In light of the recent legal cases and lawsuits against companies from the cryptocurrency industry, the US Commodity Futures Trading Commission (CFTC) filed a suit against world’s biggest cryptocurrency exchange Binance. The Binance exchange, and the company CEO Changpeng Zhao are accused of trading violation, by not registering with the US regulatory body.
The commission has been investigating the online exchange since 2021 and this is a final step in their investigation. The CFTC claims that Binance also allowed US citizens to buy and trade cryptocurrency on its platform, back in 2017. Currently, the US citizens are not allowed to trade on the exchange which implements Know Your Customer (KYC) procedure. The companies CEO Changpeng Zhao is accused of having numerous accounts on the exchange which he used to trade against their customers.
The Binance exchange started in Shanghai and it now holds companies in a couple of world jurisdictions, with a yearly revenue of $20 billion. Mr Changpeng Zhao has Canadian and Chinese passports, while living in Dubai.
The new 2024 Revenue Proposal in the US will consider the progressive tax on electricity that is used for cryptocurrency mining. The US Department of the Treasure proposed a tax for energy used in mining of any digital asset, and defines digital assets as: ‘any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology (blockchain)’
Cryptocurrency mining is seen as a wasteful use of energy and the proposed tax would start from 10% in year one (2024), increasing to 30% in the two-year time. The environmental impact is the main reason behind the proposal as the document suggest that: ‘the increase in energy consumption attributable to the growth of digital asset mining has negative environmental effects and can have environmental justice implications as well as increase energy prices’
The instability of the mining operations is also stated as one of the reasons, as the mining industry follows the cheapest energy sources. ‘Digital asset mining also creates uncertainty and risks to local utilities and communities, as mining activity is highly variable and highly mobile.’
According to a report from Reuters, the world’s largest payment processor companies, Visa and Mastercard, are pushing back the launch of products and services related to crypto, until market conditions and the regulatory environment improve. Visa and Mastercard already have a card issued in partnership with the cryptocurrency exchange Binance, and it offers a fiat-to-cryptocurrency gateway for Binance users.
Anyhow, companies shared concerns about the future of cryptocurrency regulation in a midst of the recent collapse of large players in the crypto industry, such as the FTX. A hard year for crypto companies, pushed Visa and MasterCard to delay the proposed partnerships and decide the way forward after a clearer regulation perspective is established.
She pointed out the difference between legal tenders (national currencies) which are backed by countries that issue them, and the ‘publicly issued cryptoassets and stablecoins calling them ‘just a speculative asset’. If such assets start to pose a threat to the consumers and/or financial stability for countries we should have a mechanism to ban crytpoassets altogether. We have requests from our members not to rule out the mechanism for the total ban. If there are strong consumer protection laws set in place, we will not need a ban. The ban of cryptocurrencies is indeed a tool of last resort, she added in her interview.
The Zambian Minister for technology and science, pointed out in the statement that: ‘there is a need for a policy framework that supports this revolutionary technology.’
In his words, Zambia is seeking the opportunity to embrace this innovative finance technology and will use the regulatory framework ‘as part of deliberate measures to achieve an inclusive digital economy for Zambia’. ‘Cryptocurrency will be a driver for financial inclusion and a change maker for Zambia’s economy’ he added.
Nigeria is the first African country that introduced the digital version of its national currency. The e-Naira currency has been in use for more than a year now, but still lacks mass adoption. In a country of 200 million people, only 0.5% is using e-Naira on a daily basis. The Nigerian government is already using some of the programmability features of digital money, and it’s looking now to enhance them. According to reports from Bloomberg, the Nigerian government is seeking help from the US private tech companies to improve technology behind the virtual currency. Final idea is that at the end of this process, the Central bank of Nigeria achieves full custody and know-how on the technology needed to run a virtual currency environment.
The Nigerian government confirmed that they are looking at: ‘developing additional features and enhancements.”
After a couple of months of investigations, Sam Bankman-Fried, the CEO of once the third largest cryptocurrency exchange the FTX, is arrested in the Bahamas by local law enforcement. The FTX trading platform was established in the Bahamas with the headquarters in the US from where they run their operations. Earlier this year, the FTX exchange and its proxy investment firm Alameda Research collapsed under a series of bad financial decisions and revelations of insolvent balance sheets, creating almost $100 million in damages for its customers. The FTX’s CEO is now being charged by the US Security and Exchange Commission for orchestrating a scheme to defraud investors.
In an interview for ABC news, Sam Bankman-Fried said he didn’t know that “there was any improper use of customer funds.” The SEC’s complaint published on December 13, claims that ‘since at least May 2019, FTX, based in The Bahamas, raised more than $1.8 billion from equity investors’. “We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said the SEC Chair Gary Gensler.
The fall of the large cryptocurrency funds started in summer 2022, when the nominal price of the bitcoin cryptocurrency fell from an all-time high of $67.000 to $18.000. This had a ripple effect on cryptocurrency exchanges and the rest of the cryptocurrency industry that collateralised almost all funds in bitcoin.
Earlier in May, the Congress of the state of New York drafted a bill that would ban bitcoin mining in the state of New York. Yesterday, on June 30th drafted bill passed the floor of the New York State Senate, and will become the law. With this new law, the bitcoin mining, or any other ‘cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions’.
In order to participate in bitcoin network security, bitcoin miners solve the cryptographic problem (called ‘target’) and provide the proof-of-work result. The first one who submits the correct answer, claims the award in a form of a newly minted bitcoins.
Bitcoin mining machines, are specialized computer graphic cards ASIC (which stands for Application-Specific Integrated Circuit) that consume a lot of electricity. Even the smallest ones are more powerful than several personal computers joint together. The amount of electricity needed for the mid-to-full size mining operation is almost the same of the amount used for powering massive computer data centers. This, of course raised a lot questions related to the environmental impact of the cryptocurrency mining.