Tag: Regulation & Policy

Sony Bank has received conditional approval from the U.S. Office of the Comptroller of the Currency (OCC) to establish a national trust bank, a step toward its plan to issue a dollar-backed stablecoin. The approval, reported on July 6, allows its subsidiary, Connectia Trust, to prepare for operations expected in 2027, pending the fulfillment of remaining regulatory conditions.

Connectia Trust, a wholly owned subsidiary, is slated for establishment this month with $40 million in capital. This entity will manage the issuance and reserves for a dollar-denominated stablecoin. Sony Bank stated the trust aims to create a “medium- to long-term business foundation” for its digital asset ventures. The bank previously indicated to Nikkei its intention for U.S. customers to use the token for digital content purchases across Sony’s ecosystem, potentially lowering transaction fees.

The U.S. market for this stablecoin initiative is enabled by the GENIUS Act, federal legislation passed last year that outlines reserve and disclosure rules for dollar-pegged tokens. This aligns with Sony’s broader digital asset strategy, including the launch of its Ethereum layer-2 network, Soneium, in early 2025. Sony’s blockchain partner, Startale, introduced a separate dollar stablecoin on Soneium last year. For its own token, Sony Bank has engaged infrastructure firm Bastion for issuance, reserve management, and custody.

Sony Bank’s application follows similar moves by other crypto and payment firms seeking federal trust status. In December, the OCC conditionally approved Circle, Ripple, BitGo, Fidelity Digital Assets, and Paxos. A national trust charter allows firms to custody assets, manage reserves, and issue stablecoins under federal supervision, but prohibits them from accepting cash deposits or making loans.

Despite the conditional approval, Sony’s initiative faces opposition. The Independent Community Bankers of America urged the OCC to reject the Connectia Trust application in November, arguing it would permit Sony to issue deposit-like stablecoins while circumventing the insurance and regulations governing traditional banks. Senator Elizabeth Warren (D-MA) has also contended that the OCC has improperly granted charters to firms not qualifying under the National Bank Act. Cody Carbone, CEO of the Digital Chamber, countered in May that these criticisms “misread both the statute and the OCC’s longstanding charter authority.” A U.S. banking lobby has also considered legal action regarding these charters.

Connectia Trust currently exists as a plan. The conditional nod requires Sony Bank to satisfy all outstanding OCC conditions before its stablecoin can launch, a process anticipated to conclude in 2027. The global stablecoin market cap is currently over $308 billion.

Broader Context

Source materials place the factual news in this context: Sony Bank has secured conditional approval from the U.S. Office of the Comptroller of the Currency to establish a national trust bank, moving Japan’s Sony Financial Group closer to issuing its own dollar-backed stablecoin.

Why This Matters

This development signifies Sony Bank’s strategic move into the stablecoin market, aiming to integrate digital assets into its existing ecosystem and potentially reduce transaction costs for consumers. The initiative is supported by the GENIUS Act, which provides a regulatory framework for such tokens in the U.S., and aligns with Sony’s broader digital asset strategy, including its Ethereum layer-2 network, Soneium. However, the path forward involves meeting remaining regulatory conditions and navigating opposition from traditional banking groups and political figures concerned about the implications of national trust charters for stablecoin issuers.

Payward, the parent company of cryptocurrency exchange Kraken, has been awarded $22 million in arbitration against its former auditor, Mazars USA, following the auditor’s abandonment of a nearly completed audit. Payward is seeking to have this award entered as a final judgment by the Delaware Court of Chancery.

According to Arjun Sethi, co-CEO of Kraken, the auditor’s withdrawal occurred during a period Payward claims was associated with reputational harm and financial losses, particularly during what critics describe as ‘Operation Choke Point 2.0’—a campaign to pressure banks into cutting off the crypto industry. Sethi stated that when an auditor walks away without findings, the client is left to repair reputational damage at a significant cost.

Mazars USA had audited Kraken’s financials for three years, delivering two clean opinions. However, the firm quit the third audit in December 2023, days before its completion. Mazars reported in writing that it had no disagreement with management, no concerns about integrity, and found no fraud before withdrawing. The firm cited legal uncertainty, including an SEC complaint filed against Kraken weeks prior, as a reason for its withdrawal.

This dispute unfolded against a backdrop of increased regulatory scrutiny on the crypto industry. In December 2022, Mazars Group had already halted its proof-of-reserves work for the crypto sector. In January 2023, regulators including the Federal Reserve, FDIC, and OCC issued a joint statement warning banks about crypto risks. Around the same time, the FDIC sent approximately 25 ‘pause letters’ to 24 banks, which advocates say instructed lenders to halt or reconsider crypto-related activities.

The SEC had filed a complaint against Kraken weeks before Mazars abandoned its audit. This suit was later dismissed with prejudice in March 2025, with no penalties or admission of wrongdoing by Kraken, noted as part of a broader shift in regulatory approach.

In a related development, Kraken co-founder and former CEO Jesse Powell’s home was raided by federal agents in March 2023. The investigation was reportedly closed about two years later with no charges filed.

Sethi has pointed to these events as a reason to support legislative efforts like the Clarity Act, a bill aimed at dividing oversight of digital assets between the SEC and the CFTC. The Clarity Act cleared the Senate Banking Committee in May with a 15-9 vote, after passing the House in the previous year, but has faced hurdles and requires further votes to become law.

Payward’s claim in arbitration centered on the reputational and financial damage was associated with by Mazars’ abrupt departure from the audit. Sethi argued that proving a lawful crypto business deserves ordinary banking and professional services should not require winning a legal fight.

Uncertainties remain regarding the exact date of the arbitration award announcement and the specific years the Clarity Act passed the House and cleared the Senate Banking Committee. The full extent of legal uncertainty cited by Mazars and whether the firm acted independently or under pressure are also points of ambiguity. The precise reasons for the SEC’s initial complaint against Kraken and the full impact of ‘Operation Choke Point 2.0’ on the broader crypto industry are also not fully detailed.

Why This Matters

The materials describe a narrow update: Payward, the parent company of Kraken, received a $22 million arbitration award from its former auditor, Mazars USA. The exact date of the Tuesday announcement.

Broader Context

Source materials place the factual news in this context: Operation Choke Point 2.0 is a widely used term for what critics describe as the Biden administration’s unofficial campaign to pressure banks into cutting off the crypto industry after the collapse of FTX.

Bankers Flagged £5 Million Gift to Nigel Farage to UK Crime Agency

Bankers flagged a £5 million donation to Nigel Farage from billionaire Tether investor Christopher Harborne to the UK’s National Crime Agency (NCA), according to a report by The Guardian.

The financial institution filed a suspicious activity report (SAR) with the agency on May 16, 2024, The Guardian reported, noting that the bankers were unable to trace the ultimate origin of the funds. A SAR is not an accusation of wrongdoing but rather a notification prompting the agency to review a transaction for potential further investigation.

Harborne, a British businessman based in Thailand, who owns a 12% stake in USDT issuer Tether and ranks sixth on The Sunday Times Rich List, has also made substantial donations to the Reform UK party.

Banks are particularly vigilant with transactions involving “politically exposed persons” (PEPs), who are considered to be at a higher risk of bribery or corruption. Financial Conduct Authority (FCA) guidance mandates that firms adopt a “risk-based and proportionate approach to PEPs when considering money laundering risks.” Harborne’s cryptocurrency holdings further elevated this risk from a banking perspective, The Guardian stated, due to the inherent difficulty in tracing funds moving in and out of digital assets.

Farage told The Guardian that he was unaware of the SAR and had “no reason to doubt the ultimate source of the money.” He asserted that the information had been “illegally obtained” by the newspaper and claimed he had no knowledge of any discussions with the NCA concerning transactions involving him.

The NCA declined to confirm or deny to The Guardian whether it had received any report, citing the confidentiality of SARs and the potential for breaching this confidentiality to constitute a “tipping off” offense under the Proceeds of Crime Act.

Discrepancies in Donation Timeline Emerge

Harborne’s lawyers informed The Guardian that Farage received the funds on April 5, 2024. However, financial industry sources cited by the newspaper indicated that at least a portion of the £5 million arrived after May 23, 2024, the date Farage announced his decision not to stand in that year’s general election, citing it was “not the right time for me.” He later reversed this decision days later to contest the Clacton seat.

This timeline appears to conflict with an account in a new book, “The Farage Factor” by Conservative peer Michael Ashcroft. The book suggests that Reform UK was already preparing to launch Farage’s candidacy by mid-May, having enlisted a GB News producer to assist with promoting a planned announcement event.

Farage has characterized the donation as an “unconditional gift” and has provided various explanations for its purpose, including security funding, a reward for his Brexit advocacy, and as “nobody’s business,” stating he could use it for luxury items like Ferraris.

Scrutiny Over Declaration and Potential By-Election

Farage has argued that he was not obligated to declare the gift as he was not a politician at the time of receipt. According to The Guardian’s reporting, he became a “person of significant control” of Reform’s corporate entity on May 1, 2024, and served as the party’s honorary president from March 2021 to June 2024.

Parliament’s standards commissioner is already investigating whether the failure to declare the funds breached parliamentary rules. The Labour party has accused him of evading scrutiny over the gift.

Hours before The Guardian’s latest report, Farage stated his intention to force a by-election in his Clacton seat. However, this move appeared to backfire on Tuesday night as the Conservatives, Labour, the Greens, the Liberal Democrats, and Restore Britain all announced they would not field candidates, dismissing the contest as a “circus.”

Should Farage be re-elected, he would still face the ongoing standards inquiry and any subsequent reprimand.

Separately, George Cottrell, a convicted fraudster with connections to an offshore crypto casino, has called for an investigation into Farage’s “failure to declare financial support.” The Reform UK leader has denied that the benefits required declaration, and Cottrell denies having expected any reciprocal benefit.

U.S. Deploys AI “Kill Switch” in June, China Explores Similar Measures for July

Beijing has engaged in quiet discussions with its leading artificial intelligence companies over the past month regarding restrictions on access to their advanced models, according to Reuters. Chinese authorities reportedly met with representatives from Alibaba, ByteDance, and the startup Z.ai to explore limiting overseas access to the nation’s most sophisticated AI systems, including those not yet released.

The meetings, convened by China’s Ministry of Commerce, involved discussions on imposing limits on both closed-source and open-weight models, the latter being accessible for local modification by developers. Officials also reportedly raised the possibility of classifying unauthorized disclosure or theft of proprietary AI technology as an offense under China’s national security law. Separately, proposals were floated to restrict the types of investors eligible to fund domestic AI startups.

The precise scope of any potential restrictions remains under debate, with some sources suggesting measures might only apply to future models rather than existing ones. No definitive timeline has been established, and the implementation of any new regulations is uncertain.

While the practicalities of such restrictions are unclear, a summary published in a Supreme People’s Court journal from a May roundtable on open-source AI regulation offered potential insights. Chinese legal experts proposed a three-tier system: basic open-source tools would require a simple government filing, more advanced technologies would undergo security reviews before release, and the most sensitive frontier models would be barred from public release or restricted to domestic use.

This proposed structure would represent a significant shift for Chinese AI companies, whose global growth has largely stemmed from open access. Alibaba’s Qwen series, for instance, has gained considerable traction on Hugging Face, a major repository for open-source AI models. ByteDance’s Doubao is a prominent AI product within China, and Z.ai’s GLM-5.2 has garnered attention from U.S. researchers for its performance comparable to top American models, offered at a significantly lower API access cost.

Any decision to restrict overseas access could increase costs for businesses that have come to rely on Chinese models as more affordable and less restricted alternatives to U.S. frontier systems. Concerns have also been amplified by the possibility that advanced cybersecurity models, such as Anthropic’s Mythos—which the U.S. administration restricted in June—could be reverse-engineered and used against Chinese systems, adding a defensive urgency to the discussions.

On June 12, Anthropic received a directive from the U.S. Commerce Department’s Bureau of Industry and Security to suspend all access to its Claude Fable 5 and Mythos 5 models for foreign nationals, including its non-citizen employees. Due to the technical challenges of selectively restricting API access, Anthropic temporarily withdrew both models globally. This marked the first instance of the U.S. applying export controls to a deployed AI model rather than the underlying hardware. The models were reinstated on June 30 after Anthropic updated its safety classifiers and the Commerce Department lifted the restrictions.

A similar pattern unfolded four days prior with OpenAI, Anthropic’s chief competitor. The company released its GPT-5.6 Sol, Terra, and Luna models, disclosing that it had previewed them with the U.S. government and, at Washington’s request, initially provided access to approximately 20 vetted partners. OpenAI has stated that government-gated access “shouldn’t become the long-term default.” President Trump’s executive order on AI issued in June had already encouraged developers to voluntarily submit frontier models for federal cybersecurity review prior to public release. A framework defining “covered frontier models” and the conditions for government pre-release access is expected by August 1.

Beijing has reportedly been closely monitoring these developments. Officials expressed alarm that Anthropic’s Mythos cybersecurity model could be weaponized against Chinese infrastructure to exploit software vulnerabilities. Additionally, concerns have been raised in China regarding allegations that Anthropic may be employing spyware-like tactics to track Chinese users.

Qihoo 360 founder Zhou Hongyi publicly voiced these concerns at ISC.AI 2026 in Beijing, advocating for China to develop domestic equivalents and unveiling Tulong Feng, a homegrown AI vulnerability agent.

The tiered structure proposed in China’s Ministry of Commerce discussions mirrors the U.S. approach to chip export controls over the past three years, a policy that has arguably narrowed rather than widened the technological gap with China.

Beijing has been progressively tightening its regulatory perimeter. In April, its state planning agency ordered Meta to divest its $2 billion acquisition of AI startup Manus, citing national security concerns under China’s foreign investment review mechanism. Moonshot AI and StepFun were required to obtain government approval before accepting U.S. capital in funding rounds. Furthermore, a broader regulatory package introduced in early June extended scrutiny to cross-border transactions involving Chinese technology and data.

The prevailing logic since the viral success of DeepSeek R1 in early 2025 has been that U.S. restrictions on frontier AI create a natural market for Chinese open-weight models. Chinese open-weight models saw a dramatic surge in usage on OpenRouter, a key global AI distribution hub, rising from less than 2% in late 2024 to approximately 61% by mid-2026. The U.S. defensive posture, therefore, inadvertently provided Beijing with a global distribution advantage that was not solely based on technical superiority.

This dynamic, however, hinges on the continued openness of Chinese models. If Beijing restricts overseas access to its frontier systems, whether closed-source or open-weight, this advantage could diminish. Z.ai’s GLM-5.2, for example, built its value proposition on borderless access under an MIT license; any restriction on this distribution would undermine its core appeal.

An analysis of the June U.S. controls highlighted a structural challenge that also applies to Beijing: national AI restrictions often struggle to remain purely national. The U.S. order on Anthropic, for instance, encompassed foreign nationals within the United States, including Anthropic’s own non-citizen employees. Data from MacroPolo indicates that over two-thirds of top-tier AI researchers in the U.S. received their training abroad, with foreign-born individuals comprising up to 70% in leading labs. Nationality-based access controls aimed at adversaries can inadvertently exclude the very engineers needed to address the vulnerabilities that prompted the restrictions. China faces a similar challenge in reverse. ByteDance and Alibaba are reportedly accelerating the rollout of humanlike agent features ahead of Chinese AI regulations scheduled to take effect on July 15, demonstrating Beijing’s capacity to implement restrictions on a defined schedule, independent of market feedback.

This potential shift could pose challenges for smaller labs and developers worldwide who rely on open-source technologies, an area where China has been a leading contributor.

French President Macron warned at the G7 summit that European governments would cease purchasing U.S. AI products if access could be abruptly curtailed. Canadian Prime Minister Carney described concentrated AI dependence as a “strategic mistake.” Both reactions implicitly assumed that Chinese AI would serve as an unconstrained alternative.