First day of Celsius' bankruptcy hearing
A new legal advisory notice from the Office of Government Ethics disallows federal workers who own crypto from working on policies that could influence the value of their digital assets.
Speech: Vice Chair Lael Brainard at Bank of England Conference, London, United Kingdom
The EU has moved to rein in the “wild west” of crypto assets by agreeing a groundbreaking set of rules for the sector, adding to pressure on the UK and US to act too.
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
First day of Celsius’ bankruptcy hearing
CoinDesk | Cheyenne Ligon, Krisztian Sandor | Jul 18, 2022
First day of Celsius' bankruptcy hearing
News of Celsius’ liquidity crisis broke on June 12, when the company announced it was pausing all customer withdrawals, citing “extreme market conditions.” The company formally filed for Chapter 11 bankruptcy protection in the Bankruptcy Court of the Southern District of New York (SDNY) last week.
The company has an enormous $1.2 billion hole in its balance sheet (at least) – and retail depositors who held their crypto in Celsius accounts will likely be the last to get paid. Chapter 11 bankruptcy, also called a “reorganization bankruptcy,” pauses any attempts at civil litigation from creditors, and allows the company time to get its finances in order to repay its debts.
The firms claimed that most of the drop was due to the collapse in crypto prices, shrinking its assets by $12.3 billion. The rest of the losses added up as:
See: Justin Hartzman: Unveiling the Celsius and 3 Arrows Capital implosions
- Users withdrew $1.9 billion from deposits up until June 12, the date when the company suspended withdrawals.
- Loan redemptions and liquidations reduced the firm's assets by another $1.9 billion.
- Tether, the issuer of the largest stablecoin, USDT, in the market and also an investor in Celsius, set back the firm by an additional $900 million when it liquidated a loan to Celsius. (Tether issued a statement about the liquidation.)
- And the firm also lost $100 million from investments.
Celsius wants to recoup losings from mining operations as a 'Hail Mary'
A 61-page declaration from CEO Alex Mashinsky – indicate that much of Celsius’ plan to recoup its losses depends heavily on the projected future profits of its half-finished, wholly owned mining subsidiary, Celsius Mining. However, that mining subsidiary is also a debtor.
Lawyers for Celsius asked the court on Monday to approve over $5 million in spending to finish the construction of the mining center in Texas (which Celsius’ attorneys said would take approximately two more months), as well as pay duties on mining rigs “currently sitting with the customs authorities.”
See: U.S. Ethics Office: Federal Employees Are Banned From Drafting Crypto Policy if Invested
At Monday’s hearing, Shara Cornell, an attorney with the U.S. Trustee Program, voiced her concerns:
“There’s one mining company that I don’t believe is currently operable, but has caused the debtor a considerable amount of money. I’m not clear if construction may or may not be the best avenue for the debtor at this time,” Cornell told the court. “Why not just consider liquidating it and move on?”
Retail customers will suffer
Even if Celsius’ promises to mine 10,100 this year are accurate (something that is difficult to independently verify), at current market prices that would yield approximately $225 million – only a fraction of what is needed to make Celsius’ solvent.
Read: Gun-shy advisors struggle to provide clients with crypto guidance
Nash told the court on Monday that Celsius has approximately 500,000 depositors, 300,000 of which have more than $100 worth of crypto in their accounts.
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. Ethics Office: Federal Employees Are Banned From Drafting Crypto Policy if Invested
CoinDesk | Cheyenne Ligon | Jul 6, 2022
A new legal advisory notice from the Office of Government Ethics disallows federal workers who own crypto from working on policies that could influence the value of their digital assets.
U.S. officials who are personally invested in cryptocurrencies are now disqualified from working on crypto-related policy and regulation that could affect the value of their assets.
A legal advisory notice issued by the U.S. Office of Government Ethics (OGE) on Tuesday declared that the de minimis exemption – which, when applied to a security, would allow the owner of an amount below a certain threshold to work on policy related to that security – doesn’t apply to any cryptocurrency or stablecoin, even if the cryptocurrencies in question “constitute securities for purposes of the federal or state securities laws.”
See: EU agrees on landmark MiCA rules putting pressure on UK and US to regulation crypto assets too
The directive applies to all White House staff and the employees of all federal agencies, including the Federal Reserve and Treasury Department.
The directive will likely have a significant impact on some White House staffers who have been open about their crypto investments, like Tim Wu, a technology adviser to the Biden administration who holds millions of dollars in bitcoin. Wu has already voluntarily recused himself from working on crypto policy.
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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Federal Reserve: Crypto and DeFi Insights from Recent Turbulence Through a Financial Stability Lens
Federal Reserve | Jul 8, 2022
Speech: Vice Chair Lael Brainard at Bank of England Conference, London, United Kingdom
Recent volatility has exposed serious vulnerabilities in the crypto financial system. While touted as a fundamental break from traditional finance, the crypto financial system turns out to be susceptible to the same risks that are all too familiar from traditional finance, such as leverage, settlement, opacity, and maturity and liquidity transformation. As we work to future-proof our financial stability agenda, it is important to ensure the regulatory perimeter encompasses crypto finance.
Distinguishing Responsible Innovation from Regulatory Evasion
- New technology often holds the promise of increasing competition in the financial system, reducing transaction costs and settlement times, and channeling investment to productive new uses. But early on, new products and platforms are often fraught with risks, including fraud and manipulation, and it is important and sometimes difficult to distinguish between hype and value.
- If past innovation cycles are any guide, in order for distributed ledgers, smart contracts, programmability, and digital assets to fulfill their potential to bring competition, efficiency, and speed, it will be essential to address the basic risks that beset all forms of finance.
See: The FCA Hosted CryptoSprints in May and June 2022: Here are The Outputs
- These risks include runs, fire sales, deleveraging, interconnectedness, and contagion, along with fraud, manipulation, and evasion. In addition, it is important to be on the lookout for the possibility of new forms of risks, since many of the technological innovations underpinning the crypto ecosystem are relatively novel.
Insights from Recent Turbulence
- Contrary to claims that crypto-assets are a hedge to inflation or an uncorrelated asset class, crypto-assets have plummeted in value and have proven to be highly correlated with riskier equities and with risk appetite more generally.
- Second, the Terra crash reminds us how quickly an asset that purports to maintain a stable value relative to fiat currency can become subject to a run. New technology and financial engineering cannot by themselves convert risky assets into safe ones.
- Third, crypto platforms are highly vulnerable to deleveraging, fire sales, and contagion—risks that are well known from traditional finance as illustrated by the freeze on withdrawals at some crypto lending platforms and exchanges and the bankruptcy of a prominent crypto hedge fund. Some retail investors have found their accounts frozen and suffered large losses.
- Large crypto players that used leverage to boost returns are scrambling to monetize their holdings, missing margin calls, and facing possible insolvency. The crypto ecosystem is tightly interconnected, as many smaller traders, lenders, and DeFi (decentralized finance) protocols have concentrated exposures to these big players.
See: Important Nuances in the Lummis‐Gillibrand Crypto Bill: Not Securities?
- Finally, we have seen how decentralized lending, which relies on overcollateralization to substitute for intermediation, can serve as a stress amplifier by creating waves of liquidations as prices fall.
Private Digital Currencies and Central Bank Digital Currencies
- Stablecoins represent a second area with a heightened risk of spillovers. Currently, stablecoins are positioned as the digital native asset that bridges from the crypto financial system to fiat.
- Well-regulated stablecoins might bring additional competition to payments, but they introduce other risks. There is a risk of fragmentation of stablecoin networks into walled gardens. Conversely, there is a risk that a single dominant stablecoin might emerge, given the winner-takes-all dynamics in such activities.
Building in Risk Management and Compliance
- While innovation and competition can reduce costs in finance, some costs are necessary to keep the system safe. Someone must bear the costs of evaluating risk, maintaining resources to support those risks through good times and bad, complying with laws that prevent crime and terrorism, and serving less sophisticated customers fairly and without exploitation.
Read: Opinion: Rising cost of compliance may lead to consolidation
- In the current crypto ecosystem, often no one is bearing these costs. So when a service appears cheaper or more efficient, it is important to understand whether this benefit is due to genuine innovation or regulatory noncompliance.
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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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Revolut executive resigns amid growing tensions with the FCA over banking license
City AM | Charlie Conchie | Jul 10, 2022
One of Revolut’s UK regulatory chiefs has stepped down from her role amid growing tensions between the fintech firm and the Financial Conduct Authority over its sluggish progress on towards a banking licence.
- Deirdre Halligan, head of global affairs, wealth and trading, oversaw the firm’s expansion, authorisations and regulatory affairs, including its relationship with UK regulators.
- Her departure, reported in the Telegraph, comes as tensions between Revolut and the regulator grow over the speed of movement on its licence applications, including a full banking licence and fully registered status to provide crypto services.
- Halligan’s departure from Revolut marks the latest in a series of resignations at the firm, with Harry Gill, Revolut’s global head of regulatory compliance, resigning in May, the Telegraph first reported, and the chief of operational risk and head of UK compliance also leaving in recent months.
See: 9 digital assets powering the DeFi revolution?
Boss Nikolay Storonsky went public with his criticism of the regulator in an interview with City A.M. last month, saying that the firm’s progress towards a banking licence had been “slower than expectations” and had lagged behind international competitors.
I definitely see the process is slower compared to other regulators. I’ll give you an example – so we applied for 48 licences across the globe and we received 44, and three of the licences that we haven’t received are actually in the UK.
Storonsky added that staffing pressures at the FCA may explain the hold up, and recommended that certain key performance indicators be put in place at the regulator, as well as “stricter timelines”, more people or “more efficient people”.
See: FCA review finds evidence of growing competition in retail banking
In a statement to City A.M., an FCA spokesperson said that while it did not comment on individual cases, it reviews “banking applications to ensure they meet the standards we expect”. The spokesperson added the regular had “successfully recruited across the organisation” to meet its “expanding remit”, including bringing in over 200 new colleagues in the first three months of this year.
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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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Unconstitutional financial surveillance? Advocacy group Coin Center is suing the US government
The Verge | | Jun 21, 2022
Image: Alex Castro, The Verge
Last week, Coin Center filed a legal challenge in the United States District Court for the Eastern District of Kentucky, naming as defendants Janet Yellen as a representative of the Treasury Department, IRS commissioner Charles Rettig, and US attorney general Merrick Garland on behalf of the government as a whole.
A blog post from the advocacy group says that the legal complaint aims to overturn “unconstitutional financial surveillance.” If Coin Center’s challenge is successful, it could have implications far beyond cryptocurrency due to how the reporting law was passed in the first place.
See: NCFA Response to FINTRAC’s ‘Knee Jerk’ Regulations Requiring Donation Crowdfunding Platforms to Register and Comply with AML/ATF Legislation
The authors, Coin Center executive director Jerry Brito and research director Peter Van Valkenburgh, write:
Our suit leads with two major claims: (1) forcing ordinary people to collect highly intrusive information about other ordinary people, and report it to the government without a warrant, is unconstitutional under the Fourth Amendment; and (2) demanding that politically active organizations create and report lists of their donors’ names and identifying information to the government is unconstitutional under the First Amendment.
When the new requirement was made law through the infrastructure bill, it wasn’t written as a new statute: rather, it was an amendment to an existing part of the US tax code — Section 6050I — that has been on the books for almost 40 years.
The 6050I rule states that any person who receives more than $10,000 in cash as part of a business transaction must provide details of the sender to the IRS through a particular form. This cash reporting requirement, which became law in 1984, came on the heels of the Bank Secrecy Act of 1970: one of the first major laws to address money laundering in the United States. Together, the new reporting laws passed in the ’70s and ’80s helped law enforcement agencies to detect and deter money laundering by creating requirements to file documentation that made it easier to track cash transfers and imposing penalties if such documents weren’t filed.
See: Privacy laws might prove to be a blessing in disguise for crypto
The law has been in effect ever since, without any significant change until now. In the infrastructure bill, a critical change of eight words was made to 6050I, expanding the definition of cash to include “any digital asset” and thereby extending the tax code’s reporting requirements to cryptocurrency. And because of this construction, a successful challenge on behalf of cryptocurrency users could mean overturning the statute completely.
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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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EU agrees on landmark MiCA rules putting pressure on UK and US to regulation crypto assets too
The Guardian | Dan Milmo | Jul 1, 2022
The EU has moved to rein in the “wild west” of crypto assets by agreeing a groundbreaking set of rules for the sector, adding to pressure on the UK and US to act too.
Representatives from the European parliament and EU states inked an agreement on Thursday that contains measures to guard against market abuse and manipulation, and require that crypto firms provide details of the environmental impact of their assets.
- “Today, we put order in the wild west of crypto assets and set clear rules for a harmonised market,” said Stefan Berger, the German MEP who led negotiations on behalf of the parliament. The recent fall in the value of digital currencies shows us how highly risky and speculative they are and that it is fundamental to act.
- The European parliament’s markets in crypto assets (MiCA) law is expected to come into force at the end of 2023. Globally, crypto assets are largely unregulated, with national operators in the EU required only to show controls for combating money laundering.
See: A European approach to DeFi regulation
MiCA will be the world’s first comprehensive regime for crypto assets and will contain strong measures to guard against market abuse and manipulation, said Ernest Urtasun, a Green party MEP:
- The law gives issuers of crypto assets and providers of related services a “passport” to serve clients across the EU from a single base, while meeting capital and consumer protection rules.
- Non-fungible tokens (NFTs), a $40bn market last year, are not covered by MiCA.
- The EU negotiations focused on issues such as supervision and energy consumption of crypto assets. “We have agreed that crypto asset providers should in future disclose the energy consumption and environmental impact of assets,” Berger said.
The MiCA law is expected to set a benchmark for other regulatory regimes globally, although one expert said the all-encompassing nature of the EU regime might not be replicated.
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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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Will the Supreme Court’s EPA Decision Move Crypto Regulations off their Tracks?
This week’s Supreme Court ruling limiting the Environmental Protection Agency's authority may have a surprising beneficiary: cryptocurrency investors who want to avoid federal regulation. In ruling against the EPA, Chief Justice John Roberts wrote for a 6-3 majority that when a government agency seeks to regulate an area of major significance, it needs to point to “clear congressional authorization.”
Read: Important Nuances in the Lummis‐Gillibrand Crypto Bill: Not Securities?
Bitcoin and similar digital currencies are so new, there’s no specific federal law governing them. In that absence, two regulatory agencies, the Securities and Exchange Commission and the Commodity Futures Trading Commission, have taken significant steps toward oversight of crypto.
Blockchain Association, Jake Chervinsky:
[He said that based on the decision, he] believes the Supreme Court would strike down proposed SEC rules for the crypto market.
Perianne Boring, founder and CEO of the Chamber of Digital Commerce:
Today’s decision in West Virginia v. EPA at the very least should give regulators pause in attempting to set policies that exceed their congressionally mandated roles.
See: Gensler’s Updated Regulatory Agenda Critized by SEC Commissioners Peirce and Roisman (Exempt Securities)
Sheila Warren, CEO of the Crypto Council for Innovation:
I don’t think federal agency rulemaking is off the table in the digital assets space, but I do think this ruling is an indicator that SCOTUS will be a barrier to agencies that are trying to establish broadscale federal policies, especially in areas that states have expressed interest in.
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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