Lưu trữ cho từ khóa: Regulation

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Bybit secures VASP license, becomes card operator in Argentina

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Crypto exchange Bybit has been awarded a crypto services license by the Argentine General Inspectorate of Justice.

Crypto trading platform Bybit says it has been awarded a virtual-asset services provider license by Argentina‘s General Inspectorate of Justice just a few weeks after entering the market with its Mastercard debit card offering.

In an Aug. 15 press release, the crypto exchange that in addition to the VASP license, it has also become a card operator in Argentina to boost its services in the local market. Bybit chief executive Ben Zhou says with the license, the exchange is “committed to supporting Argentina’s economic growth and empowering its citizens through the payment capabilities and potential of blockchain technology.”

Argentina advances crypto regulation

The licensing comes shortly after Bybit launched its Bybit Card in Argentina. According to Joan Han, Bybit’s sales and marketing director, the card program expansion was driven by Argentina’s rapid growth in digital assets, creating demand for innovative solutions to improve financial inclusivity and convenience.

Earlier this year, Argentina’s National Securities Commission introduced the VASP registry, following mandatory registration requirements announced in late March. Roberto E. Silva, chair of the CNV, noted the country’s expedited efforts to enhance compliance measures aimed at combating money laundering and terrorism financing.

Despite these efforts, the local crypto community remains wary of heightened government regulation. Manuel Ferrari, a member of the Argentinian NGO Directive and co-founder of the Money On Chain protocol, called the registry a “terrible idea” in a Forbes interview, asserting that Bitcoin (BTC) should be considered “money, not a security.”

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OSCE hosts crypto training for Armenian and Georgian investigators

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The OSCE hosted a three-day training in Warsaw to enhance crypto investigation skills for Armenian and Georgian law enforcement.

In an Aug. 14 press release, the Organization for Security and Co-operation in Europe announced that it had conducted a specialized training session on “countering blockchain obfuscation techniques” in Warsaw, aimed at improving the investigative skills of law enforcement from Armenia and Georgia.

The OSCE said the course, hosted by Poland’s Ministry of Finance, marked the second such session facilitated by the organization, as part of a broader effort to combat illicit activities facilitated by cryptocurrencies.

“This course, delivered by a team of experts with substantial experience, has helped me acquire skills that I can apply directly in my work environment, making it very practically relevant.”

A participant from Georgia’s Financial Monitoring Service

The training addressed challenges in detecting and tracing crypto transactions that cybercriminals reportedly use to obscure their illicit activities. Participants were trained on advanced techniques used by bad actors to hide their digital footprints on-chain and explored methods for law enforcement to effectively counter these tactics, the press release reads.

The OSCE says the course was designed to equip investigators with the tools needed to navigate the complexities of blockchain technology in real-world scenarios. The course also “encouraged the investigators to exchange knowledge on trends, challenges and good practices from the different beneficiary countries.”

This initiative is part of the OSCE’s extra-budgetary project, supported by Germany, Italy, Poland, Romania, the U.K., and the U.S., which aims to combat money laundering and other financial crimes facilitated by virtual assets. In November 2023, the OSCE also hosted a similar training for Ukrainian authorities, aimed at improving their capacity to trace crypto transactions.

In a separate effort, the U.S. Internal Revenue Service announced in September 2023 that nearly 40 Ukrainian law enforcement officers completed advanced training on crypto tracing, utilizing blockchain analytics tools from CipherTrace and BlockTrace.

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Binance to pay $1.7m to Brazilian regulator for violating derivatives laws

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Binance, through its Brazilian subsidiary B Fintech Serviços de Tecnologia Ltda, has agreed to pay $1.7 million to the authorities.

The settlement involved a case with Brazilian regulator Comissão de Valores Mobiliários on the back of alleged violations of local derivatives laws. The CVM’s scrutiny of Binance in Brazil dates back to 2020, when the exchange was first ordered to halt the offering of derivatives in the country. 

According to Brazilian law, derivative contracts are classified as securities, requiring specific regulatory approval. However, Binance, operating through B Fintech, did not hold this authorization, prompting the CVM to take action.

Despite Binance’s initial compliance by removing the Binance Futures service from its Brazilian website, it reportedly continued offering the product through workarounds, such as allowing access to clients who changed the website language to Portuguese.

Following Binance’s partial compliance, the CVM closed the first case. However, the regulatory agency launched a second administrative process into Binance in December 2022 on the back of the workaround it provided to clients. As part of the settlement terms for the second case, Binance proposed a $370,000 fine in August 2023, which the CVM rejected. 

The agency deemed the initial proposal insufficient given the seriousness of the allegations. Notably, the regulator found that the initial terms did not adequately address the legal violations.

After further negotiations, Binance submitted a revised proposal in February this year, which included a payment of $1.7 million. The CVM, after reviewing this new proposal, found it satisfactory and legally sound, leading to the acceptance of the settlement. 

Binance’s global regulatory issues

Globally, Binance has faced increasing regulatory pressures. In the United States, the Commodity Futures Trading Commission accused Binance of not properly registering its derivatives products, echoing the issues it faced in Brazil. 

Nigerian authorities have also held Binance executives in the country, accusing the exchange of violating anti-money laundering provisions and contributing to currency devaluations. In addition, Binance has come under scrutiny from European regulators, leading to the exchange’s exit from some markets such as the Netherlands.

In Brazil, Binance has been trying to solidify its operations by acquiring local entities that are fully compliant with Brazilian regulations. This includes the acquisition of Sim;paul Investimentos, a brokerage firm licensed by the CVM and the Central Bank of Brazil.

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Binance completes registration with India’s financial intel

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Crypto exchange Binance has registered with India’s Financial Intelligence Unit to comply with AML standards in the country.

Binance has completed its registration with India‘s intelligence as a reporting entity, marking its 19th regulatory milestone globally, the exchange said on Thursday, Aug. 15, in a blog announcement.

The trading platform said the registration underscores its commitment to adhering to anti-money laundering standards as well as fostering a “transparent and efficient ecosystem.” With the latest developments, Binance is nearing its 20th registration around the globe, which its chief executive Richard Teng has labeled as an “important milestone in Binance’s journey.”

“Recognizing the vitality and potential of the Indian VDA [virtual digital asset] market, this alignment with Indian regulations allows us to tailor our services to the needs of Indian users.”

Richard Teng

Following the registration, Binance has resumed operations in India after a seven-month ban by local authorities for operating without proper registration. The ban also affected other crypto exchanges like KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC, among others, which were similarly required to register locally to adhere to India’s AML and counter-terrorism financing regulations.

In early August, Binance received a show-cause letter from India’s tax enforcement agency to pay around $86 million as goods and services tax. Per reports, the DGGI, an agency operating under India’s Ministry of Finance to combat tax evasion, alleges that Binance is liable to pay GST as it had collected fees from Indian nationals using its platform. The crypto exchange also reportedly failed to register under the GST framework.

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Russia’s Minfin considers launching a domestic crypto exchange

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Russia’s Finance Ministry and central bank are in talks about setting up a domestic crypto exchange, though no final decision has been made yet.

As Russia explores the development of its own crypto trading platforms, driven by the need to circumvent the impact of international sanctions, the country’s top financial authorities are grappling with unresolved complexities.

According to a report by state-run news agency TASS, Finance Minister Anton Siluanov confirmed the ongoing negotiations between the Ministry of Finance and the Bank of Russia. Siluanov noted that while the discussions are thorough, no definitive decision has been reached.

“We are actively discussing this topic, but we have not yet found a solution on how to implement it.”

Anton Siluanov

The move to establish a regulated crypto exchange follows a legislative step made by President Vladimir Putin, who signed a law in early August legalizing crypto mining in Russia. The legislation aims to create a legal framework for the issuance and circulation of cryptocurrencies, which are still banned as legal tender in the country.

Russia one step closer to legalizing crypto

Russia, which ranked third globally in Bitcoin mining capacity at the end of 2021, according to data from the Cambridge Centre for Alternative Finance, has since risen to become the second-largest Bitcoin miner, trailing only the U.S. The new law appears to be part of a broader strategy to leverage this capacity by facilitating legal crypto activities within the country.

In addition to these efforts, Russia has been considering ways to integrate cryptocurrency into its financial system to ease cross-border trade. In mid-July, the Ministry of Finance reportedly explored the possibility of permitting crypto trading on traditional stock exchanges, but limited to professional investors. However, it remains unclear if any progress has been made on this front.

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Stablecoins bring financial inclusion, but their fate is still undecided | Opinion

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Stablecoins have grown to become an over $160 billion market. Yet, regulatory uncertainty across the globe threatens their future. We have seen the digital asset industry invest in effective lobbying campaigns. More of that is needed.

Numerous threats remain to the stablecoin market. For instance, regulators could reel in the market by mandating changes to issuer business models. As Tether (USDT) makes clear on its transparency page, stablecoins are not precisely backed by dollars. Instead, a pool of assets earning a little more than 5% for stablecoin issuers back the world’s first popular real-world asset. Issuers generally do not pass any of the yields they earn to holders. 

Tightening the regulatory belts 

Stablecoin sponsors argue this is why stablecoins are not securities and face a comparatively light regulatory regime compared to most tokens with centralized teams. However, stablecoins’ existence as a currency and a lightly regulated financial instrument could be coming to an end. While Donald J. Trump promises to allow the expansion of stablecoins in the United States, the European Union and Switzerland are exploring legislation that could undermine stablecoins. 

Questions remain over the future of stablecoins, which differ from many digital assets due to major stablecoins’ dependence upon central issuers. 

Even though stablecoins don’t produce profit for holders, they could still be considered a security. In fact, a February 2024 New York federal court ruling determined a stablecoin may become a security when combined with a yield. 

Stablecoins have an issuer who profits off the stablecoin: companies like Tether, Circle, Coinbase, etc. In addition, Circle uses BlackRock as a “primary asset manager of USDC cash reserves.” Moreover, securitized bonds exist today with negative nominal coupons despite investors having no reasonable expectation of profit. 

Circle argued in a September 2023 amicus curiae brief in a legal battle between Binance and the SEC that stablecoins are not securities simply because users don’t expect to profit. The SEC, however, argued in a case against Binance that BUSD, Binance’s stablecoin, has represented security “since its inception,” mostly leaning on the fact that it offers yield.  

Indeed, Binance’s stablecoin places money into “profit-generating” opportunities. In addition, Binance promised “interest-like” payments to people in the US for “simply buying BUSD and deploying BUSD into yield programs.

The SEC approach

The SEC does not only rely on the Howey analysis. It could be argued, for instance, that stablecoins represent a share in an open-end company under the Investment Company Act of 1940, especially if the stablecoin looks like a money market fund, which have Net Asset Value of shares pegged 1:1 to the US dollar. 

It is therefore not unreasonable to think the SEC might view a stablecoin backed by a bundle of assets as an asset backed security. 

In the Binance case, the New York Department of Financial Services ordered Paxos to stop administering BUSD. A Paxos spokeswoman in 2023 said the company does not view their stablecoins as securities under Howey or Reves. Stablecoin sponsors argue that stablecoins do not meet the three-part Howey test of an investment contract and sponsors keep profits to themselves. They argue stablecoins preserve value and prevent losses, but do not create profit.

In a court of law, an SEC lawyer might argue that just because issuers keep all of the profit for themselves doesn’t mean stablecoins are non-securities. All it takes is for a judge to agree and make a ruling based on this argument. A stablecoin is, after all, a receipt for an off-chain asset. There are also secondary markets for stablecoins, as well as an issuer-investor relationship. Financial instruments representing underlying digital assets—such as the Bitcoin (BTC) ETF—are considered securities. So, why not stablecoins, as well?

Stablecoin proponents will have been wrong. For a stablecoin to constitute a security, the buyer of a security doesn’t necessarily need to expect to make or lose money by buying and selling a security. The crypto market would be upended since it operates based on the assumption that stablecoins are currencies and not securities.

Centralization, one more time 

What’s more, the dominant stablecoin model is highly centralized, both adding to concerns these might be securities and putting the stablecoin and broader crypto market at risk for government interference.  

US authorities—or any country authorities—could revoke stablecoin issuers’ access to the banking and financial system. If a USD stablecoins issuer is overseas, the US government could request foreign governments to disinclude such entities from their respective banking systems. Furthermore, US authorities could require stablecoin issuers to comply with anti-money laundering and know your customer procedures, as Swiss authorities have done with a recent guidance document.

If the digital asset industry exerts the influence it so clearly now has, then stablecoins can continue to proliferate and millions can reap the benefits of financial inclusion.

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New Jersey investors urged to redeem funds from Abra amid crypto company’s shutdown

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The New Jersey Attorney General has urged state investors to withdraw funds from the crypto lending and trading platform Abra as the company winds down its U.S. operations following a multistate investigation into the sale of unregistered securities.

In an Aug. 12 statement, A.G. Matthew Platkin advised New Jersey investors that have accounts with the California-based crypto company to quickly reclaim their assets before the company exited the U.S. market.

Platkin’s warning follows a settlement in principle between the Abra platform, its chief executive, William Barhydt, and the New Jersey Bureau of Securities. 

The settlement addressed allegations that Abra illegally sold investors interest-bearing crypto accounts, known as Abra Boost and Abra Earn, with New Jersey residents buying nearly $3 million worth of the products.

As part of the settlement, the crypto company is required to give back to investors all their crypto assets remaining on the platform. According to the A.G.’s statement, the funds will be converted to U.S. dollars, and refund checks will be issued for amounts of $10 or more.

However, for balances below $10, investors can withdraw directly through the Abra app. Any unclaimed funds will then be transferred to the New Jersey Department of the Treasury’s Unclaimed Property Administration.

Following the enforcement actions, Abra initiated the wind-down of its U.S. retail operations. The settlement is the result of a coordinated effort led by a working group of state securities regulators, including the Texas State Securities Board. 

Investigation into the crypto company began in mid-2023 and focused on Abra’s offerings and the legality of its financial products.

At the time, the TSSB took legal action against Abra, accusing the company of deliberately hiding important financial information, including party capitalization, loan defaults, operating history, and asset transfers to platforms like Binance.

Following months of investigation, Abra reached a settlement with TSSB, allowing users of the platform to withdraw their funds. Similar to the recent New Jersey settlement, Abra users in Texas with more than $10 in assets were issued checks, while those holding less than that amount could withdraw directly from the Abra app.

About 12,000 Texans had invested as much as $13.6 million in Abra’s financial products, including Abra Boost and Abra Earn.

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DAOs and centralized organizations must work in tandem | Opinion

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Since David Chaum’s 1982 dissertation introduced decentralized blockchains, the goal has been to create systems free from central authority corruption. Decentralized autonomous organizations are now emerging as alternatives to traditional entities like LLCs or non-profits.

However, what if there were a way for DAOs to work in tandem with centralized organizations while still maintaining their fundamental purpose—to operate as self-governing, decentralized entities managed by the collective decisions of their members?

The Wyoming DAO law 

In 2021, the state of Wyoming enacted the “Decentralized Autonomous Organization Supplement.” This law allows DAOs to be officially recognized as LLCs, enabling them to enter into legal contracts and own property without the need for off-chain shell corporations. This new status provides DAOs with opportunities to raise funds through both token sales and traditional funding avenues.

Additionally, DAOs can leverage R&D facilities, employ staff, and utilize RegTech, all while preserving their decentralized, transparent, and democratic decision-making processes. This legal recognition opens up new avenues for DAOs to collaborate effectively with centralized organizations, combining the strengths of both models to foster innovation and growth.

The benefits of collaboration explored

Initially, blockchain projects were launched in a monolithic fashion, with everything bundled into a single stack. However, as the technology has matured, specialization and optimization at each layer became crucial for scalability and efficiency.

Centralized organizations possess substantial resources, structured processes, and access to traditional funding avenues. These advantages can significantly aid DAOs in scaling their operations and facilitating legal agreements.

Moreover, one of the most compelling benefits of such collaborations lies in enhancing governance and decision-making processes. DAOs excel in decentralized governance, enabling members to directly influence a project’s direction, thereby reflecting a broader stakeholder base. By integrating diverse voting mechanisms, such as Quadratic Voting, furthers fairer representation.

The opportunities are far from complete

To further grow this collaboration, we can leverage one of the major perks of DAOs and blockchain technology: transparency. By combining DAOs with decentralized finance, we can create systems where every transaction is permanently recorded and linked to a community vote. This ensures that all spending within an organization is fully transparent and accountable to its members.

This transparency can significantly change how traditional organizations track spending. It prevents fraud from going unnoticed and ensures everyone can see how and where the money is being used. For non-profits, this level of transparency is especially influential. Members and donors can see exactly where their money is going and how much is being spent, which can prevent situations like the Arts Center Scheme, where over $1.1 million was embezzled by a low-level accounts receivable employee.

Another major benefit is the use of smart contracts to automate processes. Smart contracts can streamline operations by executing predefined actions when certain conditions are met. This reduces administrative overhead and human error, making things more efficient. Plus, it ensures that everything is done transparently and according to agreed-upon rules, which strengthens trust and accountability in both centralized and decentralized environments.

The potential shortcomings

Anything that looks too good to be true is probably not true. Combining DAOs and centralized organizations presents many challenges and issues, but there are ways to prevent and mitigate many of these problems.

A primary concern with DAOs is the cost of voting. Since votes must be done onchain for the smart contract to execute, the transaction costs can quickly add up, especially with numerous proposals.

One proposed solution is voting off-chain. However, off-chain voting introduces the risk of manipulation and centralization. An alternative approach involves using zk-rollups, which execute transactions on a zk-rollup L2 chain. This method batches transactions and sends them to the L1 chain, drastically reducing fees and increasing efficiency.

Another major concern is that incorporating a centralized aspect into a decentralized system diminishes the value of a DAO and poses significant risks. While Wyoming’s DAO law does not require the main owners to verify their identities, operational and legal considerations, particularly when interacting with financial institutions or engaging in regulated activities, may necessitate individual verification.

The means for the future

The collaboration between DAOs and centralized organizations opens up exciting possibilities for the future. This partnership could transform how we handle governance, transparency, and operational efficiency across various sectors. By combining the decentralized nature of DAOs with the resources and structured processes of centralized organizations, we get the best of both worlds.

Looking ahead, we can expect more regions to develop legal frameworks similar to Wyoming’s DAO law. This will provide DAOs with the legal recognition they need to operate alongside traditional entities, paving the way for seamless collaboration and innovation.

This hybrid model preserves the transparency and democracy of DAOs while bringing in the efficiency and resources of centralized organizations. This blending of decentralized and centralized approaches is set to redefine how organizations operate, making the future of governance and operations more democratic and effective. 

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Web3 challenges lead Hong Kong official to push for virtual bank expansion

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Hong Kong legislator Johnny Ng has called for an expansion of virtual bank services to address hurdles faced by web3 startups in the region.

Hong Kong should embrace a more crypto-friendly approach by expanding virtual banking services as web3 startups face ongoing hurdles in accessing financial services, Johnny Ng, a member of the Legislative Council of Hong Kong, said in an X post on Aug. 9.

Ng emphasized the need for virtual banks to diversify their services and proposed the establishment of dedicated crypto-focused banks, referring to a report by the Hong Kong Monetary Authority that highlighted ongoing difficulties web3 companies encounter when attempting to open bank accounts in the region. “The survey showed that web3 firms had difficulties in opening accounts, resulting in inefficiency in developing business locally,” Ng said.

Per Ng’s proposals, virtual banks should focus more on the needs of web3 companies and accelerate the development of Hong Kong’s digital ecosystem, stating that “virtual asset policies have become the focus of global government discussions.”

Web3 firms struggle with banking challenges in Hong Kong

Web3 startups in Hong Kong have encountered challenges with opening bank accounts due to stringent regulatory requirements and the conservative approach of traditional financial institutions toward the crypto space.

According to the HKMA’s report, out of over 120 web3 firms that established their presence in Hong Kong in 2022, around 95% faced difficulties opening accounts with virtual banks. Moreover, 70% of these companies were required to have shareholders or directors visit Hong Kong multiple times, while 60% were asked to maintain fixed deposits. Additionally, 54% of the firms took six months or more to open an account, with nearly 20% taking between two to five months, and 3% were refused altogether.

Ng urges Hong Kong’s authorities to advance their efforts focused on web3 adoption, saying that if the city wants to become the web3 center, it should “promote the development of the entire chain and ecosystem as soon as possible.”

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