The online cryptocurrency exchange Binance, and its CEO Changpeng Zhao are planning to seek dismissal of a CFTC complaint accusing the crypto exchange of violating the Commodity Exchange Act and certain related federal regulations.
The CFTC alleged that Binance operated an ‘illegal’ exchange and had a ‘sham’ compliance program, and the company is obliged to respond until the July 27th
This week, Nigeria’s markets regulator has ordered the world’s largest cryptocurrency exchange, Binance, to halt its operations in the country. The move follows Nigeria’s central bank’s decision in 2021 to ban banks and financial institutions from dealing in or facilitating transactions in digital currencies. The Nigeria’s Securities and Exchange Commission said that Binance Nigeria Limited, which was soliciting Nigerian investors through a website, was illegal. The order indicated that the company was not registered or regulated, making it illegal.
Despite the ban, Nigeria’s young, tech-savvy population has eagerly adopted cryptocurrencies, for example using peer-to-peer trading offered by crypto exchanges to avoid the financial sector ban. In an effort to find a middle ground between an outright ban on crypto assets and their unregulated use, Nigeria’s SEC published a set of regulations for digital assets last year.
As a result of the ban and the SEC’s actions, Binance is now required to halt its operations in Nigeria. It remains to be seen how the Nigerian authorities will implement the regulations and how the cryptocurrency industry will evolve in the country in the future.
Earlier this month the U.S. Securities and Exchange Commission (SEC) also sued Binance and Coinbase for allegedly breaching its rules.
This incident was one of the early events highlighting the vulnerability of cryptocurrency exchanges to cyber criminals. Since then, the industry has experienced multiple large-scale thefts.
One day after the US Securities and Exchange Commission (SEC) accused Binance for securities fraud, the Coinbase, a largest US based cryptocurrency exchange, is sued by the SEC. The SEC alleges that cryptocurrency exchange has failed to register its services with the SEC as required by law, resulting in the company making billions of dollars unlawfully facilitating the buying and selling of crypto asset securities. In addition, the SEC alleges that since 2019, Coinbase has been engaging in an unregistered securities offering through its staking-as-a-service program. The SEC’s complaint seeks injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief.
Inside the suit, the SEC identified tokens issued by foundations and companies or tied to protocols including Solana (SOL), Cardano (ADA), Polygon (MATIC), and Nexo (NEXO) (to name only a few) as securities.
The SEC first warned Coinbase it might sue the cryptocurrency exchange earlier this year, sending a Wells Notice, which Coinbase responded to in April.
In the synchronized actions Coinbase is facing scrutiny from a task force of ten US state securities regulators. Namely in Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin. The Alabama Securities Commission (ASC) has ordered Coinbase to explain within 28 days how it is not violating state securities laws with its staking program.
The California Department of Financial Protection and Innovation (DFPI) has filed for an order for Coinbase to ‘desist and refrain from the further offer and sale of securities in California.’ The ASC and DFPI are motivated by a desire to protect consumers and investors in the decentralized finance space. The claims against Coinbase are that it is offering securities without a permit or other form of qualification in California and that it is violating state securities laws with its staking program.
The US Securities and Exchange Commission (SEC) has accused Binance, the world’s largest cryptocurrency exchange, of mishandling customer funds and lying to US regulators and investors. According to the SEC’s 136-page complaint, company mixed billions of dollars in customer funds and sent them to a separate company, Merit Peak Limited, which is controlled by Binance’s founder, Changpeng Zhao.
The SEC alleges that Binance operated as an unregistered securities exchange, and illegally offered and sold securities. By doing this the company broke the US securities laws. The exchange has also been accused of misleading investors about the adequacy of its systems to detect and control manipulative trading. The SEC’s lawsuit is the second time this year that federal regulators have accused the Binance of evading laws designed to protect investors in the USA.
The worlds largest cryptocurrency exchange has long been seen as a major target in the SEC’s quest to tighten the crypto industry regulation, and by extension, the US financial system response toward the cryptocurrency investments. By the report from Binance, company is making $65 billion in average daily trading volume, and thus the SEC’s allegations have sent shockwaves throughout the cryptocurrency industry. According to the Financial Times, the Binance said it was ‘disappointed’ by the SEC’s actions. ‘We look forward to working with them in good faith and in a constructive manner to resolve the issues they have identified,’ the company said.
By the report from the Financial Times, traditional financial firms are building or funding new crypto exchange and custody platforms, hoping to capitalize on their expertise, reputations, and lack of regulatory scrutiny. They believe asset managers prefer dealing with established players over crypto-native exchanges, and are betting that fund managers are still interested in trading crypto.
This is due to the collapse of many cryptocurrency firms, and the disclosures of malpractices last year, which eroded the trust of crypto investors. To this end, firms such as BNY Mellon and Fidelity have already set up separate crypto custody divisions, and the Nasdaq is awaiting regulators to green-light its service. The traditional firms are also aiming to build more transparent platforms for crypto trading.
The new wave of legacy-backed crypto platforms will compete with Coinbase and Binance, which also host institutional clients. Traditional finance firms plans to compete by building more transparent operations, particularly in separating exchanges from asset custody to avoid conflict of interest and reduce risk.
The digital assets investment fund Grayscale Investments published an opinion they received from the US Securities and Exchange Commission (SEC) on the Filecoin cryptocurrency which is behind the Grayscale Filecoin Trust. Earlier in April, the Trust applied to the SEC to register shares of the Trust, under the US Securities Exchange Act
The Securities and Exchange Commission reply stated that Filecoin will be considered a security, therefore the Trust can be registered only under the US Investment Company Act, and according to company report: ‘requested that Grayscale seek withdrawal of the registration statement promptly’
The company announced an appeal as they are not agreeing with the SEC definition of the Filecoin cryptocurrency as a security. They also announced that if SEC is persistent in the definition will ask for dissolution of the Trust.
This news comes in the continuation of recent decisions by the US regulators, in efforts to define the legislation scope around digital assets and cryptocurrency.
The UK lawmakers have called for cryptocurrencies to be regulated as gambling, citing concerns about the risks involved and the potential harm to individuals. The Parliament’s Treasury committee on crypto-assets argues that cryptocurrencies share characteristics with gambling due to their speculative nature and the potential for significant financial losses. As a result, they propose a redo of the regulatory framework to safeguard consumers in the evolving digital landscape.
The report emphasizes the need for comprehensive measures to address the risks associated with cryptocurrency investments. One of the key recommendations is to license and regulate cryptocurrency exchanges under the purview of the UK Gambling Commission, much like traditional gambling platforms. By imposing strict regulations on exchanges, lawmakers hope to enhance consumer protection and weed out fraudulent operators.
Additionally, the report suggests tightening advertising standards to curb misleading marketing practices that often target vulnerable individuals. It recommends banning endorsements of cryptocurrencies by celebrities and influencers, as these endorsements can create a false sense of security and credibility. To further safeguard the public, the report suggests launching a widespread awareness campaign to educate individuals about the potential risks involved in crypto investments.
The lawmakers also advocate for an international collaborative approach to regulation, calling on the UK government to work with global partners to develop unified standards. They propose bolstering the powers and resources of the Financial Conduct Authority (FCA) to effectively regulate the crypto market, ensuring a coordinated and robust oversight framework.
By proposing stricter regulations, licensing requirements, and improved consumer awareness, UK lawmakers aim to strike a balance between embracing innovation and protecting individuals from potential financial harm in the fast-paced world of digital assets.
DAC8 serves a different purpose than MiCA. MiCA regulates and authorizes cryptocurrency service providers established in the EU. However, some operators are not covered by it, and MiCA does not enable tax authorities to collect and exchange the necessary information for taxing cryptocurrency income. DAC8 applies to all cryptocurrency service providers and operators with users in the EU. It covers businesses that provide services to EU residents, regardless of their location, and requires reporting of information for both regulated and unregulated cryptocurrency service providers and operators. As mentioned in the statement: ‘DAC8 is also consistent with the recently approved OECD Crypto-Asset Reporting Framework (CARF), as well as the amendments to its Common Reporting Standard. These standards have also been endorsed by the G20. This initiative aims at introducing greater tax transparency on crypto-assets’.’
The need for this regulation arises because effective taxation is important for public investment, services and business innovation. However, tax authorities are unable to monitor cryptocurrency profits for taxation purposes, resulting in a loss of revenue.
The Directive aims to improve UE’s ability to detect and counter tax fraud through more reporting obligations and automatic exchange of information on advance cross-border rulings used by individuals. The updated Directive also includes financial institutions’ reporting obligations regarding e-money and the central bank digital currencies (CBDC)
The new reporting rules for cryptocurrencies, e-money, and central bank digital currencies will be enforced from 1 January 2026, after the consultative opinion of the European Parliament.
The US Department of Justice’s director of the National Cryptocurrency Enforcement Team (NCET) Eun Young Choi, has vowed to crackdown on illicit behavior on crypto exchanges. In an interview with the Financial Times, the director stated that they would be focusing on preventing criminal activity such as money laundering and terrorism financing on digital asset trading platforms. The department is particularly concerned about the anonymity offered by cryptocurrencies and how it can be exploited by criminals.
The director also emphasized the importance of collaboration between law enforcement agencies and crypto companies to combat illegal activity in the crypto space. He called for increased transparency and regulation in the industry (and cryptocurrency exchanges) to prevent abuse.
The crackdown on illicit behavior in the crypto industry is part of a broader effort by the US government to regulate the sector. The director’s comments come as the crypto market continues to experience heightened scrutiny from regulators, with concerns about investor protection, financial stability, and national security.
The Financial Times article suggests that the increased focus on regulation and enforcement in the crypto industry may lead to a shift in the perception of digital assets from being a tool for criminal activity to a legitimate asset class. Overall, the crackdown on illicit behavior on cryptocurrency exchanges is seen as a necessary step to ensure the long-term viability and growth of the industry.
