Attorneys practicing in the Digital Asset and Virtual Currency space have already said this will be the year of enforcement actions and regulation in the United States. While we wait for those policies to be announced two major governments, Singapore and the United Kingdom, have issued their guidance taking relatively different approaches. Spain is also set to announce policies in the short future.
Taking the UK first, HM Treasury’s response to its consultation on financial promotions for cryptocurrencies deems cryptoassets investment, including both digital currency (like BTC and ETH) and well as NFTs, as high risk to the average consumer requiring the implementation of consumer protection intervention. HM Treasury stated the government will be adding qualifying cryptoassets to the list of controlled investments under the Financial Promotion Order. This is nothing new for security tokens which are already designated as qualifying cryptoassets. The papers also state the promotion of covered cryptoassets may only occur by firms authorized by the FCA under the Financial Services and Markets Act. If an unauthorized person engages in promotion, these papers deems such violation as a criminal offence.
So far, NFTs will be exempt as they are viewed as collectibles rather than financial services products. Personally, I’m hoping our regulators take the same approach. Although some tokens make venture into the FSP arena, the percentage of those would be very low.
Singapore is stricter than HM Treasury going so far as to say providers of digital payment tokens should not promote their DTPs to the general public. Interestingly enough, providers (or influencers) may still use their websites and social media platforms to promote “but not trivialize the risks of trading DTPs in a manner that is inconsistent with or contradicts the risk disclosures” listed in Singapore’s paper. The allowance of social media and website advice expressly stated leaves more breathing room than I believe most will realize at first glance. I would say the majority of cryptoassets advice is shared through social media platforms so as long as a provider is using strong disclaimers and attempting to follow the scrutiny required in the papers, I believe there could be more flexibility for providers.
One extremely harsh note requiring its own paragraph in this short blog is the ban of all Bitcoin ATMs. They are now forbidden in public spaces. Period. End of Story. No exceptions.
Much the same as the UK, Singapore also views cryptoassets as high risk for an average consumer and agrees the implementation of heightened consumer protection is necessary.
It was surprising the UK will seemingly allow for more freedom in growth surrounding cryptocurrency assets but require more prior approval guidelines and authorization than Singapore. From my reading, the UK views cryptocurrency assets similarly to those of more traditional investments.
We will have to wait and see which direction our US regulators go, however, regulation is coming. The best way our clients can prepare for this inevitability is to make sure they are deliberately following compliance protocols currently in place, have strong AML/OFAC policies, are properly trained, registering when necessary and preparing themselves for what’s to come. Regulation is on the horizon, but well-prepared groups need not fear. Regulators are looking for the bad guys and the best way to prove a company isn’t a bad guy is to make sure they are doing everything that is already required of them in their space.
More to come on both of these developments in the near future but wanted to share my initial thoughts as this could be a sign of what’s to come in the United States.