IMF Explores Tokenisation’s Impact on Financial Market Inefficiencies
The International Monetary Fund (IMF) has released its latest Fintech Note, ‘Tokenization and Financial Market Inefficiencies (Note 2025/001)‘, examining how tokenisation, a financial innovation powered by digital ledger technology (DLT), could address inefficiencies in financial markets. The report, authored by Itai Agur, Germán Villegas-Bauer, Tommaso Mancini-Griffoli, Maria Soledad Martinez Peria, and Brandon Tan, provides a structured analysis of tokenisation’s potential to reduce market frictions while highlighting the associated risks.
- The IMF report defines Tokenisation as the creation of assets or asset representations on a shared, trusted, and programmable digital ledger, with applications across asset issuance, trading, servicing, and redemption.
- The report categorises financial inefficiencies that tokenisation may address into two areas i.e. Market frictions, including asymmetric information, transaction costs, search frictions, and counterparty risks; and Externalities, internalities, and market power, where tokenisation could enhance liquidity, encourage innovation, and lower entry barriers.
- The IMF references existing tokenisation pilot projects, such as Project Agorá, a Bank for International Settlements (BIS) initiative with seven central banks exploring tokenised commercial bank deposits and central bank money integration. Other examples include Project Global Layer 1 (Monetary Authority of Singapore) and Drex (Central Bank of Brazil), which examine DLT-based financial asset issuance and settlement.
- By 2030, tokenised assets could account for 10% of global GDP, according to Boston Consulting Group projections.
- The IMF report discusses various financial jurisdictions, including the United States, United Kingdom, European Union, and key Asian markets, engaging in pilot programmes to test tokenised securities and central bank digital currencies (CBDCs).
- The Bank of England, Swiss National Bank, and the Federal Reserve Bank of New York are among central banks evaluating how tokenised bank deposits can be integrated into monetary systems.
- The IMF report made its finding that the success of tokenisation in mainstream finance will depend on regulatory clarity, technological reliability, and market acceptance.
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Czech National Bank Prepares for Oversight Role Under EU MiCA Regulation
On 06 December 2024, the Czech National Bank (CNB) was designated as the competent authority under the European Union’s Markets in Crypto-Assets Regulation (MiCA) in accordance with the draft Act on the Digitalisation of the Financial Market. The law was approved by the Chamber of Deputies on 06 December 2024 and forwarded to the Senate on 30 December 2024. The legislation is expected to take effect the day after its promulgation, enabling the CNB to begin processing applications and notifications under MiCA Regulation (EU) 2023/1114.
- The Act on the Digitalisation of the Financial Market is currently under discussion in the Parliament of the Czech Republic and, once enacted, will authorise the CNB to regulate and supervise the crypto-asset market under MiCA’s provisions.
- Under the proposed draft law, the CNB will oversee crypto-asset applications and notifications, including:
- White paper notifications for crypto-assets that are not classified as asset-referenced tokens (ARTs) or electronic money tokens (EMTs).
- Authorisation applications from non-bank ART issuers and white paper approvals from ART issuers that are banks.
- Notifications from EMT issuers intending to offer EMTs publicly or seeking admission to trading.
- Authorisation applications for crypto-asset service providers (CASPs) and notifications from entities already regulated by the CNB, such as credit institutions, central securities depositories, investment firms, electronic money institutions, management companies, and regulated market operators.
- Entities operating under a trade licence before 30 December 2024 will be permitted to continue operations under transitional provisions.
- CASPs applying by 31 July 2025 will be allowed to operate until a final decision is made, but no later than 01 July 2026.
- The CNB will be ready to begin receiving applications as soon as the Act on the Digitalisation of the Financial Market takes effect, with implementation timelines dependent on final legislative approval.
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Czech National Bank to Explore Expansion of Investment Portfolio
On 30 January 2025, the Czech National Bank (CNB) held a Bank Board meeting to review its international reserve management for 2024 and approved an assessment of potential investments in additional asset classes. The initiative, proposed by Governor Aleš Michl, aims to explore whether expanding the CNB’s investment portfolio would enhance diversification and returns. The evaluation will determine the feasibility of such changes, but no immediate modifications will be made to the CNB’s reserve portfolios.
- The CNB has been diversifying its investments over the past two years to broaden reserve management strategy.
- Expanding investments into new asset classes is now under consideration to further improve portfolio diversification and financial returns.
- The Bank Board’s review of international reserve management for 2024 led to the approval of a detailed analysis of additional investment options.
- The CNB’s evaluation aims to determine whether alternative assets align with the CNB’s diversification and financial stability objectives.
- No changes will take effect until the analysis is completed. The assessment is expected to take place over the coming months, but no specific timeline for completion has been set.
- Stakeholders and market participants will be informed of any developments through the CNB’s official publications.
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India’s Union Budget 2025-26 updates Cryptocurrency Tax Regulations and Compliance Measures
On 1 February 2025, the Indian government released the Union Budget for the financial year 2025-26. The Indian budget 2025-2026 upholds the existing 30% tax on cryptocurrency income while introducing new tax compliance measures and stricter penalties for unreported gains.
- The Indian government continues to classify cryptocurrency as a high-risk speculative asset, prohibiting investors from offsetting losses against other income sources.
- Cryptocurrency entities are now required to report transaction details under Section 285BAA of the Indian Income Tax Act.
- A 70% penalty has been introduced for undisclosed gains from cryptocurrency transactions, retroactively applying to profits made over the past 48 months. This measure targets an estimated $3.8 billion in unreported digital asset earnings from the 2021–2023 crypto boom.
- India’s Economic Affairs Secretary Ajay Seth confirmed that the government is conducting a “comprehensive review” of cryptocurrency policies to ensure regulatory clarity while maintaining oversight.
- Policy divisions persist between the Reserve Bank of India (RBI) and the Indian Finance Ministry over the approach to digital assets.
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UK FCA Intensifies Crackdown on Misleading Financial Adverts with Crypto Asset, Debt Solutions, and Claims Management Company
On 07 February 2025, the United Kingdom Financial Conduct Authority (UK FCA) published its annual report detailing regulatory actions taken in 2024, with an increase in enforcement against misleading financial promotions, particularly in the crypto asset sector, debt solutions, and claims management companies (CMCs).
- The UK FCA reported that nearly 20,000 financial promotions were withdrawn or amended in 2024, representing a 97.5% increase from 2023.
- A total of 9,197 misleading CMC-related promotions were flagged and removed, particularly those relating to housing disrepair and motor finance claims.
- The regulator issued 2,240 warnings against unauthorised or potentially fraudulent firms.
- Social media influencers, or “finfluencers,” were a major focus of enforcement, with 20 individuals interviewed under caution for their involvement in illegal financial promotions.
- The UK FCA introduced the Section 21 Gateway, requiring firms to obtain regulatory permission before approving financial promotions for unauthorised persons, ensuring compliance before promotions reach consumers.
- The regulator also urged social media platforms to take proactive measures to prevent the spread of misleading and illegal financial advertisements.
- The UK FCA has commenced collaboration with social media platforms and other regulatory bodies to prevent misleading promotions and maintain market integrity.
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US CFTC to Hold CEO Forum to Discuss Launch of Digital Asset Markets Pilot
On 07 February 2025, the United States Commodity Futures Trading Commission (US CFTC) announced plans to hold a CEO Forum with leading industry firms to discuss the launch of the US CFTC Digital Asset Markets Pilot, an initiative focused on integrating tokenized non-cash collateral, such as stablecoins, into the regulated financial ecosystem.
- The CEO Forum will include market participants, including Circle, Coinbase, Crypto.com, MoonPay, and Ripple, who will discuss the framework and implementation of the US CFTC’s digital asset pilot program.
- The pilot program is structured as a US regulatory sandbox, allowing digital asset markets to operate within a defined framework.
- The initiative follows previous US CFTC pilot programs, which date back to the 1990s and have historically facilitated financial market innovation.
- The Global Markets Advisory Committee (GMAC), recommended expanding the use of non-cash collateral via distributed ledger technology, as the foundation for this pilot program.
- The US CFTC’s digital asset markets pilot will serve as a testing ground for innovation while maintaining regulatory oversight, with industry leaders contributing to its development.
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US SEC Grants Temporary Exemption from Rule 13f-2 Compliance and Form SHO Reporting of US Securities Exchange Act
On 07 February 2025, the United States Securities and Exchange Commission (US SEC) issued an Order Granting Temporary Exemption Pursuant to Section 13(f)(3) of the United States Securities Exchange Act of 1934 from Compliance with Rule 13f-2 and Form SHO. granting a temporary exemption from compliance with Rule 13f-2 and Form SHO, extending the reporting requirements for institutional investment managers until 02 January 2026.
- The original compliance deadline of 02 January 2025 has been extended by one year, and the first US SEC Form SHO filings, initially due by 14 February 2025, will now be due by 17 February 2026, covering the January 2026 reporting period.
- US SEC Rule 13f-2, adopted on 13 October 2023, requires institutional investment managers meeting reporting thresholds to file Form SHO within 14 calendar days after each month-end through the US SEC’s EDGAR system. The US SEC intends to aggregate and publish short sale-related data to enhance market transparency.
- The decision follows concerns raised by the United States Financial Information Forum, the Securities Industry and Financial Markets Association, the Managed Funds Association, and the Alternative Investment Management Association.
- These organisations cited operational challenges in implementing Form SHO reporting, particularly system changes, data capture issues, and compliance testing delays.
- The US SEC released the US SEC Form SHO XML technical specifications and updated the EDGAR Filer Manual on 16 December 2024, but industry participants argued that the short turnaround time before the 02 January 2025 compliance deadline was insufficient for implementation.
- Firms required additional time for software development, compliance integration, and risk management. Many companies were also subject to year-end IT code freezes, further delaying necessary system updates.
- The temporary exemption under Section 13(f)(3) of the US Securities Exchange Act allows institutional investment managers to finalise systems, complete testing, and address compliance concerns before full implementation in 2026.
- The US SEC clarified that this delay does not alter the legal framework for short selling and stated that “abusive naked short selling as part of a manipulative scheme remains unlawful.”
- The US SEC may continue publishing failures to deliver data for equity securities twice per month and maintain existing transparency measures through self-regulatory organisations until the new compliance deadline.
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US Federal Court Orders New York Resident to Pay Over $1.5 Million in Digital Assets Fraud Case
On 10 February 2025, the United States Commodity Futures Trading Commission (US CFTC) announced that the United States District Court for the Eastern District of New York had entered an order against Rashawn Russell, a New York resident, in a US CFTC enforcement action. The court found Russell liable for fraudulent solicitation and misappropriation of investor funds intended for digital asset trading and ordered him to pay over $1.5 million in restitution to victims.
- The order permanently bars Russell from engaging in any activities that violate the Commodity Exchange Act and US CFTC regulations.
- He has been banned from trading in any US CFTC-regulated markets for eight years and is prohibited from registering with the US CFTC, soliciting investments, or trading on behalf of third parties.
- The enforcement action, originally filed on 11 April 2023, alleges that between November 2020 and August 2022, Russell fraudulently solicited investments, misrepresenting the structure, size, and performance of his purported digital asset trading fund.
- The U.S. District Court for the Eastern District of New York issued an order on 16 January 2025, requiring him to pay over $1.5 million in restitution and imposing an eight-year trading ban.
- In a parallel criminal case, Russell was sentenced to over three years in prison, followed by three years of supervised release, and was ordered to pay restitution to his victims.
- The US CFTC acknowledged the assistance of the US Department of Justice, Fraud Section, in prosecuting the case, which was handled by US CFTC’s Division of Enforcement staff.
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US Federal Court Orders Florida Resident to Pay $7.6 Million for Digital Asset Fraud
On 10 February 2025, the United States Commodity Futures Trading Commission (US CFTC) announced that the United States District Court for the District of Massachusetts had entered a consent order against Randall Crater, a resident of Heathrow, Florida, for his role in the fraudulent My Big Coin digital asset scheme. The court ordered Crater to pay over $7.6 million in restitution to victims, with a dollar-for-dollar credit for payments made under a parallel criminal case.
- The consent order permanently bars Crater from trading in US CFTC-regulated markets, engaging in commodity-related transactions, and registering with the US CFTC.
- Crater was found to have violated multiple provisions of the United States Commodity Exchange Act (US CEA) and US CFTC regulations by engaging in fraudulent solicitation, misrepresentation, and misappropriation of investor funds.
- The US CFTC alleged that Crater falsely claimed that My Big Coin (MBC) was backed by gold, actively traded on currency exchanges, and had real economic value, when in reality, it was a non-existent asset designed to deceive investors.
- The court’s order appoints the United States National Futures Association as the Monitor to oversee restitution compliance, though the US CFTC cautioned that victims might not fully recover their losses.
- In a parallel criminal case, United States v. Randall Crater, Crater was convicted on 21 July 2022 of wire fraud, unlawful monetary transactions, and operating an unlicensed money-transmitting business.
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BaFin Warns Consumers About Unauthorised Crypto Trading Bots Operating in Germany
On 11 February 2025, the Federal Financial Supervisory Authority (BaFin) of Germany issued a public warning against a series of online platforms offering AI-controlled algorithmic trading for financial instruments and cryptoassets without the required authorisation. The regulator cautioned consumers about engaging with these platforms due to their lack of transparency and regulatory oversight.
- The platforms under investigation include ZivaProfit7 Ai, Velmo Coin AI, Zolintex AI, LuxiGain AI, GrabCapitaL4u Ai, TivanaFund AI, Brixo Gain AI, BrixoFund AI, Pamborich Ai, Zono Cash AI, Econarix AI, ZorboFund AI, GAINTOMO AI, TrovaFund AI, GlipoRich AI, ViznoFund AI, and GrivoGain AI.
- BaFin stated that these websites appear to be unauthorised and display identical text designs and layouts, raising concerns about their legitimacy. They provide no clear details regarding their registered offices.
- Under German law, any entity offering financial, investment, or cryptoasset services must obtain the necessary authorisation from BaFin. Consumers are urged to verify a company’s regulatory status via BaFin’s online database before engaging with any financial service provider.
- The warning is issued under section 37 (4) of the German Banking Act (Kreditwesengesetz – KWG) and section 10 (7) of the German Cryptomarkets Supervision Act (Kryptomärkteaufsichtsgesetz), which allow BaFin to take public action against unauthorised financial service providers.
- The regulator’s investigation into these platforms is ongoing, and further enforcement actions may follow. BaFin strongly advises consumers to exercise caution, conduct thorough due diligence, and report any suspicious activities directly to the regulator.
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Singapore to Establish New Payments Entity to Strengthen National Payment Schemes
On 12 February 2025, the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) announced the creation of a new payments entity to consolidate the administration and governance of Singapore’s national payment schemes. This initiative aims to enhance coordination, drive innovation, and strengthen the resilience of the country’s payment infrastructure.
- The new entity will oversee key national payment schemes, including FAST (Fast And Secure Transfers), Inter-bank GIRO, PayNow, and the Singapore Quick Response Code (SGQR). Currently, these schemes are managed by multiple entities, including MAS, ABS, the Singapore Clearing House Association (SCHA), and the Infocomm Media Development Authority (IMDA).
- Consolidating these schemes under a single entity aims to enhance coordination, and optimise growth opportunities for financial institutions and payment service providers.
- Senior representatives from MAS and the financial sector will govern the entity, while industry committees will engage banks, payment service providers, and businesses in shaping the national payments strategy.
- The transition will not affect the ongoing operations or scheme rules, and further details, including the entity’s name, governance structure, and board composition, will be announced later in 2025.
- The entity will function as an administrative body rather than a regulated financial institution. Final implementation details and operational frameworks will be confirmed later in 2025 as MAS, ABS, and stakeholders finalise the transition process.
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