An overview of fintech and cryptoassets

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Why is fintech of interest to authorities?

Rules and standards for cryptoassets

Published: 19 May 2022

Different jurisdictions have tackled cryptoassets in different ways

Cryptoassets are largely unregulated in many parts of the world, although a great deal of work is in progress to regulate them. Certain aspects concerning cryptoassets are however already regulated; for example, legislation aimed at counteracting money laundering and terrorist financing is often applicable also for cryptoassets and related operations.

Some countries have chosen to ban cryptoassets, directly or indirectly, while others are attempting to create new rules or adapt current regulations to encompass cryptoassets and related activity.

In China, cryptoassets have been banned in a number of stages. The first was to ban financial institutions from getting involved in cryptoasset transactions. Then, all mining of cryptoassets was banned and finally a full ban on cryptoasset transactions was imposed in the country in September 2021.[88] M. Quiroz-Gutierrez (2022), “Crypto is fully banned in China and 8 other countries”, 4 January 2022, Fortune. Other countries that have banned cryptoassets are Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia and Bangladesh.[89] The Law Library of Congress (2021), “Regulation of Cryptocurrency Around the World: November 2021 Update”, November 2021, The Law Library of Congress, Global Legal Research Directorate. There are also several countries – 42 in November 2021 – that have indirectly banned cryptoassets by limiting the possibility of banks and other financial institutions to trade in them or by banning cryptoasset trading venues.

The United States has opted for a different approach than both a ban and the chosen path in the EU (see the section Work is in progress in the EU to regulate cryptoassets ). No concrete proposal has yet emerged on the regulation of cryptoassets from the US Congress, but in a report prepared by a working group under the President of the United States, it is proposed that stablecoins that are used for payments should be treated in a way which, in regulatory terms, resembles banks with deposit guarantee schemes.[90] U.S. Department of the Treasury (2021), “President's Working Group on Financial Markets Releases Report and Recommendations on Stablecoins”, press release. Published 1 November 2021. Accessed 28 February 2022. [online] Available at: President’s Working Group on Financial Markets Releases Report and Recommendations on Stablecoins | U.S. Department of the Treasury. In March 2022, the President of the United States issued an Executive Order aimed at ensuring that digital assets develops responsibly. The Executive Order is aimed at aspects such as consumer and investor protection, and at preventing cryptoassets from causing systemic risks, in both the American and global financial systems.[91] The White House (2022), “Executive Order on Ensuring Responsible Development of Digital Assets”, 9 March 2022.

The government of the United Kingdom stated at the beginning of April that they wanted stablecoins to be included in the financial legislation of the United Kingdom by primarily updating existing regulations governing electronic money and payments.[92] HM Treasury (2022), “Government sets out plan to make UK a global cryptoasset technology hub”, news item. Published 4 April 2022. Accessed 5 April 2022. [online] Available at: Government sets out plan to make UK a global cryptoasset technology hub - GOV.UK ( The government already had plans to strengthen regulation linked to marketing cryptoassets to improve consumer protection.[93] HM Treasury (2022), “Government to strengthen rules on misleading cryptocurrency adverts”, news item. Published 18 January 2022. Accessed 5 April 2022. [online] Available at: Government to strengthen rules on misleading cryptocurrency adverts - GOV.UK (

Work is in progress in the EU to regulate cryptoassets

In September 2020 the European Commission presented a proposed regulation to govern cryptoassets in the EU called the Markets in Crypto-Assets (MiCA).[94] Proposal for a regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937. MiCA is a legal framework covering both issuers of cryptoassets and providers of cryptoasset services.

The background of the proposed regulation is that many cryptoassets are not covered by any regulation in the EU, for example in terms of consumer and investor protection. Also, some EU countries have introduced their own laws that concern cryptoassets in various ways, which means that cryptoassets are not treated in the same regulatory way throughout the EU. When MiCA enters into force, it will however replace rules introduced by individual EU countries.

The European Commission has proposed for MiCA to set a number of requirements for issuers of cryptoassets. For instance, the issuer must be a legal entity and publish a white paper. The purpose of the white paper is to describe the issuer and the cryptoasset and explain the various characteristics of the cryptoasset, such as rights and obligations as well as the number of cryptoassets issued.

Particular requirements are proposed for stablecoins which, in the regulations, are called asset-referenced tokens and e-money tokens.[95] Asset-referenced token refers to cryptoassets that are intended to maintain a stable value by referring to the value of several national currencies that are legal tender, to the value of one or several commodities or one or several cryptoassets, or to the value of a combination of such assets. E-money token refers to cryptoassets that are intended to maintain a stable value by referring to the value of a national currency that is legal tender.

For example, it is proposed that issuers of asset-referenced tokens are be authorised by a national authority in their home country prior to being permitted to issue tokens. Just like for other cryptoassets, issuers of asset-referenced tokens should issue a white paper. Also, the issuer must, on an ongoing basis, publish certain information on the number of issued tokens and the reserve size and composition, and exercise sound governance and control over it. The proposal also stipulates a number of requirements for the asset-referenced token reserve, such as how it may be invested and managed. For example, it is proposed that reserve assets may only be invested in highly liquid financial instruments with minimal credit and market risk. For asset-referenced tokens that are considered to be of “significant size”, special requirements are proposed, for example that they should monitor their liquidity requirements to enable fulfilling redemption requirements.

Similar requirements are proposed for issuers of e-money tokens, for instance that they too must be authorised and publish a white paper. Also for e-money tokens, special requirements are proposed to apply if they are considered to be of “significant size”.

Examples of cryptoasset services affected by the MiCA proposal are custody and administration of cryptoassets on behalf of third parties, operation of cryptoasset trading venues and advice on cryptoassets. Authorised service providers can use a “passport procedure” to enable also offering their services in EU countries other than the one where they are authorised.

In the proposal, MiCA also sets requirements for various authorities, such as how they should cooperate and exchange information with each other.

The legislative process in the EU generally works such that the European Commission presents a regulatory proposal. The European Parliament and European Council then review and propose amendments to it. Negotiations are then initiated between the European Parliament and the Council to enable them to agree on the legislation. The Council adopted MiCA at the end of November 2021 and the European Parliament adopted MiCA in mid-March 2022.[96] European Council (2021), “Digital finance package: Council reaches agreement on MiCA and DORA”, press release. Published 24 November 2021. Accessed 15 March 2022. [online] Available at: Digital finance package: Council reaches agreement on MiCA and DORA – Consilium ( and European Parliament (2022), “Cryptocurrencies in the EU: new rules to boost benefits and curb threats”, press release. Published 14 March 2022. Accessed 15 March 2022. [online] Available at: Cryptocurrencies in the EU: new rules to boost benefits and curb threats | Nyheter | Europaparlamentet. Negotiations have therefore been commenced. The European Parliament’s version of MiCA, among other things, includes proposals that aim to improve the transparency concerning the energy consumption of cryptoassets.

International standards address different aspects of cryptoassets

Besides the various regulatory initiatives in place, a number of bodies have also prepared standards concerning different aspects of cryptoassets and which, on the whole, aim to limit the potential risks that they present.

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a consultative report on stablecoins in October 2020.[97] CPMI-IOSCO (2021), “Application of the Principles for Financial Market Infrastructures to stablecoin arrangements”, October 2021, Bank for International Settlements. It contains overall guidance on how the Principles for Financial Market Infrastructures (PFMI) should be applied to systemically important stablecoin arrangements.[98] PFMI are international standards for different types of financial market infrastructure. They span everything from governance and control, to various types of risk to which infrastructure firms are exposed, and how the firms should adapt their operations accordingly. The Riksbank bases its oversight of the Swedish infrastructure firms on these principles. A stablecoin arrangement is defined as an arrangement that combines a range of functions to provide an instrument that purports to be used as a means of payment or store of value. In short, CPMI and IOSCO conclude in the report that the transfer functions performed by a stablecoin arrangement are comparable with the transfer functions performed by other types of financial market infrastructure, such as payment systems. A stablecoin arrangement is therefore considered to be a financial market infrastructure and should be expected to observe all relevant principles in the PFMI.[99] CPMI and IOSCO’s guidance for stablecoin arrangements are expected to be published in the not-too distant future.

The Financial Stability Board (FSB) has prepared overarching recommendations for global stablecoin arrangements. The recommendations address the challenges that global stablecoin arrangements can present, from a regulatory perspective and also from a supervisory and oversight perspective.[100] FSB (2021), “Regulation, supervision and oversight of ‘global stablecoins’ arrangements: Progress report on the implementation of the FSB high-level recommendations”, October 2021, Financial Stability Board. They concern aspects such as authorities having the right tools to enable supervision and oversight, and regulation of global stablecoin arrangements. Also, FSB recommends that the authorities cooperate and coordinate with each other, both nationally and internationally. FSB also finds that authorities should ensure that global stablecoin arrangements have sound governance, effective risk management frameworks, appropriate recovery and resolution plans and robust data management systems.

In 2021, the Basel Committee on Banking Supervision (BCBS) published a consultative paper with proposals on how to manage banks’ exposures to cryptoassets.[101] Basel Committee on Banking Supervision (2021), “Prudential treatment of cryptoasset exposures”, 10 June 2021, Bank for International Settlements. More specifically, BCBS proposes minimum levels for the risk-based capital requirements with which banks shall comply to manage their credit and market risks. Cryptoassets are therefore assigned different risk weights depending on their assessed risk profile. The risk weights form the basis of how much capital the banks need to hold to cover their risks. For example, cryptoassets like Bitcoin were considered to be high-risk. BCBS therefore proposed that banks should hold capital equalling at minimum their exposure to such cryptoassets.

However, the proposal was met with criticism by various industry players and BCBS therefore plans to publish a further consultative paper in mid-2022 that takes account of the criticism.[102] Finextra (2021), “Basel Committee to revisit cryptoasset proposals after market pushback", 9 November 2021, Finextra.

The Financial Action Task Force (FATF) works with matters concerning money laundering and terrorist financing and has prepared standards to combat this.[103] FATF (2012), “International standards on combating money laundering and the financing of terrorism & proliferation: The FATF Recommendations”, 16 February 2012, updated March 2022, Financial Action Task Force. FATF has subsequently developed guidance on how these standards should be applied to virtual assets (VAs) and virtual asset providers (VASPs).[104] FATF (2019), “Virtual Assets and virtual asset service providers”, June 2019, Financial Action Task Force. In 2021 an updated version of the guidance was published.[105] FATF (2021), “Updated Guidance for a risk-based approach: Virtual Assets and virtual asset service providers”, October 2021, Financial Action Task Force.

Cryptoasset-related services are covered by the Eurosystem’s new oversight framework

In November 2021 a new framework was published for the oversight of digital payments, to apply in the Eurosystem and to be used by the Eurosystem central banks.[106] ECB (2021), “Eurosystem oversight framework for electronic payment instruments, schemes and arrangements”, November 2021, European Central Bank. It is called the PISA framework – Payment Instruments, Schemes and Arrangements. The intention is that it will be used to monitor entities that enable or support the use of payment cards, credit transfers, direct debit, transfers of e-money and digital payment tokens, including electronic wallets. This also encompasses cryptoasset-related services. However, because Sweden is not in the Eurosystem, this framework does not apply in Sweden.