Topic: Cryptoassets cryptocurrencies stablecoins and cbdcs

In this webinar, our global crypto regulation team will delve into the critical aspects of Markets in Crypto-Assets Regulation (MiCA), a new landmark piece of European legislation that is due to become applicable at the end of 2024, and explain its importance to crypto-asset firms operating in Asia but looking to provide services to EU clients. Whether you’re a crypto-asset service provider, issuer, or investor, this session will provide valuable insights on navigating this broad-ranging regime. We will also use this session to flag key cross-border issues in the upcoming UK regime for crypto-assets.

It was a pleasure to attend the latest series of policy roundtables hosted by the Financial Conduct Authority as the industry looks to collaborate on the possible routes forward regarding the expansion of the UK regulatory regime to trading venues and other cryptoassets “intermediaries”.

When talking about digital assets, how much is saying too much? How much is saying too little? Did what you say ultimately matter? Recent court decisions arising from the purchase and sale of digital assets have grappled with liability claims posing such questions about information that had been stated or omitted.

In a notable victory for the US Securities and Exchange Commission (SEC) in its closely-watched enforcement action against Coinbase over its crypto-assets activities, a New York federal court on March 27, 2024, rejected nearly all of Coinbase’s challenges to the SEC’s charges against it and cleared the case to proceed. SEC v. Coinbase, Inc., No. 1:23-cv-04738-KPF (S.D.N.Y. Mar. 27, 2024) (Katherine Polk Failla, J.). The court held that the SEC’s allegations about Coinbase’s crypto transactions were sufficient for them to “suffice to constitute ‘investment contracts’ under the three-pronged Howey test” and thus be subject to the federal securities laws and the SEC’s enforcement authority. The SEC’s victory was not total, however, as one specific claim as to Coinbase’s Wallet product was rejected, although on different grounds.

The new Digital Assets Law No 2 of 2024 (the Digital Assets Law) was enacted in the Dubai International Financial Centre (DIFC) on 8 March 2024, alongside significant supporting amendments to existing legislation.

The Supreme Court of British Columbia recently released an important decision considering the validity of government directions to the British Columbia Utilities Commission (BCUC): Conifex Timber Inc. v British Columbia (Lieutenant Governor in Council).1 Under review was an Order in Council (OIC) requiring the BCUC to allow BC Hydro to halt cryptocurrency interconnections for 18 months (until June 28, 2024). In a decision with impacts beyond cryptocurrency operations, Justice Tammen dismissed Conifex’s challenge of the OIC, concluding that the suspension of cryptocurrency interconnections was lawful.

We can look back to 2023 as a year of categorization and enforcement in the crypto space across the world, with significant local and international developments impacting the crypto markets and their regulation in Canada. This was no surprise, as such developments came following the turbulence of 2022 where many important crypto institutions crashed and went bankrupt, resulting in immense financial consequences for investors and users involved.

In late 2023, HM Treasury set out its final proposals for the UK’s future financial services regulatory regime for cryptoassets, confirming its intention to bring a number of crypto activities into the regulatory perimeter for the first time. A week after HM Treasury’s final proposals were published, the FCA and the Bank of England both published discussion papers on their proposals to implement Phase 1 of the regime.

HM Treasury has set out its final proposals for the UK’s future financial services regulatory regime for cryptoassets, confirming its intention to bring a number of crypto activities into the regulatory perimeter for the first time. The proposals, published on 30 October 2023, are outlined in HM Treasury’s response to its February 2023 consultation and call for evidence on the topic, its response to the May 2022 consultation on managing the failure of systemic digital settlement asset (including stablecoin) firms, and a policy paper which provides an update on plans for the regulation of fiat-backed stablecoins (together the HMT Final Proposals). The legislation to facilitate the bringing of stablecoins and cryptoassets into financial services regulation, the Financial Services and Markets Act 2023 (FSMA 2023), received Royal Assent on 29 June 2023.

Recovery of fraudulently obtained cryptoassets has been a key driver of crypto litigation in the English courts, and this is set to continue in 2024. English Courts have been ready to deploy remedies such as freezing orders and interim proprietary injunctions and the recent detailed analysis by HHJ Pelling, writing extra-judicially, illustrates that English courts recognise the importance – and the complexities – of this litigation. However, exactly how these remedies should be deployed against exchanges is still a developing area, as shown by the recent decision in Piroozzadeh v Persons Unknown [2023] EWHC 1024. Binance successfully argued that an injunction against it should be discharged and the judgment threw doubt on the basis for any proprietary or restitutionary liability against exchanges. The scope of remedies available to victims of cryptoasset fraud may become clearer if any statutory action is taken following the Law Commission’s final Report on Digital Assets (published on 28 June 2023). The Law Commission proposes explicit statutory recognition of digital assets as a ‘third form’ of property and the creation of an advisory technical group, which will facilitate the creation of a principled set of remedies involving digital assets.