Crypto news & regulatory update: August 18 - September 1, 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. The US Second Circuit Court of Appeals overturned the Securities and Exchange Commission’s (SEC) rejection of Grayscale’s spot bitcoin ETF application and ruled that the SEC must reconsider the application.
2. In its first enforcement action relating to non-fungible tokens, the SEC charged Impact Theory, a media and entertainment company, with conducting an unregistered offering of crypto asset securities that raised approximately $30 million from hundreds of investors. Commissioners Hester M. Peirce and Mark T. Uyeda dissented in part.
3. The Department of Justice (DOJ) charged two Tornado Cash founders with conspiracy charges relating to money laundering, sanctions violations, and operating an unlicensed money transmitting business. The Department of the Treasury’s Office of Foreign Assets Control (OFAC) also sanctioned one of the founders.

🦅 Congress

• US House Representative and Chair of the House Financial Services Committee Patrick McHenry (R-N.C.) and other Republicans sent a letter to Federal Reserve Board Chairman Jerome Powell, expressing concern over recent Fed actions that “subvert” Congressional progress on establishing a stablecoin regulatory regime.
• House Representative French Hill (R-Ark.) spoke with Forbes about recent Congressional efforts to pass crypto legislation.

⚖️ Department of Justice

• As mentioned in “tl;dr,” the DOJ charged two Tornado Cash founders with conspiracy charges relating to money laundering, sanctions violations, and operating an unlicensed money transmitting business. The Department of the Treasury’s Office of Foreign Assets Control (OFAC) also sanctioned one of the founders.
• A former OpenSea product manager was sentenced to three months in prison in the government’s first case relating to a scheme to commit insider trading in non-fungible tokens.
• The Federal Bureau of Investigation released a statement that warned crypto companies that North Korean hackers may attempt to cash out bitcoin worth more than $40 million, and alerted them to six wallets that currently hold those illicit funds.
• The DOJ announced that it had disrupted the botnet and malware known as Qakbot and taken down its infrastructure in a multinational operation. The DOJ also announced the seizure of approximately $8.6 million in cryptocurrency in illicit profits.

📈 Securities and Exchange Commission

• As mentioned in “tl;dr,” the US Second Circuit Court of Appeals overturned the SEC’s rejection of Grayscale’s spot bitcoin ETF application and ruled that the SEC must reconsider the application.
• As also mentioned in “tl;dr,” in its first enforcement action relating to non-fungible tokens, the SEC charged Impact Theory, a media and entertainment company, with conducting an unregistered offering of crypto asset securities that raised approximately $30 million from hundreds of investors. Commissioners Hester M. Peirce and Mark T. Uyeda dissented in part.
• The SEC charged FinTech investment adviser Titan Global Capital Management USA LLC with securities violations that included misleading disclosures about custody of clients’ crypto assets and a failure to adopt policies concerning crypto asset trading by employees. 
• The SEC charged a former New Jersey State Correctional Police Officer with fraudulently raising approximately $620,000 through an unregistered token offering and for misappropriating investor funds, much of which he sent to his personal crypto asset wallets and used to pay for a bathroom renovation.

🌍 International

🇦🇺 Australia

• Australia’s central bank announced that the country is likely “some years away” from making a decision regarding a central bank digital currency.

💰 Bank for International Settlements

• The Bank for International Settlements published a paper on the “financial stability risks from cryptoassets in emerging market economies.” 

🇭🇰 Hong Kong

• The Hong Kong Monetary Authority said that tokenization of real-world assets has the potential to “enhance efficiency, liquidity, and transparency in bond markets.”
• Hong Kong’s Securities and Futures Commission (SFC) awarded a regional subsidiary of the Swiss digital asset bank Seba approval-in-principle to operate in the city.

🇦🇪 United Arab Emirates

• Dubai’s Virtual Asset Regulatory Authority granted an operating license to Komainu, the cryptocurrency custody joint venture of Nomura, Ledger, and Coinshares.

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