Amid the excitement over the past two weeks, stemming from various ETF applications, a variety of developments have occurred involving centralized exchanges as each adapts to increasing oversight and a changing regulatory landscape. The following are a few examples of this.
FTX to Restart?
As it stands, the bankruptcy proceedings involving disgraced exchange FTX still have a ways to go. Promisingly, it is believed that of the roughly $8.7B owed to its clients, over $7B has already been recovered. Although this is still a large shortfall in assets vs. liabilities, much more has been recovered than was initially anticipated.
On a more controversial note, it has been reported that the exchange may be gearing up to re-launch on an international stage. While it remains to be seen who exactly would be interested in utilizing the platform after becoming a blight on the digital asset sector and its current reputation, such a move may be the best road taken to begin generating revenue to cover the aforementioned shortfall in its liabilities.
Coinbase Responds to Suit
Earlier today, Coinbase filed its official response to the lawsuit brought upon it weeks ago by the Securities and Exchange Commission (SEC). In this 177-page response, Coinbase goes to great lengths to explain its positioning on why digital assets offered through its platform are not securities, and that the charges should be dismissed.
Among its 11 listed defenses, the exchange notes that it believes,
- “Coinbase did not have, and Plaintiff failed to provide, fair notice that its conduct was in violation of law.” – Seventh Defense
- “The SEC has no authority to regulate Coinbase under Sections 5, 15(a), or 17A(b) of the Exchange Act or Section 5 of the Securities Act because none of the tokens identified in the Complaint is a security within the meaning of the Exchange Act, and because Coinbase’s staking services do not involve the offering or sale of any securities.” – Second Defense
- “Plaintiff abused its discretion by bringing this enforcement action instead of engaging in notice-and-comment rulemaking.” – Eighth Defense
In addition to addressing the charges and its stance on each individual asset, Coinbase also took the opportunity to highlight the ongoing unwillingness of the SEC to cooperate with different levels of the government itself, confusion over past commentary to come from representatives of the SEC, and more.
BaFin Denies Binance
Coinbase is not the only exchange actively navigating what has become a hostile regulatory environment. Binance has also found itself in the spotlight – and not for good reasons. While its issues with the SEC pertain mostly to Binance.US, the international arm of the company is being met with distrust and skepticism now as well. The most recent example of this comes from Germany, where it has been reported that the local regulator, BaFin, has denied the exchange’s application for a license to custody digital assets.
Moving forward, it would appear as though Binance is not giving up on its desire to build in Germany, noting that it will continue working with regulators to ensure it brings its operations into compliance.
KuCoin to Implement KYC
Despite holding out longer than many of its competitors, KuCoin has now announced that it will be implementing stringent and mandatory KYC measures for new clients as of July 15th. The process is comprised of multiple tiers – each of which unlocks further features and capabilities within the platform. Existing users are encouraged to complete this new process, KuCoin notes that those opting out will only have deposits frozen, while trading and withdrawal support will continue.
News of more stringent KYC measures among centralized exchanges should come as no surprise to anyone. Whether in the United States or abroad, regulators are cracking down on such platforms. While some may delay implementing such measures for some time, expect for this to eventually be the case for all exchanges of this kind.
Coinsquare Acquisition Approved
Meanwhile, in Canada, WonderFi has shared that both Coinsquare and CoinSmart have officially been greenlit to undergo an anticipated merger between the three entities. The deal, which will see Coinsquare become the majority shareholder in the resulting entity post-merger, was one fraught with issues and delays. Despite this, the trio was able to pull off the deal, consolidating the crop of Canadian digital asset exchanges in the process.
Now that approval has been granted, it should be interesting to see how these exchanges operate as a whole. Will each combine under one banner? Will each share order books to improve asset liquidity for clients? Time will tell.
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