Launchy Regulatory Roundup - Introducing the First Issue

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Good Morning.

Welcome to the first edition of Launchy’s Regulatory Roundup.

Law is a cornerstone of our daily lives, and its importance is amplified when it comes to emerging technologies, especially those revolutionizing the financial sector, like crypto.

Recognizing this, we have created this specialized newsletter to keep our readers informed and up-to-date on the evolving regulatory landscape in the crypto world.

In Today's Edition:

• Headline: Another Ripple victory against the SEC 🥳 

• Global Legal Roundup: 🇺🇸 🇬🇧 🇧🇷 🇷🇺 🇫🇷 

• Case Study: Is Tornado Cash sanctions effective?

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HEADLINE

Another Ripple Win Against the SEC

State of play: A year after the court ruled XRP isn't a security in certain cases, Judge Torres recently ordered Ripple to pay a $125M civil penalty from the SEC's $2B demand and barred the firm from violating US securities laws.

• Ripple was expected to pay to the SEC within 30 days after the order.

• The Court's analysis of Ripple's expert report found that 1,278 transactions violated Section 5 of US securities laws.

• Ripple CEO Brad Garlinghouse called the ruling a "victory for Ripple, the industry, and the rule of law," noting the court reduced the SEC's proposed penalty by 94%.

Why it Matters: The order is a nail in the coffin (at least for now) for the SEC’s argument that crypto is a security. Moreover, Judge Amy Berman Jackson ruled in SEC v Binance.US that crypto tokens are not securities.

• Judge Amy Berman Jackson ruled that the focus should be on the circumstances of each token sale, not the cryptocurrencies themselves.

Our Take: This is not the end as the SEC could and is likely to appeal the ruling. However, the current political climate also shows that both presidential candidates might ease up on crypto.

GLOBAL LEGAL ROUNDUP

🇺🇲 NY Judge Approves $12.7B FTX & Alameda-CFTC Settlement

Judge Peter Caster approved a $12.7B settlement for FTX and Alameda Research to repay creditors under a CFTC agreement. The CFTC did not seek a civil penalty, directing the entire amount to creditors.

• FTX and Alameda will repay $8.7B to defrauded investors, plus $4B in disgorgement.

• The order also permanently bans them from digital asset transactions.

• Creditors, preferring a crypto payout due to market gains, have until Aug. 16 to vote, with a final decision by Judge John Dorsey on Oct. 7.

🇺🇲 Senators Introduce Bill to Expand Secret Service's Reach to Crypto Crime

Two US Senators introduced the “Combatting Money Laundering in Cyber Crime Act of 2024” on August 2, expanding the Secret Service’s authority to investigate unlicensed cryptocurrency transactions and frauds.

• This follows the House's July 23 passage of the Financial Technology Protection Act to curb illicit crypto activities while protecting consumer choice.

🇺🇲 Grayscale, Bitwise, and NYSE Request Rule Change to Allow Options on Spot Ethereum ETFs

NYSE American, Grayscale, and Bitwise proposed a rule change to list options on three products: the Bitwise Ethereum ETF, Grayscale Ethereum Trust, and Grayscale Ethereum Mini Trust. Comments on the proposal are due in 21 days.

🇧🇷 Brazil’s SEC Approves Solana-Based ETF

The Brazilian Securities and Exchange Commission (CVM) has approved a Solana-based ETF, the first of its kind in Brazil and among the earliest globally.

• QR Asset will offer the ETF, with Vortx managing it.

• Currently, the ETF is in a pre-operational stage, pending approval from the Brazilian stock exchange, B3.

• B3 listed Bitcoin and Ethereum ETFs between 2021 and 2022, and began offering BlackRock's IBIT in March 2024.

🇬🇧 UK’s FCA Reselead More Crypto Promotion Guidance

The UK's Financial Conduct Authority (FCA) released new guidance for crypto firms on advertising compliance. The FCA has been monitoring crypto industry compliance by reviewing selected companies and conducting site visits.

• The FCA will review how crypto companies are complying with regulations on crypto promotion.

• The focus is on areas like the 24-hour cooling-off period, personalized risk warnings, and client categorization.

• FCA will also assess investment appropriateness, recordkeeping, and due diligence of crypto assets.

🇷🇺 Russia Allows Crypto Mining

Russian President Vladimir Putin approved a law that allows approved firms to register for crypto mining, with small miners exempt if energy use is low.

• Oversight will be shared by the Bank of Russia, the Ministry of Finance, and select government ministers.

• The bill also bans mass cryptocurrency advertising in Russia.

• Recently, Russia also passed a bill that will allow businesses to use cryptocurrencies in international trade.

🇫🇷 French Regulator Accepting CASP Applications Before MiCA Rollout

France's financial regulator, Autorité des marchés financiers (AMF), is now accepting applications for crypto asset service providers (CASPs), six months before MiCA regulations take effect.

• Effective on Dec. 30, firms offering crypto services must obtain CASP authorization, which enforces uniform rules on AML, CFT, cybersecurity, and other business practices.

More Regulatory Updates:

• US policy group proposes a Bitcoin tax-free zone.

• India demands $86M from Binance in unpaid GST taxes.

• US senators urge CFTC to finalize ban on election betting.

• Artists sue the SEC over confusing security status of NFTs.

• Industry execs discussed crypto policy with White House officials.

• Canadian crypto exchanges face the deadline for CIRO membership.

• UK Law Commission proposes a property category for crypto assets.

• Hong Kong lawmaker calls for easier banking access for crypto firms.

• Turkey sees a surge in crypto license applications amid new regulations.

• Japan's regulator says Crypto-ETF approvals need 'Cautious consideration.

CASE STUDY

Tornado Cash Sanctions: Are They Effective?

State of play: The Federal Reserve Bank of New York has released a report on the effect of sanctions on Tornado Cash. The report claims that the sanctions work, by and large, even in DeFi, the report concluded.

• The report also finds Ethereum's resistance to censorship and cooperation "fragile."

• On Aug. 8, 2022, the Treasury's OFAC sanctioned Tornado Cash addresses due to its role in large-scale money laundering, marking the first sanction on a computer protocol.

• The report notes that Tornado Cash usage dropped significantly after the sanction but gradually recovered.

• The crypto community reacted with exchanges banning Tornado Cash and industry groups defending it.

• The NY Fed report found that most users adhered to Tornado Cash sanctions, with large builders observing them to a lesser extent.

• Block builders who ignored the sanctions did so out of conviction rather than profit, while proposers' behavior remained mostly unchanged, though they could have filtered non-compliant blocks.

• Tornado Cash is still operational and has seen a resurgence this year.

• Developer Alexey Pertsev was convicted of money laundering in the Netherlands in May.

• Meanwhile, developers Roman Storm and Roman Semenov face US charges for conspiracy related to money laundering, sanctions violations, and operating an unlicensed money-transmitting business.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our comprehensive database of crypto regulations around the world👇

NOTEWORTHY READS & MEME

• Tyler Winklevoss’s read on Operation Choke Point 2.0.

• Eric Wessan & Phil Pillari’s publication on SEC’s improper crypto regulation.

• Paradigm’s publication on principal settlement risks for financial transactions on a public blockchain.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.