Legal Bi-Weekly Update

Friday 16th December

Welcome back to our legal news blog where you’ll find a range of key insights selected to highlight what is happening in the legal side of crypto at the moment.

• Oasis’ Ann Sofie Cloots spoke about the EU’s crypto approach to Peter Kerstens, Adviser for Technological innovation and cybersecurity at the European Commission. The conversation raised questions including: Will DAI be unlawful in the EU under the highly anticipated Markets in Crypto Assets Regulation? To what extent is DeFi excluded from MiCA? And how will the EU enforce MiCA on non-EU based entities?

• The US judge in the Ooki DAO trial ordered the CFTC to serve notice of its lawsuit on the original founders of  bZeroX, Tom Bean and Kyle Kistner, both residing in the US and Ooki DAO token holders. The CFTC had argued that it served a lawsuit on the entire DAO by posting it on an online forum and chat box. However, the judge ruled that “to provide the best practicable notice, the CFTC should serve at least one identifiable Token Holder”. Since both Bean and Kistner are US residents and token holders, the judge ordered the CFTC to serve notice to them.

• Eva Kaili, Vice President of the European Parliament and one of the most pro-crypto MEPs, was arrested in a bribery investigation. Prior to her arrest, Kaili had been gathering input on a regulatory approach to NFTs, which are not covered from the EU’s MiCA Regulation.

Sam Bankman-Fried was denied bail by a Bahamian Court, where he was arrested on the instruction of the US. The US SEC, CFTC and the Southern District of New York each have brought charges against SBF. Meanwhile, the Securities Commission of the Bahamas accused new FTX CEO John Ray of misstating its relationship with SBF in order to “make headlines and advance questionable agendas.”

• Authorities in China arrested 63 individuals accused of laundering 1.7bn USD using tether. Operating since 2021, Chinese authorities said the group sourced funds from illegal pyramid schemes, fraud and gambling, and recruited people around the world to help launder funds with USDC.

• Crypto exchanges in Canada are required to segregate user funds from operational cash and stop offering leverage to margin traders, according to new guidelines by the Canadian Securities Administrators. The CSA “Crypto trading platforms are expected to have established policies and procedures to determine whether each crypto asset they provide exposure to is a security and/or derivative.

• The US FinCEN is looking into DeFi’s impact on traditional financial intermediaries that “play a critical role” in its AML/CFT efforts. Tasked with “combating money laundering” FinCEN will be analysing whether further regulations will be introduced, in light of the executive order on digital assets that was signed by US President Joe Biden in March.

• Australia will introduce new rules for the licensing and regulation of crypto service providers firms in 2023. The Government will also update the Payment Systems Regulation Act 1998 to establish the Reserve Bank of Australia’s ability to regulate new payments systems, such as digital wallet providers. The chosen approach centres around exercising “token mapping” market research that will assist authorities in evaluating which assets and services should be regulated. A consultation paper determining the regulations is expected to be released in early 2023.

December 16, 2022

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