The Policy Pulse, 30 July 2023

UK Passes the Electronic Trade Documents Bill

At the end of last week, the Electronic Trade Documents Bill (ETDB) was passed into law by the UK Parliament. This new law is highly significant for the use of blockchain in the trade finance industry. Trade finance has long been highly antiquated, cumbersome, and mainly paper-based. Because the industry has essentially been stuck in the 19th Century, transactions take days (or even weeks) to complete.

The adoption of blockchain will be a game-changer for trade finance. Some industry groups estimate that the use of blockchain will reduce the time it takes for the transfer of title from 7 days to just minutes. Think of the efficiency that will add to global trade!

The ETDB, which allows businesses to exchange trade documents (e.g. bills of lading, waybills, and insurance certificates) electronically, will accelerate the adoption of blockchain for trade finance.

The Act states that an electronic document should be subject to exclusive ownership once transferred electronically and that the previous holder should no longer be able to assert ownership or exercise any control over the document. This sets the scene for the adoption of blockchain in trade finance – which would technologically facilitate this.

Read more about the ETDB here. Also, read about XDC Network, a trade finance-focused blockchain, and how it has the potential to revolutionize the 10 trillion dollar industry.

US Lawmakers Take Steps Toward Crypto and Stablecoin Regulation

This week saw some progress toward the regulation of cryptocurrency in the US.

1. The Financial Innovation and Technology for the 21st Century Act was passed by both the House Financial Services Committee and the House Agriculture Committee. The Act would create a federal framework for the regulation of cryptocurrency in the US.
2. In another significant development for crypto regulation, the U.S. House Financial Services Committee advanced a bill to establish a federal regulatory framework for stablecoins. The bill proposes that the U.S. Federal Reserve would be responsible for setting requirements for issuing stablecoins while maintaining the authority of state regulators.

Canada Introduces Rules for Crypto Exposure

Canada’s financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), also introduced stringent new guidelines aimed at managing crypto-asset exposure in the banking and insurance sectors.

Read the full article here.

U.S. Government Accountability Office Recommendations for Crypto and Stablecoins

A report, published earlier this week, by the U.S. Government Accountability Office (GAO) delves into the risks and gaps in regulatory authority surrounding blockchain-related financial products and services. In particular, GAO looks at crypto and stablecoins. Read our article here, which sets out the key findings and recommendations from the report.

Financial Stability Board’s Regulatory Framework for Digital Assets

On July 17th the FSB published high-level recommendations for the regulation of crypto and stablecoins.

See Also

Market Falls in Response to Silvergate Revelations

The FSB is an international body that recommends regulatory standards for the global financial system. Its recommendations are not legally binding. However, it wields a significant degree of influence and relies on the cooperation of its members, which include G20 states and several international institutions, including the IMF, European Union, OECD, European Central Bank, and the World Bank.

Central Bank Digital Currencies (CBDC) Updates

Over the past number of months, there’s been a marked increase in the number of countries and institutions testing CBDCs. This week there were a number of notable developments:

• The Republic of Palau teamed up with Ripple to launch a US Dollar backed stablecoin. Palau uses the US dollar as its currency and has had a “Compact of Free Association (COFA)” with the United States since 1994. Under the agreement, the United States has full authority and responsibility for defense and security matters in and relating to Palau. The small island nation’s CBDC pilot will run on the XRP Ledger. Read more about Palau’s CBDC.
• On July 25th, Russia passed a law that would allow the government to issue a digital ruble. The new law will come into effect on August 1st.
• The head of the Pakistani Central Bank also said this week that a CBDC could potentially be made available for public use by the end of 2025. It added that it “would proceed with caution” and learn from the experiences of other states with regard to CBDC development.