On the US SEC and CFTC, the latest Bitgail hack and the future of Cryptocurrency Regulation

The crypto space is largely unregulated. It’s been the topic of many parties, namely: government agencies, cryptocurrency personalities, the SEC, and even world leaders. Cryptocurrency adoption has been growing a rate that has alarmed regulatory bodies.

If you haven’t been tuning in to the news, let the cryptocurrencynews.ph team give you the rundown.

‘Positive’ about the future of cryptocurrency

For now, at least in the United States, the pronouncements of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) in the Senate hearing on virtual currencies is a good sign that big government is willing to work with cryptocurrency to foster innovation and progress into the future of economics and currency. Canadian and Australian governments have also pledged support for cryptocurrency and the innovation it brings to the table.

But while the senate hearing itself was full of pronouncements many cryptocurrency supporters are happy with, the SEC has aired their concerns about Initial Coin Offerings and cryptocurrency exchanges and its tendency to enable scammers to take money from unscrupulous investors. Just recently, the “exit scams” of Bitconnect, Prodeum (which left a message that trolled its buyers), and Loopx took millions of dollars from “investors”, leaving them dumbfounded as most perpetrators are anonymous and can’t be tracked.

 

Exchanges under attack

Another issue for regulatory bodies is cryptocurrency exchanges, and its complicated. In fact, the crypto space is up in arms about “exit scams” of a few exchanges right now.

Tether, for one, has been issued a subpoena regarding its issuance of Tether. We have an article about it in the site.

Binance was suspected of being hacked just a few days ago, being down fore more than a day. Even people like John Mcafee (wrongfully) accused Binance of hiding that they were hacked and millions were stolen. As of this writing, Binance is suffering from DDoS attacks from some unknown source.

Coincheck was also hacked a few weeks ago, with $534MM or  26.7 billion Php worth of NEM taken.

But the hot topic issue right now is Bitgrail, one of the first exchanges that championed Nano (XRB) and Lisk (LSK). I (the writer) would note that I was a avid user of Bitgrail before I took my funds out.

The happening has been dubbed as a “Mini Mt. Gox”, as the owner, Francesco Firano, has reported to its users just last week that about $195MM or 9.7 billion Php was taken by hackers.

But as Fortune magazine notes: that claim has been greeted with widespread skepticism, fueled in part by recent suspicious moves by BitGrail. In early January, the exchange halted all withdrawals and deposits of Nano, as well as the Lisk and CryptoForecast tokens. That was followed by the announcement that BitGrail would enforce identity verification and anti-money laundering protocols for its users, and potentially block non-European users, despite the fact that it did not deal with government currencies or banks. According to cryptocurrency news site The Merkle, at least some users at that time were already suspicious that the site was maneuvering towards a so-called “exit scam,” and the price of Nano dropped by 20% on the news.

In fact, Firano asked the developers of Nano to fork the system to restore the lost funds, but a later assessment of the issue showed that it was Bitgrail at fault, as it’s code allowed double withdrawals to users on certain circumstances. A class suit might be filed against him, and he says he would also file charges against the Nano developers. This lead people to believe that Bitgrail, right now, is insolvent.

But that’s not all, chat logs showed that Firano was already aware of the double withdrawal issue since January 5th, and tried to cover it up. In talks with Nano recently pretends he just found about it.

It was also found out that his “mandatory” KYC wasn’t mandatory at all, as he did not even check and store the IP logs of users.

The SEC may investigate these issues. But as we say in the usual telenovela: Abangan.

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An avid cypto supporter, law school student, Certified Public Accountant, and a professional HODLer