Automatically monitor regulatory updates to map to your internal policies, procesures and controls. Learn More

1558 Enforcement Actions in the U.S. over past 30 days


FTC enforcements decreased 55% over the past 30 days


SEC issued enforcements: $37,812,859 over the past 30 days


50 Final Rules go into effect in the next 7 days


49 Mortgage Lending docs published in the last 7 days


1670 docs with extracted obligations from the last 7 days


new Proposed and Final Rules were published in the past 7 days


11906 new docs in within the last 7 days


Considering RCM Solutions?  Here’s an RFP to get started.

blog 16

1. FTX, Binance and the current war against cryptocurrency in the US

“What you don’t understand, ban!” This seems to be the ongoing stance US regulators are taking in relation to cryptocurrency. While cryptocurrency has long existed, with Bitcoin being launched in 2009 right when the US was still in the middle of a subprime mortgage crisis, with other digital asset technologies following in its wake, US regulators still do not seem to have a firm grasp on how to control and regulate this powerful financial technology. This lack of understanding may also be mixed with a desire on the part of regulators and legislators to kill a highly disruptive and more efficient and cost-effective technology that is designed to disintermediate the entire traditional financial system. Thus, cryptocurrencies, decentralized exchanges, and centralized exchanges remain either unregulated or banned activity in the US. This war on digital assets has been demonstrated and justified by recent events in the digital asset space, which in some instances has been caused by massive Fed rate hikes at break-neck speed in an effort to slow inflation.

On March 27, 2023, news broke out that US regulators had brought an enforcement action against Binance for its non-US operations. Binance is tagged as the world’s largest cryptocurrency exchange platform. The Commodity Futures Trading Commission (“CFTC”), the main regulator of derivatives markets in the United States, accused Binance and its Chief Executive Officer of willful evasion of US securities laws and breaching derivatives rules intended to protect the public from money laundering. While Binance claims that the US has no jurisdiction over it, as it’s business does not do business or have any business presence in the US, 16% of its revenues reportedly comes from US residents. The CFTC argues that Binance has encouraged its American users to circumvent the compliance controls by using VPN to access Binance.

In November 2022, FTX, another cryptocurrency exchange and one of Binance’s biggest rivals, filed for bankruptcy citing a liquidity crisis. In the hours that followed the filing of its bankruptcy, it allegedly experienced a hack where hundreds of millions worth of tokens were stolen. Soon after, FTX’s founder and former CEO was arrested and indicted for several counts of securities fraud and money laundering. The lawsuit against him alleged that he created a fraudulent cryptocurrency scheme intended to defraud unsophisticated investors in the US. To date, while the case is ongoing, FTX’s collapse caused billions of dollars of withdrawals from FTX and other cryptocurrency exchanges.

In a joint statement by the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency on February 23, 2023, the US regulators reiterated their warning to banks of the liquidity risks associated with cryptocurrency and crypto-assets, stating, “certain sources of funding from crypto-asset-related entities may pose heightened liquidity risks to banking organizations due to the unpredictability of the scale and timing of deposit inflows and outflows.”

Is a goal of US regulators, as fueled by special banking and traditional finance interests, the eradication of cryptocurrency, decentralized finance, and stable coins in the US financial system since these technologies pose a clear threat to the entire monetary and banking system? It is investor protection? Or is it something else?

2. Cryptocurrency and the banking crisis

It is not only cryptocurrency exchanges which have been heavily regulated and subject to insolvency in the past few months; a short while ago, three banks (Silvergate, Silicon Valley Bank and Signature Bank) all associated with cryptocurrency services, have been the subject of insolvency proceedings. While their collapse was also due to liquidity crises resulting from poor risk management and unfavorable market conditions, the collapse, specifically Signature Bank’s, was seen as a political decision intended to send a “very strong anti-crypto message” in the US. However, New York’s Department of Financial Services spokesperson was quick to correct that the decision to close Signature Bank had nothing to do with cryptocurrency, but a “significant crisis of confidence in the bank’s leadership.” This is contrary to what was said during Senate hearings where senators seem to have blamed the cryptocurrency risk for Silvergate’s liquidation.

With these three top crypto friendly banks that were providing essential services to cryptocurrency companies, exchanges, and their customers out of the picture, it will be far more difficult for crypto companies to continue to interact with the US dollar-based financial system, which some suspect was the primary intent of the banking regulators.

3. A poor attempt at regulating cryptocurrency in the US

There are currently at least six government agencies regulating digital assets, albeit primarily by enforcement, in the US, depending on the cryptocurrency’s classification. The Securities and Exchange Commission (“SEC”) regulates digital assets which are classified as securities, including initial coin offerings. The CFTC regulates futures, swaps contracts and derivatives based upon commodities, and has recently defined Bitcoin, a cryptocurrency, as a commodity for having an intrinsic value dependent on market supply and demand. The Financial Crimes Enforcement Network (“FinCEN”) is responsible for enforcing anti-money laundering regulations, even those in relation to cryptocurrency business. The Internal Revenue Service (“IRS”) deals with the tax aspect of any transaction related to cryptocurrency transactions. The Office of the Comptroller of the Currency (“OCC”) regulates banks and their activities, even those including cryptocurrency transactions. Finally, there are state regulators which also regulate cryptocurrency transactions taking place in each of their particular jurisdictions. However, none of these regulators squarely deal with cryptocurrency transactions being done by US consumers in the US. To begin with, cryptocurrency is not even specifically defined as a security, and more and more cryptocurrency companies, including those which are outside the US, remain unregulated for lack of clarity on their classification.

The ongoing crisis in the cryptocurrency industry has left millions of US consumers unprotected in the process. With regulators taking action against several digital asset related companies, including banks, the crypto markets have experienced further volatility and drawdowns. Despite this, US regulators and legislators appear to be ramping up the war of digital assets yet still have failed to effectively address digital assets through clear regulation designed to balance the promotion of innovation, investor protection and financial stability.

In a recent White Paper, entitled, “Operation Chokepoint 2.0” published by law firm, Cooper & Kirk, PLLC , US banks are reportedly trying to “drive crypto businesses out of the financial system.” The White Paper further divulged that bank examiners have reportedly warned banks that cryptocurrency is viewed as “reputationally risky” and warned that banks would suffer the consequences if they engaged in the crypto business. It further reported that the groundwork has been laid by federal regulators in “purging their [cryptocurrency business] accounts from each of the banks subject to their supervision”.

This does not seem as a surprise to crypto companies as even Coinbase, another company related to cryptocurrency, and a company based in the US was sent a “Wells Notice” from the SEC, regarding an undefined portion of their listed digital assets. Despite numerous discussions and transparency with the SEC regarding its cryptocurrency services, Coinbase is now being investigated for possible securities law violations. The statement of Coinbase released on its website stated in part that, “A Wells notice is the way that SEC staff tells a company that they are recommending that the SEC take enforcement action for possible violations of securities laws. It is not a formal charge or lawsuit, but it can lead to one.” The statement also detailed how Coinbase has invested millions of dollars in research and development and has thoroughly discussed with the SEC how crypto companies should be allowed to register in the US. Yet despite Coinbase’s nine meetings with the SEC to discuss in an open and responsible way their proposed products and services related to cryptocurrency, the discussions took a turn when the SEC opted to investigate Coinbase instead. The statement ended with the appeal that digital assets in the US need clearer regulation, and not mere enforcement leading to either arbitrary prohibitions or penalties based upon antiquated laws and regulations that were never intended to be used for digital assets.

How can regulators properly deal with digital assets when they do not even have clear guidance or law appropriate for these new technologies and related activities? As is already seen in several cases, US regulators have seemed to adopt a “ban or penalize” approach to digital asset companies and cryptocurrency-friendly banks. With the numerous rulings over the past few years, even the courts have criticized the SEC for being inconsistent with its rulings in relation to digital assets and how to regulate this rising industry. In a federal bankruptcy case against Voyager Digital Holdings, Inc., another US-based company providing cryptocurrency services, Judge Michael Wiles was quoted to have said that “[t]here are firms that operate as cryptocurrency brokers or exchanges and have done so for several years, without being subject to clear and well-defined regulatory requirements. Regulators themselves cannot seem to agree as to whether cryptocurrencies are commodities that may be subject to regulation by the CFTC, or whether they are securities […] subject to securities laws, or neither, or even what criteria should be applied in making the decision. This uncertainty has persisted despite the fact that cryptocurrency exchanges have been around for a number of years.”

Unless and until US regulators can agree among themselves how to define, categorize, and regulate digital assets and related activities, regulation will continue to involve an attempt to apply antiquated securities and commodities laws that do not adequately address these new technologies and related activities. Until new laws, regulations and guidance are provided for the digital asset community and regulators, digital asset business will continue to flee the US for better regulatory environments.

4. The Future of Cryptocurrency in the US – Compliance, Compliance, Compliance!

The Senate Banking Committee has recently introduced a bill intended to regulate cryptocurrency and virtual assets. Entitled, “The Responsible Financial Innovation Act”, the bill attempts to create a comprehensive regulatory framework for virtual assets in the US, and to formally recognize digital assets as a legitimate part of the US financial system. Under this bill, cryptocurrencies will be defined, and jurisdictions of different regulatory agencies, including the CFTC and the SEC, will be settled. One of the key features of this is the “responsible innovation review” that will be conducted before new cryptocurrency services or products are introduced in the US financial system.

If these cryptocurrencies remain undefined and uncategorized, and current laws and regulations will not squarely fit their technical specifications, and activities, they will remain improperly and ineffectively regulated. This could lead to continued government mandates, with the current government enforcing arbitrary penalties and shutdowns using inappropriate laws, which leaves the everyday US consumer unprotected and technology companies and valuable resources fleeing the US for more amenable jurisdictions and regulations.

While it remains to be seen if this new bill will eventually be passed into law, this bill, or something similar to it, may address the rising issues facing US regulators in dealing with digital asset-related companies, which are forced to comply with rules and regulations that are not suitable, thus, resulting in value destruction (e.g., arbitrary penalties, bankruptcies or liquidations) rather than value creation (e.g., improve productivity based in new technologies promoting radically improved efficiencies) without any real protections for market participants.