Shalini Nagarajan

The Federal Deposit Insurance Corporation (FDIC) slammed crypto exchange OKCoin with a demand to halt misleading claims about being insured.



Under the Federal Deposit Insurance Act, it is against the law to misrepresent uninsured deposits as insured or provide false information about the coverage.



In a <a href="https://www.fdic.gov/resources/regulations/laws/section-18a4-of-fdi-act/letters/2023-06-15-okcoin-usa.pdf" target="_blank" rel="noreferrer noopener">letter</a> to OKCoin CEO Hong Fang on Thursday, the FDIC pointed out three instances where the exchange was accused of making false claims. The agency has the authority to issue cease-and-desist orders and impose civil penalties for violations.



A <a href="https://blog.okcoin.com/10-reasons-to-use-okcoin" target="_blank" rel="noreferrer noopener">blog</a> from 2020 shows San Francisco-based OKCoin saying that it is &#8220;licensed across the US with FDIC insurance on OKCoin accounts&#8221; as one of the top 10 reasons to choose its platform.



On the <a href="https://go.okcoin.com/hash" target="_blank" rel="noreferrer noopener">website</a>, they also claimed that the Provenance blockchain&#8217;s HASH token on OKCoin had gained regulatory acceptance from entities including the FDIC.



Further, the FDIC also cited a Twitter post where OKCoin’s chief marketing officer and its affiliated exchange OKX claimed that “if you are in the US, we offer FDIC insurance on USD deposits.”



“In fact, OKCoin is not FDIC-insured and the FDIC does not insure non-deposit products,” the letter said.&nbsp;



“By not distinguishing between US-dollar deposits and crypto assets, the statements imply FDIC insurance coverage applies to all customer funds (including crypto assets).” The agency also mentioned that it does not endorse or support any specific blockchains.



An OKCoin spokesperson told Blockworks that the platform is aware of this matter and is taking action to assess the FDIC&#8217;s statements.



&#8220;A core principle at Okcoin is to respect applicable laws and regulations, and we remain committed to collaborating with stakeholders including regulators whenever possible,&#8221; they added.



<h2 class="wp-block-heading">FDIC protection excludes crypto custodians and exchanges</h2>



Several other companies, including <a href="https://blockworks.co/news/fdic-slaps-bankrupt-lender-voyager-over-deposit-insurance-claims">Voyager</a> and <a href="https://blockworks.co/news/fdic-accuses-ftx-us-of-making-misleading-statements">FTX US</a>, have also earlier received cease and desist letters from the FDIC.



The FDIC has <a href="https://www.fdic.gov/news/financial-institution-letters/2022/fil22035b.pdf?source=govdelivery&amp;utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">clarified</a> in the past that its protections kick in when an insured bank fails, but they don&#8217;t cover crypto custodians, exchanges, or wallet providers.



Crypto platforms aren&#8217;t the only ones without FDIC insurance. Apps like Venmo, Cash App, and PayPal are also <a href="https://blockworks.co/news/paypal-venmo-lack-fdic-insurance">deemed risky for storing cash</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

FDIC warns OKCoin about deceiving customers with protection claims

Ben Strack

Ava Labs hired Justin Kim and Roi Hirata to lead its businesses in South Korea and Japan, respectively, in new roles created as part of the Avalanche blockchain developer’s push into the Asia Pacific region.&nbsp;



Kim was previously an investment banker at Korea Development Bank for more than 13 years.&nbsp;



“As Korea is home to multinational conglomerates, leading gaming companies and highly crypto-native demographics, we have so many opportunities on the horizon,” Kim said in a statement.&nbsp;



Hirata previously founded two startups and was working in an advocate role with Chainlink Labs in the Japan and Singapore regions until January.



He joins as Japan’s number of on-chain transactions doubled year over year from July 2021 to June 2022 relative to the previous year, according to Chainalysis.



Ari Redbord, head of legal and government affairs for blockchain intelligence firm TRM Labs, was named vice chair of the Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee.



The new committee is tasked with taking on issues at the intersection of technology, law, policy and finance. Redbord will give opening remarks in the decentralized finance section of the committee’s inaugural meeting on March 22.



<a href="https://www.linkedin.com/in/ari-redbord/" target="_blank" rel="noreferrer noopener">Redbord</a> was assistant United States Attorney for the District of Columbia at the Department of Justice from 2008 to 2019, according to his LinkedIn profile. He went on to become senior advisor to the under secretary for terrorism and financial intelligence at the US Department of the Treasury.&nbsp;



“Contributing to conversations that serve to develop crypto-related regulatory standards and encourage a more open financial system while thwarting bad actors and illicit activity is our primary focus,” he said in a statement.



The announcement came as TRM Labs added <a href="https://www.linkedin.com/in/chrisbrummerlaw/" target="_blank" rel="noreferrer noopener">Chris Brummer</a> as a senior adviser.&nbsp;



Brummer, a Georgetown law professor with a focus on how policy makers and industry can build regulatory frameworks for DeFi and blockchain-based technologies, is set to help the company find ways to make finance more inclusive.



TRM Labs’ new senior adviser is an advisory council member for blockchain, crypto and digital currencies at PayPal. He is also a senior adviser at crypto-focused investment firm Paradigm, as well as a board member of K2 Integrity and Fannie Mae.



<h2 class="wp-block-heading">Execs formerly at Crypto.com, Coinbase move to exchange</h2>



Crypto platform Okcoin has appointed new leaders as part of global expansion efforts.&nbsp;



The company hired <a href="https://www.linkedin.com/in/erald-ghoos-55024a9/" target="_blank" rel="noreferrer noopener">Erald Ghoos</a> as general manager of Okcoin Europe and <a href="https://www.linkedin.com/in/drenold/" target="_blank" rel="noreferrer noopener">David Renold</a> as CEO of OKG Payments, the company’s Ireland-based affiliate.



Ghoos previously was chief operating officer and chief compliance officer at Crypto.com — a dual-role he was in from 2017 to 2020. He started his career at AXA Bank Europe as an engineer and then program manager.



Renold formerly held leadership roles at Coinbase, including operations lead of e-money up until last month. The executive also spent about 20 years at UBS, ending his tenure there in 2018 as head of international payments and cash management.



Blockchain firm Enjinstarter hired <a href="https://www.linkedin.com/in/vasseh/" target="_blank" rel="noreferrer noopener">Vasseh Ahmed</a> as a managing director for the Middle East and North Africa region.&nbsp;



Founded in 2021, the Singapore-based company has launched more than 50 Web3 projects. It now seeks to add more, with a focus on complementing the UAE’s focus on impact and sustainability initiatives, the company said.



Up until January, Ahmed worked as head of digitization strategy at Dubai-based digital bank Zand.



<a href="https://www.linkedin.com/in/tsivarev/" target="_blank" rel="noreferrer noopener">Anthony Tsivarev</a> joined the TON Foundation as director of developer relations.&nbsp;



He joins the foundation from <a href="http://fslabs.io/" target="_blank" rel="noreferrer noopener">First Stage Labs</a>, a venture builder for TON-based projects. Tsivarev is set to lead the development of the TON ecosystem across DeFi, dApps and social applications.



Blockchain analytics firm Crystal appointed Jordan Alexander as its new associate director of product.



The Amsterdam-based company builds products that look to streamline crypto compliance operations and aid investigations into financial crime. Alexander’s hire signals the firm’s effort to enter the US market, according to the company.



Alexander was previously a product lead at cybersecurity software company Avast, where he designed solutions to identify and combat security threats.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Crypto Hiring: Avalanche Developer Adds Execs Amid Asia-Pacific Push

Jacquelyn Melinek

<div id="highlights-block_616879ad9dd09" class="highlights">
 <ul>
 <li>The separate proposed framework would be guided by three goals of enhancing transparency, disclosing requirements and protecting users against fraud and market manipulation</li>
 <li>In hosting the policy on GitHub, Coinbase is opening up the conversation to the rest of the industry</li>
 </ul>
 
</div>



Coinbase launched its Digital Asset Policy Proposal (dApp) in hopes of defining the regulation of cryptocurrency and Web3 in the US, the company’s CEO Brian Armstrong said in a tweet on Thursday.&nbsp;



<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">Today we&#39;re launching our Digital Asset Policy Proposal (dApp) which we hope will help chart a course for clear regulation of cryptocurrency and web 3.0 in the US. It&#39;s critical to bring clarity to this space and ensure America remains a financial leader. <a href="https://t.co/LYEMpmS99T">https://t.co/LYEMpmS99T</a>&mdash; Brian Armstrong (@brian_armstrong) <a href="https://twitter.com/brian_armstrong/status/1448714553764712451?ref_src=twsrc%5Etfw">October 14, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The <a href="https://github.com/coinbase/digital-asset-policy-proposal" target="_blank" rel="noreferrer noopener">proposal</a>, formally known as the “Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership” is hosted on GitHub and aims to spark conversation about regulating crypto through a high-level view of changing the financial institutions that exist today, instead of nitpicking specific products or actions, Armstrong <a href="https://www.wsj.com/articles/new-approach-regulating-crypto-bitcoin-coinbase-armstrong-digital-asset-policy-proposal-11634226117?st=xppf8iwuboouazn&amp;reflink=mobilewebshare_twitter" target="_blank" rel="noreferrer noopener">wrote</a> in an opinion article on Wall Street Journal Thursday. 



“It&#8217;s critical to bring clarity to this space,” Armstrong tweeted.&nbsp;



While Coinbase has shared the initiative, it is not just about Coinbase, but the collective industry and aims to be inclusive and democratic, Armstrong said.&nbsp;



“Our policy proposal is about enabling more crypto startups, getting the average consumer access to better financial services, and helping America stay at the forefront of innovation, entrepreneurship and technology,” Armstrong wrote.&nbsp;



Some of the key points in the proposal include: the US government should regulate digital assets under a new framework, which Coinbase referred to as MDAs. It said that the responsibility for the new framework should be upon one single federal regulator to provide better supervision.&nbsp;



Additionally, the separate proposed framework would be guided by <a href="https://github.com/coinbase/digital-asset-policy-proposal" target="_blank" rel="noreferrer noopener">three goals</a> of enhancing transparency, disclosing requirements and protecting users against fraud and market manipulation. Lastly, the proposal states that there should be fair competition and the new proposed regulatory framework should encourage communication and interoperability.  



Hong Fang, CEO of OKCoin, previously <a href="https://cms.blockworks.co/coinbase-wants-a-seat-at-the-regulatory-table-so-does-everyone-else/" target="_blank" rel="noreferrer noopener">told Blockworks</a> that regulating the industry is a complicated issue and it would be harmful if Coinbase is the only company with a voice. 



In hosting the policy on GitHub, Coinbase is opening up the conversation to include the rest of the industry — something that Emilie Choi, chief operating officer of the company <a href="https://cms.blockworks.co/coinbases-choi-we-will-be-rolling-out-a-regulatory-proposal/" target="_blank" rel="noreferrer noopener">confirmed</a> during last month’s Mainnet event in New York City.



“We are regulated, I think, by more than 50 regulators right now, I think it’s actually much more than that,” she said. “If we’re struggling with this, then what is your audience going to be able to do? That’s part of the reason that we felt the need to be a little bit more public about this and figure out what works for everyone.”



During The Best Business Show with Anthony Pompliano in September, Armstrong shared that he viewed the intense demand for regulation in crypto to be a “positive trend.” But, he noted that whenever he visits Washington DC, many people he speaks to look at the crypto industry as a risky sector for illicit activities, Blockworks <a href="https://cms.blockworks.co/coinbase-ceo-50-of-the-people-he-spoke-to-in-dc-think-crypto-is-a-risk/" target="_blank" rel="noreferrer noopener">reported</a>. With that said, Armstrong believes the other half of regulators realize crypto is a hugely important industry for the US.  



“If someone won’t meet with us to have a conversation, my optimistic view is that we can change that. My hope is it’s still on the table. But if I can’t get that, I’m just going to go out publicly and talk about it. I think it’s a form of accountability,” Armstrong said at the time.



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can’t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



<hr class="wp-block-separator"/>

Coinbase Proposes Digital Asset Policy to Help Chart Regulatory Course

Casey Wagner

<div id="highlights-block_6164563e8c680" class="highlights">
 <ul>
 <li>In recent months, the broader crypto community has been wrestling with similar issues of how to appeal to legislators and regulators when it comes to digital assets</li>
 <li>Galaxy Digital’s Mike Novogratz has said that the crypto community should expect a volatile next six to 12 months as regulatory guidelines are established</li>
 </ul>
 
</div>



After canceling plans to expand into digital asset lending following a warning from the US Securities and Exchange Commission, Coinbase has promised lawmakers and industry peers a regulatory proposal, but the rest of the cryptocurrency community might not like what they have to say.&nbsp;



“My two cents are that there really has to be a little bit more community participation, because Coinbase has a pretty big voice in the space, particularly when it comes to regulatory conversations,” said Hong Fang, CEO of OKcoin. “I just don&#8217;t want anything put in front of regulators that is misleading or not capturing the full picture.” 



The announcement that Coinbase will write a set of regulatory rules came shortly after the SEC informed the cryptocurrency exchange that it <a href="https://cms.blockworks.co/the-sec-will-sue-coinbase-if-it-launches-lend/" target="_blank" rel="noreferrer noopener">would be sued</a> if it moved forward with plans to launch its lending service, Lend. The SEC issued Coinbase a Wells notice, a formal statement sent to individuals or firms when an enforcement action can be expected, on September 1, according to the exchange.&nbsp;&nbsp;



“We felt the need to be a little bit more public about this and figure out what works for everyone,” <a href="https://cms.blockworks.co/coinbases-choi-we-will-be-rolling-out-a-regulatory-proposal/" target="_blank" rel="noreferrer noopener">said</a> Emilie Choi, chief operating officer of Coinbase, during a virtual appearance at the Mainnet conference in September, referring to the company’s plans to release a regulatory framework to help guide lawmakers. Coinbase has not revealed any details about how the proposal will be written or if any collaborators will be involved.&nbsp;&nbsp;



<h3 class="wp-block-heading">Common struggles</h3>



The struggles Coinbase faces on a regulatory front are not unique, but they are one of the larger companies in the industry.&nbsp;



“I think Coinbase is a leader in its class in many ways,” said David Tawil, president of ProChain Capital. “At this point there&#8217;s clearly challenges for Coinbase and all of its peers in terms of regulation.”&nbsp;



Regulating crypto is a complicated issue, Hong said, and it would be harmful to the industry if Coinbase is the only company with a seat at the table.&nbsp;



<blockquote class="wp-block-quote">“If regulators are hearing certain inputs, particularly at the federal level, and they put crypto in ‘a-one-size-fits-all’ framework, that is too premature for the industry, that ends up stifling innovation,” said Fang. “There&#8217;s a lot of experts in this space that are very much keen on contributing on this front.”&nbsp;</blockquote>



Regulation, Fang points out, is in many ways fundamentally at odds with the founding principles of cryptocurrency.&nbsp;



“The technology is trying to play a role in replacing what regulation is trying to, with regards to protecting customers,” she said. “You want to come up with something where you encourage the protocol-level participation and self-governance to make sure that customer protection is baked into the protocols and that there&#8217;s enough security, and then it&#8217;s really the work of math, the work of the algorithm.”&nbsp;



<h3 class="wp-block-heading">Centralized decentralization</h3>



During a recent <a href="https://www.youtube.com/watch?v=23P1UO3hPuk" target="_blank" rel="noreferrer noopener">interview</a> on the Best Business Show podcast, Coinbase’s CEO Brian Armstrong said that if he had to build Coinbase all over again, he may consider building it as a decentralized organization, but regulatory pressures would make that difficult.&nbsp;



<blockquote class="wp-block-quote">“I think if I had to do it all over again, I would lean more into some of the decentralization aspects, in the sense that we would probably just put a lot of our documentation we have internally and just make it all public and just do it out in the open,” Armstrong said. “Would I do it as a decentralized autonomous organization? The DAO tools still need to get a little more refined in the sense that you should probably have a DAO as the governing body of these organizations, but in local countries where you operate, you may actually still need a C-Corp.”</blockquote>



The decentralized vs. centralized debate is common in the crypto community, Tawil pointed out, given how difficult it is to operate without adhering to traditional financial guidelines.&nbsp;



“I&#8217;m actually not so sure that this all ends up decentralized, I really believe that there is going to be a fair amount of centralization that happens,” he said. “Frankly, if Coinbase is the centralized player, I think an even bigger player may come along and buy it to have immediate access to everything that the asset class has to offer.”&nbsp;



<h3 class="wp-block-heading">Not a seamless process</h3>



Regulation will not be a quick or seamless process, Tawil pointed out.&nbsp;



“There are going to be a whole host of challenges beyond the substance, there&#8217;s going to be political jockeying, there&#8217;s going to be legislative, calls for all sorts of different things, there&#8217;s going to be public interest groups that weigh in as well,” he said. “So certainly it&#8217;s not going to be smooth sailing.”&nbsp;



In recent months, the broader crypto community has been wrestling with similar issues of how to appeal to legislators and regulators when it comes to digital assets. Some, including <a href="https://cms.blockworks.co/galaxys-novogratz-our-industry-did-a-terrible-job-educating-washington/" target="_blank" rel="noreferrer noopener">Galaxy Digital CEO Mike Novogratz</a>, feel that the industry has not done enough to help legislators understand the technology and its purpose.&nbsp;



“Our community did a terrible job of educating Washington on what our industry was and what’s important,” said Novogratz during a panel discussion at the same Mainnet conference. He added that the community should expect a volatile next six to 12 months as regulatory guidelines are established.&nbsp;