Regulations Round-Up – April 2024

Global stocks and cryptocurrencies continued soaring in March as demand rose and as investors embraced a risk-on sentiment. In the United States, the S&P 500 and Nasdaq 100 indices jumped to a record high. The same happened in Europe, where the Stoxx 50 and Stoxx 600 jumped to their all-time highs. As an agency specialising in financial services marketing, our team has rounded up the biggest changes that happened last month and what’s coming up in April.

SEC Climate Disclosure Rules

The biggest regulatory story of March was the decision by the Securities and Exchange Commission (SEC) to pass the climate disclosure rule. Essentially, most publicly traded companies in the United States will need to disclose their Scope 1 and Scope 2 carbon emissions.

These rules were highly controversial. Conservatives believe that the SEC increased the burden of most companies, a move that will affect their profitability. On the other hand, liberals and climate activists were disappointed in that these rules avoided Scope 3 emissions. Scope 1 are emissions that companies produce internally while Scope 2 are those that companies use indirectly. Scope 3 emissions come from a company’s supply chain and customers.

SEC Ethereum ETF delay

The Securities and Exchange Commission delayed the approval of spot Ethereum ETFs as it continues reviewing the disclosures. 10 companies like Blackrock, Franklin Templeton, and VanEck have all filed for their spot in Ethereum ETFs. This ongoing review is happening at a time when there is a strong demand for spot Bitcoin ETFs. Most of these funds, especially from Blackrock and Fidelity have seen the most inflows. They have $15 billion and $7.6 billion in assets, respectively.

In multiple interviews, Gary Gensler, the head of the SEC, hinted that the agency was concerned about Ethereum. Unlike Bitcoin, Ethereum is a blockchain project with staking features. Staking is a process where people delegate their tokens to secure the network and earn rewards.

The SEC believes that this staking turns Ethereum into a financial security, which should have more disclosures. Therefore, there is a likelihood that the agency will not approve these ETFs.

FDIC And Bank Mergers

The Federal Deposit Insurance Corporation (FDIC), a powerful regulator in the banking sector proposed new regulations to govern bank mergers in the US. In a statement, the FDIC said that it will deliver new rules to govern mergers of banks with over $50 billion. These regulations will then increase for banks with over $100 billion in.

Most bank mergers in the US already require approvals by three regulators: FDIC, Office of the Comptroller of Currency, and the Fed. Today, these regulations apply to banks with over $100 billion in assets. The new regulations will apply to smaller banks. These regulations are coming a year after several US banks like Silicon Valley Bank (SVB) and Signature Bank collapsed. Recently, there have been concerns that New York Community Bank (NYCB) could also collapse.

FCA Warns On Finfluencers

The Financial Conduct Authority (FCA), the main regulator in the UK, warned on advertising rules and potential criminal prosecution.

These consumer duty regulations mean that finfluencers who promote financial products and services without proper approvals may be committing a criminal offence punishable by up to 2 years in prison or fines. In a statement, the director of consumer investments at the SEC said:

Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.

Financial services products are becoming popular in the UK and other countries. As a result, many regulators have published new regulations and executed enforcement actions among many celebrities. In the US, Kim Kardashian was ordered to pay a $1.3 million fine for hyping financial solutions in social media platforms like Instagram and Facebook.

FCA To Allow Some Crypto Products

In the UK, the FCA also moved ahead to allow some bitcoin-linked securities to be listed on the stock market. This is a major reversal considering that the agency has long been opposed to these products in the UK.

The statement said that financial issuers can apply to list notes linked to Bitcoin and Ethereum on the LSE. An exchange-traded note is a debt security that track an underlying security and are settled through a centralized exchange. The FCA said:

With increased insight and data due to a longer period of trading history, the FCA believes exchanges and professional investors should now be able to better establish whether crypto-ETNs meet their risk appetite.

The announcement came two months after the SEC gave its green light for spot Bitcoin ETFs, which have become highly successful.

EU To Finalize MiCA Rules

In Europe, the European Securities and Markets Authority (ESMA) said that it was finalizing setting rules and guidelines on the Markets in Crypto Asset (MiCA) regulations. The third consultation package sought public comments on the proposed rules on areas like the detection and reporting of suspected market abuse in crypto assets. The regulator has already published rules about stablecoin issuers like Tether and Circle, which runs USD Coin (USDC).

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