The volatility of cryptos — and the emergence of any number of blockchain and tokenization projects through the last year — has invited fresh regulatory scrutiny of digital currencies.
In Ireland, reported CryptoGlobe, the Irish cabinet has approved legislation that will bring more regulation to the sector. The site noted that the new rules still await passage by the country’s legislative body.
The bill, tied to cryptos, is part of the Fifth Anti-Money Laundering (AML) Directive, which is part of a pan-European mandate to, among other things, combat terrorist financing through Know Your Customer (KYC) and other measures.
With the new directive, cryptos fall under that mandate. In addition, the legislation is focused on crypto exchanges and wallet providers, with Ireland’s legislation — known as the Criminal Justice Amendment Bill of 2019 — also letting the Criminal Assets Bureau and Garda access bank records amid money laundering investigations, as reported by TheCryptoUpdates.
Separately, in India, the action toward crypto regulation seems to be … inaction. The new year dawned with the government's statement that there is an “absence of a globally acceptable solution, and the need to devise a technically feasible solution” … and it all warrants “further study.”
The statement comes as cryptocurrencies are still not being recognized as legal tender. Against that backdrop, there are, at present, no plans for the nation to issue a state-backed cryptocurrency, as the government has pointed toward continuing concerns over money laundering and cyber risks.
One caveat, as noted in this space last week, is that India is among several nations that make up the Financial Stability Board (FSB), which has 20 nations on its roster. The FSB said it has reviewed the rapid growth of crypto and has found that “crypto assets do not pose risks to global financial stability currently.” That may open the door to revisiting the issue, as the U.S. Securities and Exchange Commission (SEC) may have its own set of regulations forthcoming in 2019, where those regulations can serve as a de facto template for crypto adoption in other nations moving forward.
Beyond crypto and into the more traditional banking realm, Denmark — with headlines still swirling from the $230 billion money laundering scandal via Danske Bank — will, through its government, propose new ways for the financial regulator to be more removed from banks it supervises. The Financial Times (FT) reported that the idea of “regulatory capture” exists, where authorities are influenced by the financial entities that are being supervised.
Denmark’s Business Minister Rasmus Jarlov said the government would look into ways to strengthen and separate the Financial Supervisory Authority (FSA) at the beginning of the new year, according to reports.
Jarlov said, “We are considering this challenge [of regulatory capture]. We have not decided on specific measures. During the beginning of 2019, we will do a lot of work to strengthen the FSA in Denmark, based on the experience of this case and also based on the experience of other countries. We have specifically asked for a neighbor check on this challenge: How to have the right balance between getting competent people from the banking sector into the authorities without having [conflicts of interest].”
In the U.S., Jelena McWilliams, chair of the Federal Deposit Insurance Corporation (FDIC), told Reuters that banks have enough capital to deal effectively with ongoing market volatility.
“Frankly, recent market movements have not given us any reason to be concerned,” she said. “Banks are well capitalized. Actually, they are superbly well-capitalized at this point in time,” and added that “nothing that happened in December gave us concern.”
She said a review into the system known as CAMELS has started, where ratings in place are tied to capital adequacy, earnings and risk sensitivity, among other factors. The ratings, said Reuters, “are of critical importance” to bank management, as low scores can lead to additional regulatory scrutiny and action.