Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets Regulations
US Treasury Demands DeFi Adhere to Anti-Money Laundering Rules
BNN Bloomberg | , | Apr 6, 2023
Image: Unsplash/Freddie Collins
Decentralized financial transactions, including those done with virtual currencies, need to comply with anti-money laundering and sanctions laws, the US Treasury Department said in a new report.
- The 39-page report, which was commissioned by the Biden administration, concludes there are several risks associated with DeFi technology, which has no exact definition but includes self-executing transactions between two or more people based on the same blockchain technology that underpins cryptocurrencies.
- As various countries, including the US, deliberate on how to regulate cryptocurrencies and virtual assets, a report has surfaced advocating for more stringent rules around the technology. The report also emphasizes that firms and individuals must adhere to the already-established laws regarding money laundering and terrorist financing. According to the report, many institutions and users are currently not following existing regulations.
- The report’s findings, which recommend some changes to the law, come as the Biden administration is considering a broader regulatory framework for cryptocurrencies and other forms of payment conducted with blockchain technology. The administration in September called on the Securities and Exchange Commission and other regulators to “aggressively pursue investigations and enforcement actions against unlawful practices.”
See:
Linklaters: Crypto and DeFi: Understanding the Risk Landscape and Tackling the Shifting Outlook
Bank of Canada Paper: Fragility of DeFi Lending
Brian Nelson, the Treasury undersecretary for Terrorism and Financial Intelligence:
Capturing the potential benefits associated with DeFi services requires addressing these risks. The private sector should use the findings of this assessment to inform their own risk mitigation strategies and to take clear steps, in line with AML/CFT regulations and sanctions obligations, to prevent illicit actors from abusing DeFi services.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Court Tests the Liability of DAOs and Their Makers: What You Need to Know
Coindesk | Sam Reynolds | Mar 29, 2023
Image: Unsplash
Decentralized autonomous organizations (DAO) are beginning to look like general partnerships in the eyes of U.S. courts.
- A U.S. court in California has ruled in favor of plaintiffs who alleged that the bZx protocol, and governance token-holding members of its decentralized autonomous organization (DAO), were negligent and liable for losses resulting from a hack that drained its treasury.
- The putative class action against bZx, its founders, software developers Leveragebox LLC and Hashed Labs LLC was initiated in July 2022.
- Drained wallets: The case stems from the $55 million hack of decentralized finance (DeFi) lender bZx in 2021, which resulted because a developer downloaded an email attachment containing malware. Not only did the attacker drain the wallet of the BZRX token, but other digital assets like ether. This is on top of other hacks the protocol suffered in 2020, one of which was for $8 million, while two others that occurred were for $630,000 and $350,000.
See: Sushi DAO Head Chef Served With SEC Subpoena
- While the court dismissed some of the claims, such as claims that founders Tom Bean and Kyle Kistner are personally liable for breaching fiduciary duty, the fact that it allowed the negligence claims to proceed has created a landmark ruling in the relatively murky topic of the liability of governance token holders in DAOs.
- The decision implies that DAO members might be held liable for negligence, potentially undermining the already challenged decentralized nature of DAOs, while providing a defense for founders who have seen their creations accused of wrongdoing.
- Does a DAO have duty of care and fiduciary liability? Before the court was the question of whether all persons holding BZRX tokens are part of a general partnership.
- The court found that the bZx protocol meets the definition of a general partnership because of how the token holders can both suggest and vote on governance proposals, including hiring and dispersing treasury assets to token holders in the same way that a corporation authorizes dividends.
- The involvement that token holders have in the business via participation in governance protocols also means they have a duty of care, the court found, including that the protocol was properly maintained and had sufficient security measures.
- The court found that the bZx protocol meets the definition of a general partnership because of how the token holders can both suggest and vote on governance proposals, including hiring and dispersing treasury assets to token holders in the same way that a corporation authorizes dividends.
See: Ooki vs CFTC: Emerging Questions on Legal and Tax Status of DAOs
- Are DAO founders personally liable? The court found that complaints against developers Leveragebox LLC and Hashed Labs LLC failed to provide the necessary elements to establish claims of negligence, breach of fiduciary duty, and joint and several liability.
- "Because Plaintiffs have failed to allege that the Moving Defendants had actual authority to control the bZx DAO, the Court finds that Plaintiffs have failed to allege joint and several liability,” the docket reads.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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U.S. SEC Files Lawsuit Against Tron Founder Justin Sun
Coindesk | Nikhilesh De | Mar 22, 2023
Image: Justin Sun - video screenshot, YouTube, Tron
The regulator alleged TRX and BTT are unregistered securities, and claimed Sun created an "extensive wash trading" program to boost their trading volume.
- The SEC said in a press release it was suing Sun, the Tron Foundation, the BitTorrent Foundation and BitTorrent (now known as Rainberry) over the sale of tronix (TRX) and bitTorrent (BTT) tokens, which the regulator described as unregistered crypto asset securities. The regulator further alleged the defendants "fraudulently manipulat[ed]" TRX's secondary market through an "extensive wash trading" scheme.
See: SEC Warns Investors: Be Vigilant Regarding Crypto Asset Securities
- The SEC alleged, by having his own employees "engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled." According to the court filing, Sun's Tron Foundation employees conducted the trades, the BitTorrent and Tron foundations controlled the accounts and Rainberry employees transferred funds for the trading.
- Celebrity influencers: The agency is also suing Lindsay Lohan, Jake Paul, Soulja Boy, Lil Yachty, Ne-Yo, Akon and Michele Mason on illegal touting charges for their roles allegedly promoting TRX and BTT without disclosing they were paid to do so. The majority of these celebrities settled the charges.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Should the SEC Be Allowed to Wage an Unsupervised Dirty War on Crypto?
Cato Institute | Jack Solowey and Jennifer J. Schulp | Mar 6, 2023
Image: Cigar Emperor Ltd
Congress must both defend its oversight authority and give American crypto developers, entrepreneurs and users a clear path to lawfully carry on their business. Providing a common‐sense disclosure framework for asset‐backed stablecoins is the place to start.
- On Feb. 9, the SEC settled allegations that Kraken’s “staking‐as‐a‐service” program constituted the illegal sale of unregistered securities. Then the SEC sent a Wells notice to stablecoin issuer Paxos, indicating a potential future enforcement action over its Binance USD token (a Binance‐branded asset designed to keep a 1:1 peg with the U.S. dollar), which the commission apparently also alleges is an unregistered security.
- And Gensler indicated in a recent interview that basically every crypto project — “everything other than Bitcoin” — could have an SEC target on its back.
- The SEC maintains it is merely enforcing existing registration and disclosure requirements on crypto tokens and services it considers securities. But this is misleading for two reasons.
- One, the applicability of securities laws to the projects at issue — Kraken’s staking service and Paxos’s BUSD stablecoin — is, at the very least, contestable. Even more so if the idea is that every crypto token other than Bitcoin is to be considered a security.
- Two, a regulator interested in getting consumers the best disclosures about new products, including stablecoins, would provide clear guidance on how to do so. The SEC hasn’t.
- Gensler’s comments also could imply that he views even highly decentralized tokens, like Ether, as securities. This is inconsistent with previous comments by SEC officials, as well as the idea that securities laws are to address managerial risks — hallmarks of centralized bodies, not decentralized software protocols.
See: Gary Gensler, Chairman of the SEC Speech
- Lawmakers have a vital role in restoring administrative accountability.
- In a Feb. 14 Senate Banking Committee hearing, Republican Senator Tim Scott told the hearing, “If Chairman Gensler is going to take enforcement action, Congress needs to hear from him very soon.” Across the aisle, Democratic Senator Kirsten Gillibrand has voiced similar sentiment: “I have many concerns about Chairman Gensler and his approach to this space.”
- Oversight would be most welcome. Congress should go a step further by legislating, first providing a practical registration path for stablecoins.
- The SEC shouldn’t be left in the shadows to try to snuff out Americans’ work on and access to a new class of technology. As House Financial Services Committee Chairman Patrick McHenry has recognized, the future of digital assets “is a major political and economic question that must be decided by Congress.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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3 U.S. Senators Demand to see Binance’s Balance Sheets and AML Policies
Cointelegraph via TradingView | March 2, 2023
Image: Pixabay/JESHOOTS-com
Three United States senators led by Elizabeth Warren have sent a letter to Binance CEO Changpeng “CZ” Zhao and Binance.US CEO Brian Shroder expressing concern over a number of facets of Binance’s activities and requesting information from the companies that includes their balance sheets.
- Crypto skeptic Warren’s cosigners were fellow Democrat Chris Van Hollen and Republican Roger Marshall. They claimed there is evidence that the companies attempted to evade U.S. regulators, evade sanctions and facilitated the laundering of at least $10 billion, and lack transparency.
- The senators requested documents and other information. At the top of the list is “all Binance and Binance subsidiary balance sheets from 2017 to the present.” In addition, they ask for copies of Anti-Money Laundering and similar policies, documentation of the relationship between Binance and Binance.US and other information, as well as explanations of various news reports.
- They gave the addressees two weeks to respond.
See: Will Binance Severes U.S. Ties in Face of Crypto Crackdown
Senators:
“Your companies’ apparent attempts at evading the enforcement of anti-money laundering laws, securities laws, information reporting requirements, and other financial regulations cast serious doubt on the stability and legitimacy of Binance and its related entities, and on your commitment to your customers.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Crypto Banking is in a Mess. Where to from here?
Coindesk | Frances Coppola | Mar 2, 2023
Image: Pixabay/TheDigitalArtist
Crypto banking is in a mess
- The collapse of the FTX exchange caused damaging runs on two U.S. regulated banks. One of them – Silvergate Capital Corp. – had to sell assets at a loss to repay depositors and lenders, and as a result has now warned that it may not be able to continue as a “going concern.”
- A third bank had to issue an emergency warning that those who had deposited fiat funds with its customer Voyager Digital did not have deposit insurance.
- U.S. regulators are pressuring banks to withdraw banking services for crypto platforms and exchanges. And in a decision that sent shock waves across the crypto world, the U.S. Federal Reserve rejected a membership application from Custodia Bank, a full-reserve bank providing payment and custody services to crypto businesses.
- The regulatory clampdown on crypto banking began in earnest on Jan 3, when the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Controller of the Currency (OCC) issued a joint statement on crypto-asset risks to banking organizations.
- The message is clear. U.S. regulators think crypto is a serious threat to the traditional financial system. Not because it is going to take it over, but because it could bring it down.
See: Banking-As-A-Service Is Under Fire
- So crypto companies want a type of bank we don’t currently have: a “full-reserve” bank. In 2019, Wyoming created a charter for full-reserve banks. Its “special purpose depository institution” can receive deposits and provide asset management, custody and related services, but is not allowed to lend (though it can purchase certain types of debt securities) and must maintain unencumbered liquid assets of at least 100% of its total deposits.
- If crypto companies stopped fighting the regulators and cleaned up their act, the Fed might look more favorably on banks providing services to them.
- The reason why we don’t have full-reserve banks is that they are intrinsically less profitable than their fractional-reserve competitors. Historically, full-reserve banking has never lasted for long: Banks either find ways of leveraging customer deposits or they are bought by a fractional reserve bank or they go out of business.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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IMF 9 Point Action Plan for Crypto Asset Treatment: Recommends Against Legal Tender Status
Reuters | Marc Jones | Feb 23, 2023
Image: Unsplash/Dmitry Demidko
The International Monetary Fund has laid out a nine-point action plan for how countries should treat crypto assets, with point number one a plea not to give cryptocurrencies such as bitcoin legal tender status.
- The global lender of last resort said its Executive Board had discussed a paper, "Elements of Effective Policies for Crypto Assets," that provided "guidance to IMF member countries on key elements of an appropriate policy response to crypto assets."
- The top recommendation was to "safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status."
See: IMF Magazine: Money Revolution in the Age of Crypto and CBDCs
- The IMF had hit out at El Salvador in late 2021 when the central American country became the first to adopt bitcoin as legal tender, a move that has since been copied by Central African Republic.
- Other advice on Thursday's list, which comes as G20 decision makers meet in India, included guarding against excessive capital flows, adopting unambiguous tax rules and laws around crypto assets, and developing and enforcing oversight requirements for all crypto market actors.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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