Just a month ago, the scent of a showdown was in the air when Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), expressed his distaste for Binance during an interrogation by Congress. Labeling the cryptocurrency exchange as a deceiver of customers and a circumventor of U.S. securities laws, Gensler signaled a storm brewing on the horizon.

Fast forward to today, Binance finds itself squarely in the SEC's sights. A formal lawsuit against Binance, its CEO, and associated parties has been filed, alleging severe breaches of federal securities laws. According to the SEC, these supposed violations jeopardized investors' assets and enabled the accused to unlawfully accumulate profits totaling billions.

Before diving into the lawsuit, it's important to understand how things got here...

There are some vital details that set the stage for the ensuing legal battle. This is not your regular SEC operation.

- SEC Chairman Gary Gensler is one of the most contentious leaders to date.

His leadership style significantly deviates from his predecessors, instigating a tense atmosphere between the SEC and regulated firms.

Formerly, the SEC used to handle compliance issues in a manner that fostered dialogue between enterprises and regulators. However, attempts to uphold this tradition of open communication under Gensler's leadership were met with silence. A notable point of concern is Gensler's often refusal to respond to inquiries, even when he is the sole authority capable of answering.

His silence speaks volumes when firms, after being overlooked, find themselves on the receiving end of an SEC lawsuit. "Leveraging enforcement actions to interpret law in a burgeoning industry is neither an effective nor equitable regulatory approach," argues a congressional representative.

SEC Chair Gary Gensler takes questions from Congress.

- Under Gensler we have witnessed a large number of disgruntled employees leaving the SEC, and unhappy businesses leaving the country...

Gensler's management style has been controversial, eliciting criticism from within the SEC. Commissioner Hester Pierce described his leadership as 'lethargic,' critiquing the reliance on enforcement actions for legislative interpretation in an emerging industry as inefficient and unfair.

- The most concerning illustration of the SEC's broken leadership: its interaction with Coinbase.

Despite obtaining SEC approval and listing on the stock exchange following detailed disclosure of operations, Coinbase, without any operational changes, received a Wells Notice stating an impending lawsuit for potential violations.

Essentially, after SEC approval and US investors buying hundreds of millions of dollars of coinbase stock, that stock is now at risk of the agency that approved it, now out to crash it - all with no changes in business operations since it was approved. 

*Update* - One day after this article was published the 'impending lawsuit' referenced above was executed.

- Criticized for Missing in Action When the SEC was Actually Needed - FTX Debacle Occurred on Gensler's Watch.

While firms seeking guidance were ignored, then slapped with lawsuits for violating undisclosed rules, FTX, under Gensler's supervision, ascended to be the #2 global exchange free of any interference. Ironically, the Binance CEO, now facing a lawsuit, exposed FTX's underlying fraud.

The SEC nowhere to be found as users traded assets that were non-existent or misplaced due to FTX's deficient and fraudulent accounting.

- These are not criminal charges.

The lawsuit seeks financial penalties for regulation violations. No criminal incarceration can result from the legal actions taken thus far.

- A recurring name you will see in the charges 'BAM Trading'.

Listed as the 'owner' of Binance.us, BAM Trading was purportedly created to comply with U.S. laws. However, the SEC alleges that Binance.com CEO CZ controls both Binance.com and Binance.us, implying that BAM Trading is merely a facade for Binance's U.S. operations.

Armed with this background, let's delve into the lawsuit:

The SEC accuses Binance and BAM Trading of deceptive practices, enticing U.S. investors into buying, selling, and trading crypto assets through their unregistered online platforms, Binance.com and Binance.US. The defendants are alleged to have offered unauthorized crypto asset securities, imperiling investor wealth.

The charges extend to Binance and BAM Trading's operations, helmed by Zhao Changpeng, for providing securities market services—trading, brokering, and clearing—on their platforms without SEC authorization.

Moreover, the lawsuit alleges that Binance and BAM Trading partook in illegal, unregistered offers and sales of crypto asset securities, concealing crucial investment-related information.

Another accusation centers on BAM Trading and BAM Management's deceitful promises about the Binance.US Platform's controls, while allegedly accumulating about $200 million from private investors and billions in trading volume.

The lawsuit goes on to accuse Binance of an underground operation, alleging a multi-step strategy since 2018 to evade U.S. laws. The scheme involved the establishment of BAM entities in the U.S. under Zhao and Binance's control, disguised as independent operators of the Binance.US Platform.

Furthermore, the defendants are accused of circumventing U.S. regulatory oversight while providing securities-related services to U.S. clients. The defendants also reportedly failed to implement vital trading surveillance or manipulative trading controls, leading to 'wash trading' and self-dealing on the Binance.US Platform.

The lawsuit portrays Binance and BAM Trading as willful evaders of key disclosure requirements and other investor and market protections, thereby violating the Securities Act of 1933 and the Securities Exchange Act of 1934.

Yes, 1934 is when the laws they are applying to crypto trading in the US were authored.  Many point out 'that's decades before blockchain tech was invented' - I point out that color TV's were still 20 YEARS away.

Binance Vows to Stand Its Ground...

As this report was in preparation, both Binance.com and Binance.US responded.

Binance.US's response emphasized that "the lawsuit is baseless, and we intend to defend ourselves vigorously." The full statement is available on their Twitter account.

Binance.com denounced the SEC's actions on their website, asserting the SEC has "zero justification" to suggest customer assets were at risk. They stated that instead of engaging in a productive dialogue about the platform's safety and security, the SEC preferred to "make headlines."

CEO and Founder of Binance 'CZ' also took to Twitter, sarcastically polling "Who protects you more?" between the SEC and Binance—with Binance has an 85% lead, but obviously this isn't an accurate polling method. He also retweeted the SEC Chairman's lawsuit announcement, provocatively asking "Wonder if he ever reads the comments under his post, from the consumers he is suppose to protect?" 

-------
Author: Mark Pippen
London News Desk | Breaking Crypto News

Brian Armstrong, Coinbase CEO, says the United Arab Emirates deserves "a lot of credit" for its commitment to crypto regulation.

The European Union's Markets in Crypto Assets (MiCA) regulation is progressing towards completion fast, and by all indications will become law in the 27 countries that make up the European Union, possibly before the end of the year.

The response from the crypto industry as well as critics has been generally positive, with many believing the law has found the right balance between protecting consumers from scammers and other criminal conduct, empowering enforcers to go after those criminals, all while acknowledging the future potential of the technology and the importance of allowing legitimate use to proceed with as little interference as possible. 

Europe Takes The Lead After Biden Administration Fails to Show Ability to Understand Crypto Market...

The EU clearly plans to take the lead when it comes to setting the world regulatory standards of the cryptocurrency ecosystem. In online crypto communities some European traders are now suggesting that "the US should just follow our lead". 

This new determination to be the standard-setters seems to have ignited when the Biden administration shared their "first comprehensive framework for the responsible development of digital assets" - which basically asked government agencies to submit answers to their  completely open ended question of what they believe they need to properly regulate the industry, this warned the rest of the world that current US leadership appears to be unqualified to regulate crypto (and probably all tech) as senior citizens fill many of the vital roles. 

White House seems "only focused on the risks and not the opportunities" that the cryptocurrency sector has to offer....

Both Biden and officials appointed by him seem to have taken media clickbait articles as fact, and often remarks focus on addressing only the negative aspects in the crypto world.

But law isn't just about stopping the bad guys, it's also about protecting the good ones. Which is why lawmakers shouldn't be looking at anything but hard data and reality to form their opinions.

In reality, about 2.1% of crypto is being used for illegal purposes like money laundering or purchases of items found on the darkweb, according to the firm that works with the FBI analyzing blockchain data for illegal activity, Chainalysis.

According to the UN, as much as 5% of ALL global currency is being used to facilitate something illegal, meaning Fiat currency, specifically paper cash, remains the preferred format of currency in the criminal underworld.

The European Union recently just slipped in harsh new rules regarding Dollar-pegged stablecoins...

How the US could still be first to implement comprehensive crypto regulations...

There are some major flaws in the he most current version of the EU's 'Markets in Crypto Assets' regulatory proposal...

By dividing a user's deposit into a random number of parts and distributing those pieces to other users, a cryptocurrency "mixer" essentially muddles up the transactions of individuals who make deposits to them. In exchange, you receive the same amount back (less fees) from other anonymous users.

Tracking stolen cryptocurrency becomes difficult since it may rapidly change hands from one person to dozens when 'mixed'.

Tornado.Cash joins Blender.io on the list of mixer websites that are now forbidden for US citizens to access after being sanctioned by the US Treasury today.

The US Treasury estimates that since Tornado's inception in 2019, more than $7 billion in virtual currency has been laundered on the platform.

However, it's the $455 million from the "Lazarus Gang," a hacker group supported by the North Korean government, is what officials find most upsetting.

The sanctions also covered 44 wallets, making it prohibited to receive or send money to any those addresses.

Tornado Cash made an effort to abide by the rules, but ultimately failed.

In attempts to comply with the US government but still function for it's users, Tornado Cash implemented improvements like a screening tool to stop money from travelling between it and bitcoin wallets that officials say are tied to illegal activity.

Despite that, the Lazarus Group and other hackers were still able to transmit money to Tornado Cash for money laundering, according to a law enforcement investigation of open cryptocurrency transactions, the official added.

“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in a statement. “Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”

Treasury officials added that they hope this motivates the private sector and partner nations to help in regulating illegal use of crypto.

-------
Author: Mark Pippen
London News Desk 
Breaking Crypto News

Cryptocurrency has had an underwhelming start to 2022, with 2021's bull market taking a turn that sent Bitcoin down to $38,500 in January. Despite a couple wild swings, it keeps returning to approximately that same price - now 3 months in to the year and it's $38,450 at the time of publishing.

While 2022 on a micro scale has been a battle of fear and confidence between crypto bulls and bears, the macro investor will be happy with the headlines emerging throughout February. Every day, there appears to be a more positive attitude toward cryptocurrency among big companies, institutions, and countries.

Within every country, there are development conversations and plans being drawn on how to integrate, adopt, make use of, and ultimately benefit from the coming adoption and demand of Bitcoin by the public. In comparison to other successful developing technologies, Bitcoin’s positivity and acceptance is snowballing at a rapid pace. Countries that already embrace crypto are moving fast to stay ahead of the curve, while countries that still have a legal grey area over crypto are starting to have their heads turned, making some cautious moves in attempt to keep a hand in the game.

I could spend all day listing new daily headlines, that show a major swing in momentum towards cryptocurrency by countries, states, institutions, companies, and key people/investors. However, let's take examples from the big guns in 2022 so far; 

- Russia recently warned of a crypto ban but looked to have pulled a U-turn, making new policy to integrate and benefit from crypto.

- India has strongly opposed crypto and still has bans in place. They have now announced a bill to tax crypto gains, allowing a huge population to use the blockchain legally.

- Turkey’s crypto bans seems to be nearing an end as they see such a high demand for blockchain use amid an inflation crisis. They too are exploring ways to tax, legalise, and make use of crypto themselves.

Current countries that have a ban, tight regulation, or heavy legal restrictions on crypto are:

COUNTRY | POPULATION:
China - 1.4Billion
India - 1.3Billion
Indonesia - 273m
Russia - 145m
Egypt - 100m
Vietnam - 97m
Turkey - 84m
Iran - 83m
Columbia - 50m
Algeria - 43m
Iraq - 40m
Nepal - 29m
Bolivia - 11m
Macedonia - 2m
Kosovo - 1.8m

Total 3,658,000,000

Combined, we discover 45% of the world's population has heavily restricted or no access to cryptocurrency markets...

Even in countries where crypto has been embraced so far, political pressures are guiding people toward crypto as a store of value and wealth preservation.

More and more people are beginning to recognize the value of hedging some of their wealth in ironically safer assets such as cryptocurrency in the face of uncertainty in places such as Ukraine and certain areas of Canada.

Citizens are pressuring politicians and forcing them to get educated on crypto - warning that if bans are imposed, they can expect to lose the next election.

Just last week in the European Parliament it initially appeared that a bill that would have banned mining of some cryptocurrencies known for using high amounts of electricity was going to pass.  Until members offices and inboxes began being flooded by voters advising they re-think their position. 

Will 2022 pan out to be the year of Adoption?

Regardless of price in the next day, week, or month, this snowballing momentum will continue to grow in favor of cryptocurrencies as the abovementioned organizations continue the race to get ahead of the game. What happens when the above 45% have crypto assets readily available?

I believe we will see the above list continue to have their heads turned in fear of falling behind of blockchain tech, and for this reason, 2022 will be the year to kickstart mass adoption of crypto.

----------------
Written By Guest Author 
Contact: 614Crypto @ Twitter
Disclaimer: Not Financial Advice

Since the first in 2013, SEC actions against cryptocurrency companies and startups had been on the rise. But according to recent statistics from economic research firm Cornerstone Research, 2021 marked the first year these actions decreased. 

The obvious question is - why? Perhaps simply Covid and a generally backed-up legal system, meaning while prosecutions may have been delayed, they had not deceased.

Others say the difference is Gary Gensler, who was appointed director in 2021 and his experience prior to joining the SEC - as a professor of bitcoin and blockchain at MIT...

Lawmakers and politicians with misconceptions about cryptocurrency, and often a general ignorance of technology in general remain the biggest threat.  But with the appointment of Gensler many of crypto's supporters are feeling a bit less worried, as it at least appears the SEC is now led by someone with a full understanding of what they're tasked with regulating. 

Since 2013, the SEC has taken action in 123 cases that focused on cryptocurrency...

From otherwise legitimate projects that lacked the proper licenses to operate, to full blown Ponzi-scheme style scams.

Since their first crypto based case in 2013 - the amount of actions taken by the SEC each year has only grown, with the amount of cases peaking in 2020 with a total of 35.  Last year, 2021, was the first decline in total cases with a total of 24.

Pressure on US Regulators and lawmakers continues to grow, as the industry increases political influence...

Particularly over the past 3 years the crypto industry has put a major focus on making sure their voices are heard by those who will eventually decide how their businesses will need to operate.

Getting to a position where they can be heard involves playing the game - political donations, charities, resources, speaking engagements. Cryptocurrency company founders and executives are being spotted in every corner of Washington DC these days. 

Inside the crypto industry, as they go inside Washington DC...

The US crypto industry has accepted that new regulations are eventually coming - so the sooner they know what they will be, the better. Over the years we've heard multiple large investors and investment firms say regulatory uncertainty is their main reason for still sitting on the sidelines. 

While acknowledging the urgency for clarity, they cannot push so hard that politicians feel pressure to just 'do something' - sacrificing the time needed to draft reasonable, productive, and positive guidelines.

"The end goal everyone wants is a stronger, more stable industry, with better protected and informed investors and traders - and we're positive this can be achieved" says a contact from one of the major US crypto companies involved in lobbying Washington DC, who asked to remain unnamed, and that we note they are speaking as an individual and not a spokesperson for any organization. 

But they also believe that completing their current goal must come before anything goes up for a vote, which my contact describes as 'educating lawmakers, because if there was a vote today I think about 10% of them would understand the impact of what they're voting on". 

Which isn't as simple as addressing Congress and the Senate with a '1 size fits all' speech, my contact explains "There's a huge range of experience among lawmakers when it comes to finance and tech. That's why it's about asking for just a few minutes to speak to them 1 on 1 - and then we don't just lecture them on crypto but also make them feel comfortable to ask questions and raise concerns". 

So, while the industry wants a resolution soon, a plan that aims for informed people making smart decisions comes with a speed limit. 

 ------- 
Author: Justin Derbek
New York News Desk
Global Crypto Press Association / Breaking Crypto News

As expected, the President's Working Group on Financial Markets (PWG) has released its report on stablecoins. According to the report, which is available here and below, if stablecoins are properly regulated, they could emerge as a more efficient and "inclusive" payment option. Simultaneously, stablecoins and stablecoin-related activities “present a variety of risks.”

The FDIC and the Comptroller of the Currency collaborated with the PWG to create the report.

These risks, according to the PWG Stablecoin report, include market integrity and investor protection against fraud and misconduct in digital asset trading, including market manipulation, insider trading, and front running, as well as a lack of trading or price transparency.

Furthermore, stablecoins may raise illicit finance concerns and risks to financial integrity, such as anti-money laundering (AML) and counter-terrorism financing (CFT), as well as prudential concerns such as a run on stablecoin assets when questions about redemptions arise.

According to the PWG, digital asset regulations are the responsibility of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), and these two agencies "have broad enforcement, rulemaking, and oversight authorities that may address certain of these concerns." According to the report, stablecoins or parts of stablecoin arrangements may be securities, commodities, or derivatives depending on the structure.

The PWG requests that Congress pass legislation requiring "stablecoin issuers to be insured depository institutions, subject to appropriate supervision and regulation at both the depository institution and the holding company level."

According to the proposed legislation, "custodial wallet providers should be subject to appropriate federal oversight."

Congress should also give a stablecoin issuer's federal supervisor the authority to require any entity that performs activities critical to the operation of the stablecoin arrangement to meet appropriate risk-management standards.

In advance of any new regulations, the PWG states;

“[regulatory agencies are] committed to taking action to address risks falling within each agency’s jurisdiction, including efforts to ensure that stablecoins and related activity comply with existing legal obligations, as well as continued coordination and collaboration on issues of common interest.”

Treasury Secretary Janet L. Yellen issued a statement on the report:

“Stablecoins that are well-designed and subject to appropriate oversight have the potential to support beneficial payments options.  But the absence of appropriate oversight presents risks to users and the broader system. Current oversight is inconsistent and fragmented, with some stablecoins effectively falling outside the regulatory perimeter. Treasury and the agencies involved in this report look forward to working with Members of Congress from both parties on this issue.  While Congress considers action, regulators will continue to operate within their mandates to address the risks of these assets.”

While the legislative process can be slow, you can expect the CFTC and SEC to make independent statements while coordinating any activity. In the absence of legislation from Congress, the group may take additional action as outlined in the document.

The stablecoin market is currently valued at around $127 billion, with Tether (USDT) and Circle's dollar-based cryptocurrency USDC leading the way.

The SEC has hired a company out of California named 'AnChain AI' and begun a 5 year contract reportedly costing $625,000 - with the goal of  implementing greater oversight over the world of decentralized finance platforms (aka DeFi).

Company CEO and co-founder Victor Fang says they "will provide the technology to analyze and track smart contracts". AnChain AI says their software uses artificial intelligence and machine learning, and includes a tool that flags potentially suspicious transactions and wallets.

Fang says the big picture is to stop “post-incident investigations” by preventing the incidents to begin with, which he describes as “defense all the way up the upstream”.

They list Microsoft and crypto exchange Huobi as clients.

The SEC Has Not Yet Commented On The Deal, But Recent Quotes From It's Director Give Us Some Insight...

Since April of this year Gary Gensler has been the director of the SEC, and he isn't new to Bitcoin - he taught a class on it at MIT.  So many give him the benefit of the doubt when he says the organization's goal is always to protect investors.

With so many politicians clearly uneducated on crypto, supporters hope that his knowledge about Bitcoin will translate into common sense regulation actions.

Gensler recently spoke to the Wall Street Journal, where he stated that DeFi projects are not immune to regulation, and aren't as decentralized as many believe -  often having some centralized elements.

Likewise, even if the app itself is decentralized, if a small group of developers make all the decisions for it, that's a form of centralization as well. 

------------------

Author: Mark Pippen
London News Desk / Breaking Crypto News

U.S. Rep. Anna Eshoo, known as “Pelosi’s closest friend in Congress” and comes from the same state (California) and is a member of the same party (democrat).

Eshoo has requested the highest ranking senator, Speaker Pelosi, to correct the definition of the term “broker” in the Senate’s infrastructure bill, (correctly) saying it's too broad and may be difficult for some entities to comply with.

In an open letter she writes “When the House takes up the Senate bill, I encourage you to amend the problematic broker definition in Section 80603 of the legislation”.

Eshoo joins a growing group of bipartisan lawmakers pushing back against the crypto provision. House Financial Services Committee Patrick McHenry (R-N.C.) and a handful of other Congressmen on both sides of the political aisle have expressed their support for changing the language.

The infrastructure bill, a priority for U.S. President Joe Biden, will fund $1 trillion in infrastructure improvements or new initiatives around the country, such as passenger rail and electric vehicle charging. Some $550 billion of this will come from new spending, including “pay-fors,” measures meant to raise funds to pay for the initiatives in the bill.

Under the current terms of the provision, any entity that facilitates a crypto transaction on behalf of another person would be treated as a broker, meaning they would have to file specific tax information reports which would include know-your-customer details. However, industry proponents are concerned that this would include miners or other network validators and hardware developers, who don’t typically have access to this sort of information.

Senators Ron Wyden (D-Ore.), Pat Toomey (R-Pa.) and Cynthia Lummis (R-Wyo.) proposed an amendment to narrow the scope of the language, while the provision’s original author, Senator Rob Portman (R-Ohio) as well as Senators Mark Warner (D-Va.) and Kyrsten Sinema (D-Ariz.) introduced a different amendment. Ultimately, the Senate proceeded without considering any amendments, leading to the majority of the group introducing a compromise amendment that was blocked under Senate procedural rules.

Leaving the big question - will Pelosi go against President Biden, whos has shown a severe lack of understanding when it comes to anything tech related? Supporting the bill in it's current form being the latest example.

This as Biden's approval hit new lows today, with 2 polls, Economist/YouGov and Quinnipiac both showing him at 47% (For perspective, Obama was at 62%, Bush Jr was at 55.8% at the same time into their presidency)

The house expected to take up the bill when it returns at the end of August when it returns from recess.

------- 
Author: Vincent Russo
Los Angeles News Desk

Last Friday Binance US lost their CEO after just 3 months. Prior to taking the role with Binance, he served as acting comptroller in the Trump administration.

Brian Brooks gave as the reason for his departure disagreements over strategic direction.

And the 2nd former regulator to leave a top crypto firm in recent days...

Brett Redfearn has resigned as Coinbase's head of capital markets after just four months in the job.

Redfearn, a former Securities and Exchange Commission official, was the SEC's director of the trading and markets division prior to joining Coinbase.

According to sources familiar with the matter, Redfearn's departure was triggered by Coinbase's shift in focus away from digital asset securities.

A spokesperson from Coinbase confirms the story and says the Redfearn left to pursue other goals, but on positive terms.