Representatives from key jurisdictions discuss global regulatory harmonization and what’s next on their respective agendas from Europe’s landmark Markets in Crypto Assets (MiCA) framework, the UK’s Financial Services and Markets Act 2023, to Hong Kong's new licensing regime at CoinDesk's State of Crypto 2023 in Washington, D.C. Panelists include Bermuda Premier E. David Burt, Virtual Assets Regulatory Authority Henson Orser, U.K.’s House of Commons Dr. Lisa Cameron, and European Commission Adviser Peter Kerstens.
Welcome everybody. This is a very cool session because we kind of have a look around the world. We have various jurisdictions represented. We have Henson here in person um from Dubai. Um and some others from around the world who are going to be participating virtually. So um I just wanna make sure. Oh, ok. Everybody's there on screen. Hi, everyone. Can you hear me? Ok? Ok, perfect. Um Excellent. Ok, so let's just get right into it. Um Again, we're doing a huge tour of the world here. Um I'm just gonna throw out a bunch of things. Um You know, please, if I can just ask you to keep your comments as short as possible just so we can get everybody in because we have the UK, we have the EU we have UAE um and we also have Bermuda. So it's pretty exciting panel. Ok. Um Let's start with a very big topic here in the United States that has global repercussions and that is the collapse of FTX, um which, you know, in the US has become many people agree that this has probably stalled crypto regulation maybe more than anything else. So I just wanna do a really quick tour around the world and just ask, you know, in your um, jurisdictions if it is having the same effect, if you are sort of still feeling the repercussions of that massive collapse. So let's just start with you, uh Henson since you're sitting right next to me. So it's funny in uh April of 2022 Gary Gensler gave a speech to his alma mater, uh University of Pennsylvania and he compared the Super Bowl ads um before that year Super Bowl 2022 to the dot com bubble and uh just prior to the global financial crisis. Um and, and of course, we know what subsequently happened, but he also talked about in that speech, uh the need for investor protections and market conduct and regulatory capital um supervision. Uh All the things that uh as FTX went down, you could see that were missing or conflicted in the centralized gateways for retail um to crypto. And so I, I think we see at VA A uh where we establish regulatory framework and clarity um that really were outcome based to try and afford all those investor protections um so that they don't get hurt uh with something like FTX going down. Thank you. Um Let's go over to uh Peter for a moment. Um So now, obviously Peter, um Mika has been in the works for a long time and it's, you know, finally about to come into effect. But has FTX played a role at all in sort of like just the way that Mika has developed, has anything been changed or has just sentiment in the U uh changed uh in response to this? I don't think so because Mica was effectively already agreed when FDX went under. But we are quite confident and we've gone on record stating that we believe that had Mica been in place already at the time and FDX could not have happened in the EU in the same way because Mica has ruled on segregation of customer assets rules on conflict of interest rules on the combination of various activities in the same group. So all of these proper governance requirements and all of these issues seem to have contributed to the downfall of FDX. It wasn't really a crypto issue. It was an issue of poor or no governance at all, conflicts of interest, no segregation of customer assets and so on. So while the FDX collapse had a chilling effect on the market and on global regulatory discussions within the EU, we had already effectively agreed to framework at the time. Uh FDX collapsed. That's great. That's, that's good to hear that. At least someone's reacted. And how about from Lisa? From the UK? What's the view from the UK? Thank you so much and greetings from the House of Commons in London. Um It's great to be with you. I think it spurred along in the UK So when I started the all Party group on Cryptocurrency, which is a cross party group of members of parliament and House of Lords. Two years ago, we were looking at regulation and we were upscaling and, and trying to, you know, really focus upon that. But I think with FTX and with some of our own constituency issues, I had one myself where someone experienced a rug pool scam and lost a lot of money. I think that spurred along uh the the legislators need to get regulatory frameworks play so that people can have redress and consumers and also investors can have confidence too. So I think we're united in that sense across parties just now in the commons. It, seeing that we really have a need to progress these issues. And uh we're very pleased with the work that's been done on Mia and obviously, we're looking at a bespoke regime moving forward for the UK too great. And um Premier Burt, what's your take from Beria? Well, just as Dr Cameron is saying, greetings from the House of Commons, I'll say greetings from the cabinet office where I stepped out of the cabinet meeting to join you, but it's a pleasure to be here. Um I think that the FDX call out uh certainly uh en force and the strength of Digital Asset business, this act here in Bermuda and the expertise of our regulator. Um and we're confident that um with the measures that we had in place uh that they, that FTE would not have been able to achieve a data license due to uh the B ma strict measures and what have laid out in the Digital Asset Business Act. Um And so, you know, the fall out of that is that certainly there is a measure of examination that all um regulators have to do. And of course, there was a rush to try to, you know, in some cases and instances, you know, attract these big names. But in Bermuda, we've always held quality. Um, and you know, clearly inside of the gas is act itself, it basically states that the segregation, applying assets and the need to have a functioning board. So they wouldn't even be able to make it past step one if they would have tried to come to. Ok. Well, that's good. It seems like for all these places, there were positive lessons learned, it seems like maybe only the US has been paralyzed by the collapse of the FTX. So I'm glad to hear that that's not happening in other parts of the world. Now, we need to cover a lot of topics. So I'm just gonna get right into them and feel free to, you know, chime in as appropriate. But let's let's start with staple coins because that is something that is just a really important topic all over the world. And actually most of the world or much of the world I should say has yet to put Stablecoin regulations in place. We have, you know, STABLECOIN frameworks and we have stable coin frameworks finalized, but we don't actually have a lot of places. I think Japan is one really notable outlier that actually has Stablecoin regulations that became law. Um So I wanna just sort of get right into this because it's a very tricky area. We're gonna start with you um Peter because uh so Stablecoin regulations will take effect uh with Mica as I understand, right? And there have been um some criticism of, of the Stablecoin uh framework in the, in the, in the EU and I know you think of some of these as fud. So I'd love to hear your, hear your thoughts on this, you know, so just a few of the criticisms that, that, that I've heard as well. So there were one is that um there's a coin desk article that just came out that has Binance um talking about how, you know, the there's gray areas um in, in, in, in the uh Eu Stablecoin regulations that will lead to a massive deli of Stablecoins. That's one. Another criticism I heard is that uh the EU has rules that um 30% of uh Stablecoin reserves need to be held in commercial banks, which means that Stablecoins or crypto is basically going to be exposed to the risks of commercial banks. So there's a bunch of them out there. And I guess I'd like to hear your perspective on like what, what are some of the stablecoin criticisms of Mika that you think are legitimate? And what do you think is just fun? And for those of you who don't know, crypto term, fear, uncertainty, what what is it? Fear, uncertainty, what is right? Yeah. So just just bad, bad vibes. So yeah, and that's what a lot of people say in response to crypto criticism. Sorry, go ahead. Well, a lot of people are saying that when Mica comes into force, all the table coins that currently exist will have to be delisted from European venues and that is just not correct. Um It is true that in June of 2024 the um um um sorry uh at the end of the year, the the the the stable companies will come into uh into uh effect six months later, the other provisions on crypto asset service providers and to issue stable coins, you must be authorized, you must be licensed. So that will uh be uh that will be applicable to all Stablecoin issuers. Be they uh electronic money tokens or be them aset reference tokens. So we have two types of stable coins in NICA issuers of those tokens will need to be authorized, they will need to be license, they need to hold capital, they need to hold reserves. All of that is set out in Mica and then six months later, the provisions on crypto asset service providers kick in and crypto asset service providers are only allowed to list tokens that comply with Mica. So they only provide uh allowed to provide services to crypto assets that comply and that strikes us as, as, as pretty normal. So there is a six month time window in which these stable coins uh can um see that exist already, can seek a license, can seek authorization and continue their operations. There's also you also alluded to the fact that um there is a requirement in Mica that 30% of the reserves have to be held in uh commercial banks as uh deposits. That is a requirement which was put in uh by our legislator. It was not the European Commission's proposal, but our legislator um put that in um and yes, um having them in commercial banks of deposits does provide a high level of liquidity. But as the S DB has illustrated those deposits can be at risk because these deposits aren't typically covered by deposit guarantee systems. So that is an issue that we have to look at. But the law is the law and the requirement from the legislature is that 30% of the reserves have to be held in deposits. Ok. Thank you very much and just quickly, very quickly because I want to get to a lot of different topics. He Henson. What exactly is the status of Stablecoins in, in the UAE like where, where is it in regulation. So we just updated our issuance rule book uh with uh fiat referenced uh tokens um as part of the new guidelines and that covers all stable coins other than a ed backed staple coins, uh which will be coming out from the central bank of the UAE um that with payments uh in the first quarter um of next year. So we covered, you know, we look at best practices and, and try and converge on best practices with, with our regulation and so quality of reserves, proof of reserves, right? Cap et cetera. We actually just uh have, have published and have an issue in through a book where va similar to the conversation we're having can get a license to issue stable coins uh out of out of the UAE. And it's funny because it is the, when people talk about the killer app, um we see the adoption of Stablecoins in micro transactions and c posted wallets in places like Dubai or Iran actually. And so the the need for the investor protection is, is actually there. So is it fair to say though that in the uae stablecoin regulations have yet to go into law? Like there's not a, we publish non A ed. We have? OK. So it's the A ED part that it still needs to go into law. Ok. OK. So basically, partially, can you say, would you say? OK, partially regular? OK. Yeah, it's um ok, great. So um I'm gonna just, ok, so I wanna, we have so much to cover. Um, and I just want Emily Emily, I can't let you get past because I know that you please go ahead to the EU and also what's it called? But the fact is that Bermuda has added Stablecoins issue and has issued Stablecoin licenses already have regulated and licensed the world's first permissionless yield bee Stablecoin as recently as a couple of months ago. So the fact is that our da regime does actually use the Stablecoins inclusive of payments, exchange and marketing. And so from this aspect, it's not that difficult, you just have to approach it from the perspective of where we have always approached things for beautiful perspective of making sure the market works well and putting the protection in place. So people are welcome to reference what we've done, but we've already put them into law and they're already working today. Thank you for clarifying that and also thank you for all of you to you and very brief that we did have financial services and markets bill earlier this year, which will bring um stable coins into scope of regulation in the UK as well. So I think it's great to see so many different jurisdictions working along similar lines trying to push this much needed framework forward so that people, consumers in principle can have much more confidence and we can also attract the investment that's much needed in this new digital marketplace, which I think is very groundbreaking and uh we're looking forward very much to Digital Britain moving forward. Excellent. Thank you so much. Ok, so I wanna move on to other topics. But again, if either anybody wants to jump in with anything, please do not hesitate because there's just, again, it's hard to cover everything. But let's um what I, what I want to move on to is just some of the challenges here because, you know, all of you are doing pretty amazing trailblazing work. I think that I'm really glad that you brought up the example of Bermuda staple coins because that's true. That's a really important development, but there's challenges everywhere. And so I kinda wanna go through sort of like the challenges of, of each of your jurisdictions. So um actually let's start with you. Uh Premier Burt. So, um II, I don't know if this is a specific challenge per se. I guess it's just that, you know, right now there's kind of a lot of competition, right? You know, for a lot of places are trying to establish themselves as these sort of like digital asset hubs and yeah, Bermuda was pretty early but competition is heating up, right? There's sort of like new or renewed players in town now, you got kind of Hong Kong in the mix and you know, so I guess my question is, is like, what ha what's your sort of sales pitch? Right? Like how are you sort of, you know, keeping Bermuda competitive in this environment where you have, you're starting to see, you know, oo other jurisdictions trying to do sort of similar things. Well, thank you, Emily Bermuda has never tried the all things on people. We adjusted our strategy in 2019 to focus on the biggest and best companies that can actually sustain the local regulation in which we apply. Bermuda is a highly regulated International Financial Services Center and because of our reputation of stability and financial services, we know that we have to have a rather solid work. I remember having a conversation with officials from the eu when I was over there will recognize that, you know, if you make it past the monetary authority, it's pretty likely that your business is in good shape. Um But what we're just doing is continuing to uh focus on making sure that our regulations are clear. Um There are companies that are able to do things under Bercu Digital Asset Business Act they are not able to do in other place. We know that other jurisdictions are playing catch up, that's perfectly fine for us. We're just continuing to press ahead. So whether it's, you know, licensing the world's first permissionless regulated and stable coin that is yield bearing, whether or not it is, you know, doing things uh four point base, having base with other exchange. That is where we've made our calling card over the years. And so far as innovation, we're just going to continue going that way. We know that we're a small jurisdiction. We know there's lots of larger places that use a larger market everywhere else. But for companies that are looking to work with a regulator so that they can scale up and build and innovate these digital asset services so they can stay to the rest of the world that's always ped as calling card and that's what we're going to continue playing in space. Thank you. Let's turn to you, Lisa. So, you know, one of, one of the things that here sometimes and please, you know, feel free to correct this is if this, if this is unfair, but you do hear people saying sometimes that the UK is a little bit behind um on crypto um regulation, you know, compared to, I don't know, just other jurisdictions. And I'm just curious if you accept that um kind of commentary or if you think it's wrong or if you think it's misguided or I just would like to hear your uh your response. Well, I mean, certainly, um since I set up the old party group two years ago, we've been working at pace and speed to get ourselves, you know, up to speed with everything that's going on in this dynamic sector. So I think we've taken great strides in the past two years. We have regular debates in the parliament. Now we've had a number of bills through parliament, we've had our own inquiry report that was very well by government. So things are moving here. Um I think the UK is not generally the first mover in these fields either. So with the advent of Brexit to, we're able to create our own bespoke framework. And I think for the next 12 months, really what we're going to be doing in our cross party group with the MPS and the members of the House of Lords is looking at international best practice and creating that bespoke regime in the UK, which will add competitiveness to the work that we're doing here. But clearly, we have um you know, a financial center of the world here in the UK in terms of London, Edinburgh and we want to see it leveled up across the population. We want opportunities young people to engage in this new digital revolution that's happening. But we want to reach out and also work with partners too. So I think yes, um there is a level of competitiveness in this and moving at speed. But there's also I think a great need for collaboration to make sure there's never a race to the bottom and that consumer protection is at the core of everything we're doing. OK, thank you. Um and um Peter, so we, we did talk a little bit about, you know, some of the criticisms of, of uh Mika with stable coins, but you know, Mika is very, very ambitious and so there are a lot of criticisms out there, right? And so, you know, I've heard everything from, um you know, it's one size fits all to like some places are more lax than others. Like there's still, you know, some loopholes there uh that there's gray areas that it's too strict. I mean, there's like everybody saying all sorts of things. So I guess, like, you know, from your perspective, what criticisms of Mica are legitimate? Like what are the things that you're worried about that, you know, like aren't quite there yet and that, you know, will need to be addressed because I'm sure they exist, right? I mean, this is a very, very ambitious project. That's a tough question because of course, you're asking me to criticize uh our own creation, but we, but we can do that. We, we are self aware and we reflect also on what has been achieved. And my personal view, this is not an institutional view, but my personal view is that the rules around the issuance of asset reference tokens and around emoly tokens may be a bit on the strict side. That's my personal appreciation. Uh and they may be so strict that on one that they provide a lot of stability, but they may make it not a very viable business proposition to be a solo issuer to provide only issuing services because it's going to be very hard for issuers to make money uh on uh in in this business line. Um But for the rest, I think, um Mia very much reflects the state of the art in the uh in the technology. We at the European Commission are very bullish about Blockchain. We're very bullish about digital assets and we, we've shaped and created Mica starting early 2018. So that's six years ago when the first idea of Mica started bubbling up, it then took until the middle of 2019, until Liber was announced to have the catalyst to really push us forward. And there was a big drive globally also in the G 20 to put frameworks in place. So we responded to that, we did that, but we very much took on board the developments as they unfold. So class service providers, another element of course, at a certain moment, we have to stop the clock and developments continued. So Mica was mostly done when NFTS started coming onto the market. So it doesn't really address uh non functional tokens to a large extent they are covered, but they are also part that are not covered. And of course, also um issues like staking of crypto crypto lending, decentralized finance. All of these issues are way too new um for them to be addressed by Mica because uh the, the drafting of Mica as a set of design was done in 2018, 2019, it was drafted in 2020. That's almost four years ago. Um So, um yes, more recent events haven't yet been taken into account, but we have an obligation from our legislator to report back to the legislator uh early 2025. And we will do and then we will pick up all these issues and we will make proposals if necessary if there is something to propose. I'm not saying there is, we'll have to see early 2025. Thank you. Um And so I want to turn similar questions to you. Um kind of similarly to what I asked from Burr and also what I asked Peter, which is um two things. One, I've also heard criticism that far is too strict. Um You know, and, and, and I'd be curious what you kind of how you, how you address that. And um and also, you know, Dubai, for example, for a long time has been known as like this really um like a real draw for crypto talent. It's kind of one of the one of the early first movers, but now again, more competition in town, right? We're sort of hearing some about newest jurisdiction. So I guess my question for you is like, um yeah, what are the criticisms of va A that you think are legitimate like that you, you think you guys need to work on? Um And also like, yeah, how do, how do you, how do you stay competitive, you know, when more places are trying to become crypto hubs. OK, great question. And there are few things there. Um V was conceived in the fourth quarter of 2021. In the law forming Varro was passed in March of 2022. And by February of 23 we had published uh final rules and regulations, which is kind of an amazing time frame uh for getting the project uh done having said that we realize moving fast, we might not get it perfectly right. So our, our documents or living documents and we take feedback from the, the, the market. And so um after a post FTX, our licensing requirements were very, very strict. We're taking that feedback and, and uh adjusting where we want to be on that while being fat a compliant um uh ee et cetera, uh our vass. Um and for example, staking from custody, we modified our custody services rulebook to allow for staking from custody. After first publication, we just um modified that, but uh just taking a quick step back um up, up to as many as 30% of UAE residents um are on the global crypto platforms. Um And as we bring those global crypto platforms to having mina entities that are licensed by V AA and have remediated KYC AM L and satisfy all these investor protections. Um The, the interesting challenge of course is the client money accounts, right? Because we get the, the proper behavior by the V Aps themselves. But then are we actually covering uh on ramp and, and, and off ramp. And so getting client money accounts with a central bank of UAE licensed banking entity um has been a challenge and once again, we published in February of, of this year. So getting the local banks to understand the licensing requirements, so they can rely on the equivalence of the KYC AM L on boarding so that they can feel comfortable um allowing client money accounts, which of course is the facilitation of on ramp and off ramp from fiat has, has been a challenge getting that communication and familiarity and and and understanding. So now, uh when a local bank is ready to open a client money account, they apply to the central bank for a no objection certificate for that particular vasp that is licensed by VA and once they get the NOC, then they can open the client money account and we've just succeeded in the first few of those in, in the last month or so. So that, that's been a challenge. Thank you. That's why I really appreciate everyone talking about the challenges. So finally, we only have a few minutes left and I think this is sort of the big question and it's great to have representatives from all over the world. Is there room for International Cooper Operation in this area, like in a real way, right? Because you have so many different approaches and you know, we don't really seem to have a lot of co ordination. Um I don't know, let's start with Premier Burt, what do you think? I mean, is there, are there, is there room here for, you know, various places to actually like, join together and form some sort of meaningful agreement on crypto or are we still pretty far from that? I mean, inevitably that will happen. So whether it's the work of which the government is doing with our bridges with AD GM over in the UAE, whether it's or not, as I said, Peter was in the Brussels, the Bermuda Brussels office meeting and discussing matters with me and other things with DG Fisma around this and certainly are closely in the United Kingdom and our continued work in the United States. Eventually, it's going to come to that because there is going to be to be the need to, you know, kind of have coming out is especially when we're dealing with the, you know, the extreme nature cross border situation. But, you know, as we close out, the fact is we're speaking about the whole issue working with other countries, Bermuda has always been going to work with other countries because that's just the nature of what we've done. But if we want to go back, you know, we, we put our Digital Assets Business Act in place in September 2018. So we have been regulating digital assets for five years now. We've seen it all and the fact that, that whether, whether I speak, you know, in the, in the eu, whether I speak the UK and other places, we're always willing to share our experiences because that is the only way that we believe that this industry is going to thrive if we share. Um And if we make sure that we learn from each other's good practices and bad practices just to make this global industry stronger. So there will not ely be competition. I mean, and there will inevitably be cooper uh down the road of Bermuda is willing to play that part in cooperating as we have done and we'll continue to do. That's great. That's a very, that's a good way of looking at it. Let's move quickly to the EU and the UK, which is kind of interesting, right? Because on the one hand, it's like, are you guys partners or rivals or both? You know, I mean, because, because there, there is an element of rivalry just in the sense that every place is trying to attract crypto talent, they're trying to attract capital. Um I would just be curious how you sort of see the dynamic for both of you, for Lisa and Peter, you know, between the UK and the EU as we sort of, you know, a as both of you are kind of moving towards um more regulation. Well, from our end, we didn't really develop Mica with a view to compete with other jurisdictions, Mica was done for European investors and European consumers and European companies so that European investors can engage through European regulated entities into the crypto space. We are not seeking to attract business into the eu. We just wanted to make sure that European consumers could do crypto business with companies that were unsure in the eu. There is a lot of international co-operation coordinations. We speak a lot with our colleagues from other jurisdictions from London, but also Bermuda, there's a lot of plagiarism. So we of course, if there's a framework popping up somewhere, we do study it and we do um uh copy it. We don't always give credit for it, but that's a practice. And then there are other discussions like the Financial Stability Board within the G 20 very active discussions on crypto asset regulation, the FAA on anti money laundering rules, very detailed discussions. Uh The Basel Committee on banking Supervision has a lot of discussions on crypto and crypto disclosures by financial institutions. So there's an awful lot of um international coordinations. Uh And we see jurisdictions around the world acting on that co ordinated position. Um I'm not in the US so I can now of course, speak a bit from a distance. Yes, we are looking forward to the, also the US coming on board in implementing these international commitments which they took in the financial Stability Board, which I took in the FADO which I took in Basel. And I'm sure that eventually they will. Thank you. And so do you want on that? Yeah, I mean, I agree with what's been said already. There's, these are global businesses. They're going to have footprints in various different jurisdictions and it would be helpful to have some sort of interoperability and standards as we move forward. Um, but I also think, you know, this isn't fine. I do firmly believe having done a lot of this work over the past two years, we're on the cusp of what I would call a digital revolution. Um And that's not going to just be finance, it will be arts, culture, healthcare. There's going to be so many changes in terms of um you know, the web three developments A I, everything's going to come together. And so it's incumbent upon all of the governments to work together to make sure that people can do that in a very safe way and get the benefits um in terms of uh making sure people can achieve their potential for what I would call jobs of the future. And we're really very firmly looking at our young workforce and what skills we need to develop there. Um But I think it's going to be about Cooper operation as much as competition and, and I really do firmly see that the jurisdictions who Cooper are the ones who are going to move forward more rapidly than the others. Thank you Henson. We have like 12 seconds. But yeah, I'll just add really quickly. Um I think this notion of regulatory convergence around best practices, interoperability, passport ability so that investors uh individuals can benefit from these global technology platforms, but you have uh local protections and supervisions to uh protect them. And it, it's great to start with the big crypto exchanges. But then it'll start to apply to any sort of global technology, whether that uh DFI or gaming or the metaverse. Um You're gonna have to deal with regulatory capture and sort of this jigsaw puzzle way um to benefit from these global or metaverse type of platforms. And so it's uh incumbent on all of us to make sure there are no weak links in the chain. Well, great. That's a wonderful note to end this on. Thank you so much. This is a great view from around the world. Um We could have gone much longer, but I think we at least got a taste of all the amazing work that you're all doing. So. Thank you so much.