Digital assets: mapping regulatory developments and news across the world

Quarterly updated map of the regulatory developments and news for digital assets in the major markets across the world

The path to digital assets is not an easy road from a regulatory perspective. Many initiatives are blooming worldwide, leading to different local perspectives and interpretations. To help understand this fragmented environment, BNP Paribas has created a quarterly updated map of the regulatory updates and news in the major markets across the world.

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The Central Bank of Ireland’s Annual Report 2021 and Annual Performance Statement 2022 published on 30 May 2022 gives a useful summary of the Central Bank’s priorities for the year ahead and on the pace of technological innovation, noting the benefits that this will have for consumers and the Irish economy, but also flagging that inherent risks will need to be managed.  It also confirms that the Central Bank is reviewing its Innovation Hub and that it will also continue to work on developing its regulatory framework to reflect advances in crypto-assets and distributed ledger technology and in addition, will work with the Irish Department of Finance to prepare for Irish implementation of MiCA (the proposed EU regulation on markets in crypto-assets) and DORA (the proposed EU legislation on digital operational resilience), and continue the review of the authorisation criteria for investment funds that offer investments in crypto-assets.

In late 2021 the Central Bank outlined that Irish Qualifying Investor Alternative Investment Funds can gain exposure to crypto-assets, provided the fund manager can show that the associated risks can be managed effectively. More recently (July 2022), the Central Bank issued an operational update Pre-submission process for a Qualifying Investor AIF | Central Bank of Ireland which confirmed that crypto funds are required to seek approval by way of pre-submission, except where the fund proposes to invest no more than 10% of its net asset value in cash settled bitcoin futures traded on the Chicago Mercantile Exchange. The Central Bank further confirmed that where a pre-submission is required that the Depositary should demonstrate how it is satisfied that it can provide for the safe-keeping of the assets of the Qualifying Investor AIF in accordance with the conditions set down in the European Union (Alternative Investment Fund Managers) Regulations 2013.


On 2 June 2022, the Distributed Ledger Technology (DLT) Pilot Regime Regulation was published in the EU Official Journal. It entered into force on 23 June 2022, and will apply from 23 March 2023. The pilot regime lays down the conditions for acquiring permission to operate a DLT market infrastructure, defines which DLT financial instruments can be traded and details the cooperation between the operators of DLT market infrastructures, national competent authorities and ESMA.


On 18 June 2022, the new regulation on crypto fund shares (Verordnung über Kryptofondsanteile – KryptoFAV) entered into force. It introduces the possibility to issue fund shares of investment funds on a DLT in addition to the possibility to issue fund shares with a global certificate. Fund shares can be partly tokenised, even within an existing share class. The register of the tokenised fund shares needs to be kept by the depositary of the fund or by a licensed crypto securities registrar, which has to be appointed by the depositary of the fund and not by the Management Company.

BaFin published on 1 June 2022 a guidance notice with explanations on the application process for the new financial service “crypto securities registrar” under its supervision. It details the requirements all service providers who want to act as registrar for crypto securities and crypto fund shares need to fulfil.

BaFin published a list of all crypto securities issued under the new Electronic Securities Act.

On 14 January 2022, the Ministry of Finance published changes to the draft regulation on the requirements of electronic securities registers, including explanations of those changes. The regulation provides details for central registers and decentralised registers on a DLT, i.e. crypto securities registers, which have been introduced with the new Electronic Securities Act.



On 1 October 2021, the regulation on transfers of crypto-assets entered into force. It is the transposition of the FATF’s “travel rule” for crypto-asset transactions into German law. Generally speaking, the draft rules extend the rules of Regulation (EU) 2015/847 (known as the Money Transfer Regulation) to crypto-asset transactions. This regulation harmonises the information that must accompany a fund transfer. The rules aim to ensure fund transfers are fully traceable in order to prevent, detect and investigate money laundering and terrorist financing.

The Financial Action Task Force (FATF) recommends the same requirement. Known as the “travel rule,” it requires virtual asset service providers, such as custodian wallet providers and exchange service providers, to obtain, hold, submit and make available to authorities certain information on virtual asset transfers. These obligations also apply to financial institutions that send or receive virtual asset transfers on behalf of their customers.

On 6 September 2021, the Ministry of Finance published a draft regulation to introduce the possibility to issue fund shares of investment funds on a DLT in addition to the possibility to issue fund shares with a global certificate. The register of the tokenized fund shares needs to be kept by the depositary of the fund.

On 10 June 2021, the Electronic Securities Act (eWpG) entered into force.

On 6 May 2021, the German parliament voted the Electronic Securities Act (eWpG) on the basis of the proposed changes of the Finance Committee. Changes to the draft law of the Electronic Securities Act (eWpG) were agreed in the Finance Committee of the German parliament on 5 May 2021.

On 4 March 2021, the German parliament (Bundestag) had its first reading on the draft bill on electronic securities (eWpG) of the German government cabinet. On 22 March 2021, the Finance Committee of the German parliament discussed the draft in a public meeting with industry experts. A second and third reading in the German parliament will take place in the coming months.


On 21 December 2021, the European Parliament and the Council of the European Union reached an agreement on the Distributed Ledger Technology (DLT) Pilot Regime Regulation. The pilot regime lays down the conditions for acquiring permission to operate a DLT market infrastructure, defines which DLT financial instruments can be traded and details the cooperation between the operators of DLT market infrastructures, national competent authorities and ESMA.

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In July 2021, the European Commission published a draft version of the recast of the Regulation on transfer of funds. The recast includes new requirements which extend existing EU rules on AML/CFT to the whole crypto-asset sector, obliging all service providers to conduct due diligence on their customers, notably through the application of the “travel rule” (transmission of key granular information related to a transaction in crypto-assets) to crypto-asset actors.

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In July 2021, the Governing Council of the European Central Bank (ECB) decided to launch the investigation phase of a digital euro project. The investigation phase is expected to last 2 years and will be launched in October 2021 to investigate what form the digital euro might take, as there are many ways it could be designed. This will allow the ECB to create and test possible solutions with the private sector. So far, no major technological restrictions to issuing a digital euro have been identified.


In January, Her Majesty’s Treasury (HMT) opened a consultation on crypto-assets. The consultation looks to ensure the UK regulatory framework is equipped to harness the benefits of new technologies, supporting innovation and competition, while mitigating risk to consumers and financial stability.

In order to keep up with the evolving nature of crypto, HMT suggests legislation be used to define the scope of the regulatory perimeter. However, the independent regulators, using agile powers to issue rules or codes of practice, will design and implement the detailed firm-level requirements within a framework of objectives and broader considerations set by HMT and Parliament.



The crypto-assets and crypto-custody legislation forms part of a legislative package implementing the fifth European Anti-Money Laundering (AML) Directive into German law. The legislation entered into force in January 2020. BaFin issued various guidance notices with regard to:

In August, the German Ministry of Finance and Ministry of Justice published a draft law on electronic securities (eWpG). The law will enable the issuance of digital bearer bonds on a DLT infrastructure without the requirement of a certificate. It introduces the definition of a decentralised securities register on a DLT and the new function of a registrar.

On 14 December, the German government cabinet voted the draft law on electronic securities (eWpG), which entered on 1 January 2021 into the voting process of the German parliament. The law is expected to enter into force in Q1 2021. The main decisions are:

  • Enabling the issuance of digital bearer bonds on a DLT infrastructure without the requirement of a paper-based certificate,
  • Introducing the definition of a decentralised securities register on a DLT,
  • Classifying the registrar function as a new financial service under BaFin supervision,
  • Introducing electronic fund shares and bearer bonds, which can be issued without a certificate but in a central register. The central registrar function would be performed by either a CSD or a custodian.



Germany’s BaFin approved a number of security token offerings (STOs).

In August, BaFin issued a 2nd advisory letter on prospectus and authorisation requirements in connection with the issuance of crypto tokens.

In November, a landmark legislation was adopted with regard to crypto services. The new rules include a definition of crypto-assets and regulate providers of “crypto custody” services. Companies wishing to store, transfer and trade crypto-assets must obtain a license from the German regulator BaFin. A grandfathering mechanism was also introduced for firms already safekeeping crypto-assets in Germany.



Germany’s BaFin issued a 1st advisory letter on the classification of tokens as financial instruments.




On 8 June 2022, the New York State Department of Financial Services (NYDFS) issued new Guidance on the Issuance of U.S. Dollar-Backed Stablecoins, establishing a first-of-its-kind state standard for USD-backed stablecoins issued by entities subject to regulation by the NYDFS.

The new regulatory Guidance on baseline criteria for USD-backed stablecoins addresses the following:

  1. Backing and Redeemability: the stablecoin must be fully backed by a Reserve of assets, meaning that the market value of the Reserve is at least equal to the nominal value of all outstanding units of the stablecoin as of the end of each business day. The issuer of the stablecoin (the “Issuer”) must adopt clear, conspicuous redemption policies, approved in advance by DFS (Department of Financial Services) in writing, that confer on any lawful holder of the stablecoin a right to redeem units of the stablecoin from the Issuer in a timely fashion at par for the U.S. dollar.
  2. Reserve Requirements: the assets in the Reserve must be segregated from the proprietary assets of the issuing entity and must be held in custody with U.S. state or federally chartered depository institutions and/or asset custodians.
    • The Reserve must consist of the following assets: U.S. Treasury Bills acquired by the Issuer three months or less from their respective maturities, Reverse repurchase agreements fully collateralised by U.S. Treasury bills, U.S. Treasury notes, and/or U.S. Treasury bonds on an overnight basis, subject to DFS-approved requirements concerning overcollateralisation, and Deposit accounts at U.S. state or federally chartered depository institutions, subject to DFS-approved restrictions.
  3. Independent Audits: the Reserve must be subject to an examination of management’s assertions at least once per month by an independent Certified Public Accountant (“CPA”) licensed in the United States and applying the attestation standards of the American Institute of Certified Public Accountants (“AICPA”)

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On 7 June 2022, new legislation was proposed in the Senate which would classify the vast majority of digital assets as commodities, and empower the Commodities Futures Trading Commission (CFTC) to regulate most of the crypto industry. The bipartisan bill, titled the “Responsible Financial Innovation Act,” aims to “incorporate digital assets into the American financial system.” This legislation would largely settle the existing dispute between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over cryptocurrency jurisdiction, with deference being given to the CFTC. The proposed bill covers: Taxation of Digital Assets; Securities, Banking, Commodities and Payments Innovation; Consumer Protection; and Interagency Coordination.

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On 3 May 2022, the SEC announced that 20 additional positions will be allocated to the Crypto Assets and Cyber Unit within the Division of Enforcement. The announcement specifically identified crypto asset offerings, crypto asset exchanges, crypto asset lending and staking products, decentralised finance (“DeFi”) platforms, non-fungible tokens (“NFTs”), and stablecoins as among the markets under investigatory scrutiny by the expanded Crypto Assets and Cyber Unit for potential securities law violations. The increase in resources will nearly double the size of the unit (now at 50 dedicated positions), which until recently was known as the “Cyber Unit.”

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On 27 January 2022, the United States Securities and Exchange Commission (“Commission”) published an order (“Order”) approving a blockchain-based exchange, BOX Exchange LLC (“Exchange”), which allows trades to settle faster than the standard two-day period. This would occur via a facility known as BSTX LCC (“BSTX”), using a proprietary blockchain system (“BSTX Market Data Blockchain”). This approval comes at a time when both the United States and markets around the world continue experimenting with blockchain’s applicability to faster settlements.

The approval was conditioned upon the Exchange joining all relevant national market system plans, updating its agreement with FINRA, ensuring its membership in the Intermarket Surveillance Group extends to the BSTX, and that the Exchange “adopted a rule establishing BSTX as a facility of the Exchange.”

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The Infrastructure Investment and Jobs Act (the Act), H.R. 3684, commonly referred to as “the infrastructure bill”, was signed into law by President Biden on 15 November 2021. The Act includes three key changes applicable to users in the crypto, blockchain and digital asset spaces.

  1. The Internal Revenue Service (IRS) code was amended to update the definition of a broker to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
  2. Brokers of digital assets will be required to provide information when filing tax returns such as details regarding gross proceeds and other information that the Secretary may require. The information reported by brokers will include the adjusted basis of the digital asset and whether any gain or loss with respect to the digital asset is subject to long-term or short-term tax rates. Failure to comply with the reporting requirements applicable to digital assets could subject brokers to a penalty of USD 280 per failure to report, up to a maximum penalty of USD 3 million.
  3. Digital assets will be treated as cash in certain circumstances. This will require any person or business that receives payment of more than USD 10,000 in digital assets to file additional information with the IRS. Failure to comply can result in penalties of up to USD 3 million per year, or higher if the failure is due to intentional disregard of the requirement.

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The President’s Working Group (PWG) issued a paper “Report on Stablecoins” (the PWG Report) in November 2021. The PWG Report highlights stablecoin risks and current perceived regulatory gaps, before concluding with recommendations for proper regulatory oversight.

The Report identifies the following risks and regulatory gaps related to stablecoins:

  1. Payment System Risks: Payments related to stablecoin transactions will face many of the same risks as legacy payment systems: credit risk; liquidity risk; operational risk; risks arising from improper or ineffective system governance; and settlement risk.
  2. Loss of Value – Risks to Stablecoin Users and Stablecoin Runs: While the confidence in stablecoins as a reliable means of payment or store of value may rise with continued use, the PWG Report identifies factors that may weaken user confidence in stablecoins.
  3. Risks of Scale – Systemic Risk and Concentration of Economic Power: The PWG Report highlights three sets of policy concerns given that the growth of stablecoins may reflect economies of scale and scope. The Report concludes that the combination of these policy concerns may have detrimental effects on competition and lead to market concentration in sectors of the real economy.
  4. Regulatory Gaps: The Report notes that stablecoins, and the digital currency market in general, are not subject to a consistent set of prudential regulatory standards.

The Report makes several recommendations for legislation and interim measures:

  1. Comprehensive Federal Legislation. To limit risk and promote interoperability among different stablecoins, the Report recommends that Congress require stablecoin issuers to be insured depository institutions (IDIs).
  2. Interim Regulatory Measures. While waiting for Congress to enact legislation, the PWG and the Agencies recommend collaboration across federal financial agencies to address stablecoin risks within their respective jurisdictions.
  3. Financial Stability Oversight Council Measures. The Report recommends that the Financial Stability Oversight Council consider taking steps within its purview to address stablecoin risks, such as designating certain activities within a stablecoin arrangement as being, or likely to become, systematically important payment, clearing, and settlement activities.

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In October 2021 the US Department of Justice announced the creation of a National Cryptocurrency Enforcement Team (NCET), to handle complex investigations and prosecutions of criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors. The NCET will combine the expertise of the Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), Computer Crime and Intellectual Property Section (CCIPS) and other sections in the division, with experts detailed from U.S. Attorneys’ Offices. The NCET builds upon MLARS’s Digital Currency Initiative and will be informed by the Department’s Cryptocurrency Enforcement Framework, released in October 2020. Prioritised NCET activities include: Investigate and prosecute cryptocurrency cases, when used as an illicit tool; Develop policies and strategic relationships; Improve enforcement and collaboration with federal, state, local and international law enforcement agencies; and engage private sector actors with expertise in cryptocurrency matters to further the criminal enforcement mission.

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In September 2021, U.S. Federal Reserve Chairman Jerome Powell spoke at the House Financial Services Committee meeting and clarified comments from a July hearing where he expressed interest in cryptocurrency regulation. In light of China’s recent cryptocurrency ban, Powell confirmed that the Fed has “no intention” of banning cryptocurrencies at this time.

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In September 2021 ransomware guidance, OFAC noted that it has designated malicious cyber actors previously under its cyber-related sanctions programme and other sanctions programmes, including perpetrators of ransomware attacks and those who facilitate ransomware payments. OFAC then designated SUEX OTC, S.R.O. (“SUEX”), a virtual currency exchange, for its part in facilitating financial transactions for ransomware actors, involving illicit proceeds from at least eight ransomware variants. Analysis of known SUEX transactions showed that over 40% of SUEX’s known transaction history was associated with illicit actors. OFAC stated that it has imposed, and will continue to impose, sanctions on these actors and others who materially assist, sponsor, or provide financial, material, or technological support for these activities.

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In July 2021 the SEC issued a consented-to Cease and Desist Order against a U.K.-based website owner of cryptocurrency-review site, Blotics Ltd. (d/b/a Coinschedule Ltd.), for violating Section 17(a) of the Securities Act.  The industry was hoping the decision would clarify the SEC’s position as to whether and when cryptocurrencies qualify as securities, but it did not. The SEC determined that the tokens which were sold to issuers for marketing packages that promised varying levels of benefits, provided an undisclosed, paid-for advantage in the competition to make Coinschedule’s “top 10 trusted ICOs” list. The failure to disclose this compensation arrangement, the Commission found, violated Section 17(b) of the Securities Act, better known as the “anti-touting” provision, which makes it unlawful to promote a security in exchange for payment without disclosing that you’ve been paid and how much.

The Coinschedule decision, however did not explain which tokens the SEC found to be securities or why; it simply concluded, “the digital tokens publicised by Coinschedule included those that were offered and sold as investment contracts, which are securities . . . .” Without knowing which digital tokens were sold as investment contracts and why the Commission sees them that way, digital token issuers and their lawyers lack clear guidance. The lack of such guidance continues to hamper industry and innovation.

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In May 2021, the US Treasury Department said it will require any transfer worth USD 10,000 or more to be reported to the Internal Revenue Service in an effort to crack down on cryptocurrency markets and transactions. “Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion,” the Treasury Department said in a release.

“This is why the President’s proposal includes additional resources for the IRS to address the growth of cryptoassets,” the department added. “Within the context of the new financial account reporting regime, cryptocurrencies and cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies would be covered. Further, as with cash transactions, businesses that receive cryptoassets with a fair market value of more than USD 10,000 would also be reported on.” Cryptocurrency assets currently have a market capitalisation of about USD 2 trillion.

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The Office of the Comptroller of the Currency (OCC) published a letter in January 2021 clarifying US national banks’ and federal savings associations’ authority to participate in independent node verification networks (INVN) and use stablecoins to conduct payment activities and other bank-permissible functions. The OCC in recent months has been issuing more guidance aimed at easing banks’ concerns about new digital asset technology.




Financial Services and Markets Bill passed to introduce requirements for VASPs (Virtual Asset Service Providers) against ML/TF (money laundering and terrorist financing) risks

The Financial Services and Markets Bill 2022 (FSM Bill) was passed by Parliament on 5 April 2022.

The FSM Bill will regulate all persons in Singapore who conduct a business of providing digital token (DT) services purely outside Singapore if they are created in or operate their business from Singapore. The FSM Bill will regulate such DT service providers as a new class of financial institutions (FIs), primarily for ML/TF risks. The FSM Bill will introduce licensing requirements and general powers over DT services providers, including powers for the Monetary Authority of Singapore (MAS) to conduct AML/CFT (anti-money laundering and countering of financing of terrorism) inspections, and render assistance to domestic authorities and MAS’ foreign AML/CFT supervisory counterparts.

MAS will also impose other requirements on DT service providers, such that they have a meaningful presence in Singapore and MAS has adequate supervisory oversight over them. The AML/CFT requirements imposed on DT service providers will be aligned with the requirements imposed on digital payment token service providers regulated under the Payment Services Act 2019. Persons that provide DT services in Singapore will continue to be regulated under existing MAS-administered Acts.

To read more

MAS Issues Guidelines on Promoting Digital Payment Token Services

On 17 January 2022, the Monetary Authority of Singapore (MAS) issued new guidelines (the Guidelines) setting out restrictions on the promotion of services related to digital payment tokens (DPTs) in Singapore. The Guidelines apply to banks and financial institutions providing DPT services in Singapore, and entities providing DPT services in Singapore that have either been granted a licence under the Payment Services Act 2019 (PSA) or that are currently operating under transitional exemptions under the PSA.

DPT under the PSA refers to a digital representation of value that is not denominated or pegged to any currency, and is intended as a medium of exchange. The term “DPT services” includes the buying or selling of DPTs or facilitating the exchange of DPTs, as regulated under the PSA. It should be noted that amendments to the PSA were passed in Parliament in January 2021 which expand the definition of DPT services to include the transfer of DPTs, the provision of custodian wallet services for DPTs and facilitate the exchange of DPTs without possession of moneys or DPTs by the DPT service provider, when the amendments to the PS Act take effect.

The following key changes were introduced:

  • Prohibited promotions: DPT service providers should not trivialise the high risks of trading in DPTs, and should not promote their DPT services in public areas in Singapore or through any other media directed at the general public in Singapore.
  • ATMs in public areas: DPT service providers are prohibited from providing physical automated teller machines (ATMs) in public areas in Singapore, to facilitate public access to their DPT services.
  • Payment token derivatives: The MAS set out specific restrictions in respect of payment token derivatives, which are derivatives contracts that reference DPTs as underlying assets. DPT service providers should not promote payment token derivatives to the public as a convenient unregulated alternative to trading in DPTs, or mislead the public that payment token derivatives are less risky than DPTs. Furthermore, payment token derivative services may only be offered through a legal entity that is not licensed under the PSA, and the MAS expects PSA licensees to take all necessary steps to ensure that its customers do not confuse any payment token derivative services associated with the licensee as being regulated by the MAS.
  • Permissible promotions: DPT service providers may promote their services on their own corporate website, mobile applications, or official social media accounts, but must not trivialise the risks of trading in DPTs in a manner that is inconsistent with or contradicts the risk disclosures required under the PSA.

The MAS has noted that the DPT services landscape in Singapore is changing rapidly, therefore it may review and update the Guidelines at a later date.


HKMA issues discussion paper on policy and design issues for introducing rCBDC (e-HKD)

On 27 April 2022, the HKMA (Hong Kong Monetary Authority) issued a discussion paper to invite views from the public and the industry on key policy and design issues for introducing retail central bank digital currency (rCBDC), ie, e-HKD, in Hong Kong. Members of the public and the industry are invited to submit their feedback by 27 May 2022.

The issues that are examined in the discussion paper include:

  • Potential benefits and challenges;
  • Design considerations, including issuance mechanism, interoperability with large-value and retail payment systems, privacy and data protection, and legal considerations; and
  • Use cases.

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SFC reminds investors of risks associated with NFTs

On 6 June 2022, the SFC (Securities and Futures Commission) issued a statement to clarify its regulatory approach in relation to non-fungible tokens (NFTs) and remind investors of related risks. The SFC notes NFTs which cross the boundary between a collectible and a financial asset, for instance, fractionalised or fungible NFTs structured in a form similar to “securities” or interests in a “collective investment scheme” (CIS).

Where an NFT constitutes an interest in a CIS, marketing or distributing it may constitute a “regulated activity”. Relevant licensing and registration requirements would be triggered. In addition, where an arrangement in relation to an NFT involves an offer to the Hong Kong public to participate in a CIS, authorisation requirements under the Securities and Futures Ordinance may also be triggered.

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HKMA and SFC issue new regulatory guidance on virtual asset related activities

On 28 January 2022, Hong Kong financial services regulators issued some much-anticipated guidance to financial institutions looking to undertake activities related to virtual assets (VAs). In particular:

  • The Hong Kong Monetary Authority (HKMA) issued a circular to banks on “Regulatory approaches to Authorized Institutions’ interface with Virtual Assets and Virtual Asset Service Providers” (HKMA Circular).
  • The HKMA and the Securities and Futures Commission (SFC) issued a joint circular to banks and SFC-licensed intermediaries on “Intermediaries’ Virtual Asset-Related Activities” (Joint Circular).

In the Joint Circular, the HKMA and the SFC noted that for banks and intermediaries that wish to distribute VA related products and provide VA dealing and advisory services, the following regime will apply. Intermediaries providing existing VA related activities to clients will have a six-month transition period before the full implementation of the expected requirements in the Joint Circular. The regulators stressed that intermediaries should notify the SFC and the HKMA (as applicable) in advance if they intend to engage in VA related activities.

  • The HKMA and the SFC noted VA related products are likely to be considered “complex products” under the SFC’s existing complex products regime. Intermediaries are required to comply with additional investor protection requirements including professional investor selling restrictions, product due diligence requirements, suitability requirements and additional disclosure and warning requirements.
  • With regard to VA dealing services, the SFC noted that dealing should be carried out by Type 1 (dealing in securities) licensed intermediaries only in partnership with SFC-licensed VA trading platforms. VA dealing services should only be provided to professional investors.
  • VA advisory services should only be provided to professional investors and the SFC’s existing regime applicable to advising on financial products and the conduct of regulated activities will generally apply to an intermediary’s VA advisory activities.

In the HKMA Circular, the HKMA proposed to adopt a risk-based approach to supervising banks’ VA activities and expects banks to identify and understand the associated risks before engaging in any VA activities. The HKMA stated the view that it does not currently intend to prohibit banks from incurring financial exposures to VAs. However, banks will need to have adequate risk management controls and conduct appropriate due diligence on VAs. Banks are expected to discuss with the HKMA (and other regulators when appropriate) and obtain the HKMA’s feedback on the adequacy of the institution’s risk-management controls before launching relevant VA products or services.

HKMA issues discussion paper on crypto-assets and stablecoins

On 12 January 2022, the Hong Kong Monetary Authority (HKMA) issued a discussion paper on crypto-assets and stablecoins seeking views from the industry and public on its regulatory approach. Comments are due by 31 March 2022.

In view of the growing adoption and ongoing evolution of crypto-assets as well as discharging its responsibilities in maintaining the monetary and financial stability in Hong Kong, the HKMA has been reviewing the regulatory treatment of crypto-assets locally. The discussion paper sets out the HKMA’s thinking on the regulatory approach to crypto-assets, particularly on payment-related stablecoins, taking into consideration international recommendations, the market and regulatory landscape, and the characteristics of stablecoins.

In particular, the HKMA has placed emphasis on issues that may affect the public’s confidence in, and the safety, efficiency, and soundness of, payment systems, and accord appropriate priority to user protection. The HKMA has identified two key areas for deliberation at this stage, namely:

  • its regulatory approaches regarding authorised institutions’ interface with and provision of intermediary services to customers related to crypto-assets; and
  • the adequacy of the existing regulatory framework in response to the challenges arising from the growing use of stablecoins and other types of crypto-assets in financial markets.

Internationally, jurisdictions are at different stages of formulating their regulatory stance and framework on crypto-assets. In APAC, Hong Kong and Singapore regulators, among others, have been working on a regulatory framework for virtual asset service providers (VASPs). In January 2021, Singapore expanded the scope of digital payment token services under the Payment Services Act 2019, with a view to aligning with the applicable enhanced FATF Standards. In May 2021, the Hong Kong Government announced that a VASP licensing regime would be implemented by amending the existing Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).


APRA sets out initial risk management expectations and policy roadmap for crypto-assets.

On 21 April 2022, the Australian Prudential Regulation Authority (APRA)released a letter setting out initial risk management expectations for all regulated entities that engage in activities associated with crypto-assets. APRA also issued a policy roadmap until 2025.

According to the letter, APRA expects that all regulated entities will:

  • conduct appropriate due diligence and a comprehensive risk assessment before engaging in activities associated with crypto-assets, and ensure that they understand, and have actions in place to mitigate, any risks that they may be taking on in doing so;
  • consider the principles and requirements of Australia’s prudential standards when relying on a third party in conducting activities involving crypto-assets; and
  • apply robust risk management controls, with clear accountabilities and relevant reporting to the Board on the key risks associated with new ventures.

APRA says it is developing a long-term prudential framework for crypto-assets and related activities in consultation with other regulators internationally.

To read more


House of Representatives passed bill to restrict stablecoins and crypto-assets

Bill to Partially Revise the Funds Settlement Act (in Japanese) has been passed by the House of Representatives on 3 June 2022. The bill introduces certain restrictions on stablecoins and crypto-assets, including introducing a registration regime for companies wishing to issue crypto-assets, and restricting the issuance of stablecoins to licensed banks, money transfer agents and trust companies.


SECT consults on proposed changes to the regulatory approach on ready-to-use utility tokens and digital asset exchange supervision.

The Securities and Exchange Commission, Thailand (SECT) is seeking feedback on its proposal to strengthen the rules on the public offering of listed, ready-to-use utility tokens and on digital asset exchange supervision. Under the proposal, any ready-to-use token issuer that seeks to list its tokens on a digital asset exchange will have to obtain approval from the SECT and file a registration statement with a draft prospectus. Newly issued, ready-to-use utility tokens must be offered via a SECT-approved initial coin offering (ICO) portal operator and the tokens must not be for use as a means of payment.

The proposal also provides the exemption from the SECT’s authorisation, if a ready-to-use utility token will not be listed on the exchange and qualifies as a plain-vanilla or uncomplicated utility token. In addition, the issuers of listed, ready-to-use utility tokens are required to disclose the information about the tokens and the projects on an ongoing basis in order to ensure that there is adequate information to inform decision-making by investors/purchasers.

Feedback is requested by 29 June 2022.



On 21 May 2021, the Hong Kong Financial Services and the Treasury Bureau (FSTB) issued its consultation conclusions (Conclusions) on the introduction of a new regulatory framework in Hong Kong to licence and regulate virtual asset exchange (VA Exchange) operators.

The Conclusions adopt most of the proposals set out in the FSTB’s November 2020 consultation paper (Consultation Paper). Consistent with the proposals in the Consultation Paper, the Conclusions provide that:

The operation of a VA Exchange will be a regulated virtual asset activity under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and persons operating a VA Exchange will require a virtual asset service provider (VASP) licence from the Securities and Futures Commission (SFC).

A VA Exchange is defined as any trading platform that is operated for the purpose of allowing an offer or invitation to be made to buy or sell any virtual asset in exchange for any money or any virtual asset, and which comes into custody, control, power, or possession of, or over, any money or any virtual asset at any point in time during its course of business.

Any VA Exchange that is already regulated as a licensed corporation under the voluntary opt-in regime supervised by the SFC pursuant to the Securities and Futures Ordinance (SFO) (i.e., exchanges that facilitate trading in at least one security virtual asset) will be exempt from the new regime. Decentralised virtual asset exchanges and other peer-to-peer trading platforms would also not be covered by the definition of a VA Exchange, provided that virtual asset transactions are conducted outside the platform and the platform is not involved in the underlying transaction by coming into possession of any money or any virtual asset at any point in time.

The term “virtual asset” is broadly defined to mean a digital representation of value that (i) is expressed as a unit of account or a store of economic value; (ii) functions (or is intended to function) as a medium of exchange accepted by the public as payment for goods or services, or for the discharge of a debt, or for investment purposes; and (iii) can be transferred, stored, or traded electronically. Central bank digital currencies, financial assets regulated under the SFO (e.g., security tokens), and stored value facilities (which are regulated by the Hong Kong Monetary Authority) are excluded from the definition of virtual assets.

Licensed VA Exchange operators will be subject to the anti-money laundering and counter-terrorist financing requirements stipulated under AMLO and other regulatory requirements. The SFC will conduct a separate consultation on these regulatory requirements before the commencement of the new regulatory regime.

Licensed VA Exchanges initially may only offer their services to “professional investors,” meaning high net-worth individuals with a portfolio of at least HKD 8 million (around USD 1 million), corporations with portfolios of at least HKD 8 million or total assets of at least HKD 40 million (around USD 5.16 million), or institutional investors such as licensed banks, broker-dealers, and asset managers. Retail customers (i.e., non-professional investors) may not trade virtual assets with VA Exchanges licensed under the new regime.

Any person who is not a licensed VA Exchange operator is prohibited from actively marketing, whether in Hong Kong or elsewhere, to the public of Hong Kong a regulated virtual asset activity or a similar activity elsewhere.

The Conclusions have refined and expanded the eligibility criteria of VA Exchanges that can apply for a licence. Under the initial proposal, only Hong Kong incorporated companies with a permanent place of business in Hong Kong would be considered for a VASP licence. The Conclusions expand the eligibility criteria to include companies incorporated outside Hong Kong but registered in Hong Kong under the Companies Ordinance. In practice, this means that offshore VA Exchanges do not need to incorporate a new Hong Kong company in order to apply for a VASP licence. Instead, offshore VA Exchanges can establish a place of business in Hong Kong with their existing offshore entity (i.e., a branch), register such entity with the Hong Kong Companies Registry and apply for a VASP licence as a Hong Kong branch of the offshore company.

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On 23 February 2021, the Hong Kong Monetary Authority (HKMA), together with the Bank of Thailand (BOT), the Central Bank of the United Arab Emirates (CBUAE) and the Digital Currency Institute of the People’s Bank of China (PBC DCI), announced the joining of the CBUAE and the PBC DCI to the second phase of Project Inthanon-LionRock1, a central bank digital currency project for cross-border payments initiated by the HKMA and the BOT.  This joint effort is strongly supported by the Bank for International Settlements Innovation Hub Centre in Hong Kong and the project has been renamed as “m-CBDC Bridge”.


China is fast expanding trials for the usage of the Digital Renminbi amongst both key financial institutions and at an increasing number of online and offline consumer sites. All six of China’s big state-owned banks, including Agricultural Bank of China (ABC), Bank of China (BOC), Bank of Communications (BOCOM), China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC) and Postal Savings Bank of China (PSBC), have deployed their own Digital Renminbi wallets according to domestic media reports. Customers can apply to be included on a “trial white list” at selected banking outlets to participate in test versions of the wallets, with applications accepted via online banking apps as well as QR code scans.

In Beijing an increasing number of businesses are participating in trials for the use of the Digital Renminbi, including restaurant chains, shopping malls and logistics firms, while in Shanghai, vending machines in the metro system as well as shopping malls in the Xujiahui district have commenced acceptance of the central bank digital currency for payments. Chinese e-commerce platforms that are participating in Digital Renminbi trials currently include and Meituan.

On 1 January 2021, the Fengtai District Bureau of Commerce announced that the People’s Bank of China’s pilot programme to test and promote its central bank digital currency, the digital yuan, had been extended to Beijing, following large-scale trials in Shenzhen and Suzhou.



On 16 February 2022, the Financial Stability Board (FSB) published a report on the assessment of risks to Financial Stability from Crypto-assets. This report examines three segments of the crypto-asset markets: unbacked crypto-assets; stablecoins; and decentralised finance.

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In March 2021, the OECD-led Financial Action Task Force (FATF) opened a consultation on the revision of its Guidance on the risk-based approach to virtual assets (VAs) and virtual asset service providers (VASPs), initially published in June 2019. The consultation seeks to update guidance on six issues : (1) definitions of VA and VASP to make clear that all relevant financial assets are covered by the FATF Standards, (2) application of the FATF guidance to so-called stablecoins, (3) additional guidance on the risks and potential risk mitigants for peer-to-peer transactions, (4) updated guidance on the licensing and registration of VASPs, (5) additional guidance for the public and private sectors on the implementation of the ‘travel rule’ and (6) include Principles of Information-Sharing and Co-operation amongst VASP Supervisors.