Another day, another shot fired as debate over how and if crypto should be regulated continues on both side of the Atlantic. The latest development came as a bipartisan UK parliamentary committee released a report urging the Government to regulate cryptocurrencies as gambling instruments, not financial assets.
The report says cryptocurrencies are “not supported by any underlying asset” and “pose significant risks to consumers, given their price volatility and the risk of losses”. Specialist crypto site The Block reports that UK trade association Crypto UK fundamentally disagrees, saying “We are both concerned and disappointed by these claims which are unhelpful, false, fundamentally flawed and unsubstantiated”.
DOJ crypto comments signal tighter regulation move
The US Department of Justice will crack down on thefts, hacks, and what it called “mixers and tumblers” on crypto trading platforms, DOJ Director of Crypto Exchanges Eun Young Choi told the Financial Times this week.
“But on top of that, they’re allowing for all the other criminal actors to easily profit from their crimes and cash out in ways that are obviously problematic to us,” Choi said. “And so we hope that by focusing on those types of platforms, we’re going to have a multiplier effect.”
This could indicate regulators simply taking a tougher enforcement stance, since most ransomware payments are demanded in cryptocurrencies and state actors use digital assets to circumvent sanctions.
The DOJ is waiting for the SEC and CFTC to define their regulatory schemes. In the meantime, this could be a signal the DOJ will enforce penalties, a signal to regulators to crack on with regulation, and a warning to crypto companies that overstep the line.
In the absence of a national framework, some states have taken matters into their own hands. The New York State Department of Financial Services (NYDFS) for example has more regulatory parameters and a BitLicense framework.
SEC claps back
In response to Coinbase’s criticism of the SEC for not providing clear guidelines, SEC chair Gary Gensler said in a keynote speech on Monday that crypto rules had already been published. The idea that many of the crypto projects are decentralized is a “false narrative”, he added.
“There’s nothing about a new technology that makes it non-consistent with the public policies that Congress has laid out.”
Gary Gensler, SEC Chair
“They tend towards centralization, and you can find a website and a team of entrepreneurs around most of these,” Gensler said, adding “their business models tend to be built on taking customer funds and commingling them…To make it quite direct: this is a field that has been operating largely non-compliant. […] There’s nothing about a new technology that makes it non-consistent with the public policies that Congress has laid out.”
Binance exits Canadian market
The world’s largest crypto exchange announced in a tweet it was “proactively withdrawing from the Canadian marketplace”, adding “unfortunately, new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time”.
This latest development follows news that Binance is considering relocating its business operations from the US to the UK.
Binance CSO Patrick Hillmann said at the FT‘s crypto summit last week the US has been “very confusing over the past six months”.
Final EU approval of MiCA
The eurozone pushed ahead with the Markets in Crypto-Assets Regulation (MiCA) on 20 April, making the EU a leading jurisdiction for crypto asset regulation. The final step was taken today when members of the EU’s Economic and Financial Affairs Council (EcoFin) adopted the MiCA with no objections.
This represents the first piece of EU legislation for tracing transfers of crypto-assets such as bitcoins and e-money tokens. It will establish a comprehensive regulatory framework for crypto assets across the EU, setting out rules for the issuance, marketing, and trading of crypto assets, as well as requirements for crypto asset service providers.
OpenAI to develop cryptocurrency
OpenAI, the company that founded ChatGPT, is in talks to secure around $100m to fund Worldcoin, a new cryptocurrency, a Financial Times piece reported Sunday.
Worldcoin describes itself as an open-source protocol, supported by a global community of developers, individuals, economists and technologists committed to expanding participation in, and access to, the global economy. It is being developed alongside a digital identity tool and app.
The project is reportedly backed by a16z, the fund which spoke up in April to say UK should not follow the US approach to crypto regulation.
“It is critical that the UK develop a nuanced regulatory approach to cryptoasset transactions that allows for a principles-based analysis of decentralisation. This would then facilitate a regulatory approach that has a lighter touch for decentralised cryptoassets (where risks to consumers are lower) and a heavier hand for centralised cryptoassets,” the firm said in response to the UK Treasury consultation.
