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Regulatory Rewind #008 - Mar 26, '25
Recorded: March 26, 2025 Duration: 0:40:17Space Recording
Short Summary
Recent developments in the crypto space include the launch of new projects such as Regulatory Rewind by Parity Technologies and a tokenization regulatory sandbox by the Dubai Financial Services Authority. World Liberty Financial announced the launch of its stablecoin, USD-1, while Ripple settled with the SEC for $50 million. VALR, a leading South African crypto exchange, is expanding internationally and has introduced a lending product offering hourly interest. The SEC's roundtable discussions and the US government's reversal on Tornado Cash sanctions indicate evolving regulatory trends. The growing involvement of young people in crypto in the UK reflects an emerging trend of youth-driven innovation in the industry.
Full Transcription
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Hey, y'all, this is Chris E Hill from Parity Technologies, and I am here along with the rest of the Parity Legal team to welcome you to Regulatory Rewind.
For 30 minutes, once a week, we take y'all around the globe for a quick canter through the major developments in our industry over the last week.
So...
We will get into that in a second, but before we do, I just want to remind everybody that although we are lawyers, we are not your lawyers.
So anything we might say is not legal advice or any other advice.
And we're just here to share our thoughts and some of those developments that may impact us on a day-to-day basis.
So I am going to jump straight to Europe and to Gustav, who is going to tell us some of his thoughts on what's been happening in the last week in that jurisdiction.
Gustav.
Thank you, Chrissy.
I would first like to mention a working paper on consumer attitudes towards central bank digital currency, CBTCs.
published by European Central Bank.
That's part of our preparation phase on the project CBDCs that began in November 2023 and is laying the foundation for the potential usage of digital currencies, digital euro.
and it includes stuff like finalizing the digital Euro scheme rulebook or selecting providers that could develop a digital Euro platform and infrastructure.
But it also involves testing and experimentation and exchange with the public and other stakeholders around the digital euro.
And this working paper on consumer editutes is interesting because it finds three results.
Result one is that the likelihood of usage by consumers is not very high,
but is potentially raised if they get more information about it.
So it would need really targeted efforts to increase the adoption of the digital euro.
Despite that, it seems that there's a limited willingness to allocate significant portion of financial assets into the digital euro.
So people will probably not want to keep a lot of digital euro around.
And additionally, they tested if holding limits that would be implemented
probably 1,000 or 10,000 euros would have an impact and they don't.
So it seems there's still, it remains to be seen if the introduction of a digital euro will resonate with potential consumers.
So that's the stable coin that's potentially coming in from the public side on the contrary to other stable coins that we've discussed in previous episodes.
And Gustav, there's been some recent breaking news from the state on the subject of stable coins, and that is the World Liberty Financial has announced it's going to be launching its own stable coin. So this is related to President Trump.
And I just wanted to ask your thoughts on maybe comparing and contrasting what was announced in the US on stable coins, what's going on legislatively versus what's happening in the EU.
That is really interesting because EU is going the CBDC route. So they are...
mainly making it more and more difficult for stable coins to be in the European market
unless they follow certain guidelines.
And Trump on the other side has said that there will be no CBDC in the US.
but that stable coins are there to help foster the dominance of the US dollar in the world.
But he seems to be aware that this is also a major business.
And following up on that, I think the USD-1, as they are going to call it, is going to be,
a very interesting launch that's also, I think it's also interesting to see how that, how that mixes stuff up.
As there's a president on the one side and on the other side there's an investment firm that's around him.
That's his private wealth. It's it's not a state initiative, but it's just private business on the side,
probably even profiting from being the president.
And this is a point worth watching and discussing.
And actually, if everyone stays around for our very last story of the day,
we'll come back to this a little bit in terms of traditional approaches to business
versus maybe more innovative and new approaches to business and how it intersects with politics and regulation.
But that will be our last story.
Thank you, Gustav.
I think you have one more bit of information to share with us.
So back to you.
Yes, I wanted to mention a very interesting case in Turkey.
In Turkey, the situation is that cryptocurrency in general is allowed,
ownership, trading, mining, everything is legal.
But payment is illegal.
It's banned since 2021.
And the Central Bank of the Republic of Turkey also forbade payment services
and issuance of electronic money in Turkey.
and the law firm Global B, I think the name is, I hope I got it right.
They now argue the case that crypto payments shouldn't be banned
because it would bring significant economic benefits if they were allowed.
And they will have a hearing on May 28 in Ankara.
And we expect the decision to be announced on the same day.
So this is going to be an interesting battle in a country where cryptocurrency is half legal, I would say,
because the main function is not usable.
So that was from Europe and I'm giving over to Jamil for Asia.
Thank you, Gustav. I think Chris is going to take us on a whistlestop tour of Asia on this next edition.
Chrisi off to you?
Sorry.
Great. No worries. Hey, we could all do it together. Asia, we're starting off with Japan. And I thought we might entitle this section, regulatory rethink, actually, rather than regulatory rewind. Because we are seeing a lot of jurisdictions around the world begin to rethink their approach to cryptocurrency.
crypto to blockchain.
And we're certainly seeing that in Japan at the moment.
So Japan's open house, which is a very well-respected real estate entity listed on the Tokyo Stock Exchange,
has just expanded the number of tokens that it accepts to include Doge, Seoul, and XRP,
and that's already in addition to Bitcoin and Ethereum.
So we see that even in the real estate area,
There are these changes that are occurring in Japan
to provide room to grow and room for innovation to breathe
and even to be used in day-to-day life.
And you're not only seeing it in terms of companies
and the digital assets that they'll accept
for day-to-day transactions,
but also in the regulations.
So whether it's related to payments or taxation,
things are changing, a regulatory rethink.
So moving away from Asia and then going to Australia,
So we're focusing on APAC.
I wanted to just call to everyone's attention.
Actually, an interesting fun fact is that after the U.S. and Canada, Australia has the third largest number of crypto ATMs in the world.
And in true form, the Aussies are, you know, wanting to make even more.
strides forward in crypto and in regulating.
And so they've announced a digital asset framework that is on the horizon.
Of course, this is something that will be coming into effect very soon over the coming months.
There's still a lot to be discussed and ironed out, but a real intention, again, to integrate crypto into every day.
So another regulatory rethink.
Now, I think in Australia, they may not stray too far from the existing regulatory regime as it relates to traditional assets.
We shall see, but certainly indications are they're not going to stray too far outside the lines, but they are going to integrate more.
So that is a very positive development from the APAC region on the rethink.
frontier. Now we're going to go to the Middle East and Africa and to Jamil.
Thank you, Chrissy. Hey everyone. Over in the UAE, the Dubai Financial Services Authority,
they've launched a tokenization regulatory sandbox.
And as part of that, they're inviting firms to apply by a specific date, April the 24th of this year.
So just next month.
And the initiative aims to provide a controlled environment for companies to test and offer tokenized investment products under regulatory supervision.
So the DFSA outlined that eligible services include tokenized equities.
bonds, collective investment fund units as well as Sukuk, which is essentially Sharia compliant bonds,
and the move aligns with the UAE's broader strategy to establish itself as a leader in digital finance.
Moving on to our next story in Israel, the Bank of Israel has unveiled a preliminary design for a central bank digital currency, a CBDC.
They term it the digital shekel, and the intention here is to serve both retail and wholesale users.
It's intended to be a multi-purpose CBDC that aims to provide an alternative to cash.
for households and businesses and while also enhancing settlement systems for financial institutions.
Despite this development, the Central Bank of Israel has emphasized that the discussions are still in the exploratory phase
and no final decision has been made regarding its issuance.
So that's the Middle East with the story from the UAE and Israel and moving on now to Africa.
And on Africa, just before we jump to that,
I think Chrissy wanted to mention something related to this point.
Sure, Jamil.
I think one of the other late breaking news items that we wanted to make sure that everyone was aware of,
and you are going to touch upon in the context of exchanges,
is the settlement announced yesterday,
between Ripple and the SEC.
And that was for the offering of unregistered securities.
And originally, the fine was meant to be $125 million
that Ripple would have to pay.
And it has been since negotiated down to 50 million.
So that is a significant reduction, and it's worth noting.
And so it's interesting to hear your thoughts on when we're talking about regulation
and other parts of the world and seeing that journey in the States, using Ripple as an example,
how you think it might play out, say, in Africa.
Of course, Chris, no, thanks. Thanks. No, no, thanks for that, Chrissy, of course.
I think as an exchange, you can't really blame an exchange for having a lot of focus on the US.
I mean, just us doing our regulatory rewind, a lot of the focus has been on the US, especially since the new Trump administration.
So, you know, you can't blame an exchange or, you know, the various exchanges across the world for looking to the US and wanting to, you know,
make sure everything is watertight in that jurisdiction.
I think the reason I want to link this to Africa is because,
it's not just the US as dual a sacredy is a big wide world out there.
While exchanges are worried about the SEC and being under its purview and jurisdiction,
as well as the framework in the US, I think a
A well-prepared exchange would consider not only the US and the SEC, but also how it can comply with jurisdictions and other agencies across the world.
And that's why I want to touch upon Africa.
So in Africa, cryptocurrency fraud is escalating as scammers exploit regulatory gaps amid the rapid adoption of digital currencies in the world's second largest continent.
In 2021, Kenya reported crypto-related losses of $120 million, and in South Africa, they experienced crypto losses of $99 million.
And despite these risks, cryptocurrency usage continues to grow in Africa.
And that has prompted calls for stronger regulations in the continent.
Some African nations, including South Africa and Mauritius, have introduced measures to oversee digital assets,
whereas others like Kenya and Nigeria have imposed restrictions without clear regulatory frameworks.
So there is a difference in approaches between the nations of Africa.
And we talked about exchanges, Chris, in response, Binance, the world's largest cryptocurrency exchange
is enhancing security measures and supporting regulatory efforts to combat fraud.
So Binance's global chief marketing officer, Rachel Conlon,
has emphasized the company's commitment to security and compliance,
noting the enforcement of strict know-your-consumer guidelines,
also known as KYC.
and look to collaborate with local authorities to prevent fraud.
This also goes to another point that Chrissy mentioned,
as mentions throughout Rugry Wind about,
you know, the appetite for KYC not going away.
We mentioned it during the by bit hack.
As we see more instances like this, it will only become more needed for KYC to still be around and in some cases be stronger as a structure than before.
So I think that's another point linking back to previous stories that we've covered.
In Kenya, they have over 4.4 million active crypto users, and Binance aims to expand its footprint in the country of Kenya,
leveraging its youthful population and high mobile money penetration.
And the executive from Binance, I just mentioned, Rachel Conlan, has estimated that crypto penetration in Kenya is currently at about 5%.
And she expressed hope to see it rise to as much as 20% within the next two years.
Moving on in staying within the content of Africa, but moving on to the next story.
In a recent AMA, the C-O-O-O-Gian Luca Sacco and CMO, Ben Caslin of VALR,
discussed the company's growth and the broader crypto landscape in Africa.
VALR was founded seven years ago and have become South Africa's largest crypto exchange.
They're expanding internationally. They've obtained licenses in South Africa as well as approval in the EU via Poland and initial approvals in the UAE in Dubai and in Hong Kong.
South Africa's progressive regulatory framework has been pivotal in supporting crypto adoption
and Jean-Lucasako has highlighted crypto's practical uses in Africa such as facilitating
cost-effective cross-border transactions and offering investment avenues beyond government control.
And VALR has introduced a lending product that provides hourly interest on crypto assets catering to the unique market dynamics, where crypto often trades at a premium due to capital controls.
And this platform also supports spot trading, leverage margin trading, nearly 50 crypto pairs, and they plan to offer up to 20x leverage on perpetual futures contracts.
They also maintain their own liquidity pool and that distinguishes it from other exchanges in the region that rely on external sources.
So quite a bit going on in Africa, especially relating to exchanges.
You've got local setups such as FLR in South Africa, but you've also got the bigger players like Binance with their large kind of global footprint,
trying to also make some inroads or business.
or gain further in roads that they already have in the region
and in specific nations in Africa.
And Jamil, before we get to Central and South America
and Gustav, I believe,
I just thought it was interesting to draw out
the point you made about young people in Africa
and the youthful population.
And that's something certainly when we get to our story
at the end of today, we'll talk a little bit more
about appealing
to the younger generations.
Do you have any views on that in terms of what's happening in Africa or any of these stories?
Well, I think it's something I touched upon last week, actually,
in our look into decentralization and douse.
One of the things that makes Africa quite ripe for the use of decentralization and
DAUs is that they do have a very energetic entrepreneurial young population who want
to get things done and the current infrastructure is in place potentially don't allow that
to happen or don't allow that to happen as quickly as they'd like.
So things like DOWS and decentralization are...
are things that could have a big impact in Africa.
And their young population and the entrepreneurial spirit has a large part to play in that.
And I think digital assets naturally kind of pairs into that as well.
So I think that is an important point.
Absolutely. And it's important for the future for many people.
I believe we have Gustav to take us through Central and South America.
Yes, thank you. I will start with Colombia, where despite ongoing efforts, including a crypto pilot project initiated in 2021, there's no definite regulatory framework for crypto in place yet.
And right now, Colombian lawmakers reintroduced a bill that was featuring 16 provisions to include a licensing system for virtual asset providers and compliance with local regulation.
Bill covers monitoring, marketing rules, education, crypto taxes, and of course, measurements again, money laundering and terrorism finance.
And all in the agency to implement a framework that makes crypto safe to use for the people who want to use it and have control over illegal.
sentiments around crypto. So that's interesting and we are going to watch if that goes through.
Meanwhile in Brazil there's another new bill about regulating voluntary salary payments.
So in Brazil you can pay up to 50% of your salary
in crypto assets and the rest is in the Brazilian real.
You can even have full payments in cryptocurrencies under certain circumstances.
For example, if it's independent service providers or if it's a case involving foreign workers.
And the bill is of course intended to boost the financial technology sector and attract crypto investments in the local economy,
emphasizing the importance of contractual freedom also between employers and employees.
And it draws its inspiration from successful implementations like that in other countries,
like in Switzerland, Japan and Portugal, where they had been quite successful with such regulations.
That's from Central and South America.
With that, back to Chrissy and to the US.
Great. Thanks, Gustav.
First up, let's talk about the CFPB.
So the CFPB is the Consumer Financial Protection Bureau, which is actually an agency that was proposed
by Senator Elizabeth Warren back in 2007, and it is closely associated with stricter consumer
protections.
Well, consensus is not very happy with some of the interpretive guidance being issued.
issued by the CFPB, because essentially, in a nutshell, what they're saying is we want to apply something called the Electronic Funds Transfer Act to any unhosted wallets, which, boiling it down would mean developers would be held accountable for any fraudulent or unauthorized transactions through unhosted wallets.
and there would be enforcement of traditional financial institution regulations on decentralized
wallets. So, of course, Metamask, top of mind, and they are very concerned about public policy,
administrative law, and just general business, major issues that will result if this
this interpretive guidance were applied.
So the General Counsel of Consensus has written a letter,
and this is definitely something that's being looked at,
because should the interpretive guidance be applied,
it could have very serious consequences.
So watch this space, but certainly Metamask consensus.
They are all on top of watching this.
We just wanted to draw it to your attention.
Second news article is regarding the recent SEC Roundtable, which was last Friday.
We definitely want to go and understand how different regulators around the globe are engaging with the industry.
And it's very interesting to see these new roundtable formats that are being introduced in the states
because they're meant to be public.
They're meant to.
to encourage lively discussion and they're meant to cover a variety of topics.
So the first one was last week.
There are four more that are planned across April and June.
And it seems that someone has been busy on chat GPT with the names of these roundtables
because the first one is between a block and a hard place,
tailoring regulation for crypto trading.
The next one is know your custodian, key considerations for crypto custody.
The third is tokenization, moving assets on chain where
tradfi and defi meet.
And then the last one is defy and the American spirit.
So very happy to see the SEC engaging like this and making it
lively and also making it something that people want to be
involved in and listening because that is certainly a huge part of any
industry and engagement with regulators.
The third and final headline this week from the U.S. is about tornado cash.
I'm sure all of y'all have seen it.
There is a, I mean, it could be a funny story, but it's not.
It is actually a dramatic reversal in
the way the US government is looking at mixers.
So if you all remember, a brief history lesson.
In 2002, Tornado Cash was sanctioned by OFAC,
which is the US Treasury Office of Foreign Assets Control
under an executive order for providing financial, material,
or technological support for cyber-enabled activities
originating outside the US,
and for failing to impose effective controls.
There were a number of lawsuits that were generated by this in the States,
also in the Netherlands,
and there were a number of Ethereum wallets
that were actually placed on the sanctions list,
the OFAC sanctions list.
So last year, the cases were dropped
and now these entities have been removed from the sanctions list.
So it's a real win for those who are focused on
privacy and those who are focused on innovation because, you know, the code itself should not be the target of sanctions.
And that is something I think we all feel very strongly about. And it's good to see this reversal.
Again, another regulatory rethink, which we are hopeful becomes a recurring theme throughout 2025.
Now, in our last two minutes, let's go to our funny story.
I've mentioned it a couple times because it is a point that really hits home for me.
And at first, actually, when I saw the headline, I thought it was something from the onion.
Essentially, the head of the FCA this week went in front of MPs in the UK to say,
he doesn't think it's so great that so many young people invest in crypto.
And I think that is something we should all take pause, think about who's saying that,
the contacts they're saying it in, and what that could potentially mean for the regulatory
and legislative approach in the UK, which is still developing.
It is very concerning to me.
I am a dual American and British citizen living in...
in the UK and very concerned with the younger generation
because I am the mother of two.
And I think it's a wonderful thing to say
that so many youth in the UK are focused on crypto
and are involved and that there is that entrepreneurial spirit
here in the UK that's reflected in the numbers.
Of course we still want people to be concerned about risk
and to invest in traditional assets.
But I think having a young population
that is heavily involved and entrepreneurial
and agile and young and energetic
and wanting to take risks is something to be proud of
and is very consistent with other countries
around the globe and where we see the regulation going.
And I think I just want to say again,
was so shocked by that headline that I did think it was satire at first.
And I really do hope that in the UK we continue,
which has always been a hugely innovative, entrepreneurial, energetic,
forward-looking approach to technology, to the economy, and to the future of not only for us here,
but also for the younger generations that are coming up. Again, maybe we should be looking to other
jurisdictions around the world for inspiration if we are concerned.
So with that, we are at 30 minutes.
Thank you, Gustav.
Thank you, Jamil.
Thank you for the coups for making this happen and making it so easy.
And also Amy as well.
Eva couldn't join us today.
She's on holiday.
We all deserve a break.
But we will see y'all next week.
Same time, same place with more regulatory rewind and regulatory rethink, we hope.
Thank you.
Thank you.
I'm going to be
I'm going to be.
