The International Monetary Fund (IMF) has announced its work on CBDC Handbook for national central banks. It is stated that the global central banking community is actively exploring CBDCs, which may have a fundamental impact on both domestic and international economic and financial stability. Over 40 countries have approached the IMF to request assistance through CBDC capacity development.
In the document, the IMF is going to systematize the regulatory framework for CBDC and provide legal and technical assistance to the authorities. With more country experiments and empirical evidence available, IMF capacity development will evolve to provide increased value-added advice more tailored to country circumstances and more solidly anchored in empirical and analytical work, and to strengthen synergies with surveillance. The Handbook is going to be issued following next four or five years.
The U.S. Securities and Exchange Commission (SEC) plans to bring the DeFi sector under mandatory regulation in the US. Commission Chairman Gary Gensler believes that DeFi platforms, same as centralized crypto exchanges, violate US laws and operate like unregistered stock exchanges. The SEC is considering to apply existing stock market rules to DeFi platforms as well.
Not only SEC is looking at DeFi in the USA. DeFi has been a major topic of concern among the U.S. Treasury Department and the FRS. The Treasury has published the 2023 DeFi Illicit Finance Risk Assessment which considers risks associated with DeFi services.
While there is currently no generally accepted definition of DeFi, the Report refers to virtual asset protocols and services that purport to allow some form of automated peer-to-peer transactions, often through use of self-executing code known as «smart contracts» based on blockchain technology.
It is noted in the Report that criminal actors and rogue nations like the Democratic People’s Republic of Korea are using DeFi services to transfer and launder their illicit incomes. They are able to exploit vulnerabilities, including the fact that many DeFi services that have anti-money laundering and countering the financing of terrorism (AML/CFT) obligations fail to implement them.
The primary vulnerability that illicit actors exploit stems from non-compliance by DeFi services with AML/CFT and sanctions obligations. Other vulnerabilities include the potential for some DeFi services to be out of scope for existing AML/CFT obligations, weak or non-existent AML/CFT controls for DeFi services in other jurisdictions, and poor cybersecurity controls by DeFi services, which enable the theft of funds.
The study also includes recommendations for U.S. government actions to mitigate the illicit finance risks associated with DeFi services. These include:
We wrote earlier that Hong Kong’s government had started the campaign to attract crypto firms to the city. This campaign aims to make the city an international virtual assets center.
According to Reuters events have begun in line with pursuing this goal, starting with numerous conferences scheduled to hold in the city in April. The earliest among the events is the Hong Kong Web3 festival, which had up to 13,000 attendees on Wednesday, April 12, 2023.
Fallowing the China’s ban on crypto and Hong Kong’s effort to be a crypto center, some of the top crypto companies with Chinese links have reportedly announced or are planning to publicize their bid for licenses in Hong Kong.
The firms are also the ones reported to be behind the various crypto-related events that are currently taking place across the city of Hong Kong.