Regulators in the US and UK have made swift advances against the cryptocurrency sector in 2023.
In the States, the Securities and Exchange Commission (SEC) set the ball rolling by suing Kraken for securities law violations.
Then the New York Department of Financial Services (NYDFS) this week ordered Binance’s business partner Paxos to cease minting all BUSD stablecoins – the third-largest stablecoin by market capitalisation – effective immediately.
Now it appears that the SEC is working on a proposal to ban, or at least make it exceedingly difficult for, cryptocurrency firms to act as custodians of clients’ assets.
According to a Bloomberg report, the proposed rule could force private equity firms and hedge funds to rethink their relationship with the broadly unregulated cryptocurrency sector.
Qualified custodians are responsible for safely holding clients’ funds, but numerous controversies throughout 2022 exposed the procedure’s inherent risk factor.
Celsius Network, BlockFi, FTX, Genesis and a raft of other collapsed crypto companies engaged in custodial practices, leading to billions worth of losses for the users.
Financial institutions may be subject to surprise audits under the proposed laws.
UK crypto ATM crackdown
In the UK, the Financial Conduct Authority (FCA) has restated its position that any crypto ATMs operating in the country are doing so illegally.
The FCA has gone to the extent of partnering with the West Yorkshire Police’s Digital Intelligence and Investigation Unit to crack down on unregistered crypto ATMs, which allow customers to buy or convert funds into cryptoassets.
Czech company General Bytes operates 24 ATMs across the UK, according to Coin ATM Radar, including one in Sheffield and two in Manchester.
General Bytes was unreachable by phone for a comment.
"We will continue to identify and disrupt unregistered crypto businesses operating in the UK,” said Mark Steward, the FCA’s executive director of enforcement and market oversight.