• io halts Japanese operations due to FSA regulatory compliance demands.
• The exchange will assist Japanese customers in migrating to compliant exchanges.
• io’s shutdown timing in Japan remains unspecified as it removes Japanese content.

Gate.io, a leading cryptocurrency exchange, has announced it will cease operations for Japanese customers due to regulatory challenges.

The decision follows compliance requests from Japan’s Financial Services Agency (FSA). The exchange, headquartered in the Cayman Islands, will also stop opening new accounts for Japanese users effective immediately.

Stringent crypto trading regulations in Japan

Gate.io’s move is driven by the stringent regulations Japan imposes on crypto trading. Despite the country being an international crypto hub and one of the first to legalize crypto trading, the regulatory landscape remains rigorous.

The Payment Services Act (PSA) mandates that exchanges register with the FSA and comply with anti-money laundering (AML) regulations and thorough customer identity checks.

Gate.io to assist affected customer move their assets

Gate.io has stated its intention to assist affected customers in migrating their assets to exchanges that meet Japanese regulatory standards.

Additionally, the exchange will remove Japanese language content from its website, although it will continue providing updates to support the migration process.

In its announcement, Gate.io mentioned the termination of services would be conducted in accordance with compliance requests from the FSA.

However, the exchange did not specify an exact date for when it will fully shut down its operations in Japan.

Gate.io is known for its extensive list of trading pairs, currently numbering 3,557, and a substantial global 24-hour trading volume of $19.5 billion, according to CoinGecko.

The exit of Gate.io from Japan underscores the complex regulatory environment in Japan, which continues to present significant challenges for crypto exchanges. Nevertheless, some Japanese firms remain optimistic about the future of Bitcoin investments.

On July 22, Metaplanet, a Japanese investment and consulting firm, announced the acquisition of an additional 20.4 BTC, valued at around $1.2 million, after an initial acquisition of 42,466 BTC at the beginning f the month.

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• US House voted 228-184 in favor of overriding President Joe Biden’s veto of H.J.Res. 109 on SAB 121.
• The vote however fell short of required two-thirds majority.

The US House of Representatives has failed to override US president Joe Biden’s veto on legislation that sought to nullify SEC’s Staff Accounting Bulletin (SAB) 121.

Biden vetoed H.J.Res. 109, a resolution that sought to disapprove of the SAB 121 on May 31, 2024. This came after the US Congress had passed H.J.Res. 109 with bipartisan support.

On July 11, the US House of Representatives voted in a fresh bid to throw out the SEC’s controversial rule that requires banks that custody crypto to add this to their balance sheets under liabilities.

Vote fails to reach two-thirds majority

The House voted 228 in favor of overriding the veto.

However, this fell short as this did not meet the two-thirds majority threshold required to nullify the president’s action. The House managed 228-184 but the vote needed 290 to pass.

Lawmaker says vote sends message

The US Congress has not overridden any of the 12 vetoes that Biden has issued since taking office in 2021, with the requirement of a two-thirds majority a major hurdle amid the political divide of Democrats versus Republicans.

This failure to overturn the veto means SAB 121 stands and that banks are likely to find it unappealing to provide crypto custody services.

However, Rep. Mike Flood says the vote has “sent a message that a bipartisan majority of the House continues to support repealing SAB 121.”

He added in a statement posted on X:

“Banks have long been America’s most trusted custodians, and regulators should work with them so they can provide the same services for digital assets that they have to other asset classes through the years.”

Rep. Flood says he will continue to work with others in the House to find “pathways” towards ending SAB 121.

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• Paxful’s lack of AML led to regulatory breaches, prompting leadership changes.
• Artur Schaback pled guilty to failing to maintain AML and KYC programs at Paxful.
• Schaback faces up to 5 years in jail and a $5 million fine, payable in installments.

Artur Schaback, co-founder and former Chief Technology Officer of the cryptocurrency exchange Paxful, has entered into a plea agreement with US prosecutors. This plea deal could result in Schaback serving up to five years in prison.

The charges against Schaback stem from failures to implement essential Anti-Money Laundering (AML) and Know Your Customer (KYC) programs, which are crucial for preventing illegal activities within financial platforms.

Details of Schaback’s plea agreement

On July 8, 2024, the United States Justice Department announced that Schaback had pled guilty to conspiring to neglect the implementation of an effective AML program at Paxful.

As part of his plea deal, Schaback has agreed to pay a $5 million fine, which will be paid in three installments: $1 million upon his guilty plea, $3 million by his sentencing date on November 4, 2024, and the final $1 million within the subsequent two years.

In addition to the financial penalty, Schaback will resign from Paxful’s board.

According to court filings, Schaback and an unnamed co-conspirator, referred to as Paxful’s “President and Chief Executive Officer,” failed to establish effective AML and KYC programs within 90 days of starting the business, as required by the Bank Secrecy Act.

This failure allowed users to create accounts and trade on Paxful without providing sufficient identifying information, making the platform a conduit for various illegal activities, including money laundering, sanctions violations, fraud, romance scams, extortion schemes, and prostitution.

The consequences of non-compliance

The lack of proper AML and KYC protocols at Paxful led to significant regulatory breaches. Undercover law enforcement officers were able to conduct trades on the platform without undergoing KYC verification.

When third parties inquired about Paxful’s AML policies, Schaback and his co-conspirator allegedly presented a policy plagiarized from another institution, knowing it was neither implemented nor enforced.

They also reportedly made exceptions to AML and KYC policies based on the trading volumes and personal relationships of certain customers.

Paxful internal disputes and leadership changes

The legal troubles of Paxful’s leadership have been compounded by internal disputes. In March 2023, Schaback sued his co-founder, Mohamad (Ray) Youssef, over control of the exchange, accusing him of misappropriation of company funds, money laundering, and sanctions evasions.

As a result, Srinivas Raju, a director at the law firm Richards, Layton, and Finger, was appointed as the exchange’s custodian.

Subsequently, in May 2023, Paxful appointed Roshan Dharia as Interim CEO to steer the company through its turbulent period.

The plea deal and impending sentencing of Artur Schaback underscore the critical importance of robust AML and KYC programs in the cryptocurrency industry.

Paxful’s case serves as a cautionary tale about the severe consequences of regulatory non-compliance, both for individuals and the companies they represent.

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• Starting Monday, July 8th, Kucoin will charge a 7.5% tax on all transactions made by users registered in Nigeria.
• This decision comes from a regulatory update from the Nigerian SEC.

Kucoin exchange took to Twitter (X) to announce that starting Monday, July 8th, Nigerian users will be charged a 7.5% value-added tax on all transactions. This move, spurred by the Nigerian SEC’s regulatory actions, comes a month after the regulator asked all crypto exchanges and businesses to re-register or risk enforcement action.

This levy may be a sign that the Nigerian SEC is at the early stages of recognising cryptocurrencies, three years after the country’s Central Bank ordered banks to stop transacting with cryptos either for themselves or corporate entities.

The Nigerian government has tried to impose a 10% levy on crypto transactions through the 2023 Finance Act but was unable to enforce it due largely to regulatory opacity.

While the SEC Chairman Emomotimi Agama has not commented on the new tax, the regulator admits that this new rule is part of its plan to regulate crypto.

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• Australia has banned the use of cryptocurrencies in online gambling
• The ban came into effect on 11th June with the introduction of the Interactive Gambling Amendment (Credit and Other Measures) Bill 2023
• Other countries are, however, seeing increased popularity for crypto casinos, including the US and UK.

Inevitably, crypto adoption is on the rise.

However, different countries and jurisdictions are taking varied approaches to regulating crypto, including its use as a payment option in online casinos. 

For example, Australia, one of the countries seeing rapid adoption of cryptocurrencies, has prohibited using crypto and digital asset-linked credit cards on online gambling sites. The ban came into effect last week.

But are there other countries where the use of crypto in online casinos is legal or allowed within existing gambling laws?

Australia bans crypto for online gambling

The Australian gambling industry entered a new era last week with the implementation of a government ban on the use of cryptocurrencies in online betting.

Australia has also banned using crypto-linked credit cards, which means online casinos are prohibited from accepting deposits from credit cards linked to digital wallets.

The ban came into effect after a bill on the same passed in the House of Representatives and Senate in 2023, introducing an amendment to the country’s Interactive Gambling Act 2001. This aligned Australia’s traditional and online gambling sectors, with both now banned from accepting cryptocurrencies.

According to authorities, the restriction on crypto use in the gambling market aims at promoting responsible gambling as well as addressing financial risks. However, gambling remains legal, with all traditional payment methods allowed.

 The law outlines hefty fines, with non-compliance attracting up to 234,750 Australian dollars.

Where are crypto casinos popular? Top 10 countries

While you can no longer gamble online with your cryptocurrency in Australia, there are several countries where crypto casinos are legal. Some countries also allow offshore casinos to accept Bitcoin and cryptocurrencies, which illustrates the evolving landscape of crypto regulation.

Here are the top 10 countries where Bitcoin and other cryptocurrencies are popular, legal, and increasingly accepted in crypto casinos.

United States

While the crypto regulatory landscape in the US continues to evolve, it’s notable that cryptocurrencies are legal. However, their use in gambling varies from state to state. As for offshore casinos, the landscape is predominantly “gray,” with many online crypto casino sites having terms and conditions that prohibit US-based players. No KYC does, however, mean anyone can access these mostly reliable, offshore-regulated online casinos.

United Kingdom

Crypto is legal in the United Kingdom, where the gambling market is one of the most popular in the world. Multiple providers offer online casinos and betting sites, but the Gambling Commission implements strict regulatory oversight.

Only licensed casinos can operate, and anti-money laundering and KYC regulations apply. One of the top sites is 10bet Online Crypto Casino, which accepts Bitcoin and other crypto assets.

Canada

Cryptocurrencies are legal in Canada, but regulators implement strict oversight, and online casinos must register. Canada also does not have specific laws against crypto use on offshore casino sites.

Norway

Norwegians have increasingly turned to crypto casinos amid monopoly by the government-controlled Norsk Tipping and Norsk Rikstoto sites. As such, the country is seeing rapid growth in crypto gambling, mostly on offshore platforms that accept Bitcoin and other digital assets.

According to a recent report, Norway is one of the countries with the highest Google searches for crypto casinos.

Sweden

Online gambling is legal in Sweden. However, regulatory oversight of foreign-based online casinos has seen players turn to cryptocurrency. Demand for crypto casinos in Sweden is also high, as with its Scandinavian neighbor.

New Zealand

New Zealand has not banned digital currencies, which is helping the gambling sector explore the benefits of crypto in online casinos.

Other countries with growing crypto casino market:

Netherlands

Online gambling is legal in the Netherlands, and the country is one of the most crypto-friendly in the EU.

India

Despite regulatory woes, India is a top crypto market, and increased adoption has put the country’s crypto casino space on an upward trajectory.

Switzerland

Switzerland requires that online gambling sites be licensed and have a domestic brick-and-mortar presence. However, crypto casinos are beginning to thrive.

Mexico

Mexico’s gambling market is set for a potential streamlining with new regulation, and with crypto legal, users can explore online sites for opportunities.

Crypto casinos are legal in Malta under the country’s legal framework that supports blockchain and crypto innovation.

Wrap up

As noted, there’s a growing demand for cryptocurrency-supported online casino games, and players worldwide continue to embrace benefits such as anonymity, fast transactions, and low fees. However, regulation is still in the early stages, and some countries have banned crypto from being used in gambling.

As Australia has shown, the question of innovation versus consumer protection is currently a key factor as crypto casinos explode in popularity.

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