Crypto news & regulatory update: December 23, 2023 – January 12, 2024

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 Securities and Exchange Commission (SEC) approved proposals for the first U.S.-listed spot bitcoin ETFs. The approved issuers include BlackRock, Fidelity, WisdomTree, Franklin Templeton, Grayscale, and others. SEC Chair Gary Gensler and Commissioners Mark T. Uyeda, Hester M. Peirce, and Caroline A. Crenshaw issued statements relating to the approval.
• A U.S. federal judge ruled that Terraform Labs and its founder, Do Hyeong Kwon, offered and sold unregistered securities, including LUNA and MIR, but that they did not offer or effect transactions in unregistered security-based swaps. A jury trial on the SEC’s claims that Terraform and Kwon engaged in fraudulent schemes to mislead investors will commence on January 29, 2024.
• An audit report from the New York State Comptroller’s Office found that there is “limited assurance that [the New York Department of Financial Services] is adequately performing its oversight responsibilities related to the application for and supervision of BitLicenses in the State.” 

🌽 Commodity Futures Trading Commission

• The Commodity Futures Trading Commission’s Digital Assets and Blockchain Technology Subcommittee released a report that discusses the risks and benefits of decentralized finance and makes recommendations on how to mitigate the risks. 

🦅 Congress

• U.S. lawmakers commented on the hack of the SEC’s X (formerly Twitter) account. Senators J.D. Vance (R-Ohio) and Thom Tillis (R.-N.C.) sent a letter to SEC Chair Gary Gensler. Senators Cynthia Lummis (R-Wyo.) and Bill Hagerty (R-Tenn.), and House Representative Bill Huizenga (R-Mich.) posted comments on X.
• House Representative Warren Davidson (R-Ohio) published an article in The Hill discussing recent illicit finance legislative proposals that target crypto.
• Senator Elizabeth Warren (D-Mass.) posted on X that the SEC was “wrong on the law and wrong on the policy” regarding its decision to approve spot Bitcoin ETFs.

⚖️ Department of Justice

• U.S. authorities arrested and charged influencer Rodney Burton, also known as “Bitcoin Rodney,” with allegedly promoting the HyperVerse crypto investment scheme and defrauding individuals who wished to invest in the scheme of more than $7 million.

📈 Securities and Exchange Commission

• As mentioned in “tl;dr,” the SEC approved proposals for the first U.S.-listed spot bitcoin ETFs. The approved issuers include BlackRock, Fidelity, WisdomTree, Franklin Templeton, Grayscale, and others. SEC Chair Gary Gensler and Commissioners Mark T. Uyeda, Hester M. Peirce, and Caroline A. Crenshaw issued statements relating to the approval.
• As mentioned in “tl;dr,” a U.S. federal judge ruled that Terraform Labs and its founder, Do Hyeong Kwon, offered and sold unregistered securities, including LUNA and MIR, but that they did not offer or effect transactions in unregistered security-based swaps. A jury trial on the SEC’s claims that Terraform and Kwon engaged in fraudulent schemes to mislead investors will commence on January 29, 2024.
• The SEC charged a former resident of New Jersey with conducting a $360,000 fraudulent securities offering by claiming that she would use investor money to invest in, among other things, private and publicly traded companies, crypto assets, and luxury real estate properties.
• The Financial Industry Regulatory Authority added a new section on compliance for crypto business dealings to its annual oversight report. The report directs member firms seeking to engage in crypto asset-related activity to “identify and address the relevant regulatory and compliance challenges and risks.”
• SEC Chair Gary Gensler posted a broad warning on X (formerly Twitter) to market participants about potential dangers relating to investing in crypto asset securities.

🌍 State

🗽 New York

• As mentioned in “tl;dr,” an audit report from the New York State Comptroller’s Office found that there is “limited assurance that [the New York Department of Financial Services] is adequately performing its oversight responsibilities related to the application for and supervision of BitLicenses in the State.”
• Genesis Global Trading agreed to pay an $8 million penalty to New York State and to surrender its BitLicense to settle claims that it violated the New York State Department of Financial Services’s virtual currency and cybersecurity regulations.

🌍 International

🇭🇰 Hong Kong

• The Securities and Futures Commission (SFC) issued a circular detailing the requirements for investment funds with greater than 10% net asset value exposure to virtual assets that seek to make public offerings.
• The SFC and the Hong Kong Monetary Authority issued a joint circular on intermediaries’ virtual asset-related activities, which states that the SFC is “prepared to accept applications for the authorization of other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds.”

🇮🇳 India

• India’s Financial Intelligence Unit (FIU) issued compliance notices to crypto exchanges Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. The FIU also asked that the Indian Ministry of Electronics and Information Technology block the exchanges’ websites on the grounds that they are operating illegally in the country.

🇳🇬 Nigeria

• Nigeria’s central bank released inaugural guidelines for banks that provide operating accounts for crypto service providers, but it retained a ban on banks trading crypto assets on their own behalf.

🇰🇷 South Korea

• South Korea’s Financial Services Commission proposed a ban on using credit cards to purchase cryptocurrency.
• The SFC said in a statement that recently-listed U.S. bitcoin ETFs may violate the Korean Capital Markets Act.

🇪🇸 Spain

• Spain’s central bank announced partnerships with Cecabank, Abanca, and Adhara Blockchain for a wholesale central bank digital currency pilot.

🇹🇼 Taiwan

• Taiwanese authorities arrested the founder of ACE Exchange based on suspicions of fraudulent activities.

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