President Joe Biden has announced his financial leadership nominations. Biden wants Christy Goldsmith Romero of the CFTC to replace Martin Gruenberg as Chair of the FDIC, and wants to make changes at the Treasury Department as well. Meanwhile, the European Banking Authority released technical standards under the MiCA regulation for asset-referenced and e-money tokens. Firms will have to be compliant with the regulations by July of 2026. In Taiwan, 24 crypto firms formed the Taiwan Virtual Asset Service Provider Association to develop self-regulatory standards. Additionally, crypto-friendly Swiss online bank FlowBank was forced into bankruptcy by FINMA.
Biden’s Financial Leadership Nominations
President Joe Biden announced some major changes to the leadership at key financial regulatory bodies. Christy Goldsmith Romero of the Commodity Futures Trading Commission (CFTC) is set to replace Martin Gruenberg as Chair of the Federal Deposit Insurance Corporation (FDIC). CFTC Commissioner Kristin Johnson has been nominated to become the next Assistant Secretary for Financial Institutions at the Treasury Department, and Caroline Crenshaw is expected to remain a commissioner at the Securities and Exchange Commission (SEC).
Romero, who has served as a CFTC commissioner since March of 2022, is seen as a pro-crypto voice in the regulatory landscape. This is good news for crypto as her nomination to the FDIC chair position could reflect her experience in securities and cryptocurrency regulation.
Caroline Crenshaw’s term at the SEC expired on Jun. 5. She has been a commissioner since 2020 and is well known for her opposition to listing and trading spot Bitcoin exchange-traded funds as she is concerned about market fraud and manipulation. Crenshaw is seen as an anti-crypto voice alongside SEC Chair Gary Gensler.
President Biden now also plans to nominate Hawaii Insurance Commissioner Gordon Ito to the Financial Stability Oversight Council. However all nominations will still require Senate approval.
Biden has faced a lot of criticism for his anti-crypto policies, including vetoing a resolution to overturn an SEC rule on banks handling digital currencies. In contrast, former President Donald Trump, a potential Republican nominee for 2024, recently met with crypto mining executives and pledged his wholehearted support for the industry if he were to be elected president.
EBA Releases MiCA Standards for ARTs and EMTs
There are new regulatory developments in Europe as well. The European Banking Authority (EBA) has released a comprehensive package of technical standards and guidelines under the Markets in Crypto-Assets (MiCA) regulation, that offers some regulatory guidance for asset-referenced tokens (ARTs) and e-money tokens (EMTs) across Europe.
The package covers six key topics, including stress testing programs, asset reserves, and recovery plans. Under MiCA, ARTs are tokens backed by assets like commodities, real estate, or a basket of different assets, while EMTs maintain a stable value by being pegged to fiat currencies and are used for payments, very similar to stablecoins.
The EBA provides guidelines for token issuers, and stressed the need for sufficient financial resources to cover potential risks. It also establishes parameters to identify when an issuer is facing a higher degree of risk, which will require an increase in own fund reserves.
The reports also detail the procedure and timeframe for issuers to adjust their own funds to 3% of the average reserve of assets classified as significant. The implementation plan has to be submitted within 25 working days and full compliance has to be achieved in six months.
Additionally, the European regulator set minimum percentages for asset reserves based on daily and weekly maturities and limits the concentration of highly liquid financial instruments that issuers can hold. For tokens not considered significant and referenced to official currencies, at least 30% of deposits must be held in reserve, rising to 60% for significant tokens. Tokens linked to assets other than official currencies, like commodities or real estate, can also be regarded as highly liquid, with the EBA setting limits on the amount an issuer can offer.
With regards to recovery plans, the regulator incorporates feedback from the consultation period, detailing communication and disclosure requirements and clarifying that asset reserve requirements do not apply to EMT issuers already exempted by the legislation.
These standards and guidelines are part of the MiCA regulation implementation. Digital asset service providers are required to comply with these regulations by Jul. 1 of 2026.
Taiwan Crypto Firms Form Self-Regulatory Association
Meanwhile, a group of crypto companies joined a Taiwan-based association to develop self-regulatory standards for the country's digital asset industry. On Jun. 13, XREX exchange announced that 24 crypto firms became founding members of the Taiwan Virtual Asset Service Provider (VASP) Association.
BitoPro founder and CEO Titan Cheng will chair the association, while XREX chief revenue officer Winston Hsiao will serve as vice chair. One of the group’s main goals is to promote and facilitate rigorous and fair regulations to support the global growth of the blockchain finance industry.
The VASP Association plans to work closely with the government, the Ministry of Justice, and law enforcement agencies to fight fraud and other criminal activities. It will also contribute technology, industrial knowledge, and infrastructure to establish a joint defense platform and design international transfer rules that comply with Taiwan’s needs and standards. This includes creating technology for currency flow scanning and tracking to align with Taiwan's money laundering and fraud patterns.
The formation of the VASP Association comes after Taiwan's Justice Ministry proposed amendments to its Anti-Money Laundering (AML) regulations for virtual asset service providers. Noncompliance with these proposed amendments could result in up to two years in prison or fines up to $1.5 million. Taiwan’s Financial Supervisory Commission (FSC) also announced plans to introduce new digital asset regulations in September.
Hsiho Huang, an FSC director present at the VASP Association announcement, is excited about the potential of VASP, and believes it will foster cooperation and consensus in the industry. It will also promote compliance, standardization, and healthy development, ensuring the industry's safety, transparency, and stability while still improving consumer protection.
Swiss Bank FlowBank Forced into Bankruptcy
FlowBank, an online Swiss bank that provided crypto trading services, has been shut down and forced into bankruptcy after a ruling by the Swiss Financial Market Supervisory Authority (FINMA). On Jun. 13, FINMA announced that FlowBank “seriously breached” the standards required to operate as a bank, leading to its closure.
The bank no longer had the minimum capital required for business operations, with no prospects for restructuring, and was feared to be over-indebted.
FlowBank was launched in 2020, and was well known for its crypto trading services and partnerships with companies like Techteryx, the issuer behind TrueUSD (TUSD), and CoinShares, a crypto asset management firm. The bank also offered services to Binance, the world's largest crypto exchange.
Customers with up to 100,000 Swiss francs ($111,710) in funds will be protected first, and FINMA plans to help them recoup their money as quickly as possible. FlowBank holds $760 million in total assets, has over 22,000 client accounts, and employs around 140 staff worldwide.
FINMA first took enforcement action against FlowBank in October of 2021 for serious breaches of supervisory law related to capital requirements. An independent auditor was appointed a year later to monitor the bank's compliance efforts.
In June 2023, further investigations by a FINMA-appointed supervisor revealed a number of higher-risk business relationships and large transactions processed without proper due diligence. FINMA ordered the withdrawal of FlowBank’s license on Mar. 8, 2024, but the ruling is pending an appeal at the Federal Administrative Court.
