Hello Fintech friends,

Welcome to another exciting week of fintech policy updates. Last week was marked by several highlights, including the European Parliament's approval of the Markets in Crypto-Assets (MiCA) regulation, which is expected to have far-reaching implications for the crypto industry in Europe, and possibly around the world.

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1.       Crypto Regulation

On April 20, the European Parliament approved MiCA, the world’s most comprehensive crypto regulation to date, with 517 votes in favor, 38 against, and 18 abstentions. The European Parliament also approved the Transfer of Funds Regulation (TFR), which focuses on anti-money laundering (AML) and countering the financing of terrorism (CFT), with 529 votes in favor, 29 against, and 14 abstentions. The next step for both regulations will be to get the approval of the European Council before they turn into law. Once they are published, which is expected to happen in June, crypto firms will have 12-18 months to get in full compliance.

Substantively, MiCA and TFR make it possible for crypto firms, such as exchanges and wallet providers, to get established in the EU and serve 450 million people in 27 states as long as they are fully licensed and adhere to AML and CFT standards. While offering a compliant route for centralized crypto activities in the EU, the new regulations will also impose significant restrictions, particularly with respect to unhosted wallets (requiring reporting of payments over €1000) and stablecoins (capping daily transaction volumes at €200M or 1M transactions per day).

Across the Atlantic, the U.S. also had a hot crypto week, even though no major regulations were passed. On the Hill, House Republicans, led by House Financial Services Committee Chair Patrick McHenry (R-NC) and House Agriculture Committee Chair Glenn ‘GT’ Thompson (R-PA), are developing new market structure rules for digital assets, which they hope to push forward along with a stablecoin regulation later this year.

In addition, the House Financial Services Committee held two important hearings that showed sharp partisan disagreements. On April 18, the Chair of the Securities and Exchange Commission (SEC) Gary Gensler appeared before the Committee for an oversight hearing. Republicans on the Committee pressed Gensler on whether certain digital assets should be classified as securities or commodities. Of course, Gensler did not provide a clear answer. Rep. Warren Davidson (R-OH) rebuked Chairman Gensler for allegedly abusing his power and failing to protect investors and called for “his removal through a restructure of the Commission.” On the other hand, Ranking Member Maxine Waters (D-CA) commended Gensler and his staff for “the forceful actions the SEC has taken and dedicated...to go after crypto criminals.”

The Committee held another hearing on stablecoins on April 19, which further highlighted the divide between Democrats and Republicans over digital assets. During the hearing, Waters noted that the bipartisan stablecoin bill proposed last summer was no longer alive and that the new stablecoin bill Republicans circulated last week "no way represents ... negotiations between [Republicans and Democrats]." As a result, Waters emphasized that the two parties are "starting from scratch."

2. Enforcement

Last week, the SEC took another major enforcement action in the crypto space, this time against crypto asset trading platform Bittrex, Inc. and its co-founder and former CEO William Shihara. The SEC is accusing Bittrex of “operating an unregistered national securities exchange, broker, and clearing agency.” In other news, the New York State Department of Financial Services announced that it would start charging crypto firms that hold the state’s famous Bitlicense for the costs of annual supervision and examination, bringing the treatment of these entities closer to that of banks and insurance companies subject to the agency’s supervision.

3. Payments

Our payments news this week is about what would have been the world’s first real-time, cross-border payment system in multiple currencies, which was a concerted effort of six major Nordic banks. Last week, P27 Nordic Payments announced that it is withdrawing its clearing license application, acknowledging that the project was “too ambitious and complex.” The recent move left many wondering about how authorities in the Nordic countries–Sweden, Denmark, Finland, and Norway–plan to modernize their payment systems, especially if these countries envision central bank digital currencies (CBDCs) to play a major role in that space.

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See you next week!