MiCA Consultative Paper, EBA’s Crypto Guiding Principles, Crypto Trading Regulation by G20, and Indonesia to Launch Crypto Exchange
ESMA Released MiCA Consultative Paper on Crypto-Asset Regulations
The European Securities and Markets Authority (ESMA), the regulatory body of the European Union for financial markets, has published a consultative paper on the regulations governing crypto-assets called Markets in Crypto-Assets (MiCA) mandates. This paper is the first of three packages that ESMA plans to release and focuses on the technical specifications for crypto asset service providers (CASPs).
Under MiCA, licensed entities are assumed to have the capability to offer crypto-asset services; however, they will need to provide additional information to the national competent authorities (NCAs) through notifications. The consultative paper seeks feedback on regulatory and technical standards for these notifications from CASPs.
ESMA is also seeking feedback on regulatory and technical standards for CASP authorization applications, complaint handling, conflict of interest management, and disclosures to NCAs by entities intending to acquire shares in a CASP.
Interested parties have until 20 September 2023 to respond to the paper. A draft of the finalized standards will be submitted to the European Commission by 30 June 2024 as required by MiCA. The second and third consultative packages are scheduled for release in October and the first quarter of 2024, respectively, to align with ESMA's deadlines under MiCA.
The questions posed in the paper include inquiries about expected turnover, the number of white papers to be published, and the utilization of on-chain and off-chain trading.
MiCA, which was approved by the European Parliament in April, will be implemented in phases between 2024 and 2025. Consequently, companies concerned by EU crypto regulations should ensure they are prepared to satisfy the regulatory requirements.
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EBA urges stablecoin issuers to follow Crypto Guiding Principles
The European Banking Authority (EBA), in anticipation of forthcoming regulations, has called on stablecoin issuers to voluntarily adhere to specific guiding principles concerning risk management and consumer protection. EBA released its initial measures for public feedback on July 12, aiming to clarify the requirements outlined in the Markets in Crypto-Assets (MiCA) regulation, set to come into effect on June 30, 2024. The measures encompass perpetual right of redemption clauses and guidelines for complaint handling.
The EBA's statement encourages timely preparatory actions to align with MiCA, aiming to reduce the risk of disruptive business adjustments, promote supervisory convergence, and protect consumers. The statement includes guiding principles covering disclosures, business models, governance, reserve arrangements, redemption processes, and communication with competent authorities. The EBA has also provided a template for financial institutions and undertakings engaging in the asset-referenced token (ART) or electronic money token (EMT) activities to communicate with the relevant competent authority in a timely manner.
It is important to note that ARTs and EMTs do not currently fall under regulated instruments or benefit from MiCA's rights and protections until June 30, 2024.?
G20 Issued Recommendations for Crypto Trading Regulation
The Financial Stability Board (FSB) of the G20 has published the final recommendations for regulating crypto trading firms, responding to the increasing demand for comprehensive digital asset legislation. These recommendations primarily focus on enhancing regulatory oversight and supervision of crypto assets to foster innovation while mitigating potential risks.
Following the collapse of TerraUSD/Luna stablecoins, the FSB has also revised its existing recommendations for stablecoins. It emphasizes that globally agreed-upon rules would compel crypto firms to implement necessary measures to prevent incidents similar to the FTX collapse.
The recommendations encompass three key areas: safeguarding customer assets, managing conflicts of interest, and promoting cross-border cooperation. Jurisdictions will implement these recommendations based on their unique experience with digital asset regulations.
The FSB also encourages all countries, including non-member states such as the Bahamas (where FTX was based), to adopt its recommendations to prevent potential threats to financial stability and associated risks.
Indonesia to Launch Crypto Exchange
The Indonesian government is progressing with its plans to establish the Indonesian cryptocurrency exchange, with the platform expected to launch in the upcoming weeks. The Commodity Futures Trading Supervisory Agency (CFTRA), also known as Bappebti, aims to debut the national crypto exchange in July 2023, according to local news agency Tempo.
Bappebti's head, Didid Noordiatmoko, revealed that all cryptocurrency transactions would be exclusively permitted through the national exchange. Discussions on stock exchange rules, including Know Your Customer (KYC) procedures, have been finalized. The CFTRA has conducted successful system integration tests involving traders, exchanges, clearing, and depository.
Bappebti intends to limit cryptocurrency sales to local transactions while aligning with international market developments, subject to approval. Trade Minister Zulkifli Hasan has been informed about the progress, and if no further instructions are given, Bappebti will issue the permit. Licensed traders will have one month to join the exchange once the permit is signed.
The initiative to establish the national crypto exchange began in 2021, with a joint venture between a state-backed telecom firm and Binance. Binance subsequently increased its shareholding in the Indonesian crypto asset trader Tokocrypto in late 2022.
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