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🇬🇧 FCA chairman challenges token regulation
This week, the chairman of the UK’s Financial Conduct Authority (FCA) called for greater regulatory oversight of crypto markets – while highlighting the challenges regulators face when engaging the crypto space.
On September 6, FCA Chairman Charles Rendell spoke at the Cambridge Symposium on Economic Crime about the need for regulators to ensure that consumers are protected in cryptoasset markets. Rendell, who also chairs the UK Regulator of payment systemsurged regulators to implement “permanent and consistent solution to the problem of online fraud“.
He points to the major the rise of crypto scams which occurred in the midst of record prices, Rendell highlighted the case of Kim Kardashian, who recently promoted Ethereum Max on Instagram. As Randel pointed out, with Kardashian’s 250 million followers, “it may have been the biggest financial promotion in history.” While Ethereum Max may not be a scam, Rendell said fraudsters are relying heavily on social media to scam huge numbers of people, and stressed that cryptocurrency users are not protected under the government’s Financial Services Compensation Scheme – making this a high-risk area for consumers.
Rendell therefore raised an important question: Should the mere act of creating, advertising and selling tokens be a regulated activity, given the prevalence of fraud in the space?
The UK, like most other financial centres, has focused on anti-money laundering (AML) enforcement against businesses that facilitate crypto-asset activities on behalf of third parties – particularly the exchange of crypto-to-fiat currencies. However, the actual buying and selling of cryptocurrencies between individual users is not regulated in the UK and most other jurisdictions.
According to Rendell, while the spate of recent scams may seem like an argument in favor of directly regulating the issuance and purchase of cryptocurrencies, it would actually be a step too far, for two reasons.
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First, activities in many other markets, such as buying gold, are not directly regulated, so directly regulating crypto markets (and not just regulating intermediaries such as exchanges) would be unfair and could hinder innovation in the space.
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Second, direct regulation of token markets may be interpreted by some investors as condoning those markets – which could cause consumers to misjudge or ignore the risks they face when trading cryptoassets.
Finally, Rendell called for a sensible approach. “Good financial regulation supports innovation, productivity and economic growth. In regulating the online world, we need to strike the right balance between encouraging innovation, providing an appropriate level of protection and allowing individuals the freedom to make decisions for which they are responsible.”
We couldn’t agree more at Elliptic. Many of the UK’s biggest crypto companies are already using ours solutions for blockchain analytics as they seek to conform to the British AML regime for cryptoassets. By proactively seeking compliance solutions, UK businesses can deter criminals and prevent abuse on their platforms.
While fraud and crime remain serious concerns, as data from Elliptic showscrime is a small and shrinking share of overall crypto activity – and taking the drastic step of directly regulating cryptocurrency issuers and users could disproportionately hinder innovation.
We look forward to continuing our work with the UK crypto industry and regulators to make markets safer for users. Contact us for a demo to learn more about how our blockchain analytics solutions can help your business detect and prevent fraud and other crimes.
🇸🇻 Bitcoin becomes official legal tender in El Salvador
September 7th will go down as a monumental day in crypto history: the day El Salvador became the first country draw out bitcoin nationwide with legal tender status. Businesses across El Salvador can now accept bitcoin payments alongside the US dollar, and all citizens have been given access to the country’s crypto wallet – which has met with some early technical challenges. As we recently noted, El Salvador also came up guidance on how banks should manage risks in crypto transactions. Against the background of the launch of bitcoin in El Salvador, central banks in neighboring Guatemala and Honduras he said they are researching whether to take advantage central bank digital currency (CBDC) to modernize their financial sectors.
🇵🇦 Panama proposes crypto legal framework
In other Central American news this week and September 7, Panamanian Congressman Gabriel Silva introduced legislation provide Panama with a legal and regulatory framework for cryptocurrencies. If passed, the bill would allow cryptocurrencies to be used as a means of payment for certain services, such as paying taxes, and would clarify how financial institutions should handle cryptocurrency. As we noted in the recent blog postcountries around the world are rapidly adopting cryptocurrency regulatory frameworks to provide markets with confidence and clarity around this new asset class.
🇰🇿 Bitfinex gets regulatory nod in Kazakhstan
Much further, cryptocurrency exchange giant Bitfinex is started security token offering in Kazakhstan. Despite restricting some crypto activities over the years, Kazakhstan has recently shown signs relaxing your position on crypto. The capital Astana is also international financial center with an independent regulatory framework. The Astana Financial Services Authority, the local regulatory body that approved Bitfinex’s new service, is in charge regulatory sandbox where crypto companies can get approval to launch new products and services from the city — an approach that allows Astana to compete with other crypto-friendly financial centers such as Abu Dhabi.
🇮🇳 CrossTower dismisses uncertainty in India
Even in parts of the world where regulatory clarity is hard to come by, crypto companies are betting long-term that common sense will prevail among policymakers. Again on September 7, US-based crypto exchange CrossTower announced that he started trading services in India. India has had a rocky relationship with cryptocurrency, and so have we noticed earlier, often taking a hostile stance; however, more recently, reports suggest that the government is considering legislation to regulate rather than ban cryptocurrencies – although the final outcome remains uncertain. A bold move by CrossTower is a vote that India will eventually see cryptocurrencies as an opportunity rather than a threat – and we at Elliptic agree with that. On the same day that CrossTower announced its plans, Elliptic’s director of policy and regulatory affairs, David Carlisle, spoke to a public and private sector audience from India at HODL2021 a conference organized by the Internet and Mobile Association of India.
🇺🇸 US banking regulator acquires crypto custody services
US banking regulators are preparing for a financial system with cryptocurrency. According to reports The US Federal Deposit Insurance Corporation (FDIC, the agency in charge of deposit insurance in US banks and bank failure management) is procurement of services anchorage crypto keeper. The move signals that the FDIC expects to one day have to manage crypto assets held at US financial institutions amid bankruptcies. This year, a number of major global banks have announced plans offer guardianship servicesespecially for institutional and wealthy clients. With crypto custody set to be introduced in the future of banking, the FDIC is getting ahead of the curve and preparing for what lies ahead. To learn more about how your bank can store cryptocurrencies in a safe, secure and compliant way, read our recent analysis here.
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