This week’s biggest news in crypto:

• A more tumultuous week than usual for Binance. It’s bye bye UK (on Binance’s request, allegedly), bye bye the Netherlands, and things not looking great in France or the US.
• Wyre is the latest crypto platform to shut due to the ongoing bear market
• Do Kwon, co-founder of the failed Terra Labs platform which spectacularly failed and brought multiple other crypto companies crashing down and lost its users circa $40 billion is sentenced to a 4 months jail for document forgery…..
• There’s more news out about the largest stablecoin, Tether’s USDT, and what it is or isn’t backed by.
• And, the UK is closer to bringing out regulation around stablecoins. This could be interesting for some of the larger ones lacking clarity around what they’re backed by.

UK: Binance no longer authorised to provide regulated services in the UK, FCA Cancels Permissions on Firm’s Request

Binance is no longer authorised to provide any regulated services in the UK. The exchange- which has is having its share of challenges with more than a few regulators – allegedly requested the withdrawal of permissions itself. The UK’s FCA has withdrawn several permissions previously granted to Binance’s UK entity, Binance Markets Limited. The permissions were for “activities that it never carried out or offered” in the UK, according to a Binance spokesperson. “As these permissions were unlikely to be required in the future, Binance Markets Limited decided that it would be prudent to cancel them in line with the FCA’s recommendations to keep these updated,” the spokesperson said, adding that “This decision has no impact on Binance.com, which does not own or operate any crypto services in the UK and is only available to UK consumers on a reverse solicitation basis”. The FCA’s website states that following the permission cancellations, Binance is no longer authorised by the FCA, and no other entity in the Binance Group holds any UK authorisation or registration for regulated business. This follows the FCA’s 2021 declaration that Binance was “not capable of being effectively supervised” and couldn’t carry out any regulated activities in the UK.

US SEC reaches compromise with Binance.US to protect customer assets and keep trading

The U.S. SEC has had its bid to freeze all of Binance.US’s assets challenged by a U.S. District Court Judge who recommended that the SEC and the exchange negotiate a bilateral agreement. It seems they have done, after several days of court-ordered mediation. Judge Amy Berman Jackson approved the agreement on Saturday. The resulting deal involves Binance.US enacting several measures to prevent any access by Binance officials to private wallet keys, hardware wallets, or root access to Binance.US’s Amazon Web Services tools. It stipulates that customer funds held by Binance.US, an affiliate of the larger offshore exchange, be stored in digital repositories accessible only to the U.S. exchange. Binance’s international operation or its founder CZ will not have access to these funds. The agreement permits Binance.US to transfer company assets exclusively for ordinary business expenses and obligations. Binance.US will also have to disclose extensive information on business expenses, including estimated costs, in the coming weeks. This agreement means that Binance.US will be able to continue operations in the U.S. and protect customer assets amidst an ongoing government lawsuit. After the SEC’s fraud charges against Binance on June 5, the regulator had attempted to freeze the exchange’s U.S. assets, a move that Binance’s legal team contended would force the company out of business in the United States. Binance responded on Saturday, saying, “Although we maintain that the SEC’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms.”

Binance Exits Dutch Market Due to Regulatory Hurdles

Binance is leaving the Netherlands. This follows regulatory obstacles and failure to secure approval from Dutch authorities, in the latest of a string of woes facing the exchange. As of 17th July, Dutch users will only be able to withdraw assets, and will no longer be able to trade or deposit. New user registration will be discontinued. Binance had been in the process of obtaining a virtual asset service provider (VASP) registration, but despite numerous attempts at compliance strategies, weren’t able to. Existing users will receive an email outlining next steps and potential impacts on their accounts.

Binance France under Probe over ‘Illegal’ Crypto Service, Money Laundering

Binance’s French division is reportedly under investigation by Parisian public prosecutors for allegedly providing crypto services before being licensed in May last year. The exchange is further suspected of “acts of aggravated money laundering.” Investigations began in February 2022 by the French Financial Judicial Investigation Service. Binance CEO CZ responded on Twitter, dismissing the report as “not news” and stating “This type of on-site inspections of regulated businesses are the norm for banks, and now for crypto too.” Binance added “Binance, as always, was fully collaborative and we met our obligations accordingly. We continue to work closely with regulators and law enforcement agencies on all ongoing compliance requirements to uphold high standards.” We’ll see. This development arrives amid Binance’s ongoing legal struggles in the U.S. with lawsuits from the Securities and Exchange Commission and the Commodity Futures Trading Commission over alleged offering of unregistered securities.

Tether’s Banking Relationships, Commercial Paper Exposure Detailed in Newly Released Legal Documents

Newly released documents reveal that Tether held funds in four banks, two investment firms, two gold depositories, a gold broker, and its affiliate Bitfinex in March 2021. The company also invested in commercial paper and other securities from various entities such as Qatar National Bank QPSC, Barclays Bank PLC, Deutsche Bank AG, Emirates NBD Bank PJSC, Natwest Group PLC, and several Chinese banks and financial institutions. On March 31st 2021 Tether claimed it held over $35.5 billion in U.S. dollar equivalents across these institutions, with an additional $5.1 billion listed under “USDT lending” and other assets. This roughly matches the 40.8 billion USDT in circulation at the time. The documents offer a limited glimpse into Tether’s finances, which have long been a subject of controversy. The company’s claim that each USDT token is fully backed by assets has been under scrutiny, especially after it was revealed that Tether loaned some $850 million in reserves to Bitfinex. The newly disclosed documents neither confirm nor deny these allegations but provide further insight into where Tether holds the assets it says it has.

Tether responds to Chinese securities exposure reports

Tether has also reportedly refuted reports suggesting its reserves once included securities issued by Chinese firms. Various outlets have reported that the stablecoin’s reserves were backed by securities from companies including Industrial & Commercial Bank of China, China Construction Bank Corp., and Agricultural Bank of China, citing the NYAG documents. Tether replied by accusing the media of hastily publishing these reports without due diligence. It claims its exposure to Chinese commercial papers was liquid and came from stable issuers, with ratings of A1 or better and that these papers were also utilised by major investment managers worldwide. Tether stated that it reduced its commercial paper holdings to zero last year and incurred no losses from any commercial paper, including those issued by Chinese firms. We’ll see.

Tether responds to account deactivation controversy, raises compliance checks

Tether has come under yet more scrutiny for deactivating approximately 29 accounts belonging to notable figures in the cryptocurrency industry in 2021, according to documents released by the New York Attorney General (NYAG). Specific reasons for the deactivations weren’t disclosed. Tether refrained from commenting on individual cases but stressed that all deactivated accounts had undergone rigorous compliance checks. This information emerged amid an NYAG investigation into Tether and sister company Bitfinex over the purported misappropriation of $850 million of funds. The parties settled, paying an $18.5 million penalty and agreeing to halt trading activities in New York. The documents were made public despite Tether’s objections over customer confidentiality concerns.

UK Crypto, Stablecoin Laws Approved by House of Lords

The House of Lords has approved the Financial Services and Markets Bill (FSMB), pushing it towards the final stages of becoming law in the UK. The bill, if enacted, could be one step towards cryptocurrency regulation in the country. It aims to regulate cryptocurrency activities and recognise stablecoins as a legitimate means of payment under existing legislation. Optimistically, this legislation could provide the long overdue and much needed legal clarity necessary for further crypto adoption, by granting regulators the necessary powers to establish crypto-specific rules which could, again optimistically, be in place within a year. Nothing will be instant, the bill still has to go through further review and approval processes before it becomes law. The FSMB will now go to the House of Commons to finalise its content. Both houses need to reach an agreement before the bill can be approved by the King and pass into law. The bill may shuttle between the chambers until consensus is achieved, i.e. it might be a while. This is part of the U.K.’s too-small and too-few efforts to catch up with the European Union’s recently established Markets in Crypto Assets regulation (MiCA), which largely focuses on stablecoins.

Crypto payments platform Wyre shutters, citing bear market conditions

San Francisco-based cryptocurrency payments company, Wyre is the latest to close due to the ongoing bear market. Wyre, which is shutting down after nearly a decade in operation, has reassured that it is not closing due to regulatory issues in the U.S. but rather to safeguard the interests of its customers and stakeholders. Users have until July 14th to withdraw their assets from the platform, after which all remaining assets will be handled through a separate process. The company had faced financial troubles since a $1.5 billion acquisition deal fell through last year. A series of setbacks ensued, including partnership uncertainties and layoffs, MetaMask winding down its support for Wyre’s crypto payment services and a short-lived 90% withdrawal cap, which was lifted after securing funding from an unnamed strategic partner. Wyre’s assets are now up for sale. This closure joins a list crypto businesses including Unbanked, BottlePay, HotBit, Terressa, and TradeBlock which all closed in May.

Crypto fund outflows surge as investor caution persists

Rising interest rates and anti-crypto U.S. regulations have triggered a $417 million outflow from the cryptocurrency industry in the last eight weeks, according to CoinShares’ latest report. This is leading to liquidity shortages and causing crypto firms to reconsider their business strategies. Last week, cryptocurrency investment products experienced outflows of $88 million, of which $36 million from Ether, the most significant weekly outflows since the Ethereum Merge in September 2022. Bitcoin investment products reported outflows of $52 million. CoinShares analysts believe this trend is driven by monetary policy considerations, leading to investor wariness towards digital assets.

Crypto Sentiment in the US ‘Remains Poor’ Following SEC Actions

The ongoing regulatory action against the cryptocurrency industry, particularly from the U.S. Securities and Exchange Commission (SEC), is continuing to contribute to the downturn in token prices, according to recent research by Bank of America. This downtrend is primarily due to the uncertainty surrounding the SEC’s legal actions. The researchers expressed concern that an “excessive focus on regulatory headwinds, spot bitcoin exchange-traded-fund (ETF) approval in the U.S. and illegal activity is overshadowing the rapid development and integration of distributed ledger and blockchain technology infrastructure”, technologies which the bank predicts will “transform financial and non-financing infrastructure and markets over the next five to 10 years.” The study pointed out the potential of “private permissioned distributed ledgers and blockchain subnets” that enable tokenisation of traditional assets. This report comes amid declining Bitcoin supply on crypto exchanges, attributed to the SEC’s lawsuits against Coinbase and Binance, two of the world’s largest crypto platforms. Realistically, the industry isn’t going to stop innovating or progressing, it will merely move elsewhere. As we have seen with the UK, crypto companies will just leave to more friendly jurisdictions and then won’t feel any need to come back. Jurisdictions such as Hong Kong and Dubai have been receptive to the industry.

Terraform Labs’ Do Kwon Sentenced to 4 Months in Jail over Document Forgery

Terraform Labs co-founder Do Kwon and former CFO Han Chong-Joon have each been sentenced to four months in jail by a court in Montenegro for possession of counterfeit passports and travel documents. They were apprehended in March while trying to travel to Dubai by private jet. While Kwon claimed he was unaware that the documents were falsified, possible but doubtful, he is also facing several charges including securities fraud from U.S. and South Korean authorities relating to the failure of Terraform Labs’ cryptocurrency projects. Despite being granted bail recently, Kwon remains in “extradition custody” as the court evaluates extradition requests from South Korea and the United States. Given the effect the collapse of the Terra ecosystem had on the market (big, estimates are up to $ half a trillion), the number of companies its collapse helped collapse (many) and the amount of money its users lost as a result of its collapse ($40 billion) one imagines this won’t be the end of Terra news.

Bank of England a step closer to launching digital pound

The Bank of England and the Bank for International Settlements have released the first phase of findings from their joint initiative, Project Rosalind, bringing the BoE worryingly closer to launching its own central bank digital currency. The project, which began last year, aims to understand how a CBDC could function and its potential benefits, without seeming to focus enough on the many potential risks. The report – which many might claim to be biased- claims a CBDC could expedite payments between individuals, facilitate firms in launching new financial products, and reduce fraud. One of the greatest risks of CBDCs to individuals is from the “programmability” they can bring to money, making payments conditional based on certain events, which could be used against individuals by governments at whim to block payments. The bank is waiting for the conclusion of a consultation at the end of June, as well as on the U.K. Treasury’s approval. London-based blockchain provider Quant, which contributed to the project, stated that the U.K.’s current monetary system is ill-equipped for a digital society. The project’s most significant outcome, according to Quant’s CEO, is a multi-party lock payment system that could dramatically enhance fraud prevention. Critics argue that the BoE lacks a detailed explanation of the benefits of a CBDC and express concerns over inevitable privacy breaches.

Blockchain Anti-Counterfeiting Trials ‘Promising,’ EU Agency Says

The European Union Intellectual Property Office (EUIPO) has trialled using blockchain-based anti-counterfeiting tools for which it announced promising results. The initiative, called the European Logistics Services Authentication, was tested with four brands, two logistics operators, and a customs authority and showed the potential of blockchain to enhance product authenticity checks along the trade supply chain. EUIPO aims to this year develop an open-source platform to facilitate the tracking and verification of branded goods by traders and customs authorities. Counterfeit products constitute around 2.5% of global trade, equivalent to approximately €412 billion, which it’s hoped blockchain could disrupt.

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