Kiffmeister’s #Fintech Daily Digest (20230328)

CFTC sues Binance, CEO Zhao over ‘willful evasion’ of U.S. laws, unregistered crypto derivatives products

The U.S. Commodity Futures Trading Commission (CFTC) sued crypto exchange Binance and founder Changpeng Zhao on allegations the company knowingly offered unregistered crypto derivatives products in the U.S. against federal law.
The suit also alleged that the company directed its employees to spoof their locations through the use of virtual private networks (VPNs). The CFTC is charging Binance with violating laws around offering futures transactions, illegal off-exchange commodity options, failing to register as a futures commissions merchant, designated contract market or swap execution facility, poorly supervising its business, not implementing know-your-customer (KYC) or anti-money laundering (AML) processes and having a poor anti-evasion program. [Read more at the CFTC]

Zhao replied to the complaint and classified them as “unexpected” and “disappointing.” The executive claims that the company has worked with the U.S. regulator since 2021. Zhao said: “upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint.” [Read more at Binance]

Custodia comments on the Fed’s 86-page order: new Fed policies and procedural abnormalities

The Fed Board of Governors released its final order on Wyoming-based Custodia Bank’s application to become a member of the Federal Reserve system, expressing strong doubts about Custodia’s management team, financial condition and business model in rejecting the application. Custodia responded with a framing of the context for the Fed’s implicit new policy stance and and what other banks might learn from them. The Fed outlined at least five new policies in the Custodia order, including the casting doubt on whether any issuer of a stablecoin on an open, public and/or decentralized network can comply with anti-money laundering/combating financing of terror laws. Also, the Fed de facto established a new requirement that state banks be FDIC-insured in order to become Fed member banks because, in its words, FDIC insurance is “a critical tool in preventing bank runs.” [Read more at Custodia]

Facilitating increased adoption of payment versus payment (PvP)

The Committee on Payments and Market Infrastructures (CPMI) published the final report on the facilitation of increased adoption of payment versus payment (PvP) to reduce foreign exchange (FX) settlement risk and improve cross-border payments. It analyses the causes of non-PvP settlement, takes stock of existing and proposed new PvP solutions and suggests roles for the private and public sectors to facilitate increased adoption of PvP. The report finds that existing PvP arrangements have been successful at reducing settlement risk for much of the FX market, but certain market segments remain exposed to risk: PvP arrangements are not available for all currencies and may not be the preferred solution of some market participants or for settling certain trades. New PvP solutions can complement the existing arrangements by providing flexibility and functionalities such as real-time settlement or 24/7 operations, expanding coverage to the retail market, and supporting emerging market currencies. [Read more at the CPMI]

UK Treasury Cancels Plans for Government-Backed NFT

The U.K. Treasury is canceling its plans to release a government-backed non-fungible token (NFT). The Royal Mint was tasked with releasing the token by the summer of 2022 but faced delays. The U.K.’s economic secretary Andrew Griffith said that the plans were not moving forward “at this time” but that the proposal would remain under review. Chair of the Treasury Select Committee Harriet Baldwin said that the government’s chief financial minister would be asked if issuing an NFT “remains the policy of his department.” [Read more at CoinDesk]

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One thought on “Kiffmeister’s #Fintech Daily Digest (20230328)

  1. Hi
    Nice read
    Interesting developments in the world of finance and cryptocurrency, including the CFTC’s action against Binance, the Fed’s policies for stablecoins, and the CPMI’s report on payment versus payment solutions. It’s great to see continued efforts to improve the industry and reduce risk.
    Scott Dubois
    Civic Edge Lifestyle

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