Global Regulatory Developments: September 2025

Executive Summary

September 2025 marked a critical phase in the maturation of the European Union’s digital asset regulatory landscape. The period was characterized by a shift from broad legislative principles to the promulgation of granular technical standards, which fundamentally shaped the operational reality for market participants. The implementation of the Markets in Crypto-Assets (MiCA) Regulation advanced significantly with the publication of detailed Regulatory and Implementing Technical Standards (RTS/ITS) for Asset-Referenced Token (ART) issuers. These standards establish a stringent, harmonised authorisation process that aligns the sector with established prudential requirements for traditional financial institutions.

Concurrently, as the industry began to digest these requirements, financial supervisory authorities from France, Austria, and Italy issued a joint position paper. This preemptive call for legislative enhancements—a prospective “MiCA 2.0”—addresses perceived structural weaknesses in the initial framework, specifically concerning supervisory divergence, regulatory arbitrage, and the risks posed by extra-EU entities.

In parallel, the European Central Bank (ECB) elevated the political discourse surrounding the digital euro, framing its development as an imperative for the Union’s strategic autonomy, financial resilience, and social inclusion. The ECB clarified that the project’s timeline is now wholly contingent on the legislative progress of the co-legislators, thereby positioning the digital euro as a foundational pillar of Europe’s future economic security.

I. MiCA Implementation: From Legislative Framework to Operational Rulebook

September’s developments focused on translating MiCA’s legal text into a concrete operational and compliance roadmap for prospective stablecoin issuers.

A. New Technical Standards for Asset-Referenced Token (ART) Issuers

The European Commission has published two key regulations that formalise a comprehensive and standardised application process for entities seeking authorisation to issue ARTs.

1. Regulatory Technical Standards (RTS) on Application Substance (Regulation 2025/1125): This regulation specifies the substantive information required for a complete authorization application. Prospective issuers must submit a detailed multi-year business plan, including go-to-market strategy and competitive analysis; comprehensive risk management frameworks covering operational, financial, and ICT risks (in line with DORA Regulation (EU) 2022/2554); financial projections under baseline and stress-test scenarios demonstrating adherence to own funds requirements; a complete description of the reserve asset management and custody framework; and documentation proving the fitness and propriety of the management body and qualifying shareholders.

2. Implementing Technical Standards (ITS) on Application Procedures (Regulation 2025/1126): This regulation provides mandatory, harmonized forms, templates, and procedures for applications. The use of these standardized templates is compulsory, ensuring uniformity in submissions and facilitating a consistent assessment methodology by National Competent Authorities (NCAs) across the Union.

Key Implications for Firms:

• Substantial Prudential and Operational Thresholds: The extensive requirements create a high barrier to market entry, mandating significant upfront investment in governance structures, risk management capabilities, and regulatory capital.

• Convergence with Traditional Financial Regulation: The mandate for robust internal controls, independent audit functions, and stringent capital requirements effectively aligns the operational standards for ART issuers with those of established financial institutions.

• Reduced Legal Ambiguity: The standardised templates provide a clear checklist for compliance, minimising interpretive ambiguity and promoting a structured, meticulous approach to the authorisation process.

B. Proposals for Framework Enhancement (“MiCA 2.0”)

Anticipating future challenges, the financial authorities of France (AMF), Austria (FMA), and Italy (CONSOB) jointly proposed four key amendments to the MiCA framework. Their primary concerns are the potential for supervisory divergence leading to regulatory arbitrage and inadequate protection for EU investors interacting with non-compliant, extra-EU platforms.

Proposed Legislative Amendments:

1. Expansion of ESMA’s Supervisory Mandate: Grant the European Securities and Markets Authority (ESMA) direct supervisory jurisdiction over the largest, most systemic crypto-asset service providers (CASPs) to ensure uniform enforcement and mitigate risks of regulatory competition among member states.

2. Regulation of Extra-EU Service Providers: Introduce a rule requiring EU-based intermediaries to execute crypto-asset orders exclusively on Mica-authorized platforms or on third-country platforms deemed equivalent, effectively closing a significant investor protection gap.

3. Mandatory Third-Party Cybersecurity Audits: Require an independent, third-party cybersecurity audit as a condition for granting and periodically renewing a MiCA authorization to verify asset protection protocols and operational resilience.

4. Centralization of White Paper Approval: Establish a “one-stop shop” at ESMA for the filing and review of pan-European token offering white papers (excluding stablecoins) to streamline the issuance process and ensure consistent legal interpretation.

II. The Digital Euro: From Technical Exploration to Political Imperative

The ECB has strategically shifted its communication on the digital euro, emphasizing its geopolitical and societal importance to accelerate the legislative process.

A. A Strategic Initiative for Resilience and Autonomy

In a formal address to the European Parliament, ECB Executive Board member Piero Cipollone articulated the case for the digital euro based on two core principles:

• Resilience and Strategic Autonomy: The EU’s digital payments ecosystem exhibits a critical dependency on non-EU commercial infrastructures, creating a strategic vulnerability. The digital euro is positioned as a public payment infrastructure—a resilient fallback mechanism—designed to guarantee payment continuity during systemic outages, cyber events, or geopolitical stress, supported by features like offline functionality and a dedicated ECB-provided application.

• Financial Inclusion: In an increasingly digitalized economy, the digital euro is designed to function as a public good, ensuring universal access to free, basic digital payments for all citizens, including vulnerable populations with limited digital literacy or disabilities.

Key Implications for the Financial Sector:

• Mandated Interoperability Protocols: The ECB is advocating for a legislative mandate requiring all private Payment Service Providers (PSPs) to ensure full technical interoperability with the public digital euro infrastructure, including the ECB’s fallback app.

• Establishment of a Public Utility Baseline: The provision of a free, secure, and universally accessible public payment rail will establish a new market baseline, exerting competitive pressure on the fee structures and value propositions of private-sector payment solutions.

• Enhancing Economic Sovereignty: The project is an explicit policy initiative aimed at bolstering the EEU’s economic sovereignty by developing a pan-European payment system under public control, thereby reducing its reliance on external networks.

B. Timeline Contingent on Legislative Action

Significantly, the ECB has made the project’s formal timeline contingent upon the finalization of the legal framework by the European co-legislators (Parliament and Council). This strategic positioning places the onus on political actors to provide the necessary legal mandate for the ECB to proceed with implementation. Inaction is implicitly framed as a risk to the Union’s long-term economic security and autonomy.

III. Swiss Innovation: A Pragmatic Approach to Tokenization

A. The Deposit Token Proof of Concept

The Swiss Bankers Association (SBA), in collaboration with major financial institutions, released the results of a landmark Proof of Concept (PoC) for a “Deposit Token” (DT). The PoC successfully demonstrated that commercial bank money can be utilized for programmable, interoperable transactions on a public blockchain architecture.

The core innovation lies in its legal and operational design. Rather than creating a new form of money, the DT was structured as a digital payment instruction under existing Swiss law. The on-chain token serves as a standardized, programmable message that initiates a traditional, off-chain settlement between bank accounts through the established Swiss Interbank Clearing (SIC) system. This model was validated through use cases, including peer-to-peer payments and delivery-versus-payment (DvP) escrow transactions on a permissioned Ethereum blockchain.

The report confirms the model is fully compliant with existing AML/CTF regulations but acknowledges that reliance on off-chain settlement is an intermediate step. The long-term objective is a “native” Deposit Token settled on-chain with a wholesale Central Bank Digital Currency (wCBDC).

Key Implications for the Financial Sector and Regulators:

• Viable Evolutionary Pathway for Banks: The “payment instruction” model offers a low-risk, legally specific method for banks to enter the DLT space and offer programmable payments without a disruptive overhaul of core systems.

• Imperative for Industry Collaboration: The PoC’s success was predicated on a common, multi-bank standard using a single smart contract. This underscores that a fragmented, proprietary approach would likely fail, making industry-wide agreement on standards and governance essential for network effects.

• Strengthened Case for a Wholesale CBDC: By demonstrating a viable private-sector solution for tokenized commercial bank money, the PoC provides a compelling argument for the Swiss National Bank (SNB) to focus on issuing a wholesale CBDC (wCBDC) as a risk-free settlement asset for interbank transactions, rather than pursuing a retail CBDC.

• Evolutionary Regulatory Approach: The model’s integration with existing legal and settlement frameworks means that radical regulatory reform is not required. Supervisors can oversee this innovation within established principles, but will need to develop hybrid capabilities that combine on-chain monitoring (SupTech) with traditional institutional supervision.

IV. United Kingdom: Building a “Multi-Moneyverse” Framework

The United Kingdom is pursuing a distinct strategy focused on fostering a competitive and interoperable “multi-moneyverse” where various forms of public and private digital money can coexist. This approach is built on three pillars: upgrading national infrastructure, designing adaptive regulation, and setting a clear strategic vision.

A. The Strategic Vision: A “Multi-Moneyverse”

In a key speech, the Bank of England (BoE) outlined its vision for an ecosystem where traditional deposits, tokenized deposits, regulated stablecoins, and a potential digital pound are all viable options for consumers and businesses. The ultimate objective is interoperability, ensuring seamless exchange at par between these different forms of money to maintain the “singleness” of money and prevent the formation of closed-loop “walled gardens.”

B. A Comprehensive Regulatory and Supervisory Regime

The UK is moving from a lighter-touch anti-money laundering registration regime for cryptoassets to a full-scale prudential and conduct framework.

1. FCA’s Full-Scope Regulation (CP25/25): The Financial Conduct Authority (FCA) has consulted on applying its core Handbook to cryptoasset activities. This represents a significant operational uplift for firms and includes:

   • Consumer Protection: Extending core conduct-of-business rules (COBS), requiring clear marketing, suitability assessments for complex products, and robust risk disclosures.

   • Client Asset Safety: Applying a bespoke version of the Client Assets Sourcebook (CASS), mandating strict segregation of client and firm cryptoassets and robust reconciliation processes.

   • Market Integrity: Extending the UK Market Abuse Regulation (MAR) to prohibit market manipulation and insider dealing, and applying the Senior Managers and Certification Regime (SM&CR) to ensure clear individual accountability.

2. Targeted AML/CTF Enhancements: HM Treasury has published a draft statutory instrument to amend the Money Laundering Regulations (MLRs). The changes are designed to be more risk-based and practical, including:

   • Narrowing Enhanced Due Diligence (EDD): Focusing mandatory EDD on countries listed by FATF as requiring a “call for action.”

   • Strengthening Crypto Firm Controls: Aligning the “fit and proper” test for controllers with the broader FSMA definition and requiring crypto firms to conduct EDD on their cryptoasset counterparties (VASP-to-VASP).

   • Technical Updates: Converting all monetary thresholds from Euros to Pound Sterling and bringing the sale of “off-the-shelf” companies under the MLR scope.

C. Firm Implications and Regulatory Expectations

The combination of these developments creates a clear, albeit challenging, path for firms operating in the UK.

• Significant Operational and Financial Investment: Firms must prepare for a substantial increase in compliance costs and an operational overhaul of systems to meet CASS, COBS, and MAR requirements. This may drive market consolidation.

• Heightened Individual Accountability: The application of SM&CR places direct, personal responsibility on senior managers for regulatory failures, requiring them to maintain meticulous documentation of governance and decision-making processes.

• High Bar for Authorisation: The FCA has explicitly highlighted the need for applicants to demonstrate a deep, in-house understanding of their regulatory obligations, a customer-centric culture underpinned by the Consumer Duty, and robust financial resources. Over-reliance on consultants and generic policies will be insufficient to gain authorization.

V. Australia: Legislating a Framework for Digital Asset Platforms

Australia is moving decisively to integrate digital assets into its established financial services framework, focusing on consumer protection and market integrity by regulating custodial platforms.

A. Comprehensive Regulation for Digital Asset Platforms (DAPs)

An Exposure Draft bill proposes to classify Digital Asset Platforms (DAPs) and Tokenised Custody Platforms (TCPs) as financial products under the Corporations Act 2001. This triggers a suite of obligations for operators:

• Mandatory Licensing: Platform operators will be required to obtain and maintain an Australian Financial Services Licence (AFSL).

• New Licensee Obligations: Operators must comply with new, ASIC-set minimum standards for asset-holding, transactions, and settlement.

• Tailored Disclosure: A new, simplified DAP/TCP Guide will replace the standard Product Disclosure Statement, outlining the risks, fees, and custody arrangements applicable to retail clients.

• Targeted Exemptions: The regulation is primarily aimed at intermediaries; however, decentralised infrastructure (protocols) and very small-scale platforms are exempt from this regulation.

B. Facilitating a Regulated Stablecoin Market

In a parallel, pro-innovation move, the Australian Securities and Investments Commission (ASIC) has granted class relief for intermediaries distributing Australian stablecoins. The key condition is that the stablecoin issuer must already hold an AFSL. This significantly reduces the regulatory burden on exchanges and brokers, as they do not need a separate license to offer these specific, pre-vetted stablecoins.

C. Firm Implications and Strategic Direction

Australia’s dual approach creates a clear regulatory perimeter and strategic incentives:

• Significant Regulatory Uplift for Platforms: Most existing Australian crypto exchanges will face a mandatory licensing requirement, leading to increased compliance costs, a necessary operational overhaul, and potential market consolidation.

• Strong Incentive for Stablecoin Issuers: The ASIC relief provides a decisive commercial advantage to issuers who obtain an AFSL, as their tokens will be simpler and cheaper for the secondary market to distribute, fostering a regulated and trusted stablecoin ecosystem.

• Enhanced Consumer Protection: The framework will provide consumers with greater safety of funds through strict custody standards and access to formal dispute resolution via the Australian Financial Complaints Authority (AFCA).

VI. United States: A Coordinated “Crypto Sprint” Towards Regulatory Clarity

September 2025 was a pivotal month for digital asset policy in the United States, marked by a coordinated, pro-innovation sprint from federal regulators and intensifying legislative activity in Congress. The overarching theme was a decisive shift away from “regulation-by-enforcement” toward establishing clear, enabling frameworks to foster innovation domestically.

A. Coordinated Regulatory Action to Mainstream Crypto Assets

The SEC and CFTC took unprecedented joint action to create clear pathways for digital assets within traditional market structures.

1. “Project Crypto-Crypto Sprint”: The agencies announced a joint initiative to provide a clear regulatory path for leveraged or margined spot crypto products. In a joint staff statement, they affirmed that current law does not prohibit national securities exchanges (NSEs) or designated contract markets (DCMs) from listing these products, inviting exchanges to submit proposals for prompt review.

2. Fast-Tracking Digital Asset ETPs: The SEC has approved rule changes that allow exchanges to adopt “generic listing standards” for Exchange Traded Products (ETPs) holding physical commodities, including digital assets. This eliminates the need for case-by-case SEC review for each new product, dramatically accelerating the time-to-market for a wide variety of regulated, exchange-traded crypto products.

B. Modernising Market Infrastructure: Tokenised Collateral

The CFTC launched a significant initiative to enable the use of tokenized collateral, including regulated stablecoins, in its regulated derivatives markets. This move, championed as the “killer app” for stablecoins, aims to revolutionize collateral management by unlocking capital efficiency, enabling 24/7 posting, and reducing settlement times. The initiative received broad industry support, signalling the deep integration of stablecoins into the core financial market plumbing.

C. Legislative and Political Developments

While regulators moved forward, Congress engaged in intense negotiations and political debate.

• Market Structure Legislation: Momentum Grew for a Comprehensive Market Structure Bill. However, a political divide emerged, with Republicans pushing for a swift vote. At the same time, key Senate Democrats called for a more deliberate, bipartisan drafting process, placing the bill at a critical tipping point.

• AI in Financial Services: A House subcommittee hearing revealed bipartisan support for the use of AI to enhance efficiency and security in financial services, but differing philosophies on regulation. The prevailing sentiment favoured a “light-touch,” principles-based approach to avoid stifling innovation in the competitive race with China.

• Political Polarisation: Digital assets became a sharp-edged political issue, with Democrats escalating attacks on the Trump family’s alleged profits from a crypto token, potentially complicating bipartisan legislative efforts.

D. Firm Implications and Strategic Outlook

The month’s developments provide a straightforward, albeit complex, strategic outlook for firms.

• Green Light for Institutional Products: The coordinated SEC/CFTC actions and the fast-tracking of ETPs provide a massive green light for traditional financial institutions. It creates a regulated, familiar pathway for exchanges, asset managers, and Wall Street firms to offer crypto products, likely unlocking substantial institutional capital.

• Competitive Threat for Crypto-Native Firms: The entry of established exchanges into spot crypto trading poses a significant competitive challenge to crypto-native platforms, increasing pressure on them to secure federal licenses to compete on a level playing field.

• Stablecoins as Core Infrastructure: The CFTC’s tokenized collateral initiative solidifies the role of regulated stablecoins as a critical component of modern financial infrastructure, creating substantial commercial opportunities for issuers and certainty providers.

• Regulatory Certainty Hinges on Congress: While the regulatory Certainty is more apparent, long-term regulatory Certainty depends on Congress passing a comprehensive market structure bill. The outcome of the ongoing Senate negotiations is the most critical variable for the industry’s future.

VII. International Standard-Setters and Global Perspectives

International bodies continued to shape the principles and best practices for digital asset regulation, with a focus on financial crime, technological risk, and the evolution of market structures.

A. Financial Action Task Force (FATF): Strengthening Risk Assessment

The FATF released a detailed toolkit to guide countries in conducting their National Risk Assessments (NRAs) for money laundering. The guidance emphasizes that a robust NRA is the foundation of an effective risk-based AML/CFT regime. It provides specific methodologies for assessing high-risk and challenging areas, including corruption, virtual assets (VAs), the misuse of legal persons, and the informal economy.

Implications for National Authorities:

• Specialized VA Expertise is Mandatory: The toolkit signals that traditional financial investigation skills are insufficient. Authorities must urgently develop or acquire technical capacity in blockchain analytics and understand the operational models of Virtual Asset Service Providers (VASPs).

• Focus on Transnational and Structural Risks: A purely domestic risk assessment is inadequate. NRAs must analyze exposure to foreign predicate crimes and the risks posed by foreign-controlled legal entities. They must also assess how systemic vulnerabilities, such as corruption and a large informal economy, enable money laundering.

B. The Wolfsberg Group: Banking Fiat-Backed Stablecoin Issuers

The Wolfsberg Group published guidance establishing a risk-based framework for financial institutions (FIs) to provide banking services to fiat-backed stablecoin issuers. The guidance moves away from wholesale de-risking and sets a high bar for due diligence and ongoing monitoring.

Implications for FIs and Issuers:

• Enhanced Due Diligence and On-Chain Monitoring: FIs must significantly upgrade their due diligence programs to assess an issuer’s governance, AML/CFT controls, and sanctions screening capabilities. Crucially, this must include the technical capacity for risk-based on-chain monitoring of the stablecoin’s activity.

• Compliance as a Prerequisite for Banking: To secure banking relationships, stablecoin issuers must demonstrate a mature, transparent, and well-resourced financial crime compliance program.

C. IMF and BIS: Analysing Technological and Market Structure Risks

International financial institutions published key research papers analyzing the evolving technological landscape and its implications for supervisors and policymakers.

1. IMF on Blockchain Risks (2025 Update): A primer for supervisors highlights that while some initial risks (e.g., PoW mining centralisation) have not fully materialized, new, more complex risks have emerged from liquid staking (hidden leverage, contagion) and Layer 2 solutions (new central points of failure, market abuse vectors like MEV). The key implication for supervisors is that a “tech-neutral” approach is insufficient; they must develop specific expertise to assess the varied risk profiles of different technologies.

2. FSI on AI Explainability: A paper from the Financial Stability Institute addresses the “explainability gap” of complex AI models in finance. It urges regulators to move beyond existing model risk management frameworks and adopt a risk-based approach. This would permit the use of less-explainable “black box” models in high-stakes areas, but only if firms can prove superior performance and implement robust compensating safeguards (e.g., enhanced human oversight, automated circuit breakers).

3. BIS on Bank Risk Tolerance: A working paper introduces a new metric, Regulatory Risk Tolerance (RRT), which measures a bank’s willingness to risk breaching regulatory capital minimums. The study finds that post-GFC, banks systematically increased their RRT, operating with smaller self-imposed capital buffers. This has real-economy consequences, as high-RRT banks are more likely to cut lending under stress. The key implication for supervisors is that capital ratios alone are insufficient; RRT provides a more dynamic indicator of a bank’s risk appetite and potential procyclicality.

4. IMF on Optimal Policy for Tokenisation: A working paper provides a formal framework analysing the risks of market fragmentation in the shift to tokenised financial markets. It finds that private incentives naturally lead to the creation of exclusionary “walled gardens” to gain a competitive advantage (trade diversion), resulting in a socially suboptimal, fragmented market. The paper concludes that neither interoperability mandates nor subsidies alone are sufficient. The optimal policy requires a two-pronged “carrot and stick” approach: mandating interoperability while providing targeted public support (e.g., cost-sharing or a wholesale central bank digital currency, or CBDC) to ensure a universal and efficient market structure.

#DigitalAssets #FinancialRegulation #MiCA #RegTech #CBDC #Stablecoins #MarketInfrastructure #Compliance #Fintech