Crystal’s Monthly Update on Crypto Regulatory Affairs

by the Crystal compliance team

A round-up of global crypto regulatory affairs from Russia, the IMF, the OFSI, and France, from Crystal’s compliance team 

Russia aims to use stablecoins for cross-border payments 

In order to avoid using U.S. dollars and euros, Russia is collaborating with some friendly countries to create clearing platforms for cross-border settlements in stablecoins.  

On September 13, 2022, the Russian Prime Minister officially announced and instructed the government to come to a consensus regarding crypto regulation in Russia and legalize crypto for cross-border payments.  

The country cannot pay for its imports in dollars or euros due to international sanctions. Stablecoins are designed to keep their value stable in the base currency. They are pegged – algorithmically or collateralized – to a common asset such as the US dollar or gold. 

Russia might be the first country in the world to authorize cross-border crypto payments while banning local crypto payments. Russia has been talking about this for years. Still the move would come after President signed a law banning digital payments across Russia, underscoring the country’s skepticism of the emerging space.  

Since last year, Russia’s central bank has sought to prohibit crypto investments due to financial stability risks. The official stressed that the upcoming draft crypto regulations should be aligned with the Russian Finance Ministry, the central bank, Anti-Money Laundering authority Rosfinmonitoring, the Federal Tax Service and the Federal Security Service.  

Despite its willingness to authorize cross-border transactions, the Russian central bank still opposed the legalization of local crypto exchanges as well as legalizing cryptocurrency as a means of payment. 

IMF International Regulatory Coverage to Tackle Crypto-Issues 

In September 2022, the International Monetary Fund (IMF) issued a report named “The right rules could provide a safe space for innovation” and urges regulators across the globe to develop a more comprehensive, consistent, and complete global regulatory policy for digital assets.  

The IMF noted that the divided approach to crypto regulations among countries results in a fragmented global response. Although the IMF sees how global authorities have been working hard to form proper and efficient crypto regulations to protect users, the agency is concerned that  

“the longer this takes, the more national authorities will get locked into differing regulatory frameworks.” 

IMF is calling for a global response that is  

  • Coordinated – to fill the regulatory gaps that arise from inherently cross-sector and cross-border issuance and ensure a level playing field;  
  • Consistent – to align with mainstream regulatory approaches across the activity and risk spectrum;  
  • Comprehensive – to cover all actors and all aspects of the crypto ecosystem. 

In addition to developing a framework that can regulate both actors and activities in the crypto ecosystem, national authorities may also have to take a position on how the underlying technology used to create crypto assets stacks up against other public policy objectives—as is the case with the enormous energy intensity of “mining” certain types of crypto assets.  

A global regulatory framework will bring order to the markets, help instill consumer confidence, lay out the limits of what is permissible, and provide a safe space for useful innovation to continue. 

OFSI requires crypto exchanges to report suspected sanctions violations 

The United Kingdom Office of Financial Sanctions Implementation (OFSI) ruled that crypto exchanges and wallet providers operating in the country must report suspected sanctions breaches to authorities and freeze assets.  

The guidance was updated on August 30, 2022, to explicitly include “cryptoassets” among those that must be frozen if sanctions are imposed on a person or company. As well to digital currencies, such as bitcoin, ether and tether, crypto assets could include other notionally valuable digital assets such as non-fungible tokens. 

The U.K. is the latest western jurisdiction to include crypto in its sanctions’ rules explicitly. The rules, set by the OFSI, will mean crypto exchanges potentially face criminal charges if they fail to report clients designated for sanctions. Under the rules, crypto exchanges must immediately act if they suspect that one of their customers is under sanctions. 

New French Bill to freeze the crypto assets of suspected criminals 

On September 7, 2022, French Government presented a new law under which suspected criminals could have their crypto assets frozen. The new bill aims to prevent cryptocurrencies from being used in criminal activities and urge crypto companies to act legislatively. 

The government wants to join the U.K. in handing the police greater power to freeze assets that could escape their clutches.  At the same time, much of the bill is dedicated to online crime, requiring ransomware payments to be reported to the authorities.    

According to the French government: “too often, criminals convert the fruits of their wrongdoing into crypto-assets, which can be more easily dispersed and therefore concealed.” A new bill would make it easier for law enforcement agencies to freeze and seize crypto assets and have more control over creating a company.  

 Our Regulatory & Compliance team at Crystal Blockchain comprises experts from financial services and regulators. We are hands-on professionals with experience in helping you to transform regulation into effective risk management. For any compliance-related questions please get in touch with us at: