Coinbase, one of the world’s largest crypto exchanges, has recently received a Digital Asset Business License from the Bermuda Monetary Authority. This move is representative of Coinbase’s strategy to expand internationally, as U.S. regulators have been cracking down on the crypto industry. The US Securities and Exchange Commission (SEC) Chair Gary Gensler recently testified before the House Financial Services Committee and highlighted the tensions between the SEC and congressional Republicans over digital asset regulation.
Coinbase will be opening an offshore derivatives exchange in Bermuda, as reported by Fortune. They have also expanded in Abu Dhabi, Canada, Brazil and Singapore.
Coinbase CEO Brian Armstrong has proposed creating cryptocurrency regulation guidelines in order to address the noncompliance in the crypto market. He has expressed disappointment that the SEC had not provided any feedback during their 30 meetings over the past year. On the other hand, SEC Chair Gary Gensler has argued that crypto investors should receive the same protections as other investors, and that calling oneself a DeFi platform does not excuse noncompliance with securities laws.
Increased pressure from the regulators stat to be mentioned after The US SEC has taken legal action on Coinbase and Tron, and the Binance exchange taking fire from a different US government agency.
The European Parliament is set to vote on a new regulation on markets in crypto-assets (MiCA). This landmark legislation is the most sophisticated set of crypto market rules yet, and comes at a time when the United States has yet to establish a concrete belief with a roadmap on crypto regulation. The MiCA regulation is aimed at placing harmonized rules for crypto assets at the EU level, and is designed to provide legal certainty for crypto assets not covered by existing EU legislation. It also has the added benefit of promoting innovation and use of crypto assets and combatting money laundering.
Parliament voted by 517 in favour and 38 against to approve the world’s first comprehensive set of regulations for issuing and trading cryptoassets such as bitcoin cryptocurrency. EU states have already given the nod to the rules, which will be rolled out from mid 2024, requiring firms that issue and trade cryptoassets to be licensed by a national regulator, giving them a ‘passport’ to serve customers across the 27-member country bloc.
The regulation will oblige crypto-asset providers to hold a license, issued by a competent authority of a member state. The license will be valid in all EU member states. To get licensed, a crypto-asset provider will have to comply with common regulatory and supervisory rules. Major service providers will have to disclose their energy consumption, and the international ‘travel rule’ already used in traditional financial transactions will be applied, meaning information on the source and recipient of the cryotoasset will have to accompany and be stored on both sides of the transfer to help combat money laundering.
Overall, the MiCA regulation is set to provide a safe and secure framework for crypto asset trading within the EU. It will promote innovation and use of crypto assets, whilst also providing legal certainty and combatting money laundering.
The UK examines the potential full stack of crypto regulations within the next 12 months. The UK government is aiming to gain the status of the world’s crypto asset hub and has taken a different approach to crypto regulation compared to other countries. Primarily, the UK seeks to establish itself as a destination for crypto innovation and attract companies running businesses in the cryptocurrency sphere.
The UK is moving fast in order to create a clear regulatory framework for crypto activity. Several countries are competing to establish themselves as crypto-friendly destinations, while the United States has taken a stricter stance on cryptocurrencies. The UK now has the ability to control its own legislation and make important decisions on crypto regulation. The UK should move ‘in an agile and proportionate way’ about this, and the proposed new law will focus on key areas such as exchange, custody, and lending activities.
The period for government consultation on the regulations will conclude on April 30. Former UK finance minister and now Prime Minister, Rishi Sunak, expressed his desire last year to position Britain as a leading destination for crypto asset technology. The US SEC and CFTC have been pressing charges against US crypto companies and crypto exchanges.
Private US company Chainalysis is a leading company in collecting and analyzing data used on cryptocurrency blockchains. In its annual report on cryptocurrency-related crime, they point out that illicit cryptocurrency volumes reach all-time highs amid a surge in sanctions and hacking.
‘Overall, the share of all cryptocurrency activity associated with illicit activity has risen for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022.’ The company assesses that an equivalent of $20.6B is used for illicit activities.
A big part of that sum comes from the offenses related to the economic sanctions on Russia. This shows that a strict regime of sanctions is efficiently imposed on cryptocurrency exchanges, by the US department of the treasury, and international financial institutions. The report describes methods that are used for money laundering and fund transfers. As a key takeaway, Chainalisys points out that the impact of crypto sanctions depends on the jurisdiction and technical constraints.
Ransomware crypto payments
The report shows a decline in ransomware from 2021. Chainalisys claims that ransomware victims increasingly refuse to pay the ransom money hence pushing the criminals out of this scheme. The report is stating that “meaningful disruptions against ransomware actor groups are driving lower than expected successful extortion attempts” In 2021, the US Office of Foreign Assets Control (OFAC) issued an advisory document about the risk of ‘sanction crimes’ that can rise from ransomware payments. OFAC advises all US companies to report ransomware to the FBI prior to any action. This is also considered to be one of the factors for the drop in ransomware payments. In addition, ransomware lifespan is significantly shorter. From 470 days in 2019, it is down to 70 days in 2022.
Money laundering
The report is stating a rise in money laundering activities from $14.2B in 2021 to $23.8B in 2022. The report is stating ‘underground money laundering services’ are a growing concern. Such groups use private channels on messaging apps to set and organise private transactions that are hard to track.
Cryptocurrency scams
Cryptocurrency scams and the use of cryptocurrency on darknet markets are on the decline compared to previous years.
