VP Strategic Partnerships and Regulatory Affairs
Ben grew up coding and exploring computers, and went on to build the world’s first interest rate swap trading platform in 2001.
He later led regulatory teams at Accenture and PwC, before spending eight years with HSBC as a Regulatory Conduct and Financial Crime Specialist — a role that involved writing the bank’s first policy on Bitcoin in 2013.
Welcome to the latest edition of the Regulatory Radar!
This month I share some personal insights and commentary on several of the most interesting things going on in crypto regulation & compliance.
Here are my highlights from August activity.
The European Union’s Markets in Crypto Assets (MiCA) legislation will likely have a final text ready in the coming weeks.
The package of measures, which was provisionally approved following months of negotiations earlier this year, is set to transform how cryptoassets are treated in the bloc.
One of the major issues which MiCA will bring into focus for the industry is how Virtual Asset Service Providers (VASPs) interact with the FATF Travel Rule, and firms are already beginning to prepare for the transition.
However, the treatment of non-fungible tokens (NFTs) by MiCA still remains unclear, even as the EU prepares to implement its first formal framework for digital assets.
In a recent online panel, MEP Stefan Berger, who has led the European Commission’s efforts around MiCA, told an online panel that the legislation was likely to be ready “in four to six weeks,” in its final form.
But he remained coy on exactly how NFTs will be regulated.
Berger said the NFTs would be excluded – unless they resemble traditional financial assets.
With EU officials suggesting that exclusions will be relatively few and far between, NFTs may well come under the scope of MiCA, but with significant uncertainties for the wider market.
Elsewhere, the EU is planning to create a dedicated anti-money laundering authority as part of its broader efforts to tackle illicit funds. This new body will likely have authority over the crypto market as part of its mandate.
Singaporean regulators have increasingly moved towards stricter regulation of the crypto market in recent months, even as the city state maintains a stellar reputation within the industry for allowing innovation.
The concerns primarily focus on the risks to retail investors, and Monetary Authority of Singapore (MAS) Managing Director Ravi Menon has said it is weighing whether to bring in even tighter rules around the promotion and trading of cryptoassets for these investors.
Speaking at a conference, Menon said that while the regulator is willing to support the digital asset sector in areas where it adds value, there remain significant concerns about the potential for harm to consumers.
"Cryptocurrencies have taken (on) a life of their own outside of the distributed ledger – and this is the source of the crypto world’s problems," Menon said.
"Cryptocurrencies are actively traded and heavily speculated upon, with prices that have nothing to do with any underlying economic value related to their use on the distributed ledger. The extreme price volatility of cryptocurrencies rules them out as a viable form of money or investment asset."
He said that “adding frictions” to retail investor access, including a potential customer suitability test, are among the options being assessed by the MAS to help rein in some of the more speculative corners of the market.
However, he added that for institutional investors, the potential of the industry remained positive, particularly in areas such as trade finance or cross-border payments.
Menon underlined that the MAS was still willing "to anchor in Singapore crypto players who can value add to our digital asset ecosystem and have strong risk management capabilities”.
Efforts to add regulatory clarity to the cryptoasset market are in motion across almost every jurisdiction in the world.
As the market has grown, it has become increasingly clear that some form of regulatory framework is going to be implemented to both control abuse of the technology and, more importantly, give the industry clarity about how and where it can operate legally.
With that growth, more and more crypto firms are increasing their compliance efforts, and many are actively working with regulators or hiring specialists from government or traditional financial backgrounds as they prepare internally for a heavier regulatory burden.
Some of the biggest exchanges and others are now seeking to work with regulators and be part of the conversation around how exactly they will be regulated, which can only be a positive step for the industry.
The more the industry engages with the regulators, the more likely it is we will see a sensible, workable framework that adds some much-needed structure while retaining the potential for innovation.
Central bank digital currencies (CBDCs) have emerged over the past few years as one of the biggest areas of interest for states seeking to find a path into the cryptoasset space themselves.
Currently, stablecoins are overwhelmingly controlled by the private sector, with assets pegged to the dollar, euro, and other currencies backed by traditional assets to maintain their 1-1 ratio with the underlying currency.
But many countries including the UK, USA and Japan are exploring a CBDC of their own in a bid to retain control over their currencies amid concerns that alternative private-sector versions could bring risks to their economies.
In a recent paper, the International Monetary Fund has come out in favor of a global CBDC, to help smooth issues within cross-border payments, even as they criticize the broader cryptoasset industry for perceived regulatory failures.
Tobias Adrian, director of the IMF’s monetary and capital markets department, proposes that a global CBDC platform could reduce the costs associated with international trade in a state-backed system.
Private sector actors could then build on that platform by adding smart contracts to the infrastructure, increasing its utility while maintaining state control.
Despite the potential, however, the IMF reiterated previous calls for global crypto regulations, citing risks of fragmentation and the potential for the market to be abused.
“The worry is that the longer this takes, the more national authorities will get locked into differing regulatory frameworks,” Aditya Narain, Deputy Director of the IMF’s monetary and capital markets department, said.
Given the challenges individual nations have encountered in attempting to build a workable framework, it remains to be seen whether the IMF’s vision for a global regulatory regime is possible both in theory and practice.
Back in March, US President Joe Biden signed an executive order which commissioned seven of the most important financial agencies in the country to conduct their own reports into various aspects of the cryptoasset market.
Agencies including the US Treasury, Justice Department and Commerce Department were required to look into topics ranging from the prospects of a dollar CBDC, to crypto’s energy usage and environmental impact.
Those responses were due at the beginning of September, and we should finally see more concrete evidence of the Federal Government’s approach to crypto shortly.