- In this week’s weekly crypto policy roundup:
- Europe elected Member of the European Parliament and MiCA lead, Dr. Stefan Berger, to head the Central Bank Digital Currency (CBDC) project, showing its committment.
- South Korea’s Federation of Banks issued a guideline for crypto exchanges that requires them to prepare a reserve of at least 30% of average daily deposits for customer compensation, from September 2023 onwards.
- Australia and New Zealand proceed with caution and the Hong Kong Monetary Authority (HKMA) continued to find potential in distributed ledger technology (DLT) to enhance efficiency, liquidity and transparency in bond markets.
- View the weekly crypto policy update on Twitter and LinkedIn
The Week of August 28 in Crypto Policy
Eleven countries across the world, including the US and China, have adopted Central Bank Digital Currency (CBDC) so far. To show its commitment to the CBDC project, Europe has decided to appoint a new leader to head the controversial project.
Member of the European Parliament (MEP), Dr Stefan Berger, took the rein of the digital Euro plan on 30 August 2023. Commenting on his appointment, Berger said, “Having our own digital currency makes the EU more independent of third countries and belongs in the digital age.”
Berger is known for leading the Markets in Crypto-Assets Regulation (MiCA) project that institutes uniform EU market rules for crypto-assets that are not currently regulated by existing financial services legislation. Known to be pro-crypto, the German MEP has been appointed to play a similar role for CBDC Europe.
“However, the (CBDC) project will only succeed if you can trust the digital euro just as much as you can trust cash,” Berger said.
Berger’s CBDC Proposal needs to be backed by 27 Member States and the European Parliament. But faith in the digital Euro has been wavering, with several Member States and leading MEPs questioning the need for the CBDC and demanding stricter laws around crypto licensing.
Binance resumes Belgian services and Switzerland boosts ties with Hong Kong
Due to uncertainties around crypto regulation, companies continue to face challenges in Europe. In June 2023, Belgium’s Financial Services and Markets Authority (FSMA) asked crypto exchange Binance to stop offering exchange and wallet services, citing violations of offering such services from countries that are not members of the European Economic Area (EEA).
“The FSMA takes the view that by offering such services in Belgium from countries that are not members of the EEA, Binance is in violation of that prohibition,” the Belgian regulatory authority said.
On 28 August 2023, Binance resumed its Belgian services after two months by using its Polish Entity for its Belgian customers.
“Binance Poland is able to provide crypto exchange and custodian services in line with its registration as a virtual assets service provider (VASP) in Poland,” the company said.
Nevertheless, Belgian users will have to go through extra steps of resubmitting some of the required know-your-customer (KYC) documentation to comply with Polish regulatory requirements.
Meanwhile, some European companies have now started seeing Asia Pacific as fertile land for progress. Switzerland’s SEBA Bank announced receiving an approval-in-principle (AIP) from the Securities and Futures Commission (SFC) in Hong Kong to its regional subsidiary, SEBA Hong Kong on 30 August 2023.
Commenting on the move, Amy Yu, CEO of Asia Pacific (APAC) region, SEBA Hong Kong said, “It is exciting to be at the forefront of innovation in one of the world’s leading financial and technological centers, Hong Kong.”
Yu added, “We see enormous potential in Hong Kong’s journey to becoming a global crypto market leader and look forward to contributing to that trajectory. SEBA Hong Kong commends the example Hong Kong sets for regulatory standards worldwide and values the role of this license in expanding our regulated footprint across the Asia Pacific”.
Asia Pacific Takes Another Look At Crypto Laws And Regulation
South Korea’s Federation of Banks has recently issued a guideline for crypto exchanges that requires them to prepare a reserve of at least 30% of average daily deposits for customer compensation, from September 2023 onwards. This means Korean crypto exchanges like Upbit and Bithumb will have bank reserves of 3 billion Won or $2.3 million at least.
The move comes after the country approved 19 crypto-related bills, to give South Korea’s Financial Services Commission and the Bank of Korea more authority to oversee crypto operators and asset custodians.
After releasing the “Virtual Asset Real-Name Account Operation Guidelines,” the Korea Federation of Banks observed that while exchanges in the won market (supporting transactions between won and coins) that already have real-name accounts have been found to be ready for compliance with the standard, the coin market exchanges (which support only coin-to-coin transactions), most of which are completely capital impaired, are having difficulty accumulating reserves.
Meanwhile, Australia has acknowledged that there are many issues around CBDC, admitting that the project is years away for the country. The recently released Australian CBDC Pilot for Digital Finance Innovation said that the project has demonstrated the value in close engagement between industry and policymakers to better understand the opportunities and challenges associated with innovations in digital money.
However, it concluded that given the many issues that are yet to be resolved, any decision on a CBDC in Australia is likely to be some years away.
Similarly, New Zealand is also moving ahead with caution as the country’s Parliamentary report suggests that the country should take a calculated approach towards crypto regulation.
“We recommend that the Government and regulators create coherent and consistent guidance on the treatment of digital assets under current law,” the report stated.
Furthermore, the report recommended adopting a technologically neutral approach to regulation of the digital asset space, tailoring measures in relation to digital assets and related services and technology as required to deal with material risks associated with them.
Hong Kong Shows Optimism Towards Bond Tokenization
This year the Hong Kong Monetary Authority (HKMA) not only assisted the Government of the Hong Kong Special Administrative Region of the People’s Republic of China in launching its inaugural tokenized green bonds (Project Evergreen), but it also continued to find potential in distributed ledger technology (DLT) to enhance efficiency, liquidity and transparency in bond markets.
In a recently released report on Bond Tokenization, the HKMA observed that DLT holds promise for revolutionizing the operation of the financial markets.
“Project Evergreen is an important step forward in promoting the adoption and realization of the full potential of DLT in the bond markets,” the authority said. “Building on the experience from Project Evergreen, the HKMA, and the Government will work with the industry to conduct further tokenized issuance(s) to advance development on this front.”
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