Ahead for the cryptocurrency sector is (jail) time

The global media has once again focused on the cryptocurrency and digital asset sectors. This time, the issue is not the assurances of an inclusive financial future; rather, it has to do with a few court cases that have been started or concluded in recent months.

These specific developments can be interpreted as an attempt by regulators around the globe to establish legal guidelines for the new class of digital assets, or crypto assets as they are called in regulations globally, and to reassure the steadily expanding consumer base of these products that they will be safe when they enter this new market.

 

One notable example is in the United States, where two of the largest cryptocurrency exchanges globally, Binance and Kraken, have been charged with and suspected of engaging in anti-money laundering operations. Regulators emphasized that the key concern in both instances was the incomplete implementation of Know-Your-Customer (KYC) standards.

 

Regarding Binance, the top cryptocurrency exchange globally, the US Justice Department contended that the lack of proper KYC procedures resulted in the evasion of international sanctions and money laundering. The US Justice Department and US Securities and Exchange Commission (SEC) brought charges against cryptocurrency exchange Binance and its CEO, Zhao Changpeng, who entered a guilty plea and agreed to pay a record USD 4.2 billion punishment.

 

The cryptocurrency exchange KuCoin is facing a similar outcome in the latest case, which involves the same anti-money laundering accusations. The SEC is requesting a complete ban on Kraken in the USA since they neglected to register under the legal requirements.

 

In recent months, a few noteworthy cases from the past have received their last acts. The trials in Celsius, Terra, and—most notably—FTX Exchange progressed past the point of inaction, and in FTX, former CEO Sam Bankman-Fried was sentenced. The penalty was given in the court case pertaining to the November 2022 collapse of the Alameda Research trading firm and the FTX exchange.

 

The long-running legal dispute involving Ripple Labs, one of the largest cryptocurrency startups, is almost over in US courts. Prosecutors seek an additional $2 billion in significant fines. They claimed that this would communicate a message about consumer protection to the industry. What message is that, exactly?

Since virtual assets frequently move to less regulated areas, governments should take the problem seriously and tighten regulations. This is made clear by T. Raja Kumar, the president of the Financial Action Task Force (FATF), who noted in an interview that just one-third of the world has put in place laws pertaining to cryptocurrencies. Mr. Kumar exhorts nations to increase legislation and treat the matter seriously.

 

That is undoubtedly a trend for cryptocurrency businesses. The value obtained by unofficial cryptocurrency addresses has significantly decreased overall, according to the cryptocurrency industry. Additionally, the percentage of all cryptocurrency transactions linked to illegal behavior has dropped. This is emphasized in Chainalysis' annual report, which offers blockchain forensics services to the majority of governments across the globe. Hence, the sector is headed in the proper way.