Crypto regulation in the world: weekly digest #71

UAE

The Abu Dhabi Global Market (ADGM) has introduced the world's first DLT Foundations Regime, which is a purpose-built legislative structure designed to address the unique legal requirements of blockchain foundations, decentralized autonomous organizations (DAOs), and the broader crypto industry.

This innovative regime provides a comprehensive framework for DLT Foundations and DAOs, enabling them to operate and issue tokens while recognizing the unique needs of the blockchain industry. It aligns with ADGM's strategy to foster initiatives in the broader blockchain and digital asset realm.

The Regime is set to enable positive transformation across the blockchain and Web3 landscape, fostering a more transparent and efficient future. It offers an effective means to organize and promote governance while recognizing the industry's need for decentralization.

The enactment of this regulatory framework followed a public consultation with DLT industry participants to obtain user feedback and enhance the regulations. Consequently, this framework solidifies ADGM's standing as a global pioneer in the regulation of digital assets. The regulations enables the creation of a «DLT Foundation» by submitting a signed charter that includes a description of the foundation's initial assets and details about its governance and token issuance, along with the organization's white paper and tokenomics paper.

Hong Kong

The Securities and Futures Commission (SFC) of Hong Kong has released an updated AML/CFT checklist for VASPs to enhance compliance in the evolving virtual asset sector. The checklist is designed to help licensed corporations and VASPs assess their compliance with the latest guidelines on AML/CFT. The updated checklist provides a structured framework for reviewing and monitoring AML/CFT compliance, with senior management being responsible for rectifying any compliance deficiencies identified during regular reviews. The key changes in the updated checklist include enhanced clarity of existing questions to assist VASPs in their self-assessment. The updated checklist is in line with the latest guidelines and is available on the SFC website for access. The purpose of the checklist is to help licensed corporations and VASPs review rules for preventing money laundering and terrorism financing, with senior management being responsible for rectifying any compliance deficiencies identified during regular reviews.

The SFC's approach shows a larger trend in how financial activities are regulated, with the aim of having companies continually monitor and update their practices.

Turkey

Turkey is planning to introduce a new regulatory framework for crypto assets in 2024, with a focus on licensing, taxation, and safeguarding the interests of investors in the sector.

The new rules are expected to introduce a licensing regime for service providers, with requirements such as a clear separation of customers' funds from proprietary assets being mandatory. This is aimed at ensuring the security of users' assets and setting up certain criteria in terms of minimum capital requirements, listings, custody, and requirements for platforms to obtain operation licenses.

The framework will also address the taxation of digital assets, aiming to establish a reasonable taxation policy that will not discourage investors and will strengthen trust in the sector.

It could also be that the future framework could contain provisions to promote the use of digital lira, as the Central Bank of the Republic of Turkey has signaled plans to continue testing its central bank digital currency throughout 2024.

It is worth noting that Turkey has had previous regulations on cryptocurrencies which prohibited the use of crypto assets as a payment instrument in legal transactions. The new framework aims to provide regulatory clarity and promote the use of digital lira while safeguarding the interests of investors in the sector.

USA

The New York State Department of Financial Services (NYDFS) has released new guidelines for crypto token listing and delisting on exchanges to strengthen oversight of crypto firms.

The new rules require crypto firms to submit their coin listing and delisting policies for NYDFS approval, which will be measured against more stringent risk assessment standards set forth by the NYDFS to protect investors. The policies must cover governance, risk assessment, and monitoring of coins, and must be tailored to the crypto firm’s specific business model, operations, customers and counterparties, geographies of operations, and service providers.

The NYDFS will start implementation of an «innovative and data-driven approach» to oversee coin listings, delistings, and the cryptocurrency market more broadly. The new guidelines supersede the previous registration process and introduce new requirements for coin listings. The policy should result in approval of a coin only if the VC Entity concludes that the coin’s intended use is consistent with the NYDFS guidance, the standards embodied in 23 NYCRR Part 200, and with the safety and consumer protection principles.

News from other countries:

• Australia plans to impose capital gains tax on wrapped cryptocurrency tokens, according to recent guidance issued by the Australian Taxation Office (ATO). The ATO clarified that when wrapping or unwrapping a crypto asset, a capital gains tax event happens, regardless of the price at the time, and the capital proceeds for the event equal the market value of the wrapped token at the time of the exchange.

• The Indian Supreme Court dismissed a public interest litigation (PIL) seeking regulations and guidelines for cryptocurrency trading, highlighting that such matters are more legislative in nature. The court suggested pursuing legal remedies through other authorities and recommended seeking bail from a different court.

• The International Organization of Securities Commissions (IOSCO) has unveiled comprehensive proposals for crypto regulation. The proposed recommendations are principles-based and outcomes-focused, aimed at activities performed by VASPs to address concerns related to market integrity and investor protection arising from crypto-asset activities.

• The Bank for International Settlements (BIS) has conducted investigations on stablecoins, highlighting various concerns and risks associated with them. In a report, the BIS emphasized the legal, regulatory, oversight, and operational challenges posed by stablecoins, as well as the potential risks to monetary policy, financial stability, and the international monetary system. We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!