Welcome to another edition of Veriscope’s weekly recap. The crypto regulatory landscape continued buzzing last week, with global regulators & financial bodies announcing their intention to reign in the digital assets market. So, without further ado, let’s dive straight into it.
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Africa’s third-largest economy, South Africa, will regulate cryptocurrencies as financial assets by 2023, with Financial Intelligence Centre Act (FICA) overseeing the crypto sector in the country. This announcement was made by South African Reserve Bank Deputy Gov. Kuben during the PSG-hosted online series on July 12.
Experts consider this decision a masterstroke because of the growing popularity of crypto assets among South Africans. For instance, with crypto regulation, the South African government will finally put an end to the use of digital assets for financing illicit activities, such as terrorism financing, money laundering, and tax evasion.
Read more here: https://shyftnetwork.medium.com/south-africa-to-regulate-cryptocurrencies-as-financial-assets-by-2023-d95ed18aa4da.
A global regulatory body that tracks & recommends measures for the global financial ecosystem, the Financial Stability Board (FSB), recently published a report titled “FSB Statement on International Regulation and Supervision of Crypto-asset Activities.”
In the report, FSB highlighted the current crypto market turmoil to point out the vulnerability and volatility of digital assets, including stablecoins. The financial regulator also stressed that the fallout from the crypto market could also extend to the broader financial industry, i.e., short-term funding markets.
Thus, a robust and effective regulatory framework is a must to offset the negative impact of crypto assets and simultaneously encourage the underlying technology’s growth. This is why the FSB is currently preparing a crypto regulatory framework, which it will present during the G20 finance ministers & central bank governors meet in October this year.
Read more here: https://www.fsb.org/wp-content/uploads/P110722.pdf.
A global group of securities regulators, the International Organization of Securities Commissions (IOSC), recently published a roadmap for crypto policy recommendations.
The document states that the Fintech Task Force, a group within IOSC, will work on preparing crypto asset policy recommendations over the next 12–24 months. Their focus will be on market integrity and investor protection.
There will be two subgroups within the Fintech Task Force, with the U.S. SEC heading the Crypto and Digital Assets group and the U.K. FCA heading the Decentralized Finance group.
Read more here: https://www.iosco.org/library/pubdocs/pdf/IOSCOPD705.pdf.
The European Central Bank published a Macroprudential Bulletin titled “A Deep Dive Into Crypto Financial Risks: Stablecoins, DeFi, and Climate Transition Risk” on 11 July. The bulletin underlines the need for robust regulation and oversight over DeFi & stablecoins.
The authors argue that robust regulations are a must before the interdependence of the crypto industry and the traditional financial sector grows further. They also point out the TerraUSD debacle saying that stablecoins may not be as stable as they were made out to be. In fact, “Stablecoin” may just be a misnomer.
That said, there’s no denying that stablecoins play a central role in the global crypto trade. Thus, a possible impact of a broader stablecoin market crash could not be rolled out, as it could destabilize the global financial stability.
As for the DeFi, the authors call it a novel approach to offering financial services. But they also state that there’s nothing new about it as it’s just an improvised version of traditional financial players with technology at its core. Thus, the authors bat for the “Same Business, Same Risk, Same Rule” approach for DeFi, demanding effective supervision and regulations over it.
Read more here: https://www.ecb.europa.eu/pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202207_1~750842714e.en.html.
The regulatory fire continues to spread wider, with many international bodies calling for robust crypto regulations amid the increasing intertwining of the digital assets market with the traditional financial sector. Interestingly, international financial watchdogs, such as the FATF, are leading the charge.
For instance, FATF has urged countries to implement the Travel Rule urgently. Thus, sooner or later, all countries will have to adopt it. And at that point, all Virtual Asset Service Providers (VASPs) will have to strictly comply with the Travel Rule provisions. Thus, VASPs should stay prepared.
All that VASPs need to comply with the Travel Rule is a Travel Rule Solution (TRS). And we have the best solution to suggest: Veriscope. It is the only solution against the much-dreaded sunrise issue, thanks to Veriscope’s historic look-back feature. Read more about it here: https://www.veriscope.network/ and contact our BizDev team for a discussion here: https://www.veriscope.network/contact.
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