Eva Dauberton
News Editor
ESMA issues final report for MiCA technical standards package 2
The European Securities and Markets Authority (ESMA) has released a final report, which includes the second package of technical standards under the Markets in Cryptoassets Regulation (MiCA). The final report includes eight draft technical standards aimed at providing more transparency for retail investors, clarity for providers regarding disclosure and record-keeping requirements, and data standards to facilitate supervision by National Competent Authorities (NCAs).
Some context
MiCA, which came into effect in June 2023, requires ESMA, in collaboration with EBA, to prepare regulatory technical standards (RTS) and implementing technical standards (ITS) on various aspects for submission to the European Commission. These standards were issued sequentially in three packages.
Following a consultation in July 2023, ESMA released the final report for the first package of technical standards in March 2024 and May 2024. It includes RTSs and ITSs covering the content requirements, forms and templates for notification from selected entities to NCAs, the content requirements, forms and templates for the application for authorisation for cryptoasset service providers (CASPs), complaint handling procedures, intended acquisition information requirements, and requirements in relation to conflicts of interest.
The newly published final report is the second batch of final draft technical standards, which were consulted on in October 2023.
Key takeaways
The final report consists of six draft RTSs and two draft ITSs.
- Content, methodologies, and presentation of sustainability indicators on adverse impacts on the climate and the environment (RTS)
- Measures that CASPs must take to ensure continuity and regularity in the performance of services (RTS)
- Pre- and post-trade transparency data to be made public (RTS)
- Content and format of order book records (RTS)
- Record-keeping by CASPs (RTS)
- Data necessary for the classification of white papers (RTS)
- Standard forms and templates for the cryptoasset white paper (ITS)
- Technical means for appropriate public disclosure of inside information (ITS)
Next Steps
The final draft technical standards will be submitted to the European Commission for adoption, and the Commission will decide within three months whether to adopt them.
The third and final MiCA consultation package was issued in March 2024 and covers all remaining mandates. This includes one RTS and three draft guidelines on the detection and prevention of market abuse, investor protection, and operational resilience. The deadline for comments on this consultation was 25 June 2024. ESMA expects to publish a final report and submit the draft technical standards to the European Commission for endorsement by December 2024.
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EBA issues final guidelines expanding the travel rule to include cryptoasset transfers
The European Banking Authority (EBA) has issued new guidelines regarding the information that should be included with transfers of funds and specific cryptoassets, also known as the ‘travel rule’.
Some context
In June 2023, Regulation (EU) 2023/1113 came into effect, recasting Regulation (EU) 2015/847 to align with Financial Action Task Force (FATF) standards by expanding the requirement to include information about the sender and receiver to cryptoasset service providers (CASPs). This regulation also subjects CASPs to the same anti-money laundering/combating the financing of terrorism (AML/CFT) obligations and supervision that apply to credit and financial institutions.
Key takeaways
The guidelines specify the information that should accompany fund or cryptoasset transfers and outline the steps that payment service providers (PSPs), intermediary PSPs (IPSPs), cryptoasset service providers (CASPs), and intermediary CASPs (ICASPs) should take to detect missing or incomplete information. They also outline the actions to be taken if a transfer lacks the required information.
The EBA concluded that significant changes to the existing guidelines were required to extend the scope to CASPs and the transfer of cryptoassets. As a result, the new guidelines repeal the previous JC/GL/2017/16 guidelines.
Next steps
Competent authorities are required to report their compliance within two months after the publication of the translations, and the guidelines will become effective from 30 December 2024.
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Unfair contract term: Australian Federal Court rules against PayPal
The Australian Federal Court has ruled that PayPal Australia Pty Limited (PayPal) used an unfair term in its standard form contracts with small businesses.
On 6 September 2023, the Australian Securities and Investments Commission (ASIC) initiated legal proceedings against PayPal, alleging that its standard form contracts with small business customers contained a contract term that was unfair. PayPal’s Combined Financial Services Guide and Product Disclosure Statement, along with its User Agreement, contained a term that permitted PayPal to hold on to fees it had mistakenly charged, provided the small business did not inform PayPal of the error within 60 days of the fee showing on its account statement.
The Court declared the unfair term void from the start of the contracts and ordered that PayPal be restrained from applying, relying on, or enforcing the term in its contracts with small businesses. The Court also ordered PayPal to pay ASIC’s litigation costs.
Deputy Chair Sarah Court stated, “Today’s decision serves as a reminder to all businesses that unfair contract terms within standard form contracts with small businesses will not be tolerated, and ASIC will take decisive action to protect the rights of consumers and small businesses when necessary.”
o note: on 9 November 2022, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 was assented to. This Act introduces civil penalties under the ASIC Act for breaches of the unfair contract term prohibition occurring from 10 November 2023.
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ASIC proposes adjusting nominal wage inflation rate for superannuation calculators
The Australian Securities and Investments Commission (ASIC) has issued a proposal to update the rate of nominal wage inflation in ASIC (Superannuation Calculators and Retirement Estimates) Instrument 2022/603 (Instrument 2022/603) and Regulatory Guide 276 Superannuation forecasts: Calculators and retirement estimates (RG 276) to align with Treasury’s revised long-term wage growth forecasts.
Key takeaways
The proposed change relates to the standardised assumptions included in the conditional relief under Instrument 2022/603 for providers of superannuation calculators and retirement estimates. It involves revising the prescribed rate of nominal wage inflation from 4% p.a. to 3.7% p.a. to reflect the 0.3 percentage point reduction in the long-term forecast of nominal wage inflation in the 2023 Intergenerational Report (IGR).
ASIC proposes that providers can adopt either the existing default nominal wage inflation rate (4% p.a.) or the revised rate (3.7% p.a.) until 31 December 2024. From 1 January 2025, the revised default nominal wage inflation rate of 3.7% p.a. will apply.
Next steps
The deadline for feedback on the proposal is 2 August 2024.
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ATO becomes first government agency to join the Australian Financial Crimes Exchange
The Australian Treasury has announced that the Australian Taxation Office (ATO) will be the first government agency to become a full member of the Australian Financial Crimes Exchange (AFCX).
This follows the government’s decision for the National Anti-Scam Centre to join the AFCX intel loop, which enables near-real-time data sharing between participants about the latest tactics and tools used by scammers.
The AFCX Anti-Scam Intelligence Loop will help identify impersonation scams that attempt to phish identity details, such as those that purport to be from MyGov. Early identification will help deter and prevent fraud and financial crime.
Assistant Treasurer and Minister for Financial Services, Stephen Jones, said, “Collaboration across the scam ecosystem is crucial to making Australia the hardest place for scammers to operate. The ATO’s membership in the AFCX is another step towards making Australia the hardest place in the world for scammers to operate.”
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Australian Treasury announces new tax reporting requirement for public companies
The Australian Treasury has announced that starting from the reporting period beginning on or after 1 July 2023, all public companies, whether listed or unlisted, will be required to include a tax consolidated entity disclosure statement in their annual financial reports. This new requirement will come into effect for the first time from 30 June 2024.
The purpose of this new statement is to hold companies accountable, especially large corporate groups, for their corporate structure and to determine whether they are engaged in opaque or atypical tax arrangements.
The reporting and audit requirements for this new consolidated entity disclosure statement are designed to set a higher standard than the disclosure of material entities in a company’s financial statements, which will still be required for the other elements of the annual report under existing accounting and auditing standards. Auditors are also expected to provide their opinions without considering materiality.
As reporting dates approach, the Australian Securities and Investments Commission (ASIC) and the Auditing and Assurance Standards Board (AASB) will assess whether public guidance is necessary.
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HKMA issues findings on trust business compliance
The Hong Kong Monetary Authority (HKMA) has issued a ‘Dear CEO’ letter to all authorised institutions (AIs) regarding the results of their self-assessment of compliance with the Supervisory Policy Manual Module TB-1 “Regulation and Supervision of Trust Business” (SPM TB-1). This self-assessment was submitted on 31 March 2024 and covers the period from 1 June 2023 to 31 December 2023.
Some context
The SPM TB-1 provides guidelines on the HKMA supervisory approach and conduct requirements for trust business and related activities. It also includes a Code of Practice for Trust Business (the Code), which outlines the general principles and practical standards that trustees in Hong Kong must adhere to in their trust business operations. The reporting institutions include AIs and their subsidiaries that engage in trust business in Hong Kong as trustees.
Key takeaways
The HKMA found that the overall compliance status during the assessment period was satisfactory, as no instances of non-compliance were reported. However, there were 12 instances of partial compliance, eight of which related to Principle 4 of the Code: “Corporate governance and internal controls.”
Principle 4 stipulates that a trustee should establish a proper corporate governance structure and implement adequate internal controls and risk management systems to ensure that its trust business is effectively managed.
The letter also includes an annexe, which provides further details on the partial compliance cases categorised by the Code’s general principles.
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