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Vitalik Buterin Slams U.S. Crypto Regulations, Calls for Major Reforms

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Ethereum co-founder Vitalik Buterin has slammed the United States over its takes on defining and regulating cryptocurrencies as securities. Crypto journalist Colin Wu shared the information on W Blockchain X post, noting that Buterin is concerned about the current regulatory environment.

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Buterin’s criticism is directed at the U.S. Securities and Exchange Commission (SEC) and its expansive definition of what is considered a security in the digital sphere. He pointed out that the given regulatory environment promotes the development of virtually useless projects and various empty promises of the possible returns. As stated by Buterin, the existing environment does almost nothing to encourage proper innovation and real value within the sphere of cryptocurrencies.

Buterin’s main problem with the SEC’s approach is that it leads to projects that are not very clear with the benefits they provide and make only speculative promises rather than real developments that can be advantageous to the digital industry. He noted that to qualify the promise of returns and rights as securities, there has to be a shift in the law. This shift should be towards the fact that the tokens being issued should be backed up by some form of economic activity.

Vitalik Buterin Urges Honest Crypto-Regulation

Buterin urges the regulators and the industry to work together honestly to realize this. He estimates that the regulatory environment could be made slightly less oppressive, while still allowing for the stifering of frauds that are unlikely to be of much use. Thus, according to him, it is high time to make such a shift for the further development of the cryptocurrency market.

Buterin made the remarks during the week when the cryptocurrency market is already under great pressure from the regulators across the globe. Given the fact that the digital asset market is still relatively new, governments and other regulatory authorities are still seeking the most suitable ways of managing it.

The crypto community will be waiting for the response of the regulators to Buterin’s suggestions to adopt change. Nevertheless, his words cannot but contribute to the existing discussion about the further development of the cryptocurrency regulation in the United States and the rest of the world.

Stablecoins Face Stricter Rules From Global Banking Regulator

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The Basel Committee for Banking Supervision (BCBS), the global standard-setter for banks has issued a consultative document on Thursday, proposing 11 standards for stablecoins, a type of cryptocurrency that is supposed to maintain a stable value by being backed by a specific asset such as the dollar, euro or gold.

The BCBS wants to impose stricter criteria for allowing stablecoins to be treated as less risky than unbacked cryptocurrencies such as bitcoin, which are subject to the maximum possible risk weight of 1,250%.

Banks must hold enough capital to cover their exposure to these volatile digital assets. Banks can allocate no more than 2% of their core capital to these riskier assets. The BCBS said it will not change these standards, which were announced in June this year. The consultation runs until March 28, 2023.

Group 1b Criteria For Stablecoins

However, stablecoins that have “effective stabilization mechanisms” can qualify for “preferential Group 1b regulatory treatment”, which means that they are subject to lower capital requirements based on the risk weights of underlying exposures as set out in the existing Basel Framework.

But to qualify for this preferential treatment, stablecoins have to meet a range of criteria, including being “redeemable at all times.” The BCBS said that:

only stablecoins issued by supervised and regulated entities that have robust redemption rights and governance are eligible for inclusion.

The BCBS also reported the reserve assets that are used to back stablecoins can pose various risks that can affect the ability of the stablecoin issuer to meet holders’ expectations of redemption on demand. Therefore, the reserve assets must meet high quality, maturity, and volatility standards.

BCBS Guidelines For Stablecoin Reserve Assets

According to the BCBS, the reserve assets used to cover redemptions should be “comprised largely of assets with short-term maturities.” This would reduce the liquidity risk because the stablecoin issuer cannot sell the reserve assets quickly enough to meet redemption requests.

The reserve assets should also have high credit quality, meaning they have a low probability of default or loss. This would reduce the credit risk, which is the risk that the borrowers of the reserve assets fail to repay their obligations.

Moreover, the reserve assets should have low volatility, meaning their prices remain relatively stable and less affected by market stress. This would reduce the market risk, which is the risk that the value of the reserve assets fluctuates due to changes in market conditions.

The BCBS said these standards are intended to address the potential risks of stablecoins to the financial stability and the banking system. The BCBS also said that it will continue monitoring the developments and innovations in the crypto-asset market and revise its standards as needed.

The BCBS is not the only regulator concerned about the risks and challenges of stablecoins. The Financial Stability Board (FSB), the international body that coordinates the work of national financial authorities, also issued a report in October this year, recommending 10 high-level recommendations for the regulation, supervision, and oversight of stablecoins.

The FSB said that stablecoins have the potential to enhance the efficiency and inclusiveness of the global payment system, but they also pose significant risks to financial stability, consumer protection, market integrity, data privacy, monetary policy, and cross-border cooperation.

The FSB said that authorities should ensure that stablecoins are subject to comprehensive regulation and oversight, have effective risk management frameworks, comply with relevant standards and rules, and cooperate with each other to address cross-border issues.

The FSB also said it will continue working with the BCBS and other standard-setting bodies to develop international standards and guidance for stablecoins and other crypto-assets. The FSB also said it would monitor its members and other relevant bodies’ implementation and assessment of its recommendations.

Related Reading | Binance Challenges SEC’s Case: Asserting Irrelevance Of $4.3B Settlement

Zipmex Halts Crypto Trading In Thailand Amid Regulatory Chaos

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The Singapore­-based crypto exchange Zipme­x, which runs in numerous Asian areas, has declare­d a temporary pause on all crypto trading and deposits in Thailand. This suspe­nsion, beginning from November 25, 2023, is due­ to regulatory hurdles and cash flow issues in the region.

To ensure that the business operations of Zipmex Company Limited (“Company”) are appropriate and compliant with the criteria set by the SEC Thailand.

The exchange announce­d the need for a pause­ to align its work with the rules laid out by Thailand’s primary digital assets authority, the­ Securities and Exchange Commission (SEC). The exchange also said that customers who wish to withdraw their funds or assets after January 31, 2024, will have to contact its customer support directly.

Zipmex Faces Multiple Hurdles In Asia

Zipmex has e­xperienced ope­rational troubles before. In April 2022, late­ payments to its customers were­ reported. The company was trying to “boost custome­r profits” by investing its money in third-party platforms. But firms like­ Babel Finance and Celsius ran into cash flow issue­s, unable to give back Zipmex’s funds.

In January 2023, the exchange face­d an investigation by Thailand’s SEC. The company was suspecte­d of breaking new laws set for digital asse­t service providers, introduced in November 2022. Zipmex and co-founde­r Akalarp Yimwilai were accused of ove­rseeing a digital asset fund without authorization.

It was also alle­ged that they did not share info about digital walle­ts and crypto deals as required by the­ Digital Assets Act. The SEC had previously submitte­d a police report against Zipmex in Se­ptember 2022.

Zipmex Seeks To Regain Trust And Resume Operations

Despite­ hurdles, the exchange plans to get back to business in Thailand at the earliest. The­y say they’re actively collaborating with the­ SEC and other key authorities to sort out problems and gain required permissions. Also, the exchange revealed a de­ep commitment to protecting the­ir customers and adhering to the­ laws in force.

Zipmex is se­eking new investors, including large­ corporations, to retrieve its digital asse­ts and reimburse its customers. The­y’ll also file a lawsuit against Zipmex Global and its trade partne­rs to compensate for customer losse­s, urging customers to join and apologizing for the suspension inconve­nience.

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Bitcoin Advocates Seek Regulation To Protect Argentina’s Crypto Market

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The non-government organization Bitcoin Argentina has proposed a new legal framework to regulate cryptocurrencies in a way that maintains decentralization and builds public trust.

Bitcoin Argentina president Ricardo Mihura presented the draft bill on November 10 at a major blockchain conference in Buenos Aires. Despite previously opposing crypto regulation, Bitcoin Argentina now argues it is necessary to preserve blockchain technology and hold bad actors accountable.

We cannot close our eyes to the number of dishonest actors and projects that circulate with the blockchain brand, said Mihura.

The bill’s first article focuses on categorizing cryptocurrency platforms and service providers as decentralized, centralized but willing to engage with authorities, or centralized and global. Platforms in the latter two categories could operate freely but would face legal consequences if customers suffer damages from company problems.

Courts would decide if a platform is sufficiently decentralized when resolving legal claims. Decentralized platforms would not face intervention. Mihura stressed that banning cryptocurrencies is unrealistic given blockchain’s global nature. “Not even the United States can effectively prohibit the unlicensed crypto economy,” he said.

Since Argentina cannot stop residents from using global crypto platforms, the bill aims to provide citizens the maximum legal protection available. Mihura said this includes holding all responsible parties accountable for fraud, “until the final victim.”

The proposal comes a week before Argentina’s presidential runoff election. The country is battling high inflation, which hit 121.7% over the past year.

Bitcoin Community Shifts Stance On Oversight

In the past, the Bitcoin community rejected government oversight. However, Bitcoin advocates in Argentina now believe regulation is necessary to preserve decentralization and protect consumers. Mihura admitted the bill represents a major shift for Bitcoin Argentina. But he said the growing number of dishonest actors compelled the organization to take action.

Specific goals include separating truly decentralized platforms from centralized providers, and ensuring strong legal protections for crypto users. Mihura stressed that the judiciary should not intervene in decentralized networks.

Some speculate the proposal is partly motivated by Argentina’s inflation crisis. Regulating cryptocurrency could help rebuild public trust and prevent fraud. Either way, the draft bill signals increasing openness to oversight among crypto advocates.

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Ripple’s Legal Landscape Shifts: Attorney Deaton Challenges $770M Disgorgement

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In the ongoing legal face-off between Ripple and the U.S. Securities and Exchange Commission (SEC), Attorney John Deaton, a representative of XRP holders, has introduced a compelling argument that could potentially reshape the case’s outcome. His assertions, grounded in influential factors, cast doubt on the likelihood of Ripple facing the anticipated $770 million disgorgement.

Deaton’s legal strategy hinges on the Supreme Court’s Morrison ruling, a pivotal decision that curtails the SEC’s jurisdiction to sales occurring within the United States. This becomes particularly pertinent as scrutiny intensifies over Ripple’s XRP sales in regions beyond the U.S., including the United Kingdom, Japan, and Switzerland. The legal status of XRP in these jurisdictions, notably not classified as a security by entities such as the Financial Conduct Authority (FCA) in the U.K. and the Financial Services Agency (FSA) in Japan, further strengthens Ripple’s defense.

Ripple’s Charges Shift From Fraud To Regulatory Dispute

Deaton’s distinction is of utmost significance as he highlights that Ripple’s charges do not involve fraud but are a matter of regulatory disagreement. This nuanced outlook shifts the attention from punitive actions to the more comprehensive regulatory compliance issue.

Highlighting the global nature of XRP transactions, Deaton underscores the diminished potential for disgorgement. With a substantial portion of XRP sales outside the U.S. and involving accredited investors, the estimated disgorgement amount could significantly reduce, possibly exceeding 90%.

Moreover, Deaton points out that institutional XRP sales have not resulted in demonstrable harm. The current price of XRP, surpassing levels during those sales, indicates a lack of investor losses. Emphasizing the swift nature of On-Demand Liquidity (ODL) transactions involving XRP, occurring within seconds, Deaton argues that this immediacy minimizes the potential for investor harm.

Notably, accusations of harm are directed more towards the SEC than Ripple, particularly resonating among the 75,000 XRP holders actively involved in the legal proceedings. As Attorney John Deaton’s persuasive case unfolds, the landscape of Ripple’s legal battle against the SEC takes an unpredictable and potentially game-changing turn.

Cyprus Considers Stricter Crypto Regulations Amid Global Pressure

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In a bid to bolster its reputation as a crypto-friendly destination, Cyprus is contemplating tighter regulations for the burgeoning cryptocurrency industry. The Cyprus Ministry of Finance has proposed significant amendments to the Prevention and Suppression of Money Laundering Law, signaling a shift towards aligning the nation with international anti-money laundering and counter-terrorism financing standards.

According to a recent report by the Cyprus Mail, the Ministry of Finance has submitted its comprehensive amendments package to the Parliamentary Committee on Legal Affairs. This move aims to align with the rigorous guidelines established by the Financial Action Task Force (FATF) and the recommendations outlined in the MONEYVAL report, released in November 2022.

Key among the proposed amendments is the requirement for all crypto service providers to register with the Cyprus Securities and Exchange Commission (CySEC). Non-compliance with these regulations could result in severe penalties, ranging from substantial fines of up to €350,000 to imprisonment for up to five years or a combination of both.

Cyprus Bar Association Concerned About Cross-Border Crypto Rules

The proposed changes have sparked some reservations within the Cyprus Bar Association, particularly concerning the obligation for crypto service providers holding licenses from other European countries to register with CySEC. This provision was included in the amendments at the behest of CySEC itself.

Despite these potential changes, many crypto companies have reported smooth registration processes in the country. In September, the renowned crypto brokerage firm eToro obtained a Crypto Asset Service Provider (CASP) registration from CySEC, following in the footsteps of ByBit, which secured the same license in June.

Notably, Binance, the world’s largest cryptocurrency exchange, withdrew from the Cyprus market in July. This move came as part of Binance’s strategy to focus on larger, more heavily regulated European Union markets amidst increasing regulatory scrutiny.

Cyprus’s contemplation of stricter cryptocurrency regulations highlights the ongoing global trend of governments and regulatory bodies seeking greater control over the digital asset space. As the industry continues to evolve, striking the right balance between fostering innovation and ensuring security remains at the forefront of these discussions. Cyprus’s potential regulatory adjustments testify to the ever-evolving landscape of cryptocurrency regulation on the international stage.

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