This week in crypto regulation, global cooperation for asset tokenization continues as the UK advances its regime, Hong Kong focuses on tokenization, Thailand’s Kasikornbank makes a strategic move, and Taiwan introduces a bespoke framework.
The US sees conviction of FTX founder Sam Bankman-Fried for “one of the largest financial deceptions in US history.”
The UK has unveiled a strategic blueprint for crypto asset regulation in November 2023, aiming to establish itself as a leading crypto asset hub. This includes regulating fiat-backed stablecoins.
With the recent conviction of FTX founder Sam Bankman-Fried, the US regulators may amplify efforts to avoid fraud and money laundering through crypto, that led to “one of the largest financial deceptions in US history.”
Meanwhile, global collaboration for asset tokenization has gained momentum in the EU and APAC, leaving the US behind in cross-border industry developments.
UK’s Ambitious Leap into Crypto Asset Regulation
The UK government unveiled a comprehensive strategy to regulate crypto assets in November 2023, as the country released three publications by His Majesty’s Treasury (Exchequer) and Finalized Guidance from the Financial Conduct Authority (FCA). The recently released consultation papers indicate a forward-thinking approach, particularly influenced by events like the FTX failure. Aimed at creating a robust framework around crypto asset regulation, considering technological advancements, the initiative seeks to curate an environment conducive for crypto service providers – in line with the country’s efforts to become a pro-innovation crypto asset hub.
The feedback on the consultation included a demand for clearer details on the Financial Market Infrastructure Special Administration Regime (FMI SAR) applications, particularly concerning customer funds and custody assets.
Furthermore, the UK government presented its consultation on the management of systemic digital settlement asset firms’ failures, including stablecoins. In just a footnote, the FCA confirmed that it will be outlining proposals for regulating stablecoins.
Set to launch a structured two-phase approach by early 2024, the UK government is focusing on regulating fiat-backed stablecoins. Concurrently, the government is contemplating measures for integrating overseas fiat-backed stablecoins into the UK payment systems, possibly by mandating FCA authorization for payment arrangers facilitating such transactions. However, the non-fiat backed stablecoins and other unbacked crypto assets, despite their allowance in payment chains, will remain unregulated due to HM Treasury’s assessment of their incompatibility with regulated payment systems.
FCA Commits to Enforcing Regulations on Crypto Asset Promotions
In a bid to ensure clarity and accuracy in crypto asset promotions, the FCA has unveiled a 30-page handbook detailing best practices for crypto firms, especially regarding social media advertisements. Prevalent issues were highlighted by the FCA including promotions about crypto’s safety and unclear risks warnings. The FCA asserted the high-risk nature of crypto investments, urging firms to present information that aids consumers in making well-informed decisions.
APAC: Hong Kong, Thailand, Singapore See Decisions Around Crypto Trading and Asset Tokenization
Moving toward APAC, during the Hong Kong FinTech Week, the country’s Securities and Futures Commission (SFC) announced taking assertive measures to regulate digital asset tokenization. Underlining its stance, the SFC now classifies tokenized securities at par with conventional securities, meaning that they might be bound by the same legal and regulatory framework. The regulator released a circular that emphasized robust compensation arrangements for licensed trading platforms to mitigate potential losses from security tokens.
While the agency acknowledges the potential advantages tokenization can bring to the financial sector, it also remains vigilant about the possible risks this emerging technology might introduce.
Thailand’s second-largest bank, Kasikornbank, expanded its foothold in the digital asset landscape by procuring a majority stake (97%) in a local crypto exchange called Satang Corporation Co on 27th October 2023. The investment will further the bank’s endeavours in the crypto domain, focusing on a diverse range of digital services including crypto trading, digital asset custodian services, fund management, and blockchain infrastructure development. This acquisition also aligns with Kasikornbank’s broader vision for Web3 and AI.
Taiwan is taking steps towards establishing a robust regulatory framework for digital assets with the Virtual Asset Management Bill that aims to define digital assets and safeguard customers. The Bill recently completed its first reading in Taiwan’s Legislative Yuan.
As the country did face an impact from the FTX fallout, VASPs operating in Taiwan will soon require a license, and those not compliant could face operational shutdowns. These regulatory advancements underscore Taiwan’s commitment to creating a secure and transparent environment for digital assets.
Singapore’s principal financial regulator and central bank, the Monetary Authority of Singapore (MAS), has committed to crypto-centric alliances with Japan, Switzerland and the UK. On 30 October, the MAS announced an international crypto collaboration with Japan’s Financial Services Agency (FSA), the Swiss Financial Market Supervisory Authority (FINMA), and the UK’s FCA. Their shared goals is to pioneer joint pilots focusing on digital assets, especially in areas such as fixed income, foreign exchange and asset management.
According to the MAS, “as the pilots grow in scale and sophistication, there is a need for closer cross-border collaboration among policymakers and regulators.” This collaborative venture stems from Singapore’s Project Guardian, initiated in 2022, that emphasized on asset tokenization.