Crypto regulation in the world: weekly digest #54

USA

This week, U.S. lawmakers introduced two pieces of legislation that could significantly impact the crypto industry. If passed, both Bills may become a significant breakthrough in the regulation of cryptocurrency in the United States.

The Financial Innovation and Technology for the 21st Century Act is a bill proposal introduced in the US House of Representatives on July 21, 2023. The bill aims to create a regulatory framework for digital assets and establish clear principles to ensure financial security and certainty as digital asset developers continue to innovate.

The bill would give the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) a seat at the table to provide clarity for the crypto industry, establishing a digital asset advisory committee to advice regulators on digital asset issues. It also obliges both CFTC and SEC in one year after bill adoption to develop clear guidelines for the industry within their competence.

The Financial Innovation and Technology for the 21st Century Act is a collaborative effort between Reps. Hill, Thompson, and Johnson. A previous bill proposal of similar magnitude was brought before the House of Representatives a year ago and still have not passed.

Another bill proposal, bill №S.2355, that was introduced on July, 17, aims to clarify the applicability of sanctions and anti-money laundering compliance obligations to United States persons in the context of certain transactions involving digital assets. The bill targets money laundering and sanctions evasion involving decentralized finance and proposes that DeFi protocols in the US must adhere to stricter anti-money laundering (AML) regulations.

It remains to be seen how the bill will evolve during the legislative process and what specific sanctions and anti-money laundering compliance obligations will be addressed in the final version of the bill.

Kuwait

Kuwait has banned cryptocurrencies to combat money laundering and terror financing. The ban was implemented on July 20, 2023, by the Capital Markets Authority and covers all transactions where cryptocurrencies are used as payment instruments or methods, investments, and digital assets mining. The regulator stated that cryptocurrencies lack legal status, are not issued or supported by any entity, and their prices are susceptible to manipulation.

The ban is part of Kuwait's efforts to comply with international regulations and combat financial crimes. By implementing the ban, Kuwait aims to strengthen its anti-money laundering measures and ensure compliance with the FATF's guidelines as the country lacks technical measures and resources to regulate cryptocurrencies.

According to our data, Kuwait has become the seventeenth state in the world to completely ban cryptocurrencies.

The UK

The UK's Financial Conduct Authority (FCA) is designing prudential requirements for firms carrying out crypto activities. This move is part of the FCA's efforts to regulate the crypto industry and ensure that firms operating in this space have appropriate systems and controls to counter the risk of being misused for financial crime.

Since January 2020, firms carrying on cryptoasset activity in the UK have had to comply with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations (the ‘MLR’s). This includes the requirement to be registered with the FCA to continue to carry on business.

The FCA's prudential requirements for crypto companies are still being designed, and it is not yet clear what they will entail. It is worth noting that the FCA has previously warned investors about the risks associated with investing in cryptoassets, stating that they are «high-risk, speculative products» that «are unlikely to be suitable for most retail consumers». The FCA has also issued warnings about the risks of investing in unregulated cryptoassets and has published a list of unregistered cryptoasset businesses that firms should be reviewing.

News from other countries:

• The G20's Financial Stability Board (FSB) published its final recommendations for regulating crypto trading firms. It focuses on issues relating to regulatory supervisory and oversight of crypto assets to help foster innovation.

• FTX sues its founder Sam Bankman-Fried and his past team. They are accused of wrongful transactions worth more than $1 billion. The new FTX management claims that they made fraudulent transfers that benefited them personally.

• The US SEC signaled that it might appeal the recent ruling in the case against Ripple.

We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!