Casey Wagner

New York Attorney General Letitia James became the first regulator in the US to claim in court that ethereum is a security in a lawsuit against exchange KuCoin.&nbsp;



Seychelles-based KuCoin has been operating in New York without registering as a securities and commodities broker-dealer, James alleged in the <a href="https://ag.ny.gov/press-release/2023/attorney-general-james-continues-crackdown-unregistered-cryptocurrency-platforms">suit</a>.&nbsp;



KuCoin facilitates trading of ETH, James added, “a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH.” The exchange should have registered before offering ETH, LUNA and TerraUSD — all of which fall under the securities classification, according to James.



However, the NYAG may not have the final say on the issue. Rostin Behnam of the CFTC told the Senate Agriculture Committee as recently as Wednesday that <a href="https://blockworks.co/news/ethereum-stablecoins-commodities-not-securities-cftc">ETH is in fact a commodity</a>, not a security. 



“We would not have allowed the Ether futures product to be listed on a CFTC exchange if we did not feel strongly that it was a commodity asset,” he explained.



SEC leaders have made similar statements. In 2018, <a href="https://blockworks.co/news/sec-emails-highlighting-alleged-conflict-of-interest-set-to-take-center-stage-in-ripple-trial">William Hinman</a>, the then-Director of Corporate Finance at the SEC, said in a speech that both bitcoin and ETH are not securities. His justification was that bitcoin is “decentralized” and ETH, despite its 2014 initial coin offering, had become “sufficiently decentralized” over the past four years to make it a non-security.&nbsp;



The Office of the State Attorney General (OAG) confirmed KuCoin’s alleged unlawful actions because OAG Detective Brian Metz has been transacting on the exchange from New York since May 2022, the lawsuit states.&nbsp;



KuCoin’s lending and staking product, KuCoin Earn, is also an unregistered security offering, the lawsuit alleges.&nbsp;



The OAG served KuCoin a subpoena on Jan. 10, 2023 but respondents did not reply and failed to appear to testify on the date specified in the subpoena, the lawsuit claims.&nbsp;



The lawsuit is similar to a suit brought against exchange <a href="https://ag.ny.gov/press-release/2023/attorney-general-james-sues-cryptocurrency-platform-failing-register-new-york">CoinEx</a> in February alleging the exchange offered trading services for tokens including AMP, LUNA and LBC, all of which the Attorney General’s office says are securities.&nbsp;

New York AG Alleges ETH is a Security in KuCoin Lawsuit

David Canellis

<div id="highlights-block_62ceb4c0f75f0" class="highlights">
 <ul>
 <li>KuCoin found sentiment is shifting negative among Saudi Arabian crypto investors</li>
 <li>76% of local digital asset holders have less than one year’s experience in the market</li>
 </ul>
 
</div>



Bitcoin discourse has been swept by a fresh conspiracy-meme that posits Saudi Arabian investors are ready to bid billions on the top cryptocurrency, saving us all from the ongoing bear market.



Such a move would diversify the Kingdom’s reserves away from oil into ‘digital gold,’ securing its financial future in a world that hopes to one day shed its fossil fuel dependency — or so goes the theory.



But if a recent report from cryptocurrency exchange KuCoin is anything to go by, it’s mostly unfounded.



Based on a commissioned survey, KuCoin found the estimated total number of Saudi crypto investors has remained relatively stable all year, at around 3 million. But their sentiment is shifting negative, the exchange found.



The report states: “In the first quarter, around half (49%) of crypto investors intended to increase investment in crypto over the coming six months, followed by the bearish market when we saw the intention slightly drop in the second quarter of 2022, as more investors changed their strategies.”



KuCoin highlighted crypto adoption in Saudi Arabia is lower than the global average, and comes in third across the Arab world in terms of raw investor numbers. Growth in the number of registered KuCoin users from Saudi Arabia did however lead the other <a href="https://www.gcc-sg.org/en-us/AboutGCC/MemberStates/pages/Home.aspx" target="_blank" rel="noreferrer noopener">GCC countries</a> throughout 2021.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">If you haven&#39;t been living under a rock for the last week, <a href="https://twitter.com/TheSaudisNFT?ref_src=twsrc%5Etfw">@TheSaudisNFT</a> is the hottest collection in town, #2 volume on <a href="https://twitter.com/opensea?ref_src=twsrc%5Etfw">@opensea</a> just under <a href="https://twitter.com/cryptopunksnfts?ref_src=twsrc%5Etfw">@cryptopunksnfts</a> <a href="https://twitter.com/hashtag/MAXBIDDING?src=hash&amp;ref_src=twsrc%5Etfw">#MAXBIDDING</a> <a href="https://t.co/hxPx3vxO2K">pic.twitter.com/hxPx3vxO2K</a>&mdash; Rotem Yakir 🍊 (@yakirrotem) <a href="https://twitter.com/yakirrotem/status/1545873060112252929?ref_src=twsrc%5Etfw">July 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



A majority (63%) of Saudi crypto investors are men, according to the survey, and persons below 30 years of age make up at least one third of all investors, with that figure rising to 37% throughout this year’s second quarter.



The report noted that the high proportion of fresh investors across Saudi Arabia is unique to their profile.&nbsp;



“Roughly three-quarters (76%) of crypto investors have less than one year of experience in crypto investment, including half (49%) of investors who first started trading crypto in the past six months, suggesting strong demand for crypto education in the market,” KuCoin wrote.



<h3>Saudi investors adopt trading bots to beat bear market</h3>



Saudi Arabians are generally investing in cryptocurrency for the long-term, the report found. 51% of surveyed digital asset holders are in crypto as they believe it’s the future of finance, while 44% reckon crypto can reap higher returns than other types of financial investments.



Although, KuCoin relayed that in this year’s second quarter, 42% of crypto investors adopted auto-trading strategies — such as trading bots — to see them through the bear market, a 7% rise from Q1.&nbsp;



Cryptocurrency exists in a legal gray area across the country, with local banks banned from handling transactions related to digital assets since 2018. And while there are no legal dangers for trading cryptocurrency, Saudi-based investors often pay close attention to what types of investments are approved under Islamic law (halal).



<figure class="wp-block-image"><img decoding="async" src="https://lh3.googleusercontent.com/_diuIiQUGG9YRKpcNOmwy-NahZTJQCZuhRgpqNZn887zMDAY2gpnewob_RkwGhYwJf_04kyJSVjVgjJLt6PAKmogYtO_wW-Zdc_M5dOu6dEOEAo0W8K1XKFpfux15XCxiLXmEr82iymY822olH5sLJc" alt=""/><figcaption>Source: <a href="https://www.kucoin.com/blog/kucoin-into-the-cryptoverse-reveals-increase-in-number-of-saudi-arabian-crypto-investors-adopting-auto-trading-strategies-in-bearish-market">KuCoin</a></figcaption></figure>



According to KuCoin’s report, which was based on just 539 survey respondents, almost half of Saudi crypto investors buy crypto with fiat and spot trade every month, as it’s the only form of crypto trading considered halal by some scholars in the Arab world.&nbsp;



Staking, futures trading and margin trading — involve interest and even gambling — are less popular.



As for what investors plan to do with their potential gains, 42% said they plan to improve their families’ living conditions, with other goals including buying a new house, saving for retirement or emergencies and other creature comforts like traveling and shopping.



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‘Saudis Bidding’ Meme Undermined by Crypto Investor Survey

Shalini Nagarajan

<div id="highlights-block_62b4597cb0d8f" class="highlights">
 <ul>
 <li>“Unlike KuCoin, Bybit responded to the OSC’s enforcement action,” the OSC said</li>
 <li>KuCoin is barred from operating in Ontario, while Bybit continues to work on registration</li>
 </ul>
 
</div>



The Ontario Securities Commission (OSC) has hit two foreign cryptocurrency exchanges with enforcement actions after finding they failed to comply with securities laws there. KuCoin has been banned from operating in the Ontario province, while Bybit agreed to pay a fine as it works with the authority to register appropriately.



“Bybit and KuCoin both operate unregistered cryptoasset trading platforms and allowed Ontario investors to trade securities without a prospectus or any exemption from the prospectus requirements,” the regulator said in a <a href="https://www.osc.ca/en/news-events/news/osc-holds-global-crypto-asset-trading-platforms-accountable" target="_blank" rel="noreferrer noopener">statement</a> on Wednesday.



KuCoin, based in Seychelles, has been ordered to pay an administrative penalty of about C$2.1 million ($1.6 million), including investigative charges. Meanwhile, Singapore-based Bybit has reached a settlement with the regulator for about $2.5 million.



“Foreign cryptoasset trading platforms that want to operate in Ontario must play by the rules or face enforcement action,” Jeff Kehoe, OSC’s enforcement director, said.&nbsp;



Bybit has agreed to continue working with the OSC to register its platform. In the event that registration talks fail, the exchange will close its operations with Ontario, the regulator said.&nbsp;



“Unlike KuCoin, Bybit responded to the OSC’s enforcement action, maintained an open dialogue, provided requested information, and committed to engaging in registration discussions,” the regulator said.



Existing Bybit retail customers in Ontario will be asked to close their positions in some restricted products involving leverage, margin or the extension of credit. The exchange <a href="https://cms.blockworks.co/bybit-to-slash-staff-citing-turbulent-markets/" target="_blank" rel="noreferrer noopener">told Blockworks</a> this week it’s looking to cut employee headcount by removing overlapping functions. 



The penalties come a little more than a year after the Canadian regulator warned exchanges operating in Ontario to contact the OSC by April 19, 2021 for registration or face enforcement action.



“Despite this warning, Bybit and KuCoin did not contact the OSC by the deadline and continued operations in Ontario,” the regulator said.



Authorities have been keeping a closing eye on cryptocurrency products as interest grows in the relatively nascent investment space. Earlier this year, crypto lender BlockFi agreed to pay <a href="https://cms.blockworks.co/crypto-lender-blockfi-to-pay-100m-in-fines-to-us-regulators/" target="_blank" rel="noreferrer noopener">$100 million in penalties</a> to the Securities and Exchange Commission over allegations it illegally offered a high-interest yield product. 



The rulings could lead to hesitation among North American investors to invest in cryptoassets as a result of the jurisdiction&#8217;s harsh regulatory framework, according to Sheraz Ahmed, managing partner at STORM Partners.&nbsp;



He thinks the exchanges themselves won’t be too concerned about financial penalties, as they have been operating successfully for years. “Fines are always preferable to complete bans, and sometimes it is better to ask for forgiveness than permission,” he said.



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Kucoin