Crypto news & regulatory update: November 20 - December 4, 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

1. Binance pleaded guilty and agreed to pay $4.3 billion in penalties and forfeitures to resolve investigations relating to its violations of the Bank Secrecy Act and the International Emergency Economic Powers Act. Binance’s founder and CEO, Changpeng Zhao, pleaded guilty to failing to maintain an effective anti-money laundering program and has resigned as CEO.
2. Binance’s former chief compliance officer, Samuel Lim, agreed to pay $1.5 million for willfully evading US law, aiding and abetting the illegal operation of a digital asset derivatives exchange, and other violations. This is the first time that the Commodity Futures Trading Commission (CFTC) charged a compliance officer with individual liability.
3. The Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Sinbad.io, a virtual currency mixer that was used as a money laundering tool by the Lazarus Group, a North Korea-sponsored cyber hacking group.

🌽 Commodity Futures Trading Commission

• As mentioned in “tl;dr,” Binance’s former chief compliance officer, Samuel Lim, agreed to pay $1.5 million for willfully evading US law, aiding and abetting the illegal operation of a digital asset derivatives exchange, and other violations. This is the first time that the CFTC charged a compliance officer with individual liability.
• Commissioner Kristin N. Johnson called the Binance settlement a “landmark moment in the CFTC’s oversight of the digital asset market” because it requires board independence, KYC and AML procedures, and an onboarding program for all customer accounts, among other things.

🦅 Congress

• House Majority Whip Tom Emmer (R-Minn.) said that the government’s successful prosecution of Binance shows that “Congress does not need to rewrite laws that work in the crypto space,” and that “current laws are suitable to help weed out bad actors.”
• Senator Elizabeth Warren (D-Mass.) called on Congress to pass a comprehensive bill that would expand the Treasury’s power to pursue crypto platforms used by terrorist groups and illicit actors.

⚖️ Department of Justice

• As mentioned in “tl;dr,” Binance pleaded guilty and agreed to pay $4.3 billion in penalties and forfeitures to resolve investigations relating to its violations of the Bank Secrecy Act and the International Emergency Economic Powers Act. Binance’s founder and CEO, Changpeng Zhao, pleaded guilty to failing to maintain an effective anti-money laundering program and has resigned as CEO.
• The Department of Justice seized nearly $9 million worth of Tether that had been traced to crypto addresses allegedly associated with an organization that exploited more than 70 victims through romance and “pig butchering” scams. (In pig butchering, scammers use fictitious identities and the guise of potential relationships to trick victims into believing they are in trusted partnerships before stealing their assets.)
• The leader of a Miami group was sentenced to 63 months in prison for defrauding banks and a crypto exchange of more than $4 million.

💵 Department of the Treasury

• As mentioned in “tl;dr,” OFAC sanctioned Sinbad.io, a virtual currency mixer that was used as a money laundering tool by the Lazarus Group, a North Korea-sponsored cyber hacking group.
• Deputy Secretary of the Treasury Wally Adeyemo said that Treasury is pursuing the creation of new sanctions tools targeting actors in the digital asset ecosystem and working with Congress and the Financial Action Task Force to update its regulatory approach and illicit finance authorities.

💰 Federal Reserve

• The Federal Reserve’s Division of Supervision and Regulation Director Michael S. Gibson said that digital asset activities that present “fundamentally the same risks” as traditional finance activities should be regulated in the same way, “regardless of where or how the activity occurs or the terms used to describe the activity.”

📈 Securities and Exchange Commission

• Commissioner Hester Peirce encouraged a more “proactive” and “productive” approach to regulating digital assets in an interview with Bloomberg TV.

🌍 International

💰 Bank for International Settlements

• The Bank for International Settlements’ (BIS) Innovation Hub published a report on two central bank digital currency prototypes that explore anonymity in digital payments.
• The BIS published a report analyzing the operating, technology, third-party, and business continuity risks for central banks issuing central bank digital currencies.

🇪🇺 European Union

• The European Parliament’s Committee on Internal Market and Consumer Protection adopted a report on the opportunities, risks, and policy implications of virtual worlds.
• The Chair of the Supervisory Board of the European Central Bank said that decentralized finance and the original cryptocurrencies, like bitcoin, pose a problem for supervisors because there are no issuers or entities to supervise.
• The European Parliament’s Committee on Economic and Monetary Affairs held a public hearing to discuss if and how a digital euro could support EU policy objectives, such as strategic autonomy and payment services digitization.

🌐 Financial Stability Board

• The Financial Stability Board published a report on the financial stability implications of “multifunction crypto-asset intermediaries” that combine a range of crypto-asset services, products, and functions typically centered around the operation of a trading platform.

🇭🇰 Hong Kong

• Hong Kong investment firm Victory Securities announced that it has received approval from Hong Kong’s Securities and Futures Commission to offer crypto services to retail clients.

🇵🇭 Philippines

• The Philippines Securities and Exchange Commission published a notice stating that Binance is not authorized to sell or offer securities to the public.

🇸🇬 Singapore

• The Monetary Authority of Singapore published its final tranche of responses to feedback received on its proposed regulations for Digital Payment Token service providers in Singapore.

🇪🇸 Spain

• Bank of Spain Governor Pablo Hernández de Cos stressed the importance of a digital euro for the European Union, but said that regulators are exercising the “utmost caution” with respect to the project as to not “jeopardize the stability of the financial and monetary system.”

🇬🇧 United Kingdom

• The UK’s Chancellor of the Exchequer presented to Parliament his Autumn Statement, which included a governmental initiative to facilitate the expansion of the digital assets sector.
• Working with HM Treasury and the Financial Conduct Authority (FCA), the Technology Working Group of the UK Government’s Asset Management Taskforce developed a blueprint for implementing the tokenization of UK investment funds.
• The UK government called on crypto users to voluntarily disclose any unpaid taxes to avoid penalties and it published guidance on how to pay them.
• Crypto.com announced that it received authorization to operate as an electronic money institution from the FCA.

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