Winds of regulatory repression are blowing over cryptocurrencies. The era of extreme freedom and decentralization seems to have come to an end. The Securities and Exchange Commission (SEC), with the impetus of FinCen, has begun to swing the regulatory hammer to bring order where there was none before. A couple of bankruptcies of tens of billions such as TerraForms (Terra-Luna) and FTX (Sam Bankman-Fried) have been enough for US supervisors to get their act together after years of neglect.
Although a posteriori, the SEC has marked the ground for the rogues who seek other people’s money with persecutions of companies, people and activities that until now moved in the shadow of legality and lived, in the case of fraud, of the sensation of impunity. But it won’t be like that anymore. 2023 marks a before and after in the essence of cryptocurrencies: their ability to issue tokens or unique digital values that carry a unique digital property and may or may not represent assets such as stocks, bonds, real estate, or simply act as a medium. payment between two parties.
The story is that the SEC has now decided to equate the issuance of tokens under its jurisdiction – which encompasses the US and its overseas partners – with that of securities, whatever their purpose or function. The case of Terraform, the company behind the Terra and Luna cryptos that collapsed in May 2022, seems to give nature to a question that was the subject of debate: What are stable currencies or ‘stablecoins’? Represents? And above all, are they bought and sold as if they were a value? The SEC has decided that issuing tokens without control so that investors buy them with dollars is not right if that sale does not pass its filter, procedures and registration like any other issue of shares, bonds, derivatives, promissory notes or negotiable ‘thing’ in market.
To do this, the supervisor’s team has carried out an investigation, twelve months after everything happened, to end up concluding what everyone knew: Terra and Luna set up a human fraud that under the guise of an algorithmic coin had the objective of enriching a few (its founders and partners), facilitate money laundering and keep the real money of the most unsuspecting.
The SEC has relied on the means of Fincen, one of the most powerful agencies in the US, and feared beyond the seas. Ask Banco Madrid, owned by the Andorran BPA, which at the time of the intervention of the Bank of Spain in 2015 had Soledad Núñez on its board of directors. The number of turns that life takes, just three years later she ended up joining the supervisor with a passport related to the PSOE and that of director of the Treasury when the risk premium went to 600 in 2011.
Beyond the strange case of the Andorran banks in Madrid, the paragraph serves to stage the power and fear caused by Fincen (Financial Crimes Enforcement Network) because a single notice from its central function to turn one of the banks upside down, for then, more solvent and reputable in the Spanish financial scene. For those who do not know, it is the agency of the United States Department of the Treasury in charge of combating money laundering and terrorist financing. It was created in 1990 under the Bank Secrecy Law and its mission is to detect crimes.
For some time now, FinCen has been fully involved in the cryptocurrency scene under the leadership of Him Das. Perhaps because those responsible finally saw the ‘Startup’ series where all the possibilities of cryptocurrency for organized crime were described or because the sector stole its greatest talent: Michele Korver, former secret agent and nicknamed the ‘cryptozar’, passed to handle regulatory affairs for A16Z (Andreessen and Horowitz) after a brief stint at Fincen as the first Chief Digital Currency Advisor, a newly minted role that apparently disappeared with her departure a few months later .
The only thing certain at this point is that Fincen is driving the recent regulatory offensive from the US after its jump on the Bitzlato platform, linked to Russian cybercrime and money laundering, but which was closely linked to stable currencies and well-known firms such as Binance, Terraforms…
The fence is tightening to exchange cryptocurrencies of different kinds but, above all, on token issuers who must now be held accountable, whether their headquarters are in Singapore, the Caribbean, or any other tax haven. The trail of money lost in the collapse of FTX has turned on regulatory sentinels, perhaps because this time is different and it has ended up splashing big investors like Blackrock, Softbank or Sequoia. In addition, the launch of centralized and central bank-backed stablecoins (CBDCs) is becoming more of a reality. China has done it, Japan is working on it and will soon do it in both the US and Europe.