SEC - Page 293

Belgian financial authorities have issued a directive to Binance, a leading cryptocurrency exchange, demanding the immediate cessation of all virtual currency services in the country.

The Belgian Financial Services and Markets Authority (FSMA) took this action after Binance failed to provide satisfactory information regarding its non-European Economic Area (EEA) companies.

The FSMA’s notice, released on June 23, highlighted that Binance’s offering of crypto-related services from non-EEA countries violated Belgian laws concerning Anti-Money Laundering and Combating the Financing of Terrorism.

Consequently, the financial regulator instructed Binance to halt all associated services in Belgium with immediate effect.

According to the FSMA, Binance had control over an estimated 19 companies located outside the EEA that were involved in its operations or technical support.

However, these companies were not disclosed in the terms and conditions agreed to by Belgian users when signing up for Binance’s services.

Despite multiple requests for information, the regulator found Binance’s responses inadequate in identifying the nature of services provided by these companies.

The FSMA stated, “Despite the opportunities offered to Binance on several occasions, the latter has failed to demonstrate, with due documentation and proof, that the exchange services between virtual currencies and legal currencies and the custody wallet services that it offers and provides within Belgium.

The exchange services which are carried out by means of a legal entity governed by the law of another member state of the European Economic Area that is duly authorized by its home member state to carry out these activities, including within Belgium.”

As part of the order, Binance is required to notify and return all cryptocurrencies and private keys held for its clients based in Belgium.

In response to the FSMA’s decision, a spokesperson for Binance expressed disappointment and confirmed that the company would review the regulator’s notice.

This move by the FSMA is part of a broader trend, with multiple national regulators taking action against Binance.

Notably, the United States Securities and Exchange Commission (SEC) is currently pursuing a lawsuit against the exchange and its U.S. entity for alleged violations of securities laws.

Additionally, in January 2022, a Belgian parliament member, Christophe De Beukelaer, made headlines by announcing his intention to receive his government salary in Bitcoin for a year.

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The blame game continues between Digital Asset and the Australian Securities Exchange (ASX) over the failed blockchain upgrade of ASX’s CHESS system.

Digital Asset, the New York-based firm responsible for the abandoned blockchain clearing system, has pointed fingers at ASX for dropping the plans. ASX representatives, however, have dismissed these claims as misleading.

ASX had been poised to become the world’s first securities exchange to adopt blockchain technology in partnership with Digital Asset over the past seven years.

However, in a surprising turn of events, ASX announced on May 17 its decision to abandon the upgrade and explore more conventional technology options.

Digital Asset’s co-founder, Eric Saraniecki, addressed the issue during a parliamentary joint committee meeting on June 8. He stated two main reasons for the failure of the blockchain upgrade.

First, he alleged that ASX was reluctant to provide crucial test data that would have allowed Digital Asset to better test the functionality of the new system.

This lack of information forced Digital Asset to make assumptions in the absence of necessary data.

Second, Saraniecki claimed that ASX had publicly discussed replacing its old CHESS platform with a “big bang” approach while simultaneously asking Digital Asset to preserve outdated elements of the system.

This conflicting approach reportedly created further discord between the two companies, ultimately leading to the failure of the upgrade.

On the other side, ASX non-executive director David Curran responded to these allegations by stating that the issue arose from a lack of communication from Digital Asset.

Curran emphasized that if Digital Asset had concerns about the project, they should have been raised and resolved through appropriate channels.

ASX managing director and CEO Helen Lofthouse explained that the challenges did not stem from the “flexible requirements” but rather from the preexisting requirements of the system itself and how they related to settlements in Australia.

She revealed that the decision to pause the upgrade in November 2022 was based on the realization that the original solution design could not meet the current market requirements and provide the necessary flexibility.

Contrary to reports stating that ASX has completely abandoned blockchain technology, ASX’s chief information officer, Tim Whiteley, clarified that no firm decision had been made.

He mentioned that ASX is on track to announce a solution design later in the year and is exploring all options for the upgrade.

The ongoing blame game and differing accounts reflect the complex nature of the failed blockchain upgrade between Digital Asset and ASX.

The exact details and outcome of the situation remain uncertain as an ongoing review prevents the release of further information.

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A creditor of the recently bankrupted cryptocurrency exchange FTX has utilized a decentralized finance (DeFi) protocol called Arcade to pledge a claim as collateral for a loan.

This groundbreaking transaction marks the first on-chain loan backed by an FTX claim, as reported by the bankruptcy claims platform Found.

The creditor tokenized their claim, representing its ownership through a nonfungible token (NFT). On June 23, this NFT was utilized as collateral to secure a loan of $7,500, which is expected to be repaid within a five-day period.

In the event of a payment default, the lender retains the right to claim the collateralized amount, which stands at $31,307.

This transaction exemplifies the concept of real-world asset (RWA) tokenization, wherein blockchain technology is employed to represent ownership rights of tangible assets.

DeFi has emerged as a prominent sector for asset tokenization, enabling a wide range of real-world assets such as stocks, government bonds, real estate, and commodities to be tokenized.

Found took to Twitter to disclose that the original creditor and lender underwent biometric Know Your Customer (KYC) and Anti-Money Laundering (AML) screenings.

The company’s website reveals that users can access loans using bankruptcy claims as collateral, subject to a 10% transaction fee upon successful trades.

FTX, the cryptocurrency exchange that filed for bankruptcy in November 2022, has locked billions of dollars in user accounts pending court proceedings.

Industry estimates suggest that FTX claim holders may recover between 35% and 66% of the face value of their claims.

The rise in crypto-related bankruptcy cases, particularly associated with the collapse of FTX, has inundated the courts over the past year.

Genesis Global Trading and BlockFi are among the crypto firms involved in these cases. As a result, there is a growing demand for on-chain claims solutions.

Found, which launched earlier this year, and Open Exchange, a claims trading platform established in April by the co-founders of the collapsed hedge fund Three Arrows Capital, are notable players in this space.

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In a recent update on June 22, Binance.US, which operates as an independent subsidiary of the larger Binance exchange, assured its customers that its system is fully operational again.

However, the exchange has cautioned its customers that this relief may only be temporary.

It stated that U.S. dollar withdrawal requests are expected to return to their normal processing time of five business days.

Earlier on June 9, the exchange had temporarily suspended dollar deposits and notified its customers about an impending pause on fiat withdrawal channels due to an ongoing battle with the Securities and Exchange Commission (SEC).

The exchange had warned that its banking partners might halt fiat withdrawal channels as early as June 13, but that did not happen at that time.

Binance.US has urged customers who faced failed withdrawal attempts to resubmit their requests, emphasizing that their systems are currently functioning properly.

However, the exchange has cautioned that their banking partners are likely to discontinue the USD withdrawal service in the near future.

As a result, Binance.US is advising its users to consider utilizing stablecoins or converting their USD holdings into stablecoins to continue engaging in crypto-to-crypto trading.

The exchange is gradually transitioning to becoming a crypto-only platform. Any remaining USD balances held by customers may be converted into Tether at a later date, according to the announcement.

Furthermore, Binance.US revealed plans to introduce additional trading pairs involving Tether (USDT) and cryptocurrencies such as ANKR, DAI, DASH, HBAR, ICX, IOTA, RVN, WAVES, XNO, XTZ, and ZIL on June 26.

However, the exchange will remove most of the “USD Advanced Trading pairs” from its platform on the same date.

Among the 150 supported crypto assets on Binance.US, only BTC, ETH, ADA, BNB, LTC, MATIC, SOL, VET, USDC, and USDT will be tradable against the dollar.

It’s worth noting that Binance.US has also experienced banking partner issues in Australia.

In May, the Australian branch of Binance witnessed a 20% drop in Bitcoin prices when local banking and payment partners suspended their services, leading to a rush of users selling and cashing out.

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Circle and Sequoia Capital were among the top depositors at Silicon Valley Bank (SVB) before its collapse, according to a recent report by Bloomberg.

Other significant depositors included SVB itself, SVB Financial Group, Altos Labs, a biotechnology research company, and Kanzhun, a China-based firm.

Documents provided by the Federal Deposit Insurance Corporation (FDIC) indicated that Circle, Sequoia, and other depositors had billions of dollars covered.

This was an exception to the usual FDIC insurance limit of $250,000 per depositor. In response to the collapse of SVB, the Federal Reserve announced its collaboration with the FDIC to compensate insured and uninsured depositors.

Circle, a stablecoin issuer, held approximately $3.3 billion in deposits, while Sequoia Capital had around $1 billion.

The failure of SVB and subsequent collapses of Signature Bank and First Republic Bank have drawn attention to how deposit insurance is handled by regulators in the United States.

The Fed, FDIC, and Treasury Department deemed the coverage of SVB and Signature deposits over $250,000 as a “systemic risk exception” but are said to be considering an increase in the insurance limit.

Following SVB’s collapse in March and Circle’s confirmation of approximately $3.3 billion exposure to the bank, the value of its stablecoin, USD Coin, briefly deviated from the U.S. dollar.

However, Circle has since announced its plans to launch a native version of USDC on the Arbitrum network in June. This move aims to strengthen the stability and accessibility of its stablecoin.

The events surrounding SVB’s collapse have highlighted the importance of regulatory oversight and insurance in the cryptocurrency and banking sectors.

As the industry continues to evolve, discussions about risk management and investor protection are likely to shape future regulatory frameworks.

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Etherscan, a prominent Ethereum block explorer and analytics platform, made significant strides in the realm of artificial intelligence (AI) during the past week.

Among the notable developments were the launch of their AI-powered code reader and Polygon’s proposal for a zero-knowledge Ethereum Virtual Machine (zkEVM) upgrade to enhance protocol security.

Etherscan’s Code Reader is a groundbreaking tool introduced on June 19. Utilizing AI technology, it allows users to retrieve and interpret the source code of specific contract addresses.

By inputting a prompt, the Code Reader generates responses using OpenAI’s large language model, providing valuable insights into the contract’s source code files.

The tool’s functionalities encompass gaining a deeper understanding of contract code through AI-generated explanations, obtaining comprehensive lists of smart contract functions related to Ethereum data, and comprehending the contract’s interaction with decentralized applications.

Furthermore, users have the option to modify the source code directly within the user interface before sharing it with the AI.

In parallel, Polygon’s co-founder put forward a proposal for a zkEVM upgrade aimed at bolstering the security of the protocol.

The zkEVM upgrade leverages zero-knowledge proofs to enhance privacy and confidentiality, while simultaneously reducing transaction costs.

This development showcases the continuous efforts of blockchain platforms to improve their underlying technology and provide a more robust and secure environment for users.

Meanwhile, ZachXBT, a blockchain investigator, received substantial support from the crypto community in his ongoing legal battle. Binance CEO Changpeng Zhao joined the cause by donating to ZachXBT’s lawsuit fund, which has now surpassed $1 million.

The community-driven initiative aims to assist ZachXBT in defending himself against a defamation case filed by Jeffrey Huang, also known as MachiBigBrother on Twitter.

This display of solidarity among crypto personalities underscores the interconnectedness and collaborative nature of the industry.

These developments coincide with a bullish momentum across the decentralized finance (DeFi) market, led by Bitcoin’s resurgence.

The top 100 DeFi tokens broke free from a three-week-long bearish phase, experiencing substantial price surges throughout the week.

Most DeFi tokens traded in the green, signaling renewed optimism and investor confidence in the market.

In summary, Etherscan’s introduction of the AI-powered Code Reader, Polygon’s proposal for a zkEVM upgrade, and the support rallied behind ZachXBT’s legal battle have been the highlights of the past week in the DeFi ecosystem.

These advancements contribute to the growth, security, and innovation within the blockchain industry, setting the stage for further breakthroughs in the future.

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