Blockchain & Cryptocurrencies Legal and Regulatory Round-Up: #2

Despite the summer period, the global regulatory landscape in the blockchain and crypto-sphere has been as active as ever over the past two months. In this round-up, Allan Murray and Mariya Lazarova from our Blockchain, Cryptocurrency and Digital Assets team, look at:

  1. The news that Bank of England might be launching a digital currency;
  2. HM Treasury’s cryptoasset promotions consultation;
  3. CFTC’s plans for comprehensive cryptocurrency regulations;
  4. US federally charted banks and custody of cryptocurrency;
  5. Shariah law and crypto trading adoption;
  6. Russia’s new major crypto bill on digital financial assets;
  7. SEC’s revised accredited investor rules;
  8. Court systems and the use of blockchain in Thailand;

Bank of England and digital currencies

Recently, the topic of digital currencies launched by central banks (or ‘CBDCs’ for short) has been gaining a lot of attention, especially in Japan, China and Sweden. Although not yet fully confirmed, it has been reported that the BoE are investigating the “real” possibility of central bank digital currency. It might not happen for a few years, but the fact that such a seismic move is possible is a welcome indication of changing attitudes towards digital currency in the upper echelons of finance.

Cryptoasset promotions

HM Treasury has recently published a consultation paper on cryptoasset promotions, seeking views on the UK government’s proposal to bring certain cryptoassets within the scope of the financial promotions regulation: “The measure is intended to enhance consumer protection, while continuing to promote responsible innovation”. It remains to be seen how appropriate such a measure will really be. The deadline for response is 25 October 2020. Since there is no transitional period proposed before the potential FPO amendments, businesses should consider starting their compliance preparations.

CFTC’s commitment to digital assets regulation by 2024

In the United States the CFTC announced the finalization of its 2020-2024 strategic plan. The CFTC is set to “develop a holistic framework to promote responsible innovation in digital assets”. It is interesting to note CFTC’s acknowledgment that “market regulation needs to keep pace”.

Custodying crypto assets

On 22 July 2020 it was announced that the OCC (the Office of the Comptroller of the Currency) is granting permission to federally chartered banks to custody cryptocurrency. The permission is said to apply to “national banks and federal savings associations of all sizes”. Custody will depend on the bank’s access to crypto wallet keys. This is an encouraging step towards making the US banking system more crypto-friendly.

The crypto space in Malaysia

The SC Shariah Advisory Council made a significant announcement that “in principle, it is permissible to invest and trade in digital currencies and tokens on registered digital asset exchanges”. This is an important step in developing the country’s financial ecosystem under Sharia law, as there are currently very few digital asset exchanges operating in Malaysia.

 

Legislative status of digital financial assets in Russia

Russia’s bill on Digital Financial Assets (DFA) is expected to be officially adopted on 1 January 2021. It is the main basis for the legislative cryptocurrency regime in Russia. However, further bills will contain the actual regulatory framework. The significance of the DFA is that transactions with cryptocurrencies will be legalized but using bitcoin and similar cryptocurrencies as methods of payment will still be prohibited.

Private securities investment and SEC’s new rules

SEC’s new definition of accredited investor could potentially increase the number of Americans who can compliantly invest in token sales. Although the expansion of the pool of investors might not be radical it is nonetheless a promising and evolutionary move that signals innovation.

Court system digitization in Thailand

Court systems are actively being modernized in Asia. After China, now Thai courts are getting ready to adopt a blockchain storage network. Reams of information are to be moved onto the blockchain, debuting next year. Such judicial innovation would be welcome in the English courts, especially in light of the current backlog of cases and limited resources.

 

*This article is not intended to give any legal advice or to give rise to a client-solicitor relationship. It has been preparation for information purposes only. If you require legal assistance, contentious and/or transactional, in the field of blockchain, cryptocurrencies and digital assets, please contact our Senior Associate, Allan Murray via email at  allan.murray@ilaw.co.uk or our Trainee Solicitor, Mariya Lazarova at mariya.lazarova@ilaw.co.uk.