This week in crypto policy news, a former startup founder is Belgium’s PM and aims to build support for the existing European Blockchain Services Infrastructure (EBSI) initiative.
South Korea is enhancing transparency by requiring public officials to disclose their crytpo holdings.
Hong Kong is ready to accept applications for spot crypto ETFs, signaling mainstream acceptance of crypto in the region.
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Belgium’s Tech-Savvy PM to Steer EU Presidency
One of Belgium’s four key priorities during its 2024 EU Presidency of Council, that came into effect on 1 January 2024, is to promote the development of a European blockchain infrastructure for storing official documents like driving licenses and property titles. Belgium aims to build political momentum and support for the existing European Blockchain Services Infrastructure (EBSI) initiative. The goal is to get more EU countries to adopt EBSI for public services or integrate their national systems.
Additionally, Belgium plans to propose measures related to regulating online anonymity and promoting skills to strengthen Europe’s digital sovereignty. This likely involves continuing negotiations on the recently agreed Markets in Crypto Assets (MiCA) regulation and the AI Act.
Belgium’s Prime Minister Alexander De Croo brings a unique tech background to the country’s upcoming presidency of the EU Council. The 48-year-old former startup founder and digital minister is known as a tech enthusiast in Belgium’s political scene.
De Croo’s digital experience could prove useful as Belgium chairs EU negotiations on key technology regulations like the AI Act during its six-mont presidency. De Croo will see cybersecurity files and Belgium’s digital ministers will lead telecom meetings.
More broadly, Belgium will support the EU’s agenda around innovation, digitalization, emerging technologies like AI, and enhancing Europe’s strategic autonomy. This includes managing issues like data control, cybersecurity, the expansion of digital finance, and monitoring crypto-asset market developments. The overarching aim is to balance innovation and regulation while reducing dependence on foreign tech providers.
While specific timelines, deliverables, and details around crypto/ digital asset working groups and work streams are not explicitly mentioned, the focus seems to be more political during Belgium’s six-month presidency term.
FINMA Mandates Digital Asset Resolution Package for Banks
The Swiss Financial Market Supervisory Authority (FINMA) introduced a new practice requiring banks that provide services related to digital assets to prepare and maintain a Digital Asset Resolution Package (DARP). The DARP is a comprehensive framework aimed at safeguarding customers’ digital assets by establishing clear responsibilities and procedures for their management and transfer, especially in the event of a bank’s bankruptcy. FINMA’s assessment is that staked crypto assets are to be segregated from a bankrupt estate and returned to custody account customers. Staking will not attract capital requirements for the supervised institution, provided it has implemented risk-mitigating measures and informed customers of the risks in an appropriate manner.
The package serves as both an internal manual and an information sheet, detailing the handling of custody assets and pending client orders, as well as outlining the involvement of third-party providers in the process. It includes various sections that cover the purpose of the DARP, legal background, conditions under which customers are entitled to digital assets, and relevant regulations and annexes for its implementation.
This initiative enhances service quality and prepares for the possibility that FINMA or self-regulatory organizations may extend the DARP requirement to other financial institutions and intermediaries holding digital assets. The main goal of the DARP is to ensure the swift and accurate transfer of digital assets to rightful owners in case of institutional failure.
Upcoming MiCA Consultations and Hearings
January marks a significant period for the Markets in Crypto-Assets (MiCA) framework, with the European Supervisory Authorities conducting several key Regulatory Technical Standards (RTS) consultations and hearings. Stakeholders are encouraged to participate in the process by attending public hearings and submitting comments. The European Banking Authority (EBA) will host these events, focusing on various aspects of MiCA, including governance, remuneration, and the approval process for crypto-asset white papers. The EBA’s public hearings on 11 January 2024 will address draft MiCA mandates and the approval of white papers for asset-referenced tokens (ARTs). Comments on the draft RTS are due by 22 January 2024. For detailed schedules and submission guidelines, interested parties should visit the official EBA and ESMA websites.
UK Implements Stricter Cryptoasset Promotion Rules
The UK introduced new financial promotion rules for cryptoassets, effective from Monday, 8 January 2024, as part of its first crypto policy update of the year. The Financial Conduct Authority (FCA) now requires all firms marketing cryptoassets to UK consumers, regardless of their location, to be wither authorized or registered by the FCA, or have their promotions approved by an authorized firm. The new rules classify cryptoassets as ‘Restricted Mass Market Investments,’ allowing them to be marketed to UK consumers under certain restrictions. These include clear risk warnings and a ban on incentives to invest. The promotions must be fair, clear and not misleading. The FCA has the power to take down websites in breach of these rules, place restrictions on firms to prevent harmful promotions, and take enforcement action. On the first day of the new regime, the FCA issued 146 alerts about cryptoasset promotions.
APAC: South Korea, India, Hong Kong Make Headlines
South Korea’s Public Officials to Disclose Crypto Holdings
In APAC crypto policy news, South Korea is taking a significant step towards transparency by requiring high-ranking public officials to disclose their crypto holding from 2024. This initiative is part of the government’s “Public Ethics and Transparency Initiative.” The ministry of Personnel Management announced that the asset details, including cryptocurrencies, of approximately 5,800 public officials will be made public through this initiative. The new legislation mandates that asset disclosures, which were previously reported in official gazettes, will now be available through the Public Official Ethics System (PETI). This move follows the passage of laws in May requiring public officials to disclose their crypto holdings. The initiative aims to enhance transparency of the public service community.
Furthermore, the five major domestic crypto exchanges in South Korea, namely Upbit, Bithumb, Coinone, Korbit and Gopax, plan to develop separate information provision systems by June 2024. These systems will aid in tracking holdings and ensuring compliance with the new disclosure requirements. The government expects that these measures will significantly increase transparency in the public service community.
India Issues Notices to Offshore Crypto Exchanges for AML Non-Compliance
India’s Financial Intelligence Unit (FIU) has issued show cause notices to nine offshore crypto exchanges, including Binance, for allegedly operating illegally in the country by not adhering to anti-money laundering (AML) laws.
The FIU has advised the Ministry of Electronics and Information Technology (MeitY) to block the URLs of these exchanges. The exchanges have been accused of non-compliance with India’s AML regulations, which require crypto service providers to register with the FIU as ‘Reporting Entities’ and fulfill obligations such as monitoring and reporting suspicious transactions. The nine exchanges targeted for non-compliance include Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfenex. This action reflects India’s stringent stance on crypto regulation and its efforts to prevent money laundering and other illicit financial activities through digital asset platforms.
Hong Kong Opens Doors for Spot Crypto ETF Applications
Hong Kong’s financial regulator, the Securities and Futures Commission (SFC), has announced its readiness to accept applications for spot crypto exchange-traded funds (ETFs). The SFC, in conjunction with the Hong Kong Monetary Authority has reviewed its existing policy for intermediaries wishing to engage in virtual asset-related activities. The regulator is open to both in-kind and in-cash subscription and redemption for these ETFs. Transactions made by such ETFs should be carried out through SFC-licensed crypto platforms or authorized financial institutions. The move is seen as a significant step towards mainstream acceptance of crypto and is expected to attract both institutional and retail investors seeking exposure to digital assets.
Furthermore, the Hong Kong Monetary Authority (HKMA) has issued its final consultation paper on fiat-referenced stablecoins (FRS), outlining new regulations for stablecoin issuers. Under the new rules, issuers of FRS will be required to obtain a license from the HKMA, and they are prohibited from paying interest to users. The regulations are part of a risk-based approach to stablecoins that reference one or more fiat currencies, as these are more likely to be used in payments and have links with the traditional financial system. The consultation period will last until February 29, 2024.