Cryptoassets and related service providers follow in the crosshairs of regulators and investors. The rises and falls of the price of cryptocurrencies gain or lose volatility at the pace of new compliance requirements, draft regulations and/or regulatory alerts issued by financial authorities, either at the product level (cryptoassets and their derivatives) or with respect to service providers related to these assets.
2020 and 2021 will be remembered not only for the pandemic, but also for the frenetic activity of public and private entities towards a standardization and/or integration of cryptoassets into international and individual finance.
The evolution of many countries in the bid for the regulation and/or control of cryptoassets it leaves no one indifferent. Just banning and/or alerting is no longer an option. But, of course, it is not easy to put the right belt on a phenomenon with a decentralized technology of global vocation.
On June 11, El Salvador has become the first country in adopting the bitcoin as legal tender. China advances its pilot tests of the ‘digital yuan’, and the European Central Bank continues its studies on the viability and risks of the so-called digital euro (a type of CBDC, from the English Central Bank Digital Currencies). In the same vein, according to a 2020 report by the Bank for International Settlements basel called ‘Impending arrival. A sequel to the Survey on Central Bank Digital Currency’, more than 80% of the institutions consulted worked on projects related to these CBDCs.
At the Spanish level, on June 4, 2021, the non-law proposal of the Socialist Parliamentary Group was published to the Bureau of the Congress of Deputies for the promotion of a study group on the implementation of a digital euro as a digital public currency, for debate in plenary. Verbatim, the non-law proposal reads: “The Congress of Deputies urges the Government to promote in collaboration with the Bank of Spain the creation of a Study Group to evaluate the possible implementation of a digital euro as a digital public currency (CBDC) that allows to offer greater financial stability both to the Spanish economy and to the whole of the eurozone, and recover the character of money as a public good and under democratic control”.
In Europe the implementation of the 5th Money Laundering Directive (the 5 AMLD) has meant the inclusion of the currency exchange service providers virtual by fiat currency ‘cryptoexchanges’) and the e-wallet custody providers in the scope of application (‘custodian wallet providers’) as obliged subjects in matters of PBC. In addition, it also goes on to require that such suppliers be registered with an authority.
Some form of registration of such providers has had to be implemented in all Member States taking into account the implementation of the 5 AMLD. However, as this is a minimum directive, there are certain differences in the way the registry is implemented in different countries (e.g. in some countries only compliance with laundering regulations is required and in others, other prudential requirements are required for such registration and broader supervision of such suppliers).
Pending the regulatory harmonization promised through the MiCA (Markets in Crypto-Asset Regulation), some countries have taken the opportunity to give a step forward in their national regimes. France and Germany are two jurisdictions that already regulate a broader licensing and supervision regime for such suppliers. Specifically, on June 28, the German authority BaFin announced the granting of the first license of custody of cryptoassets to Coinbase, and predicted that other licenses are in the analysis phase and should be granted in the coming months.
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At European level, it is also interesting to note the position of Switzerland, which has passed the so-called DLT Act, which amends some federal laws, including major changes to its securities market regulations to allow the registration of securities on blockchain. A new category of values: the ‘ledger-based securities’. The second part of the Swiss reform will come into force in August 2021, highlighting the creation of the so-called DLT Trading Facilities, a new type of market infrastructure for trading interests to buy and sell on cryptoassets.
With regard to advertising about cryptoassets, Spain is not the only one that is considering its regulation (through the CIRCULAR of the CNMV whose draft is open for public consultation until the end of August). In the UK, the HM Treasury has also consulted on the desirability of regulating financial promotion related to cryptoassets.
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In accounting matters, many countries have not yet issued an adaptation to their regulations that expressly regulate the accounting of cryptoassets, although in many cases, there are interpretative criteria (as in Spain by the ICAC) that tend to qualify such assets as “intangible assets”. Contrary to the trend, in France, the ANC (French accounting standards authority) has included in its standards specific accounting rules on token issuers and subscribers since December 2018.
Faster or slower, sympathizers or opponents, the regulatory projects and /or clarification of how to integrate the existing regulations into the ‘crypto’ sector are here to stay…
*Paula De Biase, partner responsible for the Financial Regulation Department at Baker Mckenzie Spain and member of the firm’s Steering Committee FSR.