Qatar’s digital asset regulations catches the eye of Notabene

Qatar’s digital asset regulations catches the eye of Notabene

Notabene, a crypto compliance firm that offers compliance solutions with FATF Travel Rule, has shown interest in Qatar’s proposed digital assets regulatory rules framework and has commented on Qatar’s consultation paper.

Notabene offers Safe Transact platform that helps financial institutions and crypto businesses unlock their full potential in the digital economy. With a focus on security, privacy, and end-user experience, Notabene customers use a multi-source data and software to automate real-time decision-making, perform counterparty sanctions screening, identify self-hosted wallets, and complete the smooth roll out of Travel Rule compliance, all in line with global and local regulations.

In a recent tweet on X Notabene welcomed the opportunity to comment on Qatar’s proposed digital assets regulatory rules consultation paper.

Notabene noted that they applaud the Qatar Financial Centre (“QFC”) Regulatory Authority (“Regulatory Authority”) and the Qatar Financial Centre Authority (“QFC Authority”) for taking the time to put together a comprehensive framework for digital assets.

Notabene added,” The process undertaken by both the QFC Regulatory Authority and QFC Authority to solicit public engagement on this important topic and welcome the opportunity to be part of the ongoing dialogue.”

Notabene, the crypto industry’s y pre-transaction authorization decision making platform, helps to identify and stop high-risk activity before it occurs. The platform offers a secure, holistic view of crypto transactions, enabling customers to automate real-time decision-making, perform counterparty sanctions screening, identify self-hosted wallets, conduct VASP Due Diligence, and complete the smooth rollout of Travel Rule compliance, in line with global regulations.

According to Notabene only Travel Rule compliance gives VASPs transaction-level counterparty and sanction insight, allowing them to recognize if their clients are sending transactions to sanctioned entities, wallets, or jurisdictions. VASPs worldwide are in different stages of compliance, which leaves many companies vulnerable to exposure to sanctioned individuals.

In its comment to Qatar’s consultation paper, Notabene states, “In particular, strict compliance with the Travel Rule is a prerequisite for VASPs to obtain licenses in these jurisdictions. We recommend that the QFC Regulatory Authority take the same approach. The ideal way to avoid dealing with non-compliance after settlement and its associated challenges is to ensure both TSPs assess and approve the
transaction before the Originator TSP executes it. This is in line with FATF’s recommendations.”

Qatar recently released its digital assets framework requesting feedback on it by January 2nd 2024.

Crypto trading in Qatar flourishes despite Central Bank ban

Crypto trading in Qatar flourishes despite Central Bank ban

Over the past years and despite the continuous banning of crypto in Qatar by the Qatar Central Bank, crypto trading and investing in Qatar is flourishing reflected in various ways. 

The first reflection of the attractiveness of crypto trading in Qatar is the statement made by Qatar’s Ahli bank, at the end of May 2023. The bank warned customers against, trading, buying and selling virtual assets and currencies through accounts and banking services, citing the reasons as being associated with high risks.

Secondly Triple A report in January 2023 put Qatar’s crypto ownership at 0.9 percent of the population, around 24,000 people. Since then it could be the numbers have increased. Just over a year ago CoinMENA had announced that it was serving clients in Qatar. Even Bahrain’s RAIN crypto broker supports Qatar, as does UAE based BitOasis.

But the third and most significant reflection of the growth of crypto in Qatar is the recent MENA FATF report, where they mention that Qatar needs to work more on improving its risk understanding, implementation of TFS ( Targeted Financial Transactions) and NPO (Nonprofit organizations) preventive measures for virtual assets, and virtual asset service providers.

As mentioned in their report, “ Qatar has a very strong level of compliance with the FATF Standards, with only minor improvements needed in relation to risk understanding, implementation of TFS and NPO preventive measures, VAs and VASPs, wire transfers, transparency for legal persons and arrangements and cross-border movements of cash and BNIs.

So while Qatar has embraced blockchain, digital assets, and is studying the possibility of implementing CBDC, while shunning crypto, the population in Qatar seems to be moving forward with the crypto times.

MENA FATF adopts Abu Dhabi’s five recommendations on virtual assets

MENA FATF adopts Abu Dhabi’s five recommendations on virtual assets

During the recent MENA FATF (Financial Action Task Force) regional body’s workshop attendees adopted several recommendation proposes by Abu Dhabi including those pertaining to virtual assets, in the fight against money laundering, and terrorism.

The Abu Dhabi recommendations consist of 24 best practice commitments made by MENAFATF member states for enhancing regional efforts to counter money laundering and financing of terrorism.

The recommendations were agreed at the closing of the MENAFATF Typologies and Capacity Building Workshop held between 6-8 March 2023 under the patronage of H.H. Sheikh Abdullah bin Zayed Al Nahyan, Minister of Foreign Affairs, and Chairman of the Higher Committee Overseeing the National Strategy on Anti-Money Laundering and Countering the Financing of Terrorism, and hosted by the UAE Executive Office of Anti-Money Laundering and Counter Terrorism Financing (EO AML/CTF) in Abu Dhabi.

Of the 24 recommendation five pertained to virtual assets. The first discussed enhancing MENAFATF countries’ understanding of the requirements of Recommendation 15, including the sectorial risk assessment of virtual assets, given the rapid development in this field.

The second recommendation  urged countries to build capacities in the field of virtual assets with the competent authorities, especially in the field of supervision, control, investigations and management of seized and confiscated assets and the extent of their use in evading sanctions.

While the third recommendation proposed continuing to adopt new technologies to mitigate the risks of virtual assets in partnership with the private sector.

As for the fourth and fifth recommendations, one proposed enhancing national cooperation in following up on issues related to virtual assets between the competent authorities and urged the use of best practices such as specialized task forces (working groups), while the other proposed raising awareness among member countries about the risks of cybercrime, particularly ransom ware and related payment methods, especially concerning VAs.

Suliman Al Jabrin, Executive Secretary of MENAFATF, stated that regional alignment on best practices has created of a set of shared standards that strengthens the national AML/CFT systems of member states. He added, “I am delighted that the 24 recommendations made by MENAFATF members in Abu Dhabi cover a comprehensive range of the most pressing issues facing us today. It is right that the list includes Virtual Assets (VA), ML typologies, Public-Private Partnerships, regional assessments, and multiple means of expanding cooperation. The MENA region plays an important role in the global economy, and the Abu Dhabi recommendations send a strong signal to our international partners that there is no place for financial crime in our part of the world.”

World Economic Forum calls UAE crypto regulatory framework as agile and benefiting innovation

World Economic Forum calls UAE crypto regulatory framework as agile and benefiting innovation

World Economic Forum report entitled “  Pathways to the Regulation of Crypto-Assets”  says UAE crypto asset regulatory framework is an agile one,  defining it as flexible, iterative and proactive which is beneficial because it is flexible, appreciate market maturity and ecosystem development.

According to the WEF report, regulators that fall under this model include the Swiss Financial Market Supervisory Authority. FINMA’s token classification prescribes three simple categories: payment tokens, utility tokens and asset tokens. The framework acknowledges hybrid tokens and that a token’s classification may change over time. Following the first classification, FINMA later also published further guidance in

Also included as per the report are the regulatory sandboxes in the EU and India in addition to the UAE. 

Instead of prescribing and enforcing rules, agile regulation adopts a responsive, iterative approach, acknowledging that policy and regulatory development is no longer limited to governments but is increasingly a multi-stakeholder effort. Yet it also faces challenges that include the need for coordination and collaboration being as well plagued with uncertainty. 

Regulatory sandboxes, guidance and regulators’ no-objection letters are all forms of agile regulation that enable the testing of new types of solutions, iterating policy frameworks based on ecosystem evolution and industry needs.

The report sets out to understand and highlight the needs and challenges in developing a global approach to crypto-asset regulation. In doing so, it delves into the various regulatory approaches being adopted by different jurisdictions.

The report developed rankings for each regulatory framework. The rankings covered four areas when analyzing regulatory frameworks and found that the agile regulatory framework is best at promoting innovation. Agile regulatory framework ranks in the middle ground for providing certainty for businesses, addressing data gaps and enforcement effectiveness.

The report finds for example that Regulation by enforcement which the USA falls under is weak in all the above mentioned areas except for enforcement effectiveness.

As per the report the UAE has not only initiated a license regime for crypto assets, but has also carried out consultation for decentralized applications such as DeFi, and DAOs.

In addition the report mentions that few jurisdictions have chosen to address the difficulty of classifying tokens, partially relying instead on the functionality enabled by the token.

For example, Liechtenstein has chosen not to rely solely on classifications but to introduce the token as such as an element in Liechtenstein Law, meaning that the right or asset represented in the token triggers the application of special laws (the so-called “token container model”). This means that the tokenization as such has no legal effect: if a financial instrument is tokenized, the financial market laws are applicable if the activity is regulated, too; if a commodity is tokenized, the laws for commodity trading might be applicable; and so on. For new instruments, such as utility coins and virtual currencies, a new regulation has to be defined.

While in the UAE, the Virtual Assets Regulatory Authority in Dubai has put forth a framework that is underpinned by overarching regulations and compulsory rulebooks, segregating activities-based rulebooks to rapidly account for novel products, emerging technologies, and new business models that require regulatory capture.

The paper’s findings reinforce the urgent need for policymakers and regulators to collaborate with industry and users to realize the benefits while addressing the risks involved.

Enforcement is still weak globally. For example in the context of AML supervision of crypto-assets, a Bank for International Settlements (BIS) 2021 survey found that oversight remained nascent globally. As stated, “Although many are at different stages, with some countries still finalizing applicable law and policy and a small portion engaging in active supervision, by and large effective enforcement measures remain a work in progress. The result is a complex tapestry of enforcement trends as well as enforcement risks posed by the cross-jurisdictional influence of crypto-assets.”

Even when it comes to the FATF travel rule implementations are also limited. As noted in FATF’s June 2022 targeted update report, interoperability across technical solutions and across jurisdictions is still lacking.

WEF report as such notes that such fragmented enforcement techniques will pose a challenge to the supervision and monitoring of crypto-assets against regulations in the short term and may take many years to standardize.

The report recommends promoting a harmonized understanding of taxonomy/classification of crypto assets and activities, set out best practices and baseline regulatory standards for achieving the desired regulatory outcomes and encourage passportability of entities and data sharing.

Building on this foundational paper, the World Economic Forum’s Blockchain and Digital Assets team will launch an initiative focused on evaluating the outcomes of different regional approaches to regulation. This effort will convene public- and private-sector leaders to reveal first-hand learning’s and the unintended consequences.

But not everyone shares the WEF reports belief that International crypto regulations and standards are possible.  During the Qatar Economic Forum this week, Peter Smith Co-Founder and CEO of Blockchain.com rejected claims of a “United Nations” of crypto as inconceivable. He stated, “A global system to regulate cryptocurrency is unlikely to exist.”

However, the Blockchain chief recalled the recent EU passing of the world’s first comprehensive package as a step forward in cautiously regulating the cryptocurrency industry. In addition, Smith told Bloomberg that regulators that express optimistic calls to crypto would promote development for the industry.

So whether a global harmonic set of crypto assets regulations are formulated or whether regional and national countries work to build their own, the growth of crypto assets cannot be curved by regulators. 

Jordan on FATF grey list because of virtual assets risks

Jordan on FATF grey list because of virtual assets risks

On February 24th 2023 FAFT released its latest grey and black list. For those who are on the grey list it means that these jurisdictions are under increased monitoring and are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.

As per the recent announcement by FATF, “When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. This list is often externally referred to as the “grey list”.”

Of the Arab countries on the grey list, was Jordan. It was on the list because of risks in virtual assets. As per FATF one of the reasons for it being on the list was because it needed to address strategic deficiencies including “completing and disseminating the money laundering and terrorist financing risk assessments of legal persons and virtual assets.”

It was interesting to see the term virtual assets in relation to Jordan because Jordan has not been on the list in terms of countries with high crypto ownership or transactions. Other countries such as Egypt, Morocco, and Lebanon are much more active in crypto. yet FATF chose to include the risks of virtual assets as one of the reasons it was one the grey list. 

According to Triple A crypto ownership report, the percentage of Jordanians who own crypto is just 1.5 percent equivalent to 170,000 people as of January 2023 an increase from 1.25 percent in 2022.

Concurrently, the IMF after its technical report on Jordan’s Central Bank feasibility for the launch of retail CBDC after a three month mission, recently released its report. IMF gave Jordan’s existing payment market a positive review calling it well integrated.

Nonetheless, The IMF stated that an rCBDC would enhance financial inclusion by providing services to residents without smartphones and could also improve the domestic payment system by making its infrastructure available to PSPs and lowering the cost of cross-border transfers.

The IMF however warned to avoid disintermediation in the Jordanian financial system, as it could contribute to instability in times of stress. The IMF found that an rCBDC could increase cybersecurity risks as an attractive target. “Sound legal underpinnings for an rCBDC should also be created,” the report said. 

In its report the IMF noted, “RCBDC may offer some benefits, but it does not necessarily address pain points. On the other hand, a cross-border rCBDC could add value, particularly if the authorities coordinate with other countries in the region.”

Jordan’s Central Bank had announced in February 2022 that it was researching a CBDC. Cointelegraph article noted that a central bank proposal to introduce crypto trading met with resistance in the parliament.

Whatever the case, Jordan being on FATF grey list because of virtual assets risks is another reminder of the need to regulate crypto assets.