RegWatch

A guest post by Claire Cummings from Cummings Pepperdine

SPEEDREAD

In October, the FCA announced a ban on the sale of crypto-derivatives and exchange-traded notes...

Regulators around the world are introducing increasingly stringent and specific laws to fight crypto crime. Whilst the global volume of illicit crypto-based...

Speed Read

• FATF is set to revise its June 2019 guidelines (also known as the FATF Travel Rule) for VASPs and stablecoins.
• The FATF will publish a public consultation...

In an on-going effort to set international standards that aim to prevent illegal activities, the Financial Action Task Force (FATF) released a public consultation on...

On Thursday, April 15, 2021, the US Treasury Department imposed sanctions onsixteen entities and sixteen individualsfor acting on behalf of the Russian network that...

According to Merkle Science’s own data, between 2016 and 2019, transaction volumes between illicit actors and UK-headquartered VASPs increased by 9.5 fold. In addition, out of the 23 virtual asset exchanges headquartered in the UK, 14 of them (60%) have strict compliance already in place and do not allow customers to transact on their platform without proper KYC.

With increasingly great attention placed on DeFi and institutional finance moving into the space, our panelists Matthew Homer (Exec. In Residence, Nyca Partners & Former Executive Deputy Superintendent, Research & Innovation, New York State Department of Financial Services ), Jacob Yunger (Director Financial Innovation, FINRA), Philip W. Raimondi (Sr. Assistant General Counsel, CFTC), and our very own Mary Beth Buchanan (EVP Americas & Global Chief Legal Officer, Merkle Science) discussed the risks and regulatory challenges surrounding DeFi with Ian Taylor ( Executive Director, CryptoUK).

Merkle Science believes in smart regulation around DeFi. Merkle Science recently published “Diving into DeFi: Fundamentals from the Financial Frontier” — a comprehensive primer of the current DeFi landscape especially well-suited for those who have started navigating DeFi, that gives an overview of the types of DeFi platforms, emerging trends, regulatory concerns, as well as risks individuals should be aware of when engaging with the ecosystem.

Decentralized Finance (DeFi) is pegged to be the next frontier of fintech innovation. Though the future of DeFi looks promising, it faces some significant regulatory hurdles. Merkle Science recently published “Diving into DeFi: Fundamentals from the Financial Frontier” — a comprehensive primer of the current DeFi landscape that includes a look into the Financial Action Task Force’s (FATF) potential approach toward the space based on its latest draft updated guidance for virtual assets (VAs) and virtual asset service providers (VASPs).

The growth in the crypto market has fuelled U.S. regulators to increase regulatory oversight on the crypto industry. To this end on 9 August 2021, the Securities and Exchange Commission (SEC) issued a cease-and-desist order imposing a $10.4 million USD fine against crypto exchange Poloniex for operating an “unregistered online digital asset exchange”.

Last week, the U.S. regulatory front attempted to address a long-standing desire from the industry for regulatory clarity. During a speech on 3 August 2021, at the Aspen Security Forum, the Securities Exchange Commission (SEC Chairman Gary Gensler outlined the approach that SEC may adopt to regulate the crypto industry. Keeping investor and consumer protection as his focal point, Gensler highlighted some of the concerns SEC had about DeFi platforms, stablecoins, exchange-traded funds (ETFS), crypto exchanges, and lending — and asked for resources from Congress to prevent transactions, products, and platforms from falling through regulatory cracks. This statement comes shortly after the introduction of the “Digital Asset Market Structure and Investor Protection Act” bill by Rep. Don Beyer (D-VA) on 28 July 2021. The bill, which is pegged to be the most comprehensive one to date lays down provisions that (a) regulate the categorization of digital assets, (b) desecuritization of tokens, and (c) allow the Department of Treasury to veto the creation of stablecoins amongst other measures. Further, on 1 August 2021, the senate proposed provisions on taxing digital assets in order to fund the Infrastructure Bill. The broadly worded definition of ‘broker’ in the bill has been a source of significant controversy, as the industry leaders believe it stifles innovation and investment in the crypto space.