Lawmakers vs. the SEC vs. Binance: Law Decoded, June 12–19

Once again, the United States Securities and Exchange Commission (SEC) became the week’s headliner. Its intention to freeze the entirety of Binance.US’s assets got a reality check from U.S. district court Judge Amy Berman Jackson, who advised the regulator and the crypto exchange to negotiate a deal bilaterally. 

The resulting agreement outlines measures for Binance.US to prevent any access by Binance officials to private keys of wallets, hardware wallets or root access to Binance.US’s Amazon Web Services tools. Additionally, the U.S.-based crypto trading platform will disclose comprehensive information on business expenses, including estimated costs, in the coming weeks.

Meanwhile, documents finally released publicly last week confirm that back in 2018, SEC employees were concerned that the speech of one of the regulator’s top executives, Bill Hinman, might undermine the idea that Ether is security. Sticking with 2018, a newly resurfaced video of the now SEC Chair Gary Gensler is also doing a massive disservice to him. In a 2018 speech from an event hosted by Bloomberg for institutional investors, Gensler confidently states: “Over 70% of the crypto market is Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Bitcoin Cash (BCH). Why did I name those four? They’re not securities.”

Gensler’s life will surely not be easy in the near future, as Representative Warren Davidson has introduced the SEC Stabilization Act to the U.S. House of Representatives. One of the bill’s main provisions is to fire “a tyrannical Chairman” — a position that Gensler currently occupies. However, as history shows, firing the SEC’s chair might not be easy for Congress.

Hong Kong govt pressures banking giants to accept crypto clients

The Hong Kong Monetary Authority (HKMA), which serves as the region’s central bank and regulator, has reportedly pressured major banks, including HSBC and Standard Chartered, to accept crypto exchanges as clients. The HKMA issued a circular to banking institutions urging them to pay attention to new market developments and encouraging them to adopt a more ambitious approach to new sectors, such as the crypto market. In the document, the HKMA specifically required the institutions to help crypto firms — which it calls “virtual asset service providers” — gain access to banking services.

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European Union Artificial Intelligence Act passes in parliament

The European Parliament has passed the EU Artificial Intelligence Act, which is a sweeping legislative framework for governance and oversight of artificial intelligence (AI) technologies in the European Union. Once implemented, the act would prohibit certain types of artificial intelligence services and products, while limiting or restricting others. Among the technologies to be outright banned are biometric surveillance, social scoring systems, predictive policing, so-called “emotion recognition” and untargeted facial recognition systems. Generative AI models, such as OpenAI’s ChatGPT and Google’s Bard, would be allowed to operate under the condition that their outputs be clearly labeled as AI-generated.

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U.S. senators propose bill to eliminate Section 230 protection for AI companies

U.S. Senators Josh Hawley and Richard Blumenthal introduced a bill to eliminate special protections for AI companies currently afforded to online computer services providers under the Communications Decency Act of 1996 (CDA).

Section 230 of the CDA specifically grants protection to online service providers from liability for content posted by users. It also protects them from prosecution for illegal content, provided good faith efforts are made to remove such content upon discovery. At this time, however, it’s unclear whether Section 230 applies to generative AI companies such as OpenAI and Google.

During a recent Senate hearing, OpenAI CEO Sam Altman told U.S. Senator Lindsey Graham that it was his impression that Section 230 didn’t apply to his company. When pressed by Hawley, who asked Altman what he thought about a hypothetical situation where Congress “opened the courthouse doors” and allowed people who were harmed by AI to testify in court, the CEO responded, “Please forgive my ignorance; can’t people sue us?”

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