A series of briefings that take a bite-size look at international trends in different jurisdictions, drawing on Baker McKenzie's expert financial services practitioners with local market knowledge.
This edition of Bite-size Briefings explores the regulation of crypto (or digital) assets across a number of jurisdictions: Australia, Brazil, Hong Kong SAR, Singapore, the UK and the US.
We last reviewed the state of play just a year ago (see article below) but, given the pace of development in the meantime, an update is now due. To give some context, according to the Financial Stability Board (FSB) cryptoasset market capitalization increased by 3.5 times in 2021 to USD 2.6 trillion (although it remains a small part of the global financial system's assets). Moreover institutional participation in crypto asset markets as investors and service providers has grown significantly over the last year.
*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law
Key takeaways
- Different jurisdictions remain at varying stages of development in terms of growing and regulating their markets.
- Despite the efforts of global entities such as the FSB and the International Organization of Securities Commissions, the response by regulators has been disjointed.
- The more advanced jurisdictions, having implemented anti-money laundering and counter terrorist financing controls, are now introducing consumer and investor protection rules, including restrictions on financial promotions to ordinary consumers. The EU's MiCA framework is notable for its holistic approach.
- Of special interest, Brazil, Latin America's largest economy, which to date has refrained from intervening, is now debating proposed legislation to regulate the crypto market and protect consumers.
- Meanwhile, in the US, there is vigorous discussion over the need for and extent of additional regulation, with the White House's latest executive order seen as likely to delay new measures, despite calls to act from the chair of the Securities and Exchange Commission.
View April 2021 Ed. No. 7
April 2021 Ed. No. 7 Bite-size Briefing on Cryptoasset Regulation
This edition of Bite-size Briefings, a series of briefings that take a "bite-size" look at international trends in different jurisdictions, explores the regulation of crypto (or digital assets) and, in this context, the development of anti-money laundering (AML) supervision in the UK, the US, Hong Kong SAR, Singapore and Thailand.
While each jurisdiction follows its own approach taking into account its existing regulatory frameworks and risk appetites for customer protection and financial crime etc., these are consistent with the principles set out by international standard-setting bodies. The G20-established Financial Stability Board (FSB) has published a number of reports, including its May 2019 work on the regulatory approaches toward cryptoassets and the potential gaps, for example, with respect to investor protection, market integrity and AML, and, more recently (referenced below), enhancing cross-border payments with stablecoin. For its part, in June 2019, the Financial Action Task Force (FATF) published guidance on a risk-based approach to virtual assets and asset service providers, having clarified in 2018 that its Recommendations apply to financial activities involving these types of assets. The guidance seeks to help regulators develop effective regulatory and supervisory responses, and help businesses understand their AML-related obligations, including how they can best comply.