DSG Crypto Regulatory Roundup: September 2024
International Bodies
Bank of Russia to Launch Digital Ruble Payment Infrastructure by July 2025: The Bank of Russia is set to introduce the digital ruble, its central bank digital currency (CBDC), with a goal of opening its payment infrastructure by July 1, 2025. Major banks in Russia will be required to provide digital ruble accounts and related services by this deadline, while smaller banks with universal licenses will have until July 2026, and the smallest institutions until July 2027, to adopt the system. Additionally, retailers with annual revenues exceeding 30 million rubles must start accepting digital rubles in 2025, with smaller businesses required to comply by 2027. Transactions made with digital rubles will be free for citizens, while businesses will have the option to choose between digital and traditional rubles. A pilot program involving 12 banks, 9,000 individuals, and 1,200 businesses is currently underway to test and refine the digital ruble infrastructure. More here.
China Moves to Address Bitcoin Money Laundering Activities With New Law Draft Revision: China is revising its money laundering legislation to tackle emerging risks from new technologies and cryptocurrencies, with the Standing Committee of the National People’s Congress currently reviewing the draft law. The updated draft includes seven new predicate offenses and additional monitoring requirements to enhance detection and alignment with international standards. While the exact timeline for finalizing and implementing these changes is not specified, the ongoing review aims to strengthen the regulatory framework against tech-related money laundering activities. More here.
Japan Plans to Review Its Crypto Rules: Bloomberg: Japan is set to review its cryptocurrency regulations, according to a Bloomberg report citing an anonymous official from the Financial Services Agency. The review, expected to take place over the coming months, will focus on the effectiveness of regulating crypto under the Payments Act and may lead to reclassifying cryptocurrencies as financial instruments under investment law, potentially allowing for lower taxes on digital assets. This move comes as countries worldwide, including the U.K. and the European Union, are clarifying their approaches to cryptocurrency regulation. More here.
Stablecoin Default Guarantees Pose Risks to the Issuing Banks, Swiss Regulator Says: Switzerland’s financial markets regulator, FINMA, proposed new requirements to mitigate risks associated with banks providing default guarantees to stablecoin holders, as outlined in guidance published on Friday. FINMA warned that irregularities with stablecoin issuers could lead to reputational damage and legal risks for the banks involved. To enhance customer protection, FINMA’s guidelines state that customers must have a direct claim against the bank offering the guarantee, which must fully cover deposits and interest, while ensuring that deposits do not exceed the guarantee amount. More here.
Bitcoin ETF Security Concerns Mount After FBI Warns of North Korean Hackers: North Korean hackers, notably the Lazarus Group, are targeting the substantial Bitcoin and Ethereum holdings of cryptocurrency ETF custodians, raising significant security concerns. The FBI’s warning highlights vulnerabilities in these ETFs, where underlying assets are largely uninsured and vulnerable to theft. If a hack were successful, it could cause severe market disruption, including drastic declines in ETF values and widespread investor panic. Despite Coinbase’s robust security measures, the high centralization of crypto custodians and limited insurance coverage pose ongoing risks. More here.
UK Finance Regulator FCA a ‘Deterrent’ to Crypto Industry, Says CryptoUK: The lengthy and demanding registration process for crypto firms in the UK is deterring businesses, according to CryptoUK. The Financial Conduct Authority (FCA) has rejected nearly 90% of crypto registrations due to insufficient fraud protection and Anti-Money Laundering safeguards. The process, which has an average approval time of 459 days, is criticized for being overly resource-intensive and lacking in guidance and collaboration with applicants. These critiques have led to a decrease in applications and raised concerns that the UK may fall behind more crypto-friendly regions. Despite the FCA’s defense of its rigorous standards, there are calls for better dialogue and support to encourage industry participation. More here.
UK Gov’t To Classify Cryptocurrency As Personal Property: On September 11, Parliament introduced the Property (Digital Assets etc.) Bill, which will recognize Bitcoin and other digital assets as personal property for the first time in British history. This new legislation will enhance legal protection for owners and businesses, address complexities in disputes involving digital holdings, and position the UK as a leader in global crypto regulation through ensuring that English and Welsh law evolves with technology. The new law will give legal protection to owners and companies against fraud and scams, while helping judges deal with complex cases where digital holdings are disputed or form part of settlements. More here.
United States
New Bill Seeks Collaboration Between SEC and CFTC on Digital Assets: U.S. Representative John Rose introduced the Bridging Regulation and Innovation for Digital Global and Electronic Digital Assets Act (BRIDGE Act), which aims to improve coordination between the SEC and CFTC on digital asset regulation. The bill proposes creating a Joint Advisory Committee (JAC) with 20 members, 10 appointed by each agency, to develop a balanced regulatory framework and address concerns about current enforcement practices driving investment abroad. The JAC would meet at least twice annually to advise on digital asset rules and policies. More here.
Crypto’s Risky Bet in Ohio: The cryptocurrency industry is investing significantly in Ohio to support Republican candidate Bernie Moreno in his bid to unseat Senate Banking Chair Sherrod Brown, who is a critic of digital assets. The super PAC Defend American Jobs, funded by crypto firms, has spent $12 million on ads for Moreno and may spend more leading up to the election. Despite Moreno’s crypto-funded campaign efforts, Brown is currently leading in the polls at 62%. More here.
North Carolina Resists the CBDC Tide With New Payments Ban: North Carolina’s Senate recently passed a law banning the use and testing of central bank digital currencies (CBDCs) in the state, overriding the governor’s veto. This decision, driven by privacy and sovereignty concerns, positions North Carolina as a vocal opponent of CBDCs, despite the U.S. being behind other G7 nations in developing such technologies. The move is seen as largely symbolic, given the global and domestic context of CBDC adoption and the potential legal challenges it may face. The law reflects broader skepticism and concerns about the implications of CBDCs on privacy and financial innovation. More here.
Dissenting Statement of Commissioner Caroline D. Pham on DeFi Enforcement Action Involving Uniswap Protocol: In a dissenting statement on the In re Universal Navigation Inc. decision, Commissioner Pham criticized the Commodity Futures Trading Commission (CFTC) for lacking specific evidence on the “leveraged tokens” involved and for adopting a broad, simplistic interpretation of the Commodity Exchange Act. Pham argued this approach imposes unnecessary regulatory burdens and violates proper administrative procedures. Pham advocated for balanced regulations that support innovation and suggested exploring alternative policy development methods. Pham expressed concern that the CFTC’s actions were a hasty attempt to claim jurisdiction over DeFi rather than a well-considered regulatory strategy. More here.
“Crypto Asset Security”: On September 12, the SEC filed a proposed amended complaint against Binance, indicating it will proceed with claims against multiple tokens, despite earlier assertions that the amendments would lessen the court’s need to address these issues. The complaint also includes a footnote clarifying that the SEC does not necessarily consider a crypto asset to be a security, despite previously using the term “crypto asset security.” More here.
Clarity on Airdropped Tokens: On September 18, Representatives Emmer and McHenry wrote to SEC Chair Gensler seeking clarification on the agency’s stance regarding airdropped tokens, expressing concern that the SEC’s regulatory approach undermines the decentralization fundamental to crypto and blockchain technology. More here.