red 
The OCC is opening a HUGE door for banks to offer crypto services, while Singapore and the UK are looking to expand the regulatory framework for cryptoassets. Stay tuned for these updates and more in this weeks Crypto Regulatory Affairs…
The OCC opens the door wide for banks to offer crypto services
n what could very well turn out to be the most critical regulatory development affecting the crypto space this year, the US Treasury’s Office of the Comptroller of the Currency (OCC) has given US banks the green light to offer cryptocurrency custody services. In a letter released to an unnamed US National Bank, the OCC offered its opinion that the banks it supervises can provide crypto custody services to their customers and provide banking services to legitimate crypto businesses.
According to the OCC, holding cryptocurrency users’ private keys on their behalf mimics other services banks already provide, such as physically storing money and valuables in safe deposit boxes. This clarification is vital to give confidence to US banks as they consider offering cryptocurrency custody and trading services, a growing area of technological innovation among banks and fintech companies globally, and opens the door to the integration of cryptocurrencies into the banking sector.
As huge as it is, this news shouldn’t come as a surprise. Since taking over as acting head of the OCC at the beginning of this year, Brian Brookswho previously served as Coinbase’s chief legal officer, steered the agency toward a progressive position on crypto. Importantly, the OCC’s cryptocurrency custody letter reminds US banks that choose to offer cryptocurrency custody services that they must ensure regulatory compliance, such as AML/CFT requirements.
in the Elliptical, enabling financial institutions get to know the world of cryptocurrencies confident AML/CFT risk management is at the heart of what we do. So, if your financial institution is considering offering crypto custody services, contact us today to learn more about how we can help. Check out our full analysis of the OCC’s cryptocurrency custody letter here.
The SEC’s “Crypto Mom” Takes Its Own Agency to Task Over Telegram
The acting director of the OCC is not the only head of a US agency to pioneer an innovation-friendly approach to regulation. This week, Hester Peirce, the commissioner of the US Securities and Exchange Commission (SEC), issued an important statement about the regulator’s role in enabling innovation in a fair and responsible way – and in the process pointed out her agency’s shortcomings.
U remarks addressed to the Blockchain Association of Singapore, Commissioner Peirce, who was called out by industry watchers “Crypto Mom” for his crypto-friendly views, references an action of execution The SEC sued Telegram in June when Telegram agreed to pay an $18.5 million fine to the SEC related to the sale of its Gram tokens. As part of that action, the SEC accused Telegram of violating the law by making Grams widely available, claiming that Grams were unregistered securities. Rather than prolong the legal battle, Telegram decided to settle with the SEC and pay the fine, and they abandoned the project.
Interestingly, Commissioner Peirce questioned whether this was the best outcome and said that “I did not support the settlement because I did not support the underlying action. I do not support the message that token distribution inherently involves a securities transaction.” Urging her colleagues at the SEC to take a more measured approach when assessing whether new innovations violate the law, she said: “I would prefer that we not only hold accountable reckless innovators who slide between mirrors while playing the violin, but also try to provide more cautious innovators with some guidance on how to avoid the hall of mirrors and what we consider adequate braking technology.” These strong words from America’s top securities regulator suggest so companies looking to bring new crypto-assets to market could eventually find themselves welcomed.
For more information, see our recent webinar on how your business can offer new cryptoassets in a secure and regulatory compliant manner.
Singapore is preparing to expand its regulatory framework for cryptoassets
In Singapore, which has long positioned itself as a champion of financial innovation, regulators are taking steps to ensure that their pro-innovation stance is not confused with laxity. This week the Monetary Authority of Singapore (MAS) launched a consultation on the proposed expansion of its SPN/FT requirements for crypto companies. The proposal would expand the definition of cryptocurrency-related services covered by Singapore’s regulation and require businesses located in Singapore but serving overseas customers to comply.
Industry is invited to submit comments to MAS on the proposed expanded requirements by 20 August. The proposed changes will build on measures introduced by Singapore earlier this year in January, when The Payment Services Act (PSA) came into forcerequiring companies providing crypto services to comply with anti-money laundering and anti-terrorist financing requirements such as transaction monitoring, regulatory reporting and the Travel Rule.
On that note, another important deadline looms in Singapore as this Tuesday, July 28, marks the last day for crypto companies in Singapore to submit their PSA license applications if they among them who applied for an extension earlier in the year – so make sure you get them!
As a company operating in Singapore, Elliptic is committed to assisting our customers locally in meeting the growing demands of MAS. Watch ours recent webinar on how crypto companies can meet AML requirements in Singapore, and contact us if you would like a consultation on how we can help you meet local requirements. Furthermore, if you need more information on complying with the Singapore Travel Rules, be sure to read about our new ones partnership with CoolBitXwhose Sygna Bridge solution enables compliance with travel regulations across the APAC region!
The UK also wants to expand its crypto regulation
Singapore is not alone in seeking new requirements for crypto-asset businesses. The UK is also consulting on proposed updates to its regulatory framework. This week HM Treasury UK announced its intention to extend consumer protection measures to the crypto space and invited the public to comment on its proposals.
Why is this important? Earlier this year, the UK introduced a comprehensive anti-money laundering and anti-terrorist financing regime for crypto-asset businesses – but those measures have not addressed consumer protection concerns. Consequently, UK consumers remain vulnerable to false advertising and other misinformation about cryptocurrencies. The proposed measures will fill this gap by requiring regulated businesses that advertise exchange or utility tokens, such as bitcoin and other popular cryptoassets, to provide adequate and accurate information about the nature of those tokens and any related offerings. This would lead to consumer protection measures for cryptoassets in the UKand with those already in place for traditional financial services, firms that break the rules can be subject to enforcement measures.
The consultation closes on 26 October, and although the government has not yet set a precise deadline for the proposals, UK regulated businesses should start working now to understand whether they carry out activities that could be covered by the proposals, so they can be prepared to you adhere to.
At Elliptic, we continue to work closely with UK regulators regarding cryptocurrency development. You can read our previous analysis of UK regulations here, hereand here.
Another week, another flurry of CBDC news
Right now, there’s never a dull day when it comes to central bank digital currency (CBDC) development. This week did not disappoint. Digital euro projects got a big boost with announcements from Banque de France and Italian Banking Association that they intended to test digital central bank money applications.
In the United States, on Wednesday, July 22, the Senate Economic Policy Subcommittee on Banking, Housing, and Urban Affairs held a hearing on “Winning the Economic Competition”, where MPs discussed how a digital dollar will be critical to ensuring America’s competitiveness against China in a high-tech and interconnected world.
The Senate hearing comes just a day after China’s state-owned blockchain-based service network (BSN) announced his plan to integrate six public blockchains with the country’s permissioned network that BSN is developing – a move that is no doubt part of China’s strategic aim to ensure that it can monitor a massive digital payments and economic ecosystem launches the digital yuan.
These developments show that a CBDC arms race is underway and should not be viewed in isolation from the other developments we highlighted in this week’s update. As cryptoassets proliferate, governments are feeling increasing pressure to innovate and develop CBDCs, which in turn prompts banks to look for innovative ways to support and interact with this digital payment development. Any financial services business – whether it’s an incumbent bank, fintech or crypto-asset business – must prepare to support the coming wave of innovation.
At Elliptic, we’re excited to be a part of it all. Earlier this year we were selected as one of the World Economic Forum Technology Pioneers 2020where innovators from around the world work to solve challenges related to the future of monetary systems and digital economies. So keep watching this space for more news and insights on CBDC developments.
