Regulations Roundup – December 2023

The global regulatory environment focused on the cryptocurrencies industry in November. In the United States, the Securities and Exchange Commission (SEC) reached a settlement with Binance, the biggest crypto exchange in the world, and also sued Kraken. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in November, and what’s coming up in December 2023

SEC Binance settlement

The SEC has been under considerable pressure following the collapse of FTX in 2022. Since then, it has embarked on a strategy to regulate the crypto industry through enforcement. A few months ago, it sued Binance and Coinbase, the two biggest companies in the industry.

The SEC reached a settlement with Binance in November. As part of the deal, Binance was forced to plead guilty and pay $4.3 billion. Changpeng Zhao, the company’s founder, CEO, and biggest shareholder, resigned as the head of the firm. By pleading guilty, he also faces months or years in prison.

The settlement came in the same week as the SEC sued Kraken, a leading American exchange. The agency alleged that the company provided a securities exchange without following the law and putting customer funds at risk. It also alleged that the company commingled customer funds with its own.

It is unclear whether Kraken’s and Coinbase lawsuits will move to trial or whether these firms will settle. Settling will be expensive but it will help the companies navigate the lawsuits in an efficient manner.

Binance FinCEN settlement

The other important regulatory event in November was a settlement between Binance and the Financial Crimes Enforcement Network (FinCEN). FinCEN accused Binance of facilitating crime in its network.

As part of the settlement, the company paid $3.4 billion and agreed to a multi-faceted five-year monitoring by FinCEN Also, the settlement involves an undertaking to ensure that Binance completely exits the American market.

Binance closed Binance US a few months ago and its existing product does not serve American customers. Therefore, the move will likely have no major impact in the company’s operations.

UK to regulate crypto more strictly

The UK has embraced a smoother stance towards crypto regulations as it attempts to woo innovators to the country. In a statement by the Treasury Department, the government now aims to regulate the industry more strictly by bringing it under the same regime as traditional financial services.

For example, the new plan calls for crypto exchanges to write detailed requirements on admission standards and disclosures for token issuers. In a statement, Andrew Griffith, the City Minister said:

We must make the UK a place where cryptoasset firms have the clarity needed to invest and innovate, and where customers have the protections necessary for confidently using these technologies. The UK is the obvious choice for starting and scaling a cryptoasset business.

SEC postpones spot Bitcoin ETF approvals

The Securities and Exchange Commission again postponed its decision on spot Bitcoin ETFs. The agency is reviewing proposals by the likes of Blackrock, Franklin Templeton, Grayscale, and Ark Invest. These firms have proposed creating ETFs that track the spot price of Bitcoin. For several years, the SEC has been concerned about the volatility of Bitcoin and the fact that the price can be manipulated.

Most analysts believe that the SEC will ultimately agree to these ETFs since the companies have put in place strict monitoring processes for the coins. One measure showing this optimism is the discount to NAV of Bitcoin.

Lagarde proposes the creation of EU SEC

Christine Lagarde, the head of the European Central Bank (ECB) proposed giving the European Securities Markets Authority (ESMA) more powers equivalent to those of the SEC. She believes that the current laws make regulations in the bloc more of a national matter.

According to Lagarde, creating a single unified body will help the bloc forge closer ties between the financial market. It will also make it easier for investors to deploy capital at a faster pace.

South Korea bans short-selling

The other big regulatory story of the month came from South Korea, where regulators made sweeping changes in the financial market. They became the first major country to ban short-selling, which lets traders benefit from share price declines.

The country’s regulators argue that short-selling leads to market manipulation. However, most financial experts believe that these bans often curtails trading liquidity and pushes bid to offer spreads costs up. In the United States, a similar ban during the 2008 crisis led to over $1 billion in trading costs.

BoE and FCA stablecoin regulations

In the UK, the Bank of England (BoE) and the Financial Conduct Authority (FCA) proposed bringing stablecoins into the real economy as a payment option. The new proposals will make the BoE responsible for regulating these stablecoins.

For example, all stablecoin issuers will ensure that their holdings are fully backed by central bank deposits. Also, they will need to show how they will manage in times of financial stress. In a statement, the head of Consumers and Competition at the FCA said:

Stablecoins have the potential to make payments faster and cheaper for all, and that’s why we want to offer firms the ability to utilise this innovation safely and securely.

MAS rules to discourage crypto speculation

In Singapore, the Monetary Authority released a new report in which it specified its opposition to crypto speculation. As part of the rules, the regulator will discourage offering financing, margin transactions and other incentives to trade. It wants crypto entities to not accept locally issued crypto card payments and to educate customers on the risks involved. Singapore is attempting to have a balancing act by issuing friendly laws that attract companies in the industry to the country.

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