BIS/CPIMI-IOSCO. On July 13, 2022, the Bank for International Settlements (BIS), a global forum for central banks, the Committee on Payments and Market Infrastructures (CPMI), and the International Organization of Securities Commissions (IOSCO) jointly published final guidance confirming that stablecoin arrangements (SAs) should observe international standards for payment, clearing, and settlement systems. The final guidance highlights that the transfer function of an SA is comparable to the transfer function performed by other types of financial market infrastructure (FMI). As a result, an SA that performs this transfer function is considered an FMI for the purpose of applying the principles for financial market infrastructures (PFMI) and, if determined by relevant authorities to be systemically important, the SA would be expected to observe all relevant principles in the PFMI (see Legal Update, PMI and IOSCO Report on Application of PFMI to Stablecoin Arrangements).

BIS/IMF. On July 13, 2022, BIS, in collaboration with the International Monetary Fund (IMF) and the World Bank, published a report prepared for the Group of Twenty (G-20) on access to and interoperability of central bank digital currencies (CBDCs) for cross-border payments in connection with its continued efforts to ease cross-border funds transfer markets, including high costs, low speed, limited access and insufficient transparency. The report is part of the suite of work stemming from the October 2020 "roadmap," endorsed by the G-20, which was developed by the Financial Stability Board (FSB) alongside the BIS, CPMI and other relevant international organizations and standard setters.

FSB/G-20. On July 11, 2022, the FSB published a statement on international regulation and supervision of crypto-asset activities that reaffirms FSB’s commitment to promoting international regulatory and supervisory consistency, as well as facilitating cross-border and cross-sector cooperation, among national authorities and international standard-setters as they work toward developing risk-based and technology-neutral policy for the wide spectrum of crypto-assets grounded in the principle of "same, activity, same risk, same regulation." In its statement the FSB notes that it is working to ensure that crypto-assets are subject to robust regulation and supervision, and that FSB will report to the G-20 Finance Ministers and Central Bank Governors in October 2022 on regulatory and supervisory approaches to stablecoins and other crypto-assets.

IOSCO. On July 7, 2022, IOSCO published its Crypto-Asset Roadmap for 2022-2023 that sets out its crypto-asset regulatory policy agenda and work program for the sector over the next 12 to 24 months, to be headed up by its Fintech Task Force (FTF). The FTF is tasked with developing, overseeing, delivering, and implementing IOSCO’s regulatory agenda regarding fintech and crypto-assets and charged with coordinating IOSCO’s engagement with the FSB and other standard-setting bodies on fintech and crypto-related matters.

FATF. On June 30, 2022, the Financial Action Task Force (FATF), an inter-governmental body acting as a global anti-money laundering and countering of terrorist financing watchdog, published a targeted update on the implementation of FATF Standards on virtual assets (VAs) and virtual asset service providers (VASPs). The report focuses on the FATF's Travel Rule, which requires market participants in the private sector to obtain and exchange beneficiary and originator information on VA transfers covered by the travel rule (see Legal Update, FATF Targeted Update On Implementation Of Standards On Virtual Assets And Virtual Asset Service Providers: June 2022).

BCBS. On June 30, 2022, the Basel Committee on Banking Supervision (BCBS) published a second consultative document (BCBS533) on the prudential treatment of bank crypto-asset exposures. The second consultation builds on the proposals in the first BCBS consultation, issued in June 2021 (see Legal update, BCBS consults on prudential treatment of cryptoasset exposures). The second consultation addresses issues raised in public comment on the first consultation and would introduce a new exposure limit for all Group 2 cryptoassets outside of the large-exposure rules with a provision limit set at 1.0% of Tier 1 capital. In response to comments that the originally proposed 1,250% risk weight to the maximum of long and short positions does not properly recognize the risk reduction from hedging, BCBS proposes a new Group 2 that may be subject to a modified version of the market-risk requirements. BCBS plans to finalize these rules by year-end. For further information, see Legal Update, BCBS second consultation on prudential treatment of cryptoasset exposures.

BIS. On June 16, 2022, the BIS released an update and a related appendix on miner extractable value (MEV) by intermediaries for cryptocurrency and decentralized finance (DeFi) transactions. BIS reports that cryptocurrencies such as Ethereum, and DeFi protocols built on them, rely on validators or "miners" as intermediaries to verify transactions and update the ledger. Since these intermediaries can choose which transactions they add to the ledger and in which order, they can engage in activities that would be illegal in traditional markets, such as front-running and sandwich trades. The resulting profit is termed MEV, which BIS notes is an intrinsic shortcoming of pseudo-anonymous blockchains, and addressing this form of market manipulation may call for new regulatory approaches to this new class of intermediaries.