In 2020, brave American regulators have got closer to the crypto industry than ever before. As the popularity of cryptocurrencies has grown, services that have a direct responsibility to preserve the integrity of the existing financial system have continuously worked to prevent cryptocurrency companies from developing normally.Let's take a look at some of the most memorable incidents of U.S. regulatory and law enforcement interventions that shaped the relationship between the crypto industry and the U.S. government in 2020.
SEC vs Telegram case
By far the most memorable saga was the confrontation between the US Securities and Exchange Commission (SEC) and the now infamous, untimely deceased cryptocurrency project of Pavel Durov TON. In October 2019, the SEC initiated legal proceedings against Durov's company. The regulator argued that Telegram did not register the offer and sale of tokens, which are securities, in violation of the registration provisions stipulated by the Law on Securities, besides, it hid information about how it disposed of investors' money.
After a series of court hearings, the project was closed - the court recognized the GRAM tokens as securities and completely sided with the SEC. Telegram and SEC have entered into a claims settlement agreement. As part of the agreement, Durov's company was ordered to return illegal profits for $ 1.22 billion received as part of the ICO - this is 72% of the amount of $ 1.7 billion collected during the token sale. The SEC also fined the company $ 18.5 million. Over the next three years, Telegram is required to notify the SEC 45 days in advance of its plans to issue "cryptocurrencies, digital coins, digital tokens" and any digital assets. After the end of the proceedings with the SEC, Durov wrote a heartfelt letter, where he accused the evil regulator of everything.
OCC allows US banks to store cryptocurrency
On July 22, 2020, the Office of the Comptroller of the United States of America (OCC) allowed national banks to provide cryptocurrency custody services for their clients. The OCC's job is to oversee national banks. American financial institutions that want to expand their operations across the country must obtain approval from this regulator.
In an open letter, the OCC said that cryptocurrency custody services are "a modern form of traditional custodian banking." The document gave a definition of cryptocurrencies and an explanation of what the so-called "storage" would represent: "Since digital currencies exist only in the blockchain or distributed ledger in which they are stored, we cannot talk about any physical possession of the instrument. Instead, the right to a specific unit of digital currency is transferred from one side to the other using unique cryptographic keys. Thus, the bank that owns digital currencies on behalf of the client takes possession of the cryptographic access keys to this unit of cryptocurrency. "
The letter defined the encryption key escrow service as the physical storage of assets since cryptocurrencies cannot be physically transferred to the bank in any other way. This favor of the cryptana was explained by the fact that Brian Brooks, who previously headed the legal team of Coinbase, has been acting as the head of the department since May. Everything turned out to be simple.
Withdrawal by the Ministry of Justice of bitcoins worth a billion dollars
Armed with a new set of guidelines emanating from the Attorney General's office, the US Justice Department spent much of the fall ramping up enforcement against cryptans. The process culminated in early November. A petition has been filed to seize bitcoin and bitcoin forks for a total of $ 1 billion. Presumably, this money belonged to an unnamed hacker who had previously stolen it from the now-deceased anonymous online trading platform Silk Road, which operated from 2011 to 2013. The Ministry of Justice was helped by the brave guys from the analytical firm Chainalysis.
DoJ & CFTC vs BitMEX
The fate of the crypto derivatives platform BitMEX illustrates what can happen to those who exhaust the patience of several American regulators at once. BitMEX, a Seychelles-based company, has been suspected of serving US customers in ways that circumvent regulatory bans.
The US Commodity Futures Trading Commission (CFTC) and the US Department of Justice (DoJ) went to court in early October. The marketplace and its executives were accused of maintaining an unregistered trading platform and violating anti-money laundering regulations. According to the CFTC, since its inception in 2014, BitMEX has offered traders illegal cryptocurrency trading services with borrowed funds for about $ 1 trillion. At the same time, the exchange did not register with the CFTC and did not bother introducing KYC and AML procedures for its clients.
A key takeaway from this story was articulated by SEC Commissioner Hester Peirce, who called the BitMEX case a clear message to the cryptocurrency market: "If there are American users of a product or service, US law will be enforced."
FinCEN against anonymous wallets
A week before Christmas, the Financial Crimes Enforcement Network (FinCEN) published a regulation proposal aimed at increasing the transparency of transactions that move digital funds from centralized exchanges to private wallets. If adopted unchanged, the rules will require exchanges to collect personal information about the owner of the sender's wallet if the transfer amount exceeds $ 10,000 in one day or $ 3000 in one transaction.
In addition to promising a lot of extra work for crypto exchanges, the proposed rules could deal another blow to the very concept of private, peer-to-peer cryptocurrency transactions. The cryptans are alarmed and for good reason. Coinbase CEO Brian Armstrong warned: “If this cryptocurrency regulation is released, it will be a terrible relic with a long-term negative impact on the US. In the early days of the Internet, some people called for regulation on a par with the telephone companies. Thank God they didn’t do it ”.
SEC vs XRP
The US Securities and Exchange Commission (SEC) continued its fruitful work to root out cryptocurrency companies - in late December it filed a lawsuit against Ripple and its executives. They are accused of selling $ 1.3 billion in unlisted securities. The news sparked a wave of delisting from major exchanges including Coinbase, Bittrex, and OKCoin. Bitstamp said it will stop XRP trading for US residents. Smaller exchanges including OSL, Beaxy, and CrossTower have said they will take similar action.
Ripple CEO Brad Garlinghouse has assured shareholders and the cryptocurrency industry that the company will win the case brought by the US Securities and Exchange Commission. According to him, the SEC lawsuit is "an attack on all cryptocurrencies." Market participants were urged not to draw far-reaching conclusions about the alleged violation of the law by Ripple, but this did not bring the desired effect. Major players, including MoneyGram and Grayscale, have decided to distance themselves from Ripple, not wanting to incur the wrath of the formidable regulator.