New cryptocurrency legislation awaits California Governor Gavin Newsom’s signature after passing the California Assembly on August 30, 2022. If signed into law, California’s Digital Financial Assets Law would create sweeping requirements that, among other things, would mandate that digital asset exchanges and crypto companies obtain licenses to operate within the State of California, but not until January 2025, as described in more detail below. Many observers have compared the new California legislation to New York State’s BitLicense regulation, which was adopted in 2015.
LATEST REGULATORY DEVELOPMENTS IMPACTING
THE FINANCIAL SERVICES INDUSTRY
THE FINANCIAL SERVICES INDUSTRY
As of August 11, 2022, approval is now required by the UK Financial Conduct Authority (FCA) before acquiring direct or indirect control of an FCA-registered cryptoasset business. Failure to attain such approval is a criminal offense. This is due to the UK Money Laundering Regulations (MLRs) having been updated to apply the change in control regime under Part 12 of the Financial Services and Markets Act 2000 (FSMA), as modified by Schedule 6B of the updated MLRs, to FCA-registered cryptoasset exchange providers and custodian wallet providers.
The Basel Committee on Banking Supervision (Basel Committee), a committee of global central bankers and regulators, issued a Consultative Document on June 10 on the prudential treatment of cryptoasset exposures for international banks (the Proposal). The Basel Committee has asked for comments by September 10, 2021.
The OCC granted preliminary conditional approval on April 23 to an application to charter Paxos National Trust (Paxos) as an uninsured national trust bank. Paxos, which currently operates as a New York state-charted limited liability trust company regulated by the New York Department of Financial Services and has indicated in public statements that it intends to maintain both federal and state licenses, will be permitted under the OCC approval to provide “a range of services associated with digital assets,” including custody, payment, exchange, and other agent services related to cryptocurrency.
In a series of recent interviews (including with the American Bankers Association and a podcast with the ABA Banking Journal), Acting Comptroller of the Currency Brian Brooks discussed the Office of the Comptroller’s (OCC’s) plans to soon roll out another special purpose national bank (SPNB) charter specifically geared toward payments companies.
The virtual currency Bitcoin has been a hot topic in FinReg for some time, but in recent weeks mainstream interest in Bitcoin has grown in light of the approaching “halving” or “halvening.” So what is the “halvening” and why does it matter from a regulatory perspective?
Regulators on both sides of the Atlantic continue to monitor and address cryptoasset and distributed ledger technology activities. We recently posted on the guidance issued by the US Financial Crimes Enforcement Network on cryptocurrencies and in another post touched upon differences in the regulatory treatment of cryptoassets across jurisdictions. Today we report on two new developments relating to the treatment of cryptoassets by UK and US regulators.
In its continued efforts to learn what broker-dealers and their employees are doing in the digital asset space, FINRA has effectively reissued a regulatory notice requesting that broker-dealers keep FINRA apprised of their digital asset activities.
On July 8, the staffs of the Division of Trading and Markets (TM) of the US Securities and Exchange Commission and of the Office of General Counsel of the Financial Industry Regulatory Authority, Inc. issued a joint statement on broker-dealer custody of digital assets that are also securities (Joint Statement).
We are always looking to identify good forums for keeping abreast of global fintech developments and trends. One such interesting platform was Cross-Border Fintech: Regulation & the Law 2019, held in London on June 6, where we heard some great insights into the current market trends in and the future of fintech. The conference was well attended, with representatives of many industry leaders, authorities, and industry bodies in attendance.