Federal Reserve’s plans for stablecoins could bring transparency and safety to the sector
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets Regulations
Podcast: Requirements for a fully functional CBDC
OMFIF | Aug 3, 2021
Charles Kerrigan, partner at CMS Law, and Seokgu Yun, founder and chief executive officer of Sovereign Wallet Network, join John Orchard, CEO of OMFIF, to discuss privacy concerns associated with central bank digital currencies, how policy-makers can address these and the challenges of launching a CDBC. As well as this, they share their perspectives about the underlying technology and set of features necessary for programmable money, an idea gaining momentum but which is often misunderstood. They also touch on the most significant trade-offs between design choices and briefly discuss how to build a CBDC that can adapt to future needs.
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Other links:
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BIS Research: CBDCs beyond borders: results from a survey of central banks
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The Good, the Bad and the Ugly of Central Bank Digital Coins (CBDCs)
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FFCON21: May 13 Central Bank Digital Currencies CBDCs - The Future of Money
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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A Tsunami of Regulatory Change Overwhelms Organizations
The GRC Pundit | Jul 29, 2021
Regulatory change is overwhelming organizations. Many industries, like financial services, are past the point of treading water as they actively drown in regulatory change from the turbulent waves of laws, regulations, enforcement actions, administrative decisions, and more around the world. Regulatory compliance and reporting is a moving target as organizations are bombarded with thousands of new regulations, changes to existing regulations, enforcement actions, and more each year. Regulatory change impacts the organization as it reacts to:
- Frequency of change. In the past five years, the number of regulatory changes has more than doubled while the typical organization has not increased staff or updated processes to manage regulatory change. In financial services, according to the latest Thomson Reuters research, there was an average of 257 regulatory change events every business day in 2020, which is just in this one industry. In the past five years, the number of regulatory change updates impacting organizations has grown extensively across industries.
- Global context. Regulatory change is not limited to one jurisdiction but is a turbulent sea of change around the world. Regulations have a global impact on organizations and markets. In Asia, GRC 20/20 finds that there is often more concern over EU and US regulation than over-regulation from Asian countries. Inconsistency across regulations from jurisdiction to jurisdiction brings complexity to regulatory compliance.
See: OSC unveils charter for office to promote innovation and reduce regulatory burden
- Inconsistency in regulations. Managing compliance and keeping up with regulatory changes, exams, and reporting requirements becomes complicated when faced with international requirements. Regulatory jurisdictions have varying approaches such as principle-based regulation (also called outcome-based regulation) that is popular across Europe and other countries around the world, while the United States and other countries approach a prescriptive approach to regulation that is more akin to a check box list of requirements in specifically telling the firm what has to be done. The principle-based approach gives the organization flexibility with the focus on the achievement of an outcome and not the specific process that got them there. There are conflicting challenges in privacy regulations and other laws impacting organizations across jurisdictions.
- Expansion into new markets. It has become complex for organizations to remain in foreign markets as well as enter into new markets. The pressure to expand operations and services is significant as the organization seeks to grow revenue and be competitive, while at the same time being constrained by the turbulent sea of changing regulations and requirements.
- Focus on risk assessment. Regulatory compliance is increasingly pushed to integrate with broader enterprise and operational risk strategies with a focus on delivering a specific assessment of compliance risks. For example, regulators in the US seek to ensure that compliance officers do compliance risk assessments. This is also a theme picked up on by law enforcement agencies like the U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC). The courts, with the United States Sentencing Commission, also evaluate the culpability of an organization on compliance based on compliance risk. The discipline of risk management is becoming a prerequisite for compliance officer skills to ensure that compliance has a seat at the enterprise risk management (ERM) / GRC table.
See: March 1, 2019: NCFA Submission to the Ontario Securities Commission on Regulatory Burden
- Hoards of regulatory information. Organizations are overwhelmed by information from legal, regulatory updates, newsletters, websites, emails, journals, blogs, tweets, and content aggregators. Compliance and legal roles struggle to monitor a growing array of regulations, legislation, regulator findings/rulings, and enforcement actions. The volume and redundancy of information add to the problem. Managing regulatory change requires weeding through an array of redundant change notifications and getting the right information to the right person to determine the business impact of regulatory change and appropriate response. Organizations must search for the marrow of regulatory details and transform it into actionable intelligence, which can be acted upon in a measurable and consistent manner.
- Defensible compliance. Regulators across industries are requiring that compliance is not just well documented, but is operationally effective. This can be seen in the latest DoJ Evaluation of Compliance Program guidance. Case in point, Morgan Stanley is praised by regulators as a model compliance program and is the first company in 35 years of the Foreign Corrupt Practices Acts (FCPA) history to not be prosecuted despite bribery and corruption in their Asian real estate business. One of the points the Securities and Exchange Commission (SEC) and Department of Justice (DoJ) referenced was Morgan Stanley’s ability to keep compliance current in the midst of regulatory change: “Morgan Stanley’s internal policies . . .were updated regularly to reflect regulatory developments and specific risks.”
The amount of regulatory change coming at organizations is staggering. Consider an international bank headquartered in South America that embarked on a project to build a database of regulatory requirements impacting the bank globally. The detail went down to the required level so an individual regulation may have a few requirements to more than a thousand, depending on the regulation. After eighteen months of cataloging over 81,000 requirements, they abandoned the project. The reason was that the content was already obsolete—so much had changed during the process of documenting that they did not have the resources to maintain the volume of regulatory change.
See: United States: Virtual Currencies Regulatory Overview (and Comparative Guide)
A Tier 1 Canadian bank has expressed a similar regulatory requirement documentation project demise for the same reason. If you print the United Kingdom’s Financial Conduct Authority rulebook, it comes to a stack of paper six feet tall. The U.S. Code of Federal Regulations (CFR) is over 174,000 pages. When printed and laid out end-to-end that is a paper trail that is 25 miles long, nearly as long as a marathon.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Cryptoassets as National Currency? A Step Too Far
IMF Blog | Tobias Adrian and Rhoda Weeks-Brown | Jul 26, 2021
New digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers.
But doing so is not straightforward. It requires significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money.
Some countries may be tempted by a shortcut: adopting cryptoassets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits.
Cryptoassets are privately issued tokens based on cryptographic techniques and denominated in their own unit of account. Their value can be extremely volatile. Bitcoin, for instance, reached a peak of $65,000 in April and crashed to less than half that value two months later.
See: Ripple Pilots a Private Ledger for Central Banks Launching CBDCs
And yet, Bitcoin lives on. For some, it is an opportunity to transact anonymously—for good or bad. For others, it is a means to diversify portfolios and hold a speculative asset that can bring riches but also significant losses.
Cryptoassets are thus fundamentally different from other kinds of digital money. Central banks, for instance, are considering issuing digital currencies—digital money issued in the form of a liability of the central bank. Private companies are also pushing the frontier, with money that can be sent over mobile phones, popular in East Africa and China, and with stablecoins, whose value depends on the safety and liquidity of backing assets.
Cryptoassets as legal tender?
Bitcoin and its peers have mostly remained on the fringes of finance and payments, yet some countries are actively considering granting cryptoassets legal tender status, and even making these a second (or potentially only) national currency.
If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in payment of monetary obligations, including taxes, similar to notes and coins (currency) issued by the central bank.
Countries can even go further by passing laws to encourage the use of cryptoassets as a national currency, that is, as an official monetary unit (in which monetary obligations can be expressed), and a mandatory means of payment for everyday purchases.
See: Moody’s says Crypto regulation a plus for banks, fintechs
Cryptoassets are unlikely to catch on in countries with stable inflation and exchange rates, and credible institutions. Households and businesses would have very little incentive to price or save in a parallel cryptoasset such as Bitcoin, even if it were given legal tender or currency status. Their value is just too volatile and unrelated to the real economy.
Even in relatively less stable economies, the use of a globally recognized reserve currency such as the dollar or euro would likely be more alluring than adopting a cryptoasset.
A cryptoasset might catch on as a vehicle for unbanked people to make payments, but not to store value. It would be immediately exchanged into real currency upon receipt.
Then again, real currency may not always be readily available, nor easily transferable. Moreover, in some countries, laws forbid or restrict payments in other forms of money. These could tip the balance towards widespread use of cryptoassets.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Binance CEO says he’s willing to step down as world’s biggest crypto exchange welcomes regulation
CNBC | Ryan Browne | Jul 27, 2021
The boss of cryptocurrency exchange Binance says he’s willing to step down from his role as the company seeks to become a regulated financial institution.
Speaking at a virtual press conference Tuesday, Changpeng “CZ” Zhao said he had no immediate plans to quit his role but that the company does have a succession plan in place.
“We’re going to pivot to be a fully regulated financial institution going forward,” Zhao told reporters, adding that, during that pivot, he would be “very open” to finding a replacement CEO with more regulatory experience.
Binance is the world’s largest digital currency exchange by trading volume. However, it has come under intense regulatory scrutiny lately as authorities around the world seek to clamp down on the fast-growing crypto industry.
See: Bitcoin rises as UK financial watchdog bans Binance cryptocurrency exchange
In the U.K., the Financial Conduct Authority banned Binance’s British unit from undertaking any regulated activity. Binance was one of many crypto firms that withdrew their applications to the U.K.’s temporary licensing regime due to failing to meet anti-money laundering requirements, the FCA said.
Regulators in Japan, Canada and Italy have also clamped down on the firm, warning it is not authorized to operate in the countries.
Planning for the future
Binance aims to set up a number of regional headquarters around the world and will seek licenses wherever they are available, Zhao said. He has previously said Binance has no official headquarters.
Zhao insisted there were no immediate plans for his succession, adding Binance was “keeping our options open.”
“I’ll be honored to continue to run Binance as a regulated financial institution until we find somebody who may do a better job,” he said.
In May, Bloomberg reported that Binance was facing a federal investigation by the U.S. Department of Justice and Internal Revenue Service.
See: More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps
Binance said it couldn’t comment specifically on any ongoing discussions with regulators, whether in the U.S. or elsewhere.
On Monday, the company said it was reducing the maximum leverage — or borrowed funds — users can use to trade futures contracts, amid concerns such high-risk bets were leaving clients with hefty losses.
Earlier this month, Binance said it would no longer offer “stock tokens,” digital digital versions of shares like Tesla, Apple and Coinbase, to shift its commercial focus to other products. German regulators had warned the instruments may have violated securities laws.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps
Market Insider | Camomile Shumba | Jul 22, 2021
The US Securities and Exchange Commission's chair, Gary Gensler has indicated stablecoins and other security-backed tokens will not be exempt from the regulator's upcoming rule changes.
Gensler told the American Bar Association Derivatives and Futures Law Committee's virtual mid-year program on Wednesday that stablecoin issuers would need to register with the regulator and ensure certain levels of transparency in how they transact.
"Make no mistake: It doesn't matter whether it's a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities," Gensler said. "These platforms - whether in the decentralized or centralized finance space - are implicated by the securities laws and must work within our securities regime," he said.
Stablecoins, which are crypto coins pegged to an asset such as the dollar, such as Tether, have come under greater scrutiny from regulators given their potential for destabilizing payments systems.
See: Moody’s says Crypto regulation a plus for banks, fintechs
Transparency is a big topic in the crypto-space as digital tokens are popular, in part because of their decentralized nature, and the relative anonymity they afford their users.
But the US regulator has started to clamp down on some aspects of the crypto market to prevent the use of these coins in illicit activities, such as money laundering. The SEC also sued Ripple Labs late last year over sales of its network's XRP token, which the regulator said should be treated as a security and not a currency.
Gensler said greater transparency would mean that, even for over-the-counter swaps deals, the public would be able to see both the price and the volume at which these transactions took place.
He said that for a company to register a stablecoin, it would have to have solid back-office controls and adequate cushions against losses, through both its own capital reserves and customer margin.
See: Crypto in Canada: Where are we today, and where are we heading?
On top of that, the Genlser said the SEC will require companies to have a host of new counterparty requirements for capital and margin, including internal risk management systems, supervision and chief compliance officers, trade acknowledgement and confirmation, record-keeping and reporting procedures.'
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Designing a Central Bank Digital Currency with Support for Cash-Like Privacy
SSRN | Jonas Gross et al | Jul 22, 2021
Most central banks in advanced economies consider issuing central bank digital currencies (CBDCs) to address the declining use of cash and to position themselves against increased competition from Big Tech companies, cryptocurrencies, and stablecoins.
One crucial design dimension of a CBDC system is the degree of transaction privacy. Existing solutions are either prone to security concerns or do not provide full (cash-like) privacy.
Moreover, it is often argued that a fully private payment system and, in particular, anonymous transactions cannot comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulation.
See: BIS Research: CBDCs beyond borders: results from a survey of central banks
In this paper, we follow a design science research approach (DSR) to develop and evaluate a holistic software-based CBDC system that supports fully private transactions and addresses regulatory constraints.
To this end, we employ zero-knowledge proofs (ZKP) to impose limits on fully private payments. Thereby, we are able to address regulatory constraints without disclosing any transaction details to third parties.
We evaluate our artifact in interviews with leading economic, legal, and technical experts and find that a regulatorily compliant CBDC system that supports full (cash-like) privacy is feasible.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Moody’s says Crypto regulation a plus for banks, fintechs
Investment Executive | James Langton | Jul 19, 2021
Federal Reserve’s plans for stablecoins could bring transparency and safety to the sector
U.S. banking regulators increasing their oversight of stablecoins would be a positive for banks and fintechs, says Moody’s Investors Service.
U.S. Federal Reserve Board Chair Jerome Powell discussed stepping up regulation of stablecoins in Congressional testimony last week. Among other things, he said the Fed intends to publish a white paper in early September about digital assets including stablecoins, central bank digital currencies (CBDCs) and others.
See:
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Stablecoins: What’s old is new again – speech by Christina Segal-Knowles
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A Visual Explanation of Algorithmic Stablecoins
Stablecoins are a form of digital asset whose value is linked to an underlying asset, such as U.S. dollars, in an effort to increase their appeal as a method payment and a store of value while providing the benefits of digital assets.
The prospect of greater oversight of stablecoins would be positive for banks, Moody’s said, “because it would help to increase safety and transparency around stablecoins and may limit some of the risks to financial stability and the potential competitive threats posed by the currently unregulated stablecoin industry.”
However, Moody’s said there’s little regulation around stablecoins. Without rules on disclosure or how the reserves that are backing stablecoins can be invested, “there is no guarantee that stablecoins are indeed backed by the equivalent value in assets,” it said.
The U.S. Office of the Comptroller of the Currency (OCC) has issued guidance for banks, which allows them to hold stablecoin reserves “if they can verify that the reserves are equal to outstanding stablecoin tokens to help withstand large client outflows,” it said. “However, crypto currency firms issuing stablecoins are not required to follow OCC guidance, and no other enforceable regulation exists,” Moody’s said.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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