Editor’s note: The a16z crypto Global Regulatory Roundup is a series that highlights the latest regulatory 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.Since the last edition did not cover ongoing/ still-developing news related to the crypto exchange FTX, we included a few items – as relevant to tracking the regulatory landscape here – at the top of this edition:
- Congress: The House Financial Services Committee announced that it will hold a bipartisan hearing into the collapse of FTX, and broader consequences for the digital asset ecosystem. Senators Elizabeth Warren (D-Mass.) and Dick Durbin (D-Ill.) also sent a letter to FTX founder Sam Bankman-Fried asking for more information about what caused the collapse.
- Commodity Futures Trading Commission: CFTC commissioners Caroline Pham and Kristin Johnson reiterated calls for clearer regulations.
- Department of the Treasury: Secretary of the Treasury Janet Yellen shared that FTX’s collapse reinforced her view that crypto requires “very careful regulation”, but that she does not believe crypto poses “broader threats” to financial stability at this time.
- Federal Reserve: Federal Reserve Vice Chair Lael Brainard shared that the crypto market needs firm regulations, and that it is “no different than traditional finance in the risks that it exposes”. Federal Reserve Vice Chair Michael Barr shared in testimony before the Committee on Banking, Housing, and Urban Affairs that FTX’s collapse highlights the risks to investors associated with novel asset classes and activities “when not accompanied by strong guardrails”.
- International: Japan’s Financial Services Agency ordered FTX Japan to suspend operations, allowing users there to only close out existing positions but not initiate new ones.
🌽 Commodity Futures Trading Commission
- The CFTC filed a response to the amicus briefs filed on behalf of Ooki DAO, which had urged the federal judge overseeing the case to reconsider his earlier order that approved of the CFTC’s method of serving the lawsuit: through a help bot on the DAO’s website, and a post on the forum. [For more coverage on this case, including our brief, see this past newsletter edition.]
- Senator Kirsten Gillibrand (D-N.Y.) announced that she expects to introduce a stablecoin bill with Senators Patrick Toomey (R-Pa.) and Cynthia Lummis (R-Wyo.) in the next few weeks.
🛡️ Consumer Financial Protection Bureau
- The CFPB issued an analysis of consumer complaints – just those relating to crypto-assets – noting that between October 2018 and September 2022, approximately 40% of those complaints most often related to fraud, and particularly “pig butchering”. In a pig-butchering scheme, fraudsters pose as highly successful traders, also providing fictitious returns, to entice victims to make “investments” in cryptocurrency. They usually make contact on various social media or dating applications – spoofing known, long lost contacts; or, posing as a potential friend/ romantic partner – and often spend time gaining the victim’s confidence and trust. The FBI issued a warning about this investment scheme in its October PSA. [This is not unlike spear phishing and other social engineering scams; see also this a16z resource for general security tips.]
⚖️ Department of Justice
- An Ohio man was arrested on criminal charges relating to his alleged involvement in a cryptocurrency investment fraud scheme that raised at least $10 million from investors. He was indicted specifically for wire fraud.
💵 Federal Reserve
- In its recently released Supervision and Regulation Report, the Federal Reserve said that crypto presents “potential opportunities” for banking organizations, and that it would work with other federal banking regulators to subject crypto to necessary safeguards.
🏬 Federal Trade Commission
- The FTC brought an enforcement action against DK Automation and its owners for using unfounded claims of big returns to entice consumers into money-making schemes (involving cryptocurrencies and other things). This is a rare example of the FTC asserting its false advertising and consumer protection jurisdiction in an action involving crypto.
🗽New York Department of Financial Services
- NYDFS Superintendent Adrienne Harris shared that federal regulators should look to New York’s crypto regulatory framework as a model. She also described the growth of the NYDFS crypto team to nearly fifty people, and cautioned federal regulators against passing legislation that would preempt state crypto laws.
🏦 New York Fed
- The Federal Reserve Bank of New York and a group of major commercial banks (including Citigroup, HSBC, BNY Mellon, and Wells Fargo), launched a project that will explore the feasibility of an interoperable digital money platform “known as the regulated liability network”.
💸 Office of the Comptroller of the Currency
- In testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Acting Comptroller of the Currency Michael Hsu said that the OCC has adopted a “careful and cautious” approach to crypto. He added that the approach has “proven to be prudent” following the collapse of TerraUSD and the bankruptcy of FTX.
📈 Securities and Exchange Commission
- The SEC released its FY22 annual enforcement results – which highlighted the near doubling in size of the SEC’s Crypto Assets and Cyber Unit, as well as the SEC’s significant enforcement actions against BlockFi Lending LLC; the individuals who created and promoted Forsage; and a former Coinbase product manager for insider trading.
- Alleging that a filed Form S-1 registration statement failed to contain required business information, the SEC instituted administrative proceedings against American CryptoFed DAO LLC to determine whether a stop order should be issued to suspend their registration of the offer of two crypto assets: the Ducat and Locke tokens.
- The president of the Federal Financial Supervisory Authority (also known as BaFin) shared that blockchain technology is “promising”, and that he hopes the industry can move from “promising” to “effective and scalable”. However, he also added that “not all crypto business models are serious”, and that innovation can also bring with it “freeloaders and crooks”. With the primary role of ensuring the integrity and stability of the German financial system, BaFin is the financial regulatory authority that supervises banks, financial services, insurance companies, and crypto entities there.
- India’s Enforcement Directorate requested that Binance freeze 150.22 bitcoins, as part of a money-laundering investigation relating to a crypto gaming app called E-Nuggets.
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