Back in 2018, four different courts in the U.S. held that cryptocurrencies were commodities. This did not cause a huge ripple in the cryptocurrency community because the Commodity Exchange Act does not apply to retail commodity sales if the “actual delivery” of the commodity occurs within 28 days after the execution of the transaction, and generally cryptocurrencies are delivered in merely a few days or less.Read More
The UK’s Financial Conduct Authority (FCA) has touted further regulation of cryptocurrency markets. In their Consultation Paper (Paper) published on 3 July 2019, the FCA has announced it will begin the consultation process on its proposed move to ban the sale, marketing, and distribution to retail consumers of derivatives and exchange traded notes (ETNs) that reference certain types of cryptoassets.Read More
By Jim Bulling and Charles McDonald
On 13 June 2019, the Reserve Bank of Australia (RBA) released its paper into the New Payments Platform’s Functionality and Access (Paper). In it, the RBA expressed disappointment with the slow roll out of New Payments Platform’s (NPP) services and functionality. As a consequence, the RBA will continue to push the major banks to prioritise the roll-out of services to their customers to address functionality gaps as quickly as possible. The Paper also recommends that NPP Australia Ltd (as operator of the platform) should:Read More
The Reserve Bank of Australia (RBA) along with several other central banks, have provided their initial responses to the recent announcement by Facebook (in conjunction with businesses such as MasterCard, Spotify and PayPal) of its plans to create a new blockchain based currency and payment system known as Libra.Read More
The Financial Action Task Force (“FATF”), an intergovernmental organization aimed at combatting money laundering and thwarting terrorist financing, recently issued final recommendations for the regulation of cryptocurrencies. Although the recommendations are not binding on members–it will be up to each of FATF’s 37 member countries to determine whether to enact the recommendations through legislation or regulation–it is expected that they will have widespread adoption and significant implications for the cryptocurrency industry.Read More
On 28 May 2019, the International Organization of Securities Commissions (IOSCO) published Consultation Paper CR02/2019 (Paper), which identifies the risks and regulatory considerations associated with the trading of crypto-assets on crypto-asset trading platforms (CTPs). The Paper seeks input from industry participants amid a growing demand for an international approach to the regulation of crypto-assets, recently illustrated by the G20’s joint request for global regulators to monitor risks and consider multilateral responses in relation to crypt-assets as needed.Read More
Late last month, several of the world’s largest banks invested $50 million in a digital cash settlement project with the aim of developing a more efficient clearing and settlement system. The new technology, referred to as the ‘utility settlement coin’ (USC), has been a work in progress since 2015, after Swiss bank UBS Group and London-based technology startup Clearmatics announced to the market that they had commenced working on the project.Read More
On 30 May 2019, the Australian Securities and Investments Commission (ASIC) updated its Information Sheet 225 which sets out guidance for entities that are looking to raise funds through initial coin offerings (ICOs) or are otherwise involved with crypto-assets. Interestingly, ASIC has grouped crypto-asset participants into several distinct categories and has broadly set out the obligations that may apply to participants in each category.
Particular aspects of the information sheet that may be of interest to crypto-asset participants include:
- ASIC has stated that entities should be prepared to justify a conclusion that their ICO does not involve a regulated financial product;
- platform operators that allow crypto-assets that are financial products to be traded on the platform must hold an Australian market licence or be otherwise exempt. As at the time of release, there are no platform operators that have been appropriately licensed or exempt;
- assessments of Australian Financial Services (AFS) licence applications for the purposes of crypto-asset-related financial products may take more time; and
- clearing and settlement obligations may apply to “miners” that are part of the clearing and settlement processes for tokens that are financial products.
In summary, while ASIC’s updated Information Sheet does not break any new ground in relation to the regulation of crypto-assets in Australia, it serves as a useful resource for any entity that is looking to be involved as a crypto-asset participant. We remind our readers there are many avenues to market for token issuers, even where their tokens constitute financial products, and it may be useful to seek legal advice in this regard. For example, tokens that only constitute securities can be offered to sophisticated investors without attracting significant disclosure obligations including the provision of a prospectus.
On April 23, the Federal Reserve Board (the “FRB”) published a Notice of Proposed Rulemaking (“NPR”) to “simplify and increase the transparency,” while maintaining “consistency” to its determination of whether an entity “controls” a bank or a savings association (collectively, “depository institution”). According to the FRB’s announcement, the NPR is a first draft of a “comprehensive regulatory framework for control determinations.” FinTech companies seeking to become depository institutions should pay close attention to the NPR as it provides clear guidelines for when its investors would become subject to the Bank Holding Company Act (“BHCA”).Read More