FSB stressed that international organizations are working on a number of fronts, directly addressing issues arising from crypto-assets. As described in the report, they are mainly focused on investor protection, market integrity, anti-money laundering, bank exposures and financial stability monitoring. They are monitoring and analyzing developments in these markets, setting supervisory expectations for firms and clarifying how international standards apply to crypto-assets.
The report notes that gaps may arise in cases where such assets are outside the perimeter of market regulators and payment system oversight. To some extent, explained the Board, this may reflect the nature of crypto-assets, which may have been designed to function outside established regulatory frameworks. Gaps may also arise from the absence of international standards or recommendations.
Analysts say assessing the significance of potential gaps is challenging, given the rapidly evolving nature of the crypto-asset ecosystem and related risks, and a forward-looking approach to monitoring crypto-assets can help provide a basis for identifying potential gaps and areas that should be prioritized or focused on.
The report concludes with a recommendation that the G20 keep the topic of regulatory approaches and potential gaps, including the question of whether more coordination is needed, under review.]]>
These findings are part of a Fidelity Investments research study to better understand how institutions, advisors, and investors think about digital assets both overall, and as part of an investment portfolio. More than 400 U.S. institutional investors were surveyed, including pensions, family offices, crypto and traditional hedge funds, financial advisors and endowment and foundations.
Almost half of the institutional investors surveyed (47%) view digital assets as having a place in their investment portfolios, but opinions vary on how these investors would prefer to hold digital assets in the future.
“We’ve seen a maturation of interest in digital assets from early adopters, like crypto hedge funds, to traditional institutional investors like family offices and endowments,” said Tom Jessop, president of Fidelity Digital Assets, a provider of custody and trade execution services for digital assets to institutional investors. “More institutional investors are engaging with digital assets, either directly or through service providers, as the potential impact of blockchain technology on financial markets – new and old – becomes more readily apparent.”
Institutions are overwhelmingly favorable about the appealing characteristics of digital assets. Nearly seven in ten respondents cited certain characteristics of digital assets as appealing.
Among the obstacles to digital asset investments cited by respondents were price volatility, lack of clarity around regulation, the limited track record and lack of fundamentals.
“Institutions are doing the work to develop their own investment theses—but there’s more work to be done as it relates to describing digital assets and blockchain technology in terms that are familiar to them,” said Jessop. “For example, price volatility, which was a primary concern of survey respondents, may dampen as the underlying custody, trading and financing infrastructure continues to develop in a direction that traditional market participants are familiar with.”
Jessop added that institutional sentiment mirrors many of the positive developments seen in the underlying ecosystem. “Venture investment in the sector continues at a healthy pace, complemented by an increasing number of security token offerings (STOs), and the global regulatory environment remains cautiously constructive,” he said. “Another indication of a growing ecosystem around digital assets is high transaction activity on the Bitcoin blockchain. Institutions are more aware of these developments now than they were six or twelve months ago, which is a positive sign for continued interest and adoption.”
Custody and Counterparties
Many institutions showing interest in this space either own digital assets and need a custodian or they want to invest in digital assets, but first need a custodian. Eighteen percent are using third-party custodians and another 13% are doing self-custody. Another 6% are using a non-custodial exchange. When gaining exposure to digital assets, investors overall prefer to deal with a traditional financial firm (37%) followed by dedicated crypto-focused financial firms (24%). Across all institutional segments, when considering a custodian for digital assets, 76% of institutions surveyed placed security and safety as their most important considerations.]]>
Until now, fundraising through the issuance of tokens not classified as financial instruments was not subject to any specific rules. If it is enacted, the PACTE Law will provide a legal response to this issue. The law will enable project initiators who so wish to submit their information document to the Autorité des Marchés Financiers for an optional visa that will be issued on condition that they meet certain requirements.
The regime covers digital assets not classified as financial instruments, giving rise to one or more rights and that may be issued, registered, stored or transferred using a distributed ledger technology (blockchain).
These requirements are designed to provide investors with better information and protection and are as follows:
The visa remains optional and the raising of funds without AMF visa will continue to be legal in France. However, issuers who have not received the AMF visa will not be able to use general solicitation.
The AMF will publish the list of ICOs that have received its visa.
The AMF General Regulation and an AMF Instruction will specify the implementation of these rules.
“These are common sense rules. This regime will enable us to address this new issue with a proportionate framework that both protects investors and fosters innovation. We believe it will attract the good projects,” said Robert Ophèle, AMF’s chairman.
If they wish, “digital assets services providers” (DASP) may be licensed and placed under the supervision of the AMF.
The term “digital assets” comprises tokens issued during ICOs and virtual currencies as defined by European law (such as the bitcoin). Financial instruments are excluded from this regime.
This new optional status will cover a wide range of activities:
Licensed service providers will be subject to a set of core rules common to all services (insurance or equity, internal control procedures, resilient IT system, transparent pricing policy, etc.) as well as a certain number of rules specific to the service offered.
A decree and the AMF General Regulation will draw the outlines of each of these services, with the aim being to ensure market integrity and an efficient and transparent price formation mechanism, as well as to provide investors with reliable information and guarantees.
Whether or not they choose to obtain the optional license, service providers who wish to provide digital assets custody services to third parties or to purchase/sell digital assets in exchange for legal tender are subject to mandatory registration with the AMF.
For these entities, the AMF will verify the following (this portion of the set of rules is mandatory) and will give its decision after consulting with the French Prudential Supervisory and Resolution Authority (Autorité de contrôle prudentiel et de résolution):
The draft bill provides that two types of funds may henceforth invest in digital assets:
The PACTE draft Bill as definitively adopted by the French Parliament reinforces the AMF’s powers to provide better protection to investors.
The AMF will have the powers to oversee the ICOs that have received its visa and to supervise licensed service providers. In the event of non-compliance with the rules, the AMF may hand down sanctions against ICO issuers and licensed service providers.
ICOs that do not have visa and unlicensed service providers will be prohibited from solicitation, patronage and sponsorship activities. Advertising will remain authorized.
Consequently, the AMF may publish a “blacklist” of ICOs and digital assets services providers who do not comply with the regulations.
Finally, it may block access to fraudulent websites offering services in digital assets.