Regulatory By-laws in Cryptocurrency: The Private Sector initiative in the United States and Hong Kong advocate for revised regulations concerning new Stablecoin standards
In the ever-evolving world of cryptocurrencies, recent developments have seen various regulatory bodies taking action to ensure compliance and security.
In the United States, there is no publicly available information about who requested the Senate Banking Committee to amend provisions of the GENIUS Act regarding the payment of interest on stablecoin accounts. However, private sector participants have expressed concerns about new stablecoin-related measures.
Meanwhile, across the globe, the Hong Kong Monetary Authority (HKMA) has been active in regulating stablecoins. On August 1, new rules for stablecoin issuers came into effect, yet the HKMA has not issued any full licenses since the regulatory regime went live. Industry observers anticipate that the number of licenses issued initially will be minimal.
The HKMA's Know Your Customer (KYC) requirements for stablecoin issuers, part of anti-money laundering and countering the financing of terrorism (AML/CFT) measures, have been met with criticism by industry advocates as impractical.
In a similar vein, the Hong Kong Securities and Futures Commission (SFC) has tightened compliance requirements for virtual asset trading platforms (VATPs) in light of recent security breaches. The SFC also issued a statement warning the public about volatility in cryptoasset markets and potential unlicensed stablecoin issuers lacking regulatory oversight and consumer protection.
The SFC also published a circular aimed at addressing security vulnerabilities on cryptoasset exchanges, focusing on cold and hot storage, third-party vendor risk management, and other components of infrastructure related to the custody of customer funds.
In the UAE, the Dubai Virtual Assets Regulatory Authority (VARA) and the UAE's Securities and Commodities Authority (SCA) have finalized a strategic partnership to enable them to share information and coordinate activity on the oversight of digital assets in the UAE.
Regulatory action has also been taken in response to sanctions evasion. The US Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions on persons involved in helping Russia evade financial restrictions by using a ruble-backed stablecoin known as A7A5. A7 LLC, the Kyrgyzstan-registered entity that created the A7A5 stablecoin and is owned by a sanctioned individual named Ilan Shor, was also targeted. Old Vector LLC, the official issuer of A7A5 registered in Kyrgyzstan, was also affected by these sanctions.
In the legal realm, Roman Storm, a key figure in the development of the Tornado Cash mixer, was found guilty by a jury of operating an unlicensed money transmission business due to his role in establishing the service.
Lastly, President Trump's Executive Order aimed to democratize access to alternative assets for 401(k) investors, including cryptoassets and related investment products. However, the order did not provide specific details on how this would be achieved.
As the crypto world continues to grow, regulators are working to ensure that it operates within established financial frameworks while maintaining its innovative spirit.
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