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FTX's CySEC License Suspension Likely to Start Wider Regulatory Audits

Finance Magnates

Cryptocoins News / Finance Magnates 135 Views

<p>The Cyprus Securities and Exchange Commission (CySEC) has suspended the license of FTX (EU) Ltd, a Cyprus Investment Firm (CIF) which gained authorization two months ago. While this might be only for one company, there might be a wider implication for the industry.</p><p>"No doubt this is not going to be isolated to one company – FTX," Muinmos' Founder and CEO, Remonda Kirketerp-Møller told Finance Magnates. "There are quite a few regulators in Europe ‘revoking’ many crypto registrations due to lack of governance. These are rarely made public unless it’s a situation like this. We hope more audits and controls are taking place by regulators to ensure the stability of the market and secure investor protection."</p><p>The suspension came when the troubled parent of the EU subsidiary, FTX.com, nearly collapsed in merely days. The global exchange and more than 130 affiliates, including FTX US and Alameda Research, <a href="https://www.financemagnates.com/cryptocurrency/troubled-ftx-files-for-bankruptcy-as-ceo-bankman-fried-resigns/" target="_blank">filed for Chapter 11 bankruptcy</a> in the United States. Its CEO, Sam Bankman-Fried, also stepped down.</p><p>Only four of <a href="https://www.financemagnates.com/tag/ftx/" target="_blank">FTX</a> affiliates, FTX Digital Markets, FTX Australia, FTX Express Pay and LedgerX (operating as FTX US Derivatives), were not included in the bankruptcy filing.</p><p>To add to the troubles of FTX, the exchange was <a href="https://www.financemagnates.com/cryptocurrency/ftx-hacked-1bn-drained-from-ftx-and-ftx-us-accounts-so-far/" target="_blank">reportedly hacked over the weekend</a>, draining at least $1 billion worth of cryptocurrencies.</p><p>European Business</p><p>FTX initially gained <a href="https://www.financemagnates.com/cryptocurrency/news/ftx-gains-cysec-license-to-offer-regulated-crypto-products-in-europe/" target="_blank">approval from the Cyprus regulator</a> last March and obtained full authorization as a CIF in September. Though the Cypriot license did not allow the exchange to offer crypto directly, it can provide derivative products. Additionally, the license was essential as the exchange can passport it to provide services within the entire European Economic Area (EEA).</p><p>"The Company is regulated by CySEC under the provision of Investment Services Law and is authorized to provide investment services in Derivatives and/or other financial instruments. However, it is not licensed by CySEC to engage in the direct trading of crypto assets," the Cypriot regulator said in a statement.</p><p>The regulator justified its action as the exchange is under suspension for allegedly violating Cyprus laws around "the suitability of the members of the management body" and "the Safeguarding of Client Assets, Product Governance Obligations and Inducements, in relation to the organizational requirements for safeguarding the client's assets."</p><p>With the suspension of the license, the Cypriot entity can no longer provide investment services, accept new clients or advertise its offerings. However, it can fulfil all pending client orders and return client funds and financial instruments.</p><p>"CySEC has no option but to scrutinize crypto companies after this and so does the rest of the world. CySEC has unfortunately had issues with other higher risk products such as CFDs, where despite the many product interventions we’ve seen come out of ESMA, CySEC struggled with their implementation and supervision in their local jurisdiction, so without doubt they will be highly concerned about this now and without doubt we can expect to see more audits happening by them," Kirketerp-Møller added.</p><p>The Bahamas Headquarters</p><p>The authorities in the Bahamas also took strict action against FTX, <a href="https://www.financemagnates.com/cryptocurrency/the-bahamas-freeze-ftxcom-assets-japan-halts-local-operation/" target="_blank">freezing all of its assets</a> last week. Now, the island's police are looking into the possibility of any 'criminal misconduct' by FTX.</p><p>"In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd, a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred," the Royal Bahamas Police said.</p> This article was written by Arnab Shome at www.financemagnates.com.
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