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U.S. Regulators Dole Out Small Fines while China Attempts to Erase an Industry – Regulations Weekly



The differing approaches to regulation in China versus the United States were on full display this past week.  While the former has opted to attempt erasing an entire industry, the latter is taking a more nuanced approach.

China Bans Crypto

For what is believed to be the 7th such occasion, China has banned crypto.  While in the past these bans have been somewhat limited, this most recent move is meant to eliminate industry activity altogether.  Notably, it is a joint effort between the People’s Bank of China and the Chinese Government itself.

Naturally, this decision led to immediate fallout in various forms.

ARK36 Executive Director Ulrik K. Lykke touched on this fallout, and how it may be short-lived.

Yet again, the Chinese government has cracked down on Bitcoin. Since 2013, it has done so at least 7 times now – and twice this year already. While each time this happens, the markets react with a price drop, each time the effect is smaller and more short-lived. The “China bans Bitcoin” story has gained almost a meme-like status in the Bitcoin community because of this.”

Currently however, not all are suffering from this fallout.  While scores of investors and companies are scrambling to adjust to this new development, there are a few which have thrived in the time since.  More specifically, companies which specialize in decentralized finance (DeFi), have boasted notable upticks in adoption and platform usage.

With the continuing rise of DeFi, this most recent decision by the Chinese government may by somewhat short-sighted.  Although it may be able to enforce its will upon centralized entities, this is not easily achieved for those which are decentralized.  Elon Musk recently touched on this subject, stating, “It is not possible to, I think, destroy crypto, but it is possible for governments to slow down its advancement…I suppose cryptocurrency is fundamentally aimed at reducing the power of a centralized government.  They don’t like that.”

While the Chinese government may have slowed down the industry in the present day, by taking this recent action it has quite possibly hastened the development and adoption of DeFi, strengthening the foundation of the very industry it is attempting to stifle.

Despite the official stance surrounding this recent ban by the Chinese government coming in the guise of investor protection, many believe that it is simply a move meant to push the public towards its CBDC – the Digital Yuan.  This belief is typically founded on past events which played out in a similar fashion.  Whether looking at Facebook, YouTube, Apple, etcetera, China has a tendency to ban things that it cannot control, and replace them with its own variants.

Thankfully for Bitcoin and the overall crypto industry, each of these aforementioned examples went on to be wildly successful, and integral in the way we live our lives.

U.S. Regulators

Meanwhile, in the United States, various regulators have taken action against bad-actors involved with digital assets.

CFTC Fines Kraken

Kraken, a U.S. based digital asset exchange has just been fined by the CFTC.  Coming in at $1.25 million, this fine was issued as a result of the following,

  • Failing to register as a futures commission merchant
  • Illegally offering margined retail commodity transactions in digital assets

This fine stemmed from actions taken by Kraken between June 2020 and July 2021.  In its decision, the CFTC made it clear to any others in a similar situation that, “Margined, leveraged or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.”

Wash Traders Charged by SEC

It isn’t just big exchanges in the crosshairs of U.S. regulators.  The SEC has just charged two individuals with wash trading ‘meme stocks’.

Wash trading, which involves giving off the false impression of asset liquidity, typically occurs by trading between multiple accounts each controlled by a single entity.

The pair charged by the SEC took advantage of a loop-hole, which allowed for them to capitalize on ‘liquidity-rebates’ offered by exchanges.  By continually trading between themselves, the pair were able to generate roughly $720,000 in ill-gotten gains.

SEC Market Abuse Unit Chief Joseph G. Sansone, states,

“As alleged in our complaint, Gu and Lee engaged in a deceptive wash trading scheme to game the exchanges’ maker-taker programs and take advantage of market conditions associated with meme stocks trading…This case demonstrates the SEC’s ability to quickly investigate and expose complex trading schemes, including those conducted during times of significant market volatility.”

The Blogger Scientist is a "Medical Physiologist" and a "Financial Asset" Content Creator who aims at enlightening web reader on varying Financial Assets such as Stocks, FX, Crypto, MLM,. HYIP among others.

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