On July 12, the California Department of Financial Protections and Innovation (DFPI) announced it is investigating multiple companies nationwide that offer customers interest-bearing crypto-asset accounts, which allow customers to lend crypto assets to the company in exchange for interest paid in crypto. DFPI warned that many of these account providers may not have adequately disclosed risks customers face when depositing in these accounts, and that unlike banks and credit unions, these providers are not required to have deposit insurance. DFPI also noted that "due to market conditions," some of these companies are preventing customers from withdrawing from and transferring their accounts. DFPI is looking into whether the providers are violating laws within its jurisdiction.
Also this week, a North Carolina respondent pleaded guilty to operating an unlicensed money-transmitting business and to willful failure to file a tax return, all in connection with operating an unlicensed business involving the exchange of millions of dollars of cash for cryptocurrencies. In separate news, the Ukrainian prosecutor's office announced this week it has seized roughly $3.39 million of assets belonging to over-the-counter brokers who illegally facilitated cryptocurrency purchases for users from Russia and Russia-occupied territories and enabled clients to convert assets into crypto without paying taxes. Local police are reportedly investigating fraud, money laundering and tax evasion.
And late last week, Tornado Cash, a cryptocurrency mixer (i.e., a service that helps obfuscate the chain of ownership of a cryptocurrency), announced it had fully open-sourced its user interface code. The open sourcing will purportedly allow anyone to fork the repository and modify the code as they see fit. The company says the move will help ensure that Tornado Cash "will remain forever unstoppable, secured, decentralized and censorship resistant." Tornado Cash, like other mixers, has been criticized as facilitating illegal crypto transactions and money laundering. Its proponents, however, tout its commitment to privacy and decentralization.
For more information, please refer to the following links:
- Durham, N.C. Man Admits To Operating An Unlicensed Cryptocurrency Business And Related Tax Charges
- DFPI is actively investigating multiple companies offering "crypto-interest accounts"
- Ukraine Seizes Assets From OTC Crypto Brokers for Working With Russians
- Controversial mixer Tornado Cash open-sources UI code
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