Crypto Compliance Weekly Roundup | April 8, 2024

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

This week, ???? Singapore's MAS broadens crypto regulations under the amended Payment Services Act, covering custody and international digital payment token transfers. ???? In the UK, the BoE and FCA introduce a Digital Securities Sandbox consultation. ???? The US SEC is probing firms linked to the Ethereum Foundation.

Explore more below.

APAC

???? Singapore Expands Crypto Regulation: New Rules for Custody and Cross-Border Transfers

The Monetary Authority of Singapore (MAS) has expanded its regulatory oversight within the cryptocurrency sector by amending the Payment Services Act (PS Act) to include custody services and cross-border money transfers involving digital payment tokens (DPT) or cryptocurrencies.

These changes, effective from April 4, 2024, bring under regulation activities such as:

• DPT custodial services
• Facilitation of crypto transfers between accounts and exchanges, even if the transactions do not involve Singapore directly
• Facilitation of the transmission or exchange of DPT, even if the funds do not come into the possession of the provider

Entities currently engaged in crypto-related activities under the PS Act must comply with the new regulations by initiating a transition process within 30 days and submitting a license application within six months from April 4, 2024, to continue operations temporarily pending regulatory review.

Compliance requirements include segregating customer assets in trust accounts, maintaining proper records, and implementing robust systems and controls. Additionally, applicants must provide an attestation report from an external auditor regarding AML /CFT compliance within nine months. Failure to meet these standards will lead to the cessation of activities.

EMEA

???? Bank of England and FCA Consult on Digital Securities Sandbox for UK Innovation

• The Bank of England (BoE) and the Financial Conduct Authority (FCA) have jointly released a consultation paper outlining their approach to implementing the Digital Securities Sandbox (DSS) in the UK. This initiative, enabled by the Financial Services and Markets Act 2023, aims to foster innovation in digital assets by allowing the use of emerging technologies like distributed ledger technology (DLT) for financial market infrastructure activities, particularly those traditionally handled by central securities depositories (CSDs) and trading venues.
• To accommodate this, a new category of firm called the Digital Securities Depository (DSD) has been established under the DSS, offering a modified regulatory framework for firms wishing to engage in CSD activities within the sandbox.
• Under the proposed DSS, firms can apply to become sandbox entrants to conduct CSD-related activities with temporary modifications to existing legislative and regulatory frameworks. The BoE and FCA will jointly oversee sandbox activities, with a focus on managing financial stability and market integrity risks. Firms interested in participating must apply and comply with the sandbox's guidelines, with the consultation open for feedback until May 29, 2024.
• If successful, the DSS is expected to open for applications in Summer 2024 and will run for 5 years, potentially leading to a permanent regulatory regime for securities settlement that could shape future operations in the digital asset space.

AMERICAS

???? SEC's Ethereum Subpoenas: Implications for Ether and ETF Approval

• The U.S. Securities and Exchange Commission (SEC) has issued subpoenas to firms that have had dealings with the Ethereum Foundation, according to a report from Fortune citing sources familiar with the matter.
• These subpoenas were specifically targeted towards interactions with the Ethereum Foundation, with some companies receiving inquiries following Ethereum's transition to a proof-of-stake (PoS) consensus system known as "The Merge" in September 2022.
• The SEC's investigations required firms to provide documents and financial records related to their engagements with the Ethereum Foundation.
• This development has sparked speculation about broader regulatory actions aimed at classifying ether, the cryptocurrency of the Ethereum network, as a security. This uncertainty has cast doubts on the potential approval of spot ether exchange-traded funds (ETFs) by the SEC in the near future.
• The SEC recently postponed decisions on ETF approvals, informing Van Eck that their verdict would be delayed until May 23. SEC Chair Gary Gensler's comments following The Merge suggested that tokens in a PoS system could be viewed as securities due to investor reliance on the efforts of others for profit, adding further complexity to the regulatory landscape for Ethereum and related crypto assets.

Thread of the Week ??

Elsewhere ??

• ???? Coinbase Wallet triumph over SEC allegations is a ‘giant win’ for DeFi
• ???? Japan FSA Publishes Revised Version of AML/CFT FAQs
• ???? Portuguese Regulator launches public consultation on the implementation of MiCA
• ???? MAS launches Consultation Paper on Money Laundering and Countering the Financing of Terrorism for Organised Market Operators
• ???? Indonesia Will Require Crypto Products to Pass Through Regulatory Sandbox or Be Deemed Illegal
• ???? Taiwan’s crypto sector receives government approval to form industry association
• ???? SEC asks for public comment for Grayscale, Bitwise and Fidelity spot Ethereum ETF
• ?? Project Agorá: central banks and banking sector embark on major project to explore tokenisation of cross-border payments
• ???? Singapore Grants License to Crypto Market Maker GSR
• ???? Philippines to block Binance exchange

Reads & Listens ??

• Chile Stands to Lead Latin America For Crypto Regulation, Even as it Lags in Adoption
• The Real Reason Why the SEC Might Be Going After Ethereum
• New Hampshire Has a Better Approach to DAOs

More from Notabene ???

• Read Notabene's Response to the European Banking Authority (EBA) 's Two Sets of Guidelines on Internal Policies, Procedures, and Controls to Ensure the Implementation of Union and National Restrictive Measures
• Join Notabene's Co-founder and COO, Alice Nawfal at Empire Startup's FinTech Conference in NYC on Wednesday, April 10.
• Sign up for our webinar on April 24 at 1 PM IST / 3 PM SGT for a comprehensive discussion on the findings of our annual report on the current state of crypto Travel Rule compliance.