Regulatory Actions Shake Hong Kong, Australia, and Venezuela: Binance and Coinbase Face Challenges

Regulatory Actions Shake the Cryptocurrency Landscape


Hong Kong, Australia and Venezuela took center stage as regulatory actions shook the landscape. Meanwhile, Sam Bankman Fried’s parents face lawsuits while Binance and Coinbase face challenges.

Hong Kong is stepping up its efforts

During Shanghai International Blockchain Week, Duncan Chiu, a member of Hong Kong’s Legislative Council, announced the upcoming implementation of stablecoin regulations in Hong Kong by mid-2024. This endeavor stands in stark contrast to China’s strict cryptocurrency policies.

Authorities in Hong Kong previously arrested 11 people linked to a cryptocurrency fraud case linked to the JPEX platform.

This decisive response was prompted by complaints of illegal activities amounting to HK$1 billion ($127.8 million).

The Securities and Futures Commission (SFC) emphasized its vigilant oversight of current events. A few days later, subsequent reports indicated that the number of detainees had risen to 11 people.

Australian agency sues Kraken, ByBit reaches deadlock in UK

Shifting our focus beyond Asia, news out of Australia revealed that the Australian Securities and Investments Commission (ASIC) has filed a lawsuit against Bit Trade Pty Ltd, the operator of the Kraken exchange in Australia.

These allegations relate to Bit Trade’s alleged non-compliance with Australian financial regulations. ASIC alleged that Bit Trade’s margin trading, lacking proper identification of its target market, contributed to losses estimated at $12.95 million to its Australian clients.

Bybit, a Dubai-based exchange, recently decided to suspend its services to clients in the UK due to new regulations in the country regarding cryptocurrency advertisements and promotions.

Bybit announced that UK users have until January 8, 2024 to close their positions or risk liquidation. New registrations in the UK will stop on October 1st, and deposit functions will be disabled for existing customers from October 8th.

ByBit’s announcement came a day after the UK’s Financial Conduct Authority (FCA) issued a stern final warning to companies promoting crypto assets to customers in the country.

Despite previous outreach efforts, the Financial Conduct Authority (FCA) appears frustrated by the lackluster response from unlicensed cryptocurrency firms, with 24 out of 150 bothering to respond to its queries. The agency warned that all companies are paying attention or preparing for some regulatory disruption as of October 8.

Venezuela confiscates illegal Bitcoin mining machines

This week, Venezuelan security forces raided the Tocorón prison, controlled by a notorious criminal gang, and seized Bitcoin (BTC) mining machines along with weapons such as grenades and rocket launchers.

The government deployed more than 11,000 personnel to retake the prison, which became the headquarters of the feared Tren de Aragua gang, which was notorious for a range of illegal activities.

Among the prison’s extravagant facilities, including a zoo and a casino for inmates, were Bitcoin mining machines used for illegal mining.

Journey to Bankman-Fried’s FTX experiment

The cryptocurrency scene has also seen several developments in the journey to the fraud trial of FTX founder Sam Bankman Fried in the US. This week, prosecutors raised objections to Bankman-Fried’s broad inquiries into jury selection for the upcoming trial.

They argued that these questions could prolong the selection process and potentially bias jurors in favor of the defense. They described the proposed questions as unnecessary, time-consuming, repetitive, and argumentative.

Meanwhile, Bankman-Fried is looking to make a second attempt to secure his release from the Brooklyn Metropolitan Pretrial Detention Center.

His defense team will appear before another US Court of Appeals, with the aim of convincing judges that remaining in detention hampers his preparations for defense. This comes after the Southern District Court of New York refused to release him before trial.

However, in a surprising turn of events, District Judge Lewis Kaplan barred several key witnesses, including British lawyer Lawrence Acca and University of Michigan professor Andrew D. Waugh, from testifying in Bankman-Fried’s upcoming trial.

The trial relied on these witnesses to shed light on FTX’s terms of services and obligations. Judge Kaplan’s decision was in response to concerns raised by prosecutors in late August, who said these individuals did not meet the standards for expert testimony.

Family dispute

Current FTX management has taken the unexpected step of accusing Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, of improperly redirecting millions of dollars and significantly contributing to FTX’s collapse.

According to court documents, the Stanford Law School professors were not mere bystanders; They said Joseph Bankman held a key decision-making role, while Barbara Freed influenced the company’s political donations.

To add to the twist, court filings this week highlighted how Joseph was originally offered a $200,000 annual salary at FTX, and had even bigger ambitions, seeking $1 million a year for his role at the company. He even enlisted the help of SBF’s mother, Barbara Fried, in these negotiations.

Binance vs. Securities and Exchange Commission

The Binance challenges extended into this week. Reports released on September 19 indicated that Binance is facing increased scrutiny from the Securities and Exchange Commission amid the departure of several executives, including the CEO of its US arm.

The Securities and Exchange Commission (SEC) is pushing for a deeper investigation into Binance’s activities, specifically regarding custody of assets on the exchange. The agency described Binance’s opposition to its decision as “lukewarm.”

This legal tug-of-war continues as Binance maintains that its lawyers’ accounts and documents should suffice, dismissing remaining concerns as unfounded.

The SEC is also concerned about how BinanceUS, Binance’s US arm, handles client assets.

The core of this conflict centers around an entity known as the Ceffu. The SEC confirmed that Ceffu is another Binance entity, rebranded and used to hold the assets of BinanceUS clients. However, Binance CEO Changpeng Zhao refuted these claims, claiming that BinanceUS never used Ceffu or Binance Custody.

Binance requests that the charges be dropped

Binance and Zhao filed a motion on September 21 asking the SEC to dismiss the lawsuit. They argued that the agency is exceeding its authority, also citing a lack of regulatory clarity in the cryptocurrency industry.

They asserted that the SEC’s attempts to retroactively apply its authority to crypto asset sales dating back to July 2017, without prior public guidance for cryptocurrencies, are unjustified.

Binance’s legal team also asserted that the SEC is misinterpreting securities laws in an attempt to gain regulatory control over the cryptocurrency space. Adding to this legal saga, on the same day, BinanceUS also filed a separate motion to dismiss the charges.

Coinbase is exploring growth abroad

While Binance faces regulatory challenges, Coinbase — one of the largest cryptocurrency exchanges in the US — has been looking to expand overseas.

Coinbase has added another feather to its European cap by obtaining an operational license from the Bank of Spain. The move allows the exchange to be a registered exchange for Bitcoin and other crypto assets. Thanks to this gesture from the Bank of Spain, Coinbase is now a licensed custody wallet provider and can serve retail and co-operative clients in Spain.

Coinbase has been eyeing licenses in Europe for a long time, especially in the financial derivatives market. Apparently, the exchange showed interest in acquiring the European arm of FTX shortly after the FTX empire went bankrupt.

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