News In Brief - September 17, 2021

September 17, 2021
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The Bank for International Settlements Innovation Hub to test central bank digital currencies for international settlements, while the Electronic Transactions Association sets out five guiding principles for crypto. In the U.S., the Federal Trade Commission has opened the rulemaking petition process to the public, and in Estonia the finance minister warns that new crypto-licences could be suspended.

BIS Innovation Hub To Test CBDCs For International Settlements

The Bank for International Settlements (BIS) Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore and the South African Reserve Bank will join forces to test the use of central bank digital currencies (CBDCs) for international settlements.

Project Dunbar will develop prototypes for shared platforms that will execute cross-border transactions and international settlements with digital currencies issued by various central banks. The idea is to allow direct transactions to take place between institutions, thereby cutting the time and cost of transactions and eliminating the need for intermediaries.

The project will look at different governance and operating designs with the aim of helping central banks to share CBDC infrastructures.

The "Group of 20" industrialised nations (actually only 19) stands behind the project, having come up with a plan or "road map" for improvements to cross-border payments.

Participants in Project Dunbar, which expect to publish the results early next year, will inform the development of future platforms for global and regional settlements. Demonstrations of the prototypes will take place at the Singapore FinTech Festival in November.

Andrew McCormack, centre head of the BIS Innovation Hub Singapore Centre, indicated to reporters that he was sanguine about the project's worth: “We are confident that our work on multi-CBDCs for international settlements will break new ground and lay the foundation for global payments connectivity. Enhancing cross-border payments has become a priority for the international regulatory community."

Five Guiding Principles for Crypto

The Electronic Transactions Association (ETA) has laid down five principles that it wants policymakers to take into account and follow when they are framing new laws and regulations.

First, lawmakers should develop a functional definition of crypto-assets which is clear about the regulatory requirements that apply to the technology.

Lawmakers, secondly, should tailor regulations to the risk profiles of the participants or the activities that they want to regulate.

Thirdly, they ought to do so in a way that offsets harm to consumers and promotes safety, soundness and financial stability. They ought to safeguard the privacy and security of consumers in every transaction, protect consumers’ interests and give consumers confidence to use the technology for in-person and online transactions. Policymakers should also ensure that consumers understand the ways in which the rules protect them.

As the payments industry is heavily regulated, the fourth principle provides that any new laws or regulations that govern crypto-assets should be designed to fit in with the old ones. New public policies for crypto-assets should complement, and not conflict with, existing laws and regulations, as well as private-sector rules and practices.

Finally, the association believes that any regulation of crypto-assets should encourage innovation.

The crypto-market boom of 2020 worried legislators around the world about issues such as investor protection and financial crime. U.S. financial regulators are working together to spot and fill the regulatory gaps. A Democratic member of Congress introduced the first comprehensive bill in July to bring digital assets into the ambit of existing financial regulators.

FTC Opens Rulemaking Petition Process To Public

The U.S. Federal Trade Commission (FTC) has approved significant changes to its procedures for responding to petitions for rulemaking. The idea is to promote better public participation in the way it makes rules.

The new rules make it easier for the public to petition the agency for new rules or changes to existing ones.

Among other things, they require the FTC to make each petition for rulemaking available to the public, to offer someone as a point of contact for petitioners during the process, and to allow interested parties to comment on all petitions.

The agency voted 4-1 to approve the changes. This is a departure from its previous practice, under which the agency was not obliged to respond to petitions at all.

New Crypto-Licences Could Be Suspended, Warns Estonian Finance Minister

"It is reasonable for the FIU [Financial Intelligence Unit] to consider temporarily suspending the issuance of new licences until the new regulation enters into force, in order to reduce the further accumulation of risks," said Keit Pentus-Rosimannus, Estonia's finance minister, at a meeting of the Government Committee for the Prevention of Money Laundering and Terrorist Financing.

The emerging risks in the field of virtual currencies require urgent action to ensure a competitive and fair business environment, the minister warned.

"The government's goal is to ensure that the risks of money laundering and terrorist financing are maximized in the area of virtual currencies. I will send a bill to the sector for approval in order to tighten up the existing requirements and increase transparency," he confirmed.

The finance minister warned that the risks of money laundering and terrorist financing related to providers of virtual currency services in Estonia had increased. He pointed out that virtual currencies now pose the biggest money laundering risk, according to the country's national risk assessment.

The statements come on the eve of an upcoming visit to the Baltic State by MONEYVAL, the European FATF-style regional body (FSRB). These experts will gauge the ways in which the country enforces its anti-money laundering laws and rules, and will also inspect the capacity of Estonia’s authorities to prevent money laundering and terrorist financing.

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