https://blockworks.co/news/jto-airdrop-market-reaction

After an explosive week for bitcoin, traders turned their attention to JTO, Solana-based Jito’s new governance token, which gained as much as 75% upon its launch Thursday. 

Jito, a staking project built on Solana, released its JTO token at 11 am ET Thursday. By 11:45 am ET, around 30% of the airdrop had been claimed, and none of the top 14 claiming addresses by size had sold.

Eligible recipients have 18 months to collect their assets, making the claim window unusually large for an airdropped token. Typical windows tend to give users 30 to 90 days to make their claims. 

JTO’s market capitalization at time of publication was around $211 million. 

Read more: Bitcoin has rallied. But where is the price going next?

Decentralized exchange Aevo practically crashed after a surge of futures market activity around the time of the airdrop. Coinbase and Binance also announced plans to list the token. 

JTO’s launch comes as altcoins continue to soar this year. Solana’s native token (SOL) is up more than 550% year-to-date. Polygon (MATIC) and Chainlink (LINK), which both posted rallies last month, still each maintained around a 16% gain over the month Thursday. 

Bitcoin (BTC) pulled back Thursday to around $43,100, after surpassing $44,000 earlier in the week. Ether (ETH) on the other hand extended its rally Thursday, gaining an additional 4.2% over the past 24 hours. 

Altcoin market share of total crypto trade volume surged to 67% last week, its highest level since March 2022, analysts from crypto research firm Kaiko found.

“Daily altcoin trade volume spiked above $20 billion in early November for the first time since April 2023,” Kaiko analysts added. “While altcoin volumes continue to be driven by offshore markets, Binance’s influence has shrunk, with its market share of global altcoin volume dropping to 46% last week, down from 60% in September 2022.”

It’s not just crypto-native traders taking an interest in altcoins, either. Exchange-traded products (ETPs) holding Solana increased 99% in assets under management last month, according to research from crypto investment firm Fineqia.

Read more: Solana’s NFT marketplace booms, with Tensor in top spot

“This follows the 172% growth recorded in October,” Fineqia analysts added. “In the last two months, ETPs holding SOL as underlying [assets] increased by 443%, representing 77% of the altcoins index assets under management growth.”

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https://blockworks.co/news/jamie-dimon-shut-crypto-down

If it were up to JPMorgan CEO Jamie Dimon, the crypto industry would be “closed down,” he told US senators Wednesday during the Financial Services Committee’s annual banking oversight hearing. 

CEOs from the world’s top banks, including Morgan Stanley, Goldman Sachs, Bank of America and BNY Mellon, among others, joined Dimon Wednesday to answer lawmakers’ questions about how effectively the banking industry is serving Americans. 

Sen. Elizabeth Warren, D-Mass., a vocal critic of the banking industry, found a rare moment of agreement with Dimon when she shifted the topic of conversation from Basel III — the international agreement spurred by the 2008 financial crisis — to cryptocurrencies. 

“Today’s terrorists have a new way to get around the Bank Secrecy Act: cryptocurrency,” Warren said during her allotted five minutes. “Last year an estimated $20 billion in illicit crypto transactions funded every kind of dangerous criminal. North Korea has funded at least half its missile program, including nuclear weapons, using the proceeds of crypto crime.” 

Warren appeared to be citing a January 2023 report from data firm Chainalysis, which found that more than $23 billion of cryptocurrency was laundered in 2022. A mid-year report from Chainalysis published in July however found that for the first half of 2023, illicit crypto activities were down 65%. 

Warren continued to ask Jamie Dimon why, based on his experience leading JPMorgan, criminals are so drawn to crypto. 

“I’ve always been deeply opposed to crypto, bitcoin etc.,” Dimon responded. “You pointed out the only true use case for it is criminals, drug traffickers, anti money laundering, tax avoidance, and that is a use case because it is somewhat anonymous, not fully, and because you can move money instantaneously.” 

“If I was the government, I’d close it down,” he added.

Dimon’s comments come as his institution continues to push ahead into the blockchain space. The banking giant launched its corporate stablecoin, JPM Coin, in 2017, which today is still available to select institutional clients. The bank also launched its blockchain platform, Onyx, in 2020, at the time hailing it as the first-ever bank-led project of its kind. 

Warren did not ask Dimon about any of JPMorgan’s crypto-related initiatives. She posed her next question to each witness: “Do you think that crypto companies facilitating financial transactions should have to follow the same anti-money laundering rules that your bank has to follow?”

“Absolutely,” each of the eight banking representatives answered.

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https://blockworks.co/news/bitcoin-rally-just-the-beginning

Bitcoin soared past $43,000 Tuesday afternoon, extending a rally some crypto analysts say is just the beginning. 

Bitcoin, up more than 160% year-to-date, hit highs not seen since April 2022 Tuesday, rallying close to 4% in 24 hours. Ether (ETH) similarly posted gains of close to 3%, moving the price to just under $2,300, also a level not hit since April 2022. 

“[Bitcoin] dominance has risen as Bitcoin has strengthened its position as a global macro asset and demand for alternative stores of value has increased,” Hal Press, founder and CEO of North Rock Digital, wrote in a recent market outlook. “Demand has been mainly driven by [bitcoin] BTC’s more consistent price performance as a [store of value] as well as broader regulatory clarity due to an expected US spot BTC ETF approval.”

Analysts from crypto analytics and trading platform altFINS agreed that ongoing ETF optimism and increased institutional adoption is a driving force for this rally, but global macroeconomic trends will be important to watch. 

Read more: Crypto stocks are riding the spot bitcoin ETF wave

“The global inflationary surge is quickly easing, with [the] Eurozone leading the way. It  would  be however premature to conclude with confidence that the Central  banks had won the fight against high inflation and that they are now ready to ease,” altFINS analysts said Tuesday. “The market expects they will start cutting rates as soon as March 2024, however, they might be reluctant to signal such moves yet.”

The Federal Reserve is scheduled to release its next interest rate decision next week. According to data from CME Group, traders are all but certain the central bank will opt to keep rates exactly where they are. 

Risk assets will continue to shift based on future policy, too. Analysts are also calling for interest rates to drop from their current level of 5.25% to around 4% by the end of 2024, though some economists say this is wishful thinking. 

“Keep in mind, late last week the market priced in a year-end 2024 fed funds rate of just over 4% meaning well more than 100 basis points of easing next year,” Tom Essaye, founder of Sevens Report Research, said. “That’s very aggressive given Fed commentary and current growth/inflation.”

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https://blockworks.co/news/sec-jarkesy-supreme-court

A Supreme Court case could change the way the US Securities and Exchange Commission and other federal agencies bring enforcement actions — but legal experts warn the crypto industry not to hold its breath. 

Following a 2011 investigation, the SEC sued hedge fund founder George Jarkesy for securities fraud, allegeding he inflated asset prices to boost his own management fee. By the SEC’s choice, the case was an “administrative proceeding,” a non-judicial process overseen by an administrative law judge instead of a federal court. 

In an appeal to the Fifth Circuit, Jarkesy argued the administrative proceeding violated the US Constitution’s seventh amendment by denying him a right to a trial by jury. 

The appellate judge sided with Jarkesy. But the SEC maintains that seventh amendment rights only apply when private rights are at stake, not public. 

Now, the case is in the hands of the Supreme Court. Justices heard oral arguments at the end of November and their opinion is pending. 

“If the Supreme Court determines that jury trials are required in all administrative matters, there would be a very widespread impact on all administrative agencies – and a corresponding big impact on the Federal courts which would have to absorb all of those cases,” said Sam Dibble, partner at Baker Botts.

Justices could opt to create a new process for determining which cases brought by federal agencies go to federal court versus administrative tribunal. As of now, the SEC has the power to decide the venue, which is supported by the 2010 Dodd Frank Act. 

Other legal experts are less certain the Supreme Court case could materially change much — especially for the crypto industry, where most cases are already advanced in federal court.  

Read more: Coinbase walks away with Supreme Court victory in arbitration case

“Some have suggested that Jarkesy might mark the end of the administrative state,” Andrew Kim, partner at Goodwin, said. “Such sentiments are hyperbolic, to say the least.  And it’s quite clear now that Jarkesy isn’t going to deal a death blow to either the SEC or the administrative state writ large. Regardless of how Jarkesy comes out, an Article III court will usually remain available to the SEC for enforcement proceedings, so you will continue to see actions like Coinbase, Binance, Kraken, etc.” 

The SEC’s cases against Coinbase, Binance and Kraken are all currently playing out in federal district courts as opposed to administrative proceedings. But for settlements, which are also common in the crypto space, the Supreme Court cases could change things, Kim said.

Read more: ‘Fundamental Difference’ between SEC’s Binance and Coinbase suits

“Historically, the SEC has used administrative proceedings to finalize settlements with private parties,” Kim said. “In a post-Jarkesy world, the SEC may well have to go to an Article III court, which can exercise independent discretion, every single time it wants to settle a potential enforcement action and extract civil money penalties as part of the agreed-upon resolution.” 

Article III court judges — i.e. federal judges — could easily approve consent orders for settlements, or “some may decide to put the SEC through the ringer,” Kim said. 

“While Jarkesy won’t mark the end of the SEC or the modern federal administrative state, whatever the Court decides will be in line with a consistent theme of limiting the reach of the federal government and providing a check against the Executive Branch,” he added. “You’ll see a lot more of that this term.”

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https://blockworks.co/news/uk-undecided-on-cbdcs

As researchers forge ahead with looking into how a digital pound could work in the UK, lawmakers remain undecided on whether or not a central bank digital currency (CBDC) has a place in its future economic landscape. 

In a recent report, the House of Commons Treasury Committee advised the Bank of England and HM Treasury to thoughtfully consider the introduction of a CBDC in the UK. It emphasized the importance of proceeding with caution and adopting a deliberate approach.

A digital pound specifically raises concerns about financial stability, committee members noted. 

“One of the most commonly cited risks was that of ‘bank disintermediation’ — that is, the switching of deposits held with banks into digital pounds,” the report read. “In periods of financial market stress, the ability to rapidly and easily switch into digital pounds could accelerate the withdrawal of deposits from banks — a so-called ‘bank run’— and thereby increase the risk of bank failures.” 

Further, an increase in transferring deposits into digital pounds could result in higher interest rates on bank lending, the economists noted. 

Read more: Wholesale CBDCs and automatic market makers could be the perfect pair, BIS finds

Committee members were further influenced by how other countries appear to be thinking about a CBDC. The United States, the report noted, “is not pursuing the development of a CBDC with any urgency,” further pushing UK lawmakers to recommend a slower and more thoughtful approach. 

“I am not convinced about some of the problems that we might be trying to solve,” Governor of the Bank of England Andrew Bailey said at the start of the year. “I am not necessarily convinced that the retail payment systems need this sort of upgrade at the moment.”

The Federal Reserve, while also taking steps to research the potential impacts and risks of a CBDC, seems similarly skeptical of how one would fit into the existing financial system. 

“We would not support…accounts at the Federal Reserve by individuals,” Fed Chair Jermone Powell told Congress during a June 2023 hearing. “If we were to, and we’re a long way from this, support at some point in the future a CBDC, it would be one that we’re intermediating through the banking system and not directly at the Fed.”

The report and international comments coincide with ongoing opposition to a retail CBDC by US lawmakers. Earlier this Congressional session, Rep. Tom Emmer, R-Minn., reintroduced legislation to prohibit the Federal Reserve from issuing a CBDC directly to individuals.

“This bill puts a check on unelected bureaucrats and ensures the US digital currency policy upholds our American values of privacy, individual sovereignty, and free-market competitiveness,” Emmer wrote on X, formerly Twitter, in September, citing common criticisms of the digital dollar. 

The UK report highlighted privacy, particularly with regard to government visibility into spending habits with a digital pound, as a primary concern. Nonetheless, committee members identified potential solutions to address these issues.

“The Bank of England and Treasury consultation paper states that the digital pound would not be anonymous because the ability to identify and verify users is needed to prevent financial crime,” the report said. “Payment Interface Providers — the private-sector firms that users would interact with directly to manage their digital pounds — would identify and verify users, but anonymise personal data before sharing with the Bank of England for recording on the digital pound’s ‘core ledger.’” 

In a joint statement over the weekend, the Bank of England and the HM Treasury said that they would be responding to the committee’s report “shortly,” along with their joint consultation paper outlining next steps for the UK and a digital pound.

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https://blockworks.co/news/bitcoin-ether-trading-stock-markets

While the US stock market opened mostly in the red Monday, crypto-tied equities appeared to prove the exception Monday morning.

Some publicly listed firms posted double-digit rallies to round out the last month of the year. Galaxy Digital, Marathon Digital Holdings and Riot Platforms each gained more than 10% in the first twenty minutes of Monday’s trading session. 

Coinbase and MicroStrategy weren’t far behind, posting around 8% and 9% rallies, respectively. Indeed, Coinbase, Marathon and Riot are poised to clock gains of more than 300% over the year. 

Cryptocurrencies were also in the green. Bitcoin (BTC) rallied more than 4% Monday morning over the past 24 hours, putting the largest cryptocurrency on track to post more than 150% gains over 2023. Ether (ETH), which was up around 1.4% Monday, has rallied more than 85% year-to-date. 

Read more: MicroStrategy bought nearly $600M bitcoin in less than 1 month

“Crypto trades while stocks are closed, so then they have to slingshot to maintain relative value,” said Roshun Patel, partner at Hack VC.

The ongoing optimism around a spot bitcoin exchange-traded fund remains a key market-driving narrative, Patel added, which is serving as a tailwind for both cryptocurrencies themselves and related stocks. 

“Coinbase in particular benefits a lot from anyone getting an ETF approved as they will serve as the go-to custodian. I think stock market traders have a hard time underwriting BTC much higher so their forward expectations of earnings for stocks, especially miners, are dampened to expected reality,” Patel said. 

Read more: Spot bitcoin ETF market sees new applicant ahead of SEC ruling

Bitcoin, which briefly hit $42,000 Monday before hovering around $41,600 later in the morning, is obviously riding the ETF wave, analysts agree, and the rally is positioning other cryptos in a favorable spot. 

Bitcoin “is still the ‘gateway’ into the crypto market for many mainstream and large investors, as can be seen in its climbing market dominance,” Noelle Acheson, author of the Crypto is Macro Now newsletter said. 

Broader markets, by contrast, slipped early in the trading day. The S&P 500, Nasdaq Composite and Dow Jones Industrial Average indexes each opened in the red. The Russell 2000, representing small-caps, outperformed, gaining close to 3% at the open. 

For traders considering other strategies to close out 2023, small caps may be a good place to look, analysts said. 

A run for US small-caps, which continued Monday after the Russell 2000 posted a 3% rally on Friday, may not be the most shocking narrative, but it could foreshadow what is to come for the rest of the year. 

“Friday’s Russell rally, while not especially unusual, does signal the possibility of a classic “dash for trash” rally in small caps this month,” Nicolas Colas, founder of DataTrek Research, wrote in a note Monday. 

“This slice of the US equity market has lagged large caps in 2023, largely due to its spotty profitability and worries that high interest rates would crimp the ability of smaller companies to raise affordable incremental capital,” Colas added. “Now that rates seem to be heading lower, it makes sense that small caps could continue to play catch up.”

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https://blockworks.co/news/judge-sec-lied-restraining-order

A federal judge thinks attorneys from the US Securities and Exchange Commission lied to receive a temporary restraining order, and he’s ordered them to explain why. 

In an order to show cause filed in Ohio Thursday, judge Robert Shelby has demanded the SEC make a case for why its lawyers shouldn’t be sanctioned by the court after conflicting stories led him to believe the agency presented false and misleading evidence in order to freeze Digital Licensing and DEBT Box’s assets in July 2023. 

After accusing Digital Licensing, which operates under the name DEBT Box, of offering an unregistered security and defrauding investors of “at least $49 million,” the SEC’s legal team claimed the defendants were attempting to move assets and investor funds overseas. 

The SEC cited bank statements and account closures as evidence the funds were moved internationally in its attempt to get a temporary restraining order, or TRO. It intended to use this to freeze the company’s assets, among other things.

“Just as we were on break I was reminded by investigative staff with respect to the investigation which remains ongoing that even in the last 48 hours defendants have closed additional bank accounts, and I believe the number, I don’t have it in front of me, was around 33 bank accounts have been closed,” Welsh told the court in July during the TRO hearing. 

These comments, Shelby wrote, were understood at the time to mean that defendants had closed 33 bank accounts in 48 hours. This, coupled with the accusations that DEBT Box and its team had tried to block the SEC from viewing its social media sites, was enough to grant the ten-day TRO. It was subsequently renewed “several times,” the judge wrote. 

Two groups of defendants and relief defendants moved to dissolve the TRO in September. Each group claimed the SEC had misled the court in their initial application. 

The SEC then “tacitly acknowledged” that no bank accounts were closed in July 2023 and the accounts that were closed were shut down by the banks, not the defendants, Shelby wrote. The TRO was dissolved in October 2023. 

At the hearing to dissolve, Welsh told the court that the SEC did not actually know why the bank accounts had been closed and the commission had no evidence that any money had been moved overseas since January 2023. As for his apparent comments about 33 bank accounts closing within 2 days, neither Welsh nor the SEC addressed this specifically, Shelby said. 

“The court was further troubled by Welsh’s apparent misrepresentation because another attorney from the Commission was on-screen at the ex parte TRO hearing, and there were two investigative staff off-screen,” Shelby wrote. “Yet nobody clarified or corrected Welsh’s statement.” 

Industry members say Thursday’s development is part of a “troubling pattern” displayed by the SEC recently. 

“The good news for the crypto community is that this sort of conduct is exceptionally bad, even by SEC standards, and I’m going to suspect the fact that the SEC is being sanctioned for misrepresentations might be of interest to people like [Binance, Kraken and co-founder Jesse Powell],” Austin Campbell, founder and managing partner of Zero Knowledge Consulting, added. 

The SEC has received the order “and will respond to the Court as directed,” a spokesperson from the SEC told Blockworks. 

Members of the defense team declined to comment.

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https://blockworks.co/news/hester-peirce-sec-endgame

Hester Peirce, commissioner at the US Securities and Exchange Commission, isn’t quite sure what her agency’s endgame appears to be. 

“There doesn’t seem to be a rhyme or reason for a lot of cases we bring,” Peirce said Thursday during a fireside discussion at the Blockchain Association Policy Summit in Washington, DC. 

Peirce’s agency brought a total of 784 enforcement actions during the 2023 fiscal year, a 3% increase from 2022, largely thanks to SEC Chair Gary Gensler’s escalating interest in the cryptocurrency space. 

The SEC increased its enforcement actions involving securities offerings by 48% in 2023, one of which was the agency’s case against NFT issuer Stoner Cats 2 LLC.

“I don’t really view it as my primary objective” to stop people from purchasing Stoner Cats, Pierce quipped. 

“We need to just also remember that there’s a lot of traditional securities fraud going on, and resources that were spent going after Stoner Cats are not being spent to go after [other actors.],” she added. 

The trend of taking its battles to the courts is not new for the SEC, and Peirce has made her criticism of the strategy known. 

“I will say that litigation is not the most effective way to carry out regulations,” Peirce said during an appearance on Bloomberg TV last week. 

The SEC’s case against LBRY, a saga that eventually ended in the content sharing platform shutting its doors last month, was a particularly troubling instance, Peirce said. 

“I was really heartbroken that we were bringing the case,” she said Thursday. “Here was a project that had actually built a functioning blockchain that was being used…and there had been efforts made to try to launch in a way that was consistent with the securities laws.” 

The SEC has a difficult job determining which enforcement actions to pursue, Peirce said, making the entire process somewhat arbitrary. 

“We have to make resource allocation decisions; where does it make sense to spend our resources?” she said. “[LBRY] is just a case where I would have made a different call.” 

Looking ahead, when asked what she envisioned the SEC’s ‘endgame’ in terms of crypto to be, Peirce didn’t have an answer, but she did have an opinion. 

“I really can’t tell you definitively,” she said. “We need to stick to the mandate Congress gave us and not extend beyond that.”

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https://blockworks.co/news/us-treasury-expanded-crypto-oversight

US Treasury Deputy Secretary Wally Adeyemo has a message for digital asset firms: Get in line, or end up like Binance. 

“I hoped the digital asset industry would take up this call to partner with government, design new tools and pursue new ways to protect digital assets from being abused,” Adeyemo said at the Blockchain Association Policy Summit in Washington DC Wednesday. 

While many digital asset firms have taken steps toward compliance, others have failed to act. According to Adeyemo, this “represents a clear and present danger for national security.” 

The Treasury Department sent a legislative proposal to Congress on Tuesday asking for additional authority to oversee the crypto space, including allowing it to step outside of the United States. 

Read more: From SBF to Binance: Biggest court cases of 2023

Treasury officials have asked Congress to expand the International Emergency Powers Act to explicitly allow the agency to “designate blockchain nodes or other elements of cryptocurrency transactions,” according to a copy of the proposal obtained by Blockworks. 

Some industry members argue that given the Treasury’s apparent success thus far in sanctioning exchanges, mixing services and other actors, granting the agency greater authority is unnecessary. 

The rules cannot always keep up with the technology, Adeyemo said in response to the criticism. 

“The thing that I learned most from being a treasury during the financial crisis is that innovation outpaced regulation,” he added. “Our goal is to make sure that we have the flexibility.” 

Read more: Treasury urges crypto companies to ‘prevent’ terrorist financing

Adeyemo’s remarks came hours after his office announced sanctions against cryptocurrency mixing service Sinbad for allegedly facilitating North Korea state-sponsored hacking group Lazarus’ money laundering. 

For illicit actors, the digital asset ecosystem is the “prefered” method of moving assets, as opposed to the traditional financial system, Adeyemo said. 

“My message is simple: We will find you and hold you accountable,” he said to the digital asset industry and those enabling or facilitating illicit actions.

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https://blockworks.co/news/binance-philippines-sec-reminder

The Securities and Exchange Commission of the Philippines has reminded citizens that Binance is not permitted to operate or offer its services in the country, even though it is trying to. 

“Binance has been actively employing promotional campaigns on various social media platforms to attract and entice Filipinos to engage in investment and trading activities using its platforms,” the Philippines SEC wrote in an advisory Tuesday. 

Binance does not hold the required licenses to advertise and serve customers in the Philippines, the agency added. The Philippines SEC advised citizens to exercise caution when engaging and investing with unregistered entities. 

“Those who act as salesmen, brokers, dealers or agents, representatives, promoters, recruiters, influencers, endorsers and enablers of the Binance platform in selling or convincing people to invest in this platform within the Philippines even through online means may be held criminally liable,” the notice said. 

The news comes days after the US Department of Treasury announced a settlement with the exchange for a historic $4.3 billion. In an unsealed indictment made public last week, the US government accused Binance and CEO Changpeng Zhao of violating anti-money laundering laws, and sanctions laws. 

Read more: Here are the details of Binance and Changpeng Zhao’s plea deal

“Defendants chose not to comply with US legal and regulatory requirements because it determined that doing so would limit its ability to attract and maintain US users,” the DOJ claimed. 

Zhao, who pleaded guilty and agreed to pay $50 million in fines, stepped down from his role as CEO and resigned from the board of directors. The government has asked the court to keep Zhao in the US until his sentencing, which is scheduled for Feb. 23, 2024. He faces up to 10 years in prison. 

Zhao’s legal team has opposed the motion. The judge has not yet ruled.

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https://blockworks.co/news/sinbad-sanctioned-ofac-treasury

The US Department of the Treasury has sanctioned a cryptocurrency mixing service the government claims is a key money-laundering tool for the Lazarus Group. 

“Sinbad has processed millions of dollars’ worth of virtual currency from Lazarus Group heists, including the Horizon Bridge and Axie Infinity heists,” the Office of Foreign Asset Control (OFAC), the Treasury’s department that oversees sanctions, said in a statement Wednesday. 

Sinbad.io, a cryptocurrency mixing service created by an anonymous founder, became a favorite for North Korean-state sponsored hacking organization Lazarus in 2022, researchers from analytics firm Chainalysis said in its last annual report. Researchers from Elliptic agreed, saying in February they believed Sinbad is simply a relaunched version of Blender, the mixer OFAC blacklisted in 2022. 

As of Wednesday, the US government had seized Sinbad’s website. 

“Mixing services that enable criminal actors, such as the Lazarus Group, to launder stolen assets will face serious consequences,” Deputy Secretary of the Treasury Wally Adeyemo said in a statement Wednesday. “The Treasury Department and its US government partners stand ready to deploy all tools at their disposal to prevent virtual currency mixers, like Sinbad, from facilitating illicit activities.

Read more: FBI blames North Korea’s Lazarus Group for $40M Stake hack

Lazarus Group was added to OFAC’s sanction list in September 2019. 

Sinbad was used to launder a significant portion of the $100 million worth of crypto Lazarus stole in June 2023 from customers of Atomic Wallet, OFAC said. Lazarus also used the mixer “to launder a significant portion” of crypto stolen in the $620 million Axie Infinity heist, the office alleges. 

“Sinbad is also used by cybercriminals to obfuscate transactions linked to malign activities such as sanctions evasion, drug trafficking, the purchase of child sexual abuse materials, and additional illicit sales on darknet marketplaces,” OFAC added. 

The announcement comes as cryptocurrency advocacy groups continue to fight OFAC in the courts over the agency’s sanctions against Tornado Cash — a mixing service sanctioned in August 2022 for its alleged role in helping Lazarus launder more than $455 million in stolen funds. 

Plaintiffs in two cases are bringing their battle against the Treasury to federal appellate courts. Joseph Van Loon, along with five other self-identified “Ethereum blockchain users” sued the US Treasury Department, Secretary Janet Yellen, the Office of Foreign Asset Control (OFAC) and OFAC Director Andrea Gacki in September 2022. A federal judge in Texas sided with the federal government in August, rejecting the argument that OFAC was acting outside its jurisdiction. 

Coin Center, Bankless co-founder David Hoffman and others filed a lawsuit against the same federal parties in October 2022. Like in Loon’s case, a federal judge in Florida sided with the US government last month, prompting Coin Center and its co-plaintiffs to file an appeal in the Eleventh Circuit earlier this month.

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https://blockworks.co/news/sec-terra-jump-crypto-discovery

A judge has granted Jump Crypto’s motion to confidentially submit certain materials during the discovery phase in the US Securities and Exchange Commission’s lawsuit against Terraform Labs and its founder Do Kwon.

Federal Judge Jed Rakoff filed the motion in New York Tuesday. Should the court later decide a document needs to be made public, the ruling may be overturned, Rakoff noted in his opinion. 

Jump Crypto has been accused of manipulating the price of stablecoin TerraUSD and in turn raking in a $1.28 billion profit. 

Terra, according to the SEC, loaned “a US trading firm” 30 million Terra (LUNA) tokens in November 2019 and an additional 65 million LUNA in September 2020. The trading firm in question is Jump Crypto, per a report from The Block.  

Read more: Where things stand: The SEC vs Do Kwon and Terraform Labs

The “loans” were to improve liquidity, Terra said, but the trading firm was “continuously selling LUNA into the market,” the SEC alleged. 

When TerraUSD lost its peg to the US dollar in May 2021, Jump Crypto entered into an agreement to purchase a large sum of the stablecoin in an effort to stabilize its value, according to securities regulators.

“Defendants falsely and misleadingly represented to the public that UST’s algorithm had successfully re-pegged UST to the dollar, giving the investing public the false and misleading impression that the re-peg had occurred without human intervention and misleadingly omitting the real reason for the re-peg: intervention by [Jump Crypto]” the February 2023 complaint reads. 

The SEC filed its complaint against Terra and Kwon in February this year, about nine months after the Terra ecosystem collapsed. The securities regulator alleges the Kwon “orchestrated a multi-billion dollar crypto asset securities fraud” between April 2018 and May 2022. 

In its complaint, the SEC alleges that Kwon and his company deceived investors. They reportedly made false claims that the Korean mobile payment processor Chai used the Terraform blockchain for transactions and settlements. According to regulators, these claims were not true.

Read more: Jump Crypto president pleads the Fifth when asked about alleged Do Kwon bribe

Jury selection is scheduled to begin on Jan. 29, 2024 in downtown Manhattan, should the case proceed to trial. Currently, both the SEC and Terra have requested a summary judgment, which, if granted, could result in the matter being settled outside of trial. 

Rakoff in July denied Kwon and Terra’s motion to dismiss the case, ruling that the government had made enough of a case against the company and its founder to proceed. 

“[B]ecause, according to the well-pleaded allegations of the complaint, the defendants used false and materially misleading statements to entice US investors to purchase and hold on to defendants’ products, and because those products were unregistered investment-contract securities that enabled investors to profit from the supposed investment activities of defendants and others, the motion to dismiss must be denied,” Rakoff wrote in his July 2023 opinion. 

In addition to the SEC’s civil suit against him, Kwon faces criminal charges in the US in relation to the collapse of the Terraform ecosystem. Kwon is currently serving a four month prison sentence in Montenegro for alleged document forgery. The country approved his extradition earlier this month. Following the completion of his sentence, authorities will decide whether to extradite the founder to the US or South Korea.

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https://blockworks.co/news/traders-end-november-green

Cryptos and equities picked up steam Tuesday after an uneventful Monday, setting up traders for a positive end to a strong month. 

Bitcoin (BTC) and ether (ETH) were in the green time of publication, both posting gains of around 1.3% and 0.9%, respectively. The S&P 500 and Nasdaq Composite Indexes similarly clocked modest moves, with both up around 0.4%. 

Bitcoin has gained close to 9% since the start of the month. The largest cryptocurrency rallied more than 5% in the first ten days of November and has spent the past couple weeks jumping between $35,000 and $37,000. In 2022, amid the aftermath of FTX’s bankruptcy, bitcoin closed out November 16% lower. 

Ether also saw its biggest moves early in the month, rallying close to 15% in the first nine days of November before paring gains to trade around 10% higher on the month as of Tuesday. 

Better-than-expected inflation data pushed cryptos higher this month, analysts from Kaiko Research said. Last week’s news on Binance’s historic $4.3 billion settlement barely tipped the needle for cryptos, in sharp contrast to what the FTX news from one year ago did to markets, analysts added. 

“From an outsider’s perspective, the settlement proved grim, but within the industry, there was a sigh of relief knowing that Binance is still able to operate, albeit with increased restrictions and the dismissal of its CEO,” Kaiko researchers wrote in a Monday report. “While the exchange reportedly saw outflows of over $1 billion, the immediate impact on volumes and liquidity was muted.” 

Looking ahead, continued lower Treasury yields fuel traders’ risk-on attitudes, analysts say, but whether or not the trend is sustainable is up for discussion. Benchmark 10-year notes dropped to 4.35% Tuesday, down even further from Monday’s decline when they dipped from 4.47% to 4.39%. Still, a sustained reduction is unlikely, based on historical precedent, Nicolas Colas, co-founder of DataTrek Research said. 

“Any substantial decline in nominal 10-year Treasury yields would have to come from lower real rates rather than reduced inflation expectations,” Colas said. 

Since 2004, Colas said, only three conditions have led to real rates declining by 1% or more: recession, Federal Reserve bond buying, and the Fed changing its assessment of future interest rates. 

“Since capital markets are not discounting a recession and the Fed is highly unlikely to change its current bond selling program, the only thing that will force real yields lower is a change in policymakers’ belief that ‘higher rates for longer’ is necessary to quell inflation,” Colas said.  “As we get more data supporting the idea that inflation is continuing to decline, both bonds and stocks should rally further.”

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https://blockworks.co/news/genesis-sues-gemini-legal-battle

A month after both companies were hit with a lawsuit from New York Attorney General Letitia James, Genesis Global has sued Gemini Trust and associated users in an attempt to recover over half a billion dollars.

In a complaint filed in New York bankruptcy court Tuesday, Genesis Global alleges Gemini Trust received more than $689 million in withdrawals in the three months before the crypto lender filed for Chapter 11 bankruptcy. 

Gemini, the custodian and authorized agent for Earn users, was the recipient of withdrawals Earn users made during the “bank run” spurred by the spring 2022 market collapse. Up to 232,824 Earn customers pulled money from the platform, the lawsuit alleges. 

Earn was a program owned by Gemini and Genesis where customers could lend cryptoassets in exchange for interest. Under their agreement, Genesis acted as the borrower and reinvested crypto assets in order to generate yield. Gemini processed withdrawals. 

Read more: Gemini Earn users could be made whole through plan, DCG says

“As a result of these withdrawals, [Gemini] benefitted at the expense of [Genesis’s] other creditors, and continues to benefit to this day through their retention of the property [Genesis] seeks to avoid and recover here,” the complaint reads. 

Genesis filed for bankruptcy in January 2023 after the collapse of several of its counterparties, including exchange FTX. 

James announced her lawsuit against Gemini, Genesis and parent company Digital Currency Group (DCG) on Oct. 19. 

Read more: Gemini accuses Genesis of manipulating the voting process in FTX settlement

James’ office alleges Gemini and Genesis Capital conspired on two “fraudulent schemes” with their Gemini Earn product, resulting in investors losing more than $1 billion in November 2022 when withdrawals from the platform were suspended. DCG “coordinated” with the companies to perpetuate the scheme, the complaint alleges. Earn also constitutes an investment contract under the Howey test, James added. 

Days after the joint suit was filed, Gemini sued Genesis, alleging that the bankrupt crypto lender owes Gemini roughly $1.6 billion worth of Grayscale Bitcoin Trust (GBTC) shares.

“Genesis has repeatedly taken actions to harm Earn Users and to hinder and delay Earn Users’ recovery of their digital assets,” Gemini said in its complaint. 

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https://blockworks.co/news/binance-news-crypto-rally

Crypto markets stabilized Wednesday after a brief dip Tuesday following news that Binance and former CEO Changpeng Zhao had entered into an agreement with the US government, terms of which include Zhao’s guilty plea and a payment of $4.3 billion in fines and forfeitures from Binance. 

Bitcoin and ether posted gains this morning, rallying around 2% and 5%, respectively. Stocks also opened in the green, with the Nasdaq Composite up around 0.8% and the S&P 500 gaining about 0.6% in the half hour after the open. 

Crypto’s rally is not surprising, analysts say, as Binance’s settlement with the US Department of Justice is largely being perceived as a step in the right direction, and not just for the exchange. 

“This is very good news for the industry as a whole,” Noelle Acheson, author of the Crypto is Macro Now newsletter, said. “It’s not just the ‘cleaner image’ that the Binance settlement and change of leadership confers on all market service providers, as the DOJ has shown that its arms are long. It’s also the removal of an ominous overhang, a dark cloud of ‘regulatory risk’ that many feared could break Binance, which would have been really, really bad for investors, traders and savers everywhere.” 

Read more: Binance fallout ‘opportunity to start a new chapter for this industry’: Coinbase CEO

Tuesday also saw the release of the minutes from the Federal Reserve’s last policy-setting meeting, which showed a decidedly dovish shift that, after digesting the news, traders seem to like. 

A key point in the minutes was the central bank’s decision to make all future meetings “live,” or strictly dependent upon on economic data, which at the time of the decision would suggest more rate hikes could be possible if inflation flares up again, Tom Essaye, founder of Sevens Report Research said. 

Still, Wednesday’s equity rally could be short-lived if traders’ expected rate-cut timeline plays out.

“Market-based Fed policy expectations barely budged at the release and continue to call for a first rate cut in May with additional cuts to follow over the summer and into the fall, which should remain a tailwind for stocks near-term,” Essaye added. 

Risk assets, like crypto, are also poised for a correction based on inflation data and Fed interest rates, analysts from Amberdata said in a report Tuesday. 

“Looking ahead into the end of the year and the start of 2024, risk assets are going to be data dependent as ‘hot’ data will warrant a hawkish reaction in markets and potential resurgence in volatility,” Essaye said.

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https://blockworks.co/news/hester-pierce-dont-regulate-courtroom

US Securities and Exchange Commission Commissioner Hester Peirce reiterated Tuesday that court cases are not the only path to regulatory clarity for crypto.

“I will say that litigation is not the most effective way to carry out regulations,” Peirce said during an appearance on Bloomberg TV Tuesday afternoon. “Certainly enforcement actions are one tool that we have in our toolbox, but we have other tools.” 

Peirce’s comments come amid reports that Binance and CEO Changpeng Zhao will plead guilty and pay more than $4 billion in a deal with the Department of Justice. Zhao will also step down from his position, according to a Wall Street Journal report. Zhao appeared in a federal court in Seattle as Peirce spoke. 

“I can’t talk about ongoing cases,” Peirce said. “But I will say that with all of these cases that move forward, we should really be thinking proactively about building a regulatory framework…that would work and allow companies to do business in the United States, and that’s what I’m hoping we can work on in the coming months and years.” 

The DOJ, alongside the Commodity and Futures Trading Commission (CFTC), is slated to announce “separate but related cryptocurrency enforcement actions” Tuesday afternoon in Washington, DC. No officials from the SEC will be present, according to a statement from the DOJ. 

The SEC and DOJ did not respond to Blockworks’ request for comment. 

Today’s announcement will include information about the department’s settlement with Binance, according to Bloomberg News. 

In 2023, the SEC upped its number of enforcement actions by 3% from fiscal year 2022, data released last week shows. 

“Fiscal year 2023 was another highly productive and impactful year for the SEC’s enforcement efforts relating to crypto asset securities,” the agency wrote in the report. 

Peirce admitted that she does not always see eye-to-eye with other commissioners, but added that the agency’s approach to the crypto industry as a whole needs improvement. 

“I would take issue with the characterization that I’m an advocate for the industry,” she said. “What I’m an advocate for is people being able to come into the SEC and figure out…what regulations apply, and then comply with those regulations. 

“That’s where I think we’ve fallen down on the job, and I think that’s…where the conflict has sometimes arisen between me and my colleagues.”

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https://blockworks.co/news/lawmakers-clash-over-crypto-terrorism

Members of the House Financial Services Committee clashed Wednesday in Washington over how – and how often – cryptocurrencies are used in illicit financing.

The Financial Services Committee’s Subcommittee on Digital Assets, Financial Inclusion and Inclusion hosted a hearing Wednesday titled “Crypto Crime in Context: Breaking Down the Illicit Activity in Digital Assets.” 

Industry leaders, legal minds and financial crime experts gathered to answer lawmakers’ questions on crypto’s role in financing illicit actors, including foreign actors, drug cartels and the terrorist organization Hamas. 

Rep. Stephen Lynch, D-Mass., asked witness Alison Jimenez, president of Dynamic Securities Analytics, which specializes in crypto and money laundering, about how lawmakers should proceed in terms of policing illicit activities. 

“We’ve had a number of bills come through this committee that, for instance, would take away jurisdiction from the SEC, [which has] been a primary mover in the space, and place it with the Commodities Futures [Trading Commission],” Lynch said. 

Jimenez agreed, adding that while the SEC is the superior regulator in terms of expertise, even the greatest regulations in the world will not fully protect Americans, given crypto’s international nature. 

“The SEC has a lot more broad experience investigating financial crimes, compared with the CFTC,” she said, adding that while the CFTC only gets a hundred or so Suspicious Activity Reports (SARs) a year while the SEC handles tens of thousands. 

“I’m concerned that we might have great rules, and if the US institutions follow them that’s wonderful, but US citizens and customers will still be victims… [crypto] is not going to stop being a useful tool for criminals,” Jimenez said.  

Rep. Warren Davidson, R-Ohio, disagreed, adding at the end of his five-minute allotted time slot that a high number of SARs does not correlate to an industry’s actual crime rates, as Jimenez had suggested. 

“I wish I had longer with each of you, and in particular debunking the idea that lots of SARs equals lots of illicit activity,” Davidson said in closing. 

Other witnesses presented different takes, adding that crypto’s transparent nature, combined with existing regulations, make enforcement easier. 

It’s important to balance “combating criminal activity and preserving some of the fundamental rights in the US that we hold dear, which includes privacy,” Jane Khodarkovsky, partner at Arktouros and former federal prosecutor, told members. 

“There are ways for law enforcement to investigate and trace assets on the blockchain because of its traceability and immutability even if individuals are using self-hosted wallets because they will interact, under our current US robust AML framework… with on-ramps.” 

Plus, Jonathan Levin, co-founder and chief strategy officer at Chainalysis, noted, private and public industry partnerships can only enhance the government’s ability to crack down on criminals. 

“The government has come a long way since I first testified in front of this committee on being able to actually leverage this type of technology,” Levin said. “There’s a lot more that can be done with proactive detection and data that I think the government needs to take extra steps in order to prevent… terrorist financing.” 

The hearing comes alongside a bipartisan letter 57 members of Congress sent to President Joe Biden and Treasury Secretary Janet Yellen Wednesday asking for more information on how Hamas is funded and the role of crypto in financing their operations. 

“As Congress seeks to eliminate the pathways for terrorist financing to protect both our interests at home and abroad and those of our allies, we need greater context around Hamas’ operations,” lawmakers wrote in the letter. “This is particularly critical given the conflicting reports we have on Hamas’s fundraising campaign from blockchain analytics firms.”

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https://blockworks.co/news/delaware-xrp-fake-filing-state-justice-officials

Monday’s false business registration for a BlackRock XRP trust, which briefly boosted the token’s price by as much as 10%, has garnered the attention of regulators. 

The Delaware Department of State referred the matter to the Delaware Department of Justice, a spokesperson told Blockworks Tuesday. 

The registration, which crypto fans noticed Monday afternoon, mirrored past legitimate registrations from asset manager BlackRock, which is currently vying for the US Securities and Exchange Commission to approve its bitcoin and ether products. The falsified registration listed BlackRock Advisors and Daniel Schweiger as registered agents. 

A Bloomberg ETF analyst on Monday confirmed via X the filing was fraudulent, citing a spokesperson from BlackRock. 

Should the Delaware DOJ pursue charges, it would not be the first time the agency has targeted crypto-related schemes. 

In September, the state issued a cease and desist order to OKX.com and three other respondents for allegedly facilitating a long-term fraud scheme. 

According to the order, a senior citizen lost $275,000 in retirement funds after being groomed to make cryptocurrency investments on bybit.us, an imposter of exchange ByBit.com. The funds now reside in wallets on the OKX exchange, the Delaware DOJ alleged.

“The use of crypto to commit fraud, while increasingly common, presents new challenges for law enforcement,” Delaware Attorney General Kathy Jennings, said when the order was released. Today’s order takes a first step toward protecting Delaware investors from the pig butchering scam by freezing funds belonging to the victim.”

The Delaware DOJ did not immediately respond to Blockworks’ request for comment.

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https://blockworks.co/news/tornado-cash-fans-appeal

Despite recent losses in court, interested parties and crypto industry players are not giving up their fight against Tornado Cash sanctions. 

Plaintiffs in two cases are bringing their battle against the US Treasury Department to federal appellate courts. Joseph Van Loon, along with five other self-identified “Ethereum blockchain users” sued the US Treasury Department, Secretary Janet Yellen, the Office of Foreign Asset Control (OFAC) and OFAC Director Andrea Gacki in September 2022.

They argued that the US government was out of line when it sanctioned crypto mixing service Tornado Cash. Tornado Cash was sanctioned in August 2022 under accusations the service facilitated the laundering of billions of dollars.

Read more: Tornado Cash sanctions expose potential DeFi Achilles’ heel

The mixing service has no place on the Specially Designated Nationals and Blocked Persons (SDN) list, the plaintiffs argue. The Treasury’s “unprecedented, overbroad action exceeds Defendants’ statutory authority, infringes on Plaintiffs’ constitutional rights, and threatens the ability of law-abiding Americans to engage freely and privately in financial transactions,” plaintiffs wrote in their September complaint. 

A federal judge in Texas sided with the federal government in August, rejecting the argument that OFAC was acting outside its jurisdiction. 

“Plaintiffs urge the Court to reject broad definition, claiming that OFAC is not entitled to deference when defining unambiguous statutory terms,” Judge Robert Pitman wrote in his opinion. “But ‘interest in property’ is hardly an unambiguous term.”

Loon and his fellow plaintiffs, with the support of crypto exchange Coinbase, filed an appeal in Fifth Circuit on Tuesday, stating that the Pitman’s original ruling does not address the fact that Tornado Cash, which they describe as a piece of computer code, is not a “foreign national or person,” therefore putting it outside OFAC’s authority. 

“Whether the Department’s inclusion of immutable smart contracts on the SDN List is contrary to law and in excess of statutory authority because the purported Tornado Cash entity does not have an ‘interest’ in the immutable smart contracts under [the International Emergency Economic Powers Act] and the North Korea Act,” Loon’s appeal states. 

Coin Center, Bankless co-founder David Hoffman and others filed a lawsuit against the same federal parties in October 2022. 

Read more: Tornado Cash got wrecked, and we could have prevented it

Like in Loon’s case, a federal judge in Florida sided with the US government last month, prompting Coin Center and its co-plaintiffs to file an appeal in the Eleventh Circuit last week.

Coin Center cited similar concerns over the use of the International Emergency Economic Powers Act and the government’s treatment of Tornado Cash’s as a foreign person or national. 

“Congress gave [the] Treasury the power to prohibit transactions involving certain “property” in which a foreign “national” or sanctioned ‘person’ has an interest,” Paul Grewal, chief legal officer at Coinbase, wrote on X Tuesday. Treasury’s action here stretches that authority and those words beyond any recognition.

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https://blockworks.co/news/bitcoin-mixers-tornado-cash

Bitcoin-only accumulation platform Swan warned over the weekend that users involved with bitcoin mixing services may see their accounts terminated due to increased scrutiny from banks and custodians.

Swan’s banking and custodial partners “will no longer service clients who directly interact with bitcoin mixing services such as Wasabi, Samourai and similar services,” Swan said in a statement to users on Friday. 

Depositing “directly to” or withdrawing “directly from” crypto mixing services could result in Swan’s banking and custody partners terminating the user’s account, the warning added.

Swan noted that banks and custodians have changed their policies based on new proposed rules from US Treasury’s Financial Crimes Enforcement Network (FinCEN). If enacted, it would require regulated financial institutions to report transactions when there is reason to suspect involvement in transaction mixing.  

“Mixing offers a critical service that allows players in the ransomware ecosystem, rogue state actors and other criminals to fund their unlawful activities and obfuscate the flow of ill-gotten gains,” FinCEN Director Andrea Gacki said in October when the proposal was released. 

Read more: Security firms track FTX exploiter through Bitcoin mixer

Given the proposal, which Swan vehemently opposes, Swan chief technology officer and co-founder Yan Pritzker is unsurprised that the company’s financial institution partners have taken a stance against mixers. 

“The current political climate has pushed a lot of fear into the banking sector, with most banks simply refusing to do business with anything in ‘crypto,’” Pritzker wrote on X. 

“There is no way to process USD in the United States if you do not use a bank or Money Services Business…and all such Financial Institutions…are subject to rules and guidelines from FinCEN, [Financial Action Task Force], and other unelected bodies,” he added. 

The warning comes amid an increasingly hostile US regulatory environment for crypto mixing services as agencies and lawmakers grow concerned about mixers’ ability to help illicit actors launder money. 

Last month, a federal judge sided with the US Treasury after Coin Center and other crypto industry advocates sued the Department over its Tornado Cash sanctions.  

Coin Center and its co-plaintiffs argued that the Treasury overstepped its boundaries by sanctioning mixing service Tornado Cash, which they say is simply computer code. The court dismissed the argument, asserting that the Treasury, under the International Emergency Economic Powers Act, can sanction any entity in which a foreigner has an interest. 

“The indirect interest that TORN holders (including the Tornado Cash founders, developers and DAO) have in the increased use and popularity of the Tornado Cash service as a whole is sufficient to establish that foreigners have an “interest” in the core software tool,” Judge Kent Wetherell wrote in the ruling.

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https://blockworks.co/news/ftx-ftt-crypto-markets

Crypto prices took a turn into the red Monday, following an explosive week for many tokens. Industry analysts attribute the downturn to premature excitement over anticipated developments in the Web3 sector, compounded by the influence of key macroeconomic data.

Bitcoin has been able to sustain its recent rally, managing to stay above the $36,000 level Monday despite a mild selloff. Solana’s SOL token, one of the biggest winners in the altcoin market recently, faltered as well, losing more than 6% in 24 hours.

FTT, the native token of the now-bankrupt FTX exchange, faltered a bit over the weekend, posting a roughly 3.5% loss on Monday, but remains up more than 215% over the past month. 

FTX (FTT) trade volumes have surged to around $500 million. Kaiko analysts say this increase is driven by Binance, which accounts for 86% of FTT’s trading volume. 

Read more: FTX began to unravel one year ago today: A timeline

“Despite [an] unclear use case, the token continues to be traded on a dozen crypto platforms with average daily trade volume of around $20 million,” Kaiko analysts added. 

Ether (ETH) remained one of the few in the green Monday, clocking a close to 2% gain. Bitcoin (BTC) is still slightly outperforming ether over the month, with a 37% increase. 

Traders have invested over $1 billion into bitcoin in the last seven weeks, according to CoinShares data. This might suggest that the recent rally stands apart from other occasional market upswings seen during the bear market.

“Bitcoin [exchange-traded product] trading volumes made up as much as 19.5% of total Bitcoin trading volumes on trusted exchanges,” analysts from CoinShares noted. “This has rarely happened and suggests ETP investors are participating much more in this rally compared to 2020.” 

Read more: Ark Invest, 21Shares slated to intro crypto ETF suite next week 

Data suggests that the crypto industry’s investor base is expanding; another reason why this rally might be different. A recent survey published by the French AMF shows that young investors in the country are increasingly interested in digital assets over equities. 9% of French people already own crypto, the report added. 

Analysts are closely monitoring the upcoming release of US Consumer Price Index (CPI) data, scheduled for Tuesday morning before traditional markets open. The CPI is a critical economic indicator that measures changes in the price level of a basket of consumer goods and services, providing insights into inflationary trends. This release is particularly significant as it occurs one month ahead of the Federal Reserve’s next rate-setting meeting, where decisions on monetary policy are made. These decisions are highly influential on market dynamics, particularly in the context of recent inflation concerns.

Current market expectations, informed by data from the Chicago Mercantile Exchange (CME), suggest that the Fed may pause further interest rate hikes. This anticipation stems from recent economic indicators suggesting a potential easing of inflationary pressures. Such a pause could have significant implications for the financial markets, including the cryptocurrency sector, as it might lead to a shift in investor sentiment and risk appetite.

“The next couple of days could be hugely important as the US and UK release inflation figures for October,” Craig Erlam, senior market analyst at Oanda, said. “The two countries’ central banks have, alongside others, been grappling with very high inflation for the last couple of years, and efforts to bring it down are finally bearing fruit.”

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https://blockworks.co/news/coinbase-identity-verification-kyc

Coinbase launched its Verifications platform Thursday, bringing know-your-customer policies on-chain. 

The exchange said launching identity verification on the chain protocol level increases security and transparency, providing a solution to common challenges associated with typical KYC methods. 

“Built on the [Ethereum Attestation Service’s] open standard, our verifications are public and composable,” Coinbase Cloud, the company’s blockchain infrastructure arm, wrote on X. 

Ethereum Attestation Service is a base layer where users can make declarations and add virtual signatures to information. 

“EAS enables anyone to make attestations on chain or off chain about anything,” the service’s website reads. “You simply register a schema (or use an existing one) about any topic and make attestations referencing that schema.”

Coinbase Verifications, built on Coinbase’s layer-2 Base, already has about 9,300 attestations from users, according to data from analytics firm Dune. The service is expected to help particularly with Sybil attacks, which is when hackers use a single node to create many fake identities. 

The service is the next step toward “using open source, public good infrastructure to enable the next billion users to come on-chain,” said Jesse Pollak, the creator of Base.

The move marks Coinbase’s entry into the decentralized identity game. Proof of Humanity, a verification protocol where users can submit social and video proof of their identities, emerged as a leader in the space when it launched on Ethereum-built application Kleros in 2021. 

Read more from our opinion section: Made by humans but governed by code?

“In our digital interactions, we cannot know who is sitting on the other side of the screen,” the Kleros team said at time of launch. This enables AI manipulation through impersonation and the spread of misinformation by bad actors.

Coinbase’s announcement comes as Coinbase shares begin to par gains after an explosive week. The stock was trading down a little less than 1% Friday after gaining as much as 6% during Thursday’s trading session. 

Still, Coinbase (COIN) remains up close to 7% over the past five trading days and is in the green more than 175% since the start of the year. 

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https://blockworks.co/news/sbf-altcoins-market-rally

A week after a jury found him guilty on all seven counts of fraud and conspiracy, Sam Bankman-Fried’s former tokens of choice have emerged as frontrunners in the altcoin rally. 

Risk-on is back in crypto markets, a trend analysts attribute (potentially prematurely) to bitcoin, and now ethereum, ETF optimism and estimates that the Federal Reserve’s rate-hiking cycle has reached a peak. Bitcoin and ether logged impressive gains over the last week — 7% and 15.5%, respectively — but the moves of smaller tokens have dwarfed these rallies. 

Perhaps the most ‘Sam coin’ of all, FTX’s native token (FTT) leads the pack, posting a staggering gain of 200% over the week and 75% over the past 24 hours alone. Traders appear to be betting on a revamped FTX exchange launching, a narrative driven by reports that exchange Bullish and other firms are vying to purchase the bankrupt FTX. 

Some analysts are going all in on the theory, likely pushing investors to finalize their trades. 

Read more: FTX mulls reboot proposals from bidders: Bloomberg

“While the announcement of FTX’s winning bid could occur in December 2023, we project the exchange to be operational by May or June 2024,” analysts from Matrixport wrote in a research note Thursday. “FTX is anticipated to reclaim its position as a top 3 exchange within twelve months.”

Other ‘Sam coins’ posting rallies are following far more elusive narratives, such as serum (SRM), oxygen (OXY) and maps (MAPS), but are still far outperforming other altcoins. 

Decentralized exchange Serum’s SRM token, which Bankman-Fried aggressively invested in and promoted, is up more than 33% in the past seven days. 

Bankman-Fried also poured money into Maps.me, a decentralized mapping application, leading the company’s $50 million funding round in January 2021. Today, MAPS is up 14% in the past 24 hours.

Another Alameda Research-backed operation, oxygen, dipped slightly Friday, but remains up more than 25% over the past week. 

Altcoins including ripple (XRP), cardano (ADA) and dogecoin (DOGE) may be in the green, but none have managed to crack 5% over the past 24 hours. 

Solana (SOL) also known as a “Sam coin,” at least to federal prosecutors during the disgraced FTX founder’s criminal trial last month, seems to have “transcended” Bankman-Fried over the past year, Roshun Patel, partner at Hack VC, said. 

Bankman-Fried, once a larger backer of SOL, called the token crypto’s “most underrated” asset in 2021. FTX still holds some 50 million SOL tokens (most of which are locked) worth more than $1 billion, according to bankruptcy filings last month. 

Solana remains the sole “Sam coin” in the green over the year, posting a remarkable 214% increase since November 2022. OXY, MAPS and SRM are all in the red, even after this week’s rally. 

SRM and MAPS lead the decline, losing 88% and 70%, respectively, since this time last year.

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https://blockworks.co/news/celsius-bankruptcy-plan-approved

A federal judge in New York gave Celsius Network the green light to transition into a bitcoin mining operation owned by the failed crypto lender’s creditors. 

Former Celsius customers will receive a combination of cryptocurrency assets and stock in the new venture, which will be publicly listed if all goes according to plan. The US Securities and Exchange Commision will also have to sign off on the listing, and will have the opportunity to “challenge” any crypto asset transactions they deem to involve securities. 

US bankruptcy judge Martin Glenn has asked the securities regulator to move swiftly in making its decision. 

The approval marks what could be the end of a lengthy process for Celsius and their creditors. In August, the debtor sent its plan to creditors, some of which opposed, but the official committee representing junior creditors approved the filing. 

The US Department of Justice charged former Celsius CEO Alexander Mashinsky with fraud and manipulation relating to his role at the company in July 2023, a year after the company filed for bankruptcy. 

Mashinsky has pleaded not guilty to all counts and his jury trial is scheduled for September 2024 in the Southern District of New York, the same courthouse where a jury found FTX founder Sam Bankman-Fried guilty on seven federal counts earlier this month. 

“[Mashinsky] told investors that Celsius would generate sustainably high returns by making low-risk collateralized loans to first-tier institutions and cryptocurrency exchanges as well as overcollateralized loans to retail borrowers,” New York Attorney General Letitia James said when the charges were filed.

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https://blockworks.co/news/crypto-equities-soar-market-rally

Crypto equities began to look like digital assets themselves Thursday morning as stock prices soar on continued bitcoin ETF optimism.

MicroStrategy, Coinbase and Marathon Digital clocked double-digit rallies, with mining operation Marathon leading the pack after jumping more than 17% after the open. 

Competing bitcoin mining shop Riot Platforms wasn’t far behind, posting just under 10% gains at time of publication. Galaxy digital followed suit with a roughly 6% rally. 

Bitcoin continued its rally Thursday, although related stocks far outpaced the cryptocurrency itself. 

Bitcoin (BTC) rallied as much as 6.4% before paring gains to around 1.5% higher. Bitcoin remains up around 31% over the month and more than 115% higher year-to-date though — a trend some analysts attribute to a different kind of bull run. 

“The difference between the implied volatility of calls [versus] puts is at its highest since April 2021,” said Noelle Acheson, author of the Crypto is Macro Now newsletter. “In other words, demand for bets on bitcoin continuing to go up exceeds demand for bets that it will go down by the widest margin in two-and-a-half years.” 

Earlier this month, Coinbase reported higher-than-expected revenue over the last quarter and beat estimates on loss per share, fueling the rally that has seen the exchange’s share price surge more than 15% in a week. 

MicroStrategy, maximalist Michael Saylor’s bitcoin acquirer and software firm, is up more than 260% since the start of the year, dwarfing its gains of just a week ago, when the stock was around 197% higher year-to-date. 

​​”The equity rallies in MSTR and COIN basically track bitcoin’s price with higher beta,” Roshun Patel, partner at Hack VC, said. “It is interesting to see how MSTR tends to sustain its rallies longer, whereas COIN investors tend to sell sooner, which is likely representative of slightly different holder bases.”

MicroStrategy’s 2023 third quarter earnings report last week showed a $143 million net loss, including a $34 million impairment loss on its digital asset holdings. Crypto market moves didn’t stop the company from acquiring an additional 6,067 bitcoins between June and September though, which is what investors are watching, Patel said. 

Stablecoin issuer Circle might also be coming to the public market in 2024, according to reports from Bloomberg, which analysts expect will further fuel traders. 

Circle’s valuation the last time it made a play at an initial public offering, which was squashed in 2022, was $9 billion. 

“Anticipation of the Coinbase initial public offering (or direct listing) on April 14, 2021, propelled Bitcoin prices to around $61,500,” researchers from Matrixport wrote in a report Thursday.

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https://blockworks.co/news/bitcoin-ether-altcoins-etf

Bitcoin and ether remained in positive territory on Wednesday afternoon, while altcoins sustained their dominance. Analysts suggest this may signal the onset of a period marked by a heightened appetite for risk.

Polygon (MATIC) and Chainlink (LINK) posted double digit gains Wednesday. Solana, which had previously been leading the rally, slowed to lose around 0.7% over the week. SOL remains up more than 85% over the past 30 days. 

Leverage is up, analysts say, meaning traders are once again borrowing to make their investments. Binance this week launched a Tether earn product, promising lenders 13% annual percentage yields. 

GMX with Arbitrum DAO on Wednesday launched an incentive program that could earn traders as much as 75% in annual yield on tokens such as Ripple (XRP) and Solana (SOL). 

Traders are allocating more to smaller tokens, according to data from CoinShares. Last week, Solana clocked $11 million in inflows and Chainlink raked in $2 million, representing 17% of total assets under management. 

For Solana, net buying has been led by Coinbase, with 2.2 million tokens market-purchased between Oct. 18 (the start of the rally) and Nov. 6, according to data from Kaiko. Investors also put money into Polygon and Cardano, which saw increased flows of $800,000 and $500,000, respectively, last week, CoinShares data shows. 

Bitcoin continues to attract investors, buoyed by bond yields which have dipped recently but remain high. Noelle Acheson, author of the ‘Crypto is Macro Now’ newsletter, cites sustained enthusiasm for exchange-traded funds as a contributing factor.

“We can see that the BTC annualized daily basis on Binance is at its highest since the excitement surge of June, when BlackRock filed its spot BTC ETF proposal,” Acheson said. “It’s also worth looking at the BTC basis, which reflects the premium implicit in futures pricing and can be taken as a gauge of sentiment – a positive basis means traders are feeling optimistic that the price will rise.” 

ETF optimism could be premature though, and yield-farming hype aside, a lot is still riding on macroeconomic conditions, Craig Erlam, senior analyst at Oanda said. Investors are battling hawkish commentary from central banks around the world, Erlam said, against downbeat economic expectations and speculation around rate cuts next year.

“Even if central banks were of the view that rates could fall next year, it would be unrealistic to expect them to say so at this stage as it would confuse and undermine their message that rates must stay higher for longer,” he added. 

Futures markets are still overwhelmingly banking on the Fed holding rates where they are, with CME data pricing a 90% likelihood of a pause at the next policy-setting meeting in December.

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