Regulations Round-Up – May 2023

The financial market went through a mixed period in April as concerns about the banking sector and a looming recession continued. Cryptocurrencies jumped to a multi-month high as the US dollar index dropped. There were also some important regulatory stories in the US, Europe, and other countries. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in April, and now we’re looking at what’s coming up in May 2023.

SEC and Coinbase fight continues

The Securities and Exchange Commission (SEC) filed a Wells notice to Coinbase and warned the company about its staking process and that it was operating illegally. The notice warned the firm that the agency would sue the company for offering unregistered securities. In a court filing in April, Coinbase criticized the agency for the Wells notice and pointed to several factors. First, it noted that the SEC had allowed the firm to become a publicly-traded company in the US. Second, the SEC had pointed that it lacked the statutory authority to regulate businesses like Coinbase.

Third, the response also noted that Coinbase had attempted to engage with the SEC numerous times, saying:

Coinbase repeatedly sought guidance on how to activate its Commission-registered alternative trading system (“ATS”) subsidiary, given that multiple brokerdealers today operate ATSs through which they provide trading platform, brokerage, and custody services directly to retail customers.

Fed publishes report on SVB collapse

The Federal Reserve published a report on the collapse of Silicon Valley Bank. In it, the bank attributed the collapse to mismanagement and supervisory mistakes. On supervision, the bank blamed San Francisco Fed, which has the authority to regulate the company. Further, the report cited social media frenzy that led to huge outflows from the company. The report said:

As risks in the financial system continue to evolve, we need to continuously evaluate our supervisory and regulatory framework and be humble about our ability to assess and identify new and emerging risks.

The report came at a time when the risks to the banking sector continued. The biggest bank at risk was First Republic Bank, whose shares have plunged by more than 90% in the past few weeks.

FCA to work with crypto companies

The UK has been working to make London the best place for companies in the cryptocurrencies and blockchain industries. It is hoping to outshine both the US and the European Union in attracting these firms.

In a statement, Sarah Pritchard, the Executive Director of the FCA, said that the agency will work with key players in the industry to create a new regime for the industry. As part of this work, the FCA has been registering firms to operate in the country. Only 41 companies have registered in the UK.

The Treasury is also working on a new set of crypto regulations. In March, the government’s financial arm launched a consultative paper on the industry.

CFTC wins major lawsuit

One of the biggest pieces of regulatory news was about the Commodity Futures Trading Commission (CFTC). The agency won a record $3.4 billion against Cornelius Johannes Steynberg, the founder of Mirror Trading, a company that was placed in liquidation in 2020. Mirror, which was declared a scam, had over 260k members from the US, Canada, and other countries.

EU-wide crypto regulations clear vote

Another big regulatory story was that the EU parliament voted for an ambitious set of cryptocurrencies rules. The Markets in Cryptoassets (MiCA) rules are the first of a kind, that will allow EU member states to regulate the industry. These rules will be implemented in July this year after they are approved by member states. They have been welcomed by many companies in the industry since they provide clarity about the industry. They also differ from the American approach of regulating the industry through enforcement and lawsuits. Ernest Urtasun, a shadow representative on MiCA said that the approval:

Marks the start of a new era of regulatory scrutiny on unregulated crypto markets, which have caused massive losses to many first-time investors and provided a safe haven to fraudsters and criminal organizations for over a decade.

MAS directs banks to be silent about inflows

Singapore is working to attract inflows from wealthy Chinese citizens as it seeks to boost its wealth management sector. As part of this growth, the regulator asked its biggest banks to avoid discussing the origins of these funds.

The statement came as China continues its crackdown on businesses and the richest people in the country. It also came as tensions between China and the United States have escalated. Estimates are that there are now over 1,500 family offices in Singapore, most of them coming from China.

UK Treasury touts regulatory changes

The UK government has been working hard to change the regulatory situation after Brexit. Some of the new regulatory changes have been criticized by businesses and the citizens as well. In an opinion piece, Andrew Griffith, the economic secretary to the Treasury, said that these regulations will make the UK a better place for businesses and banks.

He cited the fact that UK banks have emerged from the recent banking crisis unscathed. The only major issue was the collapse of Silicon Valley Bank UK, which was swiftly acquired by HSBC.

MAS ESG rules

Regulators in most countries are now dealing with the growth of ESG, as companies and fund managers seek inflows from investors. As a result, there have been concerns about greenwashing. In a statement, Singapore’s MAS said that it will require companies to make ESG disclosures in line with the International Sustainability Standards Board. These rules are being developed by IFRS as a complement to the existing accounting standards.

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