Legal Issues and Client Interest in Crypto Biz

Crypto exchanges around the world are facing increased regulatory challenges. In the United States, the Department of Justice has indicted KuCoin and its founders for allegedly running an unlicensed money-transmitting business and violating the Bank Secrecy Act. The charges coincide with a civil enforcement case by the Commodity Futures Trading Commission, which accuses the exchange of multiple violations. The Department of Justice claims that KuCoin handled over $5 billion in suspicious and criminal funds. Coinbase, another major exchange in the US, also faced a setback when a judge denied its motion to dismiss a lawsuit from the Securities and Exchange Commission. The judge argued that similar transactions have been considered securities transactions in the past.

In the Philippines, the financial regulator has decided to block local users’ access to Binance due to concerns over the exchange’s unlicensed operations in the country. The regulator claims that Binance offered leveraged trading services and crypto savings accounts to local users without proper licenses. In Russia, Binance’s successor, CommEx, has announced that it is shutting down operations and has halted deposits. CommEx acquired Binance’s Russian business in September 2023.

In other news, BlackRock’s Bitcoin exchange-traded fund (ETF) is on track to surpass the Grayscale Bitcoin Trust (GBTC) holdings within three weeks. BlackRock’s ETF currently holds 238,500 Bitcoin worth nearly $15.5 billion, with daily inflows averaging 4,120 Bitcoin. Grayscale’s Bitcoin Trust has 350,252 Bitcoin worth $23 billion but is experiencing daily outflows of 4,140 Bitcoin. Asset manager Hashdex has also joined the spot Bitcoin ETF market by converting its futures ETF to hold spot Bitcoin.

Galaxy Digital, a digital asset management firm, reported a net income of $296 million for 2023 after ending 2022 with a $1 billion net loss. The firm’s assets under management grew from $1.7 billion to $5.1 billion in 2023 and reached $10.1 billion by the end of February 2024. Goldman Sachs’ clients have also shown renewed interest in crypto, with many of the firm’s largest clients becoming active in the sector. Hedge funds are particularly involved in Goldman’s options and futures offerings.

The SWIFT messaging network has declared the second phase of sandbox testing for its central bank digital currency (CBDC) interlinking solution a success. The project looked at various use cases, including digital trading with instantaneous settlement and connecting tokenization platforms. SWIFT plans to further develop the beta version of its connector. Mastercard has released a white paper on remittances in Latin America, noting that remittance rates in the region are growing faster than the global average. Digital remittances in Latin America are expected to be worth $20 billion by 2026.

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