Global Trustee and Fiduciary Services News and Views Issue 50

Global Trustee and Fiduciary Services News & Views | Issue 50 | 2018 71 As a result, US regulators have closed down several schemes that have been shown to circumvent restrictions on the promotion and marketing of investments. So what are regulators doing? Regulators, both domestic and global, are obviously very interested in cryptocurrencies and ICOs. The underlying technologies pose both risks and opportunities, and regulators are attempting to control one without stifling the other. The International Organization of Securities Commissions (IOSCO) has voiced concerns on the sale of ICOs and established an ICO Consultation Network through which members can discuss their experiences and bring their concerns, including any cross-border issues, to the attention of their fellow regulators. 15 The Financial Stability Board (FSB) published a report on 16 July 2018 detailing its development of a framework to monitor the financial stability implications of developments in crypto-asset markets. While the FSB doesn’t believe crypto- assets pose a material risk to global financial stability at this time, it recognises the need for vigilant monitoring in light of the speed of market developments. 16 Already mentioned in this article, BIS in its 2018 Annual Report highlights the risks it perceives from cryptocurrencies and ICOs. The EU has incorporated cryptocurrencies in its anti-money-laundering regulations (MLD5). 17 And the European Parliament has issued two reports on crypto-asset regulation. 18 Across the globe, governments, central banks and competent authorities are developing regulations to protect investors and promote innovation in a race to become the centre of financial innovation. The journey begins Cryptocurrencies and ICOs are at the beginning of a long journey, but the first steps have been taken. Bitcoin and blockchain have captured the public imagination through press coverage from rapid gains (and just as rapid losses) to the potential impact of disruptive technologies to money laundering and to their use in the “dark web.” From governments to innovators, via central banks and regulators, the 1 http://www.weidai.com/bmoney.txt. 2 https://www.activism.net/cypherpunk/crypto-anarchy.html. 3 https://bitcoin.org/bitcoin.pdf. 4 https://www.reuters.com/article/us-global-forex- idUSKCN0ZC17J. Link here . 5 https://www.poundsterlinglive.com/bank-of-england-spot/ historical-spot-exchange-rates/gbp/GBP-to-USD-1992. Link here . 6 https://www.bis.org/publ/arpdf/ar2018e5.pdf. 7 https://coinmarketcap.com/charts/. 8 https://coinmarketcap.com/currencies/bitcoin/#charts. 9 https://www.ccn.com/biggest-theft-history-know-far-530- million-coincheck-hack/. Link here . 10 https://www.coindesk.com/blockchains-feared-51-attack- now-becoming-regular/. Link here . 11 http://www.gutenberg.org/files/26640/26640-h/26640- h#CHAPTER_II. Link here . 12 https://cointelegraph.com/news/dont-believe-the-hype-the- five-largest-ico-exit-scams-expert-take. Link here . 13 Ibid. 14 https://www.howeycoins.com/index.html#. 15 https://www.iosco.org/news/pdf/IOSCONEWS485.pdf. 16 http://www.fsb.org/2018/07/fsb-report-sets-out-framework- to-monitor-crypto-asset-markets/. Link here . 17 https://eur-lex.europa.eu/legal-content/EN/ TXT/?uri=CELEX%3A32018L0843. Link here . 18 See http://www.europarl.europa.eu/RegData/etudes/ STUD/2018/619024/IPOL_STU%282018%29619024_ EN.pdf. Link here . and http://www.europarl.europa.eu/ cmsdata/149900/CASE_FINAL%20publication.pdf. Link here . implementation of distributed ledger technology or DLT appears to be unstoppable. There are still hurdles to be overcome, regulators believe the underlying technology isn’t currently scalable, and the products being produced aren’t yet subject to explicit regulation. In the 10 years since the launch of Bitcoin, we’ve come a long way. But we’re still trading with shells. In another 10, it’s entirely possible the last Bitcoin will have been issued and DLT will be embedded in the financial system. We’re in the midst of significant changes, and only time will tell what their ultimate impact will be. Matthew Cherrill Senior Fiduciary Technical Analyst, Regulatory Services Global Trustee and Fiduciary Services Citi