The development of regulatory and legal frameworks in the past year have been instrumental in restoring trust in digital assets. In our year-end public policy blog, we had said if 2023 was the year of learning and building, 2024 will be the year of action. The dramatic developments in the cryptoverse has been met with equally urgent response from regulators across the globe.
- The price of Bitcoin (BTC)—the world’s oldest and most valued crypto—surpassed $70,000 for the first time in history, boosted by the recent approval of spot Bitcoin Exchange Traded Funds (ETF) by the US Securities and Exchange Commission (SEC).
- The 27-nation European Union is racing toward the implementation of the Markets in Crypto Assets law.
- Dubai International Financial Centre (DIFC), the leading global financial center in the Middle East, Africa, and South Asia (MEASA) region has enacted the world’s first Digital Assets Law.
- The United Kingdom is also close to passing crypto asset laws this summer.
The global standard setters and multilateral agencies are also accelerating their response to comprehensively regulate the borderless nature of this technology to mitigate risks whilst fostering innovation.
This CS Public Policy blog captures the range of key reports to be put out by various standard-setting bodies/watchdogs in 2024, aimed at regulating different aspects of crypto assets.
Financial Stability Board (FSB)
According to the FSB Chair Klass Knot, a key focus in 2024 and beyond is on the effective implementation of the FSB’s global regulatory and supervisory framework for crypto-asset activities and markets, and for global stablecoin arrangements, which was endorsed by G20 Leaders at their New Delhi Summit last year.
FSB will take forward, with SSBs and international organizations, the agreed G20 Roadmap that will support implementation of a coordinated and comprehensive policy and regulatory framework—including implementation in jurisdictions beyond the G20 and accounting for the risks specific to EMDEs.
FSB will deliver a status report on the Roadmap in October when the G20 Finance Ministers and Central Bank Governors meet in Washington DC. Responding to the G20’s call, in 2024, FSB will also deliver a report on the financial stability implications of the tokenization of assets in the same meeting.
Financial Action Task Force (FATF)
After 13 years, the Financial Action Task Force (FATF) carried out India’s mutual evaluation in November last year. The mutual evaluation report is an assessment of a country’s measures to combat money laundering and the financing of terrorism and proliferation of weapons of mass destruction. This includes an assessment of a country’s actions to address the risks emanating from designated terrorists or terrorist organizations.
In preparation for the evaluation, the virtual digital assets (VDA) sector was brought under the ambit of Prevention of Money Laundering Act (PMLA). CoinSwitch, trusted by over 2 crore users, is compliant with these rules and has registered with Financial Intelligence Unit-India (FIU-IND) as a reporting entity.
FATF’s Plenary is scheduled to be held in June in Singapore. India’s Mutual Evaluation Report will come up for discussion at the Plenary.
In March this year, FATF published an update on the status of implementation of Recommendation 15 by FATF members and jurisdictions with materially important VASP activity. The update covered all FATF members plus 20 jurisdictions based on trading volume and user base.
The International Organization of Securities Commissions (IOSCO)
IOSCO, the global standard setter for the securities sector, has released its 2024 work plan which covers crypto assets. This year, IOSCO will:
Focus on investor education and protection for retail investors: IOSCO will update its 2020 report on investor education concerning crypto assets for retail investors. The final report of the project will include information on the behavior, demographics, and experiences of retail investors in member jurisdictions concerning crypto assets. The report will also include examples of educational materials developed by C8 members (which includes India) for possible use by other IOSCO members. This will be out in the second half of 2024.
Work on tokenization of financial assets: It will focus on tokenization use-cases specific to the securities market: (1) the digital representation of an existing financial instrument, such as equities, funds, fixed income instruments and derivatives in tokenized form (Non-native token) so as to facilitate better investor access via structuring techniques such as fractionalization or securitization; and (2) the issuance of capital market products directly through DLT, in tokenized form (Native tokens), to enhance operational efficiencies and better support the product lifecycle management process. It will be delivered in two phases, with Phase 1 update due in Q4, 2024.
Implement crypto and digital asset markets roadmap: IOSCO’s Crypto Asset Implementation Roadmap was approved by its Board in December 2023. It is designed to proportionately account for the varying stages of development of crypto asset regulatory frameworks across member jurisdictions. Phase I, to be completed in 2024, will see the development of a stock-take of current approaches to crypto regulation. This will aim to establish a clear picture of the current regulatory and market landscape across IOSCO’s membership.
The International Monetary Fund (IMF) & World Bank
The World Bank and IMF jointly conducted the Financial Sector Assessment Program (FSAP) for India in 2024, in coordination with the Ministry of Finance and the Reserve Bank of India. The FSAP is a comprehensive, in-depth analysis of a country’s financial sector. CoinSwitch was also invited to share our perspectives on the crypto ecosystem in India. We discussed opportunities as well as tax and regulatory challenges.
The key findings of the stability assessment are summarized in the Financial System Stability Assessment (FSSA), prepared by the IMF team. The report is likely to be out in 2024.
