The UK’s FCA gives the green light to crypto-related assets.
Binance.US accused of stonewalling SEC.
Crypto bound by UK AML update.
Biden brings back crypto miner tax.
Crypto.com to appeal Dutch fine.
Those great whites, they have big teeth.
FCA gives green light to crypto
We’re under control: The UK’s financial regulator has approved crypto-related stock listings, paving the way for cryptocurrency-backed exchange traded notes (cETNs) for professional investors.
Six recognized investment exchanges, including the London Stock Exchange (LSE) and the London Metal Exchange, are expected to create listed market segments for cETNs. However, the green light has only been given to institutional investors, the Financial Conduct Authority (FCA) said. A ban remains in place for retail investors.
ETNs are debt securities typically issued by banks and track an underlying index. The regulator said cETNs and crypto derivatives are “ill-suited” for retail investors because of “the harm they pose.”
The FCA added it “continues to remind people that crypto assets are high risk and largely unregulated. Those who invest should be prepared to lose all their money.”
No friend of mine: The regulator originally banned cETNs and derivatives for retail traders in January 2021. But it said enough time had passed for institutional investors to have appropriately priced in the risks.
Please be careful, is never careful: “With increased insight and data due to a longer period of trading history, the FCA believes exchanges and professional investors should now be able to better establish whether cETNs meet their risk appetite,” a news release said.
The LSE said it would accept applications for admission of Bitcoin and cETNs in the second quarter.
Crypto ETNs have been available on mainland Europe for several years and have been approved by other international regulators in Australia and Canada.
The US Securities and Exchange Commission approved applications for spot Bitcoin ETFs in January.
Two months on, BlackRock’s IBIT spot Bitcoin ETF hit net assets of more than $13bn.
Hub, spoke: While the UK government has attempted to place itself as a leading hub for digital assets, the regulator has often had other ideas. “The UK sends mixed messages on crypto and digital assets,” said Simon Taylor, noted fintech expert and former Barclays blockchain lead.
“It’s often so prudish and keen to seem ‘institutionally focussed’ that its regulator’s messaging feels unwelcoming to the industry.”
A softening: Experts believe that approach may be changing. “The FCA’s statement shows that it is now softening its stance on exchanges and professional investors who wish to invest in cETNs,” said Melanie Johnson, senior knowledge lawyer at Hogan Lovells.
However, she added UK rules on the distribution of collective investment schemes and the Consumer Duty “pose obstacles to the wider distribution of UK crypto ETFs to retail consumers.”
“It is unlikely, therefore, that the less burdensome cETNs will pave the way for UK crypto ETFs to be distributed to retail investors as we have seen in other jurisdictions,” she said.
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Token bits
Indonesia’s financial services regulator has issued new regulations to implement technological innovation in the financial sector, which will apply to crypto starting January 2025.
EU financial regulators want to add more consumer protection rules to the bloc’s new crypto regulatory framework. Banking and securities watchdogs have been tasked with drafting up technical standards for issuers of stablecoins under the Markets in Crypto-Assets regulation. They have suggested improvements to how stablecoin issuers manage complaints.
It’s a fair cop: A UK crypto firm sent digital assets worth more than $4.2m to a crypto wallet belonging to a member of an alleged Russian arms-dealing network who was later sanctioned by the US, according to an investigation by the International Consortium of Investigative Journalists and The Guardian.
Copper Technologies is at the center of the row, having been involved last year in a share sale worth more than $19m that benefited a Russian banker sanctioned by the US for involvement in the Ukraine invasion.
The company maintains its innocence and claims to take regulatory compliance procedures seriously.
Copper hired former UK chancellor Philip Hammond as an adviser in October 2021; Hammond was then based in London but has since moved to Switzerland.
Binance stonewalling
Where you been, man? Binance.US is ghosting US regulators. The US Securities and Exchange Commission (SEC), currently suing the US arm of the world’s largest crypto exchange, claimed the firm is refusing to hand over compliance information as required by a court order.
Last year, the SEC charged Binance with multiple securities law violations including operating an unregistered exchange, and the unregistered offer and sale of its own stablecoin.
The regulator claims Binance.US is dragging its heels in providing evidence on customer assets and wants the Washington, D.C. District Court to intervene in the discovery process.
The SEC’s case hinges on whether employees of the (OG) non-US offshore Binance had access to Binance.US customer assets.
Huckleberry Finn: The exchange is sticking to its story that the twain never met, and it has complied with the regulator’s “exceptionally broad” requests.
The case is ongoing.
UK crypto AML update
I’m a creep: The UK Treasury is consulting on changes to money laundering laws that would bring all crypto asset service providers under the oversight of the country’s financial services regulator. The proposals are a review of money laundering and terrorist financing regulations.
Crypto asset providers not currently subject to Financial Conduct Authority (FCA) authorization will have to register with the regulator anyway under tightened anti-money-laundering rules.
Officials say they want to pursue “smarter regulation.”
Under existing laws, crypto assets are under FCA control only “if they serve as the underlying asset or property for regulated activities or financial instruments, such as in collective investment schemes.”
Existing laws will be amended to extend the reach of covered regulated activities, such as operating a crypto asset exchange and custody.
US crypto miner tax plot
Power is power: US President Joe Biden has revived a plot to tax crypto miners on electricity usage as part of his 2025 budget proposals. The administration wants to impose an excise tax on digital asset mining, which would force crypto miners to report their power use.
In addition, firms must report the value of the electricity used if they purchase it externally. Meanwhile, miners who lease computational capacity would be mandated to report the value of the electricity of the company that leased them the capacity. The value would then serve as the tax base.
The government would introduce the levy in three phases: 10% in year one, 20% in year two and 30% in year three.
It’s electrifying: The tax would also apply to crypto mining firms that generate their own electricity. Companies that produce or acquire power “off-grid” would also need to pay a 30% tax on the estimated costs of their electricity bills.
Last March, Biden first attempted to tax miners 30% in the budget proposal for 2024.
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Ponzi scheme
For richer, for poorer: A married couple who became two of the world’s most wanted crypto scammers are facing the rest of their lives behind bars. A Brazilian man and his wife linked to a cryptocurrency Ponzi scheme valued at $400m were nabbed by Argentina’s federal police and Interpol’s intelligence investigators.
The couple fled to Dubai in early 2023 after earning millions of dollars by operating a fraudulent crypto firm, before the feds tracked them to Argentina, where they lived lives of high luxury with fake identities and altered physical appearances
The couple were sentenced to a combined 159 years in prison and made to repay $76m.
Crypto.com appeal
You gotta have a license: Crypto.com is challenging a $3.1m fine from the Netherlands central bank, which sanctioned the exchange for serving the country without a license.
In a 36-page notice, De Nederlandsche Bank (DNB) said the cryptocurrency exchange copped the fine in October for violating a requirement to register.
However, the Singaporean-headquartered platform said the penalty “relates to a past and rectified incident” and is consulting with lawyers.
“We are disappointed and disagree with DNB’s decision to fine [us] and are actively appealing this decision," a spokesperson for the company said.
Rules we obey: Crypto businesses seeking to operate in the Netherlands have been required to register with the bank for anti-money-laundering purposes since May 2020.
The regulator said Crypto.com was active and unlicensed from May 2020 to November 2022, and flouted several warnings about its activities.
The exchange’s violations were “so serious and culpable” that it raised the penalty, which has a base amount of €2m ($2.18m) by €850,000 ($925k).
The DNB has previously fined two other major exchanges, Binance and Coinbase, for similar offenses. Both were penalized $3.59m.
Crypto calendar
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