U.S. Regulators Identify Their Next Target: Bybit

The CFTC subpoenaed Coinbase in search of information on Bybit exchange, and CZ is ordered not to leave the U.S.

Coinbase has received a subpoena from the U.S. Commodity Futures Trading Commission (CFTC) related to the Bybit cryptocurrency exchange's operations, possibly due to users accessing Bybit through VPNs. Coinbase warned users about the fact that they may have to disclose account and transaction information unless the subpoena is reversed by a court.

Meanwhile, Coinbase's Bitcoin reserves have increased, while Binance's have decreased amid its ongoing regulatory scrutiny. Binance's founder and former CEO, Changpeng Zhao, now faces restrictions on leaving the U.S. after pleading guilty to charges related to Binance's compliance with U.S. regulations.

Coinbase Receives CFTC Subpoena For Info on Bybit Exchange

Coinbase recently issued a warning to its users, stating that it has received a subpoena from the United States Commodity Futures Trading Commission (CFTC). This development has sparked considerable discussions among X users who have shared copies of the message all over the social media platform.

The subpoena seems to be specifically related to the CFTC's interest in gathering information about the operations of the Bybit cryptocurrency exchange. Bybit , a Dubai-based platform, has gained attention for its trading services, but it is important to note that it stated earlier in its terms of service that Bybit does not offer its services to customers in the United States. However, reports suggest that users have been accessing Bybit through the use of virtual private networks (VPNs), which may have triggered the CFTC's investigation.

The warning message sent by Coinbase to its customers who may have also used Bybit has led to speculation about the potential consequences. According to the message dated Nov. 27, Coinbase may be compelled to provide the CFTC with information regarding users' accounts and transaction activities unless the subpoena is reversed by a court before Nov. 30.

It is not only the U.S. that has caused problems for Bybit. In September, Bybit announced that it will be withdrawing from the United Kingdom market, taking effect in October. This decision coincided with the implementation of new regulations by the Financial Conduct Authority (FCA). Additionally, Bybit took a proactive step in August by removing two Russian banks that were subject to sanctions from its list of payment options as well.

Throughout the duration of this past year, the CFTC has labeled itself as the leading enforcement agency in the cryptocurrency domain. During 2023, the CFTC launched a total of 47 cases within the digital asset sector, accounting for about 49% of all cases initiated. Among these cases were legal actions taken against well known names in the crypto industry like FTX, Celsius, Stephen Ehrlich (CEO of Voyager Digital), and Binance.

Coinbase’s Bitcoin Reserves on the Rise

Coinbase has also been a topic of conversation for other reasons. One of these reasons is the fact that the exchange is seeing its Bitcoin (BTC) reserves skyrocket, while Binance’s BTC reserve holdings are plummeting.

According to new on-chain data provided by CryptoQuant, Coinbase has seen a notable uptick in its Bitcoin reserves, with an increase of 12,000 BTC, which is worth approximately $450 million. In contrast, Binance experienced a reduction in its Bitcoin holdings, with a decrease of around 5,000 BTC, valued at about $187 million. It is also worth taking note that BTC is being moved from Binance to Coinbase.

The fact that Binance has been facing regulatory scrutiny and global pressure has certainly given Coinbase an edge against it. Despite this, it seems like there are still many non-U.S. customers who remain hopeful and undeterred, and are still keeping their assets on Binance.

Former Binance CEO Ordered to Stay in the U.S.

Changpeng Zhao (CZ), the founder of Binance, who recently pleaded guilty to criminal charges related to his cryptocurrency exchange, faces temporary restrictions on his ability to leave the United States. This decision follows a ruling by a federal judge on Monday this week.

Last week, CZ was released on a $175 million bond and is scheduled for a sentencing hearing on Feb. 23, 2024. Prosecutors have tried their best to argue that CZ be prevented from leaving the country until his sentencing, while his legal team has advocated for his ability to travel freely. One of the defense’s main arguments is the fact that the former CEO willingly traveled to the U.S. for his guilty plea.

CZ is a resident of the United Arab Emirates (UAE), a nation that lacks a formal extradition treaty with the United States. In response to this circumstance, U.S. District Court Judge Richard Jones, presiding over the case in Seattle, has ruled that CZ cannot return to the UAE "until such time as this Court resolves the Government’s motion for review."

Over the past two weeks, CZ decided to step down from his position as CEO of Binance as part of a huge $4.3 billion settlement agreement with the Department of Justice. The charges against CZ and others revolve around allegations of violating the Bank Secrecy Act. These charges stem from their alleged failure to establish an effective anti-money laundering program and their deliberate disregard of U.S. economic sanctions. The Justice Department firmly believes that these actions were part of a calculated attempt to capitalize on the U.S. market without conforming to the necessary regulatory controls in the U.S.

Binance is set to continue its operations, but will do so with a few new ground rules. As part of the arrangement, the exchange will have the responsibility of both maintaining and improving its compliance program to ensure strict adherence to U.S. anti-money laundering (AML) standards. Additionally, Binance will have to designate an independent compliance monitor to oversee and validate its compliance efforts from now on.