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Cryptocurrency

Morocco's Pivotal Shift: From Cryptocurrency Ban to Regulation

2024-11-27

In a significant policy transformation, Morocco is on the verge of legalizing cryptocurrencies, reversing a 2017 ban on digital assets. This move showcases the escalating global acceptance of blockchain-based technologies and the acknowledgment of their potential to revolutionize financial systems. Abdellatif Jouahri, the Governor of Morocco's central bank, Bank Al-Maghrib (BAM), announced at an international conference in Rabat that a draft law governing cryptocurrency assets is nearing final approval. "We have crafted a draft law regulating crypto assets, and it is currently in the adoption phase," Jouahri declared. This milestone represents the culmination of years of deliberation and cooperation with global financial entities like the International Monetary Fund (IMF) and the World Bank.

Morocco Leads the Way in Crypto Policy Revolution

From Ban to Regulation: A Global Trend

In 2017, Morocco imposed a ban on Bitcoin and other cryptocurrencies due to concerns over market volatility and the risks of unregulated financial flows. However, this restriction failed to deter their adoption. By 2022, an estimated 4.9% of Moroccans were using cryptocurrencies, indicating a notable increase in underground activities. This persistent interest in digital assets, despite the absence of legal frameworks, highlights the public's strong inclination towards decentralized financial tools. Morocco's decision to regulate rather than prohibit cryptocurrencies follows a broader global trend. The country's shift aligns with regulatory advancements in jurisdictions such as the European Union, whose Markets in Crypto-Assets Regulation (MiCA) has inspired nations worldwide to establish comprehensive frameworks.

Addressing Financial Inclusion with CBDCs

Alongside its plans to legalize cryptocurrencies, Morocco is also delving into the potential advantages of a central bank digital currency (CBDC), tentatively named the e-dirham. Governor Jouahri emphasized, "Similar to many countries globally, we are examining how this new form of currency can contribute to achieving specific public policy goals, especially in terms of financial inclusion." CBDCs operate on permissioned blockchain networks under central bank supervision. Advocates argue that CBDCs can modernize financial transactions, reduce reliance on cash, and minimize economic crimes like money laundering and fraud.Despite the potential benefits, Moroccan citizens remain wary about the traceability of digital transactions and mobile wallets. To address this concern, BAM intends to launch financial education initiatives to highlight the advantages of the digital economy. The aim is to foster public trust and acceptance of the e-dirham while demonstrating its ability to enhance security, transparency, and economic efficiency.

The Road Ahead: A Global Crypto Legislative Landscape

Morocco's shift occurs in tandem with a global wave of crypto legislative developments. The Financial Conduct Authority (FCA) of the United Kingdom recently announced a framework for regulating cryptocurrencies by 2026. Similarly, countries in Africa and other regions are increasingly recognizing digital assets as instruments for financial inclusion, particularly in areas with limited access to traditional banking institutions.Finally, Morocco's endeavors to legalize cryptocurrencies and explore CBDCs mark a crucial turning point in its financial policy. By advocating a balanced approach to innovation and regulation, the country hopes to harness the benefits of digital assets while mitigating associated risks. As the proposed law progresses, Morocco becomes part of the growing list of countries embracing the digital banking revolution.

In a significant legal development, Ilya Lichtenstein, a 35-year-old from New York City, faced the consequences of his actions on November 14 in U.S. District Court in Washington D.C. He was sentenced to 60 months in federal prison for his involvement in a complex money laundering conspiracy related to the hack and theft of approximately 120,000 bitcoin from Bitfinex, a prominent global cryptocurrency exchange.

Key Players and the Investigation

Homeland Security Investigations (HSI) New York Special Agent in Charge William S. Walker, along with other key figures such as Principal Deputy Assistant Attorney General Nicole M. Argentieri, U.S. Attorney Matthew M. Graves for the District of Columbia, Chief Guy Ficco of IRS Criminal Investigation, Assistant Director Bryan Vorndran of the FBI’s Cyber Division, and FBI Special Agent in Charge Robert W. “Wes” Wheeler of the Chicago Field Office, played crucial roles in this investigation. The HSI New York Field Office, IRS-CI Washington D.C. Cyber Crimes Unit, FBI Chicago Field Office, and FBI Virtual Assets Unit were actively involved, with assistance from the Justice Department’s Office of International Affairs and the Ansbach Police Department in Germany.

The Hacking Incident

In 2016, Ilya Lichtenstein demonstrated his advanced hacking skills by breaching Bitfinex’s network. Using sophisticated tools and techniques, he managed to fraudulently authorize over 2,000 transactions, transferring a staggering 119,754 bitcoin from Bitfinex to a cryptocurrency wallet under his control. To cover his tracks, he took the drastic step of deleting access credentials and log files from Bitfinex’s network that could have exposed his illegal activities to law enforcement.After the hack, Lichtenstein enlisted the support of his wife, Heather Morgan, in laundering the stolen funds. They employed a variety of sophisticated laundering techniques. They set up online accounts using fictitious identities and utilized computer programs to automate transactions. The stolen funds were deposited into accounts at different darknet markets and cryptocurrency exchanges, and then withdrawn. They also engaged in the practice of “chain hopping” by converting bitcoin to other forms of cryptocurrency. A portion of the criminal proceeds was deposited into cryptocurrency mixing services, and U.S.-based business accounts were used to legitimize their banking activities. Additionally, they exchanged a part of the stolen funds into gold coins.

The Guilty Plea and Sentencing

On August 3, 2023, both Ilya Lichtenstein and Heather Morgan pleaded guilty to one count of conspiracy to commit money laundering. In addition to the 60-month prison term, Lichtenstein was ordered to serve three years of supervised release. This case serves as a stark reminder of the importance of cybersecurity and the legal consequences of engaging in illegal activities within the cryptocurrency realm.The investigation and subsequent legal proceedings highlight the efforts of law enforcement agencies to combat money laundering and cybercrime. It also showcases the complexity and global reach of such criminal activities. As the cryptocurrency industry continues to grow, it is crucial for authorities to remain vigilant and take decisive action against those who seek to exploit it for illegal purposes.

Britain's financial watchdog has taken a significant step by launching comprehensive regulatory rules for cryptocurrency starting from 2026. This move comes amidst the soaring demand for highly volatile bitcoin. The world's largest cryptocurrency has witnessed a remarkable surge in value since Donald Trump's US presidential election win in early November. However, it has also faced substantial losses in recent years. Trump has been committed to making the US the crypto capital of the world through supportive regulations, which has pushed bitcoin towards the symbolic $100,000 mark.

Roadmap and Stablecoin Rules

Britain's Financial Conduct Authority announced a detailed roadmap on Tuesday. It includes consultations on crypto regulation ahead of final rules in 2026. Additionally, by early next year, the FCA plans to introduce rules on "stablecoins" that are backed by traditional currencies, typically the dollar. Cryptocurrency ownership in the UK has grown to 12 percent of adults, as per data published by the regulator.

Current Crypto Landscape

Currently, cryptocurrency remains largely unregulated in the UK, posing significant risks. The Financial Conduct Authority has emphasized the need for clear regulation to support a safe, competitive, and sustainable crypto sector. Matthew Long, director of payments and digital assets at the watchdog, stated that their research highlights this requirement.In the past year, the FCA tightened rules over the promotion and selling of cryptocurrency. Measures were implemented to ensure that companies promoting these digital assets give clear warnings to customers about the potential for high-risk investments and potential losses.

Parliamentary Group's Criticism

News of the FCA's roadmap came as a cross-party parliamentary group slammed the watchdog for its activities over the past three years. They claimed that the FCA is "not fit for purpose" and is seen as either incompetent or dishonest. MPs and peers in a report urged an overhaul after concluding that the regulator's actions are slow and inadequate, and its leaders are opaque and unaccountable.This follows a series of recent scandals that have tarnished the British financial sector. The FCA responded by expressing sympathy for those who have suffered due to wrongdoing in financial services but strongly rejecting the characterization of the organization.