Original Mayer Brown content, perspectives and insights from across our global platform that touch on digital assets, decentralized finance, cryptocurrencies and related fields.
What the US FSOC Report Signals About the Future of Crypto-Asset Policy
On October 4, 2022, the US Financial Stability Oversight Council (FSOC) released its Report on Digital Asset Financial Stability Risks and Regulation (FSOC Report). Weighing in at over 120 pages, the FSOC Report provides a thorough discussion of the US regulation of crypto-assets, with a focus on their potential financial stability risks. Most importantly, the report sets forth several policy reform recommendations and, in doing so, provides a clearer view of the Biden administration’s policy priorities with respect to crypto-assets. In this Legal Update, our team breaks down highlights from the report and assesses the report’s impact on the legislative and regulatory road ahead for digital assets.
The Legislative Tortoise Chases the Cryptoasset Hare – UK Economic Crime Regulatory Reform
The UK government introduced a draft Economic Crime and Corporate Transparency Bill 2022-23 (the "Bill") in the House of Commons on 22 September 2022. The aim of the Bill is to amend the Proceeds of Crime Act 2002 ("POCA"), which regulates the recovery and confiscation of proceeds from criminal activities and money laundering. The UK government has said POCA has not kept pace with the development of cryptoassets and related technology and the Bill would amend POCA to apply expressly to criminal and civil asset recovery powers as they relate to cryptoassets. This Legal Update describes the proposed amendments to POCA and the principal impacts of the Bill.
New Regulatory Regime for Virtual Asset Service Providers in Hong Kong – Are You Ready?
Virtual assets and blockchain technology have the potential to radically change the way financial transactions and payments are effected, giving rise to money laundering and terrorist financing (“ML/TF”) risks. Accordingly, such risks have been the subject of the Financial Action Task Force's guidance and recommendations. Hong Kong recently announced the framework of a new regulatory regime for virtual assets and associated products and services to combat ML/TF risks. This Legal Update provides an overview of the new regulatory regime for virtual asset service providers (“VASPs”), which is scheduled to take effect on 1 January 2023, and suggests steps on how to prepare for it.
EU Commission Proposes New Liability Rules on Products and AI
On 28 September 2022, the European Commission adopted proposals for two directives adapting non-contractual civil liability rules to artificial intelligence (“AI”). The proposed AI Liability Directive aims at targeted harmonization measures on civil liability for AI among the EU member states. The revised Product Liability Directive proposes adaptations to the producer’s no-fault (strict) liability for defective products that have caused damage to health or property or loss or corruption of data. Under the proposed Product Liability Directive, compensation is available when defective AI causes damage, without the injured person having to prove the manufacturer’s fault. Not only hardware manufacturers but also providers of software and digital services that affect a product’s function (such as a navigation service in an autonomous vehicle) can be held liable. Further, manufacturers can be held liable for changes they make to products they have already placed on the market, including when these changes are triggered by software updates or machine learning. The parallel proposal for an AI Liability Directive seeks to ensure that, where an injured person has to prove that an AI system caused damage in order to obtain compensation under national law (e.g., if someone failed a job interview because of discriminatory AI recruitment software), the burden of proof can be eased if certain conditions are met. The proposed liability rules for AI will complement other proposed EU legislation such as the AI Act, the Digital Services Act and the Digital Resilience Act.
