BlockReg Monthly: March 2024

BlockReg Advisors ' team presents a monthly wrap-up of the key news concerning digital assets in the prominent business press and governmental information services.

Regulatory News

European Union (EU)

European Securities and Markets Authority (ESMA) publishes its third batch of MiCA Consultations - On March 25, 2024, the European Securities and Markets Authority (ESMA) has published its latest series of consultations under the Markets in Crypto Assets Regulation (MiCA). These consultations encompass a range of topics including market integrity, portfolio management standards, crypto-asset transfers, and cybersecurity protocols. Noteworthy is ESMA's alignment of guidelines with existing regulatory frameworks, such as the Market Abuse Regulation and MiFID II, to ensure regulatory compliance among Crypto-Asset Service Providers (CASPs). Stakeholders have until June 25, 2024 to provide feedback, with ESMA expected to review responses and issue final reports by December 2024.

European Securities and Markets Authority (ESMA) finalizes its first batch of Draft Technical Standards for MiCA - On March 25, 2024,? ESMA published its final Draft Technical Standards for the Markets in Crypto Assets Regulation (MiCA) on various aspects such as notification procedures for crypto-asset services, authorization processes for Crypto-Asset Service Providers (CASPs), and complaints-handling procedures. Industry responses to the initial ESMA draft RTS consultation contested the assessment of acquisitions in CASPs, with stakeholders finding ESMA's requirements stricter than MiFID. Despite objections, ESMA upheld its initial proposal. The next step involves the submission of the Draft Technical Standards to the Commission, which has three months to adopt, amend, or reject them.

Prioritization of AMLA in ECON and LIBE votes on AML Package - The ECON and LIBE Committees voted on the AML Package provisional trilogue agreement, including the Anti-Money Laundering Regulation (AMLR), Anti-Money Laundering Authority (AMLA), and the Sixth Anti-Money Laundering Directive (AMLD6), on March 19, 2024. As previously indicated in early March, it's expected that AMLR and AMLD6 will undergo the corrigendum procedure. However, AMLA may receive priority attention from lawyer linguists and could be finalized before the others.

European Central Bank seeks experts for digital euro Rulebook Development - On March 18, 2024 the European Central Bank initiated seven workstreams to establish the digital euro Rulebook. Experts are invited to contribute, with applications closing on April 5, 2024. The Rulebook Development Group (RDG) includes representatives from various parts of the ecosystem, focusing on interactions between consumers, retailers, intermediaries, and the Digital Euro Service Platform (DESP). The rulebook aims to set minimum user experience standards for the central bank digital currency (CBDC) and address certification, approvals, and risk management for different participants.

European Banking Authority (EBA) finalizes complaints handling standards for ART issuers - On March 13, 2024, the European Banking Authority (EBA) released final draft Regulatory Technical Standards (RTS) for handling complaints by ART issuers. These standards, developed under MiCAR, outline procedures and requirements for complaints management policies, information provision, and investigation procedures. The draft RTS, developed with ESMA, underwent public consultation and received general support. However, some respondents sought greater alignment between EBA's RTS and ESMA's standards for crypto asset service providers. In response, the EBA made targeted amendments to enhance clarity and alignment with ESMA.

European Banking Authority (EBA) releases draft guidelines for MiCA issuers' redemption plans - On March 8, 2024, the European Banking Authority (EBA) has issued a consultation on draft guidelines concerning issuers' redemption plans under the Markets in Crypto Assets (MiCA) Regulation. These guidelines aim to ensure swift redemption of asset-referenced and e-money tokens (ARTs/EMTs) in case of issuer insolvency or inability to fulfill obligations. MiCA mandates issuers to develop plans for such contingencies, with triggers outlined by the EBA reflecting the crypto market's volatility. National Competent Authorities (NCAs) are urged to consider various factors, including market perception, crypto market conditions, and macro-economic trends, when assessing issuers' ability to meet MiCA obligations. The consultation period ends on 10th June 2024.

United Kingdom (UK)

London Stock Exchange Plans to List Crypto ETNs by May After FCA Update - The London Stock Exchange (LSE) is set to list cryptocurrency exchange traded notes (ETNs) by the end of May, following a shift in stance by the UK's Financial Conduct Authority (FCA). Issuers will have until April 15 to submit such proposals if they want to have the securities listed on May 28, it added. The move marks a significant shift in UK crypto regulation, as the FCA previously banned the sale of crypto ETNs to retail investors but now allows them for professional investors.

UK Government Hosts Cryptoasset and Fintech Breakfast Reception to Discuss Regulatory Framework and Industry Growth - On March 21st, 2024, Bim Afolami , Economic Secretary to the Treasury, hosted a breakfast reception at No.10 Downing Street focused on crypto assets and fintech. Stakeholders, including the Financial Conduct Authority and industry representatives, discussed creating a fair regulatory framework. Afolami highlighted the UK's fintech leadership, attracting $5.1 billion in investment in 2023. He emphasized the importance of maintaining the UK's position as a top destination for fintech firms, supporting job growth and economic development.

UK regulator to tighten measures against crypto market abuse - On March 19, 2024, Financial Conduct Authority published the business plan for 2024/25 with the plan to enhance its capabilities in detecting and addressing market abuse within the crypto sector over the next year. This includes improving monitoring systems and developing advanced analytics for better oversight. Additionally, the Financial Conduct Authority aims to establish a proportionate market abuse regime for crypto assets and the PISCES facility. Despite potential challenges for crypto companies, the Financial Conduct Authority aims to support innovation while also supervising financial promotions and enhancing investor education to combat scams.

Financial Conduct Authority updates position on Crypto Asset Exchange Traded Notes for professional investors - On March 11, 2024, the Financial Conduct Authority has announced that it will not oppose requests from Recognised Investment Exchanges (RIEs) to establish a UK listed market segment for crypto asset-backed Exchange Traded Notes (cETNs) targeted at professional investors. However, the ban on selling cETNs and crypto derivatives to retail consumers remains in place due to the significant risks involved. The Financial Conduct Authority emphasizes that cryptoassets are high-risk and largely unregulated, warning investors to be prepared to lose all their money. The Financial Conduct Authority is actively collaborating with government, international partners, and industry to develop the UK's crypto asset regulatory regime and set international standards in this domain.

Financial Conduct Authority warns Annex 1 firms over anti-money laundering failings - On March 5, 2024, the Financial Conduct Authority has cautioned Annex 1 firms regarding anti-money laundering deficiencies, urging them to promptly address issues like activity inconsistencies and inadequate controls. Failure to rectify weaknesses may result in regulatory action. Emphasis is placed on combating financial crime to uphold market integrity, with ongoing efforts outlined in the FCA's strategy to reduce and prevent financial crime, requiring collaboration between public and private sectors.

UK Government launches consultation on crypto-asset reporting framework - On March 7, 2024, the UK Government has initiated a consultation to gather opinions on implementing the Crypto-Asset Reporting Framework (CARF) as part of its strategy to address the tax gap. Originally announced in November 2023, this initiative aligns with OECD - OCDE tax transparency standards and aims to facilitate information exchanges in the UK by 2027. The consultation seeks feedback on proposed amendments to the UK's Common Reporting Standards to accommodate CARF and will be open for submissions until May 29, 2024.

LATAM

Brazil's Stock Exchange Aims to Become Custodian for Banks, OTC Desks, and Bitcoin Exchanges' Crypto Holdings - On March 25, 2024, Brazil's Stock Exchange, B3, revealed its annual report outlining its strategy for the crypto market, aiming to serve as the custodian for Bitcoin and other cryptocurrencies held by exchanges, banks, OTC desks, and digital asset firms in the country. This move aligns with potential regulatory requirements for asset segregation by the Brazilian Central Bank. B3's strategy prioritizes providing infrastructure and services for digital assets, including automated services for financial institutions, institutional infrastructure for digital assets, and a platform for verifying asset reserves. Additionally, B3 plans to expand its cryptocurrency trading services, initially launched in partnership with Banco Inter's investment platform, Inter Invest, catering to a specific client base.

Brazilian Authorities Form Committee to Boost RWA Carbon Credit Tokens - On March 25, 2024, the Brazilian government has published the DECREE No 11.961, that speaks about launching the Interinstitutional Committee of the Brazilian Sustainable Taxonomy (CITSB) along with key regulatory bodies such as the Central Bank and CVM. This move signals a concerted effort to advance the market for tokens backed by real-world assets (RWA), particularly those tied to carbon credits. By creating a standardized classification system for sustainable activities and assets, the committee aims to foster a green and digital economy while addressing environmental and climate concerns.

Receita Federal introduces 15% tax on Bitcoin, effective immediately in Brazil - On March 11, 2024, the Brazilian Federal Revenue Office has enacted a new regulation imposing a 15% tax on Bitcoin and cryptocurrencies held abroad. According to the new directive, users with crypto assets held on foreign exchanges will be subject to this tax. The regulation aims to address issues related to offshore assets and applies to profits from digital asset operations conducted on exchanges not registered in Brazil. The move reflects the government's efforts to regulate the growing crypto market and ensure compliance with tax laws. Brazilian taxpayers with overseas assets, including cryptocurrencies, are now required to disclose their earnings on a new form in their tax declarations. Additionally, experts provide guidance on how to properly declare and pay taxes on cryptocurrency transactions to comply with the law.

MENA

CBUAE Launches "The Digital Dirham" Central Bank Digital Currency Strategy - On March 23, 2024, the Central Bank of UAE (CBUAE) has commenced the implementation of its Central Bank Digital Currency (CBDC) Strategy, known as "The Digital Dirham," in collaboration with G42 Cloud and R3. The strategy, part of CBUAE's Financial Infrastructure Transformation (FIT) Programme, aims to enhance domestic and cross-border payments, promote financial inclusion, and strengthen the UAE's payment infrastructure. The first phase includes soft launch of mBridge for cross-border transactions, proof-of-concept for bilateral CBDC bridges with India, and domestic CBDC issuance. CBDC will serve as a secure, efficient form of payment and contribute to the UAE's digital transformation. Governor H.E. Khaled Mohamed Balama emphasizes CBDC's role in positioning the UAE as a global financial hub and accelerating digitalization.

ADGM Consultation Paper on Registering Trust Information - On March 27, 2024, the Registration Authority?of Abu Dhabi Global Market (ADGM) has released a Consultation Paper seeking public feedback on proposed amendments to the Beneficial Ownership and Control Regulations 2022. The amendments aim to establish a non-public register of certain information for express trusts within the ADGM jurisdiction. Key features include requirements for trusts with an ADGM trustee acting by way of business, maintenance of trust records including beneficial ownership, trust name, creation date, and objectives, trustee responsibility for record maintenance, and non-public accessibility of the trust register. The proposed legislative framework reflects ADGM's commitment to combat money laundering, terrorist financing, and proliferation financing by providing competent authorities with essential trust information. The consultation period closes on April 21, 2024.

Consultation Paper 157: Proposed changes to DFSA's fees - The Dubai Financial Services Authority (DFSA) issues Consultation Paper 157 on March 14, 2024, proposing amendments to its fee structure. The aim is to align fees with regulatory responsibilities while considering commercial interests. Stakeholders, including authorized firms and market institutions, have until May 15, 2024, to provide feedback via the provided link . Following consultation, changes to the DFSA's Fee Rulebook will be made, with updates communicated through the DFSA website.

DIFC announces amendments to Select Legislation in 2024 - Dubai International Financial Centre (DIFIC) has enacted amendments to its Employment Law, Trust Law, Foundations Law, and Operating Law to align with international best practices. These legislative changes aim to ensure DIFC laws remain robust while catering to the unique needs of the region. Key amendments include requiring employers to make "top-up" payments into Qualifying Schemes for GCC national employees, strengthening DIFC Courts' jurisdiction over trusts and foundations, and enhancing the Registrar of Companies' powers to regulate entities operating outside standard business hours. These amendments, effective from March 8, 2024, reflect DIFC's commitment to maintaining a transparent and robust legal and regulatory framework in line with global best practices.

DIFC introduces groundbreaking Digital Assets Law and enhanced security regulations - On March 13, 2024, Dubai International Financial Centre (DIFC) announced enactment of new digital assets law, new law of security and related amendments to selected legislation. The Digital Assets Law, effective March 8, 2024, delineates the legal characteristics of digital assets and provides a framework for their control and transfer, while updates to existing laws accommodate specific issues related to this asset class. Additionally, the new Law of Security, also effective March 8, 2024, aligns with international best practices and clarifies procedures for securing digital assets, ensuring DIFC remains at the forefront of regulatory excellence.

Dubai Financial Services Authority (DFSA) releases Consultation Paper no 156 seeking public comment on proposals for changes to the crowdfunding regime - On Mach 5, 2024, DFSA issued the Consultation Paper (CP) that outlines proposed changes to the crowdfunding regime based on supervisory experience and feedback from a Call for Evidence published in May 2023. The paper targets crowdfunding operators, potential applicants for licensing, service providers and investors. The paper invites public comment on these proposals through an online response form until May 6, 2024. After the consultation, relevant changes will be made to the regulatory framework, with notifications issued on the regulatory authority's website.?

Global News

International Monetary Fund recommends taxation of cryptocurrencies - The International Monetary Fund (IMF) urges Pakistan's FBR to expand the Capital Gains Tax to include cryptocurrencies and to review real estate and securities taxation slabs. It proposes obligating property developers to track and report property transfers, imposing penalties for non-compliance. These recommendations could become part of the upcoming bailout package, ensuring taxation of gains from real estate transactions and listed securities, regardless of ownership duration.

Uzbekistan increases fees for crypto operations - On March 19, 2024, Uzbekistan’s National Agency for Prospective Projects ?(NAPP) raised monthly fees for crypto market participants, citing improved profitability in the sector. Crypto exchanges will now pay 740 basis reference value (BRV) per month, up from 400 BRV, while crypto retailers face a fee increase from 20 BRV to 185 BRV. The NAPP expects doubled state revenue from the crypto sector with the new fees, effective June 20, 2024.

El Salvador drops income tax for foreign investments and remittances - El Salvador has eliminated income tax on foreign investments and remittances, reducing the rate from 30% to 0% with no caps on the amount. President Nayib Bukele announced the change on social media, calling it a significant reform to attract international investments and facilitate money transfers.

Unlicensed cryptocurrency exchanges in Hong Kong must cease operations by May 31, 2024 - On March 1, 2024,tThe Securities and Futures Commission (SFC) of Hong Kong has announced a deadline of May 31, 2024, for all cryptocurrency exchanges operating without a license to cease their operations. The SFC also encourages investors currently using unlicensed platforms to transition to exchanges that have either obtained or applied for a license. The move aligns with the SFC's efforts to regulate and license the cryptocurrency sector more comprehensively.

Industry News?

European Union (EU)

French teenagers turning to crypto investment - A recent report reveals that French teenagers, particularly those aged 18-24, are increasingly investing in cryptocurrencies, with 15% of this demographic already involved in the crypto market. Despite restrictions on crypto platforms for minors, adolescents and young adults are drawn to the potential profits and adrenaline rush of trading. However, alongside this trend, there is a growing concern about scammers exploiting the rising interest in crypto, as evidenced by recent complaints against fraudulent investment platforms and fake news articles promoting cryptocurrency schemes.

Meld to launch tokenized RWAs for retail investors - Crypto banking firm Meld , with a VASP license in Lithuania, will soon introduce tokenized real-world assets (RWA) for retail investors. This partnership with German-licensed DeFi platform Swarm Markets aims to offer borrowing and lending services against tokenized RWAs. Swarm Markets, claiming to be the world’s first regulated DeFi protocol, operates under BaFin supervision. Meld's collaboration with Swarm intends to provide cross-asset margining opportunities for retail investors, enhancing traditional investment methods. Analysts project significant growth potential for tokenized RWAs, estimating up to $10 trillion by 2030.

Deutsche B?rse launches regulated crypto spot platform for institutional customers - Deutsche B?rse Group has launched the Deutsche B?rse Digital Exchange (DBDX), a regulated crypto spot platform for institutional customers. It offers a secure ecosystem for trading, settlement, and custody of crypto assets. Trading initially operates via a price request function, with multilateral trading planned. Crypto Finance (Deutschland) GmbH handles transaction processing and custody. This initiative aligns with Deutsche B?rse's goal of offering innovative financial solutions and strengthens its presence in the digital asset market.

United Kingdom (UK)

Lloyds Bank spearheads UK's trade digitalisation with WaveBL Partnership - Lloyds Bank joins forces with WaveBL for the UK's first trade digitalisation partnership, enabling clients to streamline trade processes using electronic Bills of Lading (eBLs) and fostering sustainability. The move signals Lloyds Bank's ongoing commitment to trade digitalisation and aligns with its participation in the FIT Alliance, aiming for a 100% global eBL uptake by 2030. This initiative follows Lloyds Bank's prior achievements in completing the UK's first digital promissory note transaction and successfully adopting the Electronic Trade Documents Act (ETDA) in 2023.

OANDA launches cryptocurrency trading in the UK - OANDA , owned by CVC Capital, has launched its cryptocurrency offering in the UK, leveraging technology from its acquisition of Coinpass. The move provides access to 63 crypto trading pairs and comes amid the UK's ongoing establishment of cryptocurrency regulations. OANDA already offers a range of financial services in the UK, including CFD trading and cross-border payments, with a focus on making crypto trading more accessible to all levels of investors.?

LATAM

Citi and Brazilian Development Bank join Hyperledger, driving blockchain innovation in financial services - Citi and the Brazilian Development Bank (BNDES) have become new members of the Hyperledger Foundation , contributing to the development of enterprise-grade blockchain solutions. Hyperledger Besu Financial Services Working Group, chaired by DTCC, aims to enhance the open-source Ethereum client for financial applications. The group will define new features and improvements to meet industry needs, supported by founding members like Accenture and Mastercard. Hyperledger Web3j, an Ethereum integration library, was approved to streamline blockchain development for enterprise users. Citi's involvement underscores a commitment to shaping the future of finance through blockchain technology.

Historic Printing House partners with Banco do Brasil to introduce DREX offline payments - Giesecke & Devrient (G&D), a renowned printing house with a 168-year history of printing physical currency in Europe, has teamed up with Banco do Brasil (BB) to facilitate offline payments for Brazil's digital currency, DREX. This partnership marks a significant shift for G&D, which has transitioned its focus to producing central bank digital currencies since 2020. The collaboration aims to explore innovative ways to integrate DREX into everyday transactions in Brazil, leveraging offline capabilities to enhance financial access, especially in regions with limited internet connectivity. The proposed solution, presented during the Lift Challenge program by the Brazilian Central Bank, involves a card-like device loaded with DREX stablecoins, allowing users to conduct transactions seamlessly without the need for internet connectivity.?

Mercado Bitcoin announces annual audit by Ernst & Young - Mercado Bitcoin (MB) has revealed that its financial statements and custody are now subject to annual audits by Ernst & Young (EY), one of the world's largest auditing and consulting firms. As one of the few exchanges worldwide, and the only one in Latin America, to undergo EY's annual audit, MB emphasizes its commitment to transparency and security for its customers and partners. The rigorous audit process conducted by EY includes thorough examination of MB's blockchain and cryptocurrency holdings, involving analysis of thousands of wallets and millions of transactions.

MENA

ADGM 2024 growth outlook: Over 70% of companies plan workforce expansion - A recent survey within ADGM reveals strong growth projections for 2024, with over 70% of companies planning workforce expansion. Asset Management leads growth expectations, followed by Fintech, Digital Assets, and Professional Services sectors. ADGM's robust regulatory environment and strategic location are key factors driving its appeal, with a vast majority of business leaders expressing confidence in recommending ADGM. Additionally, Abu Dhabi's reputation for safety, stability, and quality of life further enhances its attractiveness as a business destination.

Binance partners with Hassan II University in Casablanca to launch blockchain courses - Binance partners with Hassan II University in Casablanca to launch blockchain courses. ENSET faculty to undergo a 10-week online training program to integrate blockchain into the curriculum. The initiative aims to equip students with future-ready skills in blockchain technology. Hassan II University is known for its diverse faculties and commitment to technological advancement. The expansion into Morocco reflects the growing demand for blockchain education worldwide.

Nexo clears regulatory hurdles and receives license approval in the Middle East - Nexo has overcome its final hurdles with the approval of its license in the Middle East. The Dubai entity, Nexo Services FZE , has received preliminary approval from the Dubai Virtual Assets Regulatory Authority (VARA) for virtual asset lending and borrowing, management, investment, and brokerage-dealer services. The company now aims to obtain a preparatory license followed by a final operating license to fully offer its cryptocurrency services to regional clients. This move to the UAE follows setbacks in Bulgaria and the US, where Nexo faced regulatory challenges and penalties. The UAE's regulatory clarity and compliance paths make it an attractive destination for global cryptocurrency players like Nexo.

OKX granted in-principle approval for MPI license by MAS - OKX achieves in-principle approval for MPI License from MAS in Singapore, marking a pivotal milestone. The approval underscores OKX's commitment to global expansion and responsible innovation. Singapore's regulatory framework and talent pool position it as an ideal market for OKX's growth strategy. Initial focus will be on offering spot products, with plans for expanding the product suite gradually. OKX remains dedicated to nurturing the local Web3 community and enhancing Singapore's ecosystem.

SafePal launches crypto-friendly banking gateway and Visa card for mainstream adoption - SafePal has partnered with Swiss bank Fiat24 to launch a new banking gateway and virtual crypto Visa card, aiming to improve accessibility to cryptocurrency usage. Users can open free Swiss bank accounts within the SafePal app, allowing them to seamlessly use cryptocurrencies for daily expenses and transfers. The virtual Visa cards support payments via third-party platforms. Users can also earn points for various activities to unlock additional benefits and privileges. SafePal and Fiat24 plan to expand their services globally.