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BitMEX charges send ‘a message’ to global exchanges: Crypto Mom

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United States Securities and Exchange Commissioner Hester Peirce — better known as “Crypto Mom” — believes the recent action against BitMEX may be a wake up call for crypto firms. 

In an interview with “Unchained Podcast” on Oct. 13, Peirce told host Laura Shin that the recent charges laid against BitMEX by the U.S. Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) has put the international crypto industry on notice about U.S. anti-money laundering (AML) and know your customer (KYC) regulations.

“I think that the message has been coming to the industry fairly loud and clear on the AML/KYC front, and I’m sure it will continue,” said Pierce.

“It’s definitely sending a message to the crypto world that when there are U.S. users of a product or a service, there’s going to be enforcement of U.S. laws.”

On Oct.1, the CFTC filed a civil enforcement action against BitMEX and three of its executives for violating AML regulations. In addition, the DOJ filed criminal charges against four executives, including founder Arthur Hayes, for violating the Bank Secrecy Act. Hayes and two of his colleagues remain at large as of this writing, while BitMEX’s former chief technical officer, Samuel Reed, is out on bail.

Pierce also discussed the SEC’s apparent resistance to a Bitcoin exchange-traded fund (ETF). Such a product would offer a regulated means for institutional investors to access crypto without the risk of holding the underlying assets.

Though the Bermuda Stock Exchange announced it has approved a Bitcoin ETF in September, that’s outside the SEC’s jurisdiction. The Winklevoss twins, Wilshire Phoenix, and NYSE broker Arca have submitted proposals for Bitcoin ETFs with the SEC, and the commission has consistently rejected all of them over fears of market manipulation.

However, Crypto Mom believes an ETF should be “judged on its own merits” by the regulatory body. Bitcoin ETFs, she said, hold a lot of interest among investors and could be an easy way for people to get exposure to the cryptocurrency.

She criticized the commission’s resistance to a Bitcoin ETF as unfair to investors:

“In the past I think [the SEC has] taken an approach that is a merit regulation approach and is saying ‘we don’t think that investors can make wise decisions for themselves so we’re just going to cut this product off from them altogether.’ It just doesn’t make any sense to me.”

Peirce started her second term at the SEC in August and will remain at the commission until 2025.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.