Clients updates / Blockchain

Two key developments in the US mark a step toward stablecoin market institutionalization. the US Senate approved new legislation regulating activities in the market for the first time, and Circle – the issuer of the USDC stablecoin, launched an IPO on the NASDAQ.

The European Securities and Markets Authority (ESMA) recently published its final report on the guidelines for supervisory authorities to detect and prevent market fraud in crypto assets under the Markets in Crypto-Assets (MiCA) Regulation.

Earlier this month, the European Data Protection Board (EDPB) issued draft guidelines on the processing of personal data through blockchain technologies.

The European Union launched MiCA (Markets in Crypto-Assets) Regulation, which provides a clear and uniform regulatory framework for CASPs and is considered a global model for crypto regulation.

For years, the crypto industry has faced regulatory uncertainty, with the Securities and Exchange Commission (SEC) relying on “regulation by enforcement” rather than establishing specific rules for digital assets. Coinbase, one of the world’s largest crypto platforms, sought regulatory clarity—but found itself facing resistance from the SEC.

The Israel Tax Authority and the Ministry of Finance have published a memorandum of law to regulate the digital asset sector in Israel.

After the Markets in Crypto-Assets Regulation (MiCA) entered into force in June 2024, a significant step took place last July with the publication of the European Banking Authority (EBA) final Travel Rule guidance.

The Israel Securities Authority is tightening enforcement on companies, especially in the cryptographic assets sector, and is scrutinizing companies’ anti-money laundering procedures and policies and their implementation.

Under MiCA, a critical aspect for non-EU crypto firms is the reverse solicitation exemption. This rule allows firms from outside the EU to offer crypto-asset services to EU clients without needing MiCA authorization.

The SEC approval has aroused considerable excitement, especially among people in the crypto and bitcoin industry. However, these are approvals of specific applications and not across-the-board approvals, and the SEC still considers this an unstable sector requiring investors to remain cautious.

The SEC is taking a regulation by enforcement stance toward NFTs and is creating legal uncertainty in the field. Will the Israel Securities Authority follow suit?

After considering public comments, the Israel Securities Authority is promulgating a revised draft bill seeking to regulate the field of digital assets.

Regulation by enforcement is designing tests to ascertain which cryptographic assets fall under the definition of “security” in the wake of the XRP crypto token court ruling.

The draft of Israel’s Arrangements Law – Economic Plan for 2023-2024 addresses digital assets extensively for the first time. The draft bill contains a section dedicated to the regulation of digital assets and addresses stablecoins, taxation issues, the banking system, DAOs (decentralized autonomous organizations) and more.

The Israel Securities Authority recently published a proposal for a series of legislative amendments relating to digital (cryptographic) assets, whose implications go beyond the realm of digital assets and do not herald much good news for Israeli crypto ventures.

Activity in the form of financial decentralization (Decentralized Finance - DeFi) does not exempt from requirements in the field of prevention of money laundering prohibition or compliance with sanctions. It turns out that DeFi is subject to the same "laws of gravity" as projects in the traditional financial industry.

The risk of money laundering is one of the main risks involved in using and trading cryptocurrencies. This amendment to Proper Conduct of Banking Business Directive 411 addresses how banks should manage money laundering and terror financing risks.

While Israel’s banks are in no hurry to accept the blockchain industry and are avidly trying to keep their distance from cryptocurrencies, this is not the case elsewhere.

Recently, the major global securities, derivatives and financial trade associations sent a joint letter to the Bank for International Settlements (BIS), which develops banking supervision standards and criteria, to adopt regulation that will enable their involvement in the crypto asset sector.

Prompted by the use of digital currencies to fund terror and other illegal activity, the Israel Money Laundering and Terror Financing Prohibition Authority has published a document aimed at assisting financial bodies and law enforcement agencies to identify improper activity in this field.

After Libra, Facebook’s ambitious global digital currency venture, faced fierce resistance from regulators around the world, Facebook has announced “Libra 2.0.” The venture is set to undergo far-reaching changes that, on the one hand, will likely do away with regulatory concerns, but, on the other, will force Facebook to give up its original vision, i.e. a quick and simple transfer of digital currencies between accepted users worldwide without the need for a bank account.