Regulations Roundup – November 2023

The financial markets were vibrant in October as stocks dived and cryptocurrencies jumped to the highest point in more than a year. Bitcoin surged to over $35,000 while bond yields spiked to the highest levels in over a decade. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in October, and what’s coming up in November 2023.

Gary Gensler is still reviewing spot bitcoin ETFs

Bitcoin and other cryptocurrencies surged as investors remained optimistic about regulations in the United States. They focused on the issue of a spot Bitcoin ETF, which they believe is a positive thing since it will make it mainstream. In an interview with CNBC, Gary Gensler,

Chairperson, U.S. Securities and Exchange Commission, said that the agency was still reviewing ETFs and will make a decision soon. Companies like Blackrock, Invesco, Franklin Templeton, and Ark Invest have filed for spot BTC ETFs.

These companies have put in place more measures to protect customer funds and prevent market manipulation. These were some of the top concerns by the SEC when it rejected several ETFs a few months earlier. Analysts believe that several large institutional companies will be open to allocate a small portion of their funds to Bitcoin. For one, the coin has done well in the past decade, outperforming key financial assets like stocks, gold, silver, and bonds. Also, many investors believe that Bitcoin is a better version of gold.

SEC gives up the fight with Ripple Labs founders

The Securities and Exchange Commission (SEC) dropped a major lawsuit against the heads of Ripple Labs, the parent company of XRP.  The decision came a few months after the judge overseeing the case ruled that XRP was not a security.

Therefore, the move for the SEC to dismiss the lawsuit means that other wealthy crypto executives might opt to fight the SEC in court. Besides, the agency has suffered numerous setbacks in the past few months. For example, in September, a judge ruled that the SEC erred when it refused to review the decision by Grayscale to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

The SEC has filed additional lawsuits this year. It has taken action against Binance and Coinbase in a US court alleging that the two companies sold illegal securities in the United States. Most recently, it fined the founders of Safemoon for embezzling over $200 million.

Meanwhile, American prosecutors prevailed in their high-powered lawsuit against Sam Bankman-Fried (SBF), the founder of FTX and Alameda Research.

SEC and activist investors

Activist investors have become popular in Wall Street and other financial capitals in the world. Historically, actions by well-known activists tend to move the stocks they invest in. According to SEC rules, these investors must disclose their holdings 10 days after they complete their investments.

Now, the SEC wants to change this by ensuring that these funds disclose their holdings five days. This rule will only apply to activists who acquire at least five percent of companies. In a statement, Gary Gensler said:

Frankly, these deadlines from half a century ago feel antiquated. In our fast-paced markets, it shouldn’t take 10 days for the public to learn about an attempt to change or influence control of a public company.

FCA and Binance

In the United Kingdom, the Financial Conduct Authority (FCA) continued its battle with cryptocurrency companies. The agency issued a major crackdown against Binance, the biggest crypto exchange in the world. It forced it to stop advertising and accepting new customers from the UK.

The FCA has issued numerous crypto rules in the country. For example, only authorized companies can promote cryptocurrencies and gain new customers. Companies that flout the rules will be fined while officials can be locked up for two years. In a separate statement, the former head of the FCA warned that crypto regulations in the UK would harm consumers more by taking them mainstream. He also argued that fraud and scams were features and not bugs in the industry.

CFTC to be tough on enforcement

The Commodity Futures Trading Commission (CFTC) is getting more serious about its enforcement mechanisms. In a statement, the agency, which polices the derivatives market, said that it will crack down on the sector and penalise repeat offenders. The agency also wants to ensure that the penalties it charges companies are higher than enforcement costs.

Spain and MiCA rules

The European Securities and Exchange Authority (ESMA) unveiled the Markets in Crypto Assets Regulation (MiCA) rules a few months ago. These rules, which were the most comprehensive in the crypto industry, were meant to safeguard customers and encourage companies in the sector. They covered transparency, disclosure, authorization, and supervision of transactions.

After taking effect, countries were asked to implement them within a 12 to 18 months period. In a statement, Spanish regulators said that they would bring forward implementation of these rules forward by six months. Some of the top companies to be affected are big exchanges like Binance, Kraken, Coinbase, and BitStamp.

MAS and Net Zero

The Monetary Authority of Singapore (MAS) made several headlines in October. One of the most notable ones was the agency’s guidelines to financial services companies as they transition to a net-zero economy.

There are several parts in these rules. For example, instead of divestment, companies will be required to focus on engagement. Also, the transition should take a multi-year approach instead of hurrying it. Other parts of the rules include a holistic approach to risk, transparency, and that companies should consider environmental risks beyond climate-related risks. In a statement, a managing director at MAS said:

​Indiscriminate divestment from carbon-intensive activities will not get us to a net-zero world. A large part of the global economy depends on such activities for growth and jobs. Rather, financial institutions must actively support their borrowers, insured parties, and investee companies.

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