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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Texas Passes Bipartisan House Bill 1666 Regulating Digital Asset Service Providers

Aiming to reinforce regulation in the digital asset industry, the Texas legislature has enacted bipartisan House Bill 1666. Set to take effect on September 1, 2023, the legislation imposes rigorous requirements on digital asset service providers in terms of handling customer funds.

Digital asset service providers, specifically those serving over 500 customers or holding at least $10 million in customer funds within Texas, are prohibited from merging customer funds with their own under the new law. This provision includes the provider’s operating capital, proprietary accounts, digital assets, and fiat currency.

To bolster transparency and accountability, the bill mandates that providers offer customers quarterly accountings of outstanding liabilities and assets held in custody. Additionally, an independent auditor must have continuous access to a pseudonymized version of the customer’s information.

The legislation also empowers the Texas Department of Banking to suspend or revoke the provider’s money transmission license if found in violation of the new requirements, thereby implementing a regulatory oversight mechanism.

The enactment of House Bill 1666 showcases Texas’s efforts to balance the growth of the digital asset market with consumer protection, setting a precedent that other states may follow.


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G20 To Establish Standards For Global Crypto Regulatory Framework

It was announced on February 25 by the group of the 20 largest economies in the world, known collectively as the G20, that the Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS) will deliver papers and recommendations establishing standards for a global crypto regulatory framework.

The Financial Stability Board (FSB) is expected to publish its recommendations by July 2023 on the regulation, supervision, and oversight of global stablecoins, crypto asset activities and markets, as stated in a document that provides a summary of the outcomes of a meeting with finance ministers and governors of central banks.

The next set of guidelines is not anticipated to be released until September 2023. At that time, the FSB and the IMF are scheduled to jointly provide “a synthesis document incorporating the macroeconomic and regulatory aspects of crypto assets.” Another research on the “possible macro-financial ramifications of the broad adoption” of central bank digital currencies is scheduled to be published by the International Monetary Fund (IMF) in the same month (CBDCs). The following is an excerpt from the statement that was released by the G20: “We look forward to the IMF-FSB Synthesis Paper which will support a coordinated and comprehensive policy approach to crypto-assets, by considering macroeconomic and regulatory perspectives, including the full range of risks posed by crypto assets.”

Additionally, the BIS will provide a paper that discusses analytical and conceptual concerns in addition to potential risk reduction techniques associated with crypto assets. The text does not include any information on the deadline for this report. The use of cryptocurrency assets to finance terrorist operations will also be investigated by a financial task group established by the G20.

During the course of the event, United States Secretary of the Treasury Janet Yellen said that it was “essential to put in place a solid regulatory framework” for activities relating to cryptocurrencies. In addition to this, she emphasized that the nation is not advocating for a “outright ban on crypto activity.” In a brief conversation with reporters on the margins of the main event, the managing director of the IMF, Kristalina Georgieva, suggested that the G20 nations need to have the option of outlawing cryptocurrencies.


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Galaxy Digital Invests $44 Million Into Institutional Cryptocurrency

In order to access its exclusive asset storage and management capabilities, Galaxy Digital has put $44 million into an institutional bitcoin custody platform.

The purchase of GK8, a company that has created its own patent bitcoin custody system with the intention of providing safe asset management for institutional customers, has been successfully completed by the cryptocurrency investment business owned by Mike Novogratz.

The firm specializes in the provision of cold vault technology, which enables transactions to be carried out despite the absence of a connection to the internet. It has the potential to automate transactions thanks to its in-house multi-party computation (MPC) vault, and the service also gives access to decentralized finance (DeFi) networks, tokenization, and NFT trading.

According to a statement released by Novogratz, one of the primary motivations for the purchase was the rising demand for custody services among investors. The cold storage solutions and wallet technologies developed by GK8 will be integrated into GalaxyOne, the premier brokerage platform that will soon be released by Galaxy Digital.

As a result of the business transaction, Galaxy will expand its operations to include a location in Tel Aviv, where they will bring on approximately 40 staff formerly employed by GK8. Lior Lamesh and Shahar Shamai, co-founders of GK8, will continue in their roles as leaders of Galaxy’s custodial technologies offering after the company was acquired.

At the time of its introduction, GalaxyOne is expected to provide institutional-grade consumers with access to a comprehensive variety of bitcoin financial services. Trading, lending, derivatives, cross-portfolio margining, and custodial offers are all going to be a part of this. All of these are going to be handled by GK8.

In December 2022, Galaxy announced the purchase of Argo Blockchain’s primary mining operation for the price of $65 million. This move was Galaxy’s way of doubling down on its investments in the cryptocurrency mining business. In order to avoid going bankrupt during a challenging year for the mining industry, the mining company was forced to sell up its Helios mining plant.


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Siemens Issues World’s First Blockchain Bond

Siemens, a German multinational firm that is a leader in the fields of engineering and technology, is one of the first companies in Germany to issue a digital bond on a public blockchain. Because of this achievement, Siemens is now able to count itself among an exclusive club of enterprises in Germany. It has a value of sixty million euros (or sixty-four million dollars), a maturity date of one year, and a maturity date, all in accordance with Germany’s Electronic Securities Act.

According to the announcement that was released on the 14th of February, the bond was issued directly to investors such as DekaBank, DZ Bank, and Union Investment without the need of paper-based international certificates or central clearing. When compared to the traditional methods of issuing bonds, Siemens commented that the approach made it possible for transactions to be carried out substantially more rapidly and effectively.

In the announcement, Siemens put a significant amount of emphasis on the benefits of employing digital bonds as compared to traditional bond-issuing methods. The company asserts that “issuing the bond on a blockchain delivers a lot of benefits” as contrasted to the procedures that came before it. Two examples of items that will become unnecessary as a consequence of this change are paper-based international certifications and central clearance. In addition to this, the bond may be issued to investors on a one-on-one basis without the need for an intermediary financial institution such as a bank to be present during the transaction.

Despite the fact that the transaction was carried out using conventional modes of payment rather than the digital euro at the time of the transaction since the digital euro was not yet available, it was nonetheless completed in only two days. Siemens has set itself the lofty objective of being the industry leader in the ongoing process of creating digital solutions for the capital and securities markets. This is a very ambitious target.


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Digital Asset Protection Firm Coincover Secures $30 Million in Funding Round

The digital asset security business Coincover, which has its headquarters in London, raised a total of $30 million in funding in a round that was headed by Foundation Capital and included a follow-on investment from CMT Digital. Foundation Capital also led the fundraising round.

According to the release that was issued by Coincover, the money will be utilized to assist increase the overall security of the cryptocurrency ecosystem by scaling the operations of the firm, driving recruiting, developing new products, and forming collaborations with other organizations. Coincover will be able to provide an even more comprehensive level of security to people and organizations who are holders of digital assets as a result of this.

In the year 2018, Coincover was founded, and the following year, it was released into the market with the objective of generating a degree of trust within the digital asset industry. Already, the company works with more than 300 different businesses, some of which include wallets, exchanges, hedge funds, family offices, and banks, in addition to a number of digital asset custodians.

Coincover’s mission is to provide the digital asset market with a defense not just against hacker assaults but also against the mistakes that may be made by human operators. In this way, Coincover hopes to solve the security issues that have been plaguing the industry as a whole. Coincover’s goal is to make the cryptocurrency business more reputable and established by reducing the number of frauds and other fraudulent activities that are taking place. It is said that the organization’s services not only reduce the risks associated with transferring and storing bitcoin but also change people’s perceptions of digital assets and encourage improved levels of trust within the industry. This is because the services change people’s perceptions of the risks associated with digital assets.


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SEC Probes Investment Advisers Offering Crypto Custody Without Proper Qualification

The United States Securities and Exchange Commission (SEC) has begun an investigation into traditional financial advisors on Wall Street to determine whether or not these advisors grant custody of digital assets to their customers without having the necessary qualifications. The purpose of this investigation is to determine whether or not these advisors grant custody of digital assets to their customers.

According to an article that was published by Reuters on January 26, which cited “three sources with knowledge of the matter,” the investigation that is being conducted by the SEC has been ongoing for a few months, but it appears to have picked up speed after the collapse of the cryptocurrency exchange FTX.

According to the sources, the Securities and Exchange Commission (SEC) has never disclosed to the general public the inquiries that it is presently doing since the investigations that it is currently conducting are confidential.

According to a report by Reuters, the majority of the work that the SEC is putting into this investigation is focused on determining whether or not registered investment advisors have complied with the laws and regulations regarding the custody of client cryptocurrency holdings. This is the primary focus of the SEC’s investigation into whether or not registered investment advisors have complied with the laws and regulations regarding the custody of client cryptocurrency holdings. The SEC is conducting an investigation into registered investment advisers to see whether or not they have complied with the rules and regulations that govern the custody of client bitcoin assets. This is the major focus of the inquiry.

To be able to continue to comply with the custodial protections outlined in the Investment Advisers Act of 1940 and to be able to provide custody services to customers, investment advisory firms are required to be “qualified” under the legislation. This qualification is a prerequisite for providing custody services. This regulation is in place to ensure that consumers of investment advice businesses have access to safe and secure custody services.


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The White House is continuing to develop its National Digital Assets Research and Development

The National Digital Assets Research and Development Agenda is still being worked on by the administration of United States Vice President Joe Biden, who is still in office.

The White House Office of Science and Technology Policy (OSTP) has issued a request for information (RFI) dated January 26 and posted by the Federal Register. The OSTP is inviting comments to assist it in determining which agenda goals should be prioritised.

By the 23rd of March, individuals and groups may submit comments that are no more than ten pages in length. After the “first-ever” Comprehensive Framework for Responsible Development of Digital Assets was presented in September, the White House made the announcement that the formulation of the agenda would be the next step in the administration’s efforts.

The president’s executive order titled “Ensuring Responsible Development of Digital Assets,” which was issued in March, was the impetus for a flurry of research work relating to cryptocurrencies, and the new agenda is a component of that activity.

According to the request for information (RFI), the agenda’s goal was to “shape an effort by the whole government” to create digital assets and distributed ledger technology.

It was also referred to be a method to “kickstart basic research” and “continue to encourage research that turns technology advances into market-ready goods.”

It said there: “Research and development (R&D) in this area has often been carried out in a disjointed fashion, with little thought given to the wider ramifications, uses, and potential drawbacks of the inventions that are at the core of the field. […] A research and development strategy that takes a more comprehensive approach would give tangible areas of emphasis that might be used to realise a holistic vision of an ecosystem for digital assets that symbolises democratic principles in addition to other major concerns.”

The adoption of the Chips and Science Act in August resulted in the creation of a specialised post within the OSTP for blockchain technology.

As part of its mandate, the office investigated the effects that digital assets have on the environment and prepared a report on those effects. Additionally, as part of the ongoing and as of yet inconclusive consideration of a digital dollar for the United States, the office compiled a survey of central bank digital currency design options.

The response to Vice President Biden’s broad framework varied from lukewarm support to vehement expressions of dissatisfaction.


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Kevin Rose, co-founder of Moonbirds, falls victim to phishing attack

Kevin Rose, who is also the co-founder of the nonfungible token (NFT) collection Moonbirds, has been a victim of a phishing scam, which has resulted in the loss of nonfungible tokens with a combined value of over $1.1 million that were individually owned by Kevin Rose. Moonbirds was a collection of nonfungible tokens that were named after birds.

On January 25, the news was made to the 1.6 million people who follow the person who created the NFT and a co-founder of PROOF on Twitter. He advised those people to refrain from collecting any Squiggles NFTs until his team was able to have them marked as stolen until his team could do so. Until they could do so, he urged them to wait to acquire any Squiggles NFTs.

Following that, sometime in the neighbourhood of two hours later, he revealed it in a following tweet.

It is believed that Rose’s non-financial assets were depleted when he authorised a bogus signature that transferred a significant amount of his non-financial assets to the exploiter. This theory is based on the fact that Rose may have been the victim of financial exploitation. This was the occurrence that resulted in Rose’s NFTs being used up completely. Because of this, Rose’s natural defence mechanisms (NFTs) were used to their utmost potential.

An independent investigation that was conducted by Arkham discovered that the exploiter stole at least one Autoglyph, which has a floor price of 345 Ether, at least nine OnChainMonkey items, each of which is worth at least 7.2 ether, at least 25 Art Blocks, also known as Chromie Squiggles, which are each worth at least a total of 332.5 ETH, and at least one OnChainMonkey item that is worth at least a total of 332.5 ETH

It is anticipated that a total of at least 684.7 ETH, which is equivalent to around $1.1 million, was successfully obtained.


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Citi Ventures Makes First Crypto Investment in Hong Kong-Based Digital Asset Manager

Xalts, a Hong Kong-based digital-asset management firm, has raised US$6 million in a capital financing round co-led by Citi Ventures and a California-based venture-capital firm Accel. 

While this is the first digital asset seed investment made by CITIGROUP’S venture capital investing group, Accel previously funded technology firms that include Facebook and Spotify.

Luis Valdich, a Managing Director at Citi Ventures, talked about the development: “The world has changed a lot, you know, with the macro environments, and obviously, markets have been suffering as a result of that. Obviously, we are very prudent in terms of where to and how to deploy capital, but we’re absolutely active with lots of opportunities not only outside of digital assets but also within the digital asset space, which we believe is here to stay.”

Other investors who also participated in the funding round include Polygon co-founder Sandeep Nailwal and other hedge fund managers.

With the fresh funding, Xalts wants to take advantage of what it stated is increased institutional participation in the crypto ecosystem despite this year’s plunge in the prices of digital assets. The firm said it will use the capital to launch multiple fund products tied to digital assets, including mutual funds and ETFs (exchange-traded funds) listed on global exchanges.

Ashutosh Goel, the Co-founder and Chief Investment Officer of Xalts, said his company is expanding its footprints to multiple locations, including Dubai, Singapore, and New Delhi. The other co-founder is the former Meta Asia executive Supreet Kaur.

Citi’s investment in the digital asset firm signals a continued push by banks to grab a piece of the booming $2 trillion crypto market. In June, UK-based Barclays invested an undisclosed sum somewhere in the “millions of dollars” into crypto custody firm Copper’s latest funding raise.

Banks (such as London-based Standard Chartered, BNY Mellon, Citibank, UBS, BNP Paribas, Morgan Stanley, JP Morgan Chase, Goldman Sachs, Barclays, Nomura) are the ones leading in terms of size of funding rounds as a proxy of investment into the crypto space.

Given increased client demand, banks are seeking to increase their exposure to blockchain and crypto services. This has led them to make investments in crypto trading, custody, and asset management.

Image source: Shutterstock


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