2019 was a significant year for those following developments surrounding cryptoassets. The European Commission commenced a consultation process to establish a regulatory framework for cryptoassets markets. Following this, the Commission will determine whether the future of regulation will take the form of guidelines or strict legislation. Anti-Money Laundering (AML) concerns about this technology make it likely that the area will become increasingly regulated.
There is a general desire to facilitate competition and support innovation while addressing regulatory concerns. As jurisdictions are now implementing individual regimes to meet this technology, the Commission recognises the need for harmonisation. Below is a summary of some regulatory approaches adopted across a number of jurisdictions in 2019:
- In the UK the Bank of England are currently researching the possibility of issuing a digital currency. The Cryptoassets Taskforce also published a policy statement on cryptoassets following its earlier consultation paper.
The FCA will supervise crypto businesses for anti-money laundering requirements and may require registration in some circumstances but will not be supervising for conduct of business.
The High Court judgment in Vorotyntseva v. Money-4 Ltd was widely reported after the court issued an injunction to prevent the dissipation of £1.5m worth of crypto-currencies. This is not the final judgment in the matter and the full case is due to be heard this year.
- In France, the regulator is providing regulatory approval for crypto-firms who opt in to capital requirements, consumer protection codes and crucially, make tax payments in France.
European System of Financial Supervision entities have published numerous reports including the European Banking Authority Report on crypto-assets, an European Securities and Markets Authority (ESMA) Report on Licensing FinTech Business Models, ESMA Advice on Initial Coin Offerings and Crypto-Assets and considerations on the implications of crypto-assets by the European Central Bank Crypto-Assets Task Force.
Internationally, a Central Bank group comprising of the Bank of Canada, the Bank of England, the Bank of Japan, the ECB, the Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements have formed a group to assess the case for a central bank digital currency in their respective jurisdictions. The Financial Stability Board has reported on the regulatory approaches of its members and identified potential gaps. In addition:
- Switzerland's Financial Market Supervisory Authority issued a guidance paper on blockchain payments.
- Liechtenstein approved legislation, referred to as the "Blockchain Act", to regulate the token economy. The legislation adopts a broad definition of its scope of application, which allows for future technological developments to come within its remit. Cryptocurrency firms will be required to formalise their operations and comply with AML requirements such as requiring identification of customers and reporting certain transactions.
Although cryptoasset firms are not specifically regulated in Ireland, their product offering or business activity can bring them within scope for authorisation or registration or otherwise subject to various regulatory frameworks, such as:
- E-Money Regulations
- Second Payment Services Directive
- Markets in Financial Instruments Directive
- Collective Investment Scheme regulation
- AML/CFT regulations
A&L Goodbody's Financial Regulation team specialises in end-to-end guidance for firms operating in this space and can provide support on all aspects of your regulatory obligations.
For more information please contact Sinead Prunty, Knowledge Lawyer – Financial Regulation, or Kevin Allen, Partner, Financial Regulation.
