Quantum Updates 24 | December 2024

Hong Kong Stablecoins Bill to be Introduced in Hong Kong Legislative Council on 18 December 2024

On 6 December 2024, the Hong Kong Government announced the publication of the Hong Kong Stablecoins Bill in the Gazette. The Hong Kong Stablecoins Bill is scheduled for its first reading in the Legislative Council of Hong Kong on 18 December 2024.The Hong Kong Stablecoins bill aims to establish regulatory framework for fiat-referenced stablecoins.

• The HKMA and the Hong Kong Government have, over the past three years, worked to address the risks and opportunities presented by stablecoins, which lead to development of Hong Kong Stablecoins Bill
  • On 12 January 2022, HKMA issued a discussion paper on Hong Kong crypto-assets and stablecoins inviting public feedback on the potential benefits and risks of stablecoins.
  • On 31 January 2023, HKMA consolidated stakeholder feedback, and published conclusions on the discussion paper on Hong Kong crypto-assets and stablecoins, identifying the need for a regulatory regime that balances innovation with financial stability.
  • On 27 December 2023, a public consultation on a legislative proposal was published on a legislative proposal to regulate stablecoin issuers, alongside a sandbox arrangement for testing business models in a controlled environment.
  • On 12 March 2024, the Hong Kong stablecoin issuer sandbox was officially launched, providing a structured testing framework for participants.
  • On 17 July 2024, Consultation conclusions Legislative Proposal to Implement the Regulatory Regime for Stablecoin Issuers in Hong Kong were published, setting out principles and clarifying expectations for stablecoin issuers.
• The Hong Kong Stablecoin bill, if enacted in its current form, will apply to those issuing fiat-referenced stablecoins as part of a business in Hong Kong, or, pegging stablecoins to the Hong Kong dollar, or, marketing stablecoin issuances to the public in Hong Kong.
• The Hong Kong Stablecoin bill, if eneacted in its current form, grants the HKMA supervisory, investigative, and enforcement powers to ensure compliance with the regulatory framework.

To read this news in detail click here

 

ASIC Issues New and Updated Guidance Following DBFO Act Reforms

On 21 November 2024, the Australian Securities and Investments Commission (ASIC) released updated regulatory guidance to help financial advisers and Australian Financial Services (AFS) licensees comply with reforms under the Treasury Laws Amendments (Delivering Better Financial Outcomes and Other Measures) Act 2024 (DBFO Act). These reforms, which take effect on 10 January 2025, introduce new obligations. ASIC’s updates include new information sheets and revisions to existing regulatory guides, with more guidance anticipated as the reforms are implemented.

• ASIC published four updated information sheets addressing key aspects of the DBFO Act:
  • INFO 286, covers ongoing fee arrangements, offering FAQs on obtaining client consent for entering or renewing agreements.
  • INFO 287 explains requirements for obtaining client consent for non-ongoing fees charged to superannuation accounts.
  • INFO 291 outlines obligations for Financial Services Guides (FSGs) and website disclosures, allowing reliance on website disclosures for financial products.
  • INFO 292 provides clarity on obtaining informed client consent for insurance commissions to ensure compliance with conflicted remuneration rules.
• ASIC Updated to two regulatory guides to align with DBFO Act reforms:
  • RG 246: Conflicted and Other Banned Remuneration now includes advice on managing amendments to conflicted remuneration rules.
  • RG 175: AFS Licensing – Conduct and Disclosure reflects changes to FSG guidance, now detailed in INFO 291.
• Minor revisions have been made to RG 126, RG 138, and five other information sheets to maintain consistency with the DBFO Act.
• ASIC stated that the INFO 286 and INFO 287 for advisers managing new advice fee obligations will be effective from 10 January 2025.
• The updates aim to enhance transparency and rebuild trust in financial advice by addressing conflicted remuneration and insurance commission consent requirements.
• ASIC will issue further guidance after the second tranche of the Government’s Delivering Better Financial Outcomes package is legislated.
• Resources about the DBFO Act reforms and ASIC’s regulatory responses are available on the Delivering Better Financial Outcomes package section of the ASIC website.

To read this news in detail click here

 

United Kingdom Financial Conduct Authority Engages with Industry to Shape New Crypto Regulation Framework

On 26 November 2024, the United Kingdom Financial Conduct Authority (FCA) announced progress on creating a regulatory framework for cryptoassets. This follows earlier roundtable discussions with over 100 organisations, including crypto exchanges, banks, trading firms, blockchain analytics companies, and regulators like HM Treasury and the Bank of England. The discussions focused on admissions and disclosures, market abuse prevention, and trading platform regulations, aiming to establish a balanced system that fosters innovation while ensuring market integrity.

• Admissions and disclosures were identified as critical, with support for an industry-led approach tailored to institutional and retail investors. Challenges include handling decentralised cryptoassets, where compliance may rely on publicly available information.
• Participants emphasised the need for a market abuse regime addressing the unique complexities of crypto markets. Cross-border challenges, like data privacy laws, complicate the sharing of market abuse information internationally.
• Regulation of trading platforms focused on ensuring fair, transparent, and efficient trading. Participants supported distinguishing between retail and wholesale markets for customer protections, disclosures, and product offerings.
• Concerns were raised about conflicts of interest, particularly for exchanges that issue their own tokens or engage in brokerage and market-making activities.
• The UK FCA is working with the International Organization of Securities Commissions to implement international regulatory standards and improve information sharing on market abuse.

To read this news in detail click here

 

US CFTC Announces Public Meeting on Market Risk Advisory Committee’s Key Topics for December 10

On 26 November 2024, the United States Commodity Futures Trading Commission (US CFTC) announced a public meeting of its Market Risk Advisory Committee (MRAC) to be held on 10 December 2024. The meeting, focusing on critical market issues, will take place at the US CFTC headquarters in Washington, D.C., from 9:30 a.m. to 12:30 p.m. Eastern Time, with options for virtual participation.

• The meeting will address derivatives and financial markets, central counterparty risk and governance, market structure, climate-related risks, and emerging technologies.
• Discussions will be led by the Central Counterparty Risk & Governance subcommittee on cyber resilience and third-party service providers and by the Market Structure subcommittee on the cash-futures basis trade.
• The meeting is open to the public for in-person attendance or live webcast access via the US CFTC website, with phone and online options for virtual participation.
• Materials presented at the meeting will be available online, and public comments may be submitted through the US CFTC website until 17 December 2024.
• The MRAC advises the US CFTC on market structures, systemic risks, and resilience, engaging with stakeholders like clearinghouses, exchanges, market makers, and end-users.

To read this news in detail click here

 

UK FCA announces Roadmap for UK Regulation in context of Rising Crypto Ownership

On 26 November 2024, the United Kingdom Financial Conduct Authority (UK FCA) released its latest report on consumer attitudes and behaviours towards cryptocurrencies. The findings revealed increased crypto ownership, with 12% of UK adults now holding cryptoassets, up from 10% previously. Awareness of cryptocurrencies also rose from 91% to 93%, reflecting growing public interest. Despite this, the UK FCA reiterated that crypto remains high-risk and largely unregulated, cautioning consumers about potential total investment loss.

• Crypto ownership has grown to 12%, representing over seven million UK adults, with the average value of holdings increasing from £1,595 to £1,842.
• Awareness of cryptoassets climbed to 93%, but 20% of respondents mistakenly believe they would receive compensation for losses, indicating gaps in public understanding of regulatory protections.
• Credit card purchases of cryptoassets have risen to 14%, raising concerns about financial overextension and debt risks.
• Centralised exchanges, including Coinbase and Binance, dominate the market but remain in a regulatory grey area, posing challenges for oversight of trading practices and custodial services.
• Fraud and scams are prevalent, with 10% of crypto-aware individuals encountering fraudulent activity such as social media scams, phishing attacks, and fake endorsements.
• Nearly 38% of respondents reported exposure to crypto advertisements, but only 32% noticed risk warnings, prompting the FCA to strengthen financial promotion oversight.
• 27% of users indicated they would invest more if the sector were regulated, though 58% expressed comfort trading in an unregulated market.
• Staking is gaining popularity, with 27% of users participating in the past year, creating legal uncertainties regarding taxation and classification of staking rewards as income or securities.
• Around 33% of respondents incorrectly believed they could file complaints with the UK FCA for losses, underscoring the need for enhanced consumer education and a comprehensive legal framework for dispute resolution and compensation.

To read this news in detail click here

 

United Kingdom Financial Conduct Authority Published Crypto Regulation Roadmap

On 26 November 2024, the United Kingdom Financial Conduct Authority (UK FCA) released its regulatory roadmap for the cryptoasset market, aimed at fostering a secure and innovative digital asset environment. The announcement follows consumer research showing 12% of UK adults now own cryptoassets, up from 10% in previous years, with 93% public awareness of digital currencies. However, the research revealed widespread misconceptions, including a third of respondents believing they could raise complaints with the UK FCA for financial protection.

• The roadmap outlines a phased regulatory approach, building on prior measures such as anti-money laundering regulations introduced in 2020 and financial promotion rules implemented in late 2023 to prevent misleading advertising.
• Stablecoin regulation will be prioritised in the first half of 2025, focusing on requirements for asset backing, redemption processes, custody, record-keeping, asset segregation, and third-party oversight to ensure stability and transparency.
• The second half of 2025 will see rules introduced for market conduct and governance, covering market abuse, disclosures, and admissions processes. A prudential sourcebook will set out capital and liquidity requirements and risk management standards, while governance reforms will bring crypto firms under the Senior Managers and Certification Regime.
• By late 2025 and early 2026, the UK FCA will focus on trading platforms and intermediaries, introducing rules for platform access, transparency, order handling, execution, and lending and staking activities to clarify ownership rights and enhance disclosures.
• The roadmap aims to finalise all regulations by 2026, with the publication of policy statements and the full implementation of the UK’s comprehensive crypto regime, opening the regulatory gateway.
• Engagement with government, industry stakeholders, and international partners is central to the roadmap, ensuring a balanced framework that supports innovation while enforcing robust safeguards.

To read this news in detail click here

 

MAS Publishes Financial Stability Review 2024: Global Risks, Embracing Technological Change, and Strengthening Resilience

On 27 November 2024, the Monetary Authority of Singapore (MAS) released the 2024 Financial Stability Review, analysing macrofinancial risks, vulnerabilities in the corporate and household sectors, and the health of the financial system. The review also explores emerging themes such as virtual assets, artificial intelligence, and quantum technologies, reflecting Singapore’s forward-looking approach to financial stability.

• Global macrofinancial risks remain high due to geopolitical conflicts, trade tensions, and elevated debt levels. Vulnerabilities include stretched asset valuations, fiscal imbalances, and risks of financial market corrections. Emerging Asian markets are better positioned with stronger buffers but require vigilance.
• Singapore’s corporate sector remains stable, with improved financial conditions and reduced corporate debt levels. SMEs have benefited from better access to credit, though external-facing companies face risks from trade disruptions. Stress tests indicate corporates have sufficient buffers to withstand earnings declines and interest rate increases.
• SME financing conditions show positive momentum with increased borrowers and healthy collateralization of loans, though sectors like construction remain vulnerable.
• Households in Singapore demonstrate strong financial health, supported by wage growth and moderated mortgage rates. Household debt growth is slower than financial asset growth, maintaining manageable debt-to-income ratios. Stabilisation in the private residential market and low liquidity risks further reinforce resilience.
• The financial sector, including banks and non-bank institutions, remains robust. Banks show strong capital positions and low non-performing loan ratios, while insurance providers and investment funds manage liquidity risks effectively. Stress tests confirm domestic systemically important banks (D-SIBs) can withstand severe economic shocks.
• Updated securities regulations enhance transparency, investor protection, and international alignment, with MAS emphasising the adoption of blockchain technology in securities trading to improve efficiency and reduce costs.
• Emerging technologies take centre stage, with MAS advocating for regulations on virtual assets to mitigate volatility and illicit activity risks. Collaborative efforts with global regulators aim to harmonise standards and ensure stability.
• The report discusses the importance of adopting quantum-resilient cryptographic protocols to safeguard data and cybersecurity in the face of quantum computing advancements.
• Responsible AI usage is encouraged to enhance risk management and operational efficiency while ensuring fairness and transparency in financial services.

To read this news in detail click here

 

UK FCA Publishes Consultation on Transparency in Enforcement Investigations

On 28 November 2024, the United Kingdom Financial Conduct Authority (UK FCA) released a follow-up consultation paper refining its proposals for improving transparency in enforcement investigations. This initiative builds on earlier consultations from February 2024, aiming to bolster public confidence while addressing stakeholder concerns about fairness and market stability.

• The updated proposals include assessing the potential impact on the firm as part of the public interest test before announcing investigations.
• Firms will now receive a notice period of ten business days, with an additional two days if the UK FCA proceeds with the announcement after representations are made.
• Public confidence in the financial system and market stability will also be evaluated as part of the public interest test when deciding whether to disclose investigations.
• The UK FCA clarified it will not proactively announce investigations but may confirm them reactively if already public and in the public interest.
• Stakeholders impacted by these changes include authorised firms, registered entities, consumer advocacy groups, and industry organisations.
• The consultation aligns with broader regulatory changes, including restructuring rules under the Markets in Financial Instruments Directive II (MiFID II).
• Proposed changes affect a wide range of regulated entities, including MiFID investment firms, UCITS managers, UK Alternative Investment Fund Managers, and Recognised Investment Exchanges.
• The UK FCA plans to replace MiFID Organisational Regulation requirements with rules in its Handbook, ensuring consistency as the Treasury repeals certain provisions.
• The FCA invites feedback on client categorisation, the rationalisation of MiFID-derived rules, and alignment with the Consumer Duty framework.
• The consultation closes on 17 February 2025, with feedback shaping the final approach to these reforms.

To read this news in detail click here

 

US SEC Accuses Eng Taing and Touzi Capital, LLC of £115 Million Investment Fraud in Crypto Mining and Debt Investments

On 29 November 2024, the United States Securities and Exchange Commission (US SEC) filed a civil enforcement action against Eng Taing and his company, Touzi Capital, LLC, for allegedly defrauding investors through cryptocurrency mining and distressed debt rehabilitation schemes. The complaint, filed in the United States District Court for the Southern District of California, accuses the defendants of raising over £115 million from more than 1,573 investors while misappropriating funds and concealing significant investment risks.

• Touzi Capital, LLC raised approximately £94 million for cryptocurrency mining ventures and £23 million for distressed debt rehabilitation schemes, both marketed as high-return, stable investments.
• The US SEC alleges that the defendants misrepresented the speculative and high-risk nature of these investments, omitting key factors like fluctuating energy costs and unreliable third-party debt obligations.
• Investors were promised that funds would be used exclusively for their chosen investments, but the SEC claims funds were commingled, misallocated, and diverted to unrelated projects and personal expenses.
• Eng Taing allegedly transferred approximately £3.1 million to his private accounts and used investor money for personal luxuries, such as country club memberships and private school fees.
• Cryptocurrency mining projects suffered from underfunding, faulty equipment, and unmanageable energy costs, while the distressed debt programme faced defaults, including a major debtor’s bankruptcy in March 2023.
• Despite mounting financial instability, Taing allegedly continued to solicit investments without disclosing operational challenges or financial risks.
• By late 2023, Touzi Capital ceased honouring withdrawal requests and stopped communicating with investors, leaving many with substantial losses.
• The US SEC claims violations of Sections 5(a), 5(c), and 17(a) of the US Securities Act of 1933, as well as Section 10(b) and Rule 10b-5 of the US Securities Exchange Act of 1934, which address fraud and deceptive practices in securities offerings.
• The US SEC is seeking remedies including permanent injunctions against further violations, disgorgement of illicit profits with prejudgment interest, civil penalties, and a lifetime ban on Taing holding directorial or executive roles in public companies.

To read this news in detail click here

 

MAS Imposes SG$2.4 Million Civil Penalty on JPMorgan Chase for Misconduct in OTC Bond Transactions

On 2 December 2024, the Monetary Authority of Singapore (MAS) imposed a civil penalty of SG$2.4 million on JPMorgan Chase Bank, N.A. for failing to prevent and detect misconduct by its relationship managers in twenty-four over-the-counter bond transactions. The penalty highlights systemic deficiencies in JPMorgan Chase’s internal controls and processes that led to client overcharges.

• Between November 2018 and September 2019, relationship managers at JPMorgan Chase conducted over-the-counter bond transactions where clients were charged spreads exceeding agreed rates, often without disclosure of interbank pricing or the additional spreads.
• In some instances, relationship managers misrepresented interbank prices or spreads. In other cases, they omitted to inform clients about higher-than-agreed spreads.
• JPMorgan Chase’s actions contravened sections 201(c) and 201(d) of the Singapore’s Securities and Futures Act, which prohibit false or misleading statements and omissions of material facts in connection with capital market products.
• Under section 236C of the Singapore Securities and Futures Act, MAS held JPMorgan Chase liable for failing to prevent or detect its employees’ misconduct, citing negligence as a key factor.
• JPMorgan Chase admitted liability and paid the SG$2.4 million civil penalty. The bank refunded affected clients for overcharged amounts and enhanced pricing frameworks and internal controls have been implemented to prevent recurrence.
• The penalty regime in Singapore allows MAS to impose fines up to three times the profit gained or loss avoided from contraventions, with a minimum penalty of SG$100,000 for corporations.

To read this news in detail click here

 

Australia and Singapore Unite to Boost Sustainable Infrastructure and Decarbonisation Efforts in Southeast Asia

On 3 December 2024, the Monetary Authority of Singapore announced collaboration with the Australian Government, facilitated through Export Finance Australia, which has committed US$50 million to Singapore’s Financing Asia’s Transition Partnership (FAST-P) initiative. This joint effort aims to accelerate Southeast Asia’s clean energy transition and sustainable infrastructure development.

• FAST-P, launched by MAS at COP28 in 2023, is a blended finance platform designed to mobilise international concessional and commercial capital for Asia’s decarbonisation and climate resilience. Singapore has pledged up to US$500 million in concessional funding to be matched by contributions from international partners.
• The US$50 million investment is the first allocation from Australia’s A$2 billion Southeast Asia Investment Financing Facility (SEAIFF), which seeks to deepen economic ties with Southeast Asia and support sustainable infrastructure and clean energy projects.
• Pentagreen Capital, a platform founded by HSBC and Temasek, will manage FAST-P’s Green Investments Partnership (GIP) funding. Priorities include renewable energy, electric vehicle infrastructure, sustainable transport, and water management projects.
• This collaboration aligns with the goals of the “Invested: Australia’s Southeast Asia Economic Strategy to 2040 report” report, which discusses economic engagement and sustainable development as key areas of focus.
• Focus areas are renewable energy, climate-resilient infrastructure, and innovative sustainable projects which remain central to the initiative’s strategy to drive impactful investments in the region.

To read this news in detail click here

 

MAS and NUS Extend Term Professorship Programme for Five More Years

On 4 December 2024, the Monetary Authority of Singapore (MAS) and the National University of Singapore (NUS) announced the renewal of their partnership, extending the MAS Term Professorship in Economics and Finance for another five years. Originally launched in 2009, the programme has been expanded to include industry practitioners and emerging academic talents, alongside renowned scholars, to enhance its focus on practical and policy-oriented challenges.

• The programme aims to attract distinguished global scholars and seasoned industry professionals as Visiting Professors to foster innovative research and policy insights.
• Over 15 years, the MAS Term Professorship has hosted more than 20 globally recognised academics, benefiting local research and policymakers with fresh perspectives.
• The renewal broadens the scope to include visitors with deep policy or private sector experience, strengthening networks between Singapore and global experts.
• The programme includes contributions from the NUS Business School, Department of Economics, and Lee Kuan Yew School of Public Policy, showcasing its interdisciplinary reach.
• Discussions facilitated by the programme address diverse issues, from international macroeconomics and finance to governance and public policy.
• This collaboration is a practical example of the importance of connecting academia and industry to enhance the learning ecosystem and deliver impactful research.

To read this news in detail click here

 

US CFTC Reports US $17.1 Billion in Enforcement Action for FY 2024

On 4 December 2024, the US Commodity Futures Trading Commission (CFTC) announced the Enforcement action for fiscal year 2024, securing US $17.1 billion in monetary relief for fiscal year 2024, including US $2.6 billion in civil penalties and US $14.5 billion in disgorgement and restitution. These results highlight the agency’s aggressive enforcement across traditional and digital markets, with a strong focus on protecting market integrity and participants.

• The US CFTC achieved its largest-ever enforcement action with a US $12.7 billion judgment against FTX and Alameda Research for fraudulent operations, with ongoing litigation against other defendants, including Samuel Bankman-Fried.
• Binance, its founder Changpeng Zhao, and a former compliance officer were fined over US $2.8 billion for operating an unregistered derivatives exchange and evading regulations.
• Voyager Digital’s former CEO faced fraud charges in a case validated by a federal court, with litigation ongoing.
• The US CFTC filed its first fraud case in the voluntary carbon credit market, penalising CQC Impact Investors LLC US $1 million for submitting false data to inflate carbon credits.
• Penalties for market manipulation included US $55 million against Trafigura Trading LLC and US $48 million against TotalEnergies Trading SA for distorting benchmark prices in fuel and gasoline markets.
• Fraudulent schemes targeted retail investors, including a US $283 million Ponzi scheme by The Traders Domain FX Ltd. and a US $161 million cattle-trading fraud.
• Compliance failures led to stringent penalties, including US $200 million against J.P. Morgan Securities LLC and US $75 million against The Toronto Dominion Bank for deficiencies in trade surveillance and electronic communications.
• Freepoint Commodities LLC paid US $91.5 million for misusing confidential information, with other insider tipping schemes pursued to protect market integrity.
• The whistleblower programme received over 1,700 tips, awarding US $42 million to whistleblowers and recovering US $162 million through enforcement actions.
• The US CFTC launched the Surveillance and Enforcement Data Analytics Office to enhance detection and investigation of misconduct, leveraging advanced analytics and market surveillance.
• Collaborative actions with federal, state, and international regulators resulted in outcomes like a US $68 million fraud case targeting elderly investors.

To read this news in detail click here

 

MAS and ABS Announce Launch of Electronic Deferred Payment Solutions in Mid-2025 and Revised Deadline for Corporate Cheque Processing

On 5 December 2024, the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) unveiled updates to modernise Singapore’s payment ecosystem. A consultation paper was released to outline these initiatives, which include the launch of two new electronic payment solutions—Electronic Deferred Payment (EDP) and EDP+—by mid-2025, and the extension of the corporate cheque processing deadline to 31 December 2026.

• Introduction of EDP and EDP+ Solutions as the new digital payment options replicate cheque functions while enhancing security and efficiency. Accessible via existing banking platforms, they will replace post-dated cheques and cashier’s orders.
• Singapore banks will stop issuing corporate cheque books from 1 July 2025. Corporate cheque processing will continue until 31 December 2026, giving businesses additional time to adapt.
• Retail cheques and cashier’s orders will remain available, with USD-denominated cheques supported via the new CTS Lite system. CTS Lite, a cloud-based solution, will replace the current Cheque Truncation System in early 2027 to handle reduced cheque volumes cost-effectively.
• MAS and ABS will run outreach programmes to guide businesses and individuals, particularly those less familiar with digital banking, on transitioning to electronic payment systems.
• Cheque processing fees will continue to be waived for seniors aged 60 and above as of 31 December 2025 to ease their transition to e-payments.
• MAS is seeking feedback on potential legal frameworks for EDP and EDP+ adoption and addressing issues such as failed or cancelled payments under the new systems.
• Stakeholders can provide feedback on the consultation paper by 17 January 2025, either via the designated portal or email.

To read this news in detail click here