The Dutch Central Bank revealed today that it hit crypto exchange Crypto.com with a €2.85 million ($3.1 million) fine after failing to register for two years, breaking money laundering and terrorism financing laws.

Crypto.com, registered as Foris DAX MT Limited, was fined by the Dutch Central Bank (DNB) on October 2, 2023, after it failed to register with the bank between May 2020 and November 2022.

This period of non-compliance from Crypto.com was described by the DNB as ‘very severe,’ and led to the bank increasing the fine. The DNB also considered the number of Crypto.com’s customers and its competitive advantage in the country as reasons to impose a larger penalty. 

Crypto firms must register with the DNB under regulations set out in the Anti-Money Laundering and Anti-Terrorist Financing Act, abbreviated locally as WWFT.

Crypto.com attempted to reduce the fine by arguing the fine should reflect a violation of ‘low severity.’ It argued that the DNB could ‘at most’ fine them for failing to register on time, while claiming Crypto.com followed the objectives of the WWFT, maintained customer due diligence, and reported unusual transactions to Malta’s financial watchdog, the FIAU. 

Read more: Binance execs detained in Nigeria still being questioned over illicit fund flows

Crypto.com to appeal fine

The crypto exchange failed to mitigate the fine as the DNB upheld its decision, claiming Crypto.com “ran an increased risk of becoming involved in money laundering or the financing of terrorism.” It maintained its opinion that Crypto.com’s violations ‘are very serious.’ 

A Crypto.com spokesperson told Protos “We are disappointed and disagree with their (DNB’s) decision to fine Foris DAX MT Ltd and are actively appealing this decision.”

“Moreover, we have already addressed the concerns raised in a timely and transparent manner and received regulatory approval from DNB as a crypto service provider in July last year. We remain fully committed to collaboratively engaging with the DNB, and regulators around the world.”

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The HyperVerse crypto Ponzi scheme that cost investors $1.7 billion was reportedly passed between Australian regulators and police for two years before any action was taken, according to The Guardian.

It was reported this week that HyperVerse, which promised lucrative returns but relied on funds taken from investors, was first referred by the Australian Securities and Investments Commission (ASIC) to the country’s Victoria police in 2020 for “possible fraud offences.”

However, it wasn’t until two years later in January 2022, that Victoria Police referred it back to ASIC. A police spokesperson told the Guardian it took until 2021 to assess the case and that it was eventually decided that ASIC was “best placed to look at it further.”

HyperVerse police verdict took “some time”

When asked why it took so long to process the case, police said it needed to be assessed if any crime had been committed and if the police should handle it. “Depending on circumstances, this can take some time,” the spokesperson said.

An ASIC spokesperson, however, told The Guadian it “understood that the matter was under active consideration by VicPol. VicPol is ultimately best placed to explain their decision to refer the matter back to ASIC.” 

Read more: Crypto pyramid schemes thought to have stolen billions go unchecked

The operation was known as HyperCapital when the first referral was made but in 2020, it rebranded to HyperFund, eventually becoming HyperVerse in December 2021.

Global Blockchain, another affiliate scam run by HyperVerse founders Sam Lee and Ryan Xu, collapsed in this same period while owing investors AUS$58 million ($37.7 million). ASIC was previously criticized in December 2023 for failing to publish any warnings relating to HyperVerse.

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Traders in South Korea could be prevented from buying crypto with credit cards under new proposals submitted by the country’s finance regulator in a bid to counter illicit activity.

Yesterday, South Korea’s Financial Services Commission (FSC) submitted a plan to “diversify the financing methods of credit finance companies.” The proposal aims to address concerns about illegal outflows of domestic funds, made possible via crypto exchanges and speculative activities.

To do this, the FSC suggested that the Enforcement Decree of the Credit Specialized Financial Business Act should be amended and that credit card purchases of crypto should be prohibited.

The regulator said it expects “cooperation with international brands” which will reportedly help stop the illicit use of currency overseas and in money laundering. Businesses and individuals with opinions on the proposed changes have been asked to submit their thoughts to the Center for Participatory Legislation by February 13.

Read more: South Korea’s democratic party candidates will disclose crypto bags to nation

According to the South Korean Yunhap News Agency, local users looking to trade with crypto must do so using a deposit and withdrawal account that features identity verification. Overseas crypto exchanges however are not subject to this requirement. 

In December, the FSC’s vice chief said that authorities will strike a balance between investor protection and technological innovation as they continue to regulate crypto.

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In an effort to minimize risks of contagion, the European Banking Authority (EBA) and other EU regulators have announced an investigation into banks’ links to non-bank entities, such as hedge funds, crypto, and private capital firms.

The EBA will probe how shadow banks, or non-bank financial institutions (NBFIs), can possibly affect lenders, the Financial Times reported on Wednesday. These entities hold almost half of the world’s financial assets, or about $218 trillion.

The EBA will work alongside the European Systemic Risk Board (ESRB) and the Financial Stability Board (FSB) to determine how disruptions by shadow banks could have knock-on effects on wider markets. The FSB oversees global financial stability.

According to the EBA’s chair José Manuel Campa, “We should be doing more and we are going to be doing more. We need to have an understanding of the whole underlying chain in NBFIs.

Read more: ECB says crypto regulation needed MiCA yesterday — it’ll take years to enact

Campa added that implementing minimum requirements of reporting could provide regulators with more data on banks’ exposure to non-banks.

“The first step in this situation is always getting information; it’s an obscure sector where the quality of data is not homogeneous,” the EBA chair explained (via FT).

The decision by watchdogs comes at the start of a promising year for EU crypto regulation, with stricter rules expected to come into effect following MiCA.

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Two alleged crypto pyramid schemes estimated to have racked up billions in combined losses for investors have reportedly been left unchecked in Australia despite warnings from numerous financial watchdogs around the globe.

The schemes, which have operated under various names, including HyperFund and HyperVerse, are part of the wider HyperTech group run by Sam Lee and Zijing ‘Ryan’ Xu.

HyperTech was set up in 2020 and since then has been subject to warnings from organizations in New Zealand, Canada, the UK, and Germany.

Indeed, just last year, the Hungarian central bank issued a statement urging consumers to do their due diligence before putting any money into HyperVerse or HyperFund. It likened HyperTech to a “suspected pyramid scheme,” and claimed that the only source of income was payments from new entrants.

It also claimed that “there is a significant chance that investors may permanently lose part or all of their invested capital,” (via the Guardian).

Chainalysis estimates that HyperVerse alone has caused $1.3 billion in investor losses while The Guardian also estimates investor losses may also be in the billions.

Australia not yet suspicious of HyperTech

HyperVerse investors reportedly use crypto to purchase subscriptions that supposedly garner daily returns of 0.5% in so-called ‘hyper units.’ They’re also encouraged to climb the ranks through the recruitment of new members.

According to the Guardian, while the UK, New Zealand, Canada, Germany, and Hungary have all denounced HyperTech and its affiliated brands as unregulated and suspicious, Australia hasn’t. 

Read more: Australia dismantles crime syndicate that moved nearly $1B in crypto

So far the Australian Securities & Investments Commission (ASIC) has made no note of HyperTech Group or its affiliates. ASIC told The Guardian, “In relation to the issuing of warnings, actions by different regulators in different jurisdictions will depend on the evidence of activities occurring in that jurisdiction and the legislation available.”

Lee, dubbed ‘the crown prince of bitcoin,’ is said to be living in Dubai while Xu, known as ‘one of China’s four bitcoin kings,’ remains off the radar. The pair previously founded Blockchain Global before it collapsed owing creditors $58m.

Blockchain Global Liquidators referred the two of them to ASIC, claiming that they “may have contravened” the Corporations Act. ASIC reportedly took no further action.

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Crypto miners in Russia may benefit from special legislation next year, that allows them to export their mined cryptocurrency as an export product.

Deputy minister of finance Ivan Chebeskov discussed the plans at a round table about the future of digital finance, according to local outlet RBC.

“There is an option and a bill to use the export of cryptocurrency as a product of mining activity. That is, there is special legislation for the export of gas,” Chebeskov said (translated from Russian).

A bill regulating crypto mining in Russia has been in the works for years, marked with periodic delays thanks to disagreements with Russia’s central bank. However, Chebeskov has recently said that a “common ground” is slowly being found.

Read more: Russian founder of sanctioned exchange Garantex starts Tether desk

Under this legislation, crypto mining would be seen as a legitimate industry. Russia’s central bank, however, insists that miners would need to sell crypto exclusively on overseas platforms to non-residents of Russia.

The Bank of Russia is also working on a bill to introduce an “experimental legal regime” for cryptocurrencies to be used exclusively in export-import deals.

These proposed legislations come in response to global sanctions placed against Russia following its invasion of Ukraine.

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Much anticipated documents recently filed by the US government reveal an extensive monitoring program for crypto exchange Binance, a probe it agreed to as part of its $4.3 billion settlement with the Department of Justice (DoJ) and several other US agencies.

Along with conforming to rigorous compliance commitments, Binance will be visited by one or more monitors to keep it in check. This monitor, proposed by Binance but ultimately approved by the agencies, will conduct its first review within four months of being appointed. Five months after its review, the monitor must submit its first report.

From there, follow-up reviews and reports must be submitted periodically within a similar time frame — meaning Binance will be probed at least six times over the next three years.

Read more: Top Binance exec Noah Perlman’s ties to Epstein, Moonstone, and Gemini

The frequency, depth, and scope of these monitors have raised eyebrows within the crypto law community. Some, like John Reed Stark, have called the DoJ’s reach unprecedented.

“Binance’s settlement requires it to offer years of instantaneous access, audit, examination and inspection to DOJ, FinCEN and all types of financial regulators and law enforcement,” the former Securities and Exchange Commission (SEC) attorney wrote on X, “exposing the company — and its customers — to a 24/7, 365-days-a-year financial colonoscopy.”

Past and current Binance customers and employees will be probed

If the monitor discovers any potential or actual misconduct, they are obligated to report it. However, there’s no tangible requirement for Binance to be informed — just US regulators and law enforcement.

The wording of the recently filed documents give a wide range of circumstances in which Binance shouldn’t be informed of the potential misconduct.

If the potential misconduct:

• involves senior management,
• poses a risk to US national security, public health or safety, or the environment,
• involves obstruction of justice, or
• otherwise poses a substantial risk of harm,

then Binance can be kept in the dark.

The findings of these potential misconducts will remain sealed from the public. “Public disclosure of the reports could discourage cooperation, or impede pending or potential government investigations and thus undermine the objectives of the Monitorship,” the filing explains.

These “pending or potential” investigations by the US government may include the SEC’s ongoing case against Binance.

Read more: Binance and CZ plead guilty but SEC lawsuit remains

The probe will include former and current employees — including former chief Changpeng Zhao, who is also the subject of the SEC’s lawsuit — and allows the US government to root out bad actors who have likely flourished under Binance’s lax compliance.

“I don’t think Binance’s customers have the slightest clue of the ramifications of this plea and consent decree,” Reed Stark said. “If they’re a drug dealer or a terrorist or a child pornography peddler, they’re going to get caught.”

‘Unprecedented’ government access into a financial firm

The costs to comply with the rigorous protocols demanded by Binance’s plea agreement will be astronomical. Combined with the exposure to customers, the crypto exchange has an immense uphill battle in the coming years to stay afloat.

“To me, it’s only a matter of time before the entire Binance plea deal collapses, resulting in additional charges for Binance, additional charges for CZ and new charges against anyone else (partner, customer, joint-venturer, collaborator etc.) nefariously intertwined with the Binance criminal enterprise,” Reed Stark concluded.

Binance’s new CEO, however, is doing his best to spin it as an opportunity.

“The compliance monitor to me in many senses is a key positive,” said Richard Teng at a summit last week. “That gave a lot of confidence to users including institutional users which are now approaching us in a very aggressive fashion.”

During the same event, however, Teng refused to disclose Binance’s elusive global headquarters. “Why do you feel so entitled to those answers?” he said.

“Is there a need for us to share all of this information publicly? No.”

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The Securities and Exchange Commission (SEC) has proudly announced that it has had another “highly productive and impactful” year enforcing crypto-related misconduct, highlighting cases like Terraform Labs, Richard Heart, and Sam Bankman-Fried.

According to its fiscal year report published on Tuesday, the SEC filed more enforcement actions this year than in 2022, with 784 in total — up 3% from last year. Of these, 501 are stand-alone enforcement actions, marking an 8% increase year-on-year.

The commission ordered almost $5 billion in financial remedies in 2023 and distributed nearly $1 billion to harmed investors, the report added.

• The $5B in remedies obtained this year makes it the second-most lucrative year for the SEC, after the record-breaking numbers of 2022.
• In 2022, the SEC also distributed over $900 million to harmed investors.
• This year’s SEC Whistleblower Program awarded a record-breaking $279 million to one person who submitted a useful tip.

The SEC’s report doesn’t mention the most important record it broke this year: the amount of rules and regulatory proposals filed by a single chairperson since the aftermath of the 2008 financial crisis. In the first 850 days of his leadership, SEC chair Gary Gensler has put forward 47 proposals; 22 of which have been adopted. These figures have only grown larger since they were tallied at the end of August 2023 by the Financial Times.

However, Gensler’s firm hand has been criticized on both sides of the aisle, who feel that when it comes to regulation, quantity can never match quality. The 2010 Dodd-Frank financial reform act and other laws mandated 59% of former chair Mary Jo White’s proposals from 2013 to 2015. Meanwhile, just 17% of Gensler’s proposals were mandated by congressional legislation, the FT reported less than three months ago.

Read more: Coinbase claps back at SEC proposal, chief exec targets Gary Gensler

The crypto industry has reacted particularly negative towards the SEC’s regulatory crackdown. Executives have expressed concern over the rapid rise in enforcement action when clear crypto guidelines are lacking — leaving guilty parties ‘unaware’ of how to adhere to non-existent guidelines, they claim.

The SEC, however, maintains that investor protection is at the heart of its work. A rise in regulation is in response to swift technological advancements, the commission argues. And when it comes to crypto, the SEC believes that every ICO is unlawful.

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The Democratic Party of Korea has made it mandatory for prospective candidates to disclose their crypto holdings and professional backgrounds to the entire nation, in a bid to snatch up votes ahead of South Korea’s 2024 general election.

The chairman of the Democratic Party’s strategic planning committee, Han Byung-do, told journalists in a private meeting that it has “decided to verify whether candidates have conflicts of interest in virtual assets from the screening stage of the verification committee.” Along with crypto, candidates will now be required to disclose career history, academic background, and photos which will then be accessible by every South Korean voter, local outlet News 1 reports.

The opposition party’s decision was apparently made to improve the public image of candidates ahead of the 2024 general election. “We will build public trust in the general election through the aspect of a political party that prepares for the future,” Han said. The chairman added that in the event candidates are caught submitting fake reports, they will no longer be in the running.

The Democratic Party currently holds a majority in the Korean National Assembly with 167 out of 300 seats. It has been increasingly critical of President Yoon Suk-yeol’s administration, particularly on his decisions to strengthen ties with the US and Japan and openly criticise China. The Democratic Party fears that contributing to the momentum of the US Indo-Pacific strategy will alienate China and therefore jeopardize South Korea’s growth and security.

However, while the two parties are at odds when it comes to international relations, they appear in sync when it comes to crypto regulation. The Democratic Party’s decision to make disclosures mandatory for upcoming candidates comes hot on the heels of recent legislation unanimously passed by South Korea’s National Assembly in late May, in which lawmakers and other high-ranking government officials are required to declare their crypto holdings.

Read more: Four suspects face death penalty in South Korea crypto murder case

Known as the ‘Kim Nam-gun Prevention Act,’ the bill amended the National Assembly Act and the Public Official Ethics Act following a scandal that rocked the country. At the start of May, Democratic Party lawmaker Kim Nam-gun was forced to leave the party after media uncovered that he owned 6 billion won ($4.4 million) worth of highly controversial Wemix tokens and offloaded them right before new crypto disclosure rules took effect in March.

South Korean game developer Wemade developed play-to-earn video games and issued Wemix tokens to players, which quickly gained popularity among crypto traders. However, when Wemade distributed more Wemix than it promised to fund expansions, the country’s four crypto exchanges delisted the token in order to protect investors.

The case marked a turning point for South Korea’s lawmakers, who realized that robust crypto regulation was sorely needed. This latest decision by the Democratic Party is the latest example of South Korea bolstering transparency among lawmakers — placing it further ahead than the US and UK.

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A new bipartisan bill introduced on Wednesday would ban US government officials from using China-based crypto companies, China’s digital yuan, and prevent them from using the world’s largest stablecoin, Tether (USDT).

The Creating Legal Accountability for Rogue Innovators and Technology Act (CLARITY) seeks to ensure that the country’s “foreign adversaries… do not have a backdoor to access critical security intelligence and Americans’ private information,” according to the bill’s creators (via CoinDesk). US Representatives Zach Nunn (R-Iowa) and Abigail Spanberger (D-Va.) introduced the bill on Wednesday.

If passed, CLARITY would block government officials from conducting business with iFinex, Tether’s sister company. The bill comes amid growing awareness that the crypto industry is dependent on China. As Protos recently reported, China has generated more revenue for the world’s largest crypto firms than any other country — including Tether, Bitmain, Canaan, Binance, OKCoin, Huobi, OKX, Ebang, and many more.

Even when companies leave China, they soon sneak back in due to the lure of lucrative business. Binance still earns one-fifth of its business from China, for example.

Read more: Like it or not, crypto depends on China

American lawmakers are becoming increasingly aware of the crypto industry’s dependence on China — and are now taking steps to counteract the risks. CLARITY comes at a pivotal moment, as China’s struggling economy can have serious knock-on effects on the crypto industry. The bill would require the US Secretary of the Treasury, Secretary of State, and the Director of National Intelligence to come up with a plan to counteract risks posed by the development of blockchain tech by foreign adversaries.

“Within the next decade, every American will have sensitive, private data stored using blockchain technology, so China’s heavy investment in this infrastructure poses a colossal national security and data privacy problem,” Nunn said on Wednesday.

Along with banning Tether, the bill would also block officials from using The Spartan Network, The Conflux Network, and the architect behind China’s national blockchain project, Red Date Technology Co.

However, CLARITY is far from passing. Neither Nunn or Spanberger hold significant sway in the US House of Representatives, and their more established peers are already vying for their own crypto legislation to pass. It’s unlikely that this bill will enter law for the foreseeable future, if at all.

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