There have been many announcements and stories around the regulatory side of blockchain use since our last post (see here):
Finma, the financial regulator of Switzerland has issued these guidelines on the regulatory framework around Initial Coin Offerings(ICO). The guidelines categorise the tokens arising from ICOs into “Payment”, “Utility” and “Asset” tokens. In general Asset tokens are considered to be “Securities” under the Swiss FMIA and would be regulated accordingly. The paper is summaries in this post on the Lexology web site by Dr. Daniel Flühmann of Bär & Karrer. Last November, ESMA issued a warning on ICOs, and highlighted the fact that tokens may be considered “financial instrument”s under MiFID II. In such a case, the Prospectus Regulation applies to ICOs and other aspects of MiFID II to the tokens. Our launching post here on blockchain refers to the warning.
This article on the World Finance web site looks at how other regulators worldwide are policing ICOs including China, Korea and Japan. Meanwhile this article by Arthur Cox on Lexology lists the approaches of different European regulators. The debate is also arising in the US, with this article on Coindesk discussing whether tokens are always securities under US law. Opinion would appear to be divided on this topic. Further guidance from the SEC is awaited.
Regulators have been discussing the regulation of Crypto currencies such as Bitcoin. This article on the Reuters web site reports on comments made by Mario Draghi, president of the European Central Bank, stating that whilst oversight of cryptos is desirable, it is not the ECBs role to carry it out. This is in response to comments made by the Bank of International Settlements, calling on central banks to provide better oversight. Draghi talked of the promise of blockchain technology for many uses, although stated that it is too early for a central bank to make use of it.
Last week the CFTC’s technology Advisory Committee held a meeting with members of the Fintech world and regulators to discuss blockchain initiatives. This article on Ethnews looks at what took place there. In particular, there were discussions on the balance between innovation and oversight, as well as the challenges of using blockchain to aid regulatory compliance. Crucial issues include that of standardisation, which would need to be international in order to be effective. It is hard to achieve such standards while multiple blockchains are used across initiatives. Inter-operability methods would need to be adopted in order for any regulatory compliance initiative to be effective.
Also last week, Chris Giancarlo, Chair of the CFTC made positive comments at a congressional hearing last week, as reported here on The Hill’s web site. He spoke of the need to maintain a “thoughtful and balanced response, not a dismissive one” to cryptos and also spoke of the promise of blockchain technology.
In the UK, Kay Swinburne MEP, has made comments suggesting that the UK financial industry should embrace blockchain technology. This article on the Business Insider web site talk of how blockchain has “Big Bang” potential, a reference to the regulatory changes made to the UK financial market in 1986, which led to a significant expansion of activity in The City.
In the meantime the Canadian Stock Exchange has announced the launch of a blockchain based clearing and settlement platform, as reported here on the Financial Post web site. The platform will initially be used for the settlement of tokens.
On the energy side, this article on the EthNews web site talks of the platform being used by Vattenfall to process smaller energy trades. It also speaks of initiatives by Statkraft, TenneT, the Dutch TSO and the Australian energy retailer Origin. Each of these initiatives will have regulatory implications in their own jurisdictions.
The amount of news on these topics is likely to continue to be voluminous. We hope to pick out useful news stories that arise over the coming weeks.