The law and the cryptocurrency industry has been in a heated battle for some years now, and there is still no end to this conflict in sight. Binance and its former CEO, Changpeng Zhao, along with the governments of Iran and Syria, have been named in a lawsuit filed by families of victims of the Oct. 7 Hamas attack on Israel. The lawsuit accuses them of providing "substantial assistance" to terrorists.
Meanwhile, Coinbase is navigating its legal challenges with the SEC, having recently appointed George Osborne as an adviser. Additionally, concerns have been raised over the CFPB's proposed rule to extend its supervisory authority over digital assets.
Binance Named in Lawsuit Over Hamas Attack Funding
Binance and its former CEO Changpeng Zhao have been implicated in a lawsuit alongside the governments of Iran and Syria. The lawsuit, filed by three families of victims from the Oct. 7 Hamas attack on Israel, accuse them of providing "substantial assistance" to terrorists. The complaint, lodged in the New York Southern District Court on Jan. 31, alleges that Binance processed transactions for Hamas and related Palestinian terrorist groups from 2017 to mid-2023, effectively offering a covert financial channel concealed from U.S. regulators.
The plaintiffs, consisting of former hostages, relatives of the victims, and the estate of a doctor killed while attending to casualties, seek damages under the U.S. Anti-Terrorism Act. They argue that Binance's actions constituted aiding and abetting foreign terrorist organizations by providing material support.
The lawsuit also references a November settlement between Binance and the U.S. Department of Justice, where Binance was fined $4.3 billion for Anti-Money Laundering violations and agreed to undergo extensive monitoring by U.S. government agencies. Notably, after the Oct. 7 attack, Binance responded to Israeli law enforcement requests by freezing accounts associated with Hamas.
The lawsuit also charges the Iranian government as a "leading global sponsor" of Hamas and international terrorism, alleging it supplied the group with major financial and military support. Syria is accused on similar grounds, including the provision of Captagon, a drug purportedly used by Hamas terrorists to fuel aggression during the Oct. 7 attacks. The case has already stirred calls in the U.S. Congress for increased action against terrorism financing, with specific mentions of Binance.
George Osborne Joins Coinbase
Another exchange, Coinbase, has also been struggling with the law, but has been pushing back a bit in its lawsuit with the SEC. Coinbase Global Inc. recently appointed George Osborne, the former United Kingdom Chancellor of the Exchequer, as an adviser. This move comes as Coinbase is under very intense regulatory scrutiny in the United States.
Osborne, who has also advised BlackRock, the world's largest asset manager, from 2017 to 2021, joins a distinguished group on Coinbase’s Global Advisory Board, including former U.S. Senator Patrick Toomey, former U.S. Secretary of Defense Mark T. Esper, and former U.S. Congressperson Sean Patrick Maloney.
Osborne has shared his excitement about his new role and the big innovations happening in finance, especially the transformative impact of blockchains on financial markets and online transactions. He looks forward to contributing to Coinbase's mission to build a new future in financial services.
Last June, the SEC accused Coinbase of offering unregistered securities and failing to register as a broker, national securities exchange, or clearing agency, thus evading the disclosure requirements for securities markets. The lawsuit also alleged that several tokens offered on the exchange qualify as unregistered securities. However, according to a Bloomberg senior litigation analyst, Elliott Stein, Coinbase has a 70% chance of obtaining a full dismissal in the SEC lawsuit.
Concerns Raised Over CFPB's Digital Asset Regulation Plan
In other legal news, on Jan. 30, Representatives Patrick McHenry, Mike Flood, and French Hill, leaders of the United States House Financial Services Committee and the Subcommittee on Digital Assets, Financial Technology and Inclusion, issued a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, expressing concerns over a proposed rule issued by the CFPB in November of 2023.
This rule aims to extend the CFPB's supervisory authority over depository institutions to include digital assets by defining them as "funds." This would allow the bureau to target digital wallets, potentially impacting the digital asset space greatly.
The lawmakers highlighted the proposal's potential lack of clarity regarding its application to specific entities within the digital asset ecosystem, particularly crypto exchanges. They argued that the lack of clarity could prevent these platforms from supporting peer-to-peer transactions through wallets hosted on their systems.
The letter emphasized the importance of peer-to-peer transactions in the digital asset ecosystem for eliminating third-party risk and expressed concerns that including digital asset wallet providers in the CFPB's supervisory scope—especially those not maintaining ongoing relationships with consumers—could introduce some regulatory risk.
Requesting an additional 60 days for public comment on the proposal, the representatives urged the CFPB to consider feedback specifically related to the crypto space. They also highlighted the critical role of public input to ensure that the rule's implications are completely understood.
The Crypto Council for Innovation voiced its apprehensions on Jan. 8, stating "deep concerns" about the rule's potential effects on the crypto industry. The council argued that the proposed extension of the CFPB's authority could lead to even more regulatory fragmentation and suggested waiting for Congress to establish a clear regulatory framework for the digital asset space.
