New York Attorney General Announces Filing in Connection with Tether, Bitfinex Investigation
On April 25, 2019, New York Attorney General Letitia James announced that her office obtained a court order enjoining iFinex Inc., operator of the Bitfinex trading platform, and Tether Limited, issuer of “tether” virtual currency, from further violations of New York law in connection with potential acts of fraud. Bitfinex’s response to the Order can be found here.
New York’s Office of the Attorney General has expressed concern regarding the potential for conflicts between the interests of virtual asset trading platforms, platform insiders, and customers, and one of the primary objectives of this Order is to address the potential loss of customer funds.
“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds,” said Attorney General James. “New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up [sic] for investors and seek justice on their behalf when misled or cheated by any of these companies.”
iFinex and Tether must appear in the Supreme Court of the State of New York next month.
New York District Attorney Announces Guilty Plea in Cryptocurrency Money Laundering Case
The Manhattan District Attorney announced on Tuesday, April 23, 2019 that two individuals pled guilty for running a steroid and controlled substance business that laundered millions of dollars in cryptocurrency. This is among the first money laundering convictions involving cryptocurrency by New York State prosecutors.
The full announcement from the Manhattan District Attorney’s office can be found here.
FINRA Forms New Office of Financial Innovation
On April 24, 2019, FINRA announced that it is forming an Office of Financial Innovation that will coordinate issues related to financial innovation and, in particular, new uses of financial technology. Haimera Workie has been named the head of the new office.
“Innovation continues to pose new opportunities and challenges for our member firms and the broader financial services industry, and it is essential that we as regulator keep pace,” said FINRA President and CEO Robert W. Cook.
The full announcement can be found on FINRA’s site located here.
China’s Foreign Exchange Regulator Piloting Blockchain Trade Finance Solution
CNStock, a financial news source in China, reports that the State Administration of Foreign Exchange (“SAFE”) has built a blockchain platform to facilitate cross-border trading. SAFE is reportedly piloting the new platform in three major provinces, Jiangsu, Zhejiang, and Fujian, as well as in the cities of Shanghai and Chongqing. The pilot is designed to streamline processes involved in importing and exporting goods, including import and export receivable financing and verification of customs paperwork. China’s existing method for import/export processing relies on multiple manual processing interactions, which leads to significant delays and increased demurrage and per diem charges for cargos and resulting financing arrangements. The pilot is expected to run for six months before a decision is made to expand use of the platform nationwide.
A summary of CNStock’s reporting can be found here.
Japan’s Financial Services Agency Raids Two Cryptocurrency Exchanges
Following last week’s report from Reuters that Japan’s Financial Services Agency (“FSA”) may require additional oversight of cryptocurrency exchanges in light of a series of security lapses by Japanese exchanges last year, Reuters now reports that two such exchanges were raided last week to investigate their internal oversight, including customer protection and anti-money laundering practices. Specifically, Reuters reports that the FSA conducted inspections at Huobi Japan Inc and Fisco Cryptocurrency Exchange Inc, both of which recently underwent significant management changes.
Reserve Bank of India Announces Framework for Fintech Regulatory Sandbox
The Reserve Bank of India (“RBI”) recently announced the framework for its fintech regulatory sandbox to foster “learning by doing,” which will allow regulators to obtain first-hand experience with and understand the benefits and risks of emerging financial technology. However, because Section 6.3 of RBI’s framework explicitly excludes cryptocurrency businesses, this framework is not a sign that RBI is shifting its position on cryptocurrency as reported last summer.
French National Assembly Adopts New Blockchain Bill
On April 11, 2019, the French National Assembly adopted the Plan d’Action pour la Croissance et la Transformation de Enterprises (PACTE – Action Plan for Business Growth and Transformation) that, once enacted, will establish a framework for cryptocurrency-based fundraising and for digital asset services providers. If blockchain companies opt into the regulation, that is, they meet certain requirements to obtain a “visa” or license with the country’s financial markets overseer, then this new law grants these companies the right to a bank account and places the burden on the banks to explain why they will not serve a particular business. Businesses that opt not to obtain a visa or license will be prohibited from solicitation, patronage, and sponsorship activities.
Binance Launches Decentralized Exchange
On April 23, 2019, Binance, the world’s largest cryptocurrency exchange, launched a decentralized exchange that operates on top of the company’s Binance Chain, a blockchain system that was also launched last week.
“We believe decentralized exchanges bring new hope and new possibilities, offering a trustless and transparent financial system. . . . With no central custody of funds, Binance DEX offers far more control over your own assets,” said Binance CEO Changpeng Zhao.
The official announcement is located here.