A former Signature Bank executive has been slammed for trying to place the blame for his bank’s collapse on crypto while purportedly being able to pocket millions in bonuses and stock options. 

During a Senate Banking Committee hearing on May 16, United States Senator Cynthia Lummis lashed out at Scott Shay, the former chairman of the now-defunct bank, in relation to his prepared statement on what led to his bank’s collapse.

In his testimony, Shay noted the bank began accepting deposits from businesses in the digital asset sector in 2018 and then “significantly” reduced its digital asset deposits in 2022 as the industry experienced volatility.

He said his bank was seized by regulators after “a bank with strong ties to the digital asset sector” fell, which then led to $16 billion being withdrawn from Signature.

“It looks like there has been a lot of deflection of blame onto those particular depositors that deal in digital assets and onto regulators, but you haven’t accepted any blame yourself,” Lummis said.

Shay, however, denied pointing the finger at digital assets during the Senate hearing.

“You use the term 10 times during your testimony,” responded Lummis.

‘Keeping millions’

During another part of the hearing, Senator Elizabeth Warren blasted Silicon Valley Bank (SVB) CEO Gregory Pecker and Signature Bank’s Shay for allegedly “keeping millions after recklessly crashing banks.”

“Right now, the law says that people like Mr. Becker and Mr. Shay […] can pay themselves tens of millions of dollars in bonuses and stock options, and when the banks blow up, Mr. Becker and Mr. Shay get to keep all the money. And that is just plain wrong.”

“If we don’t fix it, every CEO for these multibillion-dollar banks will keep right on loading up on risks and blowing up banks, and everybody else is going to have to pay for it.”

Warren noted that she is working within a bipartisan group in the Banking Committee to introduce a bill that can claw back “these crazy paychecks.”

Cointelegraph contacted Shay and Becker for comment but did not receive an immediate response.

Related: Signature Bank failed to understand risks associated with crypto: FDIC chair

In April, Adrienne Harris, superintendent of the New York Department of Financial Services (NYDFS) reportedly said it was “ludicrous” that one could blame crypto for Signature Banks collapse.

During a Chainalysis Links conference in New York City, she said the events leading up to the failure of Signature were instead a “new-fashioned bank run.”

The NYDFS took control of Signature Bank on March 12, claiming it was protecting the U.S. economy from “system risk.” The bank was the latest failure following the collapse of the crypto-friendly Silvergate Bank and SVB.

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The trading of so-called “unbacked cryptoassets” such as Bitcoin (BTC) and Ether (ETH) should be regulated as gambling rather than a financial service, a panel of British lawmakers said in a new report. 

The United Kingdom is currently working on a crypto regulatory framework that would mix existing financial asset laws with new crypto-specific rules.

However, in a May 17 House of Commons Committee report, the U.K. Treasury Committee “strongly recommended” regulating retail crypto trading and investment activity as gambling, consistent with the principle of “same risk, same regulatory outcome.”

It argued the price volatility and lack of intrinsic value mean unbacked crypto assets will “inevitably pose significant risks to consumers.”

Treasury Committee chair Harriett Baldwin described Bitcoin and Ether as accounting for two-thirds of the total market capitalization of crypto assets, both of which she claimed are “unbacked.”

“We are concerned that regulating retail trading and investment activity in unbacked cryptoassets as a financial service will create a ‘halo’ effect that leads consumers to believe that this activity is safer than it is, or protected when it is not.”

In the U.K., all gambling — whether online or land-based — is regulated by the Gambling Commission under the Gambling Act 2005. Its oversight includes businesses such as bingo halls, lotteries, betting shops, online betting companies and casinos, among others.

In its arguments, the lawmakers referred to written statements from Dr. Larisa Yarovaya, an associate professor from the University of Southhampton, who said crypto exchanges, online trading platforms and other crypto-asset businesses should be regulated with the same stringency as crypto speculation “can be addictive.”

In a small win for crypto, the committee said it also recognized the potential for some crypto assets and their underlying technology to bring benefits to financial services and markets — such as reducing the cost of cross-border payments and improving financial inclusion.

It said there should be an effective regulatory framework to support these developments in the U.K. while mitigating some of the risks associated with crypto assets.

“We therefore welcome the Government publishing proposals for how it plans to regulate cryptoassets used in financial services,” the Committee wrote.

Related: UK Treasury drops plans for Royal Mint NFT

Including chair Harriet Baldwin, who once served as the Economic Secretary to the Treasury, the Committee consists of a total of 11 members of parliament from the Labor and Conservative parties as well as the Scottish National Party.

The committee said it had launched its inquiry into the crypto industry in July 2022 to explore the role of cryptoassets in the U.K.

Research conducted by His Majesty’s Revenue and Customs (HMRC) — the nation’s tax authority — last year revealed 10% of U.K. citizens hold or have held crypto with more than 55% having never sold any.

Chainalysis ranked the United Kingdom 17th in its 2022 crypto adoption index.

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A motion from the United States securities regulator to seal the controversial Hinman documents has been denied — a move that has been seen as a win for the Ripple and crypto community.

Judge Analisa Torres for the U.S. District Court ruled that the documents are “judicial documents” subject to a strong presumption of public access. 

“The Hinman Speech Documents “would reasonably have the tendency to influence [the Court’s] ruling on a motion,” she added. 

Judge Torres also said the court is rejecting the U.S. Securities and Exchange Commission’s (SEC’s) argument that sealing the documents is necessary to preserve “openness and candor” within the SEC.

“The Hinman Speech Documents are not protected by the deliberative process privilege because they do not relate to an agency position, decision or policy.”

The price of Ripple’s XRP (XRP) spiked on the news, jumping around 2.6%. It is currently trading at $0.43.

This is a developing story, and further information will be added as it becomes available.

Memecoin buyers are playing the crypto-equivalent of Powerball — with many “playing” hoping for “life-changing money” yet only a few will walk away with the jackpot, says Matrixport’s head of research.

Memecoins have seen a huge resurgence over the last week. Crypto tokens such as Pepe (PEPE) and Milady (LADYS) have boasted staggering price surges despite each having little to no discernable utility. 

Speaking to Cointelegraph on May 10, Matrixport’s Markus Thielen suggested some buyers of memecoins bear resemblance to those that participate in the lottery. 

“There are numerous studies done on how most people in lower socio-economic classes play the lottery […] as that is their way to get out of their lower economic class,” he said, adding:

“The people that speculate in the lottery are trying to make money lightning fast, and I think that’s very similar with crypto.”

One memecoin that recently gained the attention of enthusiasts is PEPE, a cryptocurrency cashing in on the “Pepe the frog” meme. It launched on April 14 and hit its peak $1.83 billion market cap only weeks later on May 5.

The price of the token plummeted almost as quickly as it rose however, falling 57% from its peak in just five days, according to CoinGecko, which puts its market cap now well below a billion dollars.

One should not discount the “entertainment” factor of buying memecoins however.

Dr. Anastasia Hronis, a clinical psychologist who specializes in gambling addiction believes younger investors are more likely driven by the “fun, entertainment element” of memecoins. 

“Many crypto investors might buy memecoins to be a part of a community or for entertainment value.” 

However, for the many hoping to gain from their investments, Hronis cautioned:

“Memecoins like PEPE might be fun, but they generally are highly risky investments and can end up holding no intrinsic value in the long run […] Investors are essentially gambling on its popularity, which undermines the principles involved in investing.”

In an emailed statement, Lucas Kiely, Chief Investment Officer at digital wealth platform Yield App argued that unlike Bitcoin (BTC), Ether (ETH) and stablecoins, memecoins don’t have the same fundamentals. Their prices are driven solely by “arbitrary factors” such as community sentiment and are “almost impossible to predict.”

“Even the most sophisticated models have been unable to discern any clear patterns,” said Kiely.

Pros and whales still get FOMO too

The unpredictability of memecoins doesn’t mean there isn’t an opportunity for outsized returns. Professional investors and “crypto whales” have been, and will continue to participate in trading them.

According to data from blockchain analytics firm Lookonchain, “Machi Big Brother,” the online persona of former tech entrepreneur Jeffrey Huang purchased a total of 73.4 ETH — equivalent to roughly $137,000 — of Pepe in the past 4 days.

Related: Coinbase calls PEPE a ‘hate symbol,’ prompting calls to boycott the exchange

Three other whales also started to buy PEPE on May 9 after prices dropped.

“When the prices are big, it can make sense,” said Thielen. “If it suddenly makes a lot of news and a lot of stories, then I think these people need to be invested as well.”

Thielen however cautioned investors of memecoins such as PEPE where the development team is anonymous and there is no discernable roadmap.

“The task is to be ahead of others and get out once the momentum is turning. This is why it is important to work with stop loss and stops when trading risky assets,” he suggested.

“Everybody wants to dunk (sell) on someone in memecoin land […] The question is only who is then holding the bag?”

Magazine: Cryptocurrency trading addiction — What to look out for and how it is treated

It comes after Coinbase launched a campaign on March 9 called “It’s time to update the system.”

OKX’s message came at the end of a 60-second video campaign launched May 9 that takes aim at the so-called “broken ways” of the centralized financial system.

Crypto exchange OKX has seemingly called out rival exchange Coinbase in a new global ad campaign that argues “the system doesn’t need an update, it needs a rewrite.” 

While the video doesn’t reference Coinbase directly, it does appear to take a subtle dig at the exchange with its tagline.

Coinbase’s campaign argued while American financial institutions are an “essential part” of the traditional finance system — they still rely on outdated technology to serve their customers. Coinbase argued that crypto is the answer to this problem.

OKX appears to take Coinbase’s idea a step further, arguing the decentralized nature of Web3 means consumers don’t even need to be involved with centralized players in the first place.

“There are two camps of thoughts. One side suggests we update existing systems to create a better world. The other believes we need a system re-write. Our new campaign is a nod to those who believe we need to re-write the system into Web3,” Haider Rafique, Chief Marketing Officer of OKX said in a statement.

OKX said the campaign was produced in collaboration with BBDO New York, its advertising agency.

Cointelegraph contacted OKX asking if the campaign was in response to the Coinbase campaign in March but did not receive an immediate response.

Related: OKX just sent $60M in USDT, MASK token to Alameda Research

The Seychelles-based crypto exchange recently signaled its intention to expand its crypto services to Australia, explaining in a March 29 statement that Australia would be a key growth market for the firm moving forward.

Rafique told Cointelegraph that the decision to expand “Down Under” was driven by Australians’ “huge appetite” for more crypto investment and trading products:

Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?

Epic Games CEO Tim Sweeney is just as optimistic about the Metaverse as ever, after poking fun at a recent suggestion that online virtual worlds are “dead.”

The now-billionaire video game entrepreneur — creator of the Unreal Engine and Fortnite — took to Twitter on May 9 to mock a newly published article from Business Insider titled “RIP Metaverse, we hardly knew ye.”

The article by PR firm CEO Ed Zitron suggested the “once-buzzy technology” had “died after being abandoned by the business world.”

The article made particular mention of Meta’s virtual reality (VR) platform Horizon Worlds which Zitron claims has failed to live up to its “grand promise” of becoming the future of the internet.

It also mentions Decentraland and Yuga Labs’ Otherside as examples of Metaverses that have seemingly failed to live up to their hype and claimed investors have turned their attention to the next big tech fad — generative AI.

Sweeney however doesn’t appear to agree, suggesting there are 600 million users across virtual world platforms such as Fortnite, Minecraft, Roblox, The Sandbox and VR Chat.

“The metaverse is dead! Let’s organize an online wake so that we 600,000,000 monthly active users in Fortnite, Minecraft, Roblox, PUBG Mobile, Sandbox, and VRChat can mourn its passing together in real-time 3D,” he joked, which was echoed soon after by Sandbox CEO Sebastien Borget.

Related: Meta coughing up big money to developers building its metaverse

In April 2022, Epic Games announced a $2 billion funding round with the aim of accelerating the company’s plans for the Metaverse. The investment included a $1 billion investment from Sony Group and KIRKBI, the holding company behind the LEGO Group.

It came not long after LEGO Group and Epic Games announced they were entering a long-term partnership to build a “family-friendly” Metaverse.

Neither company is yet to reveal what plans entail. However, Lego Group chief executive Niels Christiansen told the Financial Times earlier this year that it is looking to announce more details about the collaboration.

Web3 Gamer: ‘Ethical’ SBF game axed, Web3 games sign-up process sucks, Tomb Chaser

The Biden administration has renewed its push for a 30% Digital Asset Mining Energy (DAME) on cryptocurrency miners, part of efforts to minimize the industry’s alleged impact on climate change. 

The proposed crypto-mining tax was first announced on March 9 and seeks to impose a phased-in 30% excise tax on electricity used by crypto-miners.

“An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms,” the Department of Treasury wrote at the time. Bitcoin (BTC) fell under $20,000 just a day later.

However, a May 2 statement from the White House’s Council of Economic Advisers (CEA) has brought the proposal back to light again, attempting to justify the need for the new tax.

“Currently, cryptomining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate,” the CEA wrote.

“The DAME tax encourages firms to start taking better account of the harms they impose on society,” it wrote, adding:

“While crypto assets are virtual, the energy consumption tied to their computationally intensive production is very real and imposes very real costs.”

The blog also referenced reports suggesting crypto mining has “negative spillovers” on the environment, quality of life, and electricity grids and that pollution from electricity generation falls on low-income neighborhoods and communities of color, while pushing up the cost of electricity for consumers.

Related: Biden budget proposes 30% tax on crypto mining electricity usage

It even suggests that crypto mining using existing clean power (such as hydropower) can still have a negative impact on the environment, by pushing other electricity users to “dirtier” sources of electricity.

The Twitter thread posted by the Council of Economic Advisers has attracted widespread criticism from the community, with some calling it “misinformation” and “propaganda” while one Twitter user argued such a tax would “simply push Bitcoin mining to Russia & other countries.”

Magazine: Best and worst countries for crypto taxes — Plus crypto tax tips

Crypto exchange Coinbase’s stock price will continue to be “weighed down” until regulators establish the legal “rules of the road” in the United States, according to investment analysts from Citi.

As per reports on May 1, the investment bank downgraded shares of the crypto exchange from “Buy” to “Neutral” and lowered its price target — citing “too many unknowns” as the company battles it out with regulators.

“Until the regulatory ‘rules of the road’ are better established in the U.S., the stock will remain weighed down by this high level of uncertainty,” Citi analyst Peter Christiansen wrote in a May 1 note.

In March, Coinbase disclosed it had received a Wells notice from the Securities and Exchange Commission (SEC) over possible violations of securities laws — signaling possible future enforcement action.

In April, it shot back at the SEC, filing a federal court action compelling the SEC to give clarity into the regulatory treatment of certain digital assets.

Later in the month, Coinbase CEO Brian Armstrong and Chief Legal Office Paul Grewal released a public response to the March Wells notice on YouTube.

“As it stands, both long and short debates begin and end with Coinbase’s regulatory predicament,” said Christiansen, noting there could be a few ways the regulatory scuffle could play out:

“Clarity could come from: (i) a lengthy legal process vs. the SEC, where the possibility of an operating injunction cannot be ruled out, (ii) long-awaited legislative movement amidst a challenging legislative calendar and an upcoming election year, and/or even (iii) Ripple’s ongoing legal process, which could be potentially precedent setting,” the analyst wrote.

The analyst noted that the latest SEC developments don’t suggest that the parties are close to any resolution.

Related: Coinbase is planning to set up crypto trading platform outside US: Report

At the time of writing, Coinbase is trading at $51.32, down 58.5% over the past year, as per Yahoo Finance.

It stock price slumped around 16% on March 22 after it disclosed it received the Wells notice.

The company has recently become the target of two proposed class action lawsuits, one of which alleges it breached privacy laws in Illinois over its collection of customer biometrics, and the other alleging certain executives profited from insider information when the company went public.

Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?

A new decentralized layer has been added on top of Ethereum to make smart accounts possible with the introduction of ERC-4337 and account abstraction — but infrastructure providers suggest it may be tricky to participate profitably right now.

ERC-4337, commonly called “smart accounts” or “account abstraction” was deployed on the Ethereum mainnet on March 1. “Smart accounts” are essentially a supercharged version of an Ethereum wallet. Although smart contract wallets already exist, they rely on centralized components. ERC-4337 changes that with a distributed network of “Bundlers” and “Paymasters.”

Under the hood, there are a few subtle but significant changes — namely the addition of the “User Intent Layer” — explained Matt Cutler, co-founder and CEO of Blocknative, a core Ethereum infrastructure provider.

According to Cutler, an Ethereum transaction today involves several discrete steps.

A user accesses their standard externally-owned account (EOA) or private key to compose a signed transaction — for example, transferring a nonfungible token (NFT) to another user.

This transaction is then sent to the public mempool — which could be described as a shared queue for transactions — to be plucked out by a “Builder” who organizes it into a “profitable block.” From there the block is proposed to a Validator who ultimately proposes and publishes it on-chain, completing the transaction.

Under ERC-4337, the new “User Intent Layer” is introduced before the current EOA step.

This additional layer allows a user to initiate more complex transactions in a single step. To make this possible, ERC-4337 introduces an “Alternative Mempool” and a network of transaction Bundlers, and along with it — a new way to earn fees.

Becoming a undler

A Bundler is a node that does a very similar job to the block “Builder.” Instead of organizing signed transactions from the public mempool to assemble a profitable block, a Bundler grabs User Operations, or userOps, from the Alt-Mempool to create the most profitable bundle which is signed and submitted to the network as a single transaction. This is all part of the newly added layer that makes smart accounts possible.

Bundlers get compensated via userOp gas fees for providing their much-needed service.

While anyone can be a Bundler in theory, in reality, being a successful one might be another story, warned Cutler.

Like Builders, Bundlers are “specialized actors” made up of “relatively sophisticated development teams operating substantial computational, storage, and networking infrastructure,” he said.

“ERC-4337 is trustless and permissionless. So if you’re technically adept, by all means, you can stand up and operate your own Bundler. The challenge is Bundling is a competitive market. So you will be competing against relatively sophisticated teams that are investing heavily into being a competitive Bundler,” he said.

“Bundlers are not the sort of tooling that you just stand up, forget about and it starts printing you money. We expect Bundling to be substantially more technically sophisticated than being a validator, for instance.”

Cutler noted there are already a number of open-source bundler code repositories.

Related: Ethereum ERC-4337 ‘smart accounts’ launch at WalletCon: Account abstraction is here

There is an ongoing debate about whether ERC-4337 will have an impact on Ethereum gas fees, particularly given the increase in transaction complexity associated with the introduction of the new User Intent layer.

“While it is still too early to tell, my current expectation is that, on average, gas fees will not change all that much. If ERC-4337 has an impact, it’s going to be pretty slight — either up or down. We do not expect transaction fees to suddenly go to zero, or suddenly become 100x more expensive,” said Cutler.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide