For the Asia Pacific region, AML, DeFi and ESG developments are of particular note

A group of senior partners at global law firm Hogan Lovells managing legal actions in the areas of finance, insurance, investment, blockchain, international trade and investment, mergers & acquisitions, intellectual property, media and technology have released some predictions for the coming year.

With 2022 being a defining year for digital assets and blockchain due to governments shifting from a watch-and-wait position to a proactive regulatory stance, what can the world expect in 2023?

As regulators and policy makers look to balance investor protection with the need to stimulate growth, the legal experts have examined some of the top issues affecting this space and singled out the top areas of focus for policy makers, regulators, industry and practitioners in the coming months:

    1. Anti-money laundering (aka AML) and sanctions
    2. Decentralized finance (aka DeFi)
    3. Environmental, social, and governance (aka ESG)
    4. Non-fungible tokens (aka NFTs)
    5. Security tokens
    6. Stablecoins/Central Bank Digital Currencies (aka CBDCs)
    7. Financial promotions of crypto assets
    8. Market surveillance
    9. Interoperability
    10. Taxation

Of particular relevance to the Asia Pacific region are:

    • AML: The Financial Action Task Force in June 2022 published a targeted update on the implementation of the FATF standards on Virtual Assets and Virtual Asset Service Providers. It is expected that jurisdictions in APAC will follow with tightening AML/TF laws to be aligned to updated FATF guidelines. As the war in Ukraine drags on, governments and financial institutions in the region are also focusing on sanctions and the role that crypto assets play here.
    • DeFi: Policy makers are said to be attracted by DeFi’s potential to give rise to new types of financial instruments and services that could make financial transactions cheaper, faster, and more secure by eliminating central intermediaries, especially in South-east Asia, where a significant part of the populations remains unbanked. Countries such as Vietnam, Indonesia, and Thailand will see a rise of DeFi products and services and accompanying regulatory frameworks.
    • ESG: In the past year, governments in Asia have been announcing carbon goals and net zero targets and a large part of the conversation is focused on how governments can achieve their sustainability targets while balancing competing priorities such as economic growth. The report notes that ESG investing is growing in prominence and with the rise of digital assets and cryptocurrency, the same expectations for ESG compliance will be placed on them.

According to the firm’s Global Head of Digital Assets and Blockchain, John Salmon: “We have been involved in the digital assets and blockchain space for several years and have helped clients across a number of jurisdictions and sectors navigate complex first-in-kind matters. This report is a product of our experiences and reflects what we have seen as important recent areas of development within the industry.”