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Regulatory Rewind #009 - Apr 2, '25
Recorded: April 2, 2025 Duration: 0:33:41Space Recording
Short Summary
The discussion covers global regulatory developments in the crypto industry, highlighting trends such as increased scrutiny and innovation in digital currencies. Notable events include Switzerland's licensing of a DLT trading facility, the European Central Bank's work on a stablecoin, and the US easing crypto restrictions for banks. El Salvador's Bitcoin initiatives and partnerships with Paraguay underscore growth in Latin America, while the UK's regulatory challenges indicate a decline in crypto adoption.
Full Transcription
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Welcome to Regulatory Rewind.
This is our ninth edition of Regulatory Rewind,
where the Parity Technologies Legal Team
takes you for a quick canter around the world
to keep you up to date on the regulatory thinking,
the regulatory rethinks,
and just general regulatory view
of the industry that we are all involved in.
So as ever, when lawyers are sharing their views, we like to remind everyone that we might be
lawyers generally, but we are not your lawyers. And so this cannot be seen as legal advice or
investment advice. And I'm sure y seen as legal advice or investment advice.
And I'm sure y'all all know that story, but it's worth repeating. And today is a day I think many people U.S. to announce tariffs. And it's in some
circles, it's being called Liberation Day. So it may be a day that we look back on as one to
remember where things that might not be possible in the past are now possible for the future.
that might not be possible in the past
or are now possible for the future.
And that can be both good and bad, we shall see.
But we want to focus on Europe first
and take you through what's happened in the last week.
And I would like to ask Gustav
to share his views on what's happened.
Hello, thank you, Chrissy. I want to start with Switzerland
where FINMA has granted a license to BX Digital AG, making it the first DLT trading facility in
Switzerland under the DLT Act and governed by Financial Market Infrastructure Act. The BX Digital AG is part of the Börse Stuttgart
group and facilitates multilateral trading of DLT securities but no custody services.
And it's granted that license according to a DLT Act that's effective since August 2021
that aims to support innovation while also maintaining the market stable.
So this is an interesting development in Switzerland and with that we go over to EU where
institutional adoption according to Cointelegraph remains rather slow in contrast to the United States where we
already talked about the Bitcoin reserves. It seems that even after Trump's
effective order to keep cryptocurrency as a federal Bitcoin reserve, European
companies have largely stayed silent and it seems that the complex regulatory environment on the one side and
the lack of clear stance on Bitcoin as a reserve asset contribute to some hesitation in that field.
A speaker of Bitpanda says that the European financial institutions may be underestimating crypto investor demand by as much as 30%.
So that seems to be quite a mismatch.
On the other hand, the European finance ministers have concerns about the US policy shift under Trump to embrace cryptocurrencies as it could undermine the Eurozone's monetary
sovereignty and financial stability.
As we have talked about quite a bit, Trump's executive order talks about a strategic reserve
for cryptocurrencies.
We also know that strategic in this context means that they basically just want
to keep cryptocurrencies that the US government acquired out of legal problems that people had.
And it does not mean that they are going to buy off crypto coins on the market but still they are with that strategic
reserve having a mind shift that is important to notice while the European
Central Bank is basically working on central bank money since 2020 they
started that when Facebook wanted to launch the Libra and did not do it in the end,
but that was the first move towards a European bank, central bank backed stablecoin. And that
is interesting because with that stablecoin, they want to pose the euro as an important asset and just transform it into a digital asset, while the Americans are taking that other route, not having a central bank backed coin, but instead really go into crypto as such.
that really go into crypto as such.
And Gustav, I think there's some interesting development this week
also in the insurance space in the EU.
And I think maybe that conservative attitude towards digital assets
is reflected in some of those decisions as well.
Did you want to tell us a little bit about insurance?
Insurance in so far as the stability of stable coins is in Europe
very much densely connected to pools of money in the background
or real assets that would assure that the value of the stablecoin
is connected to something that is seen as real money in the traditional world.
And that is different from the US where they don't have these backed stablecoins
and they just have private initiatives that are basically lacking regulation, I would say, from a European perspective. So there's a lot more values created out of nothing,
very crypto attitude on the one side, and in Europe it's a much more
conservative approach that's also connected to the real money banks that people might have. And probably that also
affects the monetary markets as such. So the traditional markets of currencies
like euro and US dollar and other currencies we've seen last time that for
example Israel is also working on a state-backed stablecoin in order to be present with
currencies in the digital market. I think it's interesting because even with banks
it's not always required that there's a one-to-one backing, right? Even in a
traditional insurance market which we might all experience with cars or homes or whatever it may be. Again, a one-to-one
requirement is very conservative. And I think it is also consistent not only with the EU,
but some other approaches that we see countries taking around the world,
with the US potentially being a notable exception.
Yes, definitely.
So comparing and contrasting some different ways of looking at the same issues.
And again, not necessarily a right or a wrong way, just different ways.
Right. So we're going to move on now.
Gustav, thank you. Jamil, you're going to tell us a little bit about the UK, I believe.
And of course, last week, our story was about some more conservative traditional statements
that were emanating from the regulators here in the UK.
But I think you're going to take us through a few more things.
Over to you.
Thank you, Chrissie.
Hello, everyone. over to you thank you chrissy hello everyone so over in the uk there it's it's it's quite
notable that globally there is growing institutional adoption of bitcoin and it's seen that
the uk is lagging in this sector that's according to a recent forbes article um and this article
notes that major u.s institutions including university endowments like university of austin
and emory University,
they're significantly increasing their cryptocurrency investments.
And that's seen to be driven by President Trump's ambition to position the US as a Bitcoin superpower.
The situation is in stark contrast to the UK.
UK. So the UK is experiencing a slowdown in crypto adoption. There are regulatory challenges in the
So the UK is experiencing a slowdown in crypto adoption.
UK, such as stringent measures being implemented by the Financial Conduct Authority, the FCA,
and that's led to an exodus of crypto-related businesses in the UK and hindered the country's
vision of becoming a crypto hub. Sticking with the FCA, their classification of cryptocurrencies as restricted mass market
investments has imposed limitations on retail investors contributing to the UK's diminished
stance in the global crypto market. So it's quite clear to see quite a proactive approach of
institutions over in the US, and that's set against the backdrop of you know a cautious regulatory environment over
in the UK which which is quite difficult for for those trying to to do business here in the industry
I mentioned the FCA a couple of times there Chrissy you mentioned the FCA last week
in terms of an article by the the head of the FCA or statement by the head of the FCA, sorry,
questioning why so many young people were turning to crypto.
So I think it's quite interesting that thinking like that in the UK from people like the FCA head,
as well as, you know, the more stringent measures implemented by the FCA itself,
they're not helping the uk
environment are they chrissy what do you think is now what do you think is the kind of reasoning for
that that thinking and um you know is it is it a lack of familiarity with the space is it a lack
of understanding of how the technology works is it perhaps a lack of education even from some of these
heads of these agencies and and some politicians as well?
What do you think it might be, Chrissy? I think it's a combination of factors, actually. I think
one, diversification of investments and how you spend your money and invest your money
is always important. So I agree with everyone who says you shouldn't just invest everything in
crypto, it should be in other things like property, or shares, or bonds, or your family business, or
you know, whatever, if you're privileged enough to have those options that you're able to invest in.
able to invest in. But it should be included in the list of investments that people are
comfortable with. And it's a focus on innovation and the digital world that's being built. And I
think that's absolutely essential, especially for younger generations, because they are very,
very digitally focused. And I think you see that in how they interact with the world
generally.
And that is only going to increase.
I think there is an onus on legislators and people who,
dare I say it, are Gen Xers such as myself
to not be intimidated by the tech, to not view it as opaque, but instead make an effort to understand
innovation, whether it's blockchain or AI or quantum or whatever it may be, however they
define it. And I think what we need to do is to reach out our hands and say, all right, let's make this accessible to you and put it into terminology
that everyone can understand and not just those who understand all the acronyms that are used
within the industry. And I think we also have to be mindful that not everybody has that same level
of comfort. And so we are doing things within Polkadot, like with the Polkadot Blockchain Academy, where we are introducing as of next week our blockchain certification through our Polkadot Blockchain Academy.
And it's going to be aimed at policymakers from around the world, actually.
uh initially but actually we've received so much interest from around the globe um from
apac to south america to europe to everything in between and so uh we are starting that next week
and we will report back on that region that we should go through.
Is that over to Gustav?
Yes.
In Japan we had interesting news on March 30th coming from Nikkei,
who reported that the financial regulator was planning to submit a bill to Parliament to revise
Financial Instruments and Exchange Act as early as next year, having considered the changes through
internal study groups. Interestingly enough, the Japanese financial services agency stated that
they did not decide on any specific politics and also didn't decide whether or not they want to revise the Financial Instruments and Exchange Act
or whether to classify crypto as financial instruments.
So who knows if there are more news coming up soon or if this was just a mistake.
But it's interesting that they are also going through potentially going through study
groups and learning more about what financial products could be so let's let's stay posted on
this with that over to Jamil to Central and South America. Thank you Gustav so in Central and South America. Thank you Gustav. So in Central and South America we
have President Nayib Bukele's tour of the US. So the El Salvador president
embarked on a tour across several US cities including Washington DC, New York
and LA and the main objectives of his visit were to strengthen diplomatic
ties, attract investments and promote El Salvador's Bitcoin initiatives.
He met with U.S. officials, business leaders, and members of the Salvadoran diaspora in the States.
And he emphasized the potential of Bitcoin to drive financial inclusion and economic growth in El Salvador.
and economic growth in El Salvador.
Sticking with this story, in terms of Panama's cryptocurrency legislation,
lawmakers introduced a new cryptocurrency bill
aimed at establishing a comprehensive regulatory framework for digital assets.
And this proposed legislation seeks to recognize cryptocurrencies
as a means of payment and facilitate their integration
into the country's financial
system. And if this bill is passed, it would position Panama as more crypto friendly jurisdiction
and potentially attract blockchain based businesses as well as fostering innovation in the sector.
So I think this as well as the next story kind of underscore the growing influence of cryptocurrency in Latin America
with the countries there taking quite proactive steps to integrate digital assets into their
economies. I want to kind of highlight that against what I just discussed with the UK
and some of the challenges we're facing. Yeah. Moving on to the next story, El Salvador and Paraguay
have joined forces in crypto regulation. They've signed an MOU, which is a
memorandum of understanding, to enhance cooperation on cryptocurrency regulation.
The agreement aims to strengthen oversight of digital asset service
providers with a focus on detecting unlicensed operations and combating
financial crimes such as money laundering.
And the MOU facilitates collaboration between two agencies in these countries.
So in El Salvador, the National Digit Asset Commission,
and in Paraguay, the Secretariat for the Prevention of Money Laundering.
That's the two agencies that will be collaborating and sharing information and best practices
to develop robust regulatory frameworks
for the crypto sector. This is not the first time El Salvador has done something like this
in terms of collaboration with a local neighbor. The country had an arrangement in Argentina,
the National Securities Commission in December.
And it reflects a broader trend of Latin American countries seeking to establish standardized cryptocurrency regulations
to address both the opportunities and risks associated with digital assets.
So maybe we'll see something quite substantial
in terms of a more standardized approach
within Central and Latin America.
In Paraguay, the central bank over there recently clarified that cryptocurrencies are not officially registered or authorized within the country.
And they advise citizens to exercise caution with unregulated platforms.
So overall in the region, I think there is a drive towards having a more transparent and secure crypto
environment now moving on to the next region uh the middle eastern africa in south africa
there has been a set of travel rules that just went live on the 30th of march the nation of
south africa is set to enforce the Financial Action Task Force's
travel rule for crypto asset service providers starting on April the 30th. So from a licensing
and registration perspective, these crypto asset service providers, abbreviated as CASPS,
they must obtain a financial service provider license from the Financial Sector Conduct Authority in South Africa and register as accountable institutions with the Financial Intelligence Center in South Africa.
CASPs are required to implement the travel rule, which band-aids the collection sharing of specific information during cryptoasset transfers with the aim of enhancing transparency
and combating financial crimes. There's a grace period until the 30th of April allowing Casp's
time to align their operations with these new regulatory requirements. So the aim with these
measures is to integrate South Africa's crypto regulations with international standards,
ensuring a more secure and transparent digital asset
environment.
I think I mentioned this link back to previous weeks
when I mentioned this last week about the need for KYC
and AML and similar things to continue
and that really not going away anytime soon.
I think that's something Chrissie's mentioned as well
a few times, so yet another example of that.
And with that, over to Chrissy on the US.
Chrissy.
Thanks, Jamil.
Thanks, Gustav.
So we started off today's Regulatory Rewind
talking about two different ways to view similar issues.
And I wanted to continue that discussion in the context of what's happening on the ground in the US in particular states.
So we start off with the fact that California has introduced a Bitcoin rights concept into a money transmission bill. So that sounds a little bit boring.
I can bring that to life for you. It's actually California's Assembly Bill 1052, and it's about
money transmissions. But what's been added in is the concept of digital assets and the fact that these digital assets, including Bitcoin, can be used in private transactions.
The people have the right to use them and that California wants to promote that.
So that's been introduced by lawmakers.
And I think that focus on innovation is important to note in a state like California,
and also contrast that with a state like Florida. And anyone following the political discourse in
the US will know that California and Florida don't always see eye to eye on all issues, but certainly the concept of innovation and digital
assets is a unifying force, I think. And you'll see that in some late breaking news that just
happened yesterday because there were some officials elected from Florida for Congress, Florida's first and sixth congressional districts. The PAC, Fair Shake,
which is representing the entirety of the crypto industry, actually their candidates that they
backed for those congressional races won. And there were a number of messages from both candidates and also from
Floridians generally saying that they want crypto innovation. They want to see digital assets
included. And so again, even though we don't always see those states taking the same approach to all issues, certainly on the topic of innovation and digital assets, they are.
And it's also interesting to note that on the campaign trail, President Trump promised a digital bill of rights.
And that has not come forward yet from the White House. And California actually has gotten
ahead of that promise and introduced their own. So again, this emphasis on innovation. And I think
that is, again, contrasting that with some of our news earlier in this regulatory rewind about a more conservative
viewpoint that you could say is coming from the EU and also the UK and perhaps other jurisdictions
around the world. So another federal level newsworthy item to just make you aware of from the U.S. is that the FDIC and the CFTC have eased crypto restrictions for banks. and that's the Federal Deposit Insurance Corporation, said that institutions, including banks,
can now engage in any crypto-related activities without prior approval. That's something new.
And the CFTC announced that any digital asset derivatives would be treated exactly the same
as any other derivatives. So actions and words aligning in various ways.
So with that, we'll go to our last news story,
which is a continuation of last week's story.
And that is regarding some of the statements, again,
that have been made in the UK about a concern
about young people
investing in crypto and that not being balanced by traditional assets. And in the last week,
there have actually been six industry bodies in the UK who have written a letter to Virajandra,
a letter to Virujhundra, who is the Prime Minister's Special Advisor to Business and
Investments, asking for a special crypto for the UK in order to jumpstart this area of
the economy and pointing out that there is a number of missed opportunities if that does not happen. So very happy to see the industry's
response going straight to the government. And also this being a very lively discourse in
the place that I call home, and also a lively discourse in my home country of the United States as well.
So, and it's the conversation will continue globally as you see.
And this is why we can come to you every week with regulatory rewind,
sometimes regulatory rethink.
And we hope that we have more to discuss next week.
And perhaps we will be talking about tariffs
and the geopolitical situation.
We'd love to get your questions that you have
in advance of the next Regulatory Rewind.
If you would like us to focus on certain topics,
you can get in touch with any of us directly.
You can put your questions in the chat now.
But we look forward to seeing you next time.
Thank you everyone.
Take care everyone. Thank you. Thank you. Bye.
