Crypto lending firm Celsius Network has confirmed it is one of three platforms requested to provide information to the New York Attorney General’s office.In a Tuesday blog post, Celsius said it was not one of the two unnamed crypto lending platforms that New York Attorney General Letitia James ordered to “cease any and all such activity” around selling or offering cryptocurrencies. Rather, Celsius said it was “working on providing regulators in New York” with information regarding its business. “If any regulatory or technical changes are required in a specific jurisdiction, Celsius will provide clear and timely communication as needed,” said the lending platform. “We know that the only way to thrive and ensure our long-term growth is through clear regulatory guidance. We anticipate and plan for these kinds of routine checks and balances.”The statement from Celsius comes following the NYAG’s office issuing a non-legally binding request for information from three unnamed crypto lending platforms operating in the state — although the AG did hint at a possible subpoena. James asked the businesses to provide details on their lending products, policies, procedures, clients in New York and other relevant information.While Celsius has not received a cease and desist order from New York state, the platform is the target of regulators in Texas and New Jersey. On Sept. 17, the Texas State Securities Board filed for a hearing with the potential to impose a cease and desist order against crypto Celsius for allegedly not offering securities licensed at the state or federal level. The same day, the New Jersey Bureau of Securities ordered the lending platform to stop offering and selling interest-earning cryptocurrency products.A Celsius spokesperson said at the time that it “wholeheartedly disagreed” with the allegations and was working with United States regulators “to operate in full compliance with the law.” According to the platform’s response to the NYAG’s request for information, Celsius is “having a very open and productive dialogue with regulators around the world.”Related: Crypto lending firm Celsius Network raises $400MOf the other four firms targeted in the NYAG crackdown, Nexo Financial confirmed on Monday it received one of the two cease and desist orders. However, according to a Nexo spokesperson, the company does not offer its Earn Product and Exchange in New York state.“It makes little sense to be receiving a cease and desist order for something we are not offering in New York anyway,” said the spokesperson. “We will engage with the NYAG as this is a clear case of mixing up the recipients of the letter.”The other three companies that received notices from the NYAG remain unidentified. Under New York law, all crypto brokers, dealers, salespersons and investment advisers must register with the NYAG’s Investor Protection Bureau if they are doing business in the state. Those without an exemption who fail to do so will be subject to civil and criminal penalties.
The central bank of Iran is gearing up to begin the pilot phase of its digital currency project in the near future, its new head announced to representatives of local media. The monetary authority is also preparing to move forward with a plan to reform the legislation that governs its own activities.
Iran Preps Pilot for Sovereign Digital Currency
The “national cryptocurrency” of Iran will enter its pilot stage soon, the recently appointed Governor of the Central Bank of Iran (CBI) Ali Salehabadi has unveiled. Speaking to reporters after his first meeting with lawmakers, the high-ranking official said the regulator is now studying potential risks and benefits associated with the initiative. Quoted by IRIB News and the Financial Tribune, he explained:
The pilot trial will start, once the Money and Credit Council approves it.
Salehabadi, who has been heading the CBI since Oct. 6, did not provide any further details regarding the Iranian central bank digital currency (CBDC). According to the English-language business daily, the new phase of the project is likely to be in line with earlier plans for the development of a national crypto.
The report notes that three years ago the Informatics Services Corporation, CBI’s subsidiary operating the country’s banking automation and payment services network, was tasked to develop a sovereign digital currency. A CBDC prototype was designed using the Hyperledger Fabric platform, later statements by its representatives revealed.
It became clear that the digital version of the Islamic Republic’s national fiat, the rial, was being developed on a private blockchain. Unlike cryptocurrencies based on public blockchains such as Bitcoin, the Iranian state-issued coin is not going to be mined.
The public was never updated on the progress of this initial project until more recent announcements came out that a “crypto rial” plan is underway. Officials have emphasized that the Iranian crypto is going to be a digital currency circulated by the CBI and not a decentralized cryptocurrency that could be used for small, cashless transactions, the publication details.
New Commission to Prepare Amendments to Iran’s Central Bank Law
Besides the digital currency announcement, Iranian media has also learned that the central bank’s new management and members of the Majlis agreed to establish a joint commission tasked to reform the legislation concerning the CBI. Its members will be expected to quickly finalize a long-awaited plan to update the law that governs the central bank’s activities.
Governor Salehabadi also said that a special working group will be formed to clarify the positions of the bank and the government regarding cryptocurrencies. While, executive authorities in Tehran have been going after crypto investing and trading, only allowing banks and licensed moneychangers to use coins minted in Iran to pay for imports, lawmakers have opposed the restrictive policies. They believe that friendlier regulations would help Iran to circumvent U.S.-led sanctions and boost its economy.
Mining has been the one crypto-related sector that has received more clarity in terms of regulation. Iran recognized the extraction of digital currencies as a legal industrial activity in 2019 and introduced a licensing regime for entities involved in the business. And although mining farms have been blamed for electricity shortages during the extremely hot summer this year, restrictions have since been lifted for authorized crypto miners which number over 50, according to the state-run power utility Tavanir.
Do you think Iran will eventually issue its own digital currency? Share your expectations in the comments section below.
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Cryptocurrency lending firm Nexo Financial denies the allegations of offering unregistered services to New Yorkers put forth by Attorney General Letitia James.Attorney General James directed two unnamed crypto lending companies to cease operations On Oct. 18, citing failure to register the business in New York and performing unlawful activities. Crypto lender Nexo is revealed to be one of the two companies to receive the cease and desist order from the Office of the Attorney General. Denying their involvement in unlawful operations, Nexo spokesperson said:“Nexo is not offering its Earn Product and Exchange in New York, so it makes little sense to be receiving a cease and desist order for something we are not offering in New York anyway.”According to Nexo, the allegations of operating an unregistered business in New York “appears to be a case of mixing up the recipients of the letter.” The company also confirmed the use of IP-based geoblocking on their platform that prevents New Yorkers from participating in locally unregistered services:“Still, we will engage with the NY AG and seek clarity. Our company retains top-tier legal counsel both from US-based law firms and our in-house legal team.”In addition, the company has also highlighted that Nexo Terms & Conditions explicitly state, “we do not offer our Earn product and Exchange in New York.”To further protect New Yorkers from significant undisclosed risks, the New York State Office of the Attorney General has parallelly directed three more crypto platforms to provide information about their activities and products. The order to shut down operations is backed by the Martin Act, which requires businesses to register before offering or selling securities or commodities in New York. “My office is responsible for ensuring industry players do not take advantage of unsuspecting investors,” said James.Related: New York businesses ask governor to deny permits for crypto miningA group of local New York businesses cosigned a letter asking the New York State Governor Kathy Hochul to deny permits for repurposing the city’s defunct fossil-fuel power plants for crypto mining.The proposal demands an assessment of the environmental impact of restarting the Greenidge Generating Station and the Fortistar North Tonawanda plants, which were shut to control New York’s greenhouse gas (GHG) emissions.
The New York Attorney General’s office has alleged two unnamed crypto lending platforms operating in the state have engaged in unlawful activities and ordered three others to provide information on their businesses.In a Monday announcement, the New York Attorney General’s office said it has ordered two crypto lending platforms — at the time of publication, the names were still redacted — to “cease any and all such activity” relating to selling or offering securities and commodities within ten days. Attorney General Letitia James also requested that three crypto businesses operating in New York — names redacted — provide details on their lending products, policies, procedures, clients in the state and other relevant information.“My office is responsible for ensuring industry players do not take advantage of unsuspecting investors,” said James. “We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York. Today’s actions build on that work and send a message that we will not hesitate to take whatever actions are necessary against any company that thinks they are above the law.”The request for information from the three companies was not legally binding, but the NYAG’s office left the door open to serving a subpoena in the letter. The order to shut down operations is backed by the state’s Martin Act, which grants the AG the enforcement power to bring civil or criminal charges against unregistered securities offerings.James’ messages to the five crypto lending platforms come following the agreement of Bitfinex and Tether to pay $18.5 million in damages as part of a settlement with the NYAG office. The Attorney General later issued a warning to firms operating in the crypto industry: “Play by the rules or we will shut you down.”Under current New York state law, all crypto brokers, dealers, salespersons and investment advisers must register with the NYAG’s Investor Protection Bureau if they are doing business in the state. Those without an exemption who fail to do so will be subject to civil and criminal penalties.Related: NY attorney general warns investors and crypto firms of ‘extreme risks’In September, the New York Attorney General’s office ordered crypto investment platform Coinseed to close its doors after allegedly defrauding investors out of more than $1 million and selling an unlisted token. Coinseed has been told to permanently halt its operations and pay $3 million in fines.
The rapid growth of mainstream attention toward cryptocurrencies has forced the hands of numerous governments to create their digital alternatives. Over the past few years, interest from various jurisdictions has been pointed towards central bank digital currencies (CBDCs) — digital versions of government-issued fiat.Given their capacity to use blockchain technology to facilitate a simplified fiscal policy — not to mention calibrate privacy features and even provide cross-border banking services to the unbanked — CBDCs continue to gain even more attention from various governments worldwide.Already, surveys show more than 80% of central banks are researching CBDCs, with some working on proofs of concept that could eventually lead to the introduction of fully functional CBDCs. Out of the surveyed central banks, 10% plan to offer a retail version of a CBDC in the next three years, with another 20% set to make the move in under six years. In Asia, these efforts have been compounded by China’s release of the world’s first CBDC after setting up a task force as early as 2014. By 2016, the People’s Bank of China (PBoC) had already established a Digital Currency Institute, which developed a prototype CBDC.Major Asian banks have shown great interest in CBDCs as reports show collaborative efforts by Thailand’s, Hong Kong’s and China’s central banks to create a digital ledger technology (DLT) for a CBDC prototype designed to bridge cross-border gaps. In this article, we give you a brief look at some developing CBDC projects on the Asian continent.ChinaChina ranks among the world’s top economies to embrace digital currencies with the release of the digital yuan — a CBDC project issued by the PBoC. Dubbed the Digital Currency Electronic Payment (DCEP) China’s digital yuan (e-CNY) is set to completely replace cash payments and has been rolled out in the country’s major cities since April 2020. China’s DCEP, while sporting some anonymity features, is controlled, tracked and registered on smartphone apps by the Chinese government, giving them the ability to freeze accounts at will. Perhaps one of its advantages is the fact that users on China’s DCEP network can reverse or correct erroneous transactions, which is one of the features that is non-existent on decentralized digital currencies like Bitcoin (BTC). As China’s CBDC takes shape, various countries (especially the United States) have grown increasingly concerned that the new CBDC initiative will help China tighten increased surveillance on its citizens and private companies. The move is also seen as an attempt to supplant the dominance the U.S. dollar enjoys in international trade. Even so, China’s e-CNY remains highly localized with no significant attempts by the Asian nation to take its CBDC international.Hong KongJust recently, the Hong Kong Monetary Authority (HKMA) released a white paper discussing plans to experiment on the benefits of retail CBDCs for the city’s cross-border markets. Hong Kong is now governed under a one-country, two-system framework where it maintains its own financial and judicial system separate from mainland China. However, HKMA is working with China’s central bank to explore the infrastructure development of its digital Hong Kong dollar (e-HKD).According to the white paper, “The architecture proposed in Hong Kong’s e-HKD features a flexible and efficient two-tier distribution model of a CBDC that enabled privacy-preserving transactions, traceability and cross-border synchronizations of ledgers.”The white paper is the result of CBDC research by Hong Kong’s major financial authority that has been ongoing since 2017 under the aegis of “Project LionRock.” The HKMA considered the opinions of academic and industry experts and plans to conduct more trials to ensure the readiness of both a retail and wholesale CBDC.South Korea South Korea’s latest move towards a CBDC has seen the Bank of Korea (BoK) make calls for a technology partner to help pilot a CBDC program set to run till the end of the year. In a report published by BoK in February this year, the central bank announced plans to test and distribute a digital won while outlining the legal challenges that accompany a state-issued digital currency.Apart from selecting a technology partner to help with the project, BoK has also announced that its CBDC will first operate in a limited test environment in order to analyze the functionality and security of the CBDC.According to previous remarks by a BoK official, South Korea’s cash transactions are on the decline, and the central bank is only taking steps in preparation “for the expected changes in payment settlement systems [worldwide].”The PhilippinesIn the summer of 2020, the central bank began to consider the creation of a CBDC by forming a committee task force to study the issue.Bangko Sentral ng Pilipinas had confirmed in a virtual briefing that a committee was set up to look into CBDCs. In the briefing, Governor Benjamin Diokno explained that a feasibility test and an evaluation of the policy mechanisms of issuing a CBDC were underway. Like most governments and traditional financial institutions, the officials in the Philippine government were not shy to admit to the significance of blockchain technology. Diokno said, “Cryptocurrency for us has always been beyond the asset itself but more on the blockchain technology that underpins it.” In line with these remarks, the Philippine Bureau of the Treasury, in partnership with the Philippines’ Digital Asset Exchange and UnionBank, had launched a mobile application built on blockchain tech for distributing government-issued treasury bonds.A few months later, however, saw the Philippines’ central bank reject the possibility of issuing a CBDC any time soon. Citing the need for ongoing research and study, the country’s central bank noted that its CBDC research so far could benefit from looking at established use cases of digital currencies in the private sector as well as other industrial applications.Singapore From as early as 2016, the Monetary Authority of Singapore had been looking into CBDC initiatives and is now seeking commercial partners to help develop the currency.By setting up challenges and competitions to discover and develop a retail CBDC, Singapore was able to establish a healthy diversity of solutions with the participation of more than 300 individuals.Singapore’s move to launch a CBDC began as a joint project with an institute dubbed “Project Dunbar” that mainly focused on building an in-house retail CBDC for the country. Soon after, the Singaporean central bank announced cash prizes for participants issuing digital currency ideas. Finalists in the challenge included ANZ Banking Group, Standard Chartered Bank, Criteo, Soramitsu and HSB Bank Limited, to mention a few. Throughout 2021, the Singaporean authorities have maintained a crypto-friendly stance with approvals given to crypto exchange platforms to operate similar to other digital payment token services. CambodiaCambodia’s “Project Bakong” is probably one of the few fully operational retail CBDCs out there. The country’s blockchain-enabled money transfer project was originally launched in October 2020.By June 2021, the project was reported to have amassed over 200,000 users with an overall indirect outreach of over five million users. What’s more, the first half of 2021 saw Cambodia’s CBDC project hit a transactional throughput of 1.4 million transactions valued at $500 million. Developed on a hyper ledger platform, the Cambodian CBDC features mobile connectivity that allows users to connect to financial institutions and make payments without a centralized clearing entity. Apart from the declared goal of using the CBDC to wean off dependence on the U.S. dollar, officials also disclosed that plans are underway to explore a cross-border transaction capability through a partnership with Thailand’s central bank and Malaysia’s largest bank.JapanIn Japan, the country’s central bank joined hands with a group of other seven central banks in October 2020 to publish a report that examined CBDCs. Since then, the Bank of Japan (BoJ) has begun a proof-of-concept to test the core CBDC functions. While the testing phase was scheduled to end by March this year, officials from Japan’s panel on digital currencies have said that the digital yen should be compatible with other CBDCs and that the BoJ is still ironing out its key functions.An offline capability of the CBDC is one of Japan’s core considerations as it strives to establish a digital currency that is resilient to disruption given Japan’s vulnerability to natural disasters, earthquakes, floods and tsunamis. At the start of 2020, Japan’s parliamentary vice-minister for foreign affairs said that Japan’s digital currency could be a joint venture with public and private partners to align Japan’s goal with global changes in fintech.ThailandSince 2019, Thailand has joined forces with Hong Kong’s HKMA to test the use of a CBDC that would be used in cross-border payments between financial institutions in both countries. According to a press release by the Bank of Thailand, “The development of a CBDC is a key milestone with the potential to alter the financial infrastructure and ultimately the financial landscape which could cause many changes in the roles of many stakeholders.”Similar to other CBDC initiatives, the Bank of Thailand will seek out consultations and feedback with the general public as well as with the private and public sector on the “development and issuance of retail CBDC.”The Bank of Thailand plans to start pilot tests for the usage of its CBDC in the second quarter of 2022.VietnamPreviously, the Vietnamese government had requested the State Bank of Vietnam to investigate blockchain-based currencies. It appears that Vietnam has joined the growing list of jurisdictions looking into CBDCs despite its previous harsh stance on cryptocurrencies. In May 2020, the country’s ministry of finance announced plans to research and formulate a regulatory law for the crypto industry, even as the country experienced high levels of growth in digital currencies. In July, the Vietnamese government decided to investigate CBDCs with plans to issue a pilot CBDC, given its utility for a small country in a global financial system that is dominated by the U.S. dollar.
Authorities in Estonia are working on new legislation expected to stiffen the rules for the country’s cryptocurrency sector. The Baltic nation’s regulator for the industry is considering whether to revoke previously issued crypto licenses and restart authorization from scratch.
Licensed Crypto Companies Register Millions in Turnover, Estonia Gets Little
With only around 1.3 million people, Estonia is one of the least populated member states of the European Union and the Eurozone. However, the small nation has become a magnet for a large number of crypto companies attracted by the friendly regulatory regime it established a few years ago.
These firms process transactions for more than 20 billion euros, equal to over 40% of the cross-border transfers in the local banking sector, according to an interview with Matis Mäeker who heads the Estonian Financial Intelligence Unit (FIU). Only one in 10 companies has a bank account in the country.
The Estonia-licensed crypto businesses have at least 5 million customers around the world, Mäeker revealed speaking to the Eesti Ekspress newspaper. He added that more and more often the anti-money laundering agency identifies entities that have almost nothing to do with Estonia and its market.
Many of them neither invest nor create jobs in the country, the official remarked. Their only aim is to acquire an Estonian license allowing them to process serious amounts of money, from which Estonia does not receive anything.
The FIU executive said that if officials in Tallinn had been able to predict the risks associated with crypto companies back in 2017, they would not have allowed the ensuing explosive growth. “Definitely the decision would have been different. We are learning… the entire world is learning,” he commented for Bloomberg.
Head of FIU Supports Rescinding All Crypto Licenses
Since late 2018, the government in Tallinn has been tightening its regulations for the crypto industry. Authorities have so far revoked around 2,000 licenses issued to crypto service providers such as exchanges and wallet operators.
Earlier this year, officials indicated they were planning to introduce even stricter regulations. A new bill has been drafted by the Finance Ministry and is currently being discussed with other institutions. The legislation is likely to introduce higher capital requirements and annual audits for crypto companies along with due diligence thresholds on transaction volumes.
Matis Mäeker wants to go even further. Asked what the government should do, he told Eesti Ekspress that Tallinn has to “turn the regulation to zero and start licensing all over again,” agreeing with the publication that authorities should revoke all permits and issue new ones. The FIU chief said:
We will toughen our supervision, we will toughen our approach which concerns the market entry.
Later, the Financial Intelligence Unit told the crypto news outlet Forklog that it is not considering an automatic cancelation of all previously issued licenses for crypto-related activities. The agency added that it supports the upcoming regulations which will also increase its own powers in the authorization process.
Do you expect Estonia to adopt new tougher licensing rules for crypto companies? Tell us in the comments section below.
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On Oct. 6, the United States Department of Justice, or DOJ, announced the creation of a specialized unit, the National Cryptocurrency Enforcement Team, or NCET, tasked with prosecuting criminal misuses of digital assets and crypto infrastructure, as well as tracing and recovering the ill-gotten cryptocurrency.The move continues the U.S. authorities’ push to disrupt the corners of the crypto ecosystem that are thought to facilitate illicit activity, such as ransomware attacks. What does the government’s crypto enforcement ramp-up hold for the larger digital asset space?Pooling crypto expertiseThe new unit will operate according to the principles articulated almost exactly one year ago in DOJ’s Cryptocurrency Enforcement Framework. The document, for one, asserts the Department’s broad jurisdiction over criminal activity that affects financial or data storage infrastructure inside the U.S.In addition to investigating its own cases and supporting the efforts of U.S. Attorneys’ Offices across the country, the NCET will promote cooperation between all relevant federal, state, and local law enforcement agencies in addressing cryptocurrency-related crime. The team is also tasked with training and advising law enforcement officers on crypto matters and developing investigative strategies.Operatives for the new task force will come from of both the Money Laundering and Asset Recovery Section and the Computer Crimes and Intellectual Property Section of the DOJ, as well as from a number of U.S. Attorneys’ Offices.In a conversation with Cointelegraph, Kevin Feldis, partner at law firm Perkins Coie, called both MLARS and CCIPS “very respected components of the Department of Justice,” whose members are “well versed in handling cross border investigations and coordinating with law enforcement around the globe.”New tool for existing policiesThe NCET is expected to direct its enforcement efforts at illegal or unregistered money services, ransomware payments infrastructure, and various other marketplaces where digital money meets criminal activity. None of this is particularly new, and the DOJ is simply putting together a more streamlined, coordinated mechanism for tackling cybercrime and potentially recovering stolen funds.The announcement also extends the string of developments that illustrate the Biden administration’s commitment to enforcement-first stance on cybercrime, including criminal activity facilitated by crypto.Jackson Mueller, director of policy & government affairs at digital asset firm Securrency, commented to Cointelegraph:This announcement should not come as a surprise to those of us following the Biden administration and its efforts, whether through federal financial regulators, the Treasury Department, the President’s working group on stablecoins, among others, to apply greater scrutiny and enforcement actions against the broader ecosystem.Mueller added that the emergence of the NCET signals the government’s preference for more enforcement-focused policies rather than the orientation toward engagement and cooperation that many in the industry would prefer to see.Michael Bahar, chair of cybersecurity practice at global law firm Eversheds Sutherland, traces the roots of the NCET initiative back to Joe Biden’s May 2021 executive order, that made it a top priority to bring to bear the full scope of federal government authorities and resources to protect the nation’s computer systems against cyber-attacks. Bahar further commented:As part of that all-of-government effort, the U.S. Department of Justice is leveraging its decades of experience in following the money and in rooting out money laundering, both to catch the perpetrators and return the money, as well as to undercut the financial incentive for criminals to engage in ransomware attacks in the first place.Ron Brisé, government affairs and lobbying attorney at law firm Gunster, said that the DOJ is “Connecting the dots across all of its sections to bring a more centralized focus to cryptocurrency-related investigations and prosecutions.” Brisé added that he wouldn’t be surprised to see certain individual states replicate the federal initiative, instituting their own cryptocurrency enforcement teams in the near future.Wider implicationsGranted, rooting out bad actors of the cryptocurrency sector who give the entire industry a bad name in the eyes of the public (and, quite often, in policymakers’ eyes) is a noble endeavor. Yet, there is also room for legitimate concern for those crypto players who act in good faith and invest substantial resources in compliance – that is, for the overwhelming majority of industry participants.A scenario where overly aggressive enforcement could create additional burden for legitimate actors is not difficult to envision.Kevin Feldis of Perkins Coie believes that DOJ’s focus on ramping up criminal investigations and building capacity to recover illicit crypto proceeds will also likely mean more government scrutiny throughout the industry. Feldis added:The legal and regulatory landscape is still evolving, and investing in compliance and being a good crypto corporate citizen will likely serve industry players well in the face of this increased government enforcement focus by the DOJ, SEC and others.At the same time, the kind of expert enforcement that is competent enough to single out criminals while not imposing excessive burden on the good guys could be a boon to the sector. Having all of the DOJ’s most crypto-savvy people within one well-coordinated force could also lead the NCET to yielding its enforcement authority in a targeted fashion. Gunster’s Ron Brisé notes that the emergence of a specialized crypto unit within the Justice Department could be seen as beneficial, all things considered. He commented:From a bigger perspective, if there is recourse for those whose digital funds get stolen, the levels of confidence for both consumers and crypto business will increase.Indeed, if the NCET lives up to its stated mission rather than casting nets that are unnecessarily wide, the crypto space will become a safer place for legitimate financial activity.
On Oct. 15, the Commodity Futures Trading Commission, or CFTC, handed sister crypto companies Tether and Bitfinex fines totaling $41 million and $1.5 million, respectively, citing violations of the Commodity Exchange Act, or CEA, and of a prior CFTC order.The regulator has found that Tether, the firm behind an eponymous stablecoin, has only held sufficient fiat reserves to back the dollar-pegged asset for 27.6% of time during the 26-month period under review between 2016 and 2018. The agency also stated that Tether violated the law by holding part of the reserves in non-fiat financial instruments, as well as by comingling operational and reserve funds.In a simultaneous action, the commodity futures watchdog settled charges with Bitfinex for facilitating “illegal, off-exchange retail commodity transactions in digital assets with U.S persons” on its platform, in addition to operating “as a futures commission merchant, or FCM, without registering as required.”In a concurring statement, CFTC Commissioner Dawn Stump backed the action while also expressing concerns that the settlement could “provide users of stablecoins with a false sense of comfort” as they may falsely conclude that CFTC regulates stablecoins and oversees their issuers.While the CFTC has applied a broad definition of a “commodity” to stablecoins in the present case, Stump distanced the Commission from regulating this asset class and having “daily insight into the businesses of those who issue” stablecoins.Tether issued a rebuttal statement, insisting that it “maintained adequate reserves” at all times. The firm explained its decision to settle by its willingness to “resolve this matter in order to move forward and focus on the future.”
On Thursday, cryptocurrency exchange platform Coinbase published its Digital Asset Policy Proposal, a document offering both a justification and conceptual framework for the comprehensive regulation of digital assets in the United States.Coinbase presented the proposal as a product of dozens of meetings with industry participants, policymakers, crypto innovators and academics that the company’s representatives had held in the last several weeks.The firm’s intention is for the proposal to “animate an open and constructive discussion regarding the role of digital assets in our shared economic future” and offer good-faith suggestions on what a sensible approach to crypto regulation might look like.The document opens by enumerating the benefits of the emerging system of digital finance for both consumers (democratization of financial markets) and regulators (more transparency and new ways to combat illegal activity). The authors further maintain that laws drafted in the 1930s are a poor foundation for regulating the internet-native asset class, and that forcing digital assets into the legal framework developed before the computer age could lead to stifling crypto innovation in the U.S.A more tailored and therefore more constructive approach, according to Coinbase, should rest on four key principles: defining a separate regulatory framework for digital assets; designating a single regulator to oversee digital asset markets; protecting and empowering holders and promoting interoperability and fair competition.In a separate op-ed published on the same day in Wall Street Journal, Coinbase CEO Brian Armstrong argued that the proposed framework is not meant to benefit his company alone.He maintained that, while Coinbase is big enough to absorb the costs of an unclear regulatory environment, it is smaller firms, retail consumers and the Unites States’s position as a global technology leader that stand to benefit from forward-looking regulation of the digital asset space.
Jon Cunliffe, deputy governor for financial stability at the Bank of England, said the risks of a growing crypto market on the financial system are “relatively limited” at the moment but have the potential to grow very rapidly if regulators do not keep pace.In a speech to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) on Oct. 13, Cunliffe said policymakers around the world have only just started to develop the framework needed to properly regulate digital assets but should pursue it “as a matter of urgency.” The deputy governor spoke about the risks that cryptocurrencies and stablecoins may pose when connected to traditional financial systems through individuals, financial institutions, hedge funds and banks.Given that digital assets are continuing to work their way into these institutions, sentiment over crypto volatility and otherwise could cause “investors to sell other assets that are judged to be risky.” Cunliffe referred to the interconnectedness of crypto and traditional finance as having the potential for a shock “transmitted through the financial system” if something were to go wrong.One of the scenarios that Cunliffe posed was if the price of an unbacked crypto asset were to fall to zero. In addition, price volatility — even seemingly among major cryptocurrencies — “could trigger margin calls on crypto positions forcing leveraged investors to find cash to meet them, leading to the sale of other assets and generating spillovers to other markets.”“Financial stability risks currently are relatively limited but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace,” said Cunliffe. “How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities.”Related: Bank of England governor issues crypto investment warningCunliffe has previously argued that England’s central bank should “issue public digital money that can meet the needs of modern day life,” implying that a digital pound may be in the BoE’s future. He is currently co-chairing a task force set up by the U.K. government to explore the rollout of a central bank digital currency.