Financial Establishments warned by UK Central Bank

The Bank of England’s Prudential Regulation Authority (PRA) reminded financial institutions`CEOs that activity with crypto-assets may cause “reputation risks”
29 June 2018   370

In a letter dated June 28th to CEOs of banks, insurance firms, and designated investment companies, PRA Deputy Governor Sam Woods briefs leaders to act in correspondance to regulatory rules and work with the PRA to reveal any sort of information the financial watchdog would deem as important.

In his letter Woods writes how the cryptocurrency industry has experienced fast growth but is filled with “high price volatility and relative illiquidity.” He claims it is vulnerable to nefarious activities like money laundering and terrorist financing. The letter approves: “crypto-assets should not be considered as currency for prudential purposes,” but discussions are still going on about the prudential treatment of crypto-assets.

The letter points out risk strategies and management systems the PRA considers as appropriate in demands to cryptocurrency. The members and senior leadership demand PRA approved individual to sign off on any sort of risk assessment procedure a firm has “for any planned business direct exposure to crypto-assets and/or entities heavily exposed to crypto-assets.”

The PRA as well recommends businesses to conduct their necessary diligence before exposure to crypto-assets and directs firm leadership to rely on expert voices to assess risk. Finally, the watchdog awaits firms to keep governing contacts abreast about any cryptocurrency-related activity or planned exposure and give a risk estimation about supposed exposure.

Crypto Orders for Financial Free Zone set in Abu Dhabi

Abu Dhabi’s regulator for international financial center and free zone has set framework that will include spot crypto services, custodians and intermediaries
28 June 2018   561

In order to make the marketplace for cryptocurrency firms secure, the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) - the country capital’s international financial center and free zone - has instituted its ‘crypto asset regulatory framework’ for firms working in the zone. As declared in the ADGM statement, the start follows a public consultation, with local and global respondents that were finished by ‘several refinements’ of the framework before its release.

The FSRA has addressed issues around consumer protection, safe custody, technology governance, disclosure/transparency, Market Abuse and the regulation of Crypto Asset Exchanges in a manner similar to the regulatory approach taken in relation to securities exchanges globally.
FSRA
Excerpt from the Regulations

In the whole, the FSRA has ranked cryptocurrencies, or “crypto assets” as commodities. Security tokens published will be subject to relevant regulatory requirements while ‘utility tokens’ will also be estimated as commodities. Any off-shoot funds, derivatives or tokens will be regulated as ‘Specified Investments’ under the Financial Services and Markets Regulations.

We are encouraged by the significant global and regional interest from exchanges, custodians, intermediaries and other institutions to our crypto spot regulatory framework. Globally, responsible crypto asset players are seeking a regulatory regime upholding high standards that foster market confidence…Our engagement with fellow global regulators also validated our position that the key risks highlighted have to be addressed for crypto assets to be more widely accepted and institutionalised.
Richard Teng
FSRA of ADGM Chief 

In accordance to the new regulations, operators looking to institute a new exchange will be demanded to pay an initial authorization fee of $125,000 and an annual fee of $60,000. Crypto custodians like wallet companies will have to cough up $20,000 initially and $15,000 per year.