Quantum Updates 37 | March 2025

FATF Updates Grey List: New Jurisdictions Added for Increased Regulatory Monitoring

The Financial Action Task Force (FATF) published its latest update on jurisdictions under increased monitoring, commonly known as the Grey List, dated 21 February 2025. The list includes countries that have deficiencies in anti-money laundering (AML), counter-terrorist financing (CFT), and proliferation financing (PF) but have committed to addressing these issues within specified timeframes. These jurisdictions are subject to enhanced FATF monitoring and are working with FATF-style regional bodies (FSRBs) to implement financial sector reforms.

• The latest FATF Grey List Update includes Lao PDR and Nepal, which have been newly added, requiring them to strengthen their respective AML/CFT frameworks.
• The updated Grey List includes Algeria, Angola, Bulgaria, Burkina Faso, Cameroon, Côte d’Ivoire, Croatia, Democratic Republic of the Congo, Haiti, Kenya, Lao PDR, Lebanon, Mali, Monaco, Mozambique, Namibia, Nepal, Nigeria, South Africa, South Sudan, Syria, Tanzania, Venezuela, Vietnam, and Yemen. These jurisdictions must implement compliance reforms to address financial system vulnerabilities.
• Countries that submitted progress reports since October 2024 include Bulgaria, Burkina Faso, Cameroon, Croatia, Democratic Republic of the Congo, Kenya, Mali, Mozambique, Namibia, Nigeria, Philippines, South Africa, South Sudan, Tanzania, Venezuela, and Vietnam.
• Deferred reporting was noted for Algeria, Angola, Côte d’Ivoire, Haiti, Lebanon, Monaco, Syria, and Yemen, which means their compliance status remains unchanged from previous FATF assessments.
• The FATF update does not impose mandatory enhanced due diligence measures but calls for a risk-based approach in dealings with Grey List countries. Financial institutions should apply risk assessments without engaging in broad de-risking measures that could disrupt humanitarian assistance, non-profit organisation (NPO) activities, and remittances.
• Countries on the Grey List are expected and should aim to align their AML/CFT policies with United Nations Security Council Resolution 2761 (2024), which provides humanitarian exemptions to UN-imposed asset-freezing measures.

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Latvia’s Saeima Re-Elects Two Members to the Council of Latvijas Banka for a Second Term

On 6 March 2025, the Saeima of Latvia confirmed the re-election of Māris Kālis and Zita Zariņa for a second term as Members of the Council of Latvijas Banka. Their renewed appointments extend Māris Kālis’ tenure until 12 March 2030 and Zita Zariņa’s tenure until 14 April 2030.

• Māris Kālis Re-Appointed as Deputy Governor and he will oversee financial stability, macroprudential supervision, financial investment management, market operations, financial planning, control systems, and human resource management.
• Zita Zariņa will continue to lead cash and non-cash payment systems, payment infrastructure development, the digital euro project, innovation, data and statistics, audit, and information technologies.
• Māris Kālis formerly worked at Arthur Andersen, an international auditing and business advisory firm, Engaged in projects with the European Central Bank (ECB) and the International Monetary Fund (IMF) and he is a Academic contributor at the University of Latvia and the Latvian Association of Certified Auditors.
• Zita Zariņa previously served as a Member of the Council of the State Audit Office, where she was Director of the Audit and Methodology Department, Held senior roles at the Central Finance and Contracting Agency (CFCA) and Worked at the European Commission, holding positions as Financial Manager at the Directorate-General for Enlargement and Phare Project Manager at the European Commission Representation in Latvia.

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Hong Kong’s SFC Warns Public About Linkbex for Suspected Virtual Asset Fraud

On 6 March 2025, the Hong Kong Securities and Futures Commission (HK SFC) issued a public warning against Linkbex, an entity suspected of engaging in fraudulent virtual asset activities. The HK SFC noted that Linkbex falsely claims affiliations with seven HK SFC-licensed firms and misled investors by citing a fake anti-money laundering (AML) investigation to appear legitimate.

• Linkbex falsely associated itself with HK SFC-licensed corporations to deceive investors and gain credibility.
• At the HK SFC’s request, the Hong Kong Police Force has taken action to block access to Linkbex’s website to protect the public.
• Linkbex has been added to the HK SFC’s Suspicious Virtual Asset Trading Platforms Alert List on 6 March 2025.

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US SEC Reviews Nasdaq’s Proposal to List Canary HBAR ETF Under Commodity-Based Trust Shares Rule

On 7 March 2025, the United States Securities and Exchange Commission (US SEC) initiated its review of Nasdaq’s proposal to list and trade shares of the Canary HBAR ETF under Nasdaq Rule 5711(d). This proposal, detailed in the document “Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, to List and Trade Shares of the Canary HBAR ETF under Nasdaq Rule 5711(d) (Commodity-Based Trust Shares),” was filed under Release No. 34-102540; File No. SR-NASDAQ-2025-018. The ETF, by Canary Capital Group LLC, is designed to provide investors with exposure to Hedera Hashgraph’s native token (HBAR) without direct ownership. The trust’s assets will be under custody of BitGo Trust Company, Inc. and Coinbase Custody Trust Company, LLC, and the U.S. Bank, N.A. will manage cash holdings. The US SEC has announced that it will assess whether the ETF meets regulatory standards under the United States Securities Exchange Act of 1934 , Section 6(b)(5).

• The Canary HBAR ETF will operate under Nasdaq Rule 5711(d) as a Commodity-Based Trust Share, where each share represents a fractional undivided interest in the trust’s HBAR holdings.
• Nasdaq in its application states that the ETF’s listing will include surveillance-sharing agreements and transparency mechanisms to prevent fraudulent and manipulative practices.
• The ETF’s Net Asset Value will be calculated daily using the CoinDesk Hedera USD CCIX 30min NY Rate, aggregating market prices across multiple digital asset exchanges.
• The ETF must meet Listing and Compliance Requirements of Nasdaq’s initial and continued listing requirements, which includes:
  • A minimum of 40,000 shares outstanding at the time of listing.
  • Daily NAV dissemination for price transparency.
  • Custodian segregation of assets for investor protection.
  • Provisions for both in-kind and cash-based creation/redemption of shares.
  • Strict surveillance and compliance measures to detect market irregularities.
• The US SEC will review the proposal within 45 days of its publication in the Federal Register, extendable to 90 days if further analysis is required.
• Approval depends on whether Nasdaq demonstrates sufficient safeguards against market manipulation, as mandated under Section 6(b)(5) of the United States Securities Exchange Act of 1934.
• If approved, the Canary HBAR ETF would be the first publicly traded investment vehicle offering regulated exposure to Hedera Hashgraph (HBAR).

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US SEC Reviews Nasdaq’s Proposal to List Grayscale Polkadot Trust Holding Polkadot (DOT) Tokens

On 7 March 2025, the United States Securities and Exchange Commission (US SEC) published a notice regarding Nasdaq Stock Market LLC’s proposal to list and trade shares of the Grayscale Polkadot Trust (DOT) under Nasdaq Rule 5711(d). The proposal, originally filed on 24 February 2025, seeks regulatory approval to offer investors indirect exposure to Polkadot (DOT) through a publicly traded investment vehicle. The US SEC has invited public comments before determining whether the proposal aligns with securities regulations, particularly regarding investor protection and market integrity.

• The Grayscale Polkadot Trust is structured as a passive investment vehicle, allowing investors to gain exposure to DOT without directly holding the asset.
• Nasdaq in its application submits that the trust meets the requirements of the United States Securities Exchange Act of 1934, Section 6(b)(5) and US SEC Rule 19b-4.
• The trust’s institutional partners are Grayscale Investment Sponsors, LLC (sponsor), Coinbase Custody Trust Company, LLC (custodian), BNY Mellon Asset Servicing (administrator and transfer agent), and Foreside Fund Services, LLC (marketing agent).
• Each share represents a fractional undivided interest in the trust’s DOT holdings, with shares issued in “Baskets” of 10,000 units, available only to Authorised Participants (APs) for direct creation and redemption.
• Market surveillance measures include reliance on the CoinDesk DOT Reference Rate and Coinbase Custody’s cold storage solutions to mitigate security risks and prevent market manipulation.
• The US SEC’s review process falls under Section 19(b)(2) of the Exchange Act, requiring a decision within 45 days, extendable to 90 days if further assessment is needed.
• If approved, the Grayscale Polkadot Trust would become one of the first publicly traded products offering exposure to Polkadot (DOT).

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FINMA Updates on Licensing Status for Portfolio Managers and Trustees in Switzerland

On 11 March 2025, the Swiss Financial Market Supervisory Authority (FINMA) published a Press Release on the licensing status of portfolio managers and trustees under the Swiss Financial Institutions Act (FinIA), which came into effect on 1 January 2020. The update discusses the progress of applications, regulatory challenges, and ongoing compliance requirements for licensed institutions.

• Since the introduction of the Swiss FinIA licensing requirement, FINMA has processed 94% of 1,699 applications submitted before the December 2022 deadline. Out of 1,864 total applications, 1,532 have been approved, 131 were withdrawn, and 94 remain under review, mainly due to compliance concerns or ongoing investigations.
• Despite early guidance, over 40% of applications required at least five rounds of amendments before approval, with most submissions occurring in the last four months of the transitional period, causing delays.
• Licensed institutions must obtain FINMA approval for regulatory changes, and to date, 3,221 change requests have been processed.
• FINMA anticipates handling around 1,700 requests annually with continuous regulatory supervision.
• The number of escalations to FINMA and firms under intensive supervision increased in the second half of 2024.
• Portfolio managers and trustees remain under the two-tier supervisory model, where Swiss Supervisory Organisations (SOs) oversee routine compliance, while Swiss FINMA intervenes in cases of serious regulatory breaches.
• FINMA’s CEO Stefan Walter stated that the licensing regime has raised compliance standards across the industry, and ensures that clients can trust portfolio managers and trustees to meet regulatory requirements.
• Marianne Bourgoz Gorgé, Head of Asset Management, Swiss FINMA confirmed that the few remaining applications involve complex cases, and Swiss FINMA will actively work to finalise outstanding approvals.
• With most licensing applications now processed, FINMA’s focus is poised to shift towards ongoing supervision, enforcement actions, and maintaining regulatory integrity in Switzerland’s asset management and trust services sector.

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