is expected to be published later this month. Among the guidelines is a requirement for exchanges to implement AML procedures, maintain separate custody of their own and customer assets, and meet listing and delisting review standards.

Global: To round out our global overview, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) have recommended not to make crypto legal tender to preserve their financial stability in a joint paper submitted to the G20 nations.

Now, let’s unpack two of these most crucial developments in detail.

G20 Makes Significant Progress on Crypto Regulatory Front

The G20 Summit in India concluded with a heightened focus on cryptocurrency regulation, uniting diverse viewpoints under one umbrella of concern and opportunity.

The hosting nation, India, finds itself at a regulatory crossroads, striving for a delicate balance between encouraging innovation and ensuring financial stability. This sentiment—shared by Prime Minister Modi and Finance Minister Sitharaman—served as a lens through which other G20 nations could also view the complex crypto landscape.

Central to the summit's discourse was Sitharaman's framing of cryptocurrency as both a "threat and an opportunity." However, this outlook isn't limited to India alone, as it reflects a larger global tension: how to nurture the promise of digital assets as economic tools while addressing associated risks like fraud and market volatility.

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The input from international bodies like the IMF and the Financial Stability Board emphasized the need for coordinated action. Their jointly published report adds an additional layer of gravitas, suggesting that ad-hoc, country-specific regulations may not suffice in addressing the borderless nature of cryptocurrencies.

Building on this international call for coordination, the dialogue at the summit suggests a shifting focus—from a national to an international strategy for crypto regulation. It raises the question of whether the world's economic leaders can leverage this collective momentum to create a cohesive global policy that both enables innovation and ensures systemic stability.

CFTC Commissioner Calls for a US Crypto Regulatory Sandbox

Currently, the US is lagging behind other financial jurisdictions in providing regulatory clarity for the crypto industry. But while the SEC’s crackdown on crypto has created widespread uncertainty, things may be changing as recently we saw bills addressing stablecoins passing their relevant committees with bipartisan support. 

Now, this week, the US Commodity Futures Trading Commission (CFTC) commissioner Caroline Pham advocated for the first-ever pilot program to address digital asset regulation in the country. Through this regulatory sandbox on crypto jurisdictions, Pham aims to “capitalize” on the technology’s benefit and “take a more strategic and long-term view,” otherwise, the US may have to play catch-up while being “unable to effectively leverage this technology for economic growth,” she said.

Pham, who is one of its five CFTC commissioners, called for the agency to propose and adopt rules on the risks of crypto based on previous pilot programs, and once concluded, the commission would determine whether to implement the changes permanently.

Together, these events suggest a move towards improving the regulatory status for crypto in the US and globally. But it is just the beginning, and the industry has a long road ahead of it.

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