Clifford Chance

Welcome to this month's global crypto round-up, summarising crypto regulatory developments that have happened around the world in April 2024 along with our Clifford Chance crypto publications and upcoming events. 

Details of these and previous developments can also be found on our Fintech Topic Guide on the Clifford Chance Financial Markets Toolkit.

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CLIFFORD CHANCE PUBLICATIONS & MATERIALS

New rules on cryptoasset exposures of EU banks

The new EU banking package (CRR3/CRD6) amending the Capital Requirements Regulation and Directive (CRR/CRD) includes a transitional regime for the risk-weighting of EU banks' exposures to cryptoassets that will apply until new legislation implements the Basel Committee's standard on cryptoassets, as well as new provisions on the reporting, disclosure, governance and supervisory review of cryptoasset exposures.

The texts of CRR3 and CRD6 have been adopted by resolutions of the European Parliament. The texts will be published in the Official Journal after endorsement by the Council of the EU and revision and translation into the EU's official languages. CRR3 and CRD6 will then enter into force 20 days after publication. The transitional regime for the risk-weighting of cryptoasset exposures applies from entry into force (which could be in the next few months, depending on when CRR3 and CRD6 are published in the Official Journal) but other new requirements will apply later.

Clifford Chance International Festival of Fintech 2024 - Watch  on Demand

ICYMI, all of the videos from our recent International Festival of Fintech are available to watch on demand. International industry experts representing a variety of market-leading organisations (including BlackRock, Bullish, Galaxy Digital, Goldman Sachs, HQLAx, HSBC, JP Morgan, r3, State Street and Stripe to name a few) joined members of the global Clifford Chance fintech team to offer their insights. They shared practical guidance on navigating rapidly-evolving legal, regulatory and market developments across the sector including the latest on AI, digital bonds, tokenisation and global crypto. With thanks again to our incredible speaker line up.

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (25 May 2024) G7 Finance Ministers and Central Bank Governors’ communiqué, in which they reaffirmed their support for the G20 roadmap on cryptoassets and the effective implementation of the Cryptoasset Reporting Framework, amongst other things. The communiqué also notes that cyber threats to the financial sector are evolving rapidly and becoming increasingly sophisticated, with emerging technologies like artificial intelligence (AI) and quantum computing providing new opportunities but also posing new challenges that are not yet fully understood.
• (21 May 2024) International Swaps and Derivatives Association (ISDA) guidance note on how to approach a legal opinion on the enforceability of collateral arrangements entered into under certain ISDA collateral documentation where the relevant collateral arrangement comprises tokenised securities and/or stablecoins. | Webpage
• (16 May 2024) Basel Committee on Banking Supervision (BCBS) report on the implications of the digitalisation of finance on banks and supervision. The report considers both the benefits and risks of new technologies and the emergence of new technologically enabled suppliers on the provision of banking services. It identifies eight implications for banks and supervisors relating to macro-structural elements, specific digitalisation themes, and capacity building and coordination. | Press release
• (14 May 2024) Project Agorá, launched by the Bank for International Settlements (BIS), a group of central banks and the Institute of International Finance (IIF), is inviting the private sector to join its exploration of how tokenisation can enhance the functioning of wholesale cross-border payments. The call for private sector participation in Project Agorá will be open until 31 May 2024. | Press release
• (13 May 2024) The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the BCBS, has announced that it is postponing the implementation of its prudential standard for banks' cryptoasset exposures from 1 January 2025 to 1 January 2026. The BCBS consulted on a set of targeted revisions to the standard in December 2023 and it expects to discuss whether to make any revisions to the standard later in 2024. | Press release
• (2 May 2024) BIS working paper which uses granular transaction-level data from the Aave V2 protocol to shed light on agents' motivations to engage in decentralised finance (DeFi) borrowing and lending activity, contrasting them with those in traditional finance to highlight the unique nature of DeFi. | Webpage

Americas

US

• (23 May 2024) The US House of Representatives has passed H.R. 5403, the CBDC Anti-Surveillance State Act, which is intended to prevent the issuance of a central bank digital currency (CBDC) without explicit authorisation from Congress. | Press release
• (22 May 2024) The US House of Representatives has passed H.R. 4763, the Financial Innovation and Technology for the 21st Century Act, which is intended to create a comprehensive regulatory framework for the issuance and trading of digital assets. The legislation provides the Commodity Futures Trading Commission (CFTC) with new jurisdiction over digital commodities and clarifies the Securities and Exchange Commission’s (SEC) jurisdiction over digital assets offered as part of an investment contract. Additionally, the bill establishes a process to permit the secondary market trading of digital commodities if they were initially offered as part of an investment contract. Finally, H.R. 4763 imposes comprehensive customer disclosure, asset safeguarding, and operational requirements on all entities required to be registered with the CFTC and/or the SEC. | Press release
• (16 May 2024) The US Department of the Treasury has issued the 2024 National Strategy for Combatting Terrorist and Other Illicit Financing, which provides a blueprint of the US Government’s goals, objectives, and priorities to disrupt and prevent illicit financial activities. Amongst other things, the strategy envisages possible updates to the regulatory requirements and supervisory framework for virtual asset activities, as well as an enhanced use of artificial intelligence, data analytics, and additional technological innovations in government efforts to combat illicit finance. | Press release

APAC

Hong Kong

• (28 May 2024) Securities and Futures Commission (SFC) statement reminding the public that the non-contravention period for virtual asset trading platforms (VATPs) operating in Hong Kong under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615) (AMLO) will come to an end on 1 June 2024, and that all VATPs operating in Hong Kong must be either licensed by the SFC or 'deemed-to-be-licensed' VATP applicants under the AMLO.

Hong Kong & PRC

• (17 May 2024) The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have expanded the scope of an e-CNY pilot for cross-boundary payments to facilitate the set up and the use of e-CNY wallets by Hong Kong residents, as well as the top-up of e-CNY wallets through the Faster Payment System (FPS). | Press release

Indonesia

• (4 May 2024) The Commodity Futures Trading Regulatory Agency (Bappebti) has established a new Crypto Asset Committee tasked with encouraging and monitoring the development of cryptoasset trading in Indonesia. | Press release (in Indonesian)

Singapore

• (8 May 2024) The 9th UK-Singapore Financial Dialogue has taken place in Singapore. Amongst other things, the UK and Singapore exchanged views on their respective approaches to managing risks and capturing opportunities in the digital space, including in relation to AI, cryptoassets, CBDC, and tokenisation and distributed ledger technology (DLT). | Press release

EUROPE

EU

• (31 May 2024) European Securities and Markets Authority (ESMA) final report on draft technical standards in relation to conflicts of interests of cryptoasset service providers (CASPs) under the Markets in Cryptoassets Regulation (MiCA). | Press release
• (30 May 2024) The EU Council has formally adopted the proposed banking package comprising amendments to the Capital Requirements Regulation and Directive (CRR3/CRD6). The package includes a transitional regime for the risk-weighting of EU banks' exposures to cryptoassets that will apply until new legislation implements the Basel Committee's standard on cryptoassets, as well as new provisions on the reporting, disclosure, governance and supervisory review of cryptoasset exposures. | Press release
• (30 May 2024) The EU Council has formally adopted a series of legislative proposals that form the EU Commission's July 2021 anti-money laundering and counter terrorist financing (AML/CTF) package. Amongst other things, the package expands the list of obliged entities to cover the majority of the crypto sector, and introduces specific enhanced due diligence measures for cross-border correspondent relationships for cryptoasset service providers. | Press release
• (30 May 2024) The following four Delegated Regulations under MiCA have been published in the Official Journal: Commission Delegated Regulation (EU) 2024/1506 specifying certain criteria for classifying asset-referenced tokens and e-money tokens as significant; Commission Delegated Regulation (EU) 2024/1507 specifying the criteria and factors to be taken into account by ESMA, the European Banking Authority (EBA) and competent authorities in relation to their intervention powers;  Commission Delegated Regulation (EU) 2024/1504 specifying the procedural rules for the exercise of the power to impose fines or periodic penalty payments by the EBA on issuers of significant asset-referenced tokens and issuers of significant e-money tokens; and  Commission Delegated Regulation (EU) 2024/1503 specifying the fees charged by the EBA to issuers of significant asset-referenced tokens and issuers of significant e-money tokens. The four Delegated Regulations will enter into force on 19 June 2024.
• (30 May 2024) The following two Delegated Regulations supplementing provisions relating to ICT third-party service providers under the Digital Operational Resilience Act (DORA) have been published in the Official Journal: Commission Delegated Regulation (EU) 2024/1502 specifying the criteria for the designation of ICT third-party service providers as critical for financial entities; and Commission Delegated Regulation (EU) 2024/1505 determining the amount of the oversight fees to be charged by the lead overseer to critical ICT third-party service providers and the way in which those fees are to be paid. Both Delegated Regulations will enter into force on 19 June 2024.
• (24 May 2024) EU Blockchain Observatory and Forum (EUBOF) conclusion report, which provides an overview of EUBOF's activities over the past four years and considers future trends and policy actions for blockchain technology in Europe. EUBOF is an EU Commission initiative. | Webpage
• (22 May 2024) Association for Financial Markets in Europe (AFME) report on the key hurdles to the implementation of DORA. | Webpage
• (21 May 2024) EU Council conclusions on the future of EU digital policy, which set out the main priorities that will be developed in the upcoming legislative cycle. | Press release
• (16 May 2024) EU Parliament briefing entitled 'Digital finance legislation: Overview and state of play'.
• (14 May 2024) The Eurosystem has announced that it has successfully completed the first experiment in using DLT for the settlement of wholesale transactions in central bank money. The experiment, carried out by Oesterreichische Nationalbank, covered the tokenisation and simulated delivery-versus-payment (DvP) settlement of government bonds in a secondary market transaction against central bank money. Further trials and experiments will be conducted over the next six months on the three Eurosystem interoperability-type solutions proposed for central bank money settlement of wholesale financial transactions recorded on DLT platforms. | Press release
• (13 May 2024) The EU Parliament's Committee on Economic and Monetary Affairs (ECON Committee) has published its report on a framework for financial data access (FiDA), which it adopted on 18 April 2024.
• (13 May 2024) AFME blog post summarising a recent industry workshop discussion on the challenges and opportunities of pooled testing in light of the incoming DORA.
• (8 May 2024) EU Commission request to the European Insurance and Occupational Pensions Authority (EIOPA) for technical advice on specific items in Solvency II, including the standard formula capital requirements for investments in cryptoassets. | Covering letter
• (8 May 2024) ESMA Spotlight on Markets Newsletter April 2024, which includes articles on cryptoassets and DORA.
• (7 May 2024) The EBA has published three sets of final draft regulatory technical standards (RTS) and one set of final draft implementing technical standards (ITS) under MiCA relating to: the authorisation as issuer of asset-referenced tokens (ARTs); the information for the assessment of acquisition of qualifying holdings in issuers of ARTs; and  the procedure for the approval of white papers for ARTs issued by credit institutions.
• (3 May 2024) Letter from Mairead McGuinness, EU Commissioner for Financial Services, Financial Stability and Capital Markets Union, to ESMA Chair Verena Ross on the implementation of the DLT Pilot Regime (Regulation (EU) 2022/858). In response to perceived uncertainty amongst market participants about the duration of the DLT Pilot Regime, the letter emphasises that there is no expiration date for the regime and that at present no proposal to terminate the regime is envisaged.
• (2 May 2024) ESMA Securities and Markets Stakeholder Group advice to ESMA on its consultation papers on reverse solicitation and the qualification of cryptoassets as financial instruments in the context of MiCA. | Webpage
• (2 May 2024) Corrigendum which corrects some minor errors in the adopted text of MiCA, along with extending the period allowed for Member States to make a notification to the EU Commission, ESMA and the EBA about the existence of certain national law administrative penalties and measures in relation to MiCA.

Luxembourg

• (27 May 2024) Commission de Surveillance du Secteur Financier (CSSF) communiqué which recommends that persons interested in conducting cryptoasset transactions on ATMs located in Luxembourg verify beforehand whether the providers operating these ATMs are registered as a virtual asset service provider (VASP) with the CSSF. The communiqué also reiterates that any provider wishing to operate such an ATM in Luxembourg must register with the CSSF as a VASP beforehand.
• (21 May 2024) Bill No. 8387 (in French), the main purpose of which is to integrate the MiCA and Regulation (EU) 2023/1113 on information accompanying transfers of funds and certain cryptoassets into Luxembourg law, has been lodged with the Luxembourg Parliament. The CSSF will be designated as the supervisory authority to ensure compliance with these regulations and will be vested with the necessary supervisory and investigation powers for its new role and with the power to issue sanctions in case of breaches of these regulations. The lodging of Bill No. 8387 with the Luxembourg Parliament constitutes the start of the legislative procedure. 

Switzerland

• (15 May 2024) The Swiss Federal Council has launched a consultation on extending the international automatic exchange of information in tax matters (AEOI). Set to apply from 1 January 2026, the extension concerns the new AEOI concerning cryptoassets and the amendment of the standard for the automatic exchange of financial account information. Deadline for comments: 6 September 2024. | Press release

UK

• (16 May 2024) BoE Point-of-sale proof of concept digital pound experiment report, which details an experiment conducted by the BoE to assess the technical feasibility of using existing point-of-sale (POS) hardware, as currently used in the UK, to initiate digital pound payments. | Webpage
• (8 May 2024) The 9th UK-Singapore Financial Dialogue has taken place in Singapore. Amongst other things, the UK and Singapore exchanged views on their respective approaches to managing risks and capturing opportunities in the digital space, including in relation to AI, cryptoassets, CBDC, and tokenisation and DLT. | Press release
• (1 May 2024) HM Treasury Anti-money laundering and counter-terrorist financing: Supervision Report: 2022-23, which notes the Financial Conduct Authority (FCA)’s view that, in the reporting year 2022-23, cryptoasset firms, along with retail banking (including payments), wholesale banking, and wealth management remained particularly vulnerable to financial crime and posed the greatest risk of being exploited for money laundering.

Middle East

Israel

• (28 May 2024) The Bank of Israel has announced the 'Digital Shekel Challenge', an experiment inspired by the Bank for International Settlements (BIS) Innovation Centre's Project Rosalind.  In the experiment, the Bank of Israel is inviting entities from the private, public and academic sectors to explore the development potential of uses of the digital shekel system. The Bank has built a technological prototype simulating the heart of the digital shekel system at the Bank of Israel and its application programming interface (API) layer. Payment service providers and other service providers will receive access to the system and a range of functions through which they will be able to develop and make services available to end users from the general public, and provide advanced payment options with digital shekel. | Press release (in Hebrew).