SEC sues Consensys over MetaMask’s brokerage, staking services

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys, the parent company of MetaMask. It alleges that the company has been operating as an unregistered broker and engaging in the unregistered offer and sale of securities through MetaMask Swaps since 2020. The complaint claims that Consensys has collected more than $250 million in fees by brokering crypto-asset transactions, and offering staking services (through their Lido and Rocket Pool tokens) without proper registration. The SEC seeks a permanent injunction, civil penalties and other equitable relief against Consensys for these alleged violations of federal securities laws. [Read more at Coin Telegraph]

Crypto as a marketplace for capital flight

The IMF published a paper that shows how cryptocurrency markets can fuel cross-border capital flight by serving as marketplaces that match counterparts with and without (illicit) access to FX. In countries where international transactions are restricted, crypto exchanges effectively allow domestic agents to pay a premium to buy foreign currency. The counterparts to these transactions are agents with access to FX, who sell crypto holdings purchased abroad. A stylized model illustrates that restricted foreign currency amid economic imbalances incentivizes these transactions via persistent crypto premia in local relative to global markets. The analysis of relative crypto pricing data in several country case studies provides empirical support that crypto markets serve as marketplaces for capital flight that already took place, rather than a novel channel for capital flight. [Read more at the IMF]

Promise (un)kept? Fintech and financial inclusion

The IMF published a paper that investigates the relationship between fintech and financial inclusion in a panel of 84 countries over the period 2012–2020. It finds that the impact of fintech on financial inclusion is statistically insignificant (and negative) in advanced economies, but it becomes positive in developing countries with a statistically highly significant overall effect. Taken as a whole, these results—robust to alternative estimation methods—indicate that fintech endeavors may have so far failed to promote financial inclusion across all countries, but helped expand financial inclusion to a certain extent in developing countries. The paper concludes that policymakers need to develop an adequate regulatory framework that balances fostering innovation and ensuring equitable treatment of individuals and groups. This requires better financial education, strong regulatory institutions, and well-calibrated prudential regulations for a level playing field and effective supervision. [Read more at the IMF]

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