Cryptocurrencies

Binance fined $2.25 million by India for violations

India’s Financial Intelligence Unit (FIU) has fined Binance, the world’s largest crypto exchange, 188.2 million rupees ($2.25 million) for breaching local anti-money laundering regulations. The country mandates that virtual digital asset service providers, including crypto exchanges, must register with the FIU and adhere to its rules. Binance recently registered with the FIU in May to resume operations but has not yet commented on the fine.

Earlier, Binance received a show-cause notice from the FIU and eight other offshore exchanges for non-compliance. In response, the FIU requested that the Ministry of Electronics and Information Technology block access to these exchanges. In contrast, KuCoin, another crypto exchange, registered with the FIU in March and faced a significantly more minor penalty of 3.45 million rupees.

Why does it matter?

The legal sanction isn’t Binance’s only run-in with regulatory bodies, as Canada fined the exchange $4.38 million in May for similar violations. Additionally, Binance’s former CEO, Changpeng Zhao, was sentenced to four months in prison in the US for violating anti-money laundering laws.

New York attorney general recovers $50 million defrauded from Gemini Earn crypto investors

In a significant win for cryptocurrency investors, New York Attorney General Letitia James announced the recovery of $50 million defrauded from participants in Gemini Earn, a high-yield cryptocurrency investment program. That is part of a broader effort to address fraud and protect investors in the crypto market. Gemini Earn, a program launched by the Winklevoss twins‘ Gemini Trust Company, allowed users to lend their digital assets in exchange for interest. However, the program faced scrutiny when it was revealed that the funds were not being used as advertised. Instead of being securely invested, the funds were mismanaged, leading to significant financial losses for many investors.

The New York Attorney General’s office conducted an investigation, uncovering evidence of fraudulent activity and misrepresentation. Attorney General James emphasised the importance of holding companies accountable for their promises, particularly in the volatile and often opaque cryptocurrency sector. “The recovery sends a clear message that we will not tolerate deceit and fraud in any form, and we will use all available tools to protect New York investors,” said James. Gemini will provide full recoveries to more than 230,000 Earn investors, including 29,000 in New York, and agreed to a ban on operating crypto lending programs in the state.

“Gemini marketed its Earn program as a way for investors to grow their money, but actually lied and locked investors out of their accounts,” James said. “Today’s settlement will make defrauded investors whole.” The funds will be accessible within seven days, Gemini told investors on Friday. “With this final distribution, Earn users will have received 100% of the assets owed to them,” it said.  Gemini Earn promised investors attractive returns on their cryptocurrency holdings, capitalising on the growing interest in decentralized finance (DeFi). However, the program’s collapse highlighted the risks associated with high-yield crypto investments, particularly when transparency and proper regulatory oversight are lacking.

The investigation revealed that Gemini Earn’s operators misled investors about the safety and use of their funds. Rather than being securely invested, the assets were exposed to high-risk ventures without proper disclosure, resulting in substantial losses when these ventures failed.

Gemini Earn promised high interest rates to investors who lent crypto assets such as bitcoin to Genesis, a unit of Digital Currency Group, with Gemini taking fees that could exceed 4%. More than $1 billion was frozen when Genesis halted redemptions in November 2022, shortly after the collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange. Genesis filed for Chapter 11 bankruptcy two months later.

Why does it matter?

Gemini received a fine of $37 million in February for unsafe and unsound practices in a settlement with the New York Department of Financial Services (NYDFS) .The payout is in addition to James’ related $2 billion settlement with crypto lender Genesis Global Capital, which was announced on May 20. Gemini also agreed to cooperate in James’ October fraud lawsuit against Digital Currency Group and its chief executive, Barry Silbert. 

The recovery of funds was achieved through a combination of asset seizures and financial settlements. That included cooperation from various cryptocurrency exchanges and custodians who held the misappropriated assets. The Attorney General’s office worked closely with these entities to trace and reclaim the funds. The recovery has been met with mixed reactions. Investors who suffered losses expressed relief and gratitude for the Attorney General’s efforts. “It’s a step towards justice,” said one affected investor. “I hope this sets a precedent for greater accountability in the crypto industry.” On the other hand, some industry analysts argue that the case underscores the need for clearer regulations and better investor education.

Trump calls for all remaining Bitcoin to be mined in the US

Former US President Donald Trump has made a declaration, stating that he wants all remaining Bitcoin to be mined within the United States. The announcement, made on June 12, 2024, is the latest in a series of controversial statements from Trump, who has previously expressed skepticism about cryptocurrencies.

Trump’s proclamation comes at a time when Bitcoin and other cryptocurrencies are facing increased scrutiny from governments and regulatory bodies worldwide. The former president emphasised the need for the US to control Bitcoin mining operations to ensure the country’s dominance in the digital currency market and to safeguard national security.

Bitcoin mining is the process by which new bitcoins are created and transactions are verified on the blockchain. Miners use powerful computers to solve complex mathematical problems, which, in turn, secure the network and validate transactions. That process requires significant computational power and energy resources. Currently, the majority of Bitcoin mining operations are concentrated in countries like China, Russia, and Kazakhstan, where electricity is relatively cheap. However, the geopolitical tensions and concerns over the environmental impact of Bitcoin mining have prompted calls for a shift in mining operations to more stable and regulated regions.

The cryptocurrency community has had mixed reactions to Trump’s statement. Some industry leaders welcome the idea of increasing Bitcoin mining operations in the US, citing the potential benefits of regulatory clarity and increased investment in renewable energy sources. They argue that the US has the technological expertise and infrastructure to support large-scale mining operations sustainably. However, others express concern over the potential for increased government intervention and regulation in the cryptocurrency space. They fear that such measures could stifle innovation and contradict the decentralized spirit of Bitcoin and other cryptocurrencies.

Why does it matter?

Trump’s rationale for wanting Bitcoin mining to be relocated to the US centers around three main points – economic opportunity, national security, and technological leadership.

  • Economic Opportunity: Trump argues that bringing Bitcoin mining to the US would create jobs and stimulate economic growth in the tech and energy sectors. By harnessing the country’s technological infrastructure and renewable energy sources, he believes the US could become a global leader in cryptocurrency mining.
  •  National Security: By controlling Bitcoin mining operations, Trump asserts that the US can prevent foreign adversaries from leveraging cryptocurrencies for illicit activities, such as money laundering and financing terrorism. He also contends that having a significant portion of the global Bitcoin supply mined domestically would enhance the country’s financial stability.
  • Technological Leadership: Trump envisions the US leading the world in blockchain technology and digital currencies. By fostering a robust Bitcoin mining industry, he believes the country can spur innovation and set global standards for cryptocurrency regulation and adoption.

Trump positions himself as ‘crypto president’ at San Francisco fundraiser

At a San Francisco fundraiser, Republican presidential candidate Donald Trump positioned himself as a strong supporter of cryptocurrency and criticised Democrats’ regulatory efforts. The event, held at tech venture capitalist David Sacks’ home, raised $12 million. Trump declared he would be the ‘crypto president,’ according to tech executive Trevor Traina, but did not detail his policy plans.

President Joe Biden’s administration has been working on regulating digital assets to protect consumers, with an executive order in 2022 prompting agencies like the SEC to address crypto risks. White House spokesperson Robyn Patterson stated the administration supports innovation while aiming to safeguard consumers.

Jacob Helberg, an adviser to Palantir, mentioned Trump promised to halt regulatory actions against crypto if he was re-elected as US president. The fundraiser saw attendance from notable crypto figures, including executives from Coinbase and the Winklevoss twins, though representatives from their company, Gemini, did not comment. Sacks and Palihapitiya have been vocal about their crypto investments, particularly in Bitcoin. The event also highlighted the fallout from the FTX exchange scandal, where founder Sam Bankman-Fried was convicted of stealing customer funds to donate over $100 million to political campaigns.

Why does it matter?

The crypto industry is increasingly seeking political influence due to heightened regulatory scrutiny, following major firm bankruptcies in 2022. Despite San Francisco’s liberal leaning, many local venture capitalists and crypto investors back Trump, criticizing what they see as excessive regulation.

New York files lawsuit over $1 billion crypto scams targeting immigrants

New York Attorney General Letitia James has filed a lawsuit against NovaTech Ltd and AWS Mining Pty Ltd, accusing them of defrauding immigrant communities, particularly Haitians, out of over $1 billion. The suit alleges that these companies lured investors with promises of high returns, leveraging religious faith to gain trust. Instead of using the funds for legitimate trading, the majority was funneled into pyramid and Ponzi schemes by paying existing investors with funds collected from new ones. AWS Mining and its promoters, Cynthia and Eddy Petion, James Corbett, Martin Zizi, and Frantz Ciceron, promised investors 15 to 20 percent monthly returns, 200 percent returns on investments within 15 months, and bonuses for recruiting new investors.

However, the company failed to generate sufficient returns to pay these promised profits and bonuses, leading to its collapse in 2019 and causing millions of dollars in losses. Following AWS Mining’s collapse, Cynthia and Eddy Petion launched NovaTech, continuing to lure investors with promises of high returns and recruitment bonuses. They targeted minority communities, particularly Haitians, using prayer groups and WhatsApp chats, often advertising in Creole and using religious messages. James said Cynthia Petion branded herself ‘Reverend CEO’ and told investors that NovaTech was ‘God’s vision’, but privately called herself the ‘Zookeeper’ and belittled her investors as a ‘cult’ where ‘they just agree with everything you say.’

NovaTech falsely marketed itself as a registered hedge fund broker, misrepresented its licensing status in the US, and advertised high trading profits. Despite market conditions, NovaTech claimed to pay weekly trading profits, but these were fabricated, with payments coming from new investors’ funds. NovaTech collapsed in May 2023, leaving tens of thousands of investors unable to withdraw their cryptocurrency. Investigation by the Office of the Attorney General (OAG) found that from 2019 to 2023, investors deposited over a billion dollars, but less than $26 million was actually traded. The lawsuit seeks restitution, civil penalties, and a ban on their participation in the securities industry.

Why does it matter?

The following case sheds light on the susceptibility of immigrant communities to financial scams, particularly within the relatively unregulated cryptocurrency sector. James said in a statement that they’re ‘seeing the real dangers of unregulated cryptocurrency platforms with schemes like these.’  By exploiting religious faith and community trust, these fraudulent schemes inflict severe financial harm, often devastating victims’ life savings. The lawsuit seeks to recover the lost funds and hold fraudulent actors accountable, highlighting the need for robust consumer protections and the necessity of enforcing regulations to safeguard vulnerable populations. 

Rwanda to adopt digital currency by 2026

Rwanda aims to develop its own national Central Bank Digital Currency (CBDC) within the next two years. According to the National Bank of Rwanda (BNR), that initiative will offer Rwandans a secure, cost-free, and convenient alternative to physical cash. The CBDC is anticipated to boost financial inclusion, enabling more unbanked individuals to engage in the formal economy. Soraya Hakuziyaremye, Deputy Governor of Rwanda’s Central Bank, disclosed the 2026 target during an interview. She emphasised the importance of Rwanda’s CBDC, noting similar developments in other countries in the continent, including Nigeria, Ghana, and South Africa, which are either piloting or have already launched their own CBDCs.

Hakuziyaremye also noted that, considering Rwanda’s aspirations for ICT development and a cashless economy, it was essential to evaluate the potential benefits of following other countries’ examples, especially that  the country’s major trading partners are testing or adopting the technology. In November 2023, National Bank of Rwanda Governor John Rwangombwa announced during the presentation of the central bank’s annual report for the fiscal year 2022/2023 to a joint parliamentary session that the CBDC was in development. In May 2024, the Deputy Governor, working alongside the Ministry of Finance, ICT, and Innovation, formed a task force for a feasibility study on CBDC in Rwanda in order to explore the technological requirements, regulatory frameworks, and potential risks.

The Deputy Governor mentioned that the authority published a research paper and held a public consultation process to address various concerns and ensure the CBDC benefits the population, including data privacy, system resilience, and the potential destabilization of the financial system. After the public consultation process ends in the next four weeks, Rwanda will begin a proof of concept to test the technology, design, and speed on a small scale. Additionally, a six-month international test will be conducted to evaluate the technology for cross-border payments. Following these tests, selected individuals and companies will participate in testing the digital currency. While considering various CBDC design options, Rwanda prefers a retail CBDC distributed through banks and an offline-accessible CBDC, which would be particularly useful in areas without internet access or smartphones, or during power outages.

Why does it matter? 

The introduction of a CBDC in Rwanda holds significant importance for: 

  •  Economic Growth and Stability, as it contributes to a more stable and resilient economy by improving the efficiency of monetary policy implementation. That can lead to better control of inflation and economic stability.
  • Financial Inclusion in a country where a significant portion of the population remains unbanked or underbanked. A digital currency can provide easier access to financial services especially to individuals in remote and underserved areas.
  • Cost Efficiency by the reduction of the costs associated with producing and managing physical cash (savings on printing, transportation, and storage) 
  • Enhanced Security and Transparency due to its higher level of security compared to physical cash, reducing the risk of counterfeiting and fraud. The use of blockchain or similar technologies can ensure greater transparency and traceability of transactions, vital for combating money laundering and other illicit activities.
  • Technological Advancement through financial technology that can attract investment, stimulate innovation, and create new job opportunities in the tech sector.

Binance faces £10 billion lawsuit in London over delisting of Bitcoin Satoshi Vision

Crypto exchange Binance has requested the dismissal of most of a £10 billion ($12.8 billion) lawsuit in London, alleging collusion with other exchanges to delist the Bitcoin Satoshi Vision (BSV) cryptocurrency. The lawsuit, brought to the Competition Appeal Tribunal (CAT) on behalf of over 200,000 BSV owners, claims that exchanges, including Kraken, engaged in anti-competitive behaviour to delist BSV in 2019, causing its value to plummet and hindering its potential to become a ‘top tier’ cryptocurrency.

BSV Claims’ lawyers argue that the delisting prevented BSV from gaining prominence and have valued this aspect of the claim at up to £9 billion. Despite not opposing the case’s certification under the UK’s collective proceedings regime, Binance’s lawyer, Brian Kennelly, argued that those who retained BSV made a voluntary decision and could have reinvested in other cryptocurrencies.

While Binance declined to comment on the ongoing litigation, Kraken described the lawsuit as ‘baseless.’ The delisting of BSV by Binance, Kraken, and others in 2019 followed claims by Australian computer scientist Craig Wright, who asserted he was the pseudonymous inventor of bitcoin, ‘Satoshi Nakamoto.’ Wright was recently found to have lied and forged documents to support his claim, a ruling he intends to appeal.

Crypto advocacy group surpasses 1 million members in USA

Stand with Crypto, an organisation advocating for cryptocurrency owners, celebrated a milestone as its membership exceeded 1 million. The group aims to wield political influence, urging policymakers to establish favourable regulations for the digital asset industry while avoiding excessive compliance burdens. Brian Armstrong, CEO of Coinbase, a platform facilitating crypto transactions and a co-founder of Stand With Crypto, emphasised the significant voting power within the crypto community, highlighting its potential impact on policy decisions.

The cryptocurrency sector is actively engaging in US elections, investing millions of dollars to support candidates sympathetic to crypto and oppose those advocating for stringent regulations. Coinbase recently pledged $25 million to the pro-crypto political action committee Fairshake, following similar contributions from Ripple and Andreessen Horowitz. Stand with Crypto has focused its efforts on swing states like Georgia and Arizona, where close election margins underscore the potential influence of its members.

Coinbase has actively engaged with White House officials and the Biden administration to address crypto-related concerns. Armstrong stressed the bipartisan nature of crypto issues, emphasising the need for cooperation to enact necessary legislation. Criticising Biden’s veto as a ‘bad political move,’ Armstrong highlighted the broad support for crypto-friendly measures and the significant constituency within the crypto community. While it remains uncertain if crypto issues will sway votes in the upcoming presidential election, Armstrong believes a subset of the growing voter bloc could prioritise digital asset issues at the polls.

Why does it matter?

The surge in Stand with Crypto’s membership was partly catalysed by frustration over President Biden’s veto of a measure to challenge the Securities and Exchange Commission’s stance on crypto assets. Additionally, there’s strong support for a Republican-sponsored bill proposing a new legal framework for digital currencies. Despite bipartisan backing for the bill in the House of Representatives, the White House has expressed opposition, with SEC Chair Gary Gensler cautioning about potential risks.

Venture capital pours $2.4 billion into crypto startups

Crypto startup funding surged to $2.4 billion in the first quarter of 2024, marking a second consecutive quarter of growth, according to data from PitchBook. Expectations of lower interest rates and the launch of the first US bitcoin spot ETF fueled this 40.3% increase from the previous quarter. Despite the global venture capital investments hitting a near five-year low, the crypto sector saw substantial investor interest spread across 518 deals.

Why does it matter?

The rise in funding comes after a significant downturn from the peak of over $10 billion in early 2022, driven by economic uncertainties and the collapse of major market players. However, the approval of spot bitcoin ETFs by US regulators, with offerings from financial giants like BlackRock and Fidelity, has bolstered the credibility of digital assets, pushing bitcoin to an all-time high of $73,803 in March. This renewed confidence is expected to continue driving venture capital into the sector, as PitchBook analyst Robert Le noted.

Infrastructure-focused crypto and blockchain startups attracted the most funding during this period, with the largest deal being decentralised cloud platform Together AI’s $106 million early-stage round led by Salesforce Ventures, valuing the company at $1.1 billion. According to Le, early-stage deals are becoming increasingly competitive and often receive higher valuations than their late-stage counterparts. While exits remain low, mergers, particularly among exchanges, custodians, and infrastructure providers, are anticipated to increase as the market evolves.

Elon Musk deepfake crypto scam raises concerns in Hong Kong

The Hong Kong Securities and Futures Commission (SFC) recently warned about a scam involving deepfake videos of Elon Musk promoting a cryptocurrency trading platform called ‘Quantum AI.’ The scam, which promises unrealistic returns, highlights the growing use of AI for fraudulent activities, particularly in Asia. The SFC has requested the Hong Kong Police to block access to the associated websites and social media pages, many of which are now inaccessible.

Deepfake-related fraud incidents have surged in the Asia-Pacific region, with a 1,530 percent increase last year, notably affecting Vietnam and Japan. Penny Chai, Sumsub’s vice president for business development in APAC, noted that the high volume of digital financial transactions in emerging Asian markets creates a fertile ground for such scams. Videos promoting Quantum AI, often featuring altered footage of Musk, have been debunked and traced back to old appearances of Musk at events like the 2019 World AI Conference.

Why does it matter?

The use of deepfakes in fraud has become more prevalent, with Hong Kong identified as a major target. The rate of identity fraud in Hong Kong was 3.3% last year, with significant financial losses reported. In one case, a Japanese bank manager was tricked into transferring $35 million due to a deepfake audio mimicking his director’s voice. The SFC has been vigilant in flagging suspicious virtual asset trading platforms, issuing numerous warnings this year alone, particularly after the significant JPEX cryptocurrency exchange fraud.

Additionally, the SFC warned about other risky crypto-related products, such as the LENA Network, which involves cryptocurrency staking, borrowing, and lending. The regulator emphasised that these arrangements might be unauthorised collective investment schemes and carry high risks.