| Regulatory Landscape UK Regulator Clamps Down on eToro, Coinbase for ‘Misleading’ Crypto Ad The British advertising regulator, the Advertising Standards Authority (ASA), has been actively cracking down on non-compliant crypto ads, recently targeting Coinbase and eToro (UK). According to the ASA’s announcement on Dec 15, both the companies ran paid ads on online platforms to promote their cryptocurrency services. However, those ads were labeled as ‘irresponsible’ and ‘misleading’. In both cases, the regulator called the ads ‘irresponsible’ and ‘misleading’ for taking ‘advantage of consumers’ inexperience or credulity’ and ‘to illustrate the risk of the investment’. Coinbase was additionally held for claiming its competitors ‘unregulated’ and for past reference of Bitcoin price. IMF Outlines Need for Global Approach to Crypto Regulation The International Monetary Fund (IMF), the financial institution focused on maintaining worldwide financial stability, has outlined its proposal for establishing a global regulatory framework for crypto. The IMF called for a “comprehensive, consistent and coordinated” approach in order to harness the benefits of crypto’s underlying technology while mitigating some of its risks, in a blog published on Dec 9. According to the IMF, regulating crypto at a global level should have three core elements: (1) Crypto-asset service providers that deliver critical functions should be licensed or authorized; (2) Requirements should be tailored to the main use cases of crypto assets and stablecoins; (3) Authorities should provide clear requirements on regulated financial institutions concerning their exposure to and engagement with crypto. Federal Regulator Says Credit Unions Can Partner With Crypto Providers Federally insured credit unions (FICUs) can partner with third-party digital asset service providers, the National Credit Union Administration (NCUA) announced on Dec 16.“This includes facilitating member relationships with third parties that allow FICU members to buy, sell and hold various uninsured digital assets with the third-party provider outside of the FICU,” according to the statement from the NCUA. The NCUA is a U.S. regulator that oversees credit unions, acting as a counterpart to the Office of the Comptroller of the Currency (OCC), which regulates national banks. The NCUA said it wants to offer clarity around the existing authority that FICUs have when it comes to building relationships with third-party digital asset providers. Federal credit unions may continue to act as finders to bring together their members with providers of third-party services, including those related to digital assets. French Central Bank Completes First Stage of Its CBDC Experiments The Banque de France said it completed the first stage of its experiments into a wholesale central bank digital currency (CBDC) and plans to move on to the next phase, focusing on cross-border payments. France’s central bank has been exploring the use of a CBDC for the exchange of money between financial institutions since March 2020. The final stage of the first tranche of experiments consisted of the issuance of a digital bond on a blockchain with settlement in CBDC, which was conducted with numerous partners, including banking giant HSBC. A wholesale CBDC is a digital currency issued for use by financial institutions to exchange central bank-issued money. It is different from a retail CBDC, which is intended for use by the public as a form of digital cash. Bank of Russia Bars Mutual Funds From Investing in Crypto The Bank of Russia, the country’s chief financial regulator, issued new rules for the country’s mutual funds in a directive published on Dec 13. Such funds cannot invest in digital currencies or in “financial instruments, the value of which depends on the prices of digital currencies.” In July, the regulator banned Russia’s stock exchanges from listing financial instruments that are dependent on the prices of digital assets. That letter, dated July 19, said mutual funds should not touch such products, either. The Bank of Russia is currently working on a Russian ruble-backed central bank digital currency (CBDC). China, Hong Kong Enter Second Phase of Cross-Border Digital Yuan Trials China and Hong Kong are in the second phase of testing cross-border transactions using central bank digital currencies (CBDCs), Mu Changchun, director of the Digital Currency Institute of the People’s Bank of China, said on Dec 9, according to Shanghai Securities News. The two have successfully carried out the first phase of technical testing of topping up, transferring and paying through digital yuan wallets in collaboration with Hong Kong banks and merchants, Changchun said at the Hong Kong International Financial Center Status and Prospects Seminar. In the second phase, they will try to link the digital currency system and the Faster Payment System (FPS), an interbank digital payment system in Hong Kong. Industry Development Binance Singapore Drops Crypto License Plans in City-State Binance’s Singapore entity plans to withdraw its application for a crypto license in the city-state, and will expel local users by Feb. 13, 2022, the exchange said on Dec 13. Binance Asia Services (BAS), the exchange’s local affiliate, is one of approximately 170 crypto firms that had applied for a Digital Payment Token License in Singapore, which would allow them to offer digital assets services to local users. Firms are allowed to offer crypto services as long as their license application is under review. Binance will stop offering services through its local site, Binance.sg, by Feb 13, 2022, closing all existing accounts. Users have to close their positions by that date. Effective immediately, Binance Singapore will not accept any new users, and will not allow existing users to deposit assets on the exchange. Goldman Sachs Says Blockchain Is Key to Metaverse and Web 3 Development Blockchain technology is central to the development of the metaverse and Web 3, Goldman Sachs said in a research report. It is the only technology that can “uniquely identify any virtual object independent of a central authority,” and this ability to identify and track ownership will be crucial to the functioning of the metaverse, analysts led by Rod Hall wrote in a note published on Dec 14. For Web 3, blockchain allows for the “partial elimination of centralized control,” the note says. In the future, users will be able to log in without the need for a third party, such as Meta, Google or Apple, the note adds. ConsenSys Collaborates With Mastercard on New Ethereum Scaling System Ethereum software firm ConsenSys has launched “ConsenSys Rollups” with the help of Mastercard’s engineering team to enable expansion on both the Ethereum mainnet and for private use, ConsenSys said on Dec 16. “ConsenSys Rollups is an innovative modular software solution for permissioned blockchain applications focused on providing scalability and privacy capabilities that can be connected to any Ethereum Virtual Machine (EVM) compatible blockchain,” according to a company statement. ConsenSys also said systems built using Rollups can reach a throughput of up to 10,000 transactions per second (TPS) on a private chain, compared to only 300 TPS on private chains without Rollups and 15 TPS on the Ethereum mainnet. Ethereum Privacy Startup Aztec Raises $17M in Paradigm-Led Series A The Aztec Network has raised $17 million in a Series A funding round to further its efforts to bring programmable privacy to Web 3 transactions, the Ethereum startup announced on Dec 16. Paradigm led the funding round, which also included A.Capital Ventures, Ethereal Ventures, Libertus Capital, Variant Fund, Scalar Capital, IOSG and others. In addition to developer grants and product development, the funds will go toward legal work. The area of private blockchain transactions remains a new and undefined space when it comes to regulations. |