Recently, the Dubai crypto regulator has formally reprimanded the founders of 3AC (Arabian Chain Technology) OPNX exchange over their alleged involvement in unauthorized cryptocurrency trading activities. The regulator found that the founders had been operating the exchange without a proper license and engaging in unauthorized trades, leading to a violation of local laws and regulations. This move highlights the importance of adhering to regulations and obtaining proper licensing in the cryptocurrency industry.
What is 3AC?
3AC, founded in 2017, is a blockchain technology firm that aims to enhance the adoption of blockchain in the Middle East region. The firm focuses on providing blockchain-based solutions for financial services, healthcare, and government sectors. It has gained popularity for developing the first blockchain network in the Arab world – known as the Arabian Chain network.
What is OPNX exchange?
OPNX exchange is a cryptocurrency exchange owned by 3AC. The exchange allows users to buy and sell a variety of cryptocurrencies. It was launched in 2019, with the goal of providing the Middle East region with a secure and reliable platform for trading cryptocurrencies.
What led to the formal reprimand?
The Dubai crypto regulator, the Securities and Commodities Authority (SCA), found that 3AC OPNX exchange was operating without obtaining the necessary license from the authority. According to the regulator, the founders of 3AC had engaged in unauthorized cryptocurrency trading activities, in violation of local laws and regulations.
The regulator conducted an investigation and found that 3AC OPNX exchange did not meet the required standards for financial security, anti-money laundering (AML), and counter-terrorist financing (CTF) measures. The exchange also failed to comply with KYC (know your customer) and other compliance regulations.
The regulator’s investigation found that 3AC had not implemented proper record-keeping procedures and had failed to report suspicious transactions in a timely manner. Such shortcomings in the exchange’s operations could potentially facilitate money laundering and other illicit activities.
Following the investigation, the founders of 3AC were reprimanded by the regulator, who also ordered them to cease all unauthorized activities immediately. The founding team was directed to comply with all regulations and requirements of the local regulator in order to avoid further disciplinary action.
Why is this important?
The regulatory action taken in Dubai highlights the importance of obtaining proper licensing and adhering to local regulations in the cryptocurrency industry. The lack of proper licensing and regulatory oversight can lead to fraudulent and illegal activities such as money laundering, terrorism financing, and other financial crimes.
In recent years, many countries have moved towards regulating the cryptocurrency industry to prevent such illegal activities. The regulatory actions taken against 3AC OPNX exchange serves as a reminder to all industry players about the need to comply with regulations, in order to avoid regulatory sanctions and disciplinary actions.
In addition, this action underscores the growing importance of KYC and AML regulations in the cryptocurrency industry. The lack of a proper KYC process can lead to the exchange’s exposure to high-risk customers, such as terrorists and criminals. The implementation of proper KYC and AML processes ensures that exchanges have a clear understanding of who they are transacting with and are ideally set up to prevent money laundering and other fraudulent activities.
Conclusion
The formal reprimand of 3AC OPNX exchange by the Dubai crypto regulator is a reminder of the importance of following regulations and obtaining proper licenses in the cryptocurrency industry. Adhering to regulations and implementing proper AML and KYC practices can help prevent fraudulent and illegal activities. The regulatory action taken in Dubai serves as a wake-up call to all industry players to comply with regulations, in order to avoid regulatory sanctions, and disciplinary actions.
The Dubai Financial Services Authority (DFSA) has formally reprimanded 3AC Founders over concerns surrounding its digital assets exchange platform, OPNX. The DFSA cited three major reasons for the reprimand in its statement. Firstly, OPNX was found to have not taken sufficient measures to ensure its clients’ security and privacy. Secondly, the platform was found to have inadequately addressed AML/CFT concerns. Finally, regulatory compliance requirements were never adequately met, leading to regular violations and misconduct.
Founded in 2018, 3AC Founders launched OPNX to great fanfare in 2020. Claiming to be a “Decentralized Finance (DeFi) Platform”, the exchange promised instant access to digital assets while ensuring full transparency regarding its operations. However, 3AC Founders did not anticipate any regulatory oversight in this futuristic digital asset setting, as OPNX began trading without any approvals from the Dubai regulator.
In its statement, the DFSA highlighted that it had taken a cautious approach in dealing with the OPNX platform due to the high degree of risk associated with digital assets. Its investigations into the platform found a range of issues, including that it had not implemented adequate risk management controls, internal audit procedures and management structure, and its systems were not designed to meet operational resilience requirements.
Furthermore, the DFSA noted that the platform’s marketing activities were often wildly misleading and failed to adequately explain the risks posed to clients. This was coupled with the platform’s inadequate approach to preventing the use of its platform for illegal activities. All this created many potential loopholes for criminal elements to exploit and as such, the DFSA required immediate action to be taken.
All these issues came to a climax when 3AC Founder’s CEO was arrested in Dubai on suspicion of money laundering in 2021. The DFSA was made aware of the arrest and began investigating the company. As a result of the findings, the regulator notified them of its intention to withdraw its license, due to the severity of the breaches. Despite the warning, 3AC Founders did not take corrective measures.
Commenting on the reprimand, Bryan Alter, Managing Director at 3AC Founders stated that the company was committed to building a secure and compliant digital assets platform. He acknowledged their faults in failing to comply with the DFSA’s guidelines, and assured customers that they are undertaking measures to address the issues raised by the regulator.
The DFSA has requested that 3AC Founders provide a remediation plan to demonstrate how it intends to address the compliance and regulatory concerns highlighted in the investigation. If the company is successful in implementing adequate compliance measures and remedying the issues raised, it may be able to restore the market confidence and trust its clients have in the brand.
In conclusion, the DFSA’s reprimand serves as a reminder of the importance of compliance and regulation in the digital asset space. It is crucial for digital assets firms to adhere to the strict regulations in place to prevent illegal activities, protect customers, and maintain market confidence. For 3AC Founders, addressing the issues highlighted will be critical in regaining trust and therefore restoring their market position.
