Australia’s federal court has spared fintech firm Block Earner from paying a fine, even though it found the company offered a crypto yield-bearing product without a financial services license.

Justice Ian Jackman ruled on June 4 that Block Earner “acted honestly.” At the time its yield-bearing “Earner” product launched, Block Earner did consider getting licensed but concluded, based on research and legal advice, that it didn’t need one.

Block Earner founder and CEO Charlie Karaboga told Cointelegraph that obtaining a legal opinion before launching the product “showed that we acted honestly and did everything that we could do as a startup.”

The court acknowledged that Block Earner tried to obtain legal advice. Justice Jackman rejected the Australian Securities and Investments Commission’s (ASIC) request for a $234,000 (350,000 Australian dollars) fine. Block Earner had proposed a $40,000 (60,000 Australian dollars) penalty, which is three times the amount earned from the product in question.

Karaboga refrained from calling it a “fair ruling,” explaining that the only “silver lining” was avoiding a penalty. He noted that the firm still suffered “reputational damage” and has “lost a lot of money” on legal fees over the past two years.

ASIC stated in a June 4 press release that it is reviewing the decision.

In February, Justice Jackman ruled that Block Earner’s “Earner” products offered in 2022, which provided yield on loans in USD Coin (USDC), Bitcoin (BTC), Ether (ETH), and PAX Gold (PAXG), required an Australian Financial Services License (AFSL).

The company’s “DeFi Access” product, which facilitates the use of the lending protocol Aave, escaped punishment. The court found it didn’t operate under a managed investment scheme, so no AFSL was needed.

ASIC sued Block Earner in November 2022, alleging both the Earner and DeFi Access products needed a license as they were managed investment schemes—when a fund pools investor money and uses it to buy assets.

The Earner product operated from March 17, 2022, to November 16, 2022, ending before court proceedings began.

SOURCE: Block Earner spared penalty in regulator’s crypto yield suit

The Hong Kong Securities and Futures Commission (SFC) will conduct on-site inspections of local virtual asset trading platforms (VATPs) that are still navigating their regulatory applications following the June 1 licensing deadline.

The SFC reminded crypto companies on May 28 of their obligation to obtain licenses by June. After this deadline, all local crypto trading platforms must be either licensed or “deemed-to-be-licensed” by the SFC. 

Applicants under the “deemed-to-be-licensed” status fall into a short-term framework for firms operating in the region before the new licensing regime was introduced. Operating an unlicensed VATP in Hong Kong after June 1 will be a criminal offense, and the SFC will enforce this rule with in-person checks.

“In the coming months, whilst the deemed-to-be-licensed VATP applicants pursue their applications, the SFC will conduct on-site inspections to ascertain their compliance with the SFC’s regulatory requirements,” stated the SFC. The commission emphasized a particular focus on safeguarding client assets and implementing Know Your Customer (KYC) processes.

The SFC also urged investors to trade only on SFC-licensed platforms. It warned companies seeking licenses not to “actively market services or onboard new retail clients until formally licensed” and to prevent mainland Chinese residents from accessing their services.

Earlier this month, the number of crypto exchanges seeking operational licenses in Hong Kong steadily decreased. A total of 11 crypto companies and exchanges, including OKX and Huobi’s local arm, withdrew their applications ahead of the deadline, with 18 applications still pending approval.

Crypto exchange Gate.HK ceased all activities related to acquiring new users and marketing, prevented existing users from making deposits, and began delisting tokens on May 23. It plans to relaunch services after reconstructing its platform to comply with Hong Kong’s regulatory requirements.

Only two companies, OSL Digital Securities Limited and Hash Blockchain Limited, have been granted licenses to operate in Hong Kong, according to the SFC.

SOURCE: Hong Kong SFC to compliance check crypto firms offices after license deadline

Gary Gensler, U.S. SEC Chairperson, has voiced apprehensions regarding a proposed House bill that could potentially undermine regulatory oversight of crypto capital markets. The bill, if passed, could have significant implications for how cryptocurrencies are regulated and supervised in the United States.

Gensler’s remarks highlight the growing regulatory scrutiny surrounding the cryptocurrency industry, as policymakers grapple with how to effectively regulate this rapidly evolving market. The proposed legislation has drawn attention from both industry participants and regulators, raising questions about its potential impact on investor protection and market integrity.

The SEC chairman’s concerns stem from provisions in the bill that could limit the agency’s authority to oversee crypto exchanges and trading platforms. Gensler warns that such limitations could weaken regulatory safeguards and expose investors to greater risks, particularly in light of the market’s inherent volatility and susceptibility to manipulation.

The House bill comes at a time when cryptocurrencies are gaining mainstream acceptance and attracting significant investment interest. As digital assets continue to proliferate and evolve, regulators are facing mounting pressure to establish clear rules and guidelines to govern their trading and issuance.

Gensler’s remarks underscore the SEC’s commitment to ensuring the integrity and stability of capital markets, even as new asset classes like cryptocurrencies emerge. The agency remains vigilant in its oversight efforts, seeking to strike a balance between fostering innovation and safeguarding investors against potential harm.

The proposed legislation has sparked debate within the crypto community and among lawmakers, with proponents arguing that it could provide much-needed clarity and certainty for market participants. However, critics contend that it could stifle innovation and hinder the growth of the nascent industry.

As discussions around crypto regulation continue to unfold, stakeholders are closely monitoring developments in Washington and the broader regulatory landscape. The outcome of the proposed House bill could have far-reaching implications for the future of crypto regulation in the United States, shaping the trajectory of this burgeoning market for years to come.

SOURCE: SEC’s Gensler Says House Bill Would ‘Undermine’ Regulator’s Crypto, Capital Markets Oversight

Democratic leaders in the House of Representatives have indicated that they will not enforce party discipline on an upcoming vote concerning cryptocurrency legislation. This decision comes amid growing debate over regulatory measures aimed at the crypto industry.

The move to refrain from “whipping” the vote on the crypto bill reflects the complexities surrounding the issue and the diverse range of opinions within the Democratic Party. With members holding varying views on how best to regulate the burgeoning cryptocurrency market, party leaders have opted to allow for individual discretion in the upcoming vote.

The decision not to enforce party unity underscores the nuanced nature of the crypto regulation debate, with lawmakers grappling with how to strike a balance between fostering innovation and safeguarding against potential risks. By refraining from exerting pressure on members to vote along party lines, Democratic leadership aims to encourage open dialogue and deliberation on the proposed legislation.

The upcoming vote on the crypto bill is poised to have significant implications for the future of digital asset regulation in the United States. The legislation seeks to address key issues such as investor protection, anti-money laundering measures, and the oversight of crypto exchanges.

The Democratic leadership’s decision to adopt a hands-off approach to the vote reflects a recognition of the need for careful consideration and informed decision-making on complex policy matters. By allowing members to exercise their independent judgment, party leaders hope to foster a constructive and inclusive legislative process.

As the debate over crypto regulation continues to unfold, stakeholders across the political spectrum will be closely watching the outcome of the upcoming vote. The decision to eschew party discipline underscores the importance of collaboration and compromise in shaping the future regulatory landscape for cryptocurrencies.

In conclusion, Democratic House leadership’s decision not to whip the vote on the crypto bill reflects a commitment to fostering open dialogue and deliberation on complex policy issues. As lawmakers prepare to weigh in on the future of cryptocurrency regulation, the outcome of the upcoming vote will have far-reaching implications for the industry and its stakeholders.

SOURCE: Democrat House Leadership Says Crypto Bill Vote Won’t Be Whipped

Switzerland’s highest authority has initiated a public consultation on adopting global standards for crypto tax reporting to ensure equal treatment of crypto assets and traditional assets. The Federal Council, comprising seven members who collectively head the Swiss government, aims to implement the Crypto-Asset Reporting Framework (CARF) to enhance tax transparency.

On May 15, the Federal Council released a consultation paper to gauge public sentiment on joining the Automatic Exchange of Information (AEOI), an international cooperation between tax administrations to combat tax evasion. Switzerland plans to extend its participation in the AEOI starting January 1, 2026.

The Organisation for Economic Co-operation and Development (OECD) established the AEOI and other initiatives for the Group of 20 (G20) nations, which were later extended to include additional countries. Switzerland previously adopted the OECD’s Common Reporting Standard (CRS) in 2014 but excluded CARF, which governs the handling of crypto assets and their providers. Planning to address this omission, the Federal Council stated:

“Implementation of the CARF will expand Switzerland’s progressive crypto market regulation and help to maintain the credibility and reputation of the Swiss financial center.”

However, the CARF implementation will require parliamentary approval and cannot be based solely on responses to the consultation paper.

By 2027, nearly 50 countries are expected to fully adopt CARF regulations to collectively combat money laundering. The Swiss federal authority aims to “close gaps in the tax transparency mechanism and ensure equal treatment with respect to traditional assets and financial institutions.”

The consultation will run for over three months and conclude on September 6.

In a related development, Canada’s annual budget in April 2024 suggested that the country would implement CARF for taxation by 2026. The CARF would impose new reporting requirements on crypto asset service providers, such as cryptocurrency exchanges, crypto-asset brokers, and crypto-asset automated teller machine operators. When the regulation takes effect, Canadian individuals and businesses will be required to report transactions between crypto assets and fiat currencies, as well as crypto-to-crypto transactions, to the Canada Revenue Agency.

SOURCE: Swiss leaders plan to enforce global crypto reporting framework