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The Front Page of Global Fintech

The the largest fintech community in the world. Subscribe to our newsletter to stay up to date on the latest in news opinions, and all things financial technology.

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This Week in Policy (5/31)

This Week in Policy (5/31)

Hello Fintech Friends,

Welcome to another week of fintech policy updates. While Congress remains preoccupied with the heated debates over the debt ceiling, crypto regulation is garnering attention from various international organizations that are striving to establish unified global standards. Within the U.S., the Internal Revenue Service (IRS) is also adopting a global perspective on crypto. In a bid for stricter global enforcement, the IRS is offering its crypto-related expertise and resources to countries on four different continents. And in the realm of financial services, significant strides are being made by several major countries toward open banking.

As always, if you are not yet subscribed to the Policy Edition of This Week in Fintech, make sure to subscribe below! Additionally, if you are interested in contributing to the Policy Edition as a guest writer to cover ongoing events or dive deep into fintech policy issues, please feel free to reach out to me on Twitter or LinkedIn.

1. Crypto Regulation

While the focus of Congress remains centered on raising the debt ceiling, crypto was still present in the negotiations between Democrats and Republicans. Last week, President Joe Biden and GOP House Leader Kevin McCarthy reached an initial agreement to raise the debt limit. One notable detail about the agreement is that the Digital Asset Mining Energy (DAME) excise tax we discussed last week was not included. This was later confirmed by Rep. Warren Davidson (R-OH) who shared a copy of the “Fiscal Responsibility Act of 2023” outlining the agreement between the two parties, explicitly stating that the tax was blocked.

Meanwhile, several international organizations published important guidelines for crypto regulation. On May 23, the International Organization of Securities Commissions (IOSCO) proposed 18 policy recommendations for crypto regulation, set to be finalized in Q4 2023. These recommendations aim to enhance consistency among national regulatory frameworks, addressing critical issues such as market abuse, conflict of interest, and consumer protection and will be open for comments until July 31. Furthermore, the World Economic Forum (WEF) published a white paper aimed at fostering global coordination in crypto regulation. The paper explores the various regulatory approaches adopted in different countries worldwide and the pathways to establishing a responsible global ecosystem for crypto assets. The European Systemic Risk Board (ESRB) also published a report on the systemic risks associated with crypto. The report acknowledges the currently limited interlinkages between crypto markets and traditional financial markets, but it anticipates a forthcoming change due to the exponential growth of crypto, necessitating prudential regulation in the sector.

Globally, competition among countries vying to become crypto hubs is intensifying, particularly in Asia. According to a recent report by Forex, a foreign exchange education platform, Hong Kong ranks first globally in terms of its crypto-readiness. Meanwhile, the Beijing Municipal Science and Technology Commission and the Zhongguancun Administrative Committee have published a white paper titled “Beijing Internet 3.0 White Paper on Innovation and Development (2023).” The document sheds light on China’s plans to support the development and research of Web 3.0. Several observers viewed the white paper as an attempt by China to establish its leadership in the crypto space, especially as it coincides with a forthcoming crypto hub initiative in Hong Kong scheduled for June 1.

2. Enforcement

In enforcement news, the New York City Comptroller has frozen deposits in five banks, including Capital One, for their failure to submit compliance plans demonstrating adherence to state regulations aimed at combating discrimination in banking operations. In an unprecedented move, the IRS is taking global enforcement against crypto-related crimes to another level, sending four experts in cybercrime to Australia, Colombia, Germany, and Singapore in an effort to ensure that U.S. foreign counterparts have access to the same tools and expertise available in the U.S. Internationally, the Dutch court overseeing the trial of Tornado Cash developer Alexey Pertsev for money laundering has ruled that Pertsev can question crypto analytics company Chainalysis. Earlier this year, Chainalysis claimed that “34% of all funds sent to Tornado Cash came from illicit sources.” Lastly, Reuters has published an extensive report about crypto exchange Binance, currently facing charges from the U.S. Commodity Futures Trading Commission. The report alleges that the exchange commingled customer funds and company revenue in 2020 and 2021.

3. Fintech Regulation

Turning to fintech regulation, last week the Australian government announced that buy-now-pay-later services will be regulated as a credit product. The decision comes amidst concerns about repayment, particularly due to rising interest rates—a direct product of Australia’s battle against inflation. Authorities in several countries are also paying attention to open banking, which allows fintechs to have access to customers’ data held by banks as a means to increase competition in financial services. The National Bank of Georgia has recently approved the Regulation on Inclusion in Open Banking, granting non-banks access to customer account information and payment initiation services if they meet certain requirements. Likewise, the financial regulator in Colombia, Superfinanciera Colombia, has launched a consultation on open banking, inviting feedback until May 31, 2023.

4. Payments

Lastly, the Federal Reserve has published the 2023 Findings from the Diary of Consumer Payment Choice, an annual report that provides data on consumers’ preferred means of payment. The report showed a persistent decline in cash usage, dropping from 20% in 2021 to 18% in 2022. Conversely, credit card usage witnessed an upward trend, rising from 28% to 31% over the same period. The use of debit cards remained constant at 29%.

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See you next week!