Global Regulatory Updates: SEC ‘Gag Rule,’ Banking Crypto Assets, China's AML Revisions, Worldcoin Investigation, and EU's AI Act
Summary:
Hester Peirce, an SEC Commissioner, opposes the Commission's 'gag rule,' which she argues infringes on defendants’ rights. U.S. lawmakers aim to repeal an SEC bulletin that restricts banks managing cryptocurrency assets on their balance sheets. Also, requests for more time to examine a proposed rule from the CFPB have been made. China intends to revise its Anti-Money Laundering regulations to address cryptocurrency transactions. Meanwhile, Hong Kong's PCPD is investigating Worldcoin over data privacy concerns. Finally, EU member states unify on the AI Act, a first-of-its-kind regulatory framework for Artificial Intelligence.
Hester Peirce, Commissioner of the United States Securities and Exchange Commission (SEC), has voiced her discontent over the commission's refusal to change its 1972 "gag rule.” This stipulation prevents defendants from negating or failing to acknowledge the SEC's accusations after a settlement has been reached. Peirce believes this policy, which denies defendants the freedom to publicly disagree with a settlement once finalised, is unneeded, undermines the credibility of regulations, and encroaches on First Amendment rights. She adds that if the SEC is truly sure of its investigative and analytical work, silencing the settling defendants is not necessary.
Meanwhile, legislation is underway in the U.S. Congress, aiming to nullify the SEC's Staff Accounting Bulletin 121 (SAB 121), a bulletin that imposes restrictions on banks wanting to manage their customers' cryptocurrency assets. This legislation obliges them to retain their clients' assets on their balance sheets. Lawmakers including Mike Flood, Wiley Nickel, and Senator Cynthia Lummis have put forth a resolution under the Congressional Review Act to officially reject SAB 121 and terminate its legal potency. Members of Congress argue that this jeopardizes regulated banks' readiness to be crypto custodians and unfairly treats cryptocurrency differently than other assets.
In related news, heads of the U.S. House Financial Services Committee and the Subcommittee on Digital Assets, Financial Technology, and Inclusion have requested additional time to review a proposed rule from the Consumer Financial Protection Bureau (CFPB). Representatives Patrick McHenry, Mike Flood, and French Hill have enquired how the proposed rule to be implemented in November 2023 would impact specific players in the digital asset ecosystem. The proposed CFPB rule includes extending its supervisory capacity to depository establishments, incorporating digital assets in its "funds" definition, and potentially scrutinizing wallets.
Meanwhile, China is progressing towards revising its Anti-Money Laundering (AML) regulations to incorporate transactions involving cryptocurrencies. This move is a response to demands from policymakers for increased oversight of the burgeoning crypto industry. Wang Xin, a law professor at Peking University stresses the urgent necessity to address issues regarding crypto money laundering at a legal level. Xin further highlighted that the revised draft should provide operational instructions regarding the confiscation, freezing, and seizure of assets involved in money laundering crimes; a feature currently missing in the existing laws.
On another note, Hong Kong's Privacy Commissioner for Personal Data (PCPD) has raised concerns about identity verification project Worldcoin's local operations. The PCPD mentioned serious potential risks to data privacy, leading to the execution of warrants and the investigation of six premises associated with Worldcoin. The commission requested documentation and urged residents to consider possible uses of their biometric data.
Finally, on the AI front, the European Union has progressed its regulatory framework for artificial intelligence (AI), with consent from all member states on the final text for the EU's AI Act. EU's Commissioner for Internal Market, Thierry Breton, confirmed the political agreement achieved in December 2023 and referred to the AI Act as a historical and global first in a social media post. This act implements a risk-based strategy for the regulation of AI applications and addresses the use of AI in biometric surveillance, the regulation of AI systems such as Chat GPT, and the transparency rules for market entries.
Published At
2/5/2024 11:00:00 PM
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