April was a busy month for crypto, with MiCA brought through in the EU, the ramp-up of the Coinbase v SEC case, and the UK proceeding with regulation as part of its pledge to make the country a ‘cryptohub’. The start of May has proven to be quieter on the crypto front, but several noteworthy pieces of industry news have emerged:

FCA targets unregistered crypto ATMs

The FCA honed in on the cities of Exeter, Nottingham and Sheffield, all suspected of hosting illegally operated crypto ATMs. The FCA called the inspections “part of a continued crackdown on this illicit sector”.

“Crypto ATMs operating without FCA registration are illegal”, said Therese Chambers, Executive Director of Enforcement and Market Oversight, FCA. “The action we’ve taken over the past few months and wider work shows that we will act to stop illegal activity. This is especially important as crypto products are high risk and not currently regulated. That means you should be prepared to lose all your money if you invest in them.” 

Crypto ATMs are still relatively uncommon. The UK has only 17, with 11 of these in London. This compares with 29,063 in the US, 106 in Germany, and 70 in Russia, according to coinATMradar data.

More exchange fines

The US Treasury Department’s Office of Foreign Asset Control (OFAC) announced a settlement agreement on Monday for exchange Poloniex to pay a $7.59m fine amid allegations it allowed users in sanctioned regions to trade digital assets on its platform. The fine related to no less than 65,942 apparent violations of multiple sanctions programs.

“Even when it implemented a sanctions compliance program, Poloniex did not apply it consistently across sanctioned jurisdictions nor to pre-existing accounts,” OFAC said. We took an in-depth look at the case.

Meanwhile, bitFlyer USA was fined by the New York State Department of Financial Services (NYFDS) for cybersecurity failings. The company had “not performed periodic assessments of its internal and external cybersecurity risks and threats, in violation of 23 NYCRR”. Instead, the company relied upon an IT audit performed by bitFlyer (Japan).

“Although an IT audit ensures the existence of policies and procedures to protect an organization’s networks and computer systems, it does not provide visibility into the organization’s security risks or how the organization can mitigate those risks and, therefore, is not an acceptable substitute for a comprehensive risk assessment,” the NYFDS said.

UK firms object to US approach

Back in the UK, Andreessen Horowitz (a16z) said the 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.”

Statement from Andreessen Horowitz

“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 (where risks to consumers are higher), thereby achieving the Treasury’s goals of focusing on regulatory outcomes and promoting innovation,” the firm said in response to the Treasury’s “Future financial services regulatory regime for cryptoassets” consultation.

British MP Lisa Cameron spoke on crypto this week in parliament, asking the Secretary of State for Science, Innovation and Technology how the government will harness the “job potential of blockchain technology for the jobs of the future”, particularly for women, those with disabilities, and veterans.

“I’m an advocate for getting regulation in place that makes the most of the potential of the sector whilst protecting consumers.”

Lisa Cameron, MP

“I’m an advocate for getting regulation in place that makes the most of the potential of the sector whilst protecting consumers”, said Cameron at Consensus 2023 in April, adding the fallout from the 2022 crypto market crash provided the UK the opportunity to “sit up and take notice” of potential bad actors in the space.

Coinbase downgrade in face of US regulatory uncertainty

In the midst of a long and drawn-out battle between major exchange Coinbase and the SEC over regulatory uncertainty, Citi downgraded Coinbase stock on Tuesday. Shares fell 33% over the course of April.

On Monday, Citigroup analyst Peter Christiansen lowered his price target for Coinbase shares from $80 to $65 and downgraded the stock from a buy rating to “hold,” various news outlets reported.