compliance/aml news roundup – CBDC Testing and Consultation Across Europe

Here’s our latest roundup from the Compliance and Legal Teams here at BCB Group, providing insights into the recent news highlights in the worlds of compliance and AML, crypto-focused and beyond. If you’d like to get in touch with us about any of our products or services, just send us a note, we look forward to hearing from you. Flags in flight outside European union


The last few weeks have seen a wave of progress in the development of CBDCs in Europe, with varying degrees of commitment and enthusiasm from the representative parties. The actions of central banks highlight the considerable gap between the appeal of retail as opposed to wholesale or institutional CBDCs. 


In 2022 the Bank of England will begin to assess the arguments for and against a CBDC. However, the central bank noted that a digital pound rollout wouldn’t take place until after 2025, and would not be poised to replace cash and traditional bank deposits, but instead to exist alongside them. 

The Bank of England launched two forums to aid with the consultation: a technology forum, and an engagement forum. The former includes payment provider Paypal and retailer ASOS. The second comprises representatives from traditional banking institutions such HSBC and Standard Chartered. While this initiative may be promising for CBDC proponents, the time frame given suggests that the UK is still a way off any concrete action.


In contrast, the Swiss central bank has announced that the practical components of a wholesale CBDC (wCBDC) are already in place, and its implementation is merely a matter of policy. Governing board member Thomas Moser told CoinDesk that “we would be ready to go live in January, and it just takes a policy decision and the question of whether we legally could do a wholesale CBDC.” The CBDC would utilise Switzerland’s Six Digital Exchange (SDX), which was built using R3′s permissioned Corda network. A wCBDC specifically, as opposed to a retail CBDC, would enable the clearing and settlement of wholesale payments.


Meanwhile in France, the results of a CBDC experiment which began in March of last year demonstrate that a wholesale CBDC would be beneficial. Specific utility lies in “cross-border and cross-currency payments”, as it would “improve the efficiency of processing chains” according to the head of the Banque de France experiment, Nathalie Aufauvre. Nonetheless, the central bank noted that further analysis on ‘the role of financial intermediaries’ was necessary, and asserted that central banks must retain “full control”.

Indian architecture beside the water.


In a somewhat surprising turn of events, India, a country long-regarded as a staunch opponent of cryptocurrency, is now attempting to fast-track the implementation of a new moderate cryptocurrency bill. The bill is expected to be far less restrictive than the hardline bans on the use of cryptocurrency implemented by countries such as China, though it will not go as far as accepting it as legal tender as in El Salvador.

If the bill, in its moderate form, is implemented it would represent a monumental step towards the global adoption of cryptocurrency. India has a population of almost 1.4 billion people, making it the second most populous country on earth. It also ranks second globally in both crypto adoption (though this is disputed by the Reserve Bank of India) and the proportion of its population which remains unbanked. The combination of these three metrics with the regulatory certainty that this bill aims to provide would likely make India a fertile ground for businesses operating in the digital assets sector. That said, the stance of the Indian government on cryptocurrency over the last few years has been nearly as volatile as the assets it is trying to regulate: parliamentary bills proposing the outright ban of cryptocurrency have been proposed as recently as January 2021, and the Reserve Bank is still very vocal about the “serious concerns” it has in relation to the systemic risks posed by cryptocurrency. Accordingly, it might be worth waiting until the bill is passed into law before considering launching a new business venture in Bangalore.


Arial View of Spanish City


Long anticipated cryptoasset regulations in Spain are gaining momentum. The Bank of Spain has issued instructions for all individuals and institutions providing virtual currency exchange services to register for AML purposes, as well as asking that financial institutions inform the Bank of their crypto-focussed three-year roadmaps. 

Registered entities with the Bank of Spain will be required to report the controls in place to prevent money laundering and terrorist financing. The Bank of Spain will assess risk based on a variety of factors such as: country of operation, products offered, business relationship, volumes, among other factors. This assessment will apply to all platforms offering services in Spain, even if not domiciled in the country. 

In addition, financial institutions must disclose information about their relationships with cryptoasset service providers and inform the Bank of any plans to provide cryptoasset custody, payment services or issue tokens. This request for further information on crypto-specific initiatives coincides with Banco Santander, Spain’s largest bank, announcing they will offer crypto exchange-traded funds. Previously hindered by regulatory and compliance risk appetite considerations, the regulatory framework developing in Spain will support this initiative and hopefully provide a launch pad for other financial institutions to follow suit. 

Source: Yahoo!Finance | CoinTelegraph

South Korean city scape


The FATF ‘Guidelines for Virtual Assets and Virtual Asset Providers’, updated on October 28th, makes clear that NFTs are not currently classified as virtual assets and therefore are not subject to the same AML regulations. How countries should approach NFT regulation accordingly remains a grey area. Nevertheless, the FSC (South Korea’s financial services regulator) has taken these guidelines into consideration in making their decision not to regulate NFTs. 

The NFT market is booming and NFT technology in South Korea is gaining popularity. For example, Korea’s largest entertainment company, Hybe, recently announced plans for new NFT business ventures in collaboration with Korean crypto exchange, Upbit. World famous Korean pop group, BTS, have also announced plans to offer NFT fan collectibles.

Some NFTs are considered exclusively to be digital collectibles, and the FATF guidance highlights that their unique rather than interchangeable characteristics make it difficult to classify NFTs as virtual assets along with BTC, ETH and other cryptocurrencies. An FIU official explained that if NFTs were used as payment, the substantial amount that would have to be issued renders their scarcity non-existent, which is where the majority of their value is derived. 

That said, the FATF warned that in reality, NFTs are being used for both payment and investment, which should be regulated activities. In addition, it was mentioned that NFTs in the form of ‘security tokens’, representing the rights to investment assets, should also be considered as virtual assets. According to the FATF guidance, countries should therefore consider regulating NFTs on a case-by-case basis. 

Source: CoinDesk

This article was prepared by Will McFadden, Legal Analyst, Isabelle Heatley, Compliance Analyst, Anna Cooper, Junior Compliance and AML Analyst and was overseen by Natasha Gonseth, Head of Compliance.

man facing camera in business pose Will McFadden | Legal Analyst woman facing camera Isabelle Heatley | Compliance Analyst compliance/aml news roundup – CBDC Testing and Consultation Across Europe Anna Cooper| Junior Compliance Analyst compliance/aml news roundup – CBDC Testing and Consultation Across Europe Natasha Gonseth | Head of Compliance
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