Tag: crypto firms

FCA Extends Temporary Registration Deadline for Selected Crypto Firms

The U.K.’s Financial Conduct Authority, the regulator of the financial services industry in the United Kingdom, announced Wednesday it has pushed the deadline for registration for some crypto firms in order to give them more time to get complete registration.

The regulator has allowed a few firms, including crypto wallet platform Blockchain.com, fintech company Revolut, and crypto start-up Copper, to continue trading after a temporary registration period comes to an end.

The FCA explained why some companies have given more time to register with the agency beyond an original deadline set on March 31. “The Temporary Registration Regime (TRR) will close on April 1 for all but for a small number of firms where it is strictly necessary to continue to have temporary registration. This is necessary where a firm may pursue an appeal or have particular winding-down circumstances,” the FCA stated.

Crypto Firms Could Move Abroad

Crypto companies doing business in the U.K. are required to be registered with the agency under money laundering regulations. However, the majority of the firms have not managed to get full registration. The FCA created a temporary register to allow companies to continue offering crypto trading services while they seek full registration.

The list of companies on the temporary register has significantly reduced in recent weeks because many firms such as trading app Wirex, market maker B2C2, and many others have withdrawn their applications.

To date, only 33 firms have achieved full authorization. So far, just 12 companies remain on the temporary regime, including firms such as Revolut, Copper, and Blockchain.com.

The FCA said many crypto companies do not meet the required anti-money laundering standards. Only 33 firms have made it onto the full register.

More than 100 cryptocurrency companies applied for registration with the FCA after the agency became the counter-terrorism financing and anti-money laundering authority in the U.K at the end of 2020.

The regulator introduced the temporary register in December 2020 to allow companies to do the necessary to get full authorization. With the temporary registration regime closing on Thursday, April 1, the British crypto sector faces a crisis at this moment. The uncertainty is driving some firms to set up operations overseas, which is a blow to the burgeoning industry in the United Kingdom.  

Wirex has disclosed plans to provide crypto services to Brits from a Croatian subsidiary business. In contrast, B2C2, one of the crypto market-makers and OTC liquidity providers, intends to move its spot trading operations to a U.S. entity.

Hong Kong’s OSL and US-Based Abra Become the Latest Crypto Firms to Announce Layoffs

Abra, a California-based crypto trading and lending platform, and OSL, a licensed crypto exchange based in Hong Kong, are the latest in a string of crypto start-ups that have announced layoffs following the ongoing market turbulence.

Abra laid off 12 of its employees this week, and two sources familiar with the knowledge disclosed the matter.

Bill Barhydt, Abra CEO, confirmed the job cuts, stating that the company has cut 12 jobs purely as part of its cost-saving measures. The executive stated that layoffs translated to 5% of the workforce.

Barhydt said although Abra has trimmed certain jobs, the firm is still planning to hire more talents to fill various roles. While he did not mention specific job functions, he stated that an estimated 10 positions are currently open.

Meanwhile, Hong Kong-based digital asset trading platform, OSL, has slashed between 40 and 60 jobs, which is about 15% of its workforce, two individuals familiar with the source disclosed the development. The crypto exchange announced the job cuts on Wednesdays.

An OSL spokesperson confirmed the incident and said: “OSL has made the difficult decision to reduce headcount. This decision was not made lightly, and we understand the impact that this may have on employees.”

The OSL spokesperson further said the firm has adjusted its business model to renew its focus on SaaS and professional and institutional counterparts.

The spokesperson clarified that OSL made the layoffs not because it had any exposure to troubled crypto firms or tokens, including TerraUSD (UST) and staked ether (stETH).

“It is important to note that OSL has not had any exposure to stETH, luna or UST. Nor have we had exposure to any of the firms reportedly facing solvency issues,” the spokesperson said.

Abra and OSL have therefore joined several crypto firms that recently announced massive layoffs. Many crypto companies have laid off thousands of employees and frozen hiring amid challenging times for crypto and equity markets.

Last month saw more than 1,700 crypto job cuts in the crypto industry. Major crypto companies such as Gemini, Coinbase, Crypto.com, BlockFi, Mexico-based Bitso, Argentina’s Buenbit, and others, trimmed their workforces in June.

SEC Seeing 'Lots' of Crypto Firms are Non-Compliance: Gensler

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler said Tuesday that there is a lot of noncompliance in the cryptocurrency space.

“We at the SEC are going to do what we can,” Gensler stated but added that currently, too many platforms haven’t properly complied with the set-out regulations and are not registered accordingly.

Gensler mentioned that crypto trading exchanges and lending platforms had taken funds and, in some cases, failed to release customer withdrawals, referring to the recent cases triggered by the market crashes.   

The SEC boss said such crypto businesses fall under “classic parts of the securities laws.” He added that the agency will continue cracking down on digital asset firms that abuse the market.

About the current crises facing several crypto lending firms and exchanges and what type of regulation is now required, Gensler said, “it’s a mixture of things,” including collaboration with market players and reformulating some investor protections. The executive said the SEC needs to be “technology neutral” and flexible enough to protect the public.

Gensler stated if cryptocurrency continues, more trust in the system is necessary. Concerning more regulation, the chair said the SEC already maintains “a lot of laws on the books that have been there for decades.”

He mentioned that many crypto tokens have attributes of being promotional and raising funds from the public, which have led to citizens being scammed.

Cryptocurrency scams have emerged as one of the major fraud threats across the world. Scams involving digital assets rose by 34% last year. Despite the apparent advantages of crypto assets, the level of scams has raised concerns. The crackdown by the SEC has become necessary to seal avenues that perpetrators use to reach consumers.

Gensler promised that the SEC would “continue to bring robust enforcement actions” and develop its regulatory framework.

His statements echo a course of action required as the crypto industry is yet to be regulated. And cited the need for proper consultation with stakeholders in the sector as necessary to ensure the regulations are not stifling the market.

FDIC Calls Out FTX US, Other Crypto Firms to Stop Misleading Users About Deposit Protection

The Federal Deposit Insurance Corporation (FDIC), a US government agency tasked with stabilizing the financial system in the event of bank failures, on Friday issued five cease-and-desist letters demanding five crypto-related firms stop making false and misleading statements about the availability of deposit insurance for their clients.

The FDIC ordered five firms behind certain crypto websites — including FTX US, Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com — to “take immediate corrective action to address false or misleading statements concerning whether their customers’ funds were insured by the federal agency.”

Under the Federal Deposit Insurance Act, the FDIC has the power to prohibit use of the agency’s name or logo to imply customer funds are government insured when they are not.

In a statement, the regulator said: “Based upon evidence collected by the FDIC, each of these companies made false representations —including on their websites and social media accounts — stating or suggesting that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured.”

Concerning the case surrounding FTX.US, the FDIC’s letter cited a tweet from FTX. US President Brett Harrison that claims “direct deposits from employers to FTX and stocks are held in FDIC-insured accounts.”

For the other case, the cease-and-desist letter pointed out that SmartAsset.com identified FTX as an FDIC-insured exchange.

In general, the agency regulator said such claims are false and misleading statements implying that uninsured products are FDIC-insured.

The letters directed the above-mentioned companies to immediately remove the statements that suggest any firms deposited with FTX are FDIC-insured.

FDIC has given 15 days to these crypto-related firms to provide written confirmation that they have complied with the requests.

So far, FTX.US and SmartAsset.com have responded and said they have removed such content from their respective company’s online presence.

Harrison tweeted on Friday that he deleted the post and said the content didn’t mean to indicate that crypto assets deposited in FTX are insured by the FDIC, but rather “USD deposits from employers were held at insured banks.”

SmartAsset CEO and co-founder Michael Carvin also stated: “We are in communication with the FDIC to assess the matter and have removed the content at issue in the meantime.”

Controversy Surrounding Voyager  

Late last month, FDIC issued a Financial Institution Advisory Letter informing the general public that the regulator does not insure assets issued by non-banking institutions like crypto companies.

On 29th July, FDIC clashed with cryptocurrency brokerage Voyager Digital when it ordered the crypto lender to stop telling clients that their deposits are protected from losses by the Federal Deposit Insurance Corporation. The agency informed the public that such claims are not true.

Voyager mentioned its federally insured status on its website, social media accounts, and mobile app, the agency revealed.

FDIC said Voyager violated the Federal Deposit Insurance Act, which prohibits anyone from implying that deposits are insured when they are not.

Voyager Digital has a bank account with Metropolitan Commercial Bank of New York. The FDIC said that the account is insured.

But the agency clarified that customers opening and using accounts on the Voyager Digital platform are not insured.

Uzbekistan Announces Monthly Fees for Crypto Firms

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The National Agency for Perspective Projects (NAPP), an agency that regulates cryptocurrency markets in Uzbekistan, has announced new directives that require licensed crypto companies to pay a monthly fee that will mostly go toward the country’s budget.

An official document published on Wednesday but seen on Friday shows that the new rule is registered with the Department of Justice and is effective immediately.

The law set out by the NAPP, the Finance Ministry, and the State Tax Committee of the Republic of Uzbekistan is already in force.

The tariffs to be paid vary based on the type of services these companies provide. For instance, cryptocurrency exchanges are expected to pay 120 million soums ($11,000) per month. The document also highlighted proportionally smaller payments required from custodial services, mining pools, cryptocurrency stores, as well as individual miners.

According to the new rules, 20% of the monthly fees paid by crypto users and firms will go to the treasury of the NAPP while the rest (80%) will go to the country’s budget.

Firms that fail to pay the new fee will face penalties including the suspension of their licenses. “Failure to pay the fee within one month is grounds for suspension of the license. If the company fails to pay the monthly fee twice within a year, the license may be cancelled,” the document stated.

Enhancing Oversight in The Market

Last month, Uzbekistan’s crypto regulator blocked access to international exchanges, as part of the government’s efforts to keep alternative payment systems under strict control. Blockchain.News reported the matter.

On August 12, the NAPP blocked foreign exchanges because they were operating in the country without the licenses they are legally required to obtain.

During that incident, Binance exchange confirmed its services were blocked and said it was in negotiations with the government about its status in Uzbekistan.

Efforts to regulate the trade in digital currencies started in 2018 when Uzbekistan legalized crypto trading. In April, President Shavkat Mirziyoyev issued a decree that reinforced rules governing the industry, boosting regulation of cryptocurrency trading and mining in the country.

Under the regulations, crypto exchanges are required to get a license in Uzbekistan. The NAPP expects as of January 1, 2023, Uzbek citizens and companies to only conduct transactions with licensed crypto exchanges.

According to the regulator, licensed providers are required to verify users’ identities and store data about every transaction for five years. Forcing these entities to get licenses allows the government to track and tax them.

Crypto Firms Report Funds Tied Up with Shuttered Signature Bank

On March 12, New York regulators and the United States Federal Deposit Insurance Corporation shut down Signature Bank, a crypto-friendly bank that had reportedly become a systemic risk to the US economy. As news of the shutdown spread, several crypto firms came forward to report that they had funds tied up with the bank.

Coinbase, one of the largest crypto exchanges in the world, announced via Twitter that it had around $240 million in corporate funds at Signature Bank that it expected to be fully recovered. Stablecoin issuer and crypto firm Paxos also reported that it had $250 million held at the bank, but noted that it held private insurance that covered the amount not covered by the standard FDIC insurance of $250,000 per depositor.

Celsius, a crypto lender that recently filed for bankruptcy, reported that Signature Bank had held some of its funds, but did not disclose the amount. However, the Celsius Official Committee of Unsecured Creditors, which represents the interests of account holders, added that “all depositors will be made whole.”

As news of the shutdown and related crypto exposure spread, other firms in the crypto industry came forward to quell fears about their related exposures. Robbie Ferguson, co-founder of Web3 game development platform Immutable X, and Mitch Liu, co-founder of the media-focused Theta Network blockchain, both separately tweeted that their respective companies had no exposure to Signature.

Crypto.com also reported in a tweet by CEO Kris Marszalek that it had no funds in the bank. Similarly, Paolo Ardoino, the chief technology officer of stablecoin firm Tether, tweeted that Tether had no exposure to Signature Bank.

While some firms expect to recover their funds in full, the closure of Signature Bank has raised concerns about the risks associated with the crypto industry. In addition to the shutdown of Signature Bank, the Federal Reserve announced that the FDIC had been approved to take actions to protect depositors at Silicon Valley Bank, a tech-startup-focused bank that had experienced liquidity issues due to a bank run that spread contagion to the crypto sector. The Fed also announced a $25 billion program to ensure ample liquidity for banks to cover the needs of their customers during times of turbulence.

Overall, the closure of Signature Bank highlights the challenges and risks associated with the rapidly growing and often unpredictable crypto industry. While some firms may be able to recover their funds, others may face significant losses, underscoring the need for greater regulatory oversight and risk management in the sector.

Crypto Advocacy Group Calls on Regulators to Address De-Banking of Crypto Firms

The recent failures of banks providing services to crypto firms in the United States have raised concerns in the crypto community about a perceived “de-banking” of the industry. In response, the Blockchain Association has called on financial regulators to provide information about their actions in relation to the banks’ failures. The association has submitted Freedom of Information Act requests to the Federal Deposit Insurance Corporation, the board of governors of the Federal Reserve System, and the Office of the Comptroller of the Currency, seeking documents and communications that could potentially show if regulators’ actions “improperly contributed” to the banks’ collapse.

The Blockchain Association believes that crypto firms should be treated like any other law-abiding business in the U.S. and given access to bank accounts. The association is investigating allegations of account closures and refusals to open new accounts by banks against crypto firms, which it believes are part of a wider trend of de-banking the industry.

The recent banking crisis in the crypto industry began with the announcement by Silvergate’s parent company on March 8 that it would “wind down operations” for the crypto bank. This was followed by Silicon Valley Bank’s own failure after a run on deposits on March 10, and the closure of Signature Bank on March 12 by regulators. Some in the crypto community believe that federal regulators’ perceived attack on banks servicing crypto firms could force companies to turn to “shadier” options.

Prior to its closure, Signature Bank was considered a major crypto-friendly bank in the U.S., providing services to Coinbase, Paxos Trust, BitGo, and Celsius. The FDIC’s resolution handbook states that an acquirer tells the FDIC what assets and liabilities from the failed bank it is willing to take, as well as what (if any) money will change hands.

Former U.S. Representative and Signature board member Barney Frank reportedly claimed the FDIC was sending a “strong anti-crypto message” in shutting down the bank, and some lawmakers are demanding answers. The recent actions by regulators have prompted concerns in the crypto community about the potential for a wider crackdown on the industry by regulators. The Blockchain Association’s calls for transparency from financial regulators are part of wider efforts to ensure that crypto firms are treated fairly and given access to banking services like any other business.

Binance.US Struggles to Find Banking Partner in the U.S.

Binance.US, the United States arm of the global crypto exchange, has been experiencing difficulties in establishing a new bank partner to serve as a fiat on-ramp and off-ramp for its clients in the country. The exchange has been relying on middleman banks to store funds on its behalf, after the recent failures of Silvergate and Signature Bank left it without banking services.

According to a Wall Street Journal report on April 8, Binance.US needs a bank to directly hold its clients’ U.S. dollars. However, recent attempts to establish direct banking relationships with banks such as Cross River Bank and Customers Bancorp have failed. The regulatory crackdown on banks with crypto clients is another factor contributing to the exchange’s struggles. In March, the U.S. Commodity Futures Trading Commission (CFTC) sued Binance Holdings and its CEO, Changpeng “CZ” Zhao, for alleged trading violations. The cryptocurrency exchange has been the focus of a CFTC investigation since 2021.

Binance.US customers have been affected by the absence of a direct bank. In a recent status update, the exchange stated that it “was transitioning to new banking and payment service providers over the next several weeks,” adding that some U.S. dollar deposit services would be temporarily impacted during the transition. Currently, Binance.US is holding customer funds via the financial technology firm Prime Trust, and a spokesperson for Prime Trust stated that all funds received from clients are stored through its banking partners.

In response to the challenges it is facing, a spokesman for Binance.US stated that the exchange is working with multiple U.S.-based banking and payment providers and continues to onboard new partners while upgrading its internal systems to create a more stable fiat platform and offer additional services.

Binance.US is not the only crypto firm experiencing banking challenges. In the United Kingdom, banks are moving away from accepting clients from the crypto sector, and the few banks still working with crypto firms are requesting more documentation and information about how they monitor clients’ transactions.

The challenges faced by Binance.US and other crypto firms in establishing banking relationships with traditional financial institutions highlights the need for greater regulatory clarity and guidance in the crypto industry. As the industry continues to grow and mature, it is essential for regulators and financial institutions to work together to establish clear guidelines and standards that can help foster a more stable and secure financial ecosystem.

NYDFS to Assess Supervisory Costs from Licensed Crypto Firms

The New York State Department of Financial Services (NYDFS) has announced that it will be adopting a new regulation that will allow the government agency to assess supervisory costs from licensed crypto firms operating within the state. The supervisory costs collected through this regulation will be used to add top talent to the NYDFS’s virtual currency team. This move by the NYDFS is seen as an attempt to improve its oversight and regulatory capabilities in the rapidly-evolving digital asset industry.

According to the NYDFS, the regulation will allow it to assess the costs associated with the supervision and examination of crypto firms operating in the state with a BitLicense. The Department hopes that these new tools and resources will enable it to better regulate the virtual currency industry in New York, both now and in the future, as innovators continue to create new products and use cases for digital assets.

The new regulation was proposed in December 2022, after which the NYDFS met with key stakeholders and received feedback. The regulator noted that the proposed rule was added in response to the state’s Financial Services Law not including such a provision on the assessment of operating costs.

Since 2015, crypto firms operating in the state of New York have largely been required to apply for a BitLicense. As of February 10th, there were 33 companies involved in crypto and blockchain operating in the state under a virtual currency license, limited purpose trust charter, or money transmitter license. The BitLicense requirement has been a topic of debate, with some claiming that it stifles innovation and economic growth. In April 2022, New York City Mayor Eric Adams suggested that the state scrap the BitLicense regime.

This move by the NYDFS is likely to have significant implications for crypto firms operating in the state. The regulation will provide the NYDFS with additional resources and tools to regulate the industry, but it may also result in increased costs for firms. Nonetheless, the NYDFS believes that the benefits of the regulation will outweigh any potential downsides, and that it will help to ensure that the state remains at the forefront of digital asset innovation.

Estonia Shuts Down Crypto Firms

In recent news, Estonia has strengthened its Anti-Money Laundering laws and almost 400 virtual asset service providers (VASPs) have shut down as a result. The amended laws expanded the defined scope of VASPs and increased licensing fees, capital requirements, and information reporting requirements. Additionally, the laws introduced the Financial Action Task Force Travel Rule. The Estonian Financial Intelligence Unit (FIU) announced that almost 200 domestic crypto service providers voluntarily shut down, and another 189 had their authorizations revoked due to non-compliance.

The FIU’s director, Matis Mäeker, noted that the response from the legislator and the supervision activities have been relevant, given the documents submitted by the service providers that lost their authorizations and their methods of operation and risks involved. The FIU also found several general issues within the companies it shut down, including misleading company information. For instance, some companies had registered board members and company contacts without their knowledge, while others had falsified professional backgrounds on their resumes. Additionally, many companies had copy-pasted identical business plans from each other, which were also found to be lacking any logic or connection with Estonia.

Estonia has made significant efforts to implement strong AML laws, primarily due to the discovery in 2018 that around $235 billion worth of illicit capital had been laundered through the Estonian branch of Denmark megabank Danske Bank. The ongoing war between Russia and Ukraine has also had an impact, as Estonia has pushed to cut off revenues supporting Russia’s war machine and protect international financial systems via strong AML regulation as part of its partnership with the U.S. Estonia is a member of the European Union and will soon have to implement the upcoming Markets in Crypto-Assets (MiCA) laws that are slated to come into effect in early 2025. Under MiCA, crypto firms will be subject to stringent AML and terrorism prevention requirements.

In conclusion, Estonia has taken significant steps to ensure the implementation of robust AML laws. The recent enhancement of AML laws has resulted in the closure of nearly 400 crypto firms in Estonia. The FIU found several issues with the companies it shut down, including misleading company information. As a member of the European Union, Estonia will soon have to implement MiCA laws, which will require crypto firms to comply with stringent AML and terrorism prevention requirements.

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