Kalam Crypto #61: Crypto regulation, the good, the bad & the ugly!
This week is all about regulations, the good, the bad, and the ugly. VARA launches comprehensive crypto regulations (good), the SEC clamps down on staking in the United States (bad), and SEC orders Paxos to stop minting BUSD (ugly).
“Hoping for the best, prepared for the worst, and unsurprised by anything in between.” Maya Angelou
Ahlan wa sahlan, and welcome to the 61st edition of CoinMENA's weekly newsletter, Kalam Crypto. This week is all about regulations, the good, the bad, and the ugly. VARA launches comprehensive crypto regulations (good), the SEC clamps down on staking in the United States (bad), and SEC orders Paxos to stop minting BUSD (ugly). All of that, plus the IMF still not happy with El Salvador’s bitcoin experiment, so let's dive into this week's letter, and talk crypto:
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Local News 📍
The Good - VARA launches full market regulations: Dubai’s Virtual Asset Regulatory Authority (VARA) has just released the Virtual Assets and Related Activities Regulations 2023, a comprehensive regulatory framework for the virtual asset (VA) industry. The regulation signals to the market that Dubai intends to become a global crypto hub. VARA’s approach identifies 7 distinct services and provides clear and logical licensing requirements for each. At CoinMENA we are optimistic that the structure of the regulations will drive innovation and create a thriving and sustainable crypto ecosystem in the region.
To read more about the new regulations, please check out our CEO Talal Tabbaa’s blog post.
Global News 🌍
The Bad - SEC clamp down on staking: As was expected in the wake of FTX, the SEC’s 2023 crypto crackdown continued as the US regulator slapped Kraken with two charges related to its staking products. Kraken paid a $30 million fine to settle both charges. The news drew a lot of criticism from within the crypto industry. At the core of the dispute is the lack of clarity over whether the tokens on these centralized platforms are securities or not. The SEC says they are, but crypto exchanges say they are not. The law as it stands remains open to interpretation and Congress has not taken a stance either way. In this case for example, if Kraken complied with the SEC framework, they would be admitting that the tokens are securities, which Kraken does not believe they are. A useful analogy is that if you force an innocent person to sign a false confession, they still go to jail. Other crypto exchanges are vying to publicly push back and challenge the SEC. Coinbase’s CEO Brian Armstrong stated: “Coinbase's staking services are not securities. We will happily defend this in court if needed.”
Keep an eye on 👀
The Ugly: SEC labels BUSD as a Security: Paxos, the issuer of Binance stablecoin BUSD could reportedly be sued by the SEC for violating investor protection laws. The New York Department of Financial Services (DFS) also ordered Paxos to cease minting new BUSD. The issue is that there are two versions of BUSD. One highly-audited version that was approved by DFS to be issued on Ethereum and another issued by Binance on BNB, which Binance claims is backed 1-1 by the Paxos version. Over the next few days that claim will be tested. If Binance issued more BUSD than Paxos, it could depeg from the dollar. Watch this space, should be an interesting week.
Signal beyond the noise 🔊
El Salvador bitcoin risks have not materialized: In 2021, the IMF criticized El Salvador's decision to make Bitcoin legal tender, but during an annual visit, they found that the economic risks they had warned of had not yet occurred. President Nayib Bukele is a strong supporter of Bitcoin and views it as a way to free his country from debt slavery. While it is too early to determine the success or failure of the Bitcoin experiment in El Salvador, it is worth monitoring.
Tweet of the week 🐥
In response to SEC action this week, Kraken Founder Jesse Power ironically tweets the following:
CoinMENA News 🗞
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Quiz Corner ✅
Last week’s question: Which is true for the genesis block?
Answer: It’s the first block in the blockchain
This week’s question: Which was the first Initial Coin Offering (ICO)?