Tag: digital assets

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SEC charges Binance

The Securities and Exchange Commission (SEC) charged cryptocurrency platform Binance and its CEO Changpeng “CZ” Zhao with thirteen separate charges related to securities violations yesterday.  Director of the SEC’s Division of Enforcement Gurbir Grewal said, “We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximize their own profits.” Read the release. And, see the 136-page lawsuit (PDF).

In a tweet yesterday afternoon, the SEC (quoting from the press release) quoted a “Binance chief compliance officer 2018” who allegedly said, “We are operating as a fking unlicensed securities exchange in the USA bro.”

The Wall Street Journal notes, “For the SEC, the lawsuit is another significant bet that U.S. courts will agree it has jurisdiction over the crypto industry, which often disputes that digital assets are securities.” Read it.

SEC charges Binance – reaction

Binance rejected the SEC’s suit in a company blog post yesterday and said in part, “Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations.  But despite our efforts, with its complaint today the SEC abandoned that process and instead chose to act unilaterally and litigate.  We are disheartened by that choice.” Read the blog. And, read an early “take” on the lawsuit by industry participants on CoinDesk.

Meanwhile, Reuters also reports that from 2019 to 2020, Binance executive Guangying Chen operated five Silvergate Bank accounts belonging to Binance’s “purportedly” independent US affiliate. Read more. Continue reading “Binance and CEO CZ Charged By SEC; House Digital Assets Hearings Today And Tomorrow”

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market structure – the draft

It’s a BIG bill.

Please meet the “Digital Asset Market Structure Proposal” – a 162-page discussion draft of a bill intended to provide “a statutory framework for digital asset regulation intended to provide clarity, fill regulatory gaps, and foster innovation, while providing adequate consumer protections,” according to the release.

See the 162-page discussion draft (PDF).

Notably, the bill combines the efforts of House members and the staffs of the Agriculture and Financial Services (HFS) Committees led by Chairs Glenn “GT” Thompson (R, PA) and Patrick McHenry (R, NC), respectively.

On Friday, Chair McHenry tweeted his thanks across both committees including the related, digital asset subcommittee chairs Rep. Dusty Johnson (R, SD)  and Rep. French Hill (R, AR) adding, “I encourage the public to provide constructive feedback to help us get this right.”

market structure – law?

Judging from the crypto Twitter legal community, this bill is suitably dense and will effect a demonstrable change in the U.S. financial system – if adopted – by defining the market structure for digital assets.

Cutting to the chase…. Will it become law anytime soon?

Alexander Grieve of government relations firm Tiger Hill tweeted a near-term schedule for the bill explaining that “the committees will ‘mark up’ (i.e. live-edit/offer amendments) the legislation in early July; House floor vote potentially some time in late July or Sept…”

Amidst the bill’s challenging road ahead, the two Chairs want input. House Democrats have not been given an opportunity to react to this bill yet, which could, maybe, help create support in the Democratically-controlled Senate. Continue reading “Digital Asset Market Structure Proposal From House; CFTC Advising On Risk”

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citizen crypto

TRON blockchain founder Justin Sun says KYC and AML solutions will be a “must” in the future so his company has been creating a blockchain-based solution represented in the recently-launched Dominica Metaverse Bound Token (DMBT).

“Minted on the Tron blockchain, DMBT gives holders ‘citizenship’ to the Dominica Metaverse which, per marketing materials, also serves as a government-issued ID for the Commonwealth of Dominica,” reports Decrypt. Read more.

This is similar to a “universal cookie” in digital advertising – but here it’s called a soulbound token or decentralized ID.

more tips:

KYC vs AML: What is the difference? – Dow Jones

you’re talented

Electric Coin’s head of regulatory relations, Gary Weinstein, looks at the growing global battle for blockchain talent and finds Switzerland a worth competitor to the United States. In Forbes, Weinstein explains, “What truly sets Switzerland apart is its vibrant support ecosystem for blockchain companies. This is not limited to financial incentives but extends to an expansive network of reliable partners possessing in-depth know-how of the subject matter. Universities, venture capital firms, solution providers, and law firms have all leaned into blockchain, offering specialized support to startups and established businesses alike.” Read more. Continue reading “Blockchain Touts Digital Passport; Singapore Licenses Crypto.com”

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Senate Banking – Warren

A Senate Banking hearing yesterday titled, “Countering China: Advancing U.S. National Security, Economic Security, and Foreign Policy,” brought to light a report last week by blockchain analytics firm Elliptic that found “…more than 90 China-based companies [willing] to supply fentanyl precursors, 90% of which accepted cryptocurrency payments. ” The precursors equated to a street value of $54 billion of fentanyl according to the company. See the report.

During the hearing, committee member Senator Elizabeth Warren (D, MA) tied the finding to her Digital Asset Money Laundering Act from the 117th Congress and co-sponsored by Senator Roger Marshall (R, KS). Warren began by confirming with U.S. Treasury’s Assistant Secretary for Terrorist Financing and Financial Crimes, Elizabeth Rosenberg, that crypto was being used for purchases of fentanyl precursors. Rosenberg added that the perceived “pseudonymity” and “anonymity” of digital assets was attractive to fentanyl precursor sellers.

When Senator Warren pressed on how crypto was “their payment of choice” for fentanyl dealers, Rosenberg gently corrected her, “It is one. Unfortunately, there are others. But, it is certainly one.” After repeating insights from the Elliptic report and a quick outline on the re-introduction of the bill with Senator Marshall, the Massachusetts Senator concluded, “Crypto is helping fund the fentanyl trade, and we have the power to shut that down. It’s time.” See video of Senator Warren’s questioning beginning at 01:35:35.

Senate Banking – Lummis

Largely taking the other side of Senator Warren’s questions, fellow Banking committee member Senator Cynthia Lummis (R, WY) noted in her questioning of witnesses that the Responsible Financial Innovation Act (RFIA) – which “will be re-introduced soon”- will include “an entirely new title on combatting illicit finance.”

Sen. Lummis asked Assistant Secretary Rosenberg, if she agreed “that digital assets today are subject to the U.S.’s comprehensive laws on money laundering and sanction?” She did saying, “It’s certainly true that financial institutions that offer services in the digital asset domain are covered by AML/CFT obligations.” See video beginning 02:14:43. Continue reading “Warren And Lummis Defend Turf At Senate Hearing; House Adds Two Digital Assets Hearings”

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CFTC advisory

In a “staff advisory” to Derivatives Clearing Organization (DCO) registrants and applicants, the Commodity Futures Trading Commission (CFTC) issued a reminder of the risks it said were inherent with digital assets derivatives including cyber, conflict of interest and physical delivery. Read the advisory (PDF). And, see the abbreviated press release.

This advisory rings as similar in tone to the advisory to banks in January by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC): beware of the unregulated that lurks beneath. CoinDesk’s Jesse Hamilton suggests “sanctions” may be ahead for some companies if history is any indication. Read that one.

CFTC advisory – rulemaking

CFTC Commissioner Kristin Johnson will not be denied. In a follow up to the CFTC digital assets advisory to DCOs yesterday, she issued a lengthy statement of her own saying that it was finally time for rulemaking (adding that she has tried in the past, but to no avail.)  Read the statement.

Johnson says that rules should address 4 areas: “(1) Conflicts of interest arising from vertical integration of activities and functions; (2) Custody and client asset protection; (3) Operational and technological risk, specifically cyber-risks; and (4) Market manipulation and fraud.”

This would also appear to be the domain of Congressional legislation. But, the Commissioner is feeling urgency here – as outlined in her statement– and the CFTC’s mission is clear: “… promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.”

“Now is the time..” concludes Johnson. Rulemaking proposal with comment period to come? Continue reading “CFTC Issues Digital Assets Derivatives Advisory; Treasury Researchers On Digital Assets”

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China warms to Web3

The city of Beijing has apparently announced in a white paper last week that it will support the innovation of Web3. The Block details a few of the specifics, “Dubbed the ‘Web3 Innovation and Development White Paper (2023),’ the document states that web3 technology is an ‘inevitable trend for future Internet industry development…'” The investment is relatively small ($14 million for each of the next 3 years), but it coincides with the opening of crypto markets in Hong Kong this week – so said Binance CEO Changpeng “CZ” Zhao in a tweet.

Depending on your side of the fence, this could be a feint by mainland China or “signal” about the country’s belief in a future with digital assets. Also – it’s this sort of news that will increasingly ring the “national security” bells in Congress if China is perceived to be taking a leadership position on the global Web3 stage.

more tips:

Hong Kong’s new crypto rules covered by China state TV in rare move from Beijing – Yahoo Finance

dismissal wanted

New court filings released Friday (see them (PDF)) reveal crypto companies Genesis Global Capital and Gemini asking the court to dismiss an “unregistered securities” lawsuit by the Securities and Exchange Commission (SEC).  As CoinDesk notes, the SEC’s lawsuit “targeted Gemini’s yield-bearing product Earn, an unregistered offering through which the regulator alleged the two entities ‘raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors.'” Read more.  Crypto lender Genesis Global Capital is currently in bankruptcy. Continue reading “China Warms To Web3; Crypto Companies Ask for SEC Suit Dismissal”

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European DeFi

A new 77-page report from the European Systemic Risk Board (ESRB) offers up views and suggestions on decentralized finance (DeFi) and cryptocurrency policy. The ESRB explains it’s still early: “The following analysis of the current state of the crypto-asset world underscores findings by international standard-setters that currently the crypto-asset sector is too small and insufficiently integrated with the traditional financial system to pose any systemic risks.” Download it (PDF). Lots of helpful definitions beginning on page 66.

Ledger Insights notes in relation to the report: “With the EU’s MiCA legislation for crypto-assets now approved and about to come into force, the question has turned to the next iteration, which will likely cover DeFi, although it’s a few years off.” Read more.

more tips:

What is DeFi? – Coinbase Continue reading “DeFi Is Among Next Legislative Targets For EU; Hagerty and Hill Voice SEC Suspicions”