July was a volatile month for the financial market as global stocks, cryptocurrencies, and the US dollar retreated. There were also several important regulatory events by key players like the Securities and Exchange Commission (SEC) and the Financial Conduct Authority (FCA). 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 August.
SEC Approves Ether ETFs
The biggest regulatory event of the month was that the SEC finally approved nine Ethereum ETFs by companies like Bitwise, Blackrock, Fidelity, Invesco, and Franklin Templeton.
That was an important decision because the agency has expressed concerns about Ether, which it sees as a financial security. Therefore, by approving the funds, the agency opened the door for companies to apply for other crypto tokens like Solana, Tron, Polygon, and Avalanche.
VanEck, one of the leading ETF issuers has already filed for a spot Solana ETF and more companies could follow. Franklin Templeton, a company with over $1.56 trillion in assets, has announced that it would apply for a SOL ETF. Meanwhile, the SEC backed down on claiming that Solana, Cardano, Polygon and other tokens were securities. It did that in a court filing where it has accused Binance of offering unregistered securities to American clients.
The other important news was that the SEC was nearing a settlement with Ripple Labs in a long-running dispute.
FCA Seeks To Attract UK IPO
The UK has gone through an Initial Public Offering (IPO) drought in the past few years, with the number of new listings falling.
Now, the Financial Conduct Authority (FCA) is working to change this by reducing the bureaucracy that has existed for years. The agency proposed new rules aimed at making it cheaper and easier for firms to raise money.
One of the rules is that the UK will increase the threshold companies need in order to issue prospectuses for secondary fundraisings from 20% of their issued capital to 75%. This change will reduce the time taken by companies by about a month and a half. These rules will make the UK a more attractive country to list compared to Europe, which recently upgraded the prospectus ruling from 20% of issued shares to 30%.
The other change is that the new rule will give the founders more power such as allowing them dual share structures and the ability to make more decisions without shareholder votes.
FSB Focuses On Shadow Banking
Meanwhile, the Financial Stability Board (FSB), a global watchdog on financial stability, warned regulators to be more vigilant about risks in the shadow banking industry.
Shadow banking entities like those in the private credit industry have become more powerful in the past few years. This trend happened as banks were forced to improve their balance sheets after the last Global Financial Crisis (GFC).
As a result, many companies have turned to private credit companies that are not highly regulated. In a letter, the FSB warned that these companies faced risks like high debt levels and elevated asset prices, risking a potential financial crisis. The letter said:
While the memory of past turmoil fades and optimism over a soft landing for the global economy grows, it is important to emphasise that tail risks remain. Many of the underlying vulnerabilities that contributed to these incidents are still largely in place, leaving the global financial system susceptible to further shocks.
Regulators Warn On Prop Firms
We are seeing more regulators warning about the fast-growing prop trading industry. In a note, Consob, the Italian securities regulator, warned that investors should be aware of the risks associated with retail prop trading companies. It described them as online trading simulations.
Prop trading companies have become popular among traders because they provide them with funds and then share the profits.
The warning came a few months after the FSMA (Belgium) and the Czech regulator warned of the growing threat posed by these companies. Also, the European Securities and Markets Authority (ESMA) is looking at the industry and considering measures to take.
You can read our take on prop trading firms and regulators here.
EBA And Compliance With MiCAR Regulations
The European Banking Authority (EBA) issued a statement asking its members to comply with the markets in crypto-assets (MiCAR) regulations.
The statement came as Europe is implementing the most comprehensive crypto regulations globally. MiCA has set guidelines on stablecoins, asset reference tokens (ART), and e-money tokens. For example, customers buying these tokens need to check whether the issue is carried out in accordance with the regulations.
Russia To Legalise Crypto
Russia is moving towards legalising cryptocurrencies as companies in the country find it difficult to move cash abroad due to sanctions. Regulators are also working to make it easier for Russian companies to mine Bitcoin and other cryptocurrencies.
The move is a big reversal for a country that has been resistant. In a statement, the Bank of Russia governor said that she expected more Russian companies to start using these coins by the end of the year.
Under the new proposals, the central bank will be the main regulator of cryptocurrencies while other agencies like the Federal Financial Monitoring Service and the Federal Tax Service will have roles in controlling the turnover of crypto.
HKMA To Regulate Stablecoins
In Hong Kong, the financial regulator is working on a licensing regime for stablecoin issuers in the country. The proposed rules mean that issuers of stablecoins tracking fiat currencies will need to have a license.
At the same time, reserve assets for those currencies will need to be held by local banks. These rules are aimed at protecting local users of these tokens.
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