Regulations Roundup – October 2023

The financial market presented lots of action in September. Inflation in key countries bounced back while the US government shutdown started. The US dollar jumped while the American bond sell-off pushed yields to the highest level in years. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in September, and now we’re looking at what’s coming up in October 2023.

CTFC DeFi crackdown

The Decentralized Finance (DeFi) industry has grown rapidly over the years. According to DeFi Llama, the industry has over $70 billion in assets and analysts believe it has more room to grow in the coming years.

The Commodity Futures Trading Commission (CFTC) continued its crackdown in the industry by focusing on companies that offer derivatives In a statement, the agency said that Opyn, ZeroEx and Deridex offered their derivatives and margin solutions to retail traders without following the law.

The CFTC has taken a relatively aggressive tone towards companies in the crypto industry. For example, the agency sued Binance, the biggest exchange in the world, earlier this year for illegally targeting American customers. It also sued Ooki DAO, a DeFi protocol that operated on Ethereum’s network.

NYDFS targets crypto companies

The New York State Department of Financial Services, the leading financial regulator for the state, targeted crypto exchanges. In a guidance, the regulator spelled out its expectations for how exchanges like Coinbase will evaluate a coin offering before adoption.

In a statement, Adrienne Harris, the regulator’s superintendent, said that the guidance was necessary to make standards for these coin offerings more robust. As part of the new guidelines, exchanges operating in the state will need to submit new coin-listing and delisting policies. She said:

When we know that a coin that someone once thought was OK, when we see that new risks have emerged or the coin is being misused, we want our entities to have a way to delist the coin in a way that’s still protective of consumers and protects safety and soundness as well.

FCA targets bullying in the financial sector

In the UK, the Financial Conduct Authority (FCA) proposed new guidelines targeting bullying and harassment in the industry. The regulator also came up addressed the need for diversity in the industry. In its proposals, the FCA also warned that it could block appointment to senior managers deemed to be bullies.

The new guidelines came a few months after the crisis surrounding Odey Asset Management, where the founder stepped down after a series of accusations. The FCA believes that these issues pose significant risks to the country’s financial sector. Meanwhile, the FTC continued to review the banking rules surrounding politically exposed persons. These actions comes a few months after the heads of NatWest and Coutts were forced after Nigel Farage account was deactivated.

Hedge funds and PE firms target the SEC

Hedge funds, venture capital funds, and private equity funds in the United States filed a lawsuit against the Securities and Exchange Commission (SEC) citing regulatory overreach. The lawsuit surrounded new rules by the SEC that are aimed at giving investors more transparency and better terms.

For example, the rules bar these companies from giving preferential terms to some customers. This is common practice in the industry, especially when the firms are raising capital from large companies. Also, the rules mandate these companies to provide quarterly statements pertaining to their performance and expenses. The funds will also need to go through annual audits. In a statement, the head of the American Investment Council said:

It will discourage competition, harm investors, reduce returns, stifle innovation and impose costly burdens on funds of all sizes.

SEC delays Bitcoin ETF again

The Securities and Exchange Commission (SEC) delayed spot Bitcoin ETF applications by companies like Invesco, Bitwise,and Blackrock again. The new delay came two weeks earlier than scheduled since companies were expecting the ruling to happen between October 16 and 19. This delay happened because of the government shutdown, which could go on for weeks because of polarization in Washington.

Most analysts believe that the SEC will ultimately approve at least one Bitcoin ETF since these applicants have put in place a surveillance clause to prevent market manipulation. Also, the SEC will likely seek to avoid another lawsuit. The SEC recently lost a major lawsuit, which was brought up by Grayscale.

Regulators’ shadow banking concern

The shadow banking industry has been growing at a fast pace in the past few years. It has, in particular, grown at a faster pace this year as banks pulled back from lending. Therefore, many regulators are getting concerned about the implications and risks involved in the industry.

For example, the Financial Stability Board has launched a review that could limit leverage used by many hedge funds. The SEC, on the other hand, is working to bring policies on fund transparency while in the UK, the FCA is working to probe private capital valuations.

BoE to delay banking reforms

The Bank of England is considering delaying the implementation of global banking reforms by six months. It will implement them in July 2025 in line with other countries like the United States. At the same time, the bank will shorten the five-year phase-in period by six months.

The rules, known as Basel III, will introduce several important features that are meant to safeguard the banking sector. For example, they will raise the minimum capital requirements to 4.5% from the current 2%. They will also offer an additional 2.5% buffer capital requirement and limit their leverage.

If you enjoyed our Regulations Roundup October 2023, be sure to hit the share button. Love this type of content and want it for your FX broker or crypto exchange? Contact the Contentworks team for financial services content.

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