This week in crypto policy news, leaders gathered at Davos for the World Economic Forum Meeting 2024, and the Crypto Council was right there in the mix, discussing the future of finance and how we can make an impact.
While the US approved several spot Bitcoin ETFs, significantly shifting US policy toward greater acceptance of digital assets, South Korea maintained that cryptocurrencies are not recognized as financial assets.
Recently India’s central bank digital currency, the digital rupee, achieved a significant milestone by recording over a million transactions in a single day.
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Crypto Regulation and Future Plans at Davos 2024
This week, leaders gathered at Davos for the World Economic Forum Meeting 2024, and the Crypto Council was right there in the mix, discussing the future of finance and how we can make an impact. The Crypto Council has also expanded its team with new members and key hires, bringing in a wealth of experience in policy, regulatory affairs, and government relations.
Meanwhile, Coinbase CFO Alesia Haas hailed the approval of Bitcoin ETF as a “landmark day for cryptocurrency,” marking a significant step towards bringing crypto into the mainstream. On the topic of crypto regulation, Haas noted that education among regulators has improved significantly, and many G20 countries have introduced crypto-specific regulations. She cited Europe’s MICA regulation and developments in Japan and Singapore as examples of thoughtful regulation, expressing optimism that the U.S. would follow suit with appropriate regulations.
ECB Takes a Step Towards Supporting Wholesale Financial Transactions
This week, the European Central Bank (ECB) is changing its settlement infrastructures for wholesale financial transactions. The Eurosystem has taken a significant step towards embracing technological innovation in the financial sector by launching a new initiative. The aim is to enhance the understanding of the settlement of wholesale transactions, particularly in the context of emerging technologies. The latest Economic Bulletin highlights the importance of settling transactions in central bank money to reduce risks and support financial stability.
Unlike previous individual efforts by national central banks, this coordinated approach by the Eurosystem will allow market players to test and compare three distinct solutions for their specific use cases. This initiative represents a more consistent and collaborative effort to gather feedback on proposed solutions and is a notable advancement in the Eurosystem’s strategy to manage technological innovation within the financial industry.
It is also adapting to emerging technologies like Distributed Ledger Technologies (DLT) in wholesale financial transactions. Exploring potential impacts, the ECB plans to facilitate interaction between DLT platforms and central bank money settlement.
Meanwhile, the European Banking Authority (EBA) issued the final report on guidelines to address crypto-assets service providers (CASPs) on 16 January 2024. The amended guidelines insert specific risk factors for crypto-assets in Title I. From self-hosted addresses to decentralized platforms, it sheds light on the risks CASPs should consider in their operations. In Title II, EBA offers valuable guidance to credit institutions on ML/TF risks associated with customers providing crypto-assets services, ensuring a comprehensive approach for a secure crypto ecosystem.
According to the report, “The EBA reviewed the revised ML/TF Risk Factors guidelines and concluded that the items set out in these guidelines could be extended to CASPs, but also that CASPs present some specific risks that should be considered by credit institutions and financial institutions when entering into a business relationship with them. Therefore, they would benefit from further guidance and clarification on these risks.”
APAC: South Korea, Thailand and India make Headlines
Diverging Crypto Policies: US Embraces Bitcoin ETFs, South Korea Upholds Ban
Last week, the US Securities and Exchange Commission (SEC) approved several spot Bitcoin ETFs, significantly shifting US policy towards greater acceptance of digital assets. In stark contrast, South Korea reaffirmed its ban on cryptocurrency ETFs, emphasizing the high risks associated with crypto investments. Despite being a major player in the crypto market, South Korea maintains that cryptocurrencies are not recognized as financial assets, prohibiting financial institutions from engaging in cryptocurrency investments. However, South Korea is developing a two-part crypto regulation framework set to come into effect in July 2024, focusing on the intricacies of cryptocurrency trading and ownership. This regulatory divergence comes amidst a global trend towards greater integration of cryptocurrencies with countries like the US increasingly acknowledging their potential. Despite South Korea’s firm stance, the country’s significant role in the crypto market and recent high-profile crashes, such as the Terra-Luna debacle, have prompted a swift regulatory response.
In an interview with CNBC, Circle CEO Jeremy Allaire asserted that stablecoins remain the ‘killer app’ of the blockchain and crypto space, despite the industry’s recent turbulence. Allaire predicted that the recent approval of spot Bitcoin ETFs in the US will boost the entire crypto sector. He also expressed optimism that increased regulatory clarity will further drive stablecoin adoption in 2024.
Binance Expands to Thailand Amidst Challenges in India
Binance, the world’s largest cryptocurrency exchange, has announced the launch of a new crypto exchange in Thailand in partnership with Gulf Energy. The move signifies Binance’s commitment to being a driving force in digitizing Thailand’s economy, which is seen as a strategic player in the global digital finance arena. Richard Teng, CEO of Binance, expressed the company’s intention to contribute to the country’s economic growth and the creation of new opportunities. However, as Binance forges ahead with its expansion in Thailand, it faces setbacks in India, with its app being delisted from the Play Store, indicating a loss of tractions in the Indian market.
India’s Digital Rupee Achieves One Million Transactions in a Day
India’s central bank digital currency, the digital rupee, achieved a significant milestone on 27 December 2023, by recording over a million transactions in a single day. This achievement, however, was not without assistance from retail banks’ employees. A letter from the Reserve Bank of India (RBI) Governor Shaktikanta Das confirmed this milestone, while another from a participating bank revealed that it had encouraged the deposit of employee funds and benefits using the digital rupee instead of the existing fiat currency. Despite this achievement, it remains unclear whether the digital rupee has consistently hit a daily transaction volume of over a million. The RBI is currently running both retail and wholesale central bank digital currency pilots. However, the move has been met with some resistance, with the All India Union Bank Employees Federation expressing dissatisfaction, arguing that management cannot compel employees to use the digital wallet.
Tether’s Growing Use in Money Laundering
A recent United Nations report has cast a spotlight on the increasing use of Tether, a stablecoin tied to the US dollar, in money laundering activities across Southeast Asia. Unlike Bitcoin, which is primarily used for speculative investment, Tether has become a preferred tool for traders to swiftly move between crypto trades. This characteristic has inadvertently made it a go-to for illicit transactions. Highlighting the seriousness of this issue, the report cites a major crackdown by Singaporean law enforcement, which led to the recovery of a staggering $737 million in combined cash and cryptocurrency assets last August. The operation underscores a growing trend of Tether’s misuse in the shadow economy and the escalating efforts by authorities to combat such financial crimes.