USDStablecoins, Bitcoin, and SEC Battles: The Week’s Biggest Crypto Legal News
Fed Governor Calls for Clear Regulations to Allow Banks to Issue Stablecoins
U.S. Federal Reserve Governor Christopher J. Waller is advocating for new legislation to regulate the issuance of stablecoins by traditional financial institutions, emphasizing their potential benefits. During a speech in San Francisco, he highlighted that regulated stablecoins could increase U.S. dollar accessibility, simplify international transactions, and improve payment systems for consumers. Waller stressed the importance of a well-defined regulatory framework to ensure the stability and security of these digital assets, allowing both banks and non-bank entities to participate in their issuance.
However, he cautioned about risks associated with stablecoins, including past incidents of losing their dollar peg and vulnerabilities to technical failures. The regulatory environment is becoming more dynamic, as seen with Senator Bill Hagerty’s introduction of the GENIUS Act, which aims to establish clear rules for stablecoin issuers, reflecting a growing interest among policymakers to integrate stablecoins into traditional financial structures.
Standard Chartered, Animoca Brands, and HKT Team Up for Hong Kong Dollar-Backed Stablecoin License
Standard Chartered Bank (Hong Kong) Limited, Animoca Brands, and HKT have established a joint venture to seek a license from the Hong Kong Monetary Authority (HKMA) to issue a Hong Kong dollar-backed stablecoin. This initiative aligns with Hong Kong's strategic goal of advancing its digital asset ecosystem. The joint venture intends to utilize Standard Chartered's robust banking infrastructure and governance, along with its expertise in tokenization.
The partners have actively engaged in the HKMA's stablecoin issuer sandbox to test potential integrations of stablecoins within financial markets and payment systems. Animoca Brands aims to explore diverse use cases for the stablecoin in the Web3 landscape, while HKT plans to incorporate the stablecoin into its mobile wallet services. This move represents a significant step towards the integration of digital currencies in Hong Kong's financial ecosystem, reflecting a growing trend among financial institutions to innovate through collaboration in the evolving digital asset space.
West Virginia Proposes Bitcoin Inclusion in Treasury to Combat Inflation
West Virginia introduced the Inflation Protection Act, allowing its Treasury to include Bitcoin and precious metals in its investment portfolio to hedge against inflation. The legislation permits up to 10% of total treasury funds to be allocated to digital assets, specifically targeting cryptocurrencies with a market capitalization over $750 billion, currently applicable only to Bitcoin.
This move follows a trend among nearly two dozen states, beginning with Wyoming in 2024, considering digital assets as a reserve strategy to combat currency devaluation. Recent similar measures were proposed in Utah and Kentucky, while Michigan's approach remains broader without asset type restrictions. Analysts predict that state adoption of Bitcoin could create an additional $23 billion demand, potentially driving prices higher and inviting institutional involvement. However, concerns linger regarding Bitcoin's volatility and associated risks. The bill will undergo committee review before further legislative action.
Georgia Considers SB 178 to Invest 5% of Public Funds in Bitcoin
Georgia is considering the SB 178 bill, which would permit the state treasurer to allocate up to 5% of public funds into Bitcoin, exclusively excluding other cryptocurrencies like Ethereum and stablecoins. Introduced by Senators Greg Dolezal, Brandon Beach, and Clint Dixon, the bill emphasizes Bitcoin as a stable long-term asset and a hedge against inflation due to its fixed supply of 21 million units. Proponents argue it combats the devaluation of fiat currencies, while opponents caution about the management of public funds amid Bitcoin's volatility. The discussion reflects a growing interest in integrating cryptocurrency into public financial strategies.
SEC Moves to Dismiss Coinbase Case, Awaiting Final Approval
The U.S. Securities and Exchange Commission (SEC) has tentatively agreed to dismiss its enforcement case against Coinbase, pending approval from the agency’s commissioners. This decision follows months of litigation and comes after allegations that Coinbase operated as an unregistered securities platform and listed unregistered assets, claims that the company has consistently refuted. Coinbase's Chief Legal Officer, Paul Grewal, argued that the lawsuit contradicted the SEC's previous assessments of its business model and was influenced by shifting political priorities under new leadership.
The potential dismissal could undermine the SEC's broader enforcement strategy in the cryptocurrency sector, possibly encouraging other companies facing similar allegations like Binance and Kraken. Coinbase advocates for clearer regulatory frameworks instead of enforcement actions, urging Congress to legislate on digital assets. A final dismissal, if approved, would signify a major legal victory for Coinbase and the cryptocurrency industry, impacting the 52 million Americans holding digital assets.
Sam Bankman-Fried Seeks Clemency, Claims Political Bias in FTX Prosecution
Sam Bankman-Fried, the convicted founder of FTX, is seeking clemency and argues that his legal troubles stem from political bias after shifting his allegiances from the Democratic Party to Republicans due to frustrations with the Biden administration's cryptocurrency policies. Despite being sentenced to 25 years for orchestrating a major financial fraud, Bankman-Fried maintains that FTX was never insolvent, claiming that the collapse resulted from a liquidity crisis rather than bankruptcy. He asserts that there was a net positive value of $10 billion and $20 billion in equity before the downfall.
Bankman-Fried has accused the law firm Sullivan & Cromwell of mishandling the restructuring and links his prosecution to perceived political motivations, akin to those faced by Donald Trump. His comments suggest an attempt to align himself with Trump, whose administration could potentially grant him a pardon, while his family is reportedly working to secure clemency on his behalf.
Indian Authorities Seize $190M in Crypto Tied to BitConnect Ponzi Scheme
Indian authorities have seized nearly $190 million in cryptocurrencies associated with the collapsed BitConnect Ponzi scheme as part of an ongoing investigation. The Enforcement Directorate (ED) in Ahmedabad reported the seizure, valued at Rs. 1,646 million, on February 15. Additionally, other assets were confiscated, including approximately $15,582 in cash, a sports utility vehicle, and various electronic devices during raids on February 11 and 15 in Gujarat. This operation is linked to allegations that BitConnect defrauded 4,000 investors across 95 countries, resulting in losses totaling around $2.4 billion, highlighting the scheme's extensive global impact.
Nigeria Demands $81 Billion from Binance in Landmark Tax Evasion Case
Nigeria's Federal Inland Revenue Service (FIRS) has filed a lawsuit against Binance Holdings Limited, demanding over $81 billion in unpaid taxes and penalties. This claim includes $79.5 billion in economic damages and $153,223 related to its operations, along with nearly $2 billion in outstanding income tax for 2022 and 2023. FIRS alleges that Binance failed to disclose its activities in Nigeria, violating the Companies Income Tax Act and the Significant Economic Presence Order.
In 2023, Binance reportedly generated $35.4 million in net revenue from a trade volume of $21.6 billion. The tax claim incorporates a 10% penalty for tax evasion and a 26.75% interest charge for the previous year. This demand dwarfs the $4.3 billion penalty Binance faced from U.S. regulators, potentially marking the most substantial financial penalty imposed on a crypto firm by any government to date. The case underscores Nigeria's intensified scrutiny of Binance.
Safemoon CTO Pleads Guilty in $200M Fraud; Project Shifts to Community-Controlled Solana Memecoin
Thomas Smith, the former Chief Technology Officer of Safemoon, pleaded guilty to charges related to a $200 million fraud scheme involving misleading investors about the project's liquidity. His admission, a shift from a previous not-guilty plea, is part of a larger case initiated by the SEC against Safemoon's leadership, including CEO Braden John Karony and creator Kyle Nagy, who face multiple federal law violations. These include fraud, conspiracy, and money laundering, with allegations that they misled investors about a supposedly secure investment and accessed locked funds for personal gain.
As the project pivots to a community-controlled strategy, it plans to launch a Solana-based memecoin, distancing itself from prior complexities. The new approach emphasizes simplicity and community engagement, while cautioning investors about the absence of an official contract address for the upcoming token. Smith’s cooperation may influence his sentencing, facing a maximum of 45 years combined for his charges.
This article has been refined and enhanced by ChatGPT.
