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Off-Chain Crypto Transactions Targeted By US Bill For Transparency And Security

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In a major development for the crypto sector, U.S. Representative Don Beyer unveiled the “Off-Chain Digital Commodity Transaction Reporting Act” on September 28. This legislation is designed to bolster transparency and safeguard cryptocurrency investors by requiring rigorous reporting of off-chain transactions to a government repository regulated by the CFTC.

The legislation addresses a critical concern surrounding transactions occurring beyond the confines of the blockchain network, commonly referred to as off-chain transactions. Unlike on-chain counterparts, these transactions bypass instant blockchain logging and are routed through secondary layers, posing significant tracking challenges.

Highlighting the urgency, Representative Beyer emphasized the inconsistency in internal record-keeping practices among private entities. Such disparities leave investors and consumers susceptible to potential fraud and manipulation, underscoring the necessity for this proposed bill.

“This bill is a common-sense measure to restore some transparency and confidence to the digital asset market.” Beyer asserted.

US Bill Urges 24-Hour Off-Chain Crypto Reporting

As per the bill’s stipulations, crypto service providers must promptly disclose all off-chain transactions within a rigorous 24-hour timeframe to a trade repository registered with the Commodity Futures Trading Commission (CFTC). This structural framework aligns closely with the well-established reporting standards that oversee a diverse spectrum of securities and swaps transactions in the crypto space.

The move comes as part of a broader concerted effort by U.S. lawmakers to tighten regulatory reins on the burgeoning cryptocurrency sphere. In September, nine U.S. senators rallied behind Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act, demonstrating a collective push for a comprehensive regulatory framework. Originally introduced in July 2023, the legislation aims to crack down on noncustodial digital wallets and extend Bank Secrecy Act obligations to combat the illicit use of digital currencies. 

As the cryptocurrency landscape evolves, the Off-Chain Digital Commodity Transaction Reporting Act is a pivotal step toward fortifying the market’s integrity and fostering investor confidence in developing transaction methodologies.

Related Reading:| Crypto Regulation Battle Lines Drawn as Congressman Takes Charge

Coinbase CEO Urges CFTC To Refrain from DeFi Enforcement Actions

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Recently, Coinbase CEO Brian Armstrong has voiced his concerns over the U.S. Commodity Futures Trading Commission’s (CFTC) approach towards decentralized finance (DeFi) protocols. 

Armstrong firmly believes that the CFTC should abstain from pursuing enforcement actions against DeFi platforms, emphasizing that they are not conventional financial service businesses.

Armstrong’s stance stems from his conviction that the Commodity Exchange Act, under which the CFTC operates, is unlikely to apply to DeFi protocols.

He urged DeFi projects to consider legal action to establish a significant legal precedent, underlining that the courts have consistently upheld the rule of law. He noted that the current course of action could inadvertently drive an essential industry offshore, potentially hindering its growth and development.

Coinbase Embraces Bitcoin’s Lightning Network Integration

Previously, Armstrong reaffirmed Coinbase’s commitment to Bitcoin, hailing it as the “most important crypto asset.” The CEO also confirmed the cryptocurrency exchange’s decision to integrate Bitcoin’s Lightning Network following an extensive consultation process.

Armstrong praised his team for their diligence in exploring this integration, expressing excitement about enabling faster and more cost-effective Bitcoin transactions. Acknowledging that this integration would take some time, he urged users to exercise patience.

The Lightning Network represents a second-layer solution comprising payment channels built atop the Bitcoin blockchain. Its primary purpose is facilitating swift and economical transactions within the Bitcoin ecosystem.

This decision to integrate the Lightning Network followed a consultation process initiated in August, which aimed to gather feedback on the optimal approach to implementation. 

Coinbase’s commitment to this endeavor gained momentum after a Twitter exchange between Armstrong and Block CEO Jack Dorsey, who sought insights into Coinbase’s Bitcoin and Lightning Network strategy.

Coinbase’s protocol specialist, Viktor Bunin, spearheaded the initiative, emphasizing the importance of community input regarding support, user experience, open-source tools, service providers, and potential edge cases. 

Bunin’s involvement in the process came after a previous Twitter exchange in which he acknowledged his earlier misunderstanding of Bitcoin’s upgrade mechanisms, signaling a commitment to continual learning and improvement.

However, Coinbase’s CEO Brian Armstrong champions DeFi protocols in their quest for legal clarity while doubling down on Bitcoin by embracing the Lightning Network integration, signaling a pivotal moment in the company’s commitment to crypto and blockchain.

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Binance Challenges CFTC Charges in High-Stakes Legal Battle

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International cryptocurrency giant Binance is embroiled in a high-stakes legal battle as it seeks to dismiss charges brought against the company by the Commodity Futures Trading Commission (CFTC). In a recent motion filed late Thursday, Binance, along with its former chief compliance officer Samuel Lim, argued that the CFTC lacked jurisdiction for several of the charges levied against them in a March enforcement action.

The crux of the exchange’s defense lies in asserting that some of the charges brought by the CFTC are “impermissibly extraterritorial” since the company’s main operations are not based in the United States. Furthermore, the defense pointed out that the complaint against Lim fails to establish a direct link between his actions, the United States, and the case.

The civil case against the exchange primarily centers around allegations that the company’s main trading platform knowingly operated illegally in the U.S., with additional accusations of facilitating illegal transactions on its platform. This motion to dismiss is a standard tactic employed by defendants in cases within the U.S. jurisdiction, often leading to charges being dropped on technical grounds.

The implications of this legal battle extend far beyond financial penalties. Should the suit proceed unfavorably for Binance, the company and its executives could face a potential ban on doing business in the U.S., significantly disrupting its operations on American soil. It is worth noting that Binance US, as well as Binance’s CEO Changpeng ‘CZ’ Zhao, are also the subjects of an ongoing Securities and Exchange Commission (SEC) enforcement action.

Both regulatory suits leverage an unusual amount of internal communication obtained by the authorities to support their allegations. Notably, an exchange between Binance executives mentioned in the CFTC’s initial complaint allegedly shows involvement in transactions by the Palestinian group Hamas, which is designated as a sanctioned terrorist organization in the U.S.

Crypto Community Awaits Binance’s Regulatory Fate

Adding to Binance’s woes, the SEC accuses the company and its American counterpart, Binance US, of redirecting billions in customer assets, mirroring the misappropriation allegations faced by rival executive Sam Bankman-Fried and his trading platform FTX.

The U.S. District Court for the Northern District of Illinois serves as the battleground for this legal dispute. Initially, a hearing was scheduled for Thursday, but the judge waived the need for it in light of the filings presented by both parties.

As the crypto industry garners more attention from regulators worldwide, the outcome of this case will likely set significant precedents. The crypto community closely watches this legal battle, eager to see how it may impact the future of Binance, the broader industry, and the regulatory landscape governing cryptocurrency operations in the United States.

Tennessee’s Crypto Scam: Blessings Turned To Sham

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A couple from Tennessee is currently facing charges related to an investment scheme called “Blessings of God Thru Crypto,” which the Commodity Futures Trading Commission (CFTC) alleges to be a fraudulent venture that duped more than 100 victims and collected at least $6 million within a mere six months.

The accused, Michael and Amanda Griffis, utilized their connections from their real estate business to persuade people, including mortgage brokers and former real estate customers, to invest their savings into a multi-million dollar crypto investment pool. Despite lacking any trading experience, the defendants successfully convinced over 100 individuals to hand over their funds for this venture.

CFTC Seeks Restitution for Crypto Victims

Under the guise of trading crypto futures contracts, the scheme promised high returns and assured participants that their funds would be securely managed by the Griffis couple. However, the CFTC asserts that no actual trades were ever executed. Instead, a substantial amount, approximately $4 million, was diverted to digital wallets outside of the Griffis’ control. Additionally, more than $1 million was misappropriated to cover personal debts and extravagant expenses, including college tuition, an all-terrain vehicle, and credit card debts.

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Excerpt from the futures trading document purportedly written by defendant Michael Griffis

The defendants now face charges of defrauding over 100 victims and failing to register with the CFTC. In response to the complaint, the CFTC is seeking a permanent injunction to prevent the Griffis couple and any potential collaborators from engaging in future commodity interest transactions. The commission also demands full restitution for the victims who suffered losses due to the scam and proposes imposing civil penalties on the Griffis.

However, the CFTC acknowledges that obtaining full restitution may prove challenging, as the accused individuals might not possess sufficient funds or assets to cover the losses. Meanwhile, Michael and Amanda Griffis are associated with Exit Realty Screamin’ Eagle, located in Clarksville, Tennessee, as per their LinkedIn profiles. Amanda is listed as a “Broker/Co-Owner,” while Michael holds the title of “Realtor.”

Binance Stands Its Ground: Seeks Dismissal Plea Against CFTC Lawsuit

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Refusing to back down, CZ-led Binance is mulling plans to file a petition seeking a dismissal of the CFTC lawsuit against it. This was revealed in a recent filing to an Illinois District Court, and before July 27, multiple Binance entities, Zhao, and former Chief Compliance Officer Samuel Lim are considering submitting two separate petitions to drop the complaint.

“The Foreign Binance Entities and Zhao intend to file a joint Motion to Dismiss the Complaint. Lim intends to file a separate Motion to Dismiss the Complaint and join parts of the motion filed by the Foreign Binance Entities and Zhao,” the filing read.

The Commodity Futures Trading Commission, or CFTC, accused the exchange and its CEO, Changpeng Zhao [CZ], of not properly registering the exchange, conducting illegal transactions, and intentionally violating U.S. laws. The regulator that oversees the derivatives market also called the exchange’s compliance process a “sham” and alleged it wilfully conducted its activities outside of the U.S. and hid its headquarters’ location with the aim of evading U.S. regulations.

Besides the CFTC, Binance is also reportedly under investigation by the U.S. Department of Justice for allegedly allowing Russians to utilize its platform in defiance of American sanctions. Along with these regulatory actions that have intensified the pressure on the crypto industry, the top 20 exchanges, including market leader Binance, have seen a considerable slowdown in the number of spot trades.

Binance Retains Top Position Despite Drop in Spot Trade Volume

Even so, the trading platform continued to have a dominant edge in the second quarter of 2023, controlling 60% of the spot trading volume in the first half of 2023. In comparison to the same time last year, it shows a stable performance. 

According to a recent report from CoinMarketCap on exchange activities [CEX and DEX] in H1 2023, The Top 5 Exchanges jointly contributed to nearly 85% of the overall spot market volume. The three firms with the greatest average liquidity scores—Binance, Coinbase, and Kraken—all thrive at 700.

In the large-cap category, Binance in particular has performed well in terms of liquidity and has prioritized adding high-quality mainstream coins to its listings. While the majority of exchange tokens had gains in the first half of 2023, they were unable to match Bitcoin’s remarkable 182% year-to-date rise.

Crypto Rules Redefined: SEC and CFTC Unwind

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While crypto seems to be the talk of the town everywhere, a group of prominent Republican members from the US House of Representatives have introduced a new bill aimed at establishing a comprehensive regulatory framework for the crypto markets. This initiative comes on the heels of the recent XRP ruling, which has been perceived positively by many experts in the industry.

The primary goal of this legislation is to bring clarity to the process of registration with regulatory bodies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Additionally, it seeks to address the classification of assets that were initially introduced as potential securities but have evolved into commodities over time. Determining whether an asset falls under the commodity or security category will be contingent on the degree of decentralization exhibited by its parent blockchain. Presently, the regulatory landscape surrounding crypto markets in the US remains ambiguous, making this new legislation a crucial step towards resolving these uncertainties.

The driving force behind this bill is House Agriculture Committee Chairman, Glenn Thompson, alongside Republican Representatives French Hill and Dusty Johnson. Garnering support from Financial Services Chair, Patrick McHenry of North Carolina, the legislation has already received substantial backing from influential figures.

According to Thompson, this legislative proposal represents a significant milestone for both the House Committees on Agriculture and Financial Services. Their joint efforts are focused on establishing a much-needed regulatory structure that can effectively safeguard consumers and investors within the crypto market.

Moreover, Thompson expressed optimism that the recent XRP ruling would encourage more Democrats to lend their support to this endeavor, enhancing its chances of success in the legislative process.

US Crypto Firms’ Choice: SEC Registration Simplified

Since its initial draft in June, the bill has undergone several revisions to address various concerns and issues. Notably, it introduced modifications to a previous rule pertaining to provisional registrations with the SEC or CFTC. Under the revised provisions, US crypto firms will have the option to submit a notice of intent to register with the regulatory agency, thereby avoiding enforcement proceedings related to registration or token listings.

Nonetheless, these firms will be required to adhere to strict regulations concerning the protection of customer assets and disclosure practices. Furthermore, any attempts at deceit or manipulation will continue to be subject to enforcement action from the authorities.

In conclusion, the introduction of this bill signifies a significant step forward in establishing a comprehensive regulatory framework for the crypto markets. Its proponents believe that the recent XRP ruling will lend support from across the aisle, demonstrating a bipartisan effort to address the complexities of the industry and provide greater clarity and security for consumers and investors alike.

Crypto Rules: SEC and CFTC Explore Collaboration

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After the recent ruling in the Ripple case, there has been a heightened significance surrounding crypto regulations. While the industry as a whole celebrated this development, the SEC appeared to be disappointed. In a recent interview with Bloomberg, Caroline Pham acknowledged the potential for collaboration between the SEC and CFTC in shaping crypto rules.

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Currently, there exists confusion regarding which regulatory agency holds jurisdiction over the crypto industry. Pham proposed the idea of a joint approach as an ideal solution, emphasizing the importance of regulatory clarity. She expressed her anticipation for participating in both international and domestic working groups of the Financial Stability Board (FSB) to ensure a comprehensive regulatory framework for cryptocurrencies.

When questioned about the tokenization of assets and the lack of overarching regulations, the CFTC Commissioner described it as a complex matter that requires mature deliberation. She highlighted that beyond speculative crypto assets, institutions, central banks, and asset managers have recognized the potential to modernize the financial market infrastructure through tokenization of real assets since at least 2016 and 2017.

The Commissioner expressed optimism specifically regarding the use of blockchain technology for securities. A recent presentation demonstrated how leveraging this technology could lead to savings of approximately $2 billion in back office expenses related to clearing and settlements. She emphasized that these figures are substantial and indicative of real opportunities in the market, with investment banks projecting a potential $4 trillion to $5 trillion opportunity by 2030.

Money Market Integration: Crypto’s Promising Path Forward

Pham’s vision for the future is to avoid segregating tokenized markets from traditional financial markets. While acknowledging the importance of innovation, she stressed the necessity of implementing regulatory safeguards to protect investors. She believed that having such guardrails in place would not hinder progress but rather ensure a responsible and secure environment for the industry.

Additionally, Pham anticipated the expansion of practical applications on blockchain technology, such as the integration of money market funds, in the coming years.

Regulatory Whirlwind: Binance Parts Ways With Argentine Soccer Association

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Surprisingly, Binance, one of the world’s largest cryptocurrency exchanges, has terminated its five-year partnership with the Argentine soccer association (AFA) just one year into the deal. The move comes as the company faces mounting regulatory challenges and seeks to reevaluate its operations.

The announce­ment of the partnership te­rmination came through a statement in Spanish on Twitte­r. Binance stated that the sponsorship de­al ended abruptly due to a bre­ach of contract by the AFA.

“We regularly evaluate the results of our partnerships around the world, and unfortunately, despite being offered time and opportunities, the AFA has not fully complied with its contractual obligations, which goes against our business values and our partnership principles.”

The collaboration be­tween Binance and the­ Argentine soccer te­am commenced in January 2022. At that time, Binance­ became the primary sponsor of the­ team and earned naming rights for its national socce­r league.

However, controversy surrounded the deal from the outset, as the AFA terminated a contract with the fan token site Socios to agree with the exchange. It resulted in legal action, with Socios suing AFA, though the company remained the exclusive provider of AFA’s official fan token, $ARG, until 2026.

Terminating the soccer association partnership is not the only challenge Binance faces. The cryptocurrency exchange has been affected by the bear market and is grappling with regulatory crackdowns in various jurisdictions. 

Regulatory Challenges Impacting Binance

To cope with the changing market environment and declining profits, Binance has reportedly cut back on certain employee benefits. It includes stopping reimbursements for expenses such as mobile phones, fitness, and working from home.

According to rece­nt reports, the exchange has swiftly downsized its workforce­ by terminating over 1,000 employe­es. Prior to reaching its sixth anniversary on July 14th, the­ company maintained a staff of approximately 8,000 individuals.

A Binance spokesperson mentioned that the firm is considering further cost-cutting measures and reevaluating certain products, business units, staff benefits, and policies in response to business and regulatory concerns.

The regulatory challenges aren’t limited to Argentina; the exchange also faces legal action in the United States. The SEC and the CFTC have filed lawsuits against the exchange and its CEO, Changpeng Zhao. 

The lawsuits allege the offering of unregistered securities. Binance has strongly refuted these claims and called the legal actions an example of regulation by enforcement.

Amidst the challe­nging times, Binance moves through uncertainty as the crypto community eage­rly anticipates updates on the e­xchange’s strategies and plans to navigate­ regulatory changes while e­nsuring its global market dominance.

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Ethereum Withdrawer Dumps Over $19M ETH After SEC Sued Binance

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An Ethereum withdrawer swiftly sold 10,265 ETH worth $19.1 million at an average selling price of $1,861. According to on-chain analytics firm Lookonchain, this occurred not long after the crypto market crashed as a result of reports of the SEC Vs Binance lawsuit.

The seller in question is presently unknown, and the action is probably a result of the ongoing FUD that has permeated the industry in the wake of the SEC’s legal action against Binance.

This week, the crypto market woke up with a jolt after the Securities and Exchange Commission filed a lawsuit against Binance accusing its affiliated firms and Chief Executive Officer Changpeng Zhao of breaching US regulations. 

In the past 24 hours, digital asset traders lost roughly $320 million of losses in liquidations data by CoinGlass showed, as prices of the cryptos plummeted Monday after the filing.

Bitcoin [BTC], the largest crypto by market capitalization, fell below $26,000 for the first time in over two months.

The second largest digital currency, Ethereum or Ether responded by sliding 3.4 percent to $1,812.2 at the last count, with a market capitalization of nearly $218.1 billion. The trade volume of Eth was almost $9.1 billion in the last 24 hours.

According to Coinglass, the number of long liquidations during the day reached a record high of around $300 million, wiping off traders’ bets on rising prices.

SEC Once Again Avoided Ethereum’s Classification

The decrease was spearheaded by the tokens identified in the lawsuit as unregistered securities, including Binance’s BNB, Solana [SOL], and Cardano [ADA]. These leading altcoins lost as much as 10% during the day.

Notably, Ethereum was kept out of the purview. SEC chair Gary Gensler has on numerous occasions refused to provide clarity on whether Ethereum and its namesake coin count as securities.

Even though regulatory ambiguity poses a challenge for Ethereum, the need to address it remains urgent.

According to former CFTC commissioner and current SEC Counsel, Dan Berkovitz, there are specific legal provisions that allow Ethereum to fall under the purview of both the SEC and the CFTC.

Due to the overlap in the legal definitions of the two terms, it is possible for an asset to be designated as both a commodity and a security, and therefore it is not contradictory for the asset to function as both a security and a commodity, he added.

Binance Faces SEC Lawsuit: Crypto Giant Caught In Regulatory Storm

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In a surprising update, the United States Securities and Exchange Commission (SEC) has accused Binance, a popular cryptocurrency exchange, and its affiliated companies of facilitating trading for several tokens that are considered securities. 

The tokens mentioned in the SEC’s report include BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI. Additionally, the exchange has been accused of providing coin-earning programs such as BNB Vault and Simple Earn, as well as a staking investment plan. The SEC also alleges that the exchange intentionally evaded supervision by US authorities.

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It’s worth noting that the SEC’s list of securities is not exhaustive and may include other tokens as well. However, tokens with significant trading volumes, such as ETH, USDC, USDT, and LTC, are conspicuously absent from the list. 

This development follows previous statements by the chairman of the SEC, suggesting that cryptocurrencies, apart from Bitcoin, might possess securities attributes.

Bloomberg has reported that the SEC has filed a lawsuit against Binance and its CEO, Changpeng Zhao, for violating US securities regulations. 

Earlier, the Commodities Futures Trading Commission (CFTC) sued the exchange and Zhao for allegedly breaking US derivatives rules. Speculation is now rife that it may consider replacing its CEO in response to these legal challenges.

Binance CEO Responds To SEC’s Accusations

In response to the allegations, Changpeng Zhao assured users that Binance’s systems, including withdrawals and deposits, remain stable. He also mentioned that the company had not yet seen the complaint and that the media was privy to the information before them.

Binance released a blog post expressing disappointment in the SEC’s decision to file a complaint, particularly seeking emergency relief. The exchange claims to have actively cooperated with the SEC’s investigations, engaging in extensive discussions to reach a settlement.

However, the SEC has chosen to litigate unilaterally, and Binance intends to mount a vigorous defense. The exchange argues that the SEC’s actions undermine America’s position as a global hub for financial innovation and leadership. 

The exchange insists that user assets on the platform, including Binance.US, are safe and secure, refuting any claims to the contrary. The exchange views the SEC’s actions as an attempt to assert jurisdiction over other regulators and accuses the commission of prioritizing headlines over investor protection.

While the SEC’s actions may have limited reach due to its status as a non-US exchange, the company stands in solidarity with digital asset market participants in the US, vowing to fight the SEC’s alleged overreach. 

Nevertheless, Binance is committed to cooperating with regulators worldwide and fostering innovation while ensuring consumer protection in the evolving landscape of cryptocurrency regulation.

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