Quantum Updates 20 | November 2024

Singapore Tightens Grip on Digital Payment Regulation: MAS Leads New Wave of Crypto and Payment Services Reform

On 30 October 2024, the Monetary Authority of Singapore (MAS) introduced updates to Singapore’s Payment Services Act (SG PSA) under its National Anti-Money Laundering strategy, aimed at strengthening regulations for digital payment token (DPT) service providers. The updates focus on consumer asset protection, transparency, and responsible advertising, enhancing Singapore’s reputation as a secure and trusted financial hub.

• The SG PSA update, a year-long project led by MAS with industry collaboration, balances market advancement with consumer protection.
• New licensing requirements now include a broader spectrum of digital payment entities, such as token exchanges and cross-border facilitators, ensuring comprehensive regulatory coverage.
• Provisions mandate asset segregation, requiring DPT providers to hold customer assets in statutory trusts separate from their own, safeguarding consumer funds in cases of insolvency or operational failure.
• MAS imposed restrictions on aggressive marketing, aimed at curbing speculative behavior and shielding inexperienced investors from high-risk investments, prioritising ethical, transparent engagement.
• MAS’s expanded SG PSA framework fosters digital finance innovation within a secure, regulated environment, aligning technological growth with consumer protection by responsible oversight and regulatory standards.

To read this news in detail click here

 

U.S. Securities and Exchange Commission Orders Comprehensive Compliance and Disclosure Reforms at J.P. Morgan

On 31 October 2024, the United States Securities and Exchange Commission took enforcement actions against J.P. Morgan Investment Management Incorporated and J.P. Morgan Securities LLC for multiple compliance violations, undisclosed conflicts of interest, and regulatory breaches in their advisory practices. These actions, which include cease-and-desist orders, penalties, and mandatory reforms, aim to uphold investor protection and regulatory transparency standards across the financial sector.

• J.P. Morgan Investment Management conducted 65 unauthorised principal trades with its affiliate, violating US SEC requirements on fair pricing and reporting, leading to mandated policy revisions and financial penalties.
• During the COVID-19 market instability, J.P. Morgan Investment Management structured transactions allowing a foreign fund to indirectly access U.S.-only liquidity facilities, contravening US SEC joint transaction rules. The US SEC ordered the cessation of this practice and improvements to compliance controls.
• J.P. Morgan Securities held shares in Conduit investments for extended periods, contrary to timely liquidation disclosures, increasing clients’ risk exposure. The US SEC directed financial restitution and required enhanced disclosure practices.
• The firm favored its in-house Portfolio Manager Programme, creating financial conflicts not fully disclosed to clients. The US SEC ordered enhanced disclosure protocols and adviser training to prioritise client interests.
• J.P. Morgan Securities recommended high-fee mutual funds over identical, lower-cost ETFs from June 2020 to July 2022, costing clients $14 million in unnecessary fees. The US SEC mandated client restitution and procedural overhauls to align future recommendations with client-first principles.
• These US SEC-enforced corrective measures and penalties put emphasis on safeguarding investor interests, ensuring adherence to legal standards, and reinforcing accountability within J.P. Morgan’s advisory and investment practices.

To read this news in detail click here

 

Bitcoin Meets the Central Bank: Argentina’s Groundbreaking Exhibit Merges Art and Crypto Mining

On 31 October 2024, the Central Bank of Argentina (BCRA) launched an exhibition at its Historical Museum, integrating live Bitcoin mining into an art display. Titled “Art, Artificial Intelligence, and the Future of the Economy,” this exhibit combines cryptocurrency mining technology with contemporary art to reflect on the evolution of currency, from physical cash to decentralised digital systems.

• The exhibit’s focal point, created by artist Alberto Echegaray, features “Moneyballs,” an installation with spheres of shredded banknotes from decommissioned U.S. dollars and Argentine pesos.
• Embedded within the installation are operational Bitcoin and Ethereum mining rigs, connecting Echegaray’s art to real-time blockchain processes, offering an immersive experience that invites viewers to reconsider their understanding of value and wealth.
• This exhibit signals the Argentine government’s openness to decentralised finance within a central institution, acknowledging the role of blockchain in reshaping the economy.
• The BCRA’s display of DeFi principles within its own museum shows the growing acceptance of decentralised finance worldwide, as central banks globally, including those in Europe and the U.S., explore digital currencies and blockchain-backed assets.
• This exhibition fosters a conversation about the compatibility of traditional finance with decentralised systems, presenting a new model of value defined by technology and direct public engagement in the financial sphere.

To read this news in detail click here

 

United States Commodity Futures Trading Commission Issues Advisory Warning on Dangers of Messaging Apps for Crypto Users

On 31 October 2024, the U.S. Commodity Futures Trading Commission issued a customer advisory, warning users about the rising risks of crypto-related fraud schemes on popular messaging applications. The advisory, titled “Use Caution Responding to Messaging Apps,” seeks to inform consumers about how fraudsters exploit default messaging app settings to target crypto users, aiming to protect them from deceptive schemes.

• The US CFTC highlighted the increasing prevalence of scams on platforms like WhatsApp, Telegram, and SMS, where fraudsters add users to group chats without their consent. These groups often promote fraudulent schemes, including crypto pump-and-dump tactics.
• The advisory warns users against engaging with unsolicited messages that promise high returns on crypto investments, noting these often advertise substantial, guaranteed gains with no risk which are an indicator of potential fraud.
• Melanie Devoe, Director of the US CFTC’s Office of Customer Education and Outreach, discussed the importance of caution, advising users to avoid engaging with enticing but suspicious crypto opportunities promoted through group messages.
• The US CFTC recommends several protective measures, including not replying to unknown messages, deleting unsolicited group messages, blocking and reporting senders, and adjusting privacy settings to limit contacts to known individuals. Many carriers also offer free spam-blocking services for additional security.
• To support public awareness, the US CFTC provides a range of educational materials on its website to help consumers understand and navigate digital finance risks.
• US CFTC advises users to engage only with regulated financial entities for crypto trading and to verify the legitimacy of trading platforms through its registration tool, which lists regulated firms and individuals in compliance with U.S. trading standards.

To read this news in detail click here

 

Singapore FinTech Festival 2024 to Spotlight Artificial Intelligence and Quantum Technology in Financial Innovation

On 3 November 2024, the Monetary Authority of Singapore (MAS) announced the ninth annual Singapore FinTech Festival (SFF), set for 6-8 November 2024, focusing on the transformative impact of artificial intelligence and quantum technology on the financial sector. Co-organised with the Global Finance & Technology Network and Constellar, SFF 2024 will serve as a collaborative platform for industry leaders, policymakers, and technology experts to explore innovations and their applications in areas like digital asset adoption, efficient cross-border payments, and financial inclusion.

• The festival will kick off with the invitation-only Insights Forum on 4-5 November, featuring the Layer One Summit on future financial infrastructure and the Green Circle Climate Forum, focusing on high-quality carbon markets.
• The Innovation Lab Crawl, also on 4-5 November, will showcase cutting-edge fintech projects from 16 institutions, including Visa Innovation Centre and the NUS FinTech Lab.
• SFF 2024’s main conference will feature over 900 speakers across 400 sessions organised around six themes: AI and Quantum Technology, Digital Assets, Next-Gen Transactions, Sustainability in Action, Bridging the Financial Inclusion Gap, and Talent of Tomorrow.
• A large-scale exhibition will feature 600+ exhibitors and 41 international pavilions, organised into five zones: Technology, Founders and Investors, ESG, Regulation, and Talent, highlighting industry advancements in these key areas.
• New certification programs, including “Leadership in the Future of Finance” developed with BondbloX and the Singapore FinTech Association, will enhance professional skills in AI, digital assets, and sustainability.
• Chief FinTech Officer Sopnendu Mohanty highlighted the festival’s role as a catalyst for digital finance transformation, while Constellar’s Paul Lee highlighted the importance of adapting to emerging technologies for global financial resilience.
• With a wide-ranging agenda showing AI, quantum technology, and digital finance innovation, SFF 2024 aims to drive collaboration among stakeholders to enhance regulatory standards, operational efficiency, and build a sustainable digital economy.

To read this news in detail click here

 

UK Financial Conduct Authority Welcomes First Project Guardian Industry Report on Tokenisation in Asset Management

On 4 November 2024, the UK Financial Conduct Authority (UK FCA) expressed support for the first report on tokenisation in asset management from Project Guardian, led by the Monetary Authority of Singapore (MAS). This report, developed by Project Guardian’s asset management workstream, presents a roadmap for integrating distributed ledger technology (DLT) in asset management, aiming to enhance investment efficiency, transparency, and accessibility.

• The UK FCA views the report as a foundational step toward widespread adoption of DLT and tokenisation within the asset management industry.
• The UK FCA plans to collaborate with Project Guardian participants to address regulatory considerations, evaluating safe tokenisation practices and any regulatory barriers.
• The Guardian Funds Framework, discussed in the report, proposes a phased DLT implementation across asset management processes, including origination, issuance, trading, and custody.
• In 2025, the UK FCA will partner with MAS to explore regulatory adaptations needed for tokenised assets, prioritising consumer protection and market integrity.
• Project Guardian, initiated to globally explore tokenisation in asset management, offers a non-prescriptive guideline through the Guardian Funds Framework, addressing technical and operational challenges.
• The UK FCA has actively participated in Project Guardian, observing international developments in tokenisation to shape regulatory insights and industry standards.
• UK FCA and Project Guardian discuss the importance of establishing digital asset standards and envisioning a shift from product-centric to client-centric models in asset management. The UK FCA also engages with the UK’s Asset Management Taskforce to assess the feasibility of fund tokenisation in the UK market.

To read this news in detail click here

 

Hong Kong’s Securities and Futures Commission Hosts Forum to Drive Responsible Adoption of RegTech

On 4 November 2024, the Securities and Futures Commission (HK SFC) of Hong Kong concluded its Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) Regulatory Technology Forum 2024. This event gathered over 300 participants from government, industry, and the financial sector to advance the adoption of regulatory technology (RegTech) to combat money laundering and terrorism financing, aligning with HK SFC’s commitment to fostering a resilient financial sector with robust compliance practices.

• The forum discussed the responsible adoption of RegTech to enhance AML/CFT measures across Hong Kong’s financial services industry.
• Julia Leung, CEO of the HK SFC, opened the forum by stressing the need for financial institutions to consider RegTech as a cost-effective solution for compliance, warning against the high financial and reputational costs of overlooking money laundering risks.
• Leung introduced the HK SFC’s newly published Report on the Adoption of Regulatory Technology for AML/CFT, which provides a roadmap for RegTech integration, details current industry progress, and showcases practical applications for improved AML/CFT practices.
• Joseph Chan, Acting Secretary for Financial Services and the Treasury, delivered a keynote calling for collaborative efforts to leverage AI and financial technology to strengthen Hong Kong’s financial system against AML/CFT threats.
• A panel led by Dr. Eric Yip, Executive Director of Intermediaries at the HK SFC, with representatives from Hong Kong Customs and Excise, focused on the rising trends in money laundering and the role of RegTech in enabling proactive risk management by processing large data volumes to swiftly detect and mitigate AML/CFT risks.
• HK SFC has reinforced its support for a tech-advanced financial sector capable of upholding stringent AML/CFT standards, contributing to a secure and competitive financial environment in Hong Kong.

To read this news in detail click here

 

United States Securities and Exchange Commission Extends Order Against Pinnacle Investments for Further Compliance

On 4 November 2024, the U.S. Securities and Exchange Commission granted an extension to Pinnacle Investments, LLC, allowing until 1 July 2025 to submit a Proposed Plan of Distribution. The US SEC’s Division of Enforcement requested this extension to ensure comprehensive regulatory compliance and the effective distribution of funds to affected investors.

• Pinnacle Investments has been under US SEC scrutiny since 5 May 2023, when administrative proceedings were initiated against the firm for multiple violations from January 2015 to October 2022, including alleged misleading filings, undisclosed conflicts of interest, and inadequate compliance measures.
• Following these findings, the US SEC imposed financial penalties totaling US $488,717, which, combined with accrued interest, formed a US $495,087.68 Fair Fund under the Sarbanes-Oxley Act to compensate investors impacted by Pinnacle’s violations.
• An initial deadline for submitting the distribution plan was set for 4 November 2024, but the US SEC has now extended it to 1 July 2025 due to delays in appointing administrators and finalising the distribution methodology.
• Specific regulatory breaches by Pinnacle include:
  Section 15(b) of the US Securities Exchange Act of 1934: Pinnacle failed in its obligation to maintain accurate reporting and transparency.
  Sections 203(e) and 203(k) of the US Investment Advisers Act of 1940: Pinnacle neglected to adopt adequate policies for client account reviews and conflict disclosures, violating regulatory requirements.
• Financial penalties imposed in May 2023 comprised:
  • Disgorgement of $83,462.00,
  • Prejudgment interest of $11,874.00,
  • A civil penalty of $393,381.00.
• This extension shows the US SEC’s approach to seeing Pinnacle Investments fulfil its compliance obligations, ensuring that the fund distribution meets regulatory standards and effectively compensates impacted investors.

To read this news in detail click here

 

Monetary Authority of Singapore Expands Efforts to Advance Asset Tokenisation in Financial Services

On 4 November 2024, the Monetary Authority of Singapore (MAS) launched a strategic initiative aimed at accelerating asset tokenisation in financial services. Effective immediately, this effort seeks to bolster Singapore’s leadership in digital finance by developing foundational infrastructure, enhancing liquidity, and creating industry frameworks.

• MAS’s initiative is supported by Project Guardian, a consortium of over 40 financial institutions and policymakers. Since its inception, Project Guardian has conducted trials across six currencies, examining tokenisation’s impact on various financial products. The Guardian Wholesale Network, involving Citi, HSBC, Schroders, Standard Chartered, and UOB, has been created to commercialise tokenisation projects.
• Complementing Project Guardian, MAS has also progressed the Global Layer One (GL1) initiative, launched in 2023, to build digital infrastructure for cross-border transactions with a focus on governance, risk management, and compliance. Key financial players such as BNY Mellon, Citi, J.P. Morgan, and new entrants like Euroclear and HSBC, are collaborating to expand GL1’s interoperability standards across jurisdictions.
• To promote tokenisation adoption, MAS has introduced two industry frameworks: the Guardian Fixed Income Framework (GFIF) for tokenisation in debt capital markets and the Guardian Funds Framework (GFF) for tokenised investment funds. These frameworks standardise tokenisation practices across asset classes.
• A new Common Settlement Facility for tokenised assets has been introduced, including the SGD Testnet, a test network using SGD wholesale central bank digital currency (CBDC). This facility, involving DBS, OCBC, Standard Chartered, and UOB, will allow financial institutions to test payments and securities settlement with programmable and interoperable features.
• MAS Deputy Managing Director, Mr. Leong Sing Chiong, highlighted the strong industry demand for asset tokenisation in areas like fixed income and foreign exchange, stating that MAS aims to establish scalable standards that will drive the growth of Singapore’s capital markets.

To read this news in detail click here

 

Bank Indonesia and Monetary Authority of Singapore Extend Bilateral Financial Arrangement Until 2027

On 4 November 2024, Bank Indonesia (BI) and the Monetary Authority of Singapore (MAS) announced the extension of their bilateral financial arrangement until 1 November 2027. This shift to a three-year term, from the previous one-year renewal, shows the deep cooperation between the two central banks and their commitment to fostering monetary and financial stability amid ongoing global uncertainties.

• The arrangement includes a local currency bilateral swap agreement, allowing each central bank to exchange up to SGD 9.5 billion or IDR 100 trillion, providing financial stability and liquidity in times of market fluctuations.
• It also comprises a USD 3 billion bilateral repo agreement, enabling both banks to obtain USD liquidity using G3 Government Bonds (from the U.S., Japan, or Eurozone nations) as collateral, ensuring access to dollar liquidity, a critical asset in today’s interconnected global economy.
• The extended arrangement signals strong economic ties and collaborative resilience measures to better withstand potential macroeconomic challenges, particularly amid inflationary pressures, geopolitical tensions, and changing trade dynamics.
• By securing this extension, BI and MAS demonstrate their commitment to supporting economic stability, aligning with a broader global trend of strengthened financial alliances to safeguard national economies against regional and international risks.
• This enhanced BI-MAS partnership reinforces economic resilience for both Indonesia and Singapore.

To read this news in detail click here

 

Banque de France and Monetary Authority of Singapore Complete Post-Quantum Cryptography Experiment to Fortify Communication Security

On 5 November 2024, Banque de France and the Monetary Authority of Singapore (MAS) announced the completion of a collaborative post-quantum cryptography experiment aimed at enhancing data security against the future cybersecurity threats posed by quantum computing. This project was conducted over conventional Internet infrastructure and is a foundational step toward creating a “quantum-safe” global financial system.

• The experiment focused on securing email communications with quantum-resistant cryptographic algorithms, crucial for protecting sensitive information typically shared in the financial sector.
• A hybrid approach was used, integrating current and post-quantum cryptographic algorithms to ensure security and compatibility with existing systems, thus facilitating a smooth transition to quantum resilience.
• Quantum-resistant algorithms CRYSTALS-Dilithium and CRYSTALS-Kyber were tested in Microsoft Outlook using a specially developed email plugin, demonstrating both feasibility and practicality within commonly used applications.
• Insights from the technical report suggest a need for broader standardisation beyond cryptographic libraries to include public key infrastructure, key exchange protocols, and secure email systems.
• The findings also indicate potential applications for these algorithms in payment networks, which could bolster data security and integrity in financial transactions.
• Moving forward, Banque de France and MAS will expand the project to explore implementing post-quantum cryptographic protections in cross-border payment networks to guard against cybersecurity risks in international finance.
• Denis Beau, First Deputy Governor of Banque de France, expressed optimism about their ability to secure communications with post-quantum measures, affirming their dedication to ongoing collaboration with MAS.
• Jacqueline Loh, Deputy Managing Director of MAS, highlighted the importance of cryptographic agility for future cybersecurity in the financial sector, emphasising early preparation for the quantum era to ensure trust in digital finance. Through this joint initiative, Banque de France and MAS demonstrate a proactive stance on advancing quantum-resistant security solutions for global finance.

To read this news in detail click here

 

OKX and Komainu Expand Partnership to Enhance Institutional Off-Exchange Custody for Digital Assets

On 5 November 2024, OKX, a global cryptocurrency exchange based in the Republic of Seychelles, and Komainu, a regulated digital asset custodian from Jersey, expanded their partnership to enhance off-exchange custody solutions for institutional clients. This collaboration focuses on bolstering the security and operational efficiency of digital asset trading, a priority for institutional investors seeking secure and compliant digital finance solutions.

• OKX initially joined Komainu’s collateral management platform, Komainu Connect, in June 2023. This integration allows institutions to hold assets securely with Komainu while trading through OKX, reducing counterparty risk through regulated custodial storage.
• The expanded custody solution now supports both spot and derivatives trading on OKX, providing automated profit/loss settlements and 24/7 real-time collateral adjustment, optimising capital efficiency and liquidity for clients.
• Additional features include consolidated transaction and settlement histories accessible through Komainu’s portal, supporting institutional transparency and compliance, and enhancing audit and reporting capabilities.
• Lennix Lai, OKX’s Chief Commercial Officer, emphasised the partnership’s alignment with institutional standards, combining Komainu’s custodial expertise with OKX’s trading infrastructure for secure trading.
• Komainu’s Co-CEOs, Paul Frost-Smith and Robert Johnson, highlighted the partnership’s goal of creating a secure, compliant, and efficient trading network tailored to institutional needs for off-exchange custody.
• The collaboration between OKX and Komainu offers institutional-grade solutions for secure and compliant digital asset trading, addressing core challenges of counterparty risk and operational security in virtual asset markets. This partnership supports the broader goal of building a resilient global digital asset ecosystem, fostering long-term industry growth.

To read this news in detail click here

 

WazirX Announces Fourth Townhall to Address Restructuring Initiatives and Launch New Rebalancing Tool

On 6 November 2024, Indian cryptocurrency platform WazirX announced its fourth Townhall meeting, aimed at updating creditors on the platform’s restructuring efforts following a significant cyberattack in July 2024. WazirX’s restructuring team, including Zettai Pte. Ltd., will introduce two new tools, a Rebalancing Calculator and a Scheme Timeline Calculator, designed to enhance creditor understanding of the ongoing restructuring process.

• The Townhall will be held from 5:30 to 6:30 PM IST (8 PM to 9 PM SGT) on WazirX’s YouTube channel. It will feature a presentation and Q&A session, enabling creditors to interact directly with the Zettai restructuring team.
• Conducted under Singapore’s Scheme of Arrangement framework, the restructuring has received a moratorium from the Singapore Court until 26 January 2025 to finalise and implement a recovery plan.
• WazirX’s first Committee of Creditors (COC) meeting on 15 October 2024 outlined the restructuring strategy to address a 45% asset deficit. With USD 302 million in assets against USD 546.5 million in claims, Zettai is managing the restructuring while resolving an ownership dispute with Binance.
• The plan includes distribution of liquid assets to creditors, legal action to recover illiquid assets, potential partnerships with “white knight” investors, and the possible relaunch of the WazirX exchange. Additionally, a secondary debt market may be established, allowing creditors to sell claims for early liquidity.
• Zettai’s asset breakdown showed USD 284 million in liquid assets and USD 17.7 million in illiquid assets, with USD 12 million allocated for restructuring costs. Creditor outreach will explain the restructuring timeline, with the goal of court sanction by March 2025.
• The Townhall reflects WazirX’s commitment to transparent creditor communication, offering tools and updates to facilitate understanding of the restructuring timeline and efforts to mitigate the financial impact on creditors.

To read this news in detail click here