Published: July 31st, 2024
Qatar is moving rapidly to get a regulatory framework in place for digital assets by year’s end, a notable change in policy from its previous anti-cryptocurrency stance. The oil-rich emirate implemented an outright ban on Bitcoin trading in 2018, however it has decided that approach needs to be reconsidered.
Financial regulators in the Gulf state have proposed a new set of rules that would allow investment tokens to be traded if they are backed by tangible assets. The emirate’s two major finance watchdogs, the Qatar Financial Centre Regulatory Authority (QFCRA) and the QFC Authority (QFCA), have jointly developed the framework for digital assets in an attempt to strengthen the country's broader strategy for digital innovation.
This week they announced a consultation period where industry feedback would be gathered to help iron out any flaws the proposed regulations. The QFC also announced the launch of a Digital Assets Lab to encourage digital asset innovation.
A press release on the agency’s website said the proposed new rulebook ‘represents a significant milestone on the path to promoting innovation and growth in Qatar’s financial sector.’ That enthusiasm belies the fact that the country’s journey towards crypto adoption has been bumpy.
Last April, global money laundering watchdog the Financial Action Task Force (FATF) said Qatar wasn't policing terrorist fundraising adequately and said the emirate’s Central Bank needed to become more aggressive with sanctions against organizations and individuals that ignored the Bitcoin trading ban.
Regulators and lawmakers also allowed Crypto.com to become a headline sponsor of the 2022 FIFA World Cup while the ban was in place and Qatar was the host country.
In April the British government tabled new rules to allow the regulation of crypto staking, stablecoins, plus custody and exchange services in the UK. Then Economic Secretary Bim Afolami made the announcement to a finance industry gathering in London.
The new Labour government is expected to allow new legislation to be enacted. When first tabled, Afolami said it would set out the UK's final proposal for a comprehensive crypto regulation regime. ‘Once enacted, a range of crypto investment activities, including running an exchange and assuming custody of investors’ digital assets will be subject to regulatory oversight for the first time.’
In 2023, Westminster gave assent to a crypto in financial services bill which created a legal scaffolding for cryptocurrencies to be treated as regulated financial instruments in the UK.
In February of 2023, the Bank of England (BoE), Financial Conduct Authority (FCA) and regulators in the devolved assemblies of Scotland, Wales and Northern Ireland all consulted on what a stablecoin regime would look like in the country. The BoE said it would regulate any stablecoin provider big enough to have a systemic impact on the financial system, while the FCA agreed to assume oversight of the wider crypto market.
Afolami suggested that secondary stablecoin legislation was on the way as well, adding that then Prime Minister Rishi Sunak wanted to see it enacted within six months.
Britain’s Conservative government has previously said it had ambitions to regulate and legitimize crypto as part of a strategy to establish the UK as a crypto hub. National elections in the UK have since seen a Labour Government take power with a thumping majority in parliament.
After years of heel dragging on crypto regulation, in May 2023, the US Securities and Exchange Commission (SEC) responded to criticism that the agency wasn’t giving crypto companies the guidance they needed to comply with federal finance law.
America’s primary financial watchdog had faced ongoing criticism from the cryptocurrency industry for not setting out clear-cut rules that recognized the unique nature of digital assets.
According to Bloomberg, SEC chairman Gary Gensler told the 27th annual Financial Markets Conference in Atlanta, Georgia, that the rules for crypto companies ‘have already been published,’ adding that he doesn’t think the SEC is behind the times.
A wave of enforcement actions was underway at the time that encompassed 140 cases, he said, many of them pre-dating the FTX meltdown. ‘This proves that the SEC is up to the job’, he said, and told event attendees that too many cryptocurrency companies have developed business models that amount to fraud.
In many cases, calling these businesses decentralized ‘is a false narrative,’ Gensler said. ‘Many have centralized aspects with most business and development activity focused in these areas.’ He went on to say that it’s common for crypto business models to rely on ‘taking customer funds and commingling them,’ something FTX executives have been accused of.
When asked about the crypto industry’s longstanding call for clearer regulations, Gensler said there was nothing about blockchain’s status as a new technology gives crypto firms a pass from having to abide by established rules.
Picking up on a theme he had used before, most recently when speaking to a senate committee on finance reform, Gensler called financial intermediaries in traditional money markets 'rent-collecting-nodes.’ The message for crypto companies was clear, he said. If a firm is holding what the SEC considers securities on a tech platform, then the rules around custody and trading must be followed to the letter.
If that’s too difficult a concept to grasp, Gensler said, the SEC is ‘ready to help bring them into compliance.’
American crypto firms operating in the country’s top financial jurisdiction were warned in February 2023 that they needed to manage their customers' digital assets with greater care.
In the wake of the FTX scandal, the New York Department of Financial Services (NYDFS) published an open letter to the industry outlining how investor assets should be kept separate from company funds. The letter also included guidelines for custodians, and explained the necessary disclosures that firms need to make when keeping custody of digital assets for clients is part of their business model.
