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  • Writer's pictureSergio Puicon

Crypto Compliance Weekly Newsletter: February 13, 2023

Updated: Mar 10


This week, Squid Protocol raised $3.5 million, New Anti-Money Laundering Whistleblower Improvement Act was signed, Dubai's VARA presented its 2023 rulebook for crypto regulation, Kraken agrees to $30 million penalty with SEC.


1. Squid Protocol raises $3.5 million in a seed funding round.

Squid Protocol, an interoperability protocol for DeFi applications, has recently raised $3.5 million in a seed funding round. The protocol bridges dApps and multiple blockchains, providing interoperability between various Cosmos ecosystems and current EVM-compatible blockchains.

Due to the recent collapse of centralized exchanges such as FTX and Celsius, there has been a shift in interest toward decentralized alternatives and "interoperability solutions that can bridge any two DeFi protocols that would otherwise have been natively incompatible by design."


2. New Anti-Money Laundering Whistleblower Improvement Act

The new Anti-Money Laundering Whistleblower Improvement Act strengthens the Anti-Money Laundering Act by expanding the scope of reporting violations to include executive agencies, foreign nations and individuals, and foreign narcotics traffickers. Furthermore, the Act provides a funding structure and minimum awards to whistleblowers, which aims to provide a stronger incentive for employees to make reports regarding suspected violations, as it provides a 10% minimum award and a revolving fund for payment of prizes. However, the previous structure didn't secure a minimum amount and imposed a 30% limit on the amount recovered.

With these new changes, to protect themselves, "employers will need to maintain strong compliance practices to avoid violations of law, respond appropriately to reports that may demand further investigation, and ensure that any employee who raises a report is protected from retaliation for doing so."


3. Dubai takes steps to become a global blockchain hub with VARA's 2023 rulebook for Cryptocurrency Regulation

Dubai has been working towards becoming a global center for blockchain since 2019, with several blockchain companies, such as Binance and Coinbase, already operating within the Emirate. In that sense, The Virtual Assets Regulatory Authority (VARA) has recently published its 2023 rulebook for regulating cryptocurrencies, which aims to "attract crypto businesses, protect digital asset dealers and investors, and curtail illegal practices, all in the service of promoting Dubai as a regional and international hub for virtual assets, boosting its competitive edge both locally and globally."

Any entity in Dubai that issues virtual assets must follow these rules and apply for a license to operate in the Emirate. In addition, the VARA rulebook allows for the revocation of a claim for any material violation of laws and regulations. In addition, the new anti-money laundering regulations prohibit insider trading, unlawful disclosure, market manipulation, and financing of terrorism and other illegal organizations.


4. Kraken agrees to a $30 million penalty for unregistered staking service. SEC crackdown boosts DeFi competitors

The US Securities and Exchange Commission (SEC) has charged crypto exchange Kraken for its unregistered cryptocurrency staking service. As a result, Kraken has agreed to shut down the service and pay a $30 million penalty. Staking is a standard service offered by centralized and decentralized crypto exchanges, including Coinbase and Binance US. Still, the SEC's crackdown on Kraken marks the first time it has targeted staking.

In a statement, SEC Chair Gary Gensler said that "most staking providers fail to provide customers proper disclosures such as how a company is protecting a user's staked assets" and should register their services with the SEC. In addition, Kraken representatives have not admitted or denied the allegations and said its agreement would only affect US clients.

Nevertheless, DeFi apps like Lido, Rocket Pool, and StakeWise may benefit from the SEC's crackdown on crypto staking services as long as they avoid a similar clampdown. Henry Elder, head of decentralized finance at Wave Financial, has stated that this has presented a considerable gift for DeFi since "their competitive advantage is an innate resistance to regulatory action — something that mattered little in the absence of such action."


About us

Canaria Consulting LLC is a boutique consultancy specializing in developing, enhancing, and maintaining regulatory compliance programs for virtual currency firms. Canaria Consulting was founded to help virtual currency firms meet their regulatory obligations in a way tailored to the unique characteristics of virtual currency and decentralized blockchain technologies.

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