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Regulations Roundup – June 2024

This year, several important regulatory events around the world have occurred. The Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January while UK’s Financial Conduct Authority (FCA) unveiled new name and shame regulations. 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 June.

SEC greenlights Ethereum ETFs

In the United States, the SEC gave its green light for Exchange-Traded Funds tracking Ethereum, the second-biggest crypto in the world. The initial step was that the agency allowed venues like Cboe, Nasdaq, and the New York Stock Exchange (NYSE) to list these tokens. The next stage is that the SEC will continue reviewing the filings from top companies like VanEck, Blackrock, and Fidelity. Analysts expect that the agency will approve these ETFs either in June or later this year.

This approval is important for two reasons. It comes a few months after the SEC approved Bitcoin ETFs, which have now attracted billions in assets. The iShares Bitcoin Trust (IBIT) has passed the Grayscale Bitcoin Trust (GBTC) with its $20 billion in assets. Second, there have been concerns that the SEC would reject these ETFs because Ethereum is a different asset than Bitcoin. Ethereum is a proof-of-stake network with staking features while the SEC sees Bitcoin as a digital commodity.

Therefore, analysts predict that fund managers will now focus on other PoS tokens like Cardano, Solana, Avalanche, and Ripple. Elsewhere, in the UK, the Financial Conduct Authority approved its first crypto ETF from WisdomTree. The company started offering ETFs backed by Ethereum and Bitcoin in the UK.

Bank of England unveils the Digital Securities Sandbox

In a consultative paper, the Bank of England and the Financial Conduct Authority (FCA)  proposed the creation of the Digital Securities Sandbox (DSS). The DSS will be a framework that allows firms to issue, trade, and settle securities using the Distributed Ledger Technology (DLT). These companies will operate within these rules and regulations for five years.

The FCA and BoE hope that the new regulations will facilitate innovation, protect financial stability, and protect market integrity.

It seems like this proposal is gaining traction in other countries. In a letter, she noted that the UK and the UK should collaborate on this to promote digital innovation between the two countries. She said:

I write to make the case for a cross-border sandbox between our respective jurisdictions, which would build on the promise of the DSS and serve our investors, market participants, and regulators.

The Cyprus Securities Regulator (CySEC) also launched a regulatory sandbox that will provide testing opportunities for innovation solutions in a controlled environment.

SEC continues regulations through its enforcement strategy

Another significant regulation story was that the SEC continued its strategy of regulations through enforcement. In May, it sent a Wells Notice to Robinhood, warning of a lawsuit because of its cryptocurrency business. The SEC accuses Robinhood of offering unregistered securities in its platform.

This Well’s Notice came after the SEC sent a similar one to Uniswap, the biggest decentralised exchange (DEX) in the world. In a response to the SEC, Uniswap said that the SEC’s enforcement was unwarranted, saying that its platform offered file formats, which cannot be classified as securities. The statement said:

Tokens are, in fact, simply a file format. They are a file format for value and they are not inherently securities. The SEC has to essentially unilaterally change the definitions of exchange, broker and investment contract in order to try to capture what we do.

Meanwhile, the House of Representatives passed a new crypto bill that gives the SEC the role of regulating cryptocurrencies. This bill addresses one of the biggest regulatory issues in the US, where the SEC and the CFTC claimed that it was their responsibility to regulate cryptocurrencies.

China’s rules on exchanges

The China Securities Regulatory Commission (CRSC) released a draft of rules that are meant to boost the country’s stock market. The new rules will give the country’s stock exchanges more power to regulate the market to prevent manipulation, risks, and insider trading.

According to Gao Li, its spokesperson, the new rules have been created using the lessons from overseas markets like in the United States and Europe. They also come as China works to boost its troubled stock market, where equities tumbled to their lowest level in years earlier this year.

ASIC and FRC sign a deal on audit qualification

The Australia Securities and Investments Commission (ASIC) reached a deal with the UK’s Financial Reporting Council (FRC) on reciprocal arrangements of audit qualifications. The new deal will allow auditors who have obtained professional audit qualifications in either Australia or the UK to apply to have their qualifications recognized in the other country. Before the deal, these auditors had to carry out lengthy trials to practice in these countries.

If you enjoyed our Regulations Roundup June 2024, please share it with your network and internal teams. Want compliant financial services marketing for your finance brand? Book a free Zoom call with our team.

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