Panel | Navigating the Global Regulatory Maze (In Partnership with Steptoe)

so I'm Alan con from uh Steptoe and every year here I feel like

I get asked to do the crypto regulatory panel and it's not always known as the most gripping panel here at the gbbc

lounge but we're going to try to make that a little different this year we're going to keep it we have a great panel um and you know folks come sit down and

ask questions be engaged we'll have about 40 minutes we'll talk through and what what's really great is we have uh a panel from a number of different places around the world um so this is not going

to be a trump mem coin dis discussion we're going to be able to get beyond that um uh and go ahead so our panel um

Maha eladi head of Regulatory Affairs for the Qatar Financial Center Authority uh Simon Kim the CEO and managing partner of

hashed uh Clara Gara the director Dr Clara Gara the doc uh the director of uh of the office for financial Market Innovation and digitalization for the government of

lonstein uh and Andre Portillo partner and head of digital assets for btg Pall so we're going to start start by just kind of setting a little bit of a

foundation uh I'm going to ask each of the panelists just to talk a little bit about the state of digital asset regulation in each of their

jurisdictions um any unique features uh and any unique gaps or challenges Maha do you want to start first of all thank you so much uh for

having me it's such a pleasure to be part of the gbc's panel with such great experts that I always look up to um when we look into the way that Qatar looked

into regulating digital assets we had several considerations that we uh looked into first is we need to separate the financial regulation from the technology

so we need to look that we are not hindering Innovation the use of blockchain in general Industries should not be treated in financial regulation we are one of the few jurisdictions around the world that still bounds the

use of cryptocurrencies and stable coins so our Focus was on World asset tokenization uh and with a main focus on security tokens and fund units after

looking into several regulations and uh ways of regulating digital assets we felt that the Lenin model was the better suited one for for our needs um so this

is this is the the stance that we have taken and we decided that within a year time we would look again into the regulation and see where we can update it and upgrade it in addition we are

working uh with with the Qatar Central Bank to come up with a digital asset lab so far we have 22 participants um across industry from Real Estate to Identity to

carbon credits um and uh we're working with the Central Bank of Qatar on that because we're in onore jurisdiction and we need access to uh cash and Leisure thank

you uh hi my name is Simon Kim uh I a CEO at t uh the the largest and most active webc investor from Korean market

So Korea to these days Korea is famous for three things uh number one is BTS second one is a Kim and third one is a

crypto uh and actually second one and third one is very combined so you are familiar with a kimchi premium yeah in crypto so so Korean market Korea retail

Market is one of the most uh kinds of a reacting Market uh in the world so sometimes uh KRW pairs trading volume

surpose USD volume so at least KRW volume is at the second largest pair in the world and uh in Korea the funny

thing is not only for the uh uh uh Millen ory even my grandfather ages love to trade in crypto so it's a very

phenomenal in Korean market so so anyway uh in Korea uh the regular tion is a setting up by three uh steps

so first one is a kinds of AML and kyc Stage uh and the second one it is established it last year about the consumer protection and the third stage

will be introduced this year will be Market regulation so it's not here yet so actually Korea's regulation uh situation is very behind than many of

other countries because one of the uh reason is when the uh when the world firstly met the first crypto buan in

2017 we impeached our president at that time so so there was a no governance in the first buan mega buan of the crypto

so our government have not reacted at anything so one of the example is until now on uh Korea is one of the very few

developed country having no crypto tax for the individual so it is also determined there there will be no crypto tax until 2027 so it's a very unique situation so

anyway our our regulation setup is being very delayed and even you you might familiar with some of the recent news from Korea our recent Pro president is

also being progress of being impeached so so there are lot of bills from Congress in Korea about the regulating

or empowering of the crypto industry but uh it is being delayed a lot but uh but certainly uh so this is a kind of a

common common thing in Korea we uh our it's a kind of history of Korea we impeached our president and many of our president will be in jail but we are

okay to setting up the better same same yeah so anyway uh so uh I'm quite sure that uh from the year we set up the

new market regulation and also there will be a new stable coin law will be introduced in Korea second half of this year and yeah so this is a very pivotal

moment for Korea uh uh and and one of the limitation uh as a venture capital in Korean market uh in Korea uh still

the Venture Capital fund could not invest in token or public uh digital assets so that's the reason why we recently we are setting up our new

vehicle based in Middle East but anyway in the few one to two years it will be also reserved I believe great

thanks so um thank you welcome also from my side and thank you very much to TBC for the generous invitation uh it's a great pleasure to be here um yeah about

lonstein who has not been to lonstein yet oh my God well good you're here so I can give you some some incentives and uh to to

actually come because it's certainly a place you have to see and why well with regards to blockchain uh we have been one of the first jurisdictions to introduce really a comprehensive legal

regulatory framework uh which came into Force an application already at the beginning of 2020 um and so these are the three points that I would like to make uh what what our what yeah that

what our advantages and and unique selling points and and competitive advantages towards other jurisdictions are so we we have we are um one of the first countries who introduced these uh

Frameworks it is a comprehensive one so it's not focused on just tokenized financial instruments it's really um um expanding over the whole of the token

economy uh which is important because we never wanted just to focus on crypto um speculation or or anything in in that on

just cryptocurrencies and how to or icos we really wanted to address the whole of the token economy and real world applications so for this the legal basis that we have introduced with our o our

civil law is the foundation uh then secondly uh because of that we are actually uh proven and trusted jurisdiction because it's a uh registration and supervision regime for

crypto asset service provider so something very similar to what is coming on now with MAA and there we have now the is proven track record and experience over four years of

registering and supervising crypto asset service provider and that is definitely um one very important part because we've seen with our financial Market authorities and all the authorities and

the whole of government involved how what a steep learning curve that is and what it needs to understand the industry understand the technology and understand how it can be regulated in an equitable

and and proportionate uh and Innovation friendly way and third part is if you don't know yet lonstein is very geographically and political politically

uh uniquely positioned between uh the EU and uh Switzerland because we are part of the European economic area and the same time we have very close economic

and political Tes to Switzerland which also allows um the registered and licensed um service providers and Market players in lonstein to venture into the

post markets thank you that's great Andre well first of all pleasure to be here I think it's my fifth time here at Davos and my fifth time at gbbc so

thanks a lot for gbbc SRA pleasure to be here again uh briefly uh regulation Brazil it's uh it's evolving started

evolving slowly now it's uh the speed is increasing a lot the first I would say regulation Brazil of course was from the Brazilian IRS that was in uh 18 okay

where they basically say okay if you make money uh trading crypto you got to pay some taxes right uh right now I would say it's a very I would say broad

uh uh in comprehensive uh framework that the Brazilian IRS have you even have to they have the first 100 coins already listed on the system and you need to

declare each one uh where you make money yeah it's it's like that and uh the the we we get a law in Brazil passed in

Congress in the end of 2020 two okay basically a very broad uh law which is

good uh where they pass to the let's say executive branch to uh indicate who will be the regulator in Brazil responsible

for okay uh especially the intermediaries the the vesps okay uh it took a while for the the the president to indicate the central bank right now

the central bank is the main regulator of uh for digital Assets in Brazil and started last year in the beginning of last year they started a process of

Public public consultancy uh talking a lot to the market uh okay this what we need to do

uh what are the opinions from the market uh it was a very broad uh uh list of questions uh this was in first half of

last year and then beginning last uh the end of last year uh they now came up with I would say a written regulation

during the second phase of the public consensus it's funny because right now we have four different public consulty is that how you say consultancies yeah

uh happening the same time in Brazil one which we regulate intermediaries okay virtual asset Serv providers the second uh effects

businesses done by viral asset providers uh the third one is just regarding stable coins and effect regulation Brazil still have a very I would say uh

uh hard effects regul regulation and the third one is not exactly about crypto but touch crypto it's regulating the

bank as a service uh uh businesses uh the good thing is that most of the Central Bank uh areas that are responsible for the regulation they

understand technology they are very open to the market so they're talking to everybody from exchanges to Banks to startups to venture capitals foreign people Brazilians so they really did a

good job in understanding okay what are the pain points and and how they can come up with a a regulation that we give the protections we of course follow the

law uh but at the same time uh still allows for for uh Innovation uh on the on one of these public Consultants which is more related to stable coins then is

a little bit more tricky okay it's a separate area at Central Bank that is not so deep in the technology and I

would say we still have a lot of challenges uh regarding uh uh these uh thefx uh regulatory framework is evolved

in Brazil but brl the Brazilian currency is not a convertible currency yet we're moving towards that but still uh and that is challenging and I would say I've

been talking the last three months way more with lawyers than uh with uh uh tech people and developers glad to hear that glad to hear that yeah yeah because

uh and it's crazy because btg as as a a big player in Brazil uh we are part of several different class uh uh uh uh entities so the open market the banks

the crypto the uh fex in each of these classes they do their own uh I'll say they they send their own opinion so it's a it's a lot of uh work but I think it's

it's very important uh the Central Bank looked a lot uh to MAA okay uh for good

and bad I would say and uh a lot from the bis uh uh uh papers as well okay uh so far I would say I'm U cautious

cautiously optim optimistic about the regulation that we up and we probably going going to be have like the full regulatory framework half in in the half this year

June July maybe interesting let me pick up on that um and turn back to to clar for a moment to start this this regulatory comprehensive regulation

within your jurisdiction I think CL electr is probably the closest to that how's that been benefit and what challenges you

know and how's that been beneficial for the government how's that been beneficial for the companies interacting with the government and is there is there more that you want to that that you want to try to do with that

certainly thank you um well it has been very beneficial for us and I think also for the industry uh from from uh what I um have seen from the market because

they really know not just in the financial Market aspects what to do but they have legal Clarity especially also for tokenization and the enforcement of

um that so how the the digital world is aligned and synchronized with the analog world uh so all the questions that needed to be tackled and answered for

the businesses to thrive um we we have provided with that framework so I think the legal Clarity the legal certainty that businesses have to focus on Innovation and focuses on their business

uh there we um we scored very high in uh in in accomplishing that however having said that there we cannot rest on that success uh what we have built what we

have introduced now um as we all know technology changes um incredibly fast the business model changes uh the whole regulatory landscape changes now with ma

for example coming up so we need to stay adaptive and we need to keep on improving and further developing our legal regulatory framework so meaning

we' we've gone we've done the right things I believe and and I've done the first step but we have to keep on um looking at where are the gaps uh where

do we keep need to keep improved but I always say well we aim for for progress and not uh not Perfection because if we just want to try everything right a I don't think it would be possible and we

would be outdated uh anyways fast but so we need to have the mindset to keep um keep innovating and keep adapting uh to to the to the challenges and the developments that we see yeah no that

makes sense okay so Andre you made a really interesting comment that um that The Regulators in Brazil have looked to M for good and for not so

good is this where you think Brazil is heading needs to go that level of kind of comprehensive comprehensiveness or do you feel like

you know Brazil should try to land somewhere differently what's going to be best for in your in your perspective for

Brazilian companies Banks industry I I I would say uh uh when we talk about digital assets uh digital ass is is by definition global okay so I think you

you will never be able to be like an island in terms of a business in terms of Regulation so it's good to look for what people are doing and try if not to copy everything at least to adapt at

least to get the let's say best practice what would work in Brazil and of course I mean Brazil have different laws that we need to to to pay attention so uh uh

I would say in in in in a good way when we take I think the main pain point will be the the not only for Brazil okay it's the it would be the stable coin and the

effects uh uh uh regulations because I mean uh it deals with uh with the flow of money uh it it's a huge huge Market we're talking about potentially

trillions of dollars of market and that's where all the Regulators pay attention because that's where all the

uh uh bad things happening not all but some of them okay uh so I would say uh uh uh Brazil have the it's it's like a

uh uh specific characteris in regulation uh especially guarding there's some issues how do you uh uh uh what you need to do if you hire uh for instance a

foreigner a foreign company uh to provide technology for your business that would be some specific things because in that sense Brazil is a little

little more closed than uh in of course at the end of the day the central bank they they they don't want all the central banks they don't want to lose control okay so uh they have a a u they

have a lot that they need to to to apply uh they need to follow the rules and the the guys sitting there they are they need to fall that but uh uh again um and

I think a lot about that I mean we we we are talking a little bit about that before we have like a more uh standardized uh regulation I'm not so

optimistic about that because I mean uh we can even we cannot even agree on well the the plugs that you plug your stuff so uh uh when we talk about regulation I

think it's a it's a hard job but again having some I would say uh Communications in a lack of a better word it would be good okay because again

I think one thing that it's is truly different in digital assets is that it's digital it's Global so a lot that brings a lot of challenge for The Regulators

because even if they sometimes they try to block some things or they try to to uh put walls not necessarily they will

be able to do because it's a very fluid uh uh and this only talking about cryptos and asset class stable coins when you talk about tokenization then the problem is way way I mean you

liquify everything all the assets okay and so how to control that how it would be tough yeah so Korea has as you as you

noted early Growing Pains now more comprehensive how important is it for businesses in Korea

that there be how comprehensive of a reg of Regulation do you think is best yeah so uh as I mentioned uh there is no Market

regulation in Korea yes so uh so I can say that there are are broadly two type of crypto business so number one is for

the uh kinds of a Crypton native uh business so Bitcoin or Sana the kinds of token uh anyone can buy uh the de token

without a more developed regulation or something like that of course it's a common in Korea but uh many of the other

part is application sector so uh so in so we have a bunch of portfolios around the world but most of our portfolios in the west they are building the

infrastructure project uh as known as a layer one or Layer Two or defy kinds of stuff but in Asian market uh there are so many contents and entertainment and

gaming kinds of application sector using blockchain and web3 technology and uh to uh to publish that kind of application

along with the traditional companies uh network uh we need a clear Market regulation so the the many of the Korean

gaming giant are building their own web three uh gaming but in Korea situation uh by regulation it uh uh it handled

crypto gaming as a kind of gambling so so it's funny that uh Nexon is one of the largest gaming company in Korea they

are turning their major IP named m 3 into web3 but they they made a foundation in ababi not in Korea and

they will not serve for Korean market that's a uh very uh not good stuff so so that kind of

hter is existing for many of the Korean uh gaming companies uh hashid is a not just as a investor but as a ecosystem

Builder so we sometimes we are building some of the unique company with our capability and one of our uh initiative is building the Kpop label with the

decentralized manner so we are owning our own idle band it's a the name is Tri s and it's a 24 multinational member

from Korea Japan Thailand uh mainland China Taiwan that kinds of stuff so the total member is a 24 and we cannot use a

token because of the there's no Market regulation yet but we can use nft for taking our governance from Phantom so

using uh uh the nft technology uh the random of the three press can make a governance boring for which member should be participated for the next

album or which song should be the title song of the next album so the kinds of important uh barding made by phandom so

yeah so beyond the regulation uncertainty we are figuring out dealing with the uh nft because uh government think nft is are quite okay then they

were really interested in our nft custody uh registration role for uh that we introduced actually after after MAA

and we we had uh talks in in Korea uh regarding that yeah is Europe also considering your model as well on that broadly are you I mean is that is it going to be a more broadly

adopted well it would make sense because if nfts especially if you looked if they can represent really valuable assets uh it would it would absolutely make sense

that the service providers uh are also held to certain operational and compliance requirements uh in in dealing with them yeah yeah interesting at that point actually that was one of the

loopholes that we had in the qari digital asset regulation while we do ban cryptocurrencies and stable coins in the current form we would regard nfts as

loyalty programs and it was very much uh something that the um the lot of the startups were looking into it in sports in music in ticketing and arts so that was that was

an area that we saw a lot of growing interest from startups as well mhh okay so I would talk about the US regulatory

environment but I think I think it's fair to say we're about to see some change in the US regulatory environment now a lot of us hope that's going to be

that's going to be positive change um but I think it's fair to say that it might not be a linear process

for the US to get from where it is right now in terms of a lack of Market structure regulation multiple Regulators in the space lack of clarity lack of

harmonization um federal and state across our Regulators um to the place where we want to get to but presumably the US will get to Market structure

regulation presumably we'll get to stable coin legislation it's at least declaratory policy United States we're not going to

have a cbdc anytime soon um and then there may be other deviations and distractions from that um uh in a

variety of ways what's the what will the what do you think the impact will be in your jurisdictions as the US changes and and

what does that mean for this question of global harmonization like you know we we know we're not getting all on the USBC

CT anytime soon um but there's been a lot more convergence I think Among non- Us jurisdictions at least from our perspective and uh what's what is this

going to is this a positive thing is this a negative thing and not and a change in regulation in the US and potentially more opportunity for

projects to launch for for activity to happen with greater regulatory certainty in the US Andre do you want to start with that yeah I I I say it would be very interesting to see what uh what

what would be the path that the US will take uh because what we what we been seeing in let's say the last 10 years is that Europe is taking the lead in

everything related to digital regulation start with data then crypto uh yeah yeah exactly and of course a lot of other countries especially emerg markets they

they look up to see okay what people are doing wi as a base and as we don't have these reference from the US and and for

Brazil this is this it's a new situation because we all said in Brazil I mean my career in financial markets Brazil was like you have a crystal ball because everything that happens in the US uh

eventually happens in Brazil 5 to 10 years later right now things are faster but it it's a very odd situation that

having these uh uh this void space uh in the US so depending on how things will move which direction the US will take for instance stable coin

regulation you mentioned that okay cbdc was not would not be a thing in the US at least for uh uh the near future uh it

would be very interesting to see the the the direction that us would take it's not clear for me yet okay uh and then

how you it will uh I mean go again so go together with MAA because that might that might bring a lot of challenges for

well doing business with us right uh uh right now what we do is that well we don't accept US citizens in our platform that's easy like that okay uh and I think most of the of the crypto

companies they do that okay they don't want to go to jail okay so uh uh in the US the only country that can actually enforce uh this right uh yeah it is what

it is so I'll be very it's not clear from you uh uh it would be very interest and important to see which direction it will take Maha or I was just going to

ask because is this going to force you know a uh rethinking this you know concept of of not permitting cryptocurrency stable coins I mean is

this going to really is this going to force a reconsideration of that definitely um I mean in Qatar in the Middle East in general we our currency

is always backed by the US dollar so whatever happens on a CF cftc level SEC level we will be looking into it in our monetary policy very closely and I think

in this in this case I think having had a very prudent approach is an advantage that Qatar had because we are looking into other jurisdictions and learning from them I don't want to use the term

Sherry piing Sherry picking but it was an advantage that we did not go full speed regulation because we did not want to create an area where we're in in encouraging speculative trading but

we're focusing on the underlying technology and blockchain real world assets so for us it's good because we're not going to be having regulatory Arbitrage we will have a lot of time to

consider and we will get to see the lessons learned from other jurisdictions before we tailor our policy and the good news is in qar policymaking is

relatively quick it could literally happen in weeks so I think this this is an ad advantage that we're looking from Europe from the US from other jurisdiction also Singapore was a very

interesting model for us and also Hong Kong and I'm hoping that by the by the end of this year we will be having much more regulatory Clarity um there is a

discussion on the Central Bank level that will be introducing a draft regulation for stable coin reg for stable coins as long as it's backed by

us uh dollar so we're fine interesting Clara yeah well with regards to the US I I'd like to to quote Peter kon's from the European commission fisma he always

says well the US eventually once they wake up they will do the right thing after having done everything else first and so now we'll really I'm really curious what they're going to be but

with regards to Global harmonization I think it's very aspirational but not realistic so we won't have that um and probably also it's a good thing because

the business require different different um circumstances they they require different framework conditions and uh so we will see jurisdictional regulatory

Arbitrage but also competition so probably the jurisdictions are are motivated to to offer their you know very unique advantages and build on them

and and showcase them and so that businesses can uh choose what really fits their their need and and their higher level goals and I think that is

not necessarily just a bad thing um but and the only thing and that is necessary and this is point I really want to make where gbbc is playing such a big part we

need aligned definitions and certain standards and this is something like on a metal level not the really National regulatory Frameworks

and sure yes if we have broader regions like now with the EU that have a harmonized framework that helps but on a meta level we need Clarity on certain um

on the taxonomy on certain definitions and standards and this is where what which clearly cannot be aligned through the the governments directly but where

actually tbz and especially Sandro efforts are instrumental in in helping in creating a meta level um harmonized

understanding uh on which to build in the individual legal Frameworks no that's I think that's exactly right um but to to go to what you said about Uncle Sam waking

up it's fair to say that Uncle Sam woke up but I think he's woke up cranky so so

we will see Simon um what's the impact of potential kind of significant changes in the US regulatory environment for

yeah so so usually Korea follow uh follows us a lot so there be a significant change along with the Trump new

Administration uh and I think from your last question uh I don't think that uh we cannot reach that very high level of

the harmonization so there will be some strong harmonization for the uh a AML and kyc and maybe for some consumer Pro

protection for preting the Bad Bad actors but for the market regulation side uh that blockchain is a very big business opportunity for the countries

so there will be a lot of competition to making better regulation environment to attract the talent and capital and

Founders and uh developers so uh so I think this kind of a competition between the countries to setting up the uh different regulation will be better for

the industry so one of the example is Japan set up the uh state coin uh uh regulation for the first time in the

Eastern Asia uh it was good but it's a very strict and very recently Hong Kong set up the new and much better stable

coin regulation it's more Market oriented and uh I can say that uh you uh overally the later is better you we know

so Korea will set up the new stable coin regulation maybe the second half of this year so actually uh we we have our own Sy tank named H HH open resarch and

using our own Sy tank we are heavily advising the bank of Korea and the regulator these days and I hope the new uh stable coin regulation from Korea

will be uh the better from uh other Asian countries good good good all right so I think we have a few minutes for questions are there any questions that folks

have see this is always the regulatory p all right yes I'll give one uh Priscilla Adams uh so question that I have is on the one hand I hear all right EU has led

the way in regulation but is that actually a good thing is it over regulated to be completely Frank and when you look at user numbers and adoption you have retail users being

driven out of Asia and institutional users being driven out of the United States so my question is is this not actually an opportunity for the US with

their regulation to further Drive amount of institutional adoption that they have so what do you think I mean is is is M and and payment service is that

overregulation is that too much is it drive is it driving out the people that you want that countries want I I can give an outsider uh view about that uh I

think it's a little bit uh over regulated and you mentioned the point is precise I mean uh when you look to the to the list of like say 10 top uh

countries by uh crypto adoption uh there's none in Europe right uh but again I think that was a political decision that the EU did uh some years

ago not only crypto but well we will be the leaders in uh in terms of a digital regulation and at the end of the day I think for the US I mean if you think

like it is opportunity okay how can we make things like a more easier maybe a little bit lighter in the beginning of the regulation in other countries as well you see the examples of of Hong

Kong if you compare Hong Kong to Singapore Hong Kong is a little bit late right now but Singapore have a I'll say a a a decent framework but it's a little difficult as well uh and that that will

be the competition that we will be seeing okay so I think this will happen more and more so I see m is setting a

tough um tough bar so that that that's for sure but I I think that is actually not so so bad for the institutions actually in Europe we see it's a

catalyst uh for institutional adoption because now institutions and bigger organizations are having the legal Clarity to also actually Venture into

that space it's tougher for the bottom line so the the startups the smaller businesses to actually comply with the compliance and and regulatory

requirements for them it's actually quite tough and there we certainly need to uh double back and and maybe look at

MAA or different interpretations how we can make it more proportional uh so that it that it meets the different risks

represented um from the different uh companies um because they are smaller or because they're bigger so to have that

uh that that whole um um yeah risk span um addressed in an appropriate way other questions yeah maybe just just one

thing to add here I mean like it's it's also this is a motivation of of the of the population right of the individual jurisdiction so I think crypto market adoption is like the incentive of people

like what are these extramic motivations that push people into using crypto right I think in Europe we just have a mentality of like having a savings account and it's fine um for Brazil they

are introducing transaction based reporing requirements for May 202 five onwards um on a monthly basis every single transaction needs to be reported

uh to Federal so going to be very very mean the the the paks thing no it it actually uh uh uh went down okay last

week yeah I mean I would say there was a big digital Revolt I would say and the government uh phed down these regulation basic what they saying that uh uh we

already do this in crypto okay uh uh uh every transaction we we we need to all the exchange they read need to report for the Brazilian IRS all all the transactions okay uh but what the

Government tried to do is okay everything uh over 5,000 brl re uh in PS p is instantaneous payment in Brazil

should be reported by financial institutions to the IRS so i' would say there was a little bit of like a Revolt especially in social media and actually last week the government uh uh uh cut

off the the regulation and that good thing and as a last Point yeah that that will be a that will be an interesting thing obviously governments intend a variety of

things the people will have people have a voice and and we'll and and we'll see if that how that plays out I think we could probably keep going and discussing but our time is up it's not so boring at

end of the day time for our picture yeah exactly so let me thank the panel thank you uh Andre btio Eric era Simon Kim

mahadi thank you all for being here and listening back to gbbc [Music]