Crypto Compliance Weekly Roundup | April 15, 2024

Welcome to the Crypto Compliance Weekly, where we highlight crucial regulatory updates across the globe.

This week, ???? South Korea plans to enhance crypto trading security with new regulatory guidelines, ???? ESMA's latest findings reveal an in-depth analysis of crypto market structures, and ???? the SEC and Uniswap Labs battle for clarity in cryptocurrency regulation.

Explore more below.

APAC

???? South Korea to Enhance Crypto Trading Security with New Regulatory Guidelines

• South Korea is set to tighten regulations on virtual asset trading with new guidelines aimed at enhancing security and providing clearer information for investors.
• The Korean Financial Supervisory Service (FSS) is updating its policies to prohibit the listing or relisting of virtual coins that have been compromised in hacking incidents, unless there is a thorough explanation of the breach's causes. This decision comes in response to several hacking events that affected local virtual asset projects like Galaxia, Orbit Chain, and others, leading to delistings from exchanges affiliated with the Digital Asset Exchange Association (DAXA).
• Additionally, the new regulations will require issuers of "foreign" virtual assets to produce a whitepaper or technical manual specifically tailored for the Korean market, ensuring that all offerings meet the country's stringent investor protection standards.
• The FSS is currently gathering feedback on the draft guidelines from various stakeholders, including DAXA, and aims to finalize the rules soon. An official from the FSS indicated that while the guidelines are nearly set, the exact timeline for their release depends on procedural approvals, potentially as soon as the end of this month or early next month.

EMEA

???? In-Depth Analysis of Crypto Market Structures: ESMA's Latest Findings

The European Securities and Markets Authority (ESMA) has released a detailed report analyzing the market structures of crypto-assets and their implications within the European Union. Below we share key highlights from the report

• Top Assets: Bitcoin (BTC), Ether (ETH), and Tether (USDT) significantly influence the market, contributing to a major portion of the total market capitalization.
• Exchange Dominance: A small number of exchanges handle the majority of crypto transactions, with ten exchanges processing about 90% of all trades. The largest exchange alone accounts for nearly half of the global trading volume, emphasizing the high market concentration.

• Fiat and Crypto Transactions: Only 20-30% of transactions involve fiat currencies, indicating a preference for crypto-to-crypto and stablecoin-to-crypto transactions within the ecosystem

• MiCA Regulation: This new framework is designed to regulate market participants and protect consumers by enforcing standardized rules across the EU. It addresses issues like market abuse and the operational resilience of crypto-asset service providers. But many exchanges are based in jurisdictions with less stringent regulations.
• Co-movement with Equities: Crypto-assets have shown a tendency to move in tandem with equity markets, underlining their status as risk-sensitive assets rather than stable havens.

The ESMA report offers a thorough examination of the intricacies within the crypto market, spotlighting the notable concentration of market power among a few significant entities and platforms.

AMERICAS

???? The SEC vs. Uniswap Labs: A Battle for Clarity in Cryptocurrency Regulation

• Uniswap Labs, a major player in the decentralized finance (DeFi) ecosystem, has recently come under the scrutiny of the U.S. Securities and Exchange Commission (SEC). The agency has issued a Wells notice, indicating potential enforcement action against Uniswap Labs, despite the firm's efforts to operate within the regulatory framework of U.S. securities law.
• This move by the SEC follows a broader trend where the regulator is applying pressure on digital asset companies, akin to its ongoing legal disputes with Coinbase.
• Uniswap asserts that this represents a political manoeuvre aimed at targeting leading entities in blockchain technology development, questioning the lack of regulatory clarity which complicates compliance for law-abiding firms within the industry.
• Despite the regulatory challenges, Uniswap emphasizes that the tokens traded on its platform, including stablecoins and utility tokens, should not be classified as securities, thus falling outside the SEC's jurisdiction.

Thread of the Week ??

Elsewhere ??

• ???? Argentine government passes registration requirements for crypto firms
• ???? Hong Kong set to approve its first spot bitcoin ETFs in April, sources say
• ???? Hong Kong update its Alert Lists for suspicious virtual asset trading platforms and investment products
• ???? South Africa to Start Work on Stablecoin Regime, Will Start by Considering Use Cases
• ???? Crypto regulatory affairs: The US Treasury’s intense week of crypto-related sanctions actions

Reads & Listens ??

• BIS | Stablecoins: regulatory responses to their promise of stability
• EU's MiCA Rules Have Had Little Influence on the European Crypto Market, Regulator Says
• Sanctions Compliance in Cryptocurrencies 2024

More from Notabene ???

• Explore the benefits of Travel Rule–compliant transactions, such preventing illicit activities before they occur and bridging the gap between crypto transactions and real-world entities.
• Dive into the Financial Action Task Force (FATF) 's evaluation of global virtual asset regulation, including Travel Rule implementation and a roadmap for better regulatory oversight.
• Walk through the key milestones and developments that made 2023 the year of Travel Rule compliance.
• Join our webinar on April 24 at 1 PM IST / 3 PM SGT to discuss our yearly report on crypto Travel Rule compliance.