Veriscope Regulatory Recap - 22nd January to 4th February

Welcome to the latest edition of Veriscope Regulatory Recap! In today’s issue, we will cover the latest regulatory updates from all over the world from the last two weeks as we enter into the second month of 2024. 

As crypto adoption grows, regulatory developments, too, are getting ramped up with the US and Europe aiming for more clear guidelines. Meanwhile, in another part of the world, China remains unfriendly towards crypto while its special administrative region, Hong Kong, continues to provide regulatory guidelines in an attempt to become a crypto hub.

So, let's take a deeper look into these regulatory advances being made around the globe and their impact on the crypto world.

The Global Landscape of Crypto Regulations 

One of the major developments on the crypto regulatory front comes from the US, as American lawmakers are trying to delete the controversial accounting bulletin that imposes restrictions on companies for holding their customer's crypto assets.

In Asia, Hong Kong is making major crypto regulatory moves, as it is planning to consult on the regulatory framework for over-the-counter crypto venues "very soon." China, meanwhile, is amending its anti-money laundering regulations for the first time since 2007 to cover crypto-related transactions.

Similarly, in Europe, the European Securities and Markets Authorities, the securities regulatory authority of the 27-member union, is seeking public feedback until April-end to assess the criteria for classifying crypto as financial instruments. 

With the proposed guidelines, the financial regulator aims to provide authorities and market participants with flexible conditions to determine whether a crypto asset can be categorized as a financial instrument, avoid having a one-size-fits-all approach, and ensure consistency across the region.

US Lawmakers Challenge the SEC on Crypto Custody Rule

Members of Congress, including Mike Flood (R-Neb.), Sen. Cynthia Lummis (R-Wyo.), and Reps. Wiley Nickel (D-N.C.) has introduced resolutions to repeal the Securities and Exchange Commission’s 2022 staff accounting bulletin No.121. 

The custody rule requires a company holding a client's crypto assets to do so on its own balance sheet. This requires custodians holding crypto to maintain capital reserves to offset the risk, which could deter institutions and regulated banks from offering crypto custody options.

According to lawmakers behind the resolution, the legally binding directive was issued by the SEC without the required process of notice-and-comment, and hence, it must be repealed.

China to Introduce Revised Crypto AML Rules

Amid calls for more scrutiny, China is set to update its AML rules to cover cryptocurrency transactions. The revised rules are expected to go into effect in 2025.

Late last month, Prime Minister Li Qiang conducted an executive meeting of the State Council to discuss the new draft of its AML regulations, including crypto provisions. 

While the AML rule aims to curb illicit financial flows, it also acknowledges the ongoing engagement with cryptocurrencies despite official bans. 

Speaking of crypto-focused AML regulations, China won’t be the first to implement the rule, as it has been adopted by other countries as well in the form of the FATF Travel Rule. For example, recently, the EU also expanded its AML laws to cryptocurrencies, requiring obliged entities to report on crypto transactions exceeding €1,000.

Interesting Reads

The Shyft Perspective: Global Crypto Regulatory Outlook 2024

EBA’s Amended Money Laundering & Terrorist Financing Guidelines Explained

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VASPs need a Travel Rule Solution to comply with the FATF Travel Rule. Have you zeroed in on it yet? Check out Veriscope, the only frictionless crypto Travel Rule compliance solution. 

Visit our website to read more, and contact our team for a discussion.

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