Welcome to Veriscope, our biweekly global crypto regulatory update, providing you with the latest news from the world of cryptocurrency regulation. In this edition, we are zeroing in on key regulatory updates that are shaping the global crypto landscape.
From the US, where a renewed push for the Responsible Financial Innovation Act is on the cards, to South Korea, where virtual asset legislation is evolving. South Africa is also making headlines by requiring crypto exchanges to be licensed, while Singapore's Monetary Authority aims to enforce stricter rules for Digital Payment Tokens (DPT) providers.
So, let’s not wait any further and dive straight into it.
USA: Crypto regulation takes center stage as US lawmakers Cynthia Lummis and Kirsten Gillibrand gear up to reintroduce the Responsible Financial Innovation Act. Originally brought forward during a crypto market crash in 2022, the act aims to provide a comprehensive regulatory framework for digital assets.
South Korea: Meanwhile, South Korea strengthens its grip on virtual asset legislation with the initiation of its second phase. The Financial Services Commission plans to delve into issues related to crypto asset issuance and distribution, building on the foundation of user protection laid by the recently passed “Virtual Asset Protection Act.”
South Africa: Down south, the South African Financial Sector Conduct Authority (FSCA) requires all crypto exchanges to obtain licenses by the end of the year. This mandate marks a significant move in tightening the regulatory reigns within the crypto industry in Africa, with punitive measures planned for non-compliant entities.
Singapore: On a similar note, the Monetary Authority of Singapore (MAS) is working on firming up rules for providers handling Digital Payment Tokens (DPT). By the end of the year, MAS plans to ensure customer assets are securely held under statutory trust and intends to curb digital currency lending and staking activities.
Now, let’s dive into two of these significant developments and analyze their impact on the broader ecosystem.
A renewed push for the Responsible Financial Innovation Act has been initiated by Senators Cynthia Lummis and Kirsten Gillibrand. The aim? To offer a clear regulatory roadmap for digital assets, casting a bipartisan light on a topic that has often been cloaked in uncertainty.
First introduced in 2022 amid a crypto market downturn, the Act's resurrection is set against a backdrop of renewed demand for clarity and control.
One of the main features is the proposed alterations to the US tax code, which would empower the industry to fund its own oversight. In practical terms, this means that the costs associated with regulation, audit, and security would be borne by the digital asset firms.
As part of its comprehensive approach, the proposed regulation also includes measures to preclude events like the FTX crisis, putting consumer protection at the forefront to address existing apprehensions regarding digital assets.
The draft calls for the regulation of stablecoins, a direct response to the TerraUSD (UST) crash that sent ripples through the crypto industry. It also proposes that only depository institutions issue stablecoins, which, while providing an extra layer of security, could potentially stifle innovation.
It also demands that crypto exchanges must register with the Commodity Futures Trading Commission.
On the bright side, the clarity provided by the Act could potentially attract mainstream and institutional investors, fostering trust in regulated exchanges. Also, the proposed customer protection measures that the Act proposes could minimize fraud and market manipulation, thereby creating a safer investment climate.
Despite several upsides, there are more than a few downsides as well. For instance, over-regulation could suppress innovation, given that the decentralized nature of crypto is its lifeline. Moreover, permitting only depository institutions to issue stablecoins could result in power concentration, straying from crypto's core principle of decentralization.
In essence, the reintroduction of the Responsible Financial Innovation Act is a signal of crypto’s growing legitimacy. As the Act undergoes legislative scrutiny, the crypto industry watches in anticipation.
The balance between innovation and regulation is a delicate one. The outcome will have significant implications for the future trajectory of the crypto industry.
South Africa's Financial Sector Conduct Authority (FSCA) has drawn the line: crypto exchanges must obtain a license by the end of the year or face penalties.
This clear mandate by Commissioner Unathi Kamlana is backed by approximately 20 applications already on the table and the anticipation of more as the November 30 deadline approaches.
As observed in many other countries, the reasoning behind this decisive step is to shield consumers from potential financial risks inherent in the crypto market.
And no matter the size of operations, all exchanges serving South Africans will have to comply. While the directive is stern, Commissioner Kamlana assures a period of time will be dedicated to examining the outcome of these measures.
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