Weekly Crypto Policy Roundup – November 12 2021

Every week we bring you the latest cryptocurrency policy developments from around the world.

Central Bank of Nigeria regulatory guidelines on eNaira

On October 25, 2021 the Central Bank of Nigeria (“CBN”) issued a governing framework for the administration of the eNaira (the digital form of Nigeria’s fiat currency) with the intention to make it exchangeable with the digital currencies of other Central Banks. 

In order to access, use and hold eNaira, an end-user is required to have an eNaira wallet. 

The eNaira will complement cash, improve monetary policy effectiveness, and enhance the government’s capacity to collect revenue. 

See the CBN’s governing framework for the administration of the eNaira here.

The Bank of International Settlements – CBDCs ‘Must Try Harder’ – Cautions on CBDC ‘Unknown, Unkowns’ 

In a paper published November 2021 and titled ‘Central bank digital currencies: motives, economic implications and the research frontier’, the BIS warns that centralization of data inherent in the operation of central bank digital currencies (“CBDCs”) raises potential concerns around competition, payment system integrity and privacy. 

The paper outlines the economics literature on the operational architectures for CBDCs and examines the macroeconomic implications for the financial system, financial stability, and monetary policy.  

Section 1 gives a brief historical account of CBDC research and development, from predecessors of modern digital currencies to the work of central banks in the past decade. Section 2 discusses the motivations of central banks to issue CBDCs in light of the challenges of the digital economy. Section 3 discusses microeconomic considerations on CBDC architectures, technological infrastructures and data privacy. Section 4 then discusses the macroeconomic implications for the financial system, monetary policy and society. Section 5 discusses the cross-border implications and potential of CBDCs – a set of issues at the research frontier. Section 6 concludes amongst other things: 

“. . .further exploration on CBDC design choices and their macrofinancial implications is essential. 

. . .  important and complex questions are still to be further analysed, for instance as regards the interoperability between existing and new infrastructures, the access to and control of central bank money, the distinction between wholesale and retail CBDCs and especially the cross-border implications of CBDCs.”

Read the paper here.

Twitter Builds Crypto, Blockchain & NFT Team

On 10 November 2021 Twitter announced the launch of its dedicated crypto team to embrace digital assets and explore decentralized apps (“Dapps”). 

The team will be led by Tess Rinearson engineering and will help Twitter creators earn or accept money through cryptocurrencies and develop the use of blockchain.

Twitter currently allows users to send and receive bitcoin-denominated tips via third-party payment channels.

Singapore Regulatory Studies Retail CBDC aka ‘Project Orchid’

The Monetary Authority of Singapore (“MAS”) has launched a study on retail central bank digital currency (“CBDC”) but hastens to add that it sees no pressing need for one just yet, stating: 

“While there is no need to issue a Singapore dollar retail CBDC at this point, it is prudent for MAS to embark on exploratory work to develop the technical and policy capabilities for its possible issuance in the future.”

Read more here.

The ‘Old Lady’ to launch UK CBDC feasibility study in 2022

On 9 November 2021 HM Treasury and the Bank of England announced the next steps in the development of a UK central bank digital currency (“CBDC”) saying that they’ll launch a consultation on it in 2022, involving in-depth testing of various CBDC designs. 

Read more here. 

This announcement follows the Bank of England’s discussion paper on digital money, the feedback for which is here.

India Mulls ‘Middle Path’ Crypto Bill 

A bill named ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ will be introduced in the Indian Parliament for consideration and passing by the end of the winter season. It is expected that the bill will allow for regulation rather than the banning of cryptocurrencies. 

EU’s Regulation on Markets in Cryptoassets (MiCA)

On 24 September 2020, the European Commission (the executive body of the European Union) adopted the Digital Finance Package, with 

• a proposal for a law to regulate activities in crypto assets i.e. Regulation on Markets in Cryptoassets (MiCA)
• a proposal for a Regulation on digital operational resilience for the financial sector
• a proposal on a pilot regime for market infrastructures based on DLT
• a proposal to clarify or amend certain related financial services rules. 

The MiCA will replace existing national frameworks applicable to crypto-assets not covered by existing EU financial services legislation. It will establish uniform rules for crypto-asset service providers and issuers at EU level, provide measures ensuring consumer and investor protection, and include safeguards to address potential risks to financial stability. 

The adoption of the Digital Finance Package follows the publication by the European Commission of a consultation paper on the future EU framework for markets in crypto assets, on 19 December 2019. The consultation paper consists of three substantive parts, namely: (1) classification of crypto-assets; (2) crypto-assets that are not currently covered by EU legislation; and (3) crypto-assets that are currently covered by EU legislation. This consultation was the first step taken at EU level in preparing potential initiatives to specifically regulate crypto-assets in the EU.

In the 2019 consultation, the European Commission sought to determine whether additional regulatory requirements should be imposed on both “stablecoin” and “global stablecoin” issuers when their coins are backed by real assets or funds.