The EU has approved the most expensive, and clear, crypto regulation yet. This is great! The industry and the EU will benefit. Meanwhile the UK is being rapidly left behind, as is the US. The US SEC is facing mounting criticism for its stick and stick ‘bad policy’ approach to crypto regulation, and US crypto firms are either eyeing up overseas operations or already mid setting up elsewhere. US banks, and the European Parliament have thankfully started warning about the risks of CBDCs (central bank digital currencies), but at least for those lucky enough to still be in the EU there doesn’t seem an immediate threat. One attempt at a Euro-pegged stablecoin has been ripped to shreds with niceties such as ‘absolutely horrible’ and ‘worst code I’ve ever seen’. Bulgaria could become rich, thanks to an old stash of seized bitcoin, if it holds on and if prices go up…. and at least crypto fraud seems to be down, for now…
European Parliament Approves Landmark Crypto Law, MiCA
The European Parliament has voted in favour of the EU’s Markets in Crypto-Assets (MiCA) regulation, making the EU the first major jurisdiction to introduce comprehensive laws to regulate the digital assets industry. The regulation, expected to go live in 2024, requires digital asset exchanges and crypto wallet providers to obtain a license to operate within the region and stablecoin issuers to hold sufficient reserves. EU lawmaker Stefan Berger who led the negotiations believes the regulation puts “the EU at the forefront of the token economy” and has stated that the industry in Europe now has “regulatory clarity that does not exist in countries like the US.” MiCA aims to provide regulatory clarity as well as consumer protection. EU Commissioner for Financial Services, Financial Stability and Capital Markets Union Mairead McGuiness described MiCA as “a world first” adding that “The rules will start applying from next year. We’re protecting consumers and safeguarding financial stability and market integrity”. The European Securities and Markets Authority now has to develop the guidelines for implementing MiCA ahead of its 2024 enforcement.
With MiCA Past the Finish Line, UK’s Crypto Industry Calls for Rules of Its Own
The EU is pushing ahead of the UK, again. This time, with its finalised Markets in Crypto Assets (MiCA) legislation which is putting pressure on the UK and the US to deliver operational clarity for crypto. While MiCA sets out regulatory clarity including authorisation requirements for crypto service providers and token issuers to be enforced by member states, the UK is devoid of any clarity and is relying on different regulators to set out their requirements. The UK government says it hopes to set out specific legislation for crypto in the next 12 months, another 12 months during which the UK is lagging behind the EU. We’ll see. The EU’s advantage may simply come down to the fact that it has actually managed to finalise an approach and offer clarity.
SEC’s ‘brute force’ crypto regulation attempt is ‘bad policy’
The US SEC is facing mounting criticism for its negative approach to the crypto industry. Web3 venture capital firm Paradigm published a policy piece highlighting problems with SEC registration and arguing that SEC Chair Gary Gensler’s approach is bad policy. Paradigm states that the SEC does not provide adequate information to crypto asset users and investors and denies offering a viable compliance path for crypto entrepreneurs. Paradigm makes the point that the current disclosure policy was developed in the 1930s, and claims current policies are “tailor-made for centralized companies issuing securities” and that crypto markets are fundamentally different. The call for decentralisation really is a thing after all. Pro-crypto congressman Warren Davidson has introduced legislation to replace Gensler with an executive director reporting to the board, aiming, in his words, “to correct a long series of abuses”.
US Crypto Firms Eyeing Overseas Operations
Gemini is planning to establish a crypto derivatives operation outside the U.S. amid increasing regulatory pressure and uncertainty, and aims to expand into Asia. Gemini isn’t alone. It joins other crypto companies including Coinbase in seeking growth opportunities outside the US and UK, in jurisdictions such as Hong Kong and the Middle East, where regulatory clarity is emerging. Coinbase CEO Brian Armstrong has warned that crypto firms may build in offshore havens if the U.S. and the UK don’t establish clear regulations, suggesting that relocating is on the table for his company. The U.S. has primarily regulated the crypto space through SEC enforcement actions, which many industry actors criticise as opaque and unhelpful. “Given the progress of regulators in the Asia-Pacific and the Middle East toward clarifying their regimes, it seems likely that virtual-asset service providers will continue to gravitate toward jurisdictions that provide greater clarity and specific guidance,” Vince Turcotte, director of HK digital assets at market surveillance firm Eventus said. Coinbase CEO Brian Armstrong has said “Anything is on the table, including relocating or whatever is necessary” adding “I think the U.S. has the potential to be an important market for crypto, but right now we are not seeing that regulatory clarity that we need,” he said. “I think in a number of years if we don’t see that regulatory clarity emerge in the U.S. we may have to consider investing more elsewhere in the world.” Meanwhile, the EU is also getting ahead with MiCA, as above.
Coinbase Receives License to Operate in Bermuda
Coinbase is looking outside of the US, specifically to Bermuda. It’s acquired a Class F license from the Bermuda Monetary Authority, allowing it to operate as a digital asset exchange in the territory. This is part of its international expansion efforts following CEO Brian Armstrong’s statements suggesting it might have to move out of the US if clear crypto regulation is not enacted. It is currently unclear what specific services the company will offer in Bermuda.
EU Parliament report warns of the risks of a digital euro
The European Parliament has published a briefing casting doubt on the benefits of a digital euro, despite being broadly supportive of the preparatory work done by the European Central Bank. This report argues that evidence is inconclusive about the actual market need for a central bank digital currency, and that specific use cases still aren’t apparent and need to be addressed. It also highlights the potential issues arising from the ECB’s role in a “radically new situation,” where it would simultaneously compete and collaborate with financial institutions while distributing the digital euro, adding costs to banks whilst taking away profits. This could lead to conflicts of interest since the ECB would act as both a competitor and regulator. It also discusses concerns over privacy, noting that European citizens are rightly suspicious of potential misuse of payment information. There’s been a lack of education about the overwhelming dangers CBDCs pose to everyone except central banks and governments.
‘Worst code I’ve ever seen’: Euro stablecoin faces heavy criticism
A new Euro pegged stablecoin launched in France by Societe Generale-Forge has received some pretty harsh criticism on crypto Twitter. Like, really harsh. Some of the terms used were ‘the worst code I’ve ever seen’ and a ‘laughing stock’ by NFT project founder “foobar”, “absolutely horrible” and a suggestion that the French bank “stop trying to weasel” into crypto by crypto researcher Mason Versluis and “radical commitment to inefficiency in the name of regulation” by smart contract engineer “alephv.eth”. The criticism is due to its restriction on peer-to-peer transactions. The Ethereum-based stablecoin is only available to qualified institutional clients and requires approval by a centralised registrar for transfers.
US Banks are worried a US CBDC would hurt profits and be a drain on deposits
The American Bankers Association is worried about the rise of a US central bank digital currency. Not for any ethical reasons, but because CBDCs might (would) cost banks money to run, and take away profits. It’s expressed concerns to the Federal Reserve. If banks have to hold digital dollars in custody-like accounts, they wouldn’t be able to treat these holdings as deposits, and so couldn’t use them to make loans, from which they profit. Reduced ability to make loans also means reduced credit availability for businesses and consumers. In January 2022, the Fed sought public input on a CBDC. Views from over 2,000 responses ranged worryingly enthusiastic to skeptical to reassuringly opposed. The bankers association wrote “Based on this analysis, we do not see a compelling case for a CBDC in the United States today” adding “As proposed, the CBDC will be a government-backed competitor to bank retail deposits, which count for 71% of bank funding today. The loss of this funding source will severely limit credit availability to businesses and consumers.” Well, obviously. A CBDC by core definition is designed to benefit central banks and governments at the expense of everyone and everything else. Best avoided.
Zimbabwe’s digital-currency plan needs $100 million of gold
Zimbabwe is planning to launch a gold-backed digital currency to stabilise its struggling local currency. Its central bank has been accumulating gold reserves to support the initiative and reduce the local currency’s volatility. The country has said it will require $100 million worth of gold to kick-start the project, and that it currently has 350 kilograms of gold in reserves (at today’s prices roughly $22 million worth) according to state-owned media. The Reserve Bank of Zimbabwe is working on finalising a date to start the gold-backed digital currency, with each token issued set to be backed by real gold.
Bored Apes NFTs just won a big lawsuit – big news for NFT creator rights
Some guys decided that Bored Ape NFTs contained hidden racist symbols. So they did the logical thing and parodied (copied) them, creating very similar NFTs claiming doing so was freedom of speech. Happily for original NFT creators, a judge has decided that NFTs are copyright and can’t just be copied or counterfeited under freedom of speech claims. What happened: The US District Court for the Northern District of California has ruled in favour of NFT creators. Defendants Ryder Ripps and Jeremy Cahen had created a RR/BAYC (Bored Ape Yacht Club) NFT collection, which closely resembled (copied) the original BAYC collection. The defendants argued that NFTs were not covered by the Lanham Act, which governs trademarks and service marks, as NFTs are intangible. The judge disagreed, stating that NFTs are considered goods under the Lanham Act due to their traceable, unique, and brand-linked features. The court found that BAYC creator Yuga Labs owns valid and enforceable BAYC trademarks and that the defendants used these trademarks without permission to sell imitations that caused confusion. This is quite a big deal for other NFT creators. The whole hidden racist claim hasn’t been proven.
Hong Kong Court Declares Crypto as Property in Case Involving Defunct Gatecoin
A Hong Kong court has recognised crypto as property “capable of being held on trust”. The ruling, involving now defunct crypto exchange Gatecoin, follows similar judgments in Mainland China and the classification of crypto as property for tax purposes in the US. This decision provides HK liquidators with more clarity on how to handle crypto assets during winding down procedures. HK has been pushing for clearer regulations for the crypto sector and is attracting crypto companies by the droves. Its approach could attract capital amidst global regulatory uncertainty.
France mulls fast-tracking registered crypto firms to new EU rules
The French Financial Markets Authority is considering a “fast track” option for licensed crypto firms in the country to become regulated under the upcoming EU MiCA laws. As the transitory period for MiCA regulations spans 18 months, it is aiming to make it easier for French digital asset service providers to switch over to the new regulations. The regulator is exploring ways for these firms to become compliant with MiCA regulations as soon as possible. In France, there are two licensing options for crypto firms: a “simple” option with relaxed requirements and a more stringent “enhanced” option, which is closely aligned with MiCA regulations and favoured by the government.
Russia becomes second-largest crypto mining hub after US, sets up entities for it
Russia has become the second-largest country for crypto mining, trailing only the United States. Experts attribute this growth to restrictions on mining activities in Kazakhstan and China due to electricity shortages. Unclear regulations regarding cryptocurrencies in the US could also potentially shift the market distribution in the future. Russia is also incentivised to mine crypto- it’s a good way of getting money into a country hit by sanctions. Its central bank is planning to create “special authorized organizations” to mine crypto assets as well as to use crypto to settle international payments. This new bill is being prepared in the form of an experimental legal regime” according to former economic adviser to Russian president Vladimir Putin, Elvira Nabiullina.
Celsius auction has Gemini and Coinbase backing consortiums as new bidders
Two consortiums are set to compete for the assets of bankrupt crypto lender Celsius Network in an auction scheduled for today (Tuesday April 25th) in New York. Gemini and Coinbase are reported to be among the companies participating in the bids. One is the Fahrenheit consortium, backed by Arrington Capital, Proof Group Capital Management, Steven Kokinos, and Ravi Kaza, with Coinbase rumoured to be involved. The Blockchain Recovery Investment Committee is reportedly backed by crypto exchange Gemini, fund manager VanEck, Bitcoin mining firm Global X Digital, and Plutus Lending. The two consortiums are competing with NovaWulf Digital Management, whose proposal includes a cash contribution of $45-$55 million and a new public platform wholly owned by Celsius creditors, with customers recovering up to 70% of their funds. The auction is the first step for Celsius customers to recover their funds after the company filed for bankruptcy in July 2022.
Multiple Silvergate lawsuits over alleged FTX ties combined by judge
A California judge has consolidated three investor lawsuits accusing Silvergate Bank of helping to facilitate investor fraud by collapsed crypto exchange FTX. District Judge Jacqueline Scott Corley said “The Silvergate cases involve common questions of law and fact, as they name common defendants, arise from the same alleged course of conduct, and assert overlapping causes of action, such that the Silvergate cases are appropriate for consolidation. The plaintiffs allege that Silvergate aided and abetted FTX’s alleged misconduct. Actions included processing illegitimate transfers of FTX customer funds to its sister trading firm Alameda Research.” Not good Silvergate, not good. FTX filed for bankruptcy in November, causing liquidity issues for Silvergate due to the resulting crypto market crash. Silvergate announced plans to voluntarily liquidate its assets and cease operations in early March after facing a bank run and a class-action suit for securities law violations.
FTX vs Binance: Spreading misinformation about CZ ‘was the norm’ for SBF, allegedly
Binance CEO CZ is an ‘evil Chinese’ who spread “fake rumors” about FTX, according to former FTX CEO SBF, it has been alleged. Binance Chief Strategy Officer Patrick Hillmann has alleged that SBF spread these rumours to perpetuate his alleged scams at FTX. The public relationship between CZ and SBF was often antagonistic, with the two exchanging insults on social media. In November, when FTX filed for Chapter 11 bankruptcy, the animosity escalated, with CZ calling SBF a “fraudster” and SBF suggesting that CZ lied about buyout discussions. It’s a bit of a case of my exchange is bigger than yours, before one went bankrupt. I.E. standard mature crypto Twitter….
Voyager’s $1B deal with Binance.US moves forward after deal with Feds
Bankrupt crypto lender Voyager Digital Holdings has reached an agreement with the US Federal government to advance a $1 billion plan, allowing it to sell its assets to the US arm of Binance. The government can continue to work on an appeal concerning provisions that allegedly grant Voyager immunity from certain legal liabilities. The deal with Binance.US had been temporarily halted by a federal judge after a request by the U.S. government for an emergency stay.
Brazilian authorities investigate Binance for guiding clients past stop order
Binance is under investigation in Brazil for allegedly helping clients evade a stop order on cryptocurrency derivatives investments, according to Brazil’s Valor Econômico newspaper. The Brazilian SEC (Securities and Exchange Commission) informed the Attorney General that the exchange may have continued offering cryptocurrency derivatives after the SEC issued a stop order in 2020. The SEC presented screenshots of instructions for Brazilian users to change language settings to access Binance Futures and noted extensive Portuguese-language content with no restrictions on Brazilian users. Not exactly ideal. Binance stated that it “does not offer derivatives in Brazil” and operates in compliance with local regulations, maintaining an ongoing dialogue with authorities. But, this isn’t the first time that the exchange has faced allegations along these lines. Previous charges include operating in Ontario, Canada for months after informing the Ontario Securities Commission it would cease activities, as well as being sued by the US CFTC for alleged trading violations. So basically crypto cryptoing as normal.
Tornado Cash dev Alex Pertsev set to be released from prison under surveillance
Tornado Cash developer Alex Pertsev is set to be released from jail after spending nearly nine months in prison on suspicion of involvement in money laundering through the crypto mixing service. He was arrested in August last year by Dutch authorities following the US Treasury Department placing dozens of Tornado Cash addresses on the OFAC sanctions list. Pertsev is expected to return home on his birthday, April 26. His release will involve supervision and an ankle monitor, but at least he’ll be home and free to prepare his defence. It still isn’t clear if he did anything other than just write the code for a crypto mixer… Guess that’ll come out in time….
Bulgaria could be rich, thanks to seized Bitcoin
Bulgaria could become one of the world’s richest countries thanks to 213,000 bitcoin it seized from a criminal group in 2017. The group hacked the Bulgarian customs agency’s computers to enable their partner companies to import goods without paying taxes. At the time it was seized, the bitcoin was worth around $500,000, but its value has now increased to approximately $6 billion as of April 2023. The details surrounding the seizure remain unclear, and it is uncertain whether Bulgaria still holds the bitcoin or has plans for its use. For the value to be totally country-changing, it would have to hodl (hold onto) the Bitcoin and sell at peak projected future Bitcoin prices- which Bitcoin may or may not ever reach. Cool to have that stash though.
SafeMoon hacker agrees to return 80% of stolen funds
Another crypto project, another hack, another hacker making good money for returning the bulk part of hacked funds. SafeMoon, which was drained of $8.9 million on 29th March, has reportedly had 80% of the funds returned. The team has said “SafeMoon has reached an agreement with the party currently holding the funds. Specifically, SafeMoon has agreed to accept 80 percent of the amount returned, with the other party retaining the balance as a bounty. SafeMoon has further agreed not to file any legal actions against them”. The attacker claimed to have ‘accidentally frontrun an attack’ against them. Some argue that if bug bounties were larger and teams more diligent about paying them, hackers might be more inclined to report bugs before, or instead of rushing to exploit them.
30% of TikTok Videos On Crypto Investments Highly Misleading
30% of TikTok videos on crypto investments share misleading information, with only 1 in 10 warning viewers about the risks associated with crypto investments, according to new research which will probably surprise no one. Many of these videos featuring crypto-related hashtags such as investing, trading, and advice. TikTok influencers’ videos promoting crypto investments have cumulatively recorded 6 billion views. The study by dappGambl analysed over 1,161 TikTok videos. These influencers often target uninformed and unsuspecting viewers, convincing them to invest in crypto assets without fully understanding the potential risks. Since the majority of TikTok’s audience consists of younger, inexperienced users, they are more susceptible to being deceived by promises of high returns on crypto investments, potentially leading to significant losses. Probably safest to just not use certain apps, says the cynic who’s writing this.
Crypto Scammers Allegedly Used AI And Actors To Trick Investors
Crypto scammers are using AI to create lifelike videos of fake CEOs and other executives to get money out of potential victims. The California Department of Financial Protection and Innovation has charged five financial services firms for exploiting investor interest in cryptocurrencies by capitalising on the hype surrounding AI. Two of the companies allegedly misrepresented their CEOs by using an actor for one and a computer-generated avatar named “Gary” for the other, promoted the company’s “profitability” through a AI-generated YouTube video. The video featured the AI-generated avatar built on video generation platform Synthesia.io, which uses AI to create lifelike video content with realistic animations and speech. Basically don’t trust anyone or anything.
Funds Lost to Crypto Hacks and Scams in Q1’23 Shrunk 65% YoY
Crypto hacks and scams have experienced a 65% year on year decline in Q1 2023, with total losses amounting to $452 million compared to $1.3 billion in Q1 2022. The majority of the funds lost in Q1 2023 were due to Flash Loan issues, accounting for over $200 million. Bankless Times CEO Jonathan Merry attributed the decline to the crypto industry taking security seriously and users implementing proactive measures such as secure wallets and two-factor authentication. This decline might not be a permanent trend however, $215 million was lost within the first 20 days of March 2023 alone. A total of $130 million was recovered from crypto hacks and scams during the quarter.