Clifford Chance

Welcome to this month's global crypto round-up, summarising crypto regulatory developments that have happened around the world in September 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

The Future of Digital Finance 2024 – 1 October 2024!

From navigating the global regulatory landscape to the tokenization of assets and funds, what are the key challenges for digital assets globally? Join Clifford Chance and the Global Blockchain Business Council (GBBC) at our Future of Digital Finance 2024 event in London and online tomorrow Tuesday 1 October.

You don't want to miss our line up of regulators and expert industry speakers including keynote addresses from Baroness Kay Swinburne, Jon Relleen Director of Infrastructure & Exchanges at the UK Financial Conduct Authority and Ali Moussavi, Head of the Payments Strategy Unit at the Bank of England and fireside chats with Peter Kerstens advisor to the European Commission on MiCA and Deepa Raja Carbon, Managing Director & Vice-Chair Virtual Assets Regulatory Authority (VARA) on developments in Dubai.

Register now to attend in person in London or via our global live stream.   

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (23 Sep 2024) International Monetary Fund (IMF) paper which encourages policymakers to consider central bank digital currency (CBDC) adoption early on, by arguing that successful CBDC adoption hinges not only on technical readiness and operational robustness, but also on strategic policy and design choices that target end-user and intermediary involvement from the outset. The paper introduces the REDI Framework, which outlines various regulatory strategies, education/communication initiatives, design/deployment choices, and incentive mechanisms to prepare for CBDC adoption.
• (16 Sep 2024) The Bank for International Settlements (BIS) has announced that over 40 private sector financial firms, convened by the Institute of International Finance, will join the BIS and a group of leading central banks in Project Agorá to explore how tokenisation can enhance wholesale cross-border payments. Project Agorá will now begin the design phase of the project. | Press release

Americas

Brazil:

• (4 Sep 2024) The Central Bank of Brazil has announced the list of selected projects, prepared in conjunction with the Securities and Exchange Commission (CVM), containing 13 themes for development in the second testing phase of its CBDC project Drex. In the second testing phase, the infrastructure created for the Drex pilot platform will begin testing the implementation of financial services, made available through smart contracts created and managed by third parties participating in the pilot. | Press release (in Portuguese)

Canada:

• (26 Sep 2024) The Canadian Securities Administrators (CSA) has announced a further extension of the deadline by which it expects cryptoasset trading platforms (CTPs) to comply with its Staff Notice 21-333 on trading value-referenced cryptoassets. The CSA has extended the deadline to 31 December 2024 in order to provide more time for CTPs to either comply with the terms and conditions of their registration and exemptive relief decisions, or their pre-registration undertakings, or to propose alternatives that address investor protection concerns, as long as any alternatives are in place or substantially finalised prior to 31 December 2024.  | Press release
• (23 Sep 2024) The Bank of Canada has announced that, with its research on retail CBDC completed, and with other payments issues gaining prominence, it is scaling down its work on a Digital Canadian Dollar and shifting its focus to broader payments system research and policy development. | Press release

US:

• (23 Sep 2024) Letter from a group of US Senators and Representatives to Securities and Exchange Commission (SEC) Chairman Gary Gensler, in which they call on him to rescind SEC Staff Accounting Bulletin 121 (SAB 121) on the accounting treatment of digital assets safeguarded by custodians, exchanges, and other platforms engaged in digital asset activities.
• (9 Sep 2024) Speech by SEC Chief Accountant Paul Munter, in which he reiterated that the applicability of SAB 121 is a facts and circumstances analysis, and that while an entity with safeguarding arrangements that align with the fact pattern described in SAB 121 should present a liability on its balance sheet to reflect its obligation to safeguard the cryptoassets held for others (with a corresponding asset), there are other fact patterns the SEC staff have encountered where entities have demonstrated how the specific risks and uncertainties involved in their fact patterns are different than those contemplated in SAB 121, and accordingly SAB 121 does not apply.

APAC

Australia:

• (18 Sep 2024) The Reserve Bank of Australia (RBA) and the Australian Treasury have released a joint report summarising research to date on CBDCs and how this has informed the RBA and Treasury’s current assessment of CBDC issues in Australia. The report concludes that a clear public interest case to issue a retail CBDC has yet to emerge in Australia. The report also sets out a three-year roadmap for future work on digital money in Australia. | Press release

Hong Kong:

• (23 Sep 2024) The Hong Kong Monetary Authority (HKMA) has commenced Phase 2 of the e-HKD Pilot Programme to delve deeper into innovative use cases for new forms of digital money, including e-HKD and tokenised deposits, that can potentially be used by individuals and corporates.  As Project e-HKD expands its coverage from e-HKD only to a more comprehensive exploration of the digital money ecosystem, the project has been renamed as Project e-HKD+. | Press release

Europe

EU:

• (27 Sep 2024) Speech by Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), in which he argued that one of the key motivations behind the digital euro project is to bring central bank money into the digital age, which would provide a digital equivalent to banknotes and strengthen the EU's monetary sovereignty.
• (26 Sep 2024) The EU Commission has adopted a Delegated Regulation under the Markets in Cryptoassets Regulation (MiCA) setting out regulatory technical standards (RTS) establishing a template document for cooperation arrangements between competent authorities and supervisory authorities of third countries. Article 107 of MiCA requires the competent authorities of EU Member States, where necessary, to conclude cooperation arrangements with supervisory authorities of third countries concerning the exchange of information and the enforcement of obligations arising under MiCA in third countries. The RTS provide a template document setting out the structure of these cooperation arrangements. | Annex
• (25 Sep 2024) Commission Implementing Regulation (EU) 2024/2494 laying down implementing technical standards (ITS) for the application of MiCA with regard to standard forms, templates and procedures for the cooperation and exchange of information between competent authorities and the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), which has been published in the Official Journal and will enter into force on 15 October 2024.
• (23 Sep 2024) ECB update on the Eurosystem’s work to explore how wholesale financial transactions recorded on distributed ledger technology (DLT) platforms could be settled in central bank money.
• (5 Sep 2024) ECB progress report on the work of the digital euro scheme’s Rulebook Development Group. | Webpage

France:

• (5 Sep 2024) As part of the ongoing Eurosystem exploratory work on settlement in central bank money using new technologies, the Banque de France has announced that it has successfully completed two new experiments with its new functionality for automated wholesale payments. The Banque de France has so far completed 7 of the 19 trials and experiments planned on DL3S. | Press release

Germany:

• (19 Sep 2024) The German Federal Financial Supervisory Authority (BaFin) has updated the minimum contractual content requirements in its 'Guidance notes on the implementation of DORA for ICT risk management and ICT third-party risk management'. The update was occasioned by the publication of the final report on the draft regulatory technical standards (RTS) on the subcontracting of ICT services supporting critical or important functions under Article 30(5) of the Digital Operational Resilience Act (DORA). BaFin has translated its supervisory statement and all pertinent information into English to reach a maximum number of market participants. | Press release (in German)

Netherlands

• (26 Sep 2024) Dutch Authority for the Financial Markets (AFM) press release warning consumers about crypto pump-and-dump schemes. The AFM notes that such schemes will be banned under MiCA from 30 December 2024.

Russia:

• (12 Sep 2024) The Bank of Russia has announced that, from 1 July 2025, the largest Russian banks will have to provide their clients with the ability to conduct transactions in digital rubles, including opening and topping up digital ruble accounts, making transfers, and accepting digital rubles in their infrastructure. The remaining banks with a universal license will be given until 1 July 2026 to finalise their systems, and other credit institutions until 1 July 2027. | Press release (in Russian)

UK:

• (25 Sep 2024) The Payment Systems Regulator (PSR) has confirmed that the maximum reimbursement limit for victims of Authorised Push Payment (APP) scams will be £85,000 starting from 7 October 2024. | Press release
• (25 Sep 2024) Financial Conduct Authority (FCA) consultation paper (CP24/20) on changes to the safeguarding regime for payments and e-money firms. The FCA is consulting on rules and guidance for both the interim and end state stages of the proposed safeguarding regime. The interim rules are intended to improve compliance with the existing safeguarding requirements set out in the Electronic Money Regulations (EMRs) and Payment Services Regulations (PSRs). The end state will replace the safeguarding requirements of the EMRs and PSRs with a ‘CASS’ style regime where relevant funds and assets are held on trust for consumers. Deadline for comments: 17 December 2024.  | Webpage | Press release
• (23 Sep 2024) PSR policy statement (PS24/6) and finalised guidance to support payment service providers (PSPs) in distinguishing between APP scams and civil disputes. | Webpage
• (17 Sep 2024) UK Finance has announced the successful outcome of the Regulated Liability Network Experimentation Phase. This is a new type of financial market infrastructure intended to deliver new capabilities for payments and settlement, including tokenisation and programmability. | Press release
• (17 Sep 2024) UK Finance blog post on Next Gen financial services operations
• (12 Sep 2024) Judgment in D'Aloia v Persons Unknown [2024] EWHC 2342 (Ch), in which a High Court Judge found, amongst other things, that the stablecoin Tether (USDT) attracts property rights under English law. The Judge found that USDT is neither a chose in action nor a chose in possession, but rather a distinct form of property not premised on an underlying legal right, and can be the subject of tracing and can constitute trust property in the same way as other property.
• (11 Sep 2024) The Property (Digital Assets etc) Bill, which has been introduced as a Government bill in the House of Lords. The Bill is intended to give effect to the recommendations of the Law Commission to confirm in statute the common law position that certain digital assets can constitute property. The Law Commission recommended statutory confirmation that a thing will not be deprived of legal status as an object of personal property rights merely by reason of the fact that it is neither a thing in possession nor a thing in action. The second reading of the Bill is yet to be scheduled. | Explanatory notes | Written Ministerial Statement | Bill webpage | Law Commission press release
• (10 Sep 2024) The FCA has launched its first criminal prosecution relating to unregistered cryptoasset activity under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), bringing its first charges against a person accused of running a network of crypto ATMs in the UK. The charges follow the FCA’s recent operation, working in partnership with law enforcement agencies, to tackle illegally operated crypto ATMs across the UK. | Press release
• (9 Sep 2024) FCA guidance consultation (GC24/5) on changes to its Payment Services and Electronic Money Approach Document to support new legislation to tackle authorised push payment (APP) fraud. Deadline for comments: 4 October 2024. | Webpage
• (4 Sep 2024) PSR consultation on changing the maximum level of reimbursement for the Faster Payments APP scams reimbursement requirement for the 7 October 2024 policy start date. The PSR is proposing to implement the policy with an initial maximum level of reimbursement set at the Financial Services Compensation Scheme (FSCS) reimbursement limit, which is currently £85,000 per Faster Payments APP scam claim. Deadline for comments: 18 September 2024. | Press release

Middle East

Qatar:

• (1 Sep 2024) The Qatar Financial Centre Authority (QFCA) and Qatar Financial Centre Regulatory Authority (QFCRA) have launched the QFC Digital Assets Framework 2024, which establishes the legal and regulatory foundation for digital assets, including the process of tokenisation, legal recognition of property rights in tokens and their underlying assets, custody arrangements, transfer, and exchange. The framework also provides for the legal recognition of smart contracts. | Press release

EVENTS

The Future of Digital Finance 2024 (Hybrid – London/online, 1 October 2024): Join Clifford Chance and GBBC to network, discuss, and hear from those shaping the future of digital finance. We will be joined by a diverse line up of international regulators and industry leaders to navigate topics including the evolving global regulatory landscape for digital assets, MiCA three months on, interoperability, tokenization of funds and assets and the UK's evolving digital ambitions. Attend in person in London or tune in via our global live stream.  | To register, please see the event registration form

TradFi Meets Blockchain Policy Summit (New York, 10 October 2024) We are delighted to be hosting the 2024 TradFi Meets Blockchain Policy Summit on behalf of Capitol Asset Strategies at our office in New York. Join us for thoughtful panel conversations focused on traditional capital markets use of distributed ledger technology to sell and distribute regulated "tokenized" financial products and the real business and regulatory challenges to wider adoption. You will hear from expert business leaders, legal professionals and policy leaders with panelists and attendees spanning traditional finance and crypto-native, all together in one room for insights on this growing market. | See the full agenda and speaker line up or register here.