Financial authorities have just notched up a couple of firsts in their battle to bring compliance to crypto.
In the US, the Securities and Exchange Commission has taken its first enforcement action on cryptocurrency lending, agreeing $100mn in settlements with BlockFi over charges that it offered interest-bearing accounts without registering them as securities.
The federal regulator said the case clarified a legal grey area over popular interest-bearing accounts linked to cryptocurrency lending products, and warned that there could be more such cases to come if other lenders fail to register with the commission. BlockFi, based in New Jersey, said it would soon offer the first SEC-registered crypto interest-bearing security.
“This is the first case of its kind with respect to crypto lending platforms,” said Gary Gensler, the SEC chair. “Today’s settlement makes clear that crypto markets must comply with time-tested securities laws.”
In the UK, HM Revenue & Customs has become the first law enforcement agency to seize NFTs. The tax body said it had secured a court order to detain crypto assets worth around £5,000 and three digital artwork NFTs. The move is part of an investigation into a suspected, organised value added tax (VAT) fraud involving 250 alleged fake companies.
Nick Sharp, HMRC’s deputy director of economic crime, said: “Our first seizure of a non-fungible token serves as a warning to anyone who thinks they can use cryptoassets to hide money from HMRC. We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.”
Tim Bradshaw writes about a different kind of NFT fraud for his FT Magazine column. Kapetta was a hoax, designed by its creator to warn people against leaping too quickly into NFTs advertised by users using pseudonyms on Twitter. “Why are we normalising giving anonymous internet people money? There is so much nonsense in this space right now,” said the hoaxer.
Meanwhile, Eswar Prasad, author of The Future of Money, writes about the dangers of stablecoins to smaller economies in the FT and the US Senate Banking committee is holding a hearing today on how these digital currencies, often pegged to the dollar, can pose risks rather than offer stability to investors.
The committee’s chair, Senator Sherrod Brown said issuers had lied about having adequate reserves and “the fine print in the agreements of some of the biggest companies says that ordinary consumers can’t actually redeem their stablecoins for dollars from the company that issues them. Only institutions like hedge funds can”.
The White House and Congress are looking to legislate to restrict the issuance of stablecoins to those who can back them up 100 per cent with dollar reserves. Such a law would be another much needed first to rein in a sector running well ahead of regulation.
The Internet of (Five) Things
1. TikTok poaches Big Tech content moderators
The short-form video app owned by China’s ByteDance has poached hundreds of content moderators in Europe from outsourcing companies that serve social media rivals such as Facebook, as it seeks to tackle harmful content.
2. Meta sued over facial recognition system
The Texas attorney-general is suing Facebook parent Meta for billions of dollars over claims that it harvested and exploited citizens’ biometric data without proper consent through its recently shuttered facial recognition system.
3. Buffett bought $1bn Activision stake before deal
Berkshire Hathaway purchased a nearly $1bn stake in Activision Blizzard in the fourth quarter, weeks before the video game maker agreed to sell itself to Microsoft for $75bn. The price of Activision shares has surged 23 per cent this year, implying a paper profit of more than $200mn for Warren Buffett’s conglomerate. Meanwhile, Lex says mobile gaming could drive the next big deals in the industry.
4. Intel buys Tower for $5.4bn
It’s much smaller than GlobalFoundries, which Intel considered buying last year, but Israel-based Tower Semiconductor looks a good fit for the chipmaker as it tries to increase its capacity to make microprocessors for other companies.
5. EU plans rival satellite internet
The EU is to launch plans for a multibillion-euro satellite internet system to compete with the likes of Amazon and SpaceX, despite previous objections from its internal watchdog. Brussels’ initiative to provide encrypted broadband coverage was being unveiled today in amended form after proposals were twice rejected by the European Commission’s Regulatory Scrutiny Board. The board believed the scheme would waste money and compete with commercial services.
Tech tools — Sony LinkBuds
These remind me of Polo — the mint with the hole — for some reason. Sony has come up with an unusual design for earbuds that should appeal to those who don’t like their ears being blocked up by such devices. Sony says LinkBuds’ open ring design means a “never off” wearing experience, where you’re aware of the outside world while enjoying “crystal-clear sound and call quality”. Available this month for £150 /€180/$180, The Verge praises their design and fantastic voice call quality, while criticising so-so battery life and their unsuitability for loud environments. Also, check out Lex on the maker of Apple’s AirPods — little known Luxshare Precision Industry.
