Regulatory Updates Newsletter: January 2025
- Staff Correspondent
- Feb 2
- 4 min read
Updated: Mar 6
Welcome to the first RiskInfo.ai Monthly Regulatory Newsletter! These updates highlight evolving AI governance frameworks, enhanced financial reporting requirements, and intensified focus on crypto compliance. Below, we detail five critical developments, followed by a summary table of additional actions.
EBA Initiates 2025 EU-Wide Stress Test
On January 20, 2025, the EBA launched its 2025 EU-wide stress test, designed to assess the resilience of 64 EU banks under baseline and adverse scenarios over a three-year horizon (2025-2027). The adverse scenario envisions a hypothetical escalation in geopolitical tensions leading to a cumulative 6.3% decline in EU GDP, accompanied by significant inflationary pressures and adverse effects on private consumption and investments.
Implications:
Bank Resilience Assessment: The stress test will evaluate banks' ability to withstand severe economic shocks, providing insights into potential vulnerabilities within the EU banking sector.
Regulatory Oversight: Results will inform supervisory authorities about necessary interventions to ensure financial stability.
Market Transparency: The exercise aims to enhance market discipline by disclosing banks' capacities to manage extreme economic conditions.
The EBA plans to publish the stress test results in early August 2025
FDIC Vice Chairman Outlines New Regulatory Direction
On January 10, 2025, FDIC Vice Chairman Travis Hill outlined a significant shift in regulatory approach, emphasizing:
Fintech and Innovation: More flexible approach to bank-fintech partnerships and technology adoption.
Financial Risk Focus: Supervisory emphasis on core financial risks rather than process-related issues.
FRTB Concerns: Cited potential overlap between the Fundamental Review of the Trading Book (FRTB) and existing Fed stress tests, risking excessive regulation.
Climate Risk De-emphasis: Withdrawal from climate-focused initiatives, arguing they're outside the FDIC's mandate.
Key Quotes:
"Using both the point in time capital framework and the SCB to address these deep tail risks will make some of these activities uneconomical for banks to engage in, and as a result damage financial market functioning."
"'Greening the financial system' is not within our authorities or mandate."
Implications:
Banks may see reduced compliance costs for non-critical process items.
Potential easing of capital requirements related to trading activities.
Crypto firms and FinTechs could face a more accommodating regulatory environment.
Climate-related financial risk assessments likely to be deprioritized.
ICO Clarifies Data Protection Rights in AI Development
On January 28, 2025, the ICO published a blog titled "Debunking Data Protection Myths About AI," addressing misconceptions about how data protection laws apply to AI development. The ICO clarified that organizations using AI must comply with the UK GDPR and ensure transparency, fairness, and individual rights protection.
Implications:
Individual Rights Protection: People retain rights over their personal data used in AI models, including the right to object to processing.
Transparency Requirements: Organizations must disclose how personal data is used in AI systems and offer opt-out mechanisms where applicable.
Regulatory Compliance: The ICO reinforces that good intentions do not exempt organizations from data protection laws—AI data usage must be lawful, fair, and accountable.
This update highlights the growing regulatory focus on AI ethics and compliance, urging businesses to integrate data protection principles into their AI governance frameworks.
EBA and ESMA Analyze Recent Developments in Crypto-Assets
On January 16, 2025, the EBA and ESMA published a joint report analyzing recent developments in crypto-assets, focusing on decentralized finance (DeFi) and crypto lending, borrowing, and staking. The report finds that DeFi remains a niche market, with value locked in DeFi protocols representing 4% of the global crypto-asset market value. It also notes that while EU adoption of DeFi is above the global average, it lags behind countries like the United States and South Korea.
Implications:
Regulatory Attention: The analysis underscores the need for ongoing monitoring and potential regulatory action to address risks associated with DeFi and crypto lending activities.
Market Participants: Entities involved in DeFi and crypto lending should prepare for increased scrutiny and consider implementing robust risk management and compliance frameworks.
Consumer Awareness: The report highlights the importance of consumer education regarding the risks associated with DeFi and crypto lending platforms.
This development reflects the EU regulators' proactive approach to understanding and addressing the evolving landscape of crypto-assets.
SEC Establishes 'Crypto 2.0' Task Force
On January 21, 2025, the SEC announced the formation of the 'Crypto 2.0' Task Force, led by Commissioner Hester Peirce. This initiative aims to develop a comprehensive and clear regulatory framework for crypto assets, moving beyond the SEC's prior reliance on enforcement actions.
Implications:
Regulatory Clarity: The task force seeks to provide explicit guidelines for crypto asset regulation, reducing uncertainty for industry participants.
Industry Engagement: By collaborating with stakeholders, the SEC aims to foster innovation while ensuring compliance with existing laws.
Shift in Approach: This marks a transition from reactive enforcement to proactive regulation in the crypto space.
This development indicates the SEC's commitment to establishing a more structured regulatory environment for cryptocurrencies.
Summary Table of Additional Updates
Regulator | Update | Direct Source |
Central Bank of Oman (CBO) | Enacted comprehensive banking law reforms (Sultani Decree No. 2/2025), granting full autonomy to CBO, mandating cybersecurity protocols for fintech partnerships, and imposing fines up to OMR 500,000 (~$1.3M) for systemic violations. | |
CFTC (US) | Announced an AI Fraud Task Force targeting market manipulation via AI tools, emphasizing penalties for algorithmic collusion and synthetic data misuse in trading. | |
Saudi Central Bank (SAMA) | Updated the Regulatory Sandbox Framework to streamline fintech testing, emphasizing AI/ML solutions and cybersecurity protocols. New applicants must submit compliance plans by March 2025. | |
UAE Securities & Commodities Authority (SCA) | Released draft regulations for security tokens and commodity tokens, requiring platforms to implement KYC/AML controls and obtain pre-approval for tokenized asset listings. Public feedback open until February 28, 2025. | |
Hong Kong SFC | Enhanced licensing requirements for virtual asset trading platforms (VATPs), mandating external audits for custody solutions and real-time transaction monitoring. |
Overall, these regulatory updates underscore regulators’ dual focus on harnessing AI innovation and mitigating associated risks, particularly in banking and data protection. Financial crime frameworks are also evolving rapidly, with cryptoassets and transaction reporting in the crosshairs. Firms should prioritize AI governance audits, review reporting systems, and monitor crypto enforcement trends.
For feedback or regional coverage requests, contact us at info@riskinfo.ai.
Best regards,
The RiskInfo.ai Team
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