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Welcome back to Chain reaction.
If you thought last week was crazy with the US Securities and Exchange Commission cracking down on major crypto companies like Coinbase and Tron, you should buckle up for this week’s news.
Binance, the world’s largest crypto exchange by volume, its CEO Changpeng Zhao and Chief Compliance Officer Samuel Lim are being charged by the U.S. Commodity Futures and Trading Commission (CFTC), according to a filing Monday.
The company, Zhao and Lim are being sued for allegedly violating trading and derivatives rules.
The CFTC filing alleges that the exchange has not registered with it in any capacity and has flouted “federal laws” governing U.S. financial markets, including laws that implement controls to prevent money laundering and terrorist financing, among other things, and track down.
After its launch in June 2017, the exchange became the largest crypto exchange in the world within 180 days and has held that position ever since. Binance has spent $80 million on third-party partners such as KYC vendors, transaction monitoring, market surveillance and research tools to support its compliance programs, a company spokesperson shared with businessupdates.org.
“This filing is unexpected and disappointing given that we have been working with the CFTC for over two years,” the spokesperson added. “Nevertheless, we plan to continue to work with regulators in the US and around the world. The best way forward is to protect our users and work with regulators to develop a clear, well-thought-out regulatory regime.”
The CFTC likely disagrees with that view, as the filing states that Zhao and other concerned parties in Binance’s senior management “failed to properly oversee Binance’s operations” and that those actions “actively violated U.S. law facilitated”.
In response to the CFTC announcement, Zhao tweeted “4”, which refers to one previous tweet of him from January using the song to tell others “FUD, fake news, attacks, etc.” to ignore. FUD is an acronym for fear, uncertainty and doubt and usually refers to when a company feels it is being disadvantaged.
This move comes at a time when the crypto industry – especially big players – is facing a lot of US regulatory action, which some see as a good thing for clarity, but others see as unfair or stifling to innovation. Whether this action will have a positive effect on the US crypto ecosystem will be determined in the long run.
But even after some regulatory enforcement, the cryptocurrency market seems unaffected. Total crypto market cap increased slightly this week from $1.15 trillion to $1.18 trillion, according to CoinMarketCap facts. At the time of writing, bitcoin and ether were up about 4% and 3% respectively within the same time frame.
This week in web3
Binance CFTC suit shows ‘regulators will continue to regulate and regulate more’ (TC+)
In keeping with the theme above, businessupdates.org delved into what the CFTC’s Binance lawsuit means for the larger crypto industry — and the impact could be far-reaching. “Crypto is under attack,” Yankun Guo, a partner at Chicago-based law firm Ice Miller, told businessupdates.org+. “The past six months have seen a flurry of complaints and enforcement actions against blue-chip names, including Coinbase, Kraken, and KuCoin, and it was only a matter of time before Binance had their turn.” The eventual impact on Binance could send shockwaves through the global digital asset market, another market player noted.
Former FTX CEO Sam Bankman-Fried indicted over alleged bribery of Chinese officials
The (former) exec of another crypto exchange was also in the news this week, but for different reasons. US prosecutors filed a replacement charge against former FTX CEO Sam Bankman-Fried, alleging that he bribed Chinese officials. According to court filings from the U.S. District Court for the Southern District of New York, “in or about 2021,” Bankman-Fried authorized and directed a bribe of at least $40 million to one or more Chinese government officials.
Are cryptocurrencies commodities or securities? Depends on which US agency you ask (TC+)
It’s a confusing time to be a crypto company. The markets are volatile and trading activity is shaky at the moment, but the main problem for crypto companies seems to be that there is currently no clarity on the laws they are supposed to be in compliance with. In CFTC’s latest lawsuit against Binance, it alleged that some cryptocurrencies were commodities – a position that differs from another major US government agency, the Securities and Exchange Commission (SEC), which considers most crypto assets (aside from Bitcoin) as securities .
The US and South Korea are both seeking Do Kwon’s extradition to face charges
Do Kwon, the founder of Terraform Labs, which operated the TerraUSD stablecoin and its sister token LUNA, was arrested in Montenegro last week while attempting to board a flight to Dubai with forged documents. What’s next? We do not know which country Kwon will be sent to as he now faces criminal charges in both the US and his native South Korea. And both countries appear to be seeking Kwon’s extradition.
Coinbase execs weigh in on the future of crypto in the US amid regulatory scrutiny (TC+)
Coinbase received a message from Wells from the U.S. Securities and Exchange Commission last week, and company executives took to Twitter Spaces to discuss the decision and what Coinbase’s next steps will be in creating legal frameworks for the crypto world. “Regulators have to make the rules, tell everyone the rules and we follow them,” CEO Brian Armstrong said during the call. “The current laws are not clear and we would like more clarity.”
The latest pod
For last week’s episodeinterviewed Jacquelyn Emin Gün Sirer, founder and CEO of Ava Labs.
Ava Labs has raised approximately $640 million in total, according to Ava Labs Crunchbase, and is backed by companies like a16z and Polychain Capital. In recent months, Ava Labs has announced a number of partnerships with major brands and companies, such as Amazon Web Services, which is covered exclusively by businessupdates.org.
Ava Labs created the layer-1 blockchain Avalanche, a platform that allows developers to build multifunctional blockchains and decentralized applications with a focus on speed and low transaction costs.
We talked about Gün Sirer’s background; why he launched the layer-1 blockchain, Avalanche, in 2020; whether the room has too many L1s; and how blockchains can scale more efficiently.
We also discussed:
- How layer 2 vision is broken
- US regulatory crackdown on crypto
- Ava Labs growth in Asian markets
- The partnerships and business development of the blockchain
- Ava Labs’ focus point for 2023 and beyond
Follow the money
- Crypto wallet company Ledger raises another $108 million
- Web3 protocol Polytrade raises $3.8 million to improve global trade
- Blockchain Startup Fetch.ai Grabs $40 Million to Generate Revenue and Provide Other Tools for AI-Generated Information
- Aptos based protocol Econia Labs raises $6.5 million to build decentralized order books
- Own Labs Closes $50 Million Series A Round Led by Blockchain Capital
This list was compiled using information from Messari and businessupdates.org’s own reporting.