In the last week, several major financial regulators, both national and international, simultaneously produced new guidelines for decentralized assets. The European Banking Authority and the European Securities and Markets Authority proposed guidelines for assessing the suitability of management members in crypto firms, offering standardized criteria for evaluating their knowledge, expertise, integrity and ability to dedicate adequate time to fulfill their responsibilities.
The Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) proposed to oblige banks to provide both quantitative and qualitative data on exposures to crypto assets and the corresponding capital and liquidity requirements. According to the BIS, using a uniform disclosure format will encourage the application of market discipline and lessen information asymmetry between banks and market participants.
The United States Treasury Departmentโs Financial Crimes Enforcement Network proposed designating cryptocurrency mixing as an area of โprimary money laundering concernโ following Hamasโ attack on Israel. It suggests requiring domestic financial institutions and agencies to โimplement certain recordkeeping and reporting requirementsโ for crypto mixers transactions.
The Hong Kong Securities and Futures Commission (SFC) will make certain digital currency products available only to professional investors. The updated requirements consider digital assets โcomplex productsโ under the SFC and subject to the same guidelines as similar financial products. The commission mentions crypto exchange-traded funds and products issued outside Hong Kong as complex products.
FTX court updatesย
FTXโs former general counsel Can Sun was unaware of the exchangeโs comingling of funds with Alameda Research, he told jurors during his testimony in Sam Bankman-Friedโs criminal trial. Sun said he learned from other employees about Alamedaโs exemption from the liquidation engine system in August 2022. Typically, the system would liquidate loss-making trades, but Alameda reportedly bypassed the mechanism due to its exception.
Accounting professor Peter Easton provided a breakdown of the alleged commingling of funds between FTX and Alameda Research since 2021. According to Eastonโs analysis, Alameda invested in Genesis Capital, K5 Global Holdings, Anthropic PBC, Dave Inc, Modulo Capital and other ventures, partially using funds from FTX customers. In June 2022, Alameda had a negative balance of $11.3 billion with FTX, while the companiesโ liquid assets stood at $2.3 billion, meaning a gap of $9 billion between the sister firms. Another critical point from the analysis: Alameda has 57 accounts with FTX that could have negative balances, whereas no other customer could do so. The analysis challenges Bankman-Friedโs defense argument that Alameda had similar privileges as other market makers on FTX.
Pennsylvania aborts two-year mining moratorium billย
A Pennsylvania House Representative has cut a two-year crypto mining ban from a bill to regulate the sectorโs energy consumption, claiming trade labor unions pressured the change. The committeeโs chair and the billโs sponsor, Democratic Representative Greg Vitali, revealed that Democratic Party leaders pressured him not to run the bill inclusive of the moratorium. Vitali said building trade labor unions had โchronic oppositionโ to environmental policy and claimed the unions had his Democratic colleagues in their pocket. According to the politician, voting against the unions would risk the Democratic majority in Pennsylvaniaโs House, and he would rather see the bill pass sans moratorium than not at all.
Gemini, Genesis, DCG accused of $1 billion fraud
New Yorkโs attorney general has filed a lawsuit against cryptocurrency firms Gemini, Genesis and Digital Currency Group (DCG) for allegedly defrauding investors through the Gemini Earn investment program. An official statement from the office of Attorney General Letitia James outlines the basis of the charges, claiming that the companies defrauded more than 23,000 investors, including 29,000 New York citizens, of more than $1 billion. An investigation carried out by Jamesโ office claims that Gemini lied to investors about its Gemini Earn investment program, which it ran in partnership with Genesis. It argues that while Gemini had assured investors that the program was a low-risk investment, investigations reveal that Genesisโ financials โwere risky.โ
