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US CFTC sues Binance, crypto markets contract, ex-FTX boss faces fresh allegations

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crypto news asian woman reading a tablet side view subway background bright neon color cyberpunk

This week, like it has been the trend, regulators in the United States didn’t slow down. The Commodity Futures Trading Commission (CFTC) formally brought charges against Binance, alleging breaches of the Commodity Exchange Act. Despite the markets contracting, gains posted in the preceding week remained intact. Meanwhile, fresh revelations emerged on the ongoing FTX case.

A deluge of regulatory actions

The global trend of strengthening regulatory oversight for cryptocurrency has been gaining momentum. Financial regulatory bodies around the globe aim to offer clear guidance to the fledgling industry and protect investors. While the United States has been at the forefront, other nations are also implementing new measures.

The Hong Kong government, in particular, is actively seeking to revamp its regulatory framework on cryptocurrencies in a comprehensive effort to establish the city as a leading crypto hub in Asia. 

On March 30, reports revealed that Hong Kong’s Securities and Futures Commission is preparing to grant operational licenses to eight web3 companies by the end of the year, as a growing number of cryptocurrency-focused firms express interest in establishing a presence in the region. Among them is OKX, which also announced the establishment of an office in Hong Kong with further plans to apply for a virtual asset service provider (VASP) license.

While Hong Kong actively promotes a favorable climate for cryptocurrency-related businesses and investors, other countries like Denmark are tightening their grip. This week, the Danish Supreme Court ordered that returns or capital gains from Bitcoin investments and mining activities are subject to taxation.

In addition, a recent report said that during the Group of Seven (G7) forum, member countries want to adopt strict crypto laws following the recent implosions of CeFi platforms, including the FTX.

Industry leaders condemning U.S. regulatory efforts

Meanwhile, the United States’ campaign against the local crypto industry continues. This week saw fresh enforcement actions and, as expected, opposing responses from crypto proponents. Industry figures complain that the United States appears to be more focused on enforcement than providing clear regulatory guidance.

On March 29, Coinbase warned that the country is at risk of losing as many as 1m web3 developer jobs in the next seven years due to regulatory ambiguity and heightened enforcement activities.

The country is estimated to be losing approximately 2% of web3 developer jobs yearly. On March 31, hours after the Coinbase report, Bittrex, one of the oldest crypto exchanges in the country, announced said it would wind down its operations in the country effective April 30 due to the unfavorable regulatory environment.

Amid the crackdown on the crypto industry, Gary Gensler, the chairperson of the U.S. Securities and Exchange Commission (SEC), said the agency has the authority to classify a digital asset as a security at its discretion, thereby preventing the need for standard legislation on the matter. Ripple CEO Brad Garlinghouse responded by emphasizing the potential risks of such an approach.

Despite recent harsh enforcement actions, Elizabeth Warren, a United States senator, didn’t budge and maintained her tough stance, insisting on even stricter crypto laws. Warren, known for introducing legislation that many in the crypto community view as retrogressive, reiterated her position on the need for tighter regulatory measures or even the potential elimination of the industry.

Meanwhile, United States authorities have joined South Korea in requesting the extradition of Do Kwon, the co-founder of Terraform Labs, who was recently arrested by Montenegrin police. American and South Korean authorities want to bring Kwon to their respective countries to face justice for crimes committed.

U.S. CFTC sues Binance

This week, the United States regulatory crackdown caught up with Binance, the world’s largest exchange by daily trading volumes. The United States Commodities Futures Trading Commission (CFTC) leveled charges against the exchange on March 27 for alleged violations of the Commodity Exchange Act.

The CFTC’s case against Binance was built on the argument that cryptocurrencies like ethereum (ETH), litecoin (LTC), and bitcoin (BTC) are commodities within its regulatory purview. According to the CFTC, Binance had violated the Commodity Exchange Act by not registering as a futures commission merchant (FCM) and failing to comply with the necessary regulations while offering futures contracts.

Binance CEO Changpeng “CZ” Zhao swiftly addressed the agency’s allegations, stating that the claims lack merit and are not supported by factual evidence. Zhao highlighted Binance’s unwavering commitment to compliance with regulatory requirements. He also emphasized the company’s active support for United States authorities in their efforts to combat crypto-related crimes.

The Financial Times also alleges that Binance has been concealing its operational presence in China for years by deliberately obscuring facts about its links to the country. This was built on information from a leaked group chat between Binance CEO Changpeng Zhao and other executives and other documents.

Furthermore, a renowned yet pseudonymous crypto personality, who gained recognition for whistleblowing during the Terra scandal last year, posted a Twitter thread this week, uncovering multiple cases of insider trading that took advantage of Binance’s token listings. In reply, Zhao disclosed that Binance had taken measures against the individual and frozen $2m linked to the implicated address.

Despite the CEO’s efforts to address the growing fear, uncertainty, and doubt (FUD) surrounding the exchange, there were significant outflows this week, according to data from CryptoQuant. In 24 hours ending March 30, 4,505 BTC and 76,146 ETH had been moved out.

Crypto market performance

Due to Binance’s influential position in crypto, the CFTC lawsuit forced sentiment to bearish, triggering a sell-off, especially of the Binance ecosystem’s coin, BNB.

Notably, BTC fell below $28,000, declining by 3.2% to a low of $27,133 on March 28. ETH also contracted though the dip wasn’t very pronounced during the same time frame.

Meanwhile, XRP, the native currency of XRPL, outperformed the markets, posting major gains above $0.40. Analysts pinned this stellar performance on the positive outlook surrounding the ongoing legal dispute between Ripple and the SEC.

Still, the overall market decline was short-lived. Most cryptocurrencies soaked in selling pressure and recovered. BTC, in particular, posted encouraging gains, rallying above $29,000 on March 30.

Parallel CryptoQuant data indicated that whales had started accumulating as investors expected the primary bullish trend of the better part of Q1 2023 to continue. According to SingleQuant, a verified CryptoQuant author, the influx from bulls could support prices in the medium term.

Overall, the crypto market is stable and remains bullish. Despite news that the United States government plans to auction off an additional 41,000 BTC associated with Silk Road, the crypto and bitcoin appear to be firm. Justin Sun, the founder of Tron, proposed buying all 41,000 BTC at a 10% discount to reduce the possible market impact of a large-scale sell-off.

When writing, the global cryptocurrency market cap increased by 1.11% from $1.167t registered at the start of the week, and currently stands at $1.18t. This indicates that the global crypto market cap has added $13b to its value since the start of the week. BTC, in particular, is trading at $28,271, up 1.23% from $27,928.

Ex-FTX boss, Sam Bankman-Fried, accused of bribery

Sam Bankman-Fried, the founder and ex-CEO of FTX, accepted new bail conditions that would curtail his access to technology. In line with this, Bankman-Fried will be given a new mobile phone that can only access voice calls and SMS without internet access.

Sam Bankman-Fried also faced fresh allegations as federal prosecutors alleged that he had offered a bribe of up to $40m to at least one Chinese government official. The alleged bribe was aimed at unfreezing accounts belonging to Alameda Research, which Chinese authorities had frozen.

Additionally, on March 29, reports claimed that Sam Bankman-Fried had been financing his legal representation with funds from Alameda Research. As per the report, Bankman-Fried had donated several million dollars to his father from Alameda Research’s coffers to cover his legal expenses.

During the week, FTX debtors received a favorable update as OKX revealed intentions to release frozen assets valued at up to $157m linked to FTX and Alameda Research. OKX disclosed that it would hand over the funds to FTX debtors, who have continued to scramble for funds.

Meanwhile, FTX EU, the European subsidiary of FTX, launched a new website enabling its European clientele to easily withdraw their fiat balances. However, the website caters to fiat withdrawals and does not offer other services.

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