IOSCO Releases Landmark Policy Recommendations for Crypto and Digital Asset Markets

The International Organization of Securities Commissions (IOSCO), a leading international body of securities regulators, recently published an influential report titled ‘Policy Recommendations for Crypto and Digital Asset Markets Consultation Report.’

This ground-breaking document provides 18 recommendations, each of them structured to offer guidance to regulators worldwide on handling the burgeoning crypto and digital asset markets. The primary objective is to ensure investor protection and market integrity are consistent with those of traditional financial markets.

One of the main points of the report is the suggestion for regulatory frameworks to examine whether crypto-assets can substitute for regulated financial instruments. IOSCO encourages regulators to analyze if investors have replaced other financial investment activities with crypto-asset investments.

Additionally, the report urges Crypto-Asset Service Providers (CASPs) to set effective governance and organizational requirements. This move aims to counteract potential conflicts of interest that may arise due to their multi-faceted roles within the industry.

The document’s recommendations extend to order handling, trade disclosures, and the listing of crypto-assets. The report suggests that CASPs should adopt transparent standards for the listing and delisting of crypto-assets, which would lead to more informed decision-making by investors.

In response to the cross-border character of crypto-asset trading, IOSCO’s report advocates for enhanced international cooperation. This recommendation is aimed at ensuring effective supervision and enforcement, reducing the risk of money laundering, and addressing investor protection and market integrity issues.

Significant attention is also given to the custody of client monies and assets. The report offers guidance to safeguard these resources and mitigate risks related to asset segregation and the re-use of assets.

Another area of focus is the management of operational and technological risks associated with distributed ledger technology (DLT) and smart contracts. In addition, the report includes a dedicated section on retail investors, stressing the need for diligent assessment and onboarding.

Lastly, IOSCO addresses stablecoins, pointing out their unique features and associated risks. It provides further guidance on stablecoin disclosures and the custody of reserve assets.

IOSCO’s report is expected to have a significant impact on the crypto and digital asset markets worldwide. Its comprehensive recommendations should assist regulators in their task of addressing the challenges posed by these rapidly evolving markets.


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Hong Kong SFC Finalizes Regulatory Framework for Virtual Asset Trading Platforms

The Securities and Futures Commission (SFC) of Hong Kong concluded a consultation period today, revealing the finalized regulatory requirements for operators of virtual asset trading platforms licensed by the SFC.

Over the consultation period, the SFC collected 152 written submissions from stakeholders including industry and professional associations, professional and consultancy firms, market participants, licensed corporations, and individuals. These respondents largely welcomed the proposed measures, although several requested clarifications. Following an assessment of the feedback, the SFC made modifications and clarifications to some of the proposed requirements.

In a notable decision, the SFC has approved the proposal to allow licensed platform operators to cater to retail investors, with the majority of respondents showing agreement. To safeguard these investors, the SFC will introduce robust measures such as suitability assessments during onboarding, rigorous token due diligence, admission criteria, improved governance, and mandatory disclosures.

“Hong Kong’s comprehensive virtual assets regulatory framework adheres to the principle of ‘same business, same risks, same rules’, with a key focus on robust investor protection and risk management,” said Ms. Julia Leung, the SFC’s Chief Executive Officer. “This will foster sustainable industry development and support innovation.”

The newly released Guidelines for Virtual Asset Trading Platform Operators will come into effect from 1 June 2023, setting out key expectations such as the secure custody of assets, segregation of client assets, avoiding conflicts of interest, and complying with cybersecurity standards and requirements.

The SFC will provide further guidance on new regulatory requirements, license application procedures, and transitional arrangements. The application forms for trading platforms will be available on 25 May 2023 and the SFC will begin accepting applications on 1 June 2023.

In response to the regulations, operators are encouraged to apply for a license if they can comply with the SFC’s standards. Those unable or unwilling to comply should arrange for an orderly closure of their operations in Hong Kong.

To protect investors, the SFC will continue working with the Investor and Financial Education Council to educate the public about the risks of trading on unregulated platforms. At the time of this announcement, the SFC has not approved any virtual asset trading platform to provide services to retail investors. Most platforms currently accessible to the public are not regulated by the SFC.

The market’s response to the new regulations has been mixed, with the Hong Kong concept token CFX(Conflux) experiencing a pullback.

Currently, Hong Kong’s SFC has licensed only two virtual asset trading platforms: OSL Exchange and HashKey Pro. With the new regulatory framework set to take effect in June, this marks a significant milestone in Hong Kong’s efforts to regulate the fast-growing virtual asset sector.


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Coinbase: Moving America Forward or Moving out of US?

In an effort to promote the importance of cryptocurrency and its potential to revolutionize the global financial system, Coinbase, the leading crypto exchange, launched a national campaign, “Crypto: Moving America Forward.” 

The campaign kick-off involves a series of four different advertisements, each featuring Brian Armstrong, to be aired on popular Sunday shows with a new chapter premiering every weekend. The ads aim to articulate the significance of crypto technology and elucidate what’s at stake for the United States.

Coinbase had previously commissioned a national survey from Morning Consult, which indicated that one in five Americans owns crypto and that 80% of Americans are inclined towards updating the financial system.

In light of these findings, Coinbase announced “Go Broad, Go Deep,” a global initiative to expand its presence in significant financial markets seeking to become crypto hubs. Locations include the UK, Canada, Dubai, Brazil, and Singapore. As part of this initiative, Coinbase has also inaugurated a global advisory council and launched a new international exchange in Bermuda.

The campaign “Crypto: Moving America Forward,” also seeks to highlight that US global economic leadership and national security might be jeopardized if the US cedes its role in constructing technology that will be central to the world’s financial infrastructure.

In addition to the ad series, the campaign comprises “The History of Money Initiative,” an educational program charting the evolution of currency, and “Stand With Crypto Day,” scheduled for July 19, where crypto-enthusiasts will gather in Washington, D.C., advocating for crypto-friendly policies.

Coinbase will also collaborate with the Financial Times to host “The State of Crypto Summit” in New York City on June 22, inviting influential stakeholders from the traditional financial sector to discuss crypto’s evolving role as financial technology.

However, amid these initiatives, last month, Armstrong warned that Coinbase might consider moving its headquarters outside the US, citing dissatisfaction with the country’s approach to crypto regulation. This move underscores the tension between crypto exchanges and regulatory bodies, a situation that demands urgent attention.

Armstrong’s initiative underscores the importance of a national conversation on the role of cryptocurrency in reshaping the global financial landscape. With one in five Americans already owning crypto, it’s clear that the future is here.


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Polygon(Matic) to Slash zkEVM Transaction Fees by 20%

Polygon, the scalable Ethereum layer-2 solution, has announced its intent to optimize its zkEVM (Zero-Knowledge Ethereum Virtual Machine) in the coming weeks. These enhancements are predicted to decrease transaction fees by around 20%, according to the company’s official Twitter account. Interestingly, these improvements will be achieved without the need for any data compression techniques.

Transaction fees within the Polygon zkEVM serve to cover the costs associated with data availability and posting proof to the Ethereum network. Each transaction that gets processed requires the publication of state data. Additionally, fees cover the operational costs of running the servers that generate the proofs. Currently, around 80% of a transaction fee is dedicated to data availability, a resource that is not currently being compressed.

In a roadmap soon to be released, Polygon will detail upcoming upgrades on data compression, as well as the Ethereum Improvement Proposal (EIP) 4844. These developments are expected to improve the efficiency and cost-effectiveness of transactions on the platform.

The company also shared advice on how users can optimize fees in the current ecosystem. One major suggestion is to time on-network transactions to periods when Ethereum is the cheapest, thus minimizing the L1 interaction cost. 

Interestingly, Polygon advises users to conduct transactions when network activity on zkEVM is high. This approach may seem counterintuitive, but due to the cost of proof generation being distributed across all transactions, fees on a rollup decrease as activity increases.

For users wishing to bridge assets from Ethereum, the fees can be notably high. However, alternatives do exist. Transak, for example, can transfer tokens directly to the layer-2 solution, bypassing Mainnet fees completely.

Moreover, users with assets on a different blockchain can utilize a third-party bridge instead of first bridging to the Mainnet. For PoS (Proof of Stake) to Polygon zkEVM, LayerSwap offers a solution. For other layer-2 solutions to Polygon zkEVM, users can consider options like Orbiter Finance and Multichain.

The forthcoming updates, along with the existing strategies for optimizing transaction fees, point towards Polygon’s ongoing commitment to enhancing user experience and making blockchain technology more accessible and cost-effective.


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Bitcoin of America to Pay $86,000 in Settlement with Connecticut Department of Banking

Bitcoin of America, an Over the Counter (OTC) cryptocurrency exchange and a national operator of Bitcoin Kiosks, has been ordered to refund $86,000 to consumers in Connecticut, according to a recent announcement by the state’s Banking Commissioner, Jorge Perez.

The firm, known for its presence around the country with Bitcoin ATMs or BTMs, had been operating these kiosks without obtaining the necessary money transmitter license in Connecticut. These kiosks allowed consumers to purchase virtual currency using cash. However, four consumers in the state suffered substantial losses due to scams perpetrated through these unlicensed kiosks. This led to a settlement, and the firm is now winding down its operations in the state following a criminal indictment.

Commissioner Perez stated, “This case underlines the importance of vigilance when using virtual currency kiosks.” He emphasized the department’s commitment to ensuring that kiosk owners and operators comply with state licensing laws and regulations.

The victims were tricked into depositing cash into the kiosks using a QR code provided by the scammers, believing they were safeguarding their money. In reality, they were unknowingly purchasing virtual currency, which was then transferred to the scammers’ digital wallets, resulting in a loss of their funds.

In an effort to address this growing issue, the Department of Banking and the Connecticut State Police have introduced a bill, HB 6752 An Act Concerning Digital Assets. The bill seeks to mandate virtual currency kiosks be licensed as money transmitters, giving the Commissioner jurisdiction over these machines and their operators. It also aims to provide additional protections, including clear on-screen consumer disclosures and extra safeguards for first-time kiosk users.

Expressing his gratitude towards the Connecticut State Police for their assistance in the case, Commissioner Perez also shared that the Department of Banking, along with the Connecticut State Police, the Office of the Attorney General, and the Department of Consumer Protection, has issued an alert with tips to help consumers avoid falling prey to such scams in the future.


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FTX CEO John Ray III Confirms Plans for FTX 2.0 Amidst Legal Proceedings

In a recent disclosure of the CEO’s legal billings, FTX CEO John J. Ray III has confirmed the existence of plans for FTX 2.0, the next iteration of the cryptocurrency exchange. The disclosed legal billings, totaling $290,190.39, shed light on the ongoing efforts by Ray and his team to recover funds and rebuild the collapsed exchange.

John J. Ray III, an esteemed American attorney with expertise in recovering funds from failed corporations, was appointed as the CEO of FTX following the exchange’s collapse in November 2022. Since then, Ray has been diligently working to chart a course for the future of FTX, aiming to restore its former glory and ensure a more stable and secure platform for its users.

The announcement of FTX 2.0 plans had an immediate impact on the market, particularly on the FTX exchange native token, FTT. The news caused a significant surge in FTT’s value, with the token pumping nearly 24% at its peak. 

While the plans for FTX 2.0 have been confirmed, no concrete timetable has been established. The disclosed information reveals that, thus far, there is no tangible evidence of a comprehensive plan to restart the exchange, aside from internal sketches. However, Ray has not entirely ruled out the possibility of such a plan materializing in the future.

Amidst the news of FTX 2.0, concerns arise regarding the creditors of the collapsed exchange. On May 10, 2023, the United States Department of Treasury and Internal Revenue Service (IRS) filed 45 claims worth $44 billion against FTX and its subsidiaries, further complicating the financial landscape. It remains uncertain whether the creditors will receive any compensation from the potential reboot of FTX.


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Bitcoin (BTC) $ 38,715.37 1.79%
Ethereum (ETH) $ 2,091.05 0.04%
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Bitcoin Cash (BCH) $ 225.59 1.19%