The Crypto Currier 13th June

This week's biggest news in the Crypto Currier:

The US vs. crypto. The US SEC has decided a duck is a duck even if it sometimes barks. I.e., a crypto token is a security, even if it sometimes has utility

Crypto exchanges' attitude of we'll keep doing what we want regardless is now catching up with them, as the SEC is trying to show who's boss

The founders of failed crypto 'fund' 3AC have decided they don't need to know or care about what the SEC may think about their having profited greatly at the $3.3 billion dollar loss of their users, and are chilling out living the good life in Bali

New FCA crypto marketing laws in the UK are going to entire industry in the UK

And so I thought a tranquil photo of this fine Mandarin duck would be fitting for this week in crypto

UK's FCA Debuts ‘Significant Change’ to?Crypto?Marketing Rules

The UK's Financial Conduct Authority (FCA) has introduced strict regulations for cryptocurrency marketing, including a mandatory "cooling-off" period for new investors starting October 8th, and a ban on "refer a friend" bonuses. The FCA says these measures aim to ensure that crypto buyers comprehend the associated risks. “The crypto industry needs to prepare now for this significant change” said Sheldon Mills, the FCA’s executive director for consumers and competition. The FCA's announcement aligns with the UK's efforts to regulate crypto companies similarly to traditional finance firms. The European consumer advocacy group, BEUC, has also filed a complaint against Twitter, YouTube, TikTok, and Instagram for allowing misleading cryptocurrency ads on their platforms. “These social media companies are responsible for allowing misleading advertisements of crypto assets (‘crypto’) to multiply on their platforms (both through advertising and influencers),” BEUC said in a news release. “This constitutes an unfair commercial practice, as it exposes consumers to serious harm i.e., the loss of significant amounts of money.”?The impact of this, especially the cooling off period, on how crypto companies will be able to operate in the UK will be huge. (Pymnts)?Read More

SEC's Gary Gensler: Tokens are securities even if they also have utility?

SEC Chair Gary Gensler has argued that cryptocurrencies and their exchanges aren't unique and can't use the claim of token utility to avoid regulatory oversight. Despite certain tokens having uses beyond investment vehicles, Gensler insists they still fall under the definition of investment contracts even if they can also claim utility. A duck is a duck even if it occasionally barks. I.e, a security is a security even if it sometimes also has a use case besides that. However, tokens used solely within their blockchain ecosystems might be exempt from these classifications.?

“Some promoters of crypto asset securities contend that their token has a function beyond simply being an investment vehicle," Gensler stated. "As the courts in the Telegram case and others have said, however, some additional utility does not remove a crypto asset security from the definition of an investment contract.” This means that crypto security exchanges and platforms have to comply with securities laws, including the requirement to separate “the exchange, broker-dealer and clearing functions". Gensler isn't exactly crypto's number one fan. His take on the industry is “With wide-ranging noncompliance, frankly, it’s not surprising that we’ve seen many problems in these markets. We’ve seen this story before. It’s reminiscent of what we had in the 1920s before the federal securities laws were put in place. Hucksters. Fraudsters. Scam artists. Ponzi schemes.” Man does have a point. (Cointelegraph) Read More

SEC lawsuits: 68 cryptocurrencies are now seen as securities by the SEC

The U.S. SEC has now classified 68 cryptocurrencies, so far, as securities. This impacts over $100 billion worth of tokens. This has been an outcome of years of litigation by the SEC to clarify which cryptocurrencies it perceives as securities. Among the notable cryptocurrencies deemed as securities is Ripple's XRP. The list does not include Bitcoin or Ethereum. This new classification has impacted, i.e. reduced, the values of many cryptocurrencies.(Cointelegraph) Read More

US Senators Say Binance May Have Lied to Congress

US Senators have requested the Department of Justice to investigate whether Binance made false representations about its business operations and links to its US arm during a March inquiry. At the time, Senators had questioned Binance's regulatory compliance, finances, and the independence of its US arm. The exchange's Chief Strategy Officer Patrick Hillmann stated that Binance prioritised local regulatory compliance and that Binance.com and Binance.US are separate entities. Senators Elizabeth Warren and Chris Van Hollen suspect however that Binance may have provided inaccurate information. This follows recent charges by the US Securities watchdog against Binance for allegedly operating illegal trading platforms and offering unregistered crypto asset securities. (Finance Magnates) Read More

De-Binancing the US?

If it transpires that Binance did lie about this, that really doesn't bode well for its case in the US. The SEC isn't looking to see what it can let Binance get away with. It seems to be actively looking for any reason to de-Binance the US.

SEC’s Gensler Rebuffs Crypto Complaints, Says Gave Ample Warning Heat Was Coming

SEC Chair Gary Gensler says there's nothing special about the crypto industry and that just having some utility doesn't mean any crypto company will be able to get away with not treating crypto assets as securities. Gensler defended the SEC's recent actions against major crypto exchanges, stating that industry players claiming ignorance of potential illegality in their actions shouldn't be believed. He also refuted claims that crypto platforms can't register with the SEC, insisting that compliance is possible, albeit requiring work. This is part of a general SEC crackdown on the crypto industry in the US. No coincidence that crypto companies are looking to move to or are moving to other jurisdictions that are welcoming them with open arms. To be fair to the SEC however, the fact that at some point the vast majority of crypto assets were going to be labeled as securities can't have come as a surprise to many. Crypto exchanges have tended to live by the general tech companies attitude of 'go fast and break things and if that includes the law then we'll worry about that later' attitude and now that's catching up to them. Exchanges haven't rolled over onto their backs and submitted meekly, and now the SEC is showing them who's boss.?(CoinDesk) Read More

SEC Clampdown Spurs $4B Deposit Flight From Binance, Coinbase and Binance.US

The latest show of the SEC's crypto clampdown of last week's lawsuits against Binance, Binance.US and Coinbase triggered withdrawals of approximately $4 billion from these exchanges, $3.1 billion via the Ethereum network and $864 million in Bitcoin. The SEC accused Binance, Binance.US and CEO Changpeng "CZ" Zhao of several federal securities law violations on Monday, and on Tuesday, Coinbase of offering unregistered securities to the public. These lawsuits, helped by the SEC's intention to freeze assets on Binance.US caused significant drops in values of tokens identified as securities in the suits, including Binance’s BNB, Cardano’s ADA and Polygon’s MATIC. I think it would be naive to assume the SEC will stop with Binance and Coinbase. They're just the biggest and will cause the biggest stir by it going after them. I might be totally wrong, but I'd expect every crypto exchange with a US base to face some of the same issues, followed by a load of the tokens it now seems to be finally clarifying are securities… (CoinDesk) Read More

Robinhood Ends Support for All Tokens Named in SEC Lawsuit as Securities

Robinhood will end support for the tokens the SEC named in its lawsuit against Binance as securities. Robinhood will cease supporting Cardano (ADA), Polygon (MATIC), and Solana (SOL) on June 27, 2023. Users will be able to trade and transfer these tokens on the platform until the deadline. Any tokens remaining in a user’s account after this date will be automatically sold at market value. Robinhood's chief compliance lawyer, Dan Gallagher, mentioned during an industry testimony that the company attempted to register as a special-purpose broker for digital assets but failed to obtain SEC guidance on crypto compliance despite a 16 month effort. “We went through a 16-month process with the SEC staff trying to register a special purpose broker dealer. And then we were pretty summarily told in March that that process was over and we would not see any fruits of that effort,” he added. What's key here is not that Robinhood is delisting these tokens, but rather, Robinhood is generally quite forward thinking. If Robinhood delists, one imagines it might not be too long before other platforms also delist. (CoinDesk)?Read More

EU’s Landmark?Crypto?Law MiCA Published in Official Journal

The European Union's landmark Markets in Crypto Assets law (MiCA) has been published in its 252 page long Official Journal of the European Union. This sets the stage for its implementation on December 30, 2024. The law introduces comprehensive licensing rules for crypto firms. It will require crypto wallet providers to verify customer identities during fund transfers, permits crypto firms like exchanges and wallet providers to operate across the EU with a license, and imposes governance and financial obligations on stablecoin issuers, such as the stipulation that they will actually have to be backed by something, a feat which not all have managed to date. The law was formalised despite multiple delays due to translation issues into various EU languages. MiCA presents a clear regulatory path for the crypto industry in the EU, and so far seems to have been successful in attracting crypto companies towards the EU whilst the crypto industry in the US especially currently faces significant regulatory uncertainty and legal challenges. (CoinDesk) Read More

FTX authorised to ‘permanently redact’ names of individual customers (i.e. keep the profit)

Bankrupt crypto exchange FTX has been granted the right to permanently redact individual customer names from all court filings. Several media outlets had tried to get access to the customer list citing public interest. FTX's new management is trying to hold onto any money it can. It's argued that disclosure could endanger individuals. More pertinently for the exchange, that data is potentially worth a lot of money to any new potential owner. Giving it away for free could lower the sale value of the exchange. Kevin Cofsky, a member of FTX's restructuring team, argued that releasing the names would hinder the restructuring efforts and devalue the assets held by the debtor. Judge Dorsey acknowledged the potential risk of scams and identity theft for individuals, but deemed the risk less significant for companies and institutional investors. To keep the names of corporate and institutional investors confidential beyond 90 days, FTX would need to make a new request. (Cointelegraph) Read More

Since 3AC collapsed, the?fund's founders have reportedly been meditating in Bali, learning to surf, and taking shrooms

Just because your crypto fund has collapsed and lost your users $3.3 billion doesn't mean you can't hide away in Bali, which conveniently doesn't have an extradition treaty with the US, 'drink a lot of alcohol', 'take shrooms' and pose with chained, caged tigers. Founders of collapsed hedge fund 3AC (Three Arrows Capital), Kyle Davies and Su Zhu, have reportedly been living comfortably in Bali, since their firm's collapse last year. Davies spent his time painting, meditating, and attending a Formula 1 event in Bahrain, while Zhu indulged in video games, according to social brags. The so called fund's crashed left it owing $3.3 billion to creditors. The founders, currently under investigation in the US and Singapore, were unresponsive in legal proceedings and did not attend emergency court meetings, and have not been located by liquidators. Despite this, they launched Open Exchange in April, ironically, a platform which claims to be for trading bankruptcy claims from the crypto collapse, such as of the firm they founded… They don't seem to mind if the new venture takes off or not. They told the New York Times they have enough savings to not need to work again. (Business Insider) Read More

3AC: how to get rich quick and move to an island with your investors' money

The 3AC model was financially smart- for its two founders. Take others' money, invest it in leveraged risky crypto trades. Crypto goes up, pay people back some and keep some aside for yourselves. Take some more of others' money, invest that in more leveraged risky crypto trades. Crypto goes down, don't pay people back, take what you set aside for yourselves (a lot of money which means you'll never have to worry about money or work again) and jet off to a nice tropical island and live a chill life.?

VC firm A16z chooses London as destination for first office outside U.S.

Venture capital firm Andreessen Horowitz (a16z) has chosen London for its first international office, intending to invest in the crypto and startup ecosystem in the UK and Europe. The decision comes as the UK's crypto regulatory outlook is slowly gaining grains of clarity, with the government aiming to bring crypto under existing financial services regulation. This move has been met with some controversy, as the House of Commons Treasury Select Committee suggests treating crypto like gambling, a proposal met with industry backlash. The new office is set to open later this year. A16z's recent investment activities include leading a $43 million Series A funding round for U.K.-based Gensyn. (CoinDesk) Read More

Abrdn tokenises money market fund on Hedera with Archax

UK asset manager Abrdn has debuted its first blockchain-based investment by tokenising a part of its ￡15 billion Lux Sterling money market fund. "We see the future for financial markets lies with leveraging new technologies, such as Web 3.0 and DLT," said Russell Barlow, Global Head of Alternatives at abrdn. This tokenised security, covered by Abrdn's existing regulatory permissions, marks Abrdn as the first major UK asset manager to issue one. The token was minted using the Archax Tokenisation Engine on Hedera Hashgraph, a platform where Abrdn is a member of the governing council. (Cointelegraph) Read More

Hong Kong legislator invites exchanges to the region despite SEC scrutiny

Hong Kong legislator Johnny Ng is encouraging cryptocurrency exchanges including Coinbase to establish operations in the region, and has mentioned potential stock listing opportunities. This invitation comes amid the recent SEC lawsuits against major crypto exchanges in the US. The Financial Secretary of Hong Kong, Paul Chan, stated the government's commitment to fostering a robust ecosystem for cryptocurrency and fintech in January. Hong Kong has since been creating regulations and introducing compliance measures to support the growth of the cryptocurrency industry. Hong Kong seems to be doing everything it can to attract crypto businesses, whilst the US SEC seems intent on the opposite. (Cointelegraph) Read More

North Korean hackers linked to Atomic Wallet?crypto?hack

North Korean state-backed hackers, known as the Lazarus Group, are believed to be behind a recent hack on Atomic Wallet users, which reportedly led to millions of dollars in losses. Blockchain analysis firm Elliptic states with "high confidence" that the Lazarus Group is behind the attack, citing the hackers' method of laundering the stolen assets through Sinbad, a crypto mixer previously used by the group, as key evidence. This mixer is believed to be a rebrand of the sanctioned Blender.io, which has been linked to the Lazarus Group in the past. The hack is estimated that the hack affected less than 1% of its monthly users, approximately 50,000 individuals, though number of users affected or the amount stolen aren't known. (TechCrunch) Read More

Is it crypto companies that are being complacent vs the North Korean hacking elite?

The Lazarus Group in particular are behind many if not most of the large successful hacks and seem to be getting more sophisticated by the hack, from a good starting point. There are many cyber security measures available for crypto (and any) companies to take, and it seems that not many companies are taking as many cyber security precautions as they could. Being realistic, one can't assume the North Korean leadership is ever going to stop tasking its elite with hacking jobs. These hacks are funding a large part of the regime. One can't help but feeling the onus needs to be on crypto companies to have better security measures than they have been.

U.S. credit unions back anti-CBDC Bill

Republican Congressman Alex Mooney introduced the "Digital Dollar aiming to stop the Federal Reserve from testing a central bank digital currency (CBDC). The bill has gained support from House Republicans, conservative advocacy groups, and the National Association of Federally-Insured Credit Unions (NAFCU). Many Republicans have expressed major privacy concerns over a federally-issued digital dollar, fearing potential government surveillance. Measures to limit the Fed's attempts to develop and implement a CBDC have also been proposed at federal and state levels.?(Ledger Insights) Read More

CBDCs are the scariest thing in crypto

Anti-CBDC votes is good. CBDCs are by core definition intended to reduce privacy or freedom. Reducing their potential and abilities is the only realistic hope there is, as one can't expect governments to turn down the levels of control CBDCs offer them.

Disclaimer:?The Crypto Currier offers information, not advice or recommendations.? It does not recommend any particular investment or investment strategy and focus on news, use cases and applications of the technologies rather than investment. You should carry out your own independent research including your own independent verification of facts and data. I write the Currier carefully but we can’t guarantee the accuracy or completeness of any information we publish and we accept no liability for any act or omission by a reader of our content. Opinions entirely my own and might be totally incorrect.