Regulatory overview – EU and UK are going their different ways on crypto regulation4 min read
Welcome to last week’s regulatory overview
ECB wants tougher rules for staking and lending
The slump in the crypto market has also hit the DeFi space. The lending service Celsius therefore paused all payment services on June 13th. The reason: liquidity problems. The crypto-skeptical ECB President Christine Lagarde derived the need to tighten supervision of the staking and lending sector in the EU last week.
“These unexplored areas pose a risk to consumers as the lack of regulation often masks fraud, gross misstatements and very often speculation and criminal activity,” Lagarde said at a hearing before the European Parliament. EU institutions are currently debating the planned crypto regulation Markets in Crypto Assets (MiCA). It is scheduled to come into force in 2024. Lagarde suggested considering staking and lending in a follow-up regulation.
UK: No obligation to report “unhosted wallets”
Another key pillar of the current crypto controversy in the EU is the call for strict reporting requirements for “unhosted wallets”. The controversial regulation would amount to a ban on such wallets. However, these form the backbone of the DeFi space, and the federal government recently commented critically on this regulatory proposal. Since Brexit, the UK has also been going its own way when it comes to regulating BTC and the like.
A report by the British Ministry of Finance and Economics now states: Crypto service providers do not have to collect transaction data for “unhosted wallets”. Behind their use, the report recognizes “potential security benefits.” Accordingly, there is no evidence “that unhosted wallets pose a disproportionately high risk of being used for illegal financial transactions.” The benevolent rule is part of Britain’s strategy to become an innovation hotspot for the crypto industry.
Russia plans blockchain system as SWIFT alternative
The West responded to Russia’s invasion of Ukraine with heavy sanctions. Since then, the majority of Russian banks have been excluded from the international payment system SWIFT. In these times, the Russian financial sphere is turning to blockchain technology. According to press release is the state company Rostec A breakthrough was already achieved at the beginning of June with the blockchain platform CELLS.
The focus of this blockchain ecosystem, which combines several software solutions, is initially the processing of payments in various national fiat currencies. Rostec speaks of a “real alternative to SWIFT.” The system guarantees “speed, security and irreversibility of transactions.” 100,000 transactions per second should be possible. The ecosystem should be open to companies and banks as well as state authorities. Parallel to these technological forays into the blockchain world, Russia is working flat out on a regulatory framework for the BTC space and cryptocurrency mining.
Germany has new rules for crypto fund shares
Since June 18, German investment funds have been able to issue their share certificates on the blockchain. This is made possible by a new regulation for crypto fund shares (KryptoFAV). The law defines these shares as “electronic share certificates that are entered in a crypto securities register”. The industry reacted benevolently to the flexible regulatory solution, which makes it possible to issue special funds either fully or only partially as crypto fund shares.
When it came to managing the crypto securities register, the federal government also moved away from its idea of only leaving the register management to custodians (custodian banks). This also opens up the field for companies from the FinTech sector that have received a license from BaFin to keep such registers. The only point of contention is that it is up to the custodians themselves to pass on this task.
SEC Approves Crypto Short ETF
Meanwhile, on the other side of the Atlantic, a well-known regulatory thriller continued. In the leading role: the US Securities and Exchange Commission. The approval behavior for crypto ETFS by the authority under Gary Gensler has long been met with fierce criticism in crypto circles. Because while BTC Future ETFs have been traded on US stock exchanges for some time, the SEC has long refused to bless every spot ETF.
This will not change in the foreseeable future. Meanwhile, however, the SEC granted trading permission to a BTC Short ETF. With the financial product from Proshares, investors can benefit from falls in the BTC price. The ETF is available for trading on the NYSE New York Stock Exchange under the symbol BITI.