  How policy and regulation impact the crypto world – and the other way around By Nikhilesh De Managing Editor, Global Policy & Regulation July 13, 2021 If you were forwarded this newsletter and would like to receive it, sign up here.
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Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De. You’re probably here because you signed up, but in case you're not a fan, you can unsubscribe here.
More than half a dozen national regulators have published warnings, announced investigations or otherwise cautioned investors about crypto exchange Binance and its different affiliates. Is this part of a coordinated global action – or just a coincidence? —Nik
Breaking Binance  Binance CEO Changpeng "CZ" Zhao (CoinDesk archives, modified via PhotoMosh) The narrative Several countries have announced investigations into or published warnings against Binance, currently the world’s largest crypto exchange by trading volume. It’s unclear if this is a coordinated effort by regulators or something closer to a domino effect. What we do know for sure is that Binance is under a powerful microscope – and I seriously doubt we’re done hearing about enforcement actions against the platform. Why it matters More than any other centralized cryptocurrency platform, what happens to Binance may signal how regulators will approach crypto, with enforcement actions against the exchange hinting at what other platforms should expect.
It’s important to note here that any interpretations are likely to be specific to centralized exchanges and how they’re operating. The regulatory crackdown on Binance will almost certainly not apply to crypto trading or decentralized/peer-to-peer platforms. Breaking it down Over the last few weeks, regulators in a handful of different nations have announced that they are either investigating Binance or that Binance (or one of its legal entities) isn’t authorized to operate within its borders. Still more countries have warned users about the exchange. Several banks or payment processors, primarily in Europe and the U.K., have subsequently cut off the exchange, potentially stranding its customers.
In just the past few weeks:
That’s a lot of investigations! And it’s not even getting into the investigations that are ongoing, the largest of which may perhaps be through the U.S. Commodity Futures Trading Commission and Department of Justice.
The best parallel to these agencies’ investigation of Binance is likely the ongoing legal action against Bitmex and founder Arthur Hayes. The feds went after Bitmex on allegations it offered derivatives trading to U.S. customers and did not conduct appropriate know-your-customer checks. Federal officials are also reportedly investigating Binance on similar charges, as well as money laundering and tax evasion concerns.
Binance, however, is much, much bigger than Bitmex.
(It’s important to mention here that no wrongdoing has yet been alleged by U.S. officials, and we don’t even know whether they’ll bring an enforcement action.)
It’s possible that the regulatory backlash to Binance also reflects founder CZ’s stated goal of creating a decentralized business with no headquarters.
The exchange is reacting to this by hiring a number of former regulators to its compliance and executive teams.
Binance.US has brought on former Acting Comptroller Brian Brooks and former California Department of Financial Protection and Innovation Commissioner Manuel Alvarez.
The global version of the exchange is now looking to hire an equivalent policymaker in the U.K., after bringing on former Financial Action Task Force officials Rick McDonell and Josée Nadeau, as well as former U.S. Senator Max Baucus.
CZ called more regulations “a positive sign” in an open letter last week which said the exchange is “committed to being compliant … wherever we operate.”
Circle is going public
Circle Internet Financial announced it was going public through a special purpose acquisition corporation (SPAC) transaction last week, to be completed later this year. In addition to being the latest high-profile crypto company to go public, Circle is the other half of the Centre Consortium that is ostensibly in charge of the USDC stablecoin (alongside Coinbase, which went public earlier this year).
In an investor presentation, Circle estimated that USDC in circulation could more than double from about $26 billion as of Monday to over $80 billion by next year, and jump to a staggering $194 billion by the end of 2023.
Of course, Circle’s announcement has renewed scrutiny around just what is backing the USDC stablecoin, and how secure these reserves are.
Jeremy Allaire, the exchange’s CEO, promised that Circle will provide more detail after the company completes its transaction to go public.
“They deserve a greater degree of transparency,” Allaire told CoinDesk TV last week. “Our intention is to include greater reserves transparency there.”
These are similar questions to those that critics ask about the reserves backing Tether’s USDT.
Stablecoins more broadly have been increasingly scrutinized by global financial regulators over the past few years, but conversation around fiat-pegged cryptocurrencies seems to have shifted from focusing on global stablecoins (i.e. the former vision for Libra) to centrally-issued ones (i.e. USDC, USDT).
I’m curious to see whether this results in firmer action or regulations, particularly as stablecoins take on a more important role within the crypto world.
The Biden Bunch Changing of the guard  Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated) This isn’t in the list above but the U.S. Senate confirmed Jen Easterly to run the Cybersecurity and Infrastructure Security Agency (CISA), a Department of Homeland Security entity focused on, uh, cybersecurity. I strongly suspect Easterly’s initial work will focus heavily on ransomware – both mitigating such attacks and finding ways to investigate them. The Biden Administration has already mentioned crypto analysis a few times in statements about ransomware. Deputy National Security Advisor for Cyber and Emerging Technology Anne Neuberger was the latest official to reiterate this position in a statement last week.
Elsewhere 
CoinDesk Research Quarterly Review Q2 2021  The CoinDesk Quarterly Review 2021 Q2
After two consecutive quarters of strong price gains for most of the top crypto assets, Q2 2021 finally brought an end to market euphoria with a resounding crash.
Most CoinDesk 20 assets, which constitute 99% of the crypto market by verifiable volume, ended the quarter with negative returns. Meanwhile, protocol development for the world's largest cryptocurrencies by market capitalization, Bitcoin and Ethereum, reached new milestones.
CoinDesk Research's latest Quarterly Review dives into the trends, developments and technological progress that shaped the crypto markets from April to June 2021.
The full report is now available from the CoinDesk Research Hub.
Outside CoinDesk 
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