Regulations Round-Up – July 2021

Global stocks continued rising in June as investors priced in a sustained recovery of the global economy even after the Fed sounded hawkish. Cryptocurrencies struggled as investors continued worrying about regulations, high interest rates, and the crackdown in China. The total market capitalization of all cryptocurrencies tracked by CoinMarketCap has dropped to more than $1.3 trillion. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in June, and now we’re looking at what’s coming up in July 2021.

FCA warns on Binance

The UK Financial Conduct Authority (FCA) warned on Binance Markets and Binance Group, the biggest crypto exchange in the world. The regulator said that Binance Markets Limited was not permitted to do any regulated activities in the UK. It also warned that no entity under Binance Group was permitted to undertake any business in the UK.

The announcement came a few days after a report by the FCA found that approximately 2.3 million adults in the country held crypto assets. That was a significant increase from 1.9 million in the same period in 2020. In a statement, Sheldon Mills of the FCA said:

“However, customers need to understand that because these products are largely unregulated, they are unlikely to have access to the FSCS or the Financial Ombudsman Service if something goes wrong. If consumers invest in these types of products, they should be prepared to lose all their money.”

The FCA is not the only agency concerned about Binance. In June, the Financial Services Agency (FSA) in Japan warned that the firm was providing services in Japan without registration. The company is also being investigated in the United States by the Internal Revenue Service (IRS) and the Department of Justice.

PBOC crackdown on cryptocurrencies

China, not known for its liberal stance on financial freedom, continued its cryptocurrency crackdown in May. The government intensified its crackdown on miners, which helped push its hash rate lower. On the other hand, the People’s Bank of China (PBOC) asked financial institutions like banks and digital platforms like Ant Financial to crack down harder on cryptocurrencies. It asked them to invest more in technologies that will help them identify accounts dealing with the currencies. The announcement came a month after three industry associations issued a ban on cryptocurrencies. However, these agencies don’t have significant power like the PBOC.

CySEC on cryptocurrencies

In an interview with Finance Magnates, Demetra Kalogerou, the head of CySEC answered some questions on various issues like Brexit and cryptocurrencies. Asked about why Cyprus had lagged on crypto regulations, she warned about the risks posed by virtual currencies. She also reiterated that the currencies remained unregulated in the European Union. Further, she said that the agency was constantly re-evaluating the sector. She talked about the Markets in Crypto Assets (MiCA) regulation that was presented by the European Commission. If implemented, the regulation will see all EU members embrace a single regulatory framework for digital currencies.

US regulator warns on strict crypto regulations

While most market participants believe that the crypto industry should be regulated, a member of the Securities and Exchange Commission (SEC) warned against strict regulations. In a statement, Hester Pierce told the Financial Times that she was worried about politicians and regulators playing a role in the industry.

She believes that over-regulation will hurt innovation and shift crypto companies abroad. Her interview came a few days after the new SEC chair asked Congress to define laws on crypto regulations. Meanwhile, the SEC delayed Robinhood’s IPO as it addressed the company’s role in cryptocurrencies.

Basel III regulations are poised to shake up the gold market

New banking rules, part of a sweeping international accord known as Basel III, recently came into effect. They mark a big change for European banks and the way they deal with gold. This will potentially altering the landscape for precious metal demand and prices. Allocated gold, in tangible form, will be classified as a zero-risk asset under the new rules, but unallocated or “paper” gold, which banks typically deal with, won’t.  Under the new regime, physical, or allocated, gold, like bars and coins, will be reclassified from a tier 3 asset, the riskiest asset class, to a tier 1 zero-risk weight —putting it “right alongside with cash and currencies as an asset class,” said Adam Koos, president of Libertas Wealth Management Group.

The new liquidity requirements aim to “prevent dealers and banks from simply saying they have the gold, or having more than one owner for the gold they have” on the balance sheet. You can read more about Basel III here. 

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