For questions on the note below, please contact Ruth Lunsford at (202) 547-3035.
International Bodies
European Blockchain Sandbox Onboards 41 Regulators in Second Cohort: On September 30, the European Commission announced the regulators participating in the second cohort of its European Blockchain Sandbox Initiative (EBSI), which now includes 41 authorities from 22 countries in the EU and European Economic Area. Each year, the initiative will support 20 selected projects, offering legal and regulatory advice from the law firm Bird & Bird. Notable participants include regulators from France, Spain, Germany, Italy, and the Netherlands. The EBSI aims to support use cases for distributed ledger technology by providing a collaborative framework for blockchain projects to address legal and regulatory challenges. Among the chosen projects is Iota, which focuses on identity solutions and aims to enhance discussions around KYC and privacy in decentralized finance. More here.
IOSCO Publishes Final Report on Investor Education on Crypto-Assets: On October 9, the International Organization of Securities Commissions (IOSCO) released a Final Report focused on investor education regarding crypto-assets. The report summarizes findings from a survey conducted among IOSCO’s Committee for Retail Investors about retail investor behavior, demographics, and experiences with crypto-assets. It also outlines regulatory changes and enforcement actions since the 2020 report and emphasizes priority issues, such as investment scams and effective communication with retail investors, particularly through social media. The report concludes with suggested investor education messages for C8 members to enhance understanding of crypto-assets in their jurisdictions. More here.
Brazil to Regulate Stablecoins in 2025, Says Central Bank Chief: On October 15, Brazil’s central bank chief, Roberto Campos Neto, announced that regulations for stablecoins and asset tokenization are expected to be introduced next year. Neto emphasized that stablecoins have been gaining popularity in Brazil, often linked to tax evasion and illicit activities, necessitates regulation. More here.
EU Markets Watchdog Urges Amendments to MiCA Crypto Regulations: On October 16, the European Securities and Markets Authority (ESMA) recommended amendments to the Markets in Crypto-Assets Regulation (MiCA) to enhance investor protection and market stability. ESMA proposed that crypto asset service providers (CASPs) be required to submit external cybersecurity audit results, assessments of the management team’s reputation, and checks for penalties beyond commercial law. These changes aim to ensure a comprehensive entry point assessment for CASPs as Europe prepares for the final MiCA implementation deadline on December 30, despite industry concerns about potential risks to banking and stablecoin operations. More here.
Italy Proposes Raising Bitcoin Capital Gains Tax to 42 Percent: On October 16, Deputy Economy Minister Maurizio Leo announced that the Italian government plans to raise the tax rate on Bitcoin capital gains from 26 percent to 42 percent. This change is part of a broader budget plan aimed at balancing the national budget by 2025, which will primarily rely on revenue from banks and insurers. The proposed budget, which includes these changes, is projected to generate €3.5 billion in revenue and is set for parliamentary approval by the end of the year. Prime Minister Giorgia Meloni emphasized that the funds would support public services and vulnerable populations without imposing new taxes on citizens. More here.
BIS Releases Report on Stablecoins, MMFs, and Monetary Policy: On October 17, the Bank for International Settlements (BIS) published a working paper titled “Stablecoins, Money Market Funds, and Monetary Policy.” The authors analyzed new crypto market shocks alongside US monetary policy shocks, finding that while crypto shocks have minimal impact on money market funds (MMFs) and traditional financial markets, they negatively affect stablecoins. The paper noted that US monetary policy shocks significantly influence both MMFs and stablecoins, but in opposite directions as prime MMFs typically grow after contractionary policy, while stablecoin market capitalization declines. It concluded that stablecoins do not serve as a safe haven during financial shocks because as monetary policy tightens, crypto prices fall, bearish markets arise, and demand for stablecoins primarily used for settlement in crypto markets decreases. The authors concluded by emphasizing the critical role of US monetary policy in linking traditional and crypto markets. More here.
FCA Stands Firm on Tough Crypto Regulations to Combat Money Laundering: The UK’s Financial Conduct Authority (FCA) is reaffirming its stringent registration process for crypto businesses, despite criticisms that it may hinder innovation. In a blog post on October 21, Val Smith, head of payments and digital assets at the FCA, stressed the importance of maintaining high standards to combat risks like money laundering and terrorism, as reflected in the agency’s recent report showing that only 4 out of 35 crypto applications were approved in the past year. Smith emphasized that the FCA’s evaluations consider not only internal controls but also the broader operating environment and management of the firms, highlighting a commitment to protecting consumers and maintaining trust in the financial system. More here.
United States
Coinbase Pushes U.S. Court to Compel CFTC for Documents in Defense Against SEC Lawsuit: On October 1, Coinbase has filed a motion in a U.S. federal court to compel the Commodity Futures Trading Commission (CFTC) to disclose its communications with the issuers of 12 cryptocurrencies that the Securities and Exchange Commission (SEC) has deemed unregistered securities. This action is part of Coinbase’s defense against the SEC’s lawsuit, which alleges that the exchange operated illegally without proper registration as a broker or securities exchange. Coinbase argues that the CFTC’s communications could provide essential evidence to challenge the SEC’s classification of the tokens in question, highlighting the ongoing regulatory uncertainty surrounding cryptocurrency in the U.S. More here.
SEC Publishes Investor Bulletin on Technology and Digital Finance: On October 7, the SEC’s Office of Investor Education and Advocacy (OIEA), along with the Commodity Futures Trading Commission (CFTC), the Financial Industry Regulatory Authority (FINRA), the North American Securities Administrators Association (NASAA), the National Futures Association (NFA), and the Securities Investor Protection Corporation (SIPC), released an Investor Bulletin on Technology and Digital Finance. The Bulletin emphasizes that “emerging technologies like artificial intelligence and crypto assets, and digital platforms like social media and mobile trading apps, are increasingly influencing how people invest,” highlighting the need for awareness of how bad actors might exploit these technologies for investment scams. More here.
Crypto.com Filed Suit Against the SEC to Protect the Future of Crypto in the U.S.: On October 8, Crypto.com filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) to challenge what it describes as the agency’s overreach in regulating the cryptocurrency industry. The lawsuit follows a Wells notice from the SEC and contends that the agency has improperly classified most crypto transactions as securities, violating federal law by not adhering to required procedures. Crypto.com has also petitioned the CFTC and SEC for clarification on the regulatory status of certain cryptocurrency derivatives, emphasizing its commitment to compliance and regulatory clarity in the U.S. market. More here.
Bitnomial Exchange Sues U.S. SEC, Alleging Regulatory Overreach: On October 10, Crypto exchange Bitnomial filed a lawsuit against the SEC, arguing that the regulator overstepped its jurisdiction in seeking to regulate its proposed XRP futures contract alongside the CFTC. Bitnomial claims that the SEC’s assertion that XRP futures are security futures, which fall under joint SEC and CFTC jurisdiction, unjustly increases its regulatory burden, as it would require the company to register as a national securities exchange. This legal challenge follows a similar suit by Crypto.com, which criticized the SEC’s regulation by enforcement approach and its implications for crypto holders. More here.
Senator Hagerty Publishes Draft Bill for Regulation of Stablecoins: On October 11, Senator Hagerty (R-TN) released a discussion draft of legislation aimed at creating a clear regulatory framework for stablecoin issuers. This draft builds on HFSC Chairman McHenry’s Clarity for Payment Stablecoins Act and proposes to exempt issuers with less than $10 billion in total stablecoins from federal regulation, allowing them to be overseen by state regulators. For issuers exceeding the $10 billion threshold, the bill permits them to seek a waiver from their federal regulator to remain under state oversight. Additionally, it designates the Federal Reserve as the supervisor for issuers that are depository institutions and assigns the Office of the Comptroller of the Currency to oversee federally qualified nonbank issuers, thereby strengthening the state pathway to stablecoin issuance and fostering innovation while protecting consumers. More here.
Fed Governor Waller Discusses Centralized, Decentralized Finance: On October 18, Federal Reserve Governor Waller delivered remarks on Decentralized Finance at the Nineteenth Annual Vienna Macroeconomics Workshop, discussing the role of centralized finance and the emergence of decentralized finance. Waller highlighted the significant attention and work surrounding DeFi, noting that opinions vary on whether it will replace traditional centralized finance or simply extend traditional financial methods and trading activities onto new platforms. Waller also explored the question of whether centralized finance and DeFi serve as substitutes or complements to each other. More here.
SEC Gives Green Light for Options Listing for Spot Bitcoin ETFs to NYSE: On October 18, the SEC approved the NYSE American LLC and CBOE to list options on spot Bitcoin exchange-traded funds (ETFs), allowing institutional investors easier access to Bitcoin through traditional financial products. The NYSE will offer options on funds like the Grayscale Bitcoin Trust and the Bitwise Bitcoin ETF with CBOE listing options for the Fidelity Wise Origin Bitcoin Fund and the ARK 21Shares Bitcoin ETF. This approval is expected to enhance market liquidity, improve price accuracy, and attract more institutional interest in the cryptocurrency market, building on the $21 billion in Bitcoin ETF net inflows since its U.S. debut in January 2024. More here.
Pennsylvania House Passes Crypto Protection Bill in Bipartisan Vote: On October 22, the Pennsylvania House of Representatives passed the Digital Assets Authorization Act, protecting residents’ rights to use and store cryptocurrency, with a vote of 176-26. The bill, which received strong bipartisan support, defines digital assets broadly while excluding government-controlled currencies, ensuring users can self-custody their assets and prohibiting additional taxes based on digital asset transactions. As cryptocurrency policy gains traction among voters with 51 percent of crypto-positive individuals actively monitoring candidates’ positions, this legislation reflects a growing trend in state-level initiatives to embrace digital assets. More here.