Daily Digest - 31st May 2023

Headlines

▌The Hong Kong Monetary Authority and the Central Bank of the United Arab Emirates agreed to strengthen cooperation on financial infrastructure, virtual asset supervision and development

The Hong Kong Monetary Authority (HKMA) issued a press release stating that the Central Bank of the United Arab Emirates (CBUAE) and the Hong Kong Monetary Authority held a bilateral meeting in Abu Dhabi to enhance collaboration between the financial services sectors of the two jurisdictions. During the meeting, the Central Bank of the United Arab Emirates and the Monetary Authority discussed a number of cooperation plans and agreed to strengthen cooperation in three major areas: financial infrastructure, financial market interconnection between the two places, and virtual asset supervision and development. In addition, the two parties facilitated discussions and knowledge sharing on cooperation plans for fintech development in their respective innovation hubs. Following the bilateral meeting, the two central banks will jointly set up a working group to promote the cooperation matters agreed by the two sides with the support of relevant stakeholders (stakeholders) of the banking industry in the two places. Banks attending the seminar included First Abu Dhabi Bank, Abu Dhabi Islamic Bank, Emirates NBD, Industrial and Commercial Bank of China, Bank of China, HSBC and Standard Chartered operating in the UAE, and Bank of China, Citigroup, HSBC and Standard Chartered operating in Hong Kong.

Policies

▌The United States CFTC issued a digital asset derivatives letter to conduct liquidation compliance in three aspects

The US Commodity Futures Trading Commission (CFTC) has issued staff advisory letters to registered derivatives clearing organisations (DCOs) and DCO applicants, alerting them to the risks associated with expanding their activities. The letter from the CFTC’s Division of Clearing and Risk (DCR) is specific to digital assets. A staff advisory letter can remind recipients of their legal obligations or clarify those obligations. “DCR expects DCOs and applicants to proactively identify new, changing or unique risks and implement risk mitigation measures. Over the past few years, DCR has observed interest in expanding the types of clearing products and lines of business offered by DCOs, clearing. There is growing interest in models and services, including those related to digital assets." DCR stated that it will emphasize three aspects of compliance, system assurance, conflict of interest and physical delivery. System safeguards require attention due to the "higher cyber and other operational risks" associated with digital assets. Potential conflicts of interest manifest in "dependence on affiliated entities or services (i.e. double executive, shared systems and resources, etc.)".

▌India will join more banks in digital rupee pilot

India's central bank is stepping up two ongoing central bank digital currency (CBDC) testing projects that study the retail and wholesale implementation of the digital rupee. The Reserve Bank of India (RBI) said it will now introduce a range of use cases and features for the pilot in the next financial year. The Reserve Bank launched a digital rupee (or e-rupee) pilot last year. According to the bank's annual report, it plans to expand the retail pilot to bring in more participating banks. India’s wholesale CBDC testing began in November last year. The idea is to use the digital rupee to facilitate the settlement of secondary market transactions in government securities. Nine banks participated in the first phase. The retail pilot, launched in December, aims to use the digital rupee as a replacement for physical banknotes. The central bank said eight banks have already participated in the retail pilot and five more are in the process of joining.

Cryptocurrency

▌US District Judge Sends Matter of FTX Independent Examiner to Court of Appeals

A US district judge has sent a motion to an appeals court to appoint an independent examiner for bankrupt cryptocurrency exchange FTX. In a May 30 filing in the U.S. District Court for the District of Delaware, Judge Colm Connolly said that Andrew Vara, the US trustee in the FTX case, in bankruptcy court rejected the appointment of an examiner to oversee the failed cryptocurrency in February. Appellate exchange requested after motion. According to court documents, bankruptcy law allows for the appointment of an independent examiner when certain conditions are met, as in the case of FTX, but does not require it.

▌Affected by the tightening of Canadian regulations, Bybit withdrew from the Canadian market

Bybit announced that due to recent regulatory developments in Canada, it will be withdrawing from the Canadian market as early as May 31. In a blog post Tuesday, the exchange said, “Bybit’s primary goal has always been to operate our business in compliance with all relevant Canadian rules and regulations. In light of recent regulatory developments, Bybit has made the difficult but necessary decision to suspend our products and availability of services." No new accounts will be opened from May 31, while existing customers will have time to make new deposits and sign new contracts by July 31, the company said, noting they will be able to withdraw or reduce their deposits after the deadline position.