Crypto news and regulatory update: September 15 - 29, 2023

Editor’s note: The a16z crypto Regulatory Update is a series that highlights the latest crypto regulation and policy happenings relevant to builders in web3 and crypto, as tracked and curated by the a16z crypto regulatory team. The roundups are based on recent news, the latest updates, new guidance, ongoing legislation, and frameworks released by regulatory agencies/bodies, industry consortia and professional associations, banks, governments, and other entities as they impact the crypto industry (or applications) around the world. We also occasionally include select other resources such as talks, posts, or other commentary – from us or from others – with the updates.

🧠 tl;dr

• The U.K.’s Financial Conduct Authority (FCA) sent a final warning to crypto asset firms regarding compliance with its financial promotions regime, which will extend to crypto starting on October 8, 2023. The FCA noted the “poor engagement” of certain unregistered, overseas crypto asset firms that have U.K. customers and expressed “serious concern” about their readiness to comply with the new regime.

🌽 Commodity Futures Trading Commission

• The Commodity Futures Trading Commission (CFTC) charged Mosaic Exchange Limited and its owner and CEO for running a digital asset commodity scheme that involved fraudulently soliciting hundreds of thousands of dollars worth of bitcoin.
• The CFTC charged four individuals and a Seychelles-based company for fraudulently soliciting and misappropriating tens of millions of dollars from hundreds of individuals to purchase, sell, and trade bitcoin and other digital asset commodities on their behalf.
• The CFTC filed administrative complaints against eight entities, some of which offer digital asset services, for fraudulently claiming to be CFTC-registered futures commission merchants and retail foreign exchange dealers. Commissioner Caroline D. Pham dissented.
• Commissioner Kristin N. Johnson called on all of the CFTC commissioners to work on rulemakings that would address regulatory gaps that arise as a result of “novel market structures that eliminate intermediaries.”

🦅 Congress

• House Representative Don Beyer (D-Va.) introduced the Off-Chain Digital Commodity Transaction Reporting Act, which would require trading platforms to report all transactions in digital asset commodities to a repository registered with the CFTC.
• Senator and Chairman of the Senate Banking Committee Sherrod Brown (D-Ohio) wrote to the heads of the Department of the Treasury, Securities and Exchange Commission (SEC), and CFTC, expressing concern about the “lack of customer-facing disclosure in crypto markets.”
• House Republicans in the House Financial Services Committee advanced the CBDC Anti-Surveillance State Act, which would prohibit the Federal Reserve from issuing a retail CBDC.
• House Representatives Mike Flood (R-Neb.), Tom Emmer (R-Minn.), Wiley Nickel (D-N.C.), and Ritchie Torres (D-N.Y.) wrote to SEC Chair Gary Gensler, urging the SEC to approve the listing of a spot bitcoin ETP.

⚖️ Department of Justice

• A former Deutsche Bank investment banker pleaded guilty to participating in a scheme that defrauded clients of the R3 Crypto Fund, a purported cryptocurrency investment fund that he operated, of approximately $1.5 million.
• A federal judge sentenced a California man who co-founded the Airbit Club cryptocurrency scam to 12 years in prison for defrauding investors of assets valued at more than $100 million.

💵 Department of the Treasury

• The Department of the Treasury’s Office of Foreign Assets Control sanctioned an  Ethereum address tied to a Mexican national engaged in money laundering for the Sinaloa cartel, as well as several other foreign nationals associated with the cartel.

📈 Securities and Exchange Commission

• The SEC filed an administrative complaint against two Illinois residents for allegedly raising $1.5 million in an unregistered crypto asset securities offering.
• The SEC’s Crypto Asset and Cyber Unit Chief David Hirsch said that companies “adding the label of DeFi” would not deter the SEC from pursuing litigation within its jurisdiction. 
• SEC Chair Gary Gensler testified before the House Financial Services Committee regarding crypto, artificial intelligence, climate risk disclosure, and many other topics. 

🌍 International

💰 Bank for International Settlements

• General Manager of the Bank for International Settlements (BIS) Agustín Carstens encouraged countries to update their legal frameworks to allow for the development of central bank digital currencies.
• The BIS Innovation Hub published a report finding that certain DeFi elements, specifically automated market makers, “could form the basis for a new generation of financial market infrastructures.”

🇧🇲 Bermuda

• Coinbase International Exchange received regulatory approval from Bermuda’s financial regulator to enable eligible non-U.S. retail customers to trade perpetual futures.

🇪🇺 European Union

• European Central Bank President Christine Lagarde said that the pilot project for a digital euro would probably take another two years before it is final.

🌍 International Monetary Fund 

• The International Monetary Fund published a working paper that proposes a framework for “understanding and tracking systemic risks stemming from crypto assets.”

🇵🇭 Philippines

• The Philippines Securities and Exchange Commission collaborated with the U.S. SEC and the Asian Development Bank to host an International Organization of Securities Commission workshop and investigation and enforcement training relating to crypto fraud and other financial crimes.

🇸🇬 Singapore

• The Monetary Authority of Singapore issued a Major Payment Institution license to Coinbase. 

🇪🇸 Spain

• Coinbase announced that it has registered with the central bank of Spain to provide exchange and custody services in the country.

🇹🇼 Taiwan

• Taiwan’s Financial Supervisory Commission published guiding principles for crypto asset service providers relating to customer protection, internal controls management, and other issues.

🇦🇪 United Arab Emirates

• Dubai’s Virtual Asset Regulatory Authority updated its virtual asset rulebook and added new regulations relating to stablecoins.

🇬🇧 United Kingdom

• As mentioned in the “tl;dr,” the FCA sent a final warning to crypto asset firms regarding compliance with its financial promotions regime, which goes into effect on October 8, 2023. The FCA noted the “poor engagement” of certain unregistered, overseas crypto asset firms that have U.K. customers and expressed “serious concern” about their readiness to comply with the new regime.
• The FCA reported initial findings regarding its investigation into debanking to the HMT Chancellor. The report concluded that the most common reasons for account closures related to dormancy or concerns that the account was being used to further financial crime.
• U.K. lawmakers passed the Online Safety Bill, which includes a range of child protection laws, including protections relating to the metaverse.

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