The Policy Pulse: April 2, 2023

CFTC Pursues Binance for Violations, including ‘Sham’ Compliance Program

• Earlier this week, the US Commodity Futures Trading Commission (CFTC) sued Binance and its CEO Changpeng Zhao for running an “illegal” exchange and a “sham” compliance program.
• The regulator accused Binance, Zhao and its former top compliance executive of “wilful evasion” of US law.
• The CFTC alleged that Binance offered and executed commodity derivatives transactions for US citizens, which was in violation of US law.
• The CFTC said Binance’s compliance program had been “ineffective” and that the firm told employees and customers to circumvent compliance controls. In an official statement on Binance’s website, Zhao said the complaint contained an “incomplete recitation of facts”, and Binance vowed to continue collaborating with regulators.

New Crypto Disclosure Rules for US National Future Association Members

• The National Futures Association (NFA) is setting up standards for its 100+ members involved in digital asset commodities due to a lack of formal crypto rules from US government agencies.
• As a self-regulatory organization, the NFA can impose penalties and fines on members who do not adhere to the standards.
• The compliance rule only applies to bitcoin (BTC) and ether (ETH) for now, and gives the NFA the power to discipline members who commit fraud or misconduct related to spot digital asset commodity activities.
• Members must supervise their activities closely and implement appropriate supervisory policies and procedures for spot crypto commodity activity.
• The Commodity Futures Trading Commission (CFTC), who is responsible for overseeing the NFA, published a statement on its website regarding the new rules.
• The new rule will require NFA members to disclose the risks associated with trading spot bitcoin and ether explicitly.

Crypto influencers could be banned in France

• French lawmakers proposed a ban on the promotion of certain financial products and services, including crypto, via electronic means
• The proposal is part of a wider regulatory initiave, which aims to combat scams by influencers on social networks.
• It targets influencers promoting financial products and services that present a risk to consumers.
• If passed, only operators with approval from the Autorité des Marchés Financiers will be allowed to advertise cryptocurrencies.
• Violating the ban could result in a two-year prison sentence and a 30,000 euro fine.

Proposed EU Rules on Anonymous Crypto Transfers

• The EU has adopted draft legislation proposing to cap anonymous cryptocurrency transactions at €1,000 as part of its Anti-Money Laundering and Countering the Financing of Terrorism package.
• Negotiations on the final text of the AML/CFT package will begin after a plenary session in April.
• It’s unclear how this rule could be enforced, apart from on CEXs.