CFTC looks at DeFi, eCNY vs CBDC and 1,000 Revocations

Germany Switches from Paper to Digital Securities

Paving the way for blockchain-based financial securities, Berlin has just switched from paper to digital. On Wednesday, new legislation was passed to introduce all-electronic securities as part of its wider blockchain strategy, outlined by the German Ministry of Finance and Ministry of Justice and Consumer Protection.

The law eases rules that until now had forced issuers and holders of securities to document transactions with a paper certificate. “The paper certificate may be dear to some for nostalgic reasons, but the future belongs to its electronic version,” said Finance Minister Olaf Scholz about the move.

The legislative change paves the way for durable medium solutions such as Trudatum to strengthen trust in the digital system.

Federal Minister of Justice Christine Lambrecht commented on the new law as well, stating that “the digitization of the financial market is already well advanced and will be accelerated even further through the use of technologies such as blockchain. Today’s cabinet decision significantly expands the innovative potential of these technologies for the German financial center. At the same time, we create legal certainty in an area that is characterized by constant change through technological innovations.” – READ MORE

CFTC Looks Into DeFi

In a sign that regulators are eyeing up decenralized finance, the Commodity Futures Trading Commission’s Technology Advisory Committee held an event Monday on “The Growth and Regulatory Challenges of Decentralized Finance”, hosted by law professor Aaron Wright and attorney Gary DeWaal.

“Interesting benefit of decentralized financial projects is that they’re composable and interactible,” said Wright. “Developers often describe them as financial Lego blocks.”

Regarding regulatory compliance, Wright noted that DeFi developers typically don’t think of legal considerations first: “These contracts are alegal. That doesn’t mean that they are illegal. It means they are designed at a technical level, not necessarily with regulatory compliance in mind.”- READ MORE

Estonia’s Record Crackdown on Crypto Licences

Following years of exploding growth in crypto businesses being registered in Estonia, the country has had to cut back. The true scale of the revocation was laid bare by the Minister of Finance as it turns out that up to 1,000 entities have had their licences taken away in 2020 alone – due to the burdensome issue of monitoring them all. 

Veiko Tali, secretary-general of the Ministry of Finance, said in a post on Friday that many of the companies had “minimal” connections to Estonia and clientele in “remote countries.” – READ MORE

China’s ex Central Bank Speaks out on eCNY vs CBDC

Zhou Xiaochuan – the Governor of the People’s Bank of China until 2018 and nicknamed ‘the Father of the Digital Yua‘” has sought to clarify the distinction between the eCNY and a CBDC (Central Bank Digital Currency) and play down fears of world domination.

In HK, commercial banks issue circulated notes but must hold reserves at the HKMA, with the central bank issuing a reserve certificate. Notes issued in this manner are not a liability of the central bank, but the commercial banks. The digital yuan or ‘eCNY’ utilizes a similar model.

As commercial banks will be responsible for the eCNY’s KYC, AML and data protection, this put it apart from a CBDC. Xiaochuan states that the “CBDC in the general sense considers these responsibilities to be a part of the role of the central bank”.

“If you are willing to use it, the yuan can be used for trade and investment,” he said. “But we are not like Libra and we don’t have an ambition to replace existing currencies.” – READ MORE

FCA Issues Notice on Temporary Registration Regime

The UK’s Financial Conduct Authority (FCA) has notified cryptocurrency businesses that have applied for registration in the UK a ‘Temporary Crypto Registration Regime’ due to a backlog caused by Covid-19.

The notices comes after a number of crypto-related FCA moves this year including the issuance of the consultation “Extension of Annual Financial Crime Reporting Obligation” paper which seeks to make crypto firms regardless of operating turnover adhere to submitting an annual report on how they are dealing with their AML risk, and the outright ban of the sale of crypto-derivatives to retail consumers, announced in October. – READ MORE