Weekly Crypto Policy Roundup, February 18 2022

BlockFi fined $100mn over interest-bearing accounts

On 14 February 2022, Cryptocurrency lending platform BlockFi has agreed to pay a $100 million fine imposed by the Securities and Exchange Commission for offering interest-bearing accounts without registering them as securities with the SEC.

The SEC will get $50 million, while various US States will get the remaining $50 million.

SEC Chair Gary Gensler said: “This is the first case of its kind with respect to crypto lending platforms. Today’s settlement makes clear that crypto markets must comply with time-tested securities laws.”

No consumer detriment was alleged. BlockFi did not admit wrongdoing but will register BlockFiYield with the SEC. Read the SEC press release here.

EU Parliament Committee Report on Crypto funds transfers

The European Union Parliament’s Committee on Economic and Monetary Affairs (ECON) has published a draft report on the EU’s proposed law for stricter information rules for transfers of crypto.

Crypto asset service providers (CASPs) would be required to collect complete information about the sender and beneficiary of any crypto asset transfers so that suspicious transactions can be identified and traced.

The ECON supported the legislative proposal but also made a number of recommendations including:

• removing the exemption for low-value transfers (EUR 1,000 or less)
• applying requirements to transfers to or from ‘unhosted wallets (i.e.wallets based on software or hardware that are not hosted by a third party)
• in addition to the usual information on originators and beneficiaries, requiring CASPs to obtain information on the source and destination of crypto assets transfers, and
• requiring the European Banking Authority (EBA) to maintain a public register of CASPswho pose a greater AML/CFT risk (for example, because they are not linked to a recognized jurisdiction or offer anonymizing services)

OMFIF OpEd on Stablecoin Regulation

The Official Monetary and Financial Institutions Forum (OMFIF which is an independent think tank for central banking, economic policy and public investment) has written an opinion piece, giving its view that it is inappropriate to apply banking regulations to Stablecoin issuers and that such issuers need a bespoke regulatory framework.

Read the OpEd here.

EU and Singapore Agree Digital Partnership

On 14 February 2022, the European Union and the Government of Singapore released a joint announcement on their plans for a ‘digital partnership’.

The Digital partnership will also contribute to the development of a global architecture of interoperable standards at regional and multilateral settings and benefit workers and businesses engaging in digital trade and electronic commerce.

CME reference rates for BTC & ETH

On 15 February 2022 the Chicago Mercantile Exchange (CME) Group (a global derivatives marketplace) announced that on February 28 it will launch two New York reference rates for Bitcoin and Ether.

They will launch the CME CF Bitcoin Reference Rate New York’ (BRRNY) and the CME CF Ether-Dollar Reference Rate New York (ETHUSD_NY), which will provide a once-a-day reference rate of the U.S. dollar price of these two cryptos for 16:00 New York time, complementing the existing reference rates for 16:00 London time.

A reference rate is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract and is important in helping determine the price risk of an asset.

SDX to use eNotes

Swiss SIX Digital Exchange, being the world’s first fully regulated and fully integrated securities settlement and custody platform to trade, settle and custody digital assets, has agreed to use blockchain-based short-term debt instruments, called eNotes™ provided by Fintech company FQX.

The eNotes technology allows for the issuance, transfer and settlement of electronic promissory notes on the blockchain.

Bringing eNotes on to SDX is a crucial step for FOX on our mission to creating the global debt infrastructure for the future of finance, allowing institutional investors to directly access eNotesvia their custody banks.

Benedikt Schuppli, Co-Founder & Co-CEO of FQX