Category: Regulation

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Australia Crypto Exchange Crypto News Huobi Regulation

Huobi Global Exchange Gets Green Light to Operate in Australia

Former China-based crypto exchange Huobi Global is free to offer its services Down Under after successfully registering as a digital currency exchange provider with the Australian Transaction Reports and Analysis Centre (AUSTRAC):

Global Expansion Plan Moves Ahead

After also obtaining licences in New Zealand and the United Arab Emirates in June, Huobi is now eyeing a move into the US market. An American subsidiary, HBIT, was established last month and Huobi has already received a Money Services Business licence with the intention to launch full exchange services in the US down the line.

Following China’s most recent crypto crackdown in late 2021, Huobi was forced to relocate to Gibraltar. The company has since opened offices in Japan and South Korea, though it has struggled to obtain a foothold in Thailand, having to shut down after failing to comply with Thai Securities and Exchange Commission regulations.

Last month, Huobi was given permission to operate in Dubai. The Hong Kong Securities and Futures Commission also granted the exchange a trading licence two weeks ago.

Huobi Starts With OTC Services in Australia

In Australia, Huobi will initially offer fiat to cryptocurrency trading. Lily Zhang, the company’s chief financial officer, stated that the local office would concentrate on OTC services:

We have always made security and compliance our highest priorities, as we believe that only under this principle can we grow alongside the industry to provide professional and secure services to our users.

Lily Zhang, CFO, Huobi Global

Since it was founded in 2013, Huobi has been delivering digital asset services to more than a million customers worldwide. That number is set to expand exponentially should the US open its doors.

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Coinbase Crypto News Cryptocurrency Law Regulation

Coinbase Stock Tumbles 20% Amid Regulatory Probe into ‘Unregistered Securities’

Shortly after announcing the first crypto insider trading case, where it identified nine tokens as securities, the US Securities and Exchange Commission (SEC) has now launched an investigation into Coinbase, the publicly listed exchange that listed them:

According to a report by Bloomberg, the SEC is looking into whether Coinbase improperly let Americans trade digital assets that should have been registered as securities. On release of the news, Coinbase stock dropped by 20 percent but recovered shortly thereafter.

Coinbase share price. Source: Google Finance

What Are Unregistered Securities Anyway?

The term “securities” refers to tradeable financial assets, and under US securities law a company may not offer or sell securities to the public unless the offering has been registered with the SEC. Registered offerings are subject to a plethora of laws and regulations that purport to protect investors.

Full disclosure is one of the core elements required within a public listing, designed to help investors make informed choices, and this is typical not just in the US but across virtually all capital markets.

Some of the required information to be disclosed includes the history of the company and its founders, shareholding structure, financial statements, executive compensation, risk factors (both current and future), management’s explanation of operations, and any other material facts relevant to the offering.

If 90 percent of cryptocurrencies are securities, as has been alleged by SEC chairman Gary Gensler, the question then becomes whether relevant disclosures have been made and if not, who should be prosecuted – the project founders or the listing exchange?

Coinbase Denies It Lists Securities

For its part, Coinbase has previously stated that it does not list securities, arguing that:

Coinbase has a rigorous process to analyse and review each digital asset before making it available on our exchange – a process that the SEC itself has reviewed. This process includes an analysis of whether the asset could be considered to be a security, and also considers regulatory compliance and information security aspects of the asset.

Coinbase statement

It also argues that “the majority of assets that we review are not ultimately listed on Coinbase”. The company’s statement went on to criticise the SEC’s approach of “regulation by enforcement”, and stressed the need for a “concrete digital asset securities regulatory framework”.

Clearly, regulators are cranking up the regulatory pressure and, given that some 20,000 tokens exist across the world, the most viable mechanism for regulation appears to be with exchanges. Centralised exchanges should no doubt be expecting increased scrutiny over the coming months.

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Australia Blockchain Crypto News Regulation

Blockchain Australia CEO Departs Without a Replacement

Steve Vallas, the CEO of Blockchain Australia, has announced via a LinkedIn post that he will step down from his position, leaving the company without an immediate replacement.

Vallas will officially depart Blockchain Australia on July 29, after originally declaring he would step down as CEO in a LinkedIn announcement posted three months ago.

In both his resignation posts, Vallas recognised his board (past and present), making special mentions of those who had played key roles during his time at Blockchain Australia. He also shared some kind words regarding the mission of his company and the industry:

https://www.linkedin.com/posts/stevevallas_the-best-endings-are-new-beginnings-after-activity-6924474300515201024-Mywl/

The future of the blockchain industry is extraordinarily bright and it’s been a privilege to play a part in this development.

Steve Vallas, original resignation announcement

Vallas’s initial resignation post stated that the “formal search for a new CEO [would] begin shortly”. However, Blockchain Australia has yet to find a suitable replacement for Vallas, leaving the position vacant on his exit.

Blockchain Australia was not Vallas’s only duty. He remains deputy chair of the National Blockchain Roadmap Steering Committee, as well as vice chair of the ASEAN (the Association of South-East Asian Nations) Blockchain Consortium. He also holds a position on the ASIC Digital Finance Advisory Panel, advising on financial and regulatory technology matters.

Blockchain Australia Operations

Blockchain Australia has taken multiple influential steps toward improving the sector over the past two years. In February 2021, the organisation terminated the membership of Gold Coast-based cryptocurrency Qoin. The reasoning behind this was outlined in a Notice of Member Disciplinary Resolution, which stated that Qoin had been targeting retail merchants across Australia.

Following this, Blockchain Australia began seeking “safe harbour” for crypto businesses as regulatory uncertainty ran rampant. The organisation petitioned for clarity regarding the regulatory framework for cryptocurrencies in Australia and, alongside industry-related partners, it recommended a set of regulations to the federal government with hopes of addressing these issues.

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Dogecoin Markets Regulation Scams

Dogecoin Copycat ‘TeddyDoge’ Drops 99.95% in $4.5 Million Rug Pull

The Dogecoin copycat, TeddyDoge (TEDDY), has lost over 99.95 percent of its value over the past few days after suffering what crypto security firm PeckShield described as a “soft rug pull” last weekend:

PeckShield said wallets connected to the coin’s developers acquired and then swapped over 30 billion TEDDY tokens – valued at approximately US$4.5 million – for wrapped Binance Coin (wBNB).

The wrapped BNB was then converted to BNB and Binance USD (BUSD) and gradually transferred to Binance, sending investor confidence and the price of TEDDY plummeting.

Rogue Developers Plunder Liquidity Pools

The TeddyDoge developers were able to easily steal such a large amount of assets because they controlled the TeddyDoge liquidity pools, meaning they had total access to the token pairs held in their smart contracts.

Regulators are slowly starting to wake up to the risk rogue crypto developers pose to investors. In April, new legislation was filed in New York state to specifically outlaw crypto rug pulls.

Rug pulls in crypto refer to projects that often initially appear legitimate but eventually, when the price has pumped sufficiently, the developers abandon the project and make off with investors’ assets, figuratively pulling the rug out from under them. In the case of TeddyDoge, investigators have labelled it a “soft rug pull” as they’re not yet certain the developers have totally abandoned the project.

Project’s Telegram Admins Not Sure What Happened

The administrators of the TeddyDoge Telegram channel also remain uncertain as to exactly what caused the loss of funds and price crash, saying it could have been either “a bug in our cross-chain bridge or a leaked developer wallet”. 

The admins warned users not to buy any more TEDDY tokens for now, saying they had closed the cross-chain bridge and were “in the process of fixing it”. They also said that TEDDY holders would soon receive a new token called DRAC, as the project was rebranding from TeddyDoge to the DRAC Network.

TeddyDoge is the latest in a long line of crypto projects to have defrauded investors. In November 2021, the founders of the curiously named Monkey Jizz DeFi project made off with approximately US$300,000 of investors’ funds after having gone to great lengths to appear legitimate and assure investors.

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Coinbase Crypto News Cryptocurrency Law Regulation

US Regulator Lists 9 Tokens as Unregistered Securities

In a groundbreaking insider trading case against a former Coinbase employee, US regulator the Securities and Exchange Commission (SEC) has identified nine tokens in its complaint to be unlicensed securities:

More Bad Press for Coinbase

The case was announced as insider charges were brought against a former Coinbase product manager, his brother, and his friend for allegedly trading numerous crypto assets on multiple occasions, prior to making them available for public trading.

Coinbase CEO Brian Armstrong took to Twitter saying that the company had received information earlier in the year about possible frontrunning and “immediately launched an investigation”:

As a result of our investigation we identified three suspects and provided this information to law enforcement. One person was a Coinbase employee who we terminated. Today, the DOJ has criminally charged this former employee and the two other individuals for this abusive conduct.

Brian Armstrong, CEO, Coinbase

Unregistered Securities Claim, Again

Earlier this year, Coinbase became the subject of a class-action lawsuit for selling 79 crypto assets alleged to be unregistered securities, and unfortunately for them, another claim appears likely.

This case, emanating from the SEC, alleges that those accused were frontrunning the public listing of as many as 25 digital assets, with nine being described as unlicensed securities. Consequently, they profited to the tune of some US$1.1 million.

Specifically, the claim referred to Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX, and XYO.

Gurbir Grewal, director of the SEC’s Division of Enforcement, commented that they were less concerned with labels “but rather the economic realities of an offering”.

He added: “In this case, those realities affirm that a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase. Rest assured, we’ll continue to ensure a level playing field for investors, regardless of the label placed on the securities involved.”

Caroline Pham, a commissioner at the US Commodity Futures Trading Commission (CFTC), said that the SEC’s actions constituted “regulation by enforcement” rather than addressing the question of whether or not certain crypto assets are securities “through a transparent process that engages the public to develop appropriate policy with expert input”.

It’s become increasingly self-evident that regulatory clarity is required on the question of whether crypto assets are unregistered securities, as is often alleged. Securities require adequate disclosure, and arguably that remains conspicuously absent in the vast majority of crypto projects.

However, on the bright side, one benefit of crypto – as highlighted in this case – is that it’s very difficult to conceal your trail if shenanigans are underfoot:

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Australia Crypto News Regulation

Australian Financial Planning Association Backs ‘Crypto Rule Book’

The Financial Planning Association of Australia (FPA) is showing its support for a “crypto rule book”, calling to regulate crypto assets via exchanges and arguing it would be far too difficult to regulate the underlying assets separately.

Regulate Exchanges, Not the Technology

Ben Marshan, the FPA’s head of policy, strategy and innovation, has said that “the regulation of a financial product or service should not depend on the technology which underlies the asset”, adding:

To this point, investment in crypto assets is as much in relation to the asset itself, such as an ether [ETH] coin or a non-fungible token [NFT], as a bet on the sustainability of the technology platform supporting the asset, for example, the Ethereum blockchain.

Ben Marshan, head of policy, strategy and innovation, FPA

Marshan’s opinion is that besides regulating exchanges, it would be nearly impossible to regulate assets given the way they are housed: “[The products are] so decentralised, they’re in all sorts of foreign jurisdictions.”

He noted further that the regulation of crypto should fall under the current financial services regime and not under a new separate legal framework. Focusing regulation on crypto service providers, such as exchanges, would remove a lot of “complexity” from the equation:

It makes it a lot easier because instead of having to work your way through thousands of pages of the Corporations Act, people can go to a specific section and it’s much more efficient.

Ben Marshan, head of policy, strategy and innovation, FPA

Marshan’s view is that if a rule book were adopted, it would allow financial planners to recommend crypto assets to their clients along with specific training in associated crypto strategies.

“At the moment, it’s effectively illegal because there’s no authorisation around crypto assets,” Marshan said, “and because of that financial planners can’t recommend them and can’t get professional indemnity insurance.”

Calls to Government for Clearer Regulation

While the FPA is pledging its support for a “crypto rule book” to be implemented, many have called on Australia’s new Labor government for clearer regulation when it comes to crypto. In 2021, Aussies lost a total of A$84 million in cryptocurrency scams, which many argue could have been avoided if the previous government had enacted clearer regulations regarding digital assets.

The new government is unlikely to change its stance, having recently confirmed that crypto is not a foreign currency and would remain subject to capital gains tax.

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Australia CBDCs Crypto News Cryptocurrency Law Regulation Stablecoins

Reserve Bank of Australia Chief: Private Stablecoins May Be Better Than CBDCs

In a recent panel discussion of the G20 finance officials meeting in Indonesia, Reserve Bank of Australia (RBA) governor Philip Lowe signalled his support for privately issued stablecoins, subject to appropriate consumer protection guardrails.

Private Sector Better Suited to Issuing Digital Dollars?

Just weeks after Australian Treasurer Jim Chalmers said that crypto would remain excluded from foreign currency tax arrangements, RBA head Lowe has said that privately issued stablecoins may be better than central bank digital currencies (CBDCs), provided the relevant companies are suitably regulated.

Treasurer Jim Chalmers (left) and RBA governor Philip Lowe (centre) represent Australia at the the 2022 G20 finance officials meeting. Source: The West Australian

In a panel discussion that included the inherent risks of decentralised finance (DeFi) projects, talk shifted to CBDCs and their potential application in both a retail or wholesale context.

With the recent implosion of “stablecoin” UST and Luna, regulation has come into sharp focus, an issue that no doubt partially informed the RBA chief’s comments on privately issued stablecoins:

If these tokens are going to used widely by the community they are going to need to be backed by the state, or regulated just as we regulate bank deposits.

Philip Lowe, RBA governor

Lowe added: “I tend to think that the private solution is going to be better – if we can get the regulatory arrangements right – because the private sector is better than the central bank at innovating and designing features for these tokens”.

As crypto regulation is one of the newly elected federal government’s stated priorities, those who oppose retail CBDCs on the basis of financial surveillance and infringements on freedom will be pleased to hear that the RBA governor is seemingly more inclined towards a free-market solution. However, that in itself provides no guarantee, as Tether (USDT) and Circle (USDC) have both been accused of censorship in the past.

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Australia Crypto News Regulation Surveys

Australia 5th in Global Crypto Rankings: Report

Australia ranks fifth among the world’s top crypto-friendly economies, according to the latest quarterly global cryptocurrency rankings released by analytics firm Coincub.

Coincub awards points across nine overall categories: government, financial services, population, taxation, talent development and industry participation, trading, fraud and environmental potential. New sub-categories such as crypto education courses and initial coin offerings have been added to create a more comprehensive gauge.

Germany, US Top the Table, Followed by Switzerland and Singapore

Jointly topping the table are Germany and the US, whose dominance stems from both countries’ progressive regulatory environments and major bitcoin investments by mainstream institutions.

Allowing its savings industry to utilise crypto investments and maintaining a zero-tax policy on capital gains on BTC and ETH held for more than a year were key reasons for Germany’s ascent to the top of the rankings earlier this year.

The US moved up from third spot in Q1 to share the top rank with Germany in the wake of President Joe Biden’s March executive order on digital assets, which increased consumer protection and financial stability while also cracking down on illicit activity.

Switzerland came in third on Coincub’s global crypto rankings, largely due to the City of Lugarno recognising bitcoin as legal tender. More than 1000 blockchain and virtual asset service providers are based in Switzerland, and the country also ranks highly for its preponderance of Bitcoin nodes and ATMs.

In fourth place is Singapore, down from top spot at the end of 2021 because of recent regulatory tightening in the island republic.

Why Australia Made the Top Five

Australia’s proliferation of initial coin offerings, exchanges and transaction volumes, as well as several of its universities offering blockchain and crypto educational courses, helped see it into fifth place.

That position tallies with Australia’s status as the fourth-best market for crypto job opportunities, according to a May report. Australians also ranked eighth in the world for interest in NFTs, according to analysis published this month by online lender CashNetUSA.

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Crypto News Regulation

California Regulator Investigates ‘Multiple’ Crypto Lenders for Inadequate Disclosures

California’s Department of Financial Protection and Innovation (DFPI) has announced it is “actively investigating” crypto lenders offering crypto interest accounts.

Multiple US-based lenders face investigation after indefinitely halting transfers and withdrawals between user accounts.

Targeted Companies Fail to Disclose Deposit-Related Risks

While none of these lending companies has been named, the regulator has hinted that those offering interest-bearing crypto-asset accounts, and service providers that have failed to adequately disclose deposit-related risks, will be a focus:

The Department warns California consumers and investors that many crypto-interest account providers may not have adequately disclosed risks customers face when they deposit crypto assets onto these platforms.

California Department of Financial Protection and Innovation

In the months leading up to the regulator’s decision, several prominent crypto lenders – notably Celsius – have frozen withdrawals and transfers. Behind these freezes is the liquidity crisis kickstarted by the recent and intense market downturn, which saw bitcoin fall below US$20,000 multiple times in June alone.

The California regulator’s decision to mount its investigation also comes after public comments from politicians and other regulators cautioning consumers over the risks of crypto lending.

Crypto Lenders a Hot Topic

Crypto lenders have been the talk of the town in recent times. Last month, crypto services business Nexo sought to purchase “qualifying” assets from rival crypto lender Celsius. This followed perceptions of Celsius’ impending insolvency as it froze user withdrawals and transfers over “extreme market conditions”.

Earlier this month, crypto lender BlockFi signed a contract with FTX US, a division of Sam Bankman-Fried’s crypto exchange. The partnership would see FTX increase its credit facility with BlockFi and provide an opportunity for FTX to potentially acquire the struggling lender. BlockFi co-founder Zac Prince stated that the deal was valued at up to US$680 million, with an additional US$400 million revolving credit facility.

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Australia Investing Regulation Scams

Australians Lost Almost $100 Million in 2021 to Crypto Investment Scams

Aussies lost more than A$2 billion to scams in 2021, including losses of A$84 million due to scammers seeking payment with cryptocurrency, according to an Australian Competition and Consumer Commission (ACCC) report.

The ACCC’s annual report on scams published on July 4 found that investment scams increased by 135 percent in 2021 and caused the most financial harm, resulting in A$701 million lost by Australians. 

This spike was driven specifically by crypto investment scams, which led to Aussie investors reporting losses of A$99 million – 270 percent higher than the previous year. 

The report tallies losses based on consumer reports shared with Scamwatch, ReportCyber, and 12 financial institutions and government agencies.

Common Types of Crypto Scams Aussies Fall For

Some of the most common ways scammers exploited Aussies’ interest in crypto to steal their hard-earned money include:

  • fake investment and crypto trading platforms, which sometimes mimic legitimate, well-known websites;
  • sales of fake crypto wallets;
  • tricking people into revealing their seed phrase for an existing wallet; and
  • offers to “help” people get set up on a crypto platform by remotely accessing their computer. 

Scammers typically contacted victims by phone, or through social media and websites. Crypto investment scams affected all age groups but people aged 65 years and over lost the most money (A$26.5 million). 

Combating Crypto Scams Requires ‘Urgent Work’

In her foreword to the report, ACCC deputy chair Delia Rickard suggests urgent work is needed to combat crypto investment scams:

The popularity and hype of cryptocurrency has led to a surge in losses to investment scams with combined losses of $701 million. At the same time, it is also becoming the preferred method of payment across all types of scams.

Delia Rickard, deputy chair, ACCC

While bank transfers remained the most common way scammers requested payment from victims in 2021, requests for cryptocurrency increased dramatically – up 216 percent. Earlier this year, the ACCC revealed crypto had surpassed bank transfers as scammers’ preferred payment method. 

Rickard also expressed her hope that government efforts towards licensing digital currency exchanges and custody requirements for crypto assets would slow the growth of crypto scams. Consumer groups have also called for Australia’s new Labor government to protect crypto investors through more stringent regulation.