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The Bank of England and FCA launch public consultation on tokenized wholesale financial markets

The Financial Conduct Authority (FCA) and the Bank of England (BOE) jointly launched a public consultation on Monday, seeking industry input on the regulation, infrastructure, and market practices of tokenized wholesale financial markets in the UK. This consultation is part of the UK's digital finance market strategy, focusing on tokenized securities and post-trade infrastructure, covering areas such as prudential regulation, tokenized collateral, and settlement tools. Regulators stated that there are significant opportunities in the post-trade processes and collateral management areas for tokenization. The consultation targets banks, investment firms, asset management institutions, central securities depositories (CSD), central counterparty clearing houses (CCP), trading platforms, fintech companies, and others. The current scope mainly involves tokenized bonds, stocks, and fund shares, with potential future expansion. Market participants can submit feedback by July 3. The FCA and the Bank of England plan to publish a feedback document in the summer of 2026 and launch a roadmap for the development of the digital wholesale market within the year.Meanwhile, UK regulators are advancing the "digital securities sandbox" program, with 16 companies having passed the first phase of review and currently testing the issuance, trading, and settlement of tokenized securities. Additionally, the Bank of England has separately released a consultation document on extending the operating hours of the RTGS and CHAPS systems, planning to gradually move towards a near 7×24 hour operating model, with the goal of launching synchronized settlement services by 2028 to support tokenized assets as collateral for central bank operations and central counterparty use.

U.S. judge postpones hearing on Aave's application to unfreeze $71 million in stolen ETH

U.S. Judge Margaret M. Garnett in New York postponed the ruling on Aave's emergency application on Wednesday, which aims to unfreeze $71 million in ETH related to the Kelp DAO hacking incident, and requested both parties to submit supplemental briefs before the hearing on June 5. Aave is attempting to reclaim the $71 million in ETH frozen on Arbitrum to assist in the asset recovery efforts from this hacking incident—Kelp DAO suffered losses of up to $293 million from the hack, making it one of the most severe security incidents in the DeFi space this year.However, the U.S. law firm Gerstein Harrow LLP submitted a restraining order to the court in early May, claiming that its client has rights to the aforementioned funds. Aave then filed an emergency motion to lift the freeze, warning that if the funds are not released in a timely manner, it could lead to user liquidations and potentially impact the entire DeFi market. Judge Garnett noted in her ruling that Aave failed to adequately explain how user funds would incur "compound losses" if the restraining order remained in place. She also acknowledged the complexity of the case, the risks faced by the victims, and requested both parties to provide supplemental statements on six key issues, including: whether the hacking transaction is subject to New York state sanctuary principles, the legal distinctions between fraud and theft and what rights the hacker has over the stolen assets, which laws apply to determine the priority of claims for frozen assets, whether constructive trusts are an appropriate remedy, and whether Aave or Arbitrum can identify individual victims and proportionally return assets. Both parties must submit supplemental briefs by May 22.Meanwhile, the overall compensation work for Kelp DAO is progressing. Kelp and Aave announced on Tuesday that the rsETH held by the hacker has been destroyed on Arbitrum, and approximately $278 million in loss tokens will be restored within the next two weeks through the funds of the Aave Recovery Guardian multi-signature wallet. Once the relevant smart contracts are reactivated, all functions of rsETH will return to normal.

The U.S. banking industry claims that the stablecoin provisions of the CLARITY Act still have loopholes

According to Cointelegraph, several major banking organizations in the United States have jointly stated that despite senators attempting to prohibit stablecoins from generating yields through the CLARITY Act, the latest wording in the bill still contains loopholes that fail to effectively prevent the outflow of bank deposits and do not adequately protect bank deposits.In a joint statement released, the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Financial Services Forum, and the Independent Community Bankers of America pointed out that Section 404 of the bill allows crypto platforms to pay users interest or yields similar to bank deposits outside traditional rules, which is a significant loophole that needs to be addressed.Bank representatives warned that if the loophole is not closed, the large-scale adoption of stablecoins could lead to the loss of trillions of dollars in deposits from the U.S. banking system, particularly community banks, and could reduce loans to consumers, small businesses, and agriculture by more than one-fifth.Senator Thom Tillis responded that the current text has reached a compromise: it prohibits rewards on idle balances of stablecoins while allowing crypto platforms to offer other forms of customer rewards, believing this provides a possibility for bipartisan passage of the bill.However, the banking industry stated that it will submit specific amendment proposals to lawmakers in the coming days. The current text of the CLARITY Act was made public last Friday, and the crypto industry, including Coinbase, is pushing for a vote in the Senate next week.
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