Summary
- The UK is preparing to introduce stablecoin and staking rules within the next six months. The country is also aiming to provide clearer guidelines on crypto by 2024, following an earlier consultation on stablecoins and the enactment of the Financial Services and Markets Act last summer.
- Hong Kong’s central bank has issued guidance for firms interested in offering custodial services for digital assets, mandating firms to hold clients’ digital assets in client accounts segregated from the firm’s assets in the event of an insolvency.
- South Korean politicians are making crypto an election issue, Japan is greenlighting crypto in investment funds and South Africa is looking at stablecoin use cases.
- Read our crypto policy news roundup and share our thread on X and LinkedIn.
Starting with the EU this week, the European Commission revealed a comprehensive digital connectivity package for Europe’s digital infrastructure future. The “How to master Europe’s digital infrastructure needs?” white paper analyses challenges and proposes scenarios for investments, innovation, and a true Digital Single Market. This strategic document is part of the Commission’s broader effort to enhance Europe’s digital sovereignty and ensure its competitive stance on the global stage. By addressing critical areas such as high-speed internet access, secure communication networks, and advanced digital services, the package seeks to lay the groundwork for sustainable digital growth and development across the continent. The initiative underscores the importance of collaborative efforts among EU member states, private sector stakeholders, and international partners to achieve these ambitious goals.
Meanwhile, a column by the Centre for Economic Research (CEPR) delves into the ongoing debate regarding the potential impact of a digital euro on bank funding, aiming to demystify concerns related to bank disintermediation. The discussion is informed by various studies and expert opinions, including the European Central Bank’s (ECB) Occasional Paper Series, which explores different approaches for assessing the effects of a digital euro on euro area banks. Critics argued that the concept of a digital euro is flawed and could lead to its failure. The debate encompasses the benefits, costs, and risks associated with introducing a digital euro, with some experts emphasizing the need for a digital euro to ensure the eurozone’s competitiveness in the digital age.
UK’s Forthcoming Stablecoin and Staking Regulations
The UK government has pledged to provide clearer guidelines on crypto by 2024, following an earlier consultation on stablecoins and the enactment of the Financial Services and Markets Act last summer.
The UK’s Economic Secretary to the Treasury, Bim Afolami, has announced that the government expects to introduce new regulations for stablecoins and crypto-staking services within the next six months. This development comes as the UK aims to establish a more structured legal framework for the rapidly evolving crypto-asset sector. Afolami also emphasized the government’s commitment to advancing these regulations promptly, highlighting the importance of secondary legislation as a priority. The move is part of a broader effort to enhance the oversight of crypto exchanges and related services, which remains a significant focus for the UK government. The push for these specific regulatory measures is also influenced by the upcoming general election, underscoring the urgency to deliver concrete proposals to govern the use and management of stablecoins and staking services in the UK’s crypto asset market.
The Law Commission of England and Wales is seeking public feedback on draft legislation that would formally recognize crypto as property. This consultation follows the Commission’s report from June 202, which concluded that digital assets like crypto-tokens and non-fungible tokens (NFTs) are capable of attracting personal property rights. Stakeholders are invited to submit their responses by 22 March 2024, to shape the final version of the bill to be proposed to the government.
The Commission has also initiated a project to explore the complexities of digital assets and electronic trade documents (ETDs) within the realm of private international law. This inquiry, titled “Digital assets and ETDs in private international law: which court, which law?” aims to address the pressing legal challenges and prevalent issues that arise when digital assets and ETDs intersect with international legal disputes.
Commissioner Sarah Green of the Law Commission of England and Wales has underscored the significant challenges that digitization and decentralization present to traditional methods of resolving conflicts within private international law. “Digitization and decentralization pose significant challenges to the traditional methods by which private international law resolves conflicts of jurisdiction and conflicts of laws,” said Green.
APAC: Hong Kong, Japan, South Korea, Indonesia, Turkey Make Headlines
HKMA Guidance on Digital Asset Custodial Services
The Hong Kong Monetary Authority (HKMA) has issued a guidance document emphasizing the need for authorized institutions (AIs) to conduct a comprehensive risk assessment and establish appropriate policies for managing risks associated with the provision of custodial services for digital assets. As the digital asset sector expands, the HKMA recognizes the growing interest among Ais in engaging in digital asset-related activities, particularly those involving custodial services. To ensure the adequate safeguarding of client digital assets held in custody and the proper management of associated risks, the HKMA has outlined expected standards in the guidance. These standards are informed by international norms and practices, offering flexibility for Ais to implement operational arrangements that align with the specific nature, features, and risks of the digital assets they handle. The HKMA plans to monitor the evolving digital asset market and international regulatory landscape closely, indicating that further guidance may be provided as needed.
Furthermore, Christopher Hui, Secretary for Financial Services and the Treasury, said Hong Kong will submit stablecoin and over-the-counter crypto trading bills to the Legislative Council “as soon as practicable.” This announcement follows the launch of public consultations by the Financial Services and the Treasury Bureau (FSTB) on introducing a licensing regime for OTC crypto trading service providers, with the consultation period ending on 12 April.
Japan’s Cabinet Approves Crypto for Investment Funds
Japan’s cabinet has given its approval to a bill that would permit venture capital firms and other investment funds to hold crypto directly. This legislative move, initiated by Prime Minister Fumio Kishida’s administration represents a significant step towards integrating digital assets into the nation’s financial investment framework. The bill, which seeks to amend the Industrial Competitiveness Enhancement Act, was approved on 16 February and is set to be submitted to the parliament. If passed, the amendment will allow investment limited partnerships- a common vehicle for venture capital firms to raise capital – to include crypto in their list of acquirable assets.
Indonesia Mandates Crypto Exchange Registration with National Bourse
Indonesia’s government has mandated that all crypto exchanges operating within the country register with its newly established national bourse for digital assets. This directive aims to bring greater regulatory oversight and structure to the burgeoning crypto market in Indonesia. By requiring registration with the national exchange, the Indonesian authorities seek to enhance the transparency, security, and reliability of digital asset transactions, aligning with global trends towards the regulation of crypto operations. This move is part of a broader effort to integrate digital assets into the formal financial system while protecting investors an ensuring compliance with international standards for financial activities.
South Korea’s Election Promises on Cryptocurrency
In the lead-up to South Korea’s national elections on 10 April, both the ruling People Power Party and the opposition Democratic Party are making significant crypto-related promises to voters. The People Power Party has proposed several initiatives including exploring the possibility of allowing spot bitcoin ETFs, establishing a ‘digital asset promotion committee’ to propose laws and impose sanctions, and prioritizing the creation of a regulatory framework over the imposition of taxes on crypto gains. This could mean delaying the crypto gains tax, initially set for January 2025, potentially until 2027. Meanwhile, the Democratic Party has also pledged to enable the purchase of spot bitcoin ETFs and is expected to present a comprehensive proposal to institutionalize and energize the crypto sector.
Turkey’s Regulatory Framework for Crypto Industry
Turkey is actively developing a regulatory framework for the crypto industry, aiming to balance consumer protection with the promotion of innovation within the sector.
Ömer İleri, overseeing Information and Communication Technologies for Turkey’s ruling party, has engaged with representatives from the crypto sector, including legal experts and media members, to discuss the forthcoming regulations. The primary objective of this regulatory package is to ensure the safety of citizens and investors, regulate platforms effectively, and simultaneously create an environment conducive to innovation. This initiative is part of Turkey’s broader ambition to become a leader in various technological fields, including blockchain and AI, as evidenced by initiatives like Blockchain Istanbul and Forum Metaverse under President Recep Tayyip Erdoğan’s administration.
South Africa’s Exploration of Stablecoin Use Cases and Regulatory Implications
South Africa’s Intergovernmental Fintech Working Group (IFWG), a collaborative body of financial sector regulators, is embarking on an initiative to scrutinize the use cases of stablecoins and their regulatory implications.
This effort is part of a broader examination of the impact of tokenization on markets, with a focus on understanding how real-world assets like securities can be represented on a blockchain. The group’s analytical work throughout the year aims to identify appropriate policy and regulatory responses to the emerging trends in stablecoins and tokenization. A discussion paper on tokenization policy, expected in December, will outline the regulatory implications of tokenization and blockchain-based financial market infrastructure. This move aligns with ongoing efforts to refine its approach to crypto regulation.
