INTRODUCTION Contributed by: Adrian Ang, Allen & Gledhill LLP
forward into 2025, we expect that more “single- currency stablecoins” backed by reserve assets will hit the market, providing an increase in use- cases; not only for facilitating cross-border transactions, but also for acting as a store of value to promote financial inclusion, in markets where access to traditional banking services may be limited. By contrast, interest in “algorithmic stablecoins” may remain muted, particularly in light of con - sumer scepticism after the crash of Terra Luna’s stablecoin in 2022, where massive withdrawals led to the value of the stablecoin slipping below its USD1 algorithmic “peg”. We would also expect regulators to continue to work on robust regulatory frameworks for the regulation of stablecoins and stablecoin issuers. This includes imposing requirements relating to how reserve assets are to be stored (and what these reserve assets are), and prescribed time - lines for consumers to be able to redeem their stablecoins at par for the underlying fiat currency value. Increasing Focus on Consumer Protection Requirements In the past years, consumer protection concerns surrounding cryptocurrency have taken centre stage. Given the spate of cryptocurrency crises in 2022, with the fall of Terra Luna mentioned above, as well as the collapse of the cryptocur - rency exchange FTX in November 2022, both regulators and consumers now take a greater interest in knowing how their cryptocurrencies are being protected, and what measures are being put in place to ensure that they will be able to recover their cryptocurrencies in the event of a crash.
Accordingly, there has been a concerted push by regulators around the world to require more cryptocurrency service providers to implement measures to safeguard customers’ cryptocur - rencies, including implementing “insolvency- remote” structures to hold cryptocurrencies on behalf of customers, storing a defined proportion of customers’ cryptocurrencies in cold wallets, conducting daily reconciliation of assets held on behalf of customers, and putting in place meas - ures to maintain the security of private keys. Moving forward into 2025, we would expect an even greater focus on consumer protection requirements. Adoption and Development of RegTech Solu - tions for Blockchain Analytics, Screening, Trans - action Monitoring, and the Transmission of Val - ue/Wire Transfer Information In tandem with the deepening emphasis on con - sumer protection requirements, regulators are increasingly scrutinising how financial institu - tions comply with requirements relating to are - as such as the conduct of blockchain analytics and screening, transaction monitoring and the transmission of value and wire transfer informa- tion. This may necessitate the adoption of more sophisticated regtech solutions by fintechs, in order to comply with their regulatory require - ments. By contrast to most traditional financial institu - tions, some newer fintechs may not have devel - oped sufficiently robust procedures for trans - mitting and receiving value and wire transfer information. Fintechs may also not be plugged in to any harmonised standards for sending and receiving value transfer information. To fill the void, regtech solutions can be integrated into the process flows of fintechs to allow them to conduct screening and transaction monitoring,
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