The Malaysian Securities Commission (SC) has ordered Huobi Global to shut down for operating without a license.
According to the Commission, Huobi has operated without a Recognized Market Operator license that enforces local regulations and investor protection rules.
Malaysia Shutters 40 Exchanges
Huobi Malaysia’s CEO must stop advertising to Malaysians and remove access to the exchange’s apps on digital platforms.
The Malaysia SC advises Malaysian customers to stop trading, withdraw funds, and close their accounts. The agency placed the Asian exchange on its investor alert list in August 2022 for not registering under Section 7(1) of the Capital Markets and Services Act 2007.
Malaysian law treats cryptocurrencies as securities. Exchanges must prove fitness of senior management and demonstrate money laundering and terrorist financing risk compliance.
The Securities Commissionhas shut down 40 exchanges since March 2019.
It lists Luno Malaysia, SINEGY DAX, MX Global, and Tokenize Technology as registered digital asset exchanges.
The Huobi ban may see crypto traders migrate to other notable platforms amid growing interest in the sector. Crypto adoption in Malaysia increased from 20% in Q4 2021 to 26% a year later.
Rate of cryptocurrency ownership in Malaysia – Statista
Huobi Was Malaysia’ Third Biggest Exchange
Statista data reveals that Huobi accounted for 20% of Malaysia’s crypto trading revenues in Q4 last year. Licensed exchange Luno claimed the largest slice with 37%, with now defunct P2P exchange LocalBitcoins raking in 23%.
Leading cryptocurrency exchanges and platforms in Malaysia – Statista
The shutdowns of Huobi and LocalBitcoins will likely see take business to one of several other exchanges. Malaysians favor Bitpanda, Paybis, Kraken, eToro and SINEGY, which also recorded double-digit revenue shares in Q4 2022.
MX Global, Coinmama, and Tokenize accounted for 16%.
Huobi lost 25% of the burned dollar value of its HT tokens from Q4 2022 to Q1 2023.
However, a recent Kaiko report revealed that Binance’s rescission of zero-fee spot trading boosted Huobi’s trading volumes by 8% as of early May. Binance ended a seven-month zero fee spot-trading promotion in March for all pairs except BTC-TUSD.
The Bank of England willreportedly reject Revolut’s banking license application over concerns around its information technology (IT) systems.
The bank’s Prudential Regulatory Authority (PRA) said last week that it planned to issue a warning to Revolut in March after reviewing its initial application. Negotiations to rescue the application are underway after the PRA didn’t follow through on its warning.
The PRA initially cited concerns around Revolut’s balance sheet after the fintech underwent an audit.
Financial services firm BDO found problems with how Revolut’s IT system assured its revenue streams. The accounting firm said flaws in the system meant it could not verify $540 million of Revolut’s revenue, including income gleaned from crypto trading.
Revenues gleaned from crypto trading comprised one-third of the firm’s fees in 2021.
A U.K. ejection will prevent the firm from offering mortgages and customer loans.
The U.K.’s Financial Conduct Authority (FCA) has taken a hard-line stance against crypto firms offering services to citizens. Consequently, many firms have bypassed U.K. registration and offer services remotely.
The U.K. government blames regulators for Britain’s anti-entrepreneurial reputation.
Treasury Minister Jeremy Hunt said this week that U.K. competition authorities must consider economic growth after they rejected Microsoft’s intended takeover of gaming giant Activision Blizzard.
How Regulators Are Learning to Embrace Fintechs
While fintechs started distinct from the banking system, offering shiny interfaces that moved money rapidly at a fee, newer fintechs want to be a one-stop solution for all financial needs.
According to Vantage Research, the global fintech market was worth $133.8 Billion in 2022.
Projected FinTech Market Size | Source: Vantage Market Research
Revolut is also seeking a banking license in Australia, which already offers multi-currency business accounts and other fiat and crypto services.
The Australian Prudential Regulatory Authority granted its first restricted banking license to an online bank in 2018 amid criticism it favored Australia’s big four of Commonwealth Bank, National Australia Bank, Australia and New Zealand Banking Group, and Westpac Banking Corp.
A restricted license allows limited banking business two years before full prudential compliance is required.
Crypto news: Here’s what’s been happening in crypto in this week’s roundup. Ledger faces a PR disaster with new recovery features, while Ripple investors face uncertainty as its case with the U.S. Securities and Exchange Commission (SEC) nears a conclusion.
Google’s revamped artificial intelligence predicted Shiba Inu’s price while boxer Andrew Tate received backlash on Twitter for promoting a misogynistic meme coin.
Ledger Wallet Recovery Faux Pas
The crypto community criticized hardware wallet manufacturer Ledger for giving itself access to a seed phrase recovery feature embedded in its new firmware.
Ledger Firmware Update Notes: Ledger
Subscription-based wallet users can recover lost seed phrases to access funds, a feature community members argue negates the purpose of a hardware wallet.
Vocal critics of the recovery included Binance CEO Changpeng Zhao and Polygon Labs executive Mudit Gupta.
Ledger CEO Pascal Gauthier responded to the criticism by saying that Ledger Recover dovetails with a broader push to promote wider crypto adoption.
XRP and Ripple Labs Suffer as U.S. Case Drags On
BeInCrypto reported that investors this week continue to face losses as the U.S. Securities and Exchange Commission’s (SEC) lawsuit drags on.
The SEC’s case against Ripple Labs has restricted the company’s access to its reserves, creating liquidity issues for traders and the company, which has struggled to build its U.S. business.
If courts uphold an SEC ruling that XRP is security, the company may need to pay fines or adjust its business model.
Ripple CEO Brad Garlinghouse said this week that the company bucked resistance to its U.S. business by buying Swiss crypto custody firm Metaco for $250 million.
On Thursday, the firm announced a new central bank digital currency ledger for banks and governments.
Positive uses for crypto surfaced this week saw Google’s assistant predict Shiba Inu’s price by year-end.
Bard predicted that while SHIB is unlikely to reach $1 since such a valuation will increase its market cap to over $589 trillion, increased demand could push SHIB’s price toward the goal.
Shiba Inu Price Prediction By End Of 2023 – Discussion With Bard
At press time, SHIB’s price rose to $0.0000087, dropping 1.32% in the last 24 hours.
Do Your Own Research Importance Highlighted This Week
Boxer Andrew Tate this week highlighted the dangers of meme coins after he tweeted a dud crypto project. The token imbued with the crude ticker SLUTS, was missing important project information.
On the surface, the token appeared to be a pump-and-dump scheme, replete with an airdrop, giveaways, buy calls, and tweets about wealth creation.
Crypto trader Gainzy said that Tate is aware of his tweets’ impact, even if he didn’t know about the meme coin. Such tweets can amount to market manipulation. That’s why it’s still advisable to do your own research.
Crypto Coin News
Render Token (RNDR) has risen since the start of the year to cross the $2.10 horizontal resistance area at the end of April. A rise after a previous brief fall will likely see it increase to $3.10.
The Pepe meme coin (PEPE) could soon rise to the next resistance area at $0.0000020 or reclaim the $0.00000013 support area.
Top 10 Cryptos by Market Cap This Week | Source: BeInCrypto
An increase in the Lido DAO (LDO) governance token could see it move above a descending wedge’s $2.80 resistance line. This action follows a previously suspected breakout above the descending wedge on May 17.
The MASK token price could break the $5.05 horizontal resistance area to reach $6.80. A reversal will cause the token to drop to $3.80.
The next rise in Conflux (CFX) price could see it breach a $0.48 resistance area.
Mutant Grandpa Club Tops LunarCrush AltRank List
LunarCrush’s alt ranking pegs Mutant Grandpa Club as the number one non-fungible token (NFT) collection for the week. The AltRank metric measures a collection’s traction in the market and considers market volume, social score, and social volume.
Despite declining interest in the metaverse, Sandbox NFTs saw social engagements rise 294%.
Bitcoin is a young phenomenon – a technology that is supposed to break the mold. However, below is how a public television documentary described it last nightin the context of a scam.
The main theme of the documentary broadcast on Polish station TVP1 is the story of 10,000 gullible investors from Austria, Germany, Switzerland, and Poland, among others, who lost Bitcoins worth about €100 million.
At that point, it was the equivalent of 12,000 Bitcoin.
A Unique Investment Opportunity – Optioment
The Optioment case, presented in the documentary The Great Bitcoin Scam, concerns a huge scam worth hundreds of millions of euros.
The theft of several thousand Bitcoin morphed into one of the biggest crypto scandals in Europe before 2020. Investigative journalists of the daily Die Presse publicized the investigation.
The platform lured investors by promising unbelievable cashback for investing in Bitcoin. In September 2017, investors could count on a return of 4% per week by blocking funds for a two-year investment period.
The whole precedent was a mapping of the popular multi-level marketing scheme.
The solicitation of subsequent users meant that some of the funds awarded went directly to the wallet acquiring new customers.
During this progressive period, Optionment’s representatives decided to organize local events, often attended by hundreds of interested people. This public relations campaign also increased interest in earning money through solicitation.
Thanks to the commission system, investors tried to recruit as many people as possible for the project. However, in November 2017, the platform stopped functioning as intended. As a result, about 10,000 people became white-collar crime victims.
One investor recalled the moment he realized they’d been scammed:
“Of course we were terrified. I called and asked what was going on. The site is down and there are no payouts. My investment advisor always told me: don’t worry about the site, that’s just the way it is.”
About 12,000 Bitcoin vanished without a trace. Representatives of the platform claimed they were victims and admitted no wrongdoing. At press time, the matter had not been solved.
One of the suspects left shortly before the collapse of the Optioment platform for a permanent business trip to Turkey.
The Scam Fueled Negative Bitcoin Narrative
The documentary on the Optioment case suggests that the Bitcoin theft and the related scandal stem from the technology of Bitcoin itself, which is treated as a current digital asset.
The fact remains that the Optioment scam is unrelated to the BTC technology itself but to the scammers’ actions. They illegally abused investors’ trust. Cryptography-based technology is not the fundamental reason for the crime.
Optioment was a pyramid scheme where investors’ funds were used to pay out earlier participants until the system collapsed. This crime was a traditional form of financial fraud that extorted money from naive investors.
Unfortunately, many investors will probably see the documentary as a lesson on “what not to invest in.” This situation will certainly not speed up large-scale crypto adoption. However, other scams in recent years cost investors more money.
Bitcoin Has Since Matured
It’s been almost five years since the Optioment case. The crypto market has matured significantly since then. We have witnessed a rise in the number of available cryptocurrencies and a widespread increase in their acceptance in many countries.
Satoshi Nakamoto conceived Bitcoin (BTC) to be an independent payment instrument. Financial markets, however, still influence the crypto industry, and economic problems affect crypto. The digital asset market risks the consequences of a U.S. debt ceiling default. BeInCrypto asked experts to weigh in on the effects of a default on Bitcoin and stablecoins.
What’s Happened?
The United States reached its debt ceiling in January 2023. The ceiling is a limit Congress places on loans the government can take.
U.S. Treasury Secretary Janet Yellen predicted in May that the U.S. could default by June 1 if Congress didn’t raise the debt ceiling. The consequences of this scenario are unpredictable.
Mark Zandi, the chief economist at Moody’s rating agency, says a U.S. default could destroy the existing financial system.
His opinion is not universally shared. For example, JPMorgan CEO Jamie Dimon argues that the U.S. authorities will not risk a default.
President Joe Biden backs the optimists. On May 17, the head of the country announced that there would be no default. However, online polls reveal that many expect the worst.
U.S. spending since 2022 exceeded the income that the U.S. Treasury received from taxes and fees. The country’s debt grew significantly against the backdrop of the 2008 financial crisis and the height of the coronavirus pandemic.
During these periods, the U.S. authorities spent large sums on stimulus payments. The growing tension in the geopolitical arena in 2022 dealt another blow to the American economy.
Bloomberg analysts write that a U.S. default will provoke a flow of assets into gold, U.S. Treasury bonds, and Bitcoin. As polls have shown, professional investors prefer precious metals.
The editors of BeInCrypto decided to conduct their own survey to understand the effects a U.S. default could have on BTC and the general crypto market. Experts envisage two potential outcomes:
Bitcoin will rise despite the collapse in the stock market, which cryptos often track.
The stablecoin market may face a serious crisis.
Dmitry Noskov of the StormGain crypto exchange says that the U.S. default will promote gold and Bitcoin’s growth since Bitcoin is a digital asset analog of the precious metal. Noskov says the default could quicken BTC’s rise to the $30,000 level and beyond.
Nikolai Zhuravlev, General Director of TsFA.RF agreed.
“A U.S. default will definitely support the growth of Bitcoin, since many investors consider it a kind of ‘safe haven’ not only in comparison with the dollar, but even with traditional ‘safe haven currencies’ – the yen and the Swiss franc. Bitcoin is called “digital gold,” which has become more popular than any fiat currency.”
Dean of the Faculty of Digital Economy and Mass Communications of MTUCI Sergey Gataullin agreed with the forecast, saying the gold, Bitcoin, and U.S. Treasury Bonds could be in the spotlight.
Blockchain developer Evgeny Grechenok chipped in, noting that BTC attracts investors with its decentralized nature and limited issuance. At the same time, he drew attention to Bitcoin’s high volatility.
“During the default period, a sharp demand for Bitcoin will create the prerequisites for the growth of the asset, but then there will be a period of correction, due to which its value can drop significantly. It will be very important to find the right entry and exit points for the asset.”
Arthur Meinhard, Head of the Analytical Department for Global Markets at IC Fontvielle, reflected on a default’s effect on the stablecoin market.
He said stablecoins could lose their investment appeal since most are in short-term U.S. government bonds and cash.
“Stablecoins, being a derivative of the U.S. dollar, will experience significant selling pressure: crypto-investors will begin to massively get rid of them, preferring to shift to Bitcoin and other crypto-assets.
“Against this background, increased volatility of the entire cryptocurrency market is expected, firstly, due to massive purchases of crypto-assets, and, secondly, downward decoupling of stablecoins from parity to the US dollar one to one.”
Summing Up
A U.S. default could trigger a flow of assets into the crypto industry. There were many historical examples when the problems of the traditional finance market caused an increase in investor interest in cryptocurrency.
For example, Bitcoin experienced its best week against the backdrop of the U.S. banking crisis in the spring of 2023.
At the same time, experts recalled the high volatility of BTC. A significant correction is possible in the event of a rapid increase in the Bitcoin price.
Do not forget the connection between the crypto industry and the traditional financial market. The latter’s problems can prove bearish for crypto long-term.
Also, experts suggest a crisis in the stablecoin market should the U.S. government default on its debt. This crisis could worsen the overall health of the crypto industry.
Ripple Labs has released its new XRP Ledger-based central bank digital currency (CBDC) platform to connect governments and banks.
The new ledger technology will enable wholesale and retail CBDC transactions, as well as stablecoin architectures amid a global push towards digital payments.
Ripple Onboards Palau and Montenegro Governments
Central banks can use the CBDC platform to control digital money flow through minting, distribution, redemption, and destruction mechanisms. Ripple claims its ledger technology is 120,000 times more efficient than traditional proof-of-work blockchains.
Palau’s government agreed to use the new CBDC ledger for its national digital currency.
James Wallis, the vice president of Ripple’s central bank business, said the new technology would enable instant settlement of cross-border and domestic payments.
The firm has partnered with SBI Remit to allow cross-border transfers between Japan and Thailand.
In April, the Central Bank of Montenegro also announced a partnership with Ripple to pilot its CBDC “to maintain an efficient financial system.”
Bhutan’s central bank confirmed its CBDC partnership with Ripple in 2021 to financially include 85% of its population by 2023.
Ripple Labs still faces uncertainty from U.S. regulators insisting that XRP is a security.
The U.S. Securities and Exchange Commission (SEC) sued Garlinghouse and Ripple co-founder Chris Larsen for earning millions of dollars through XRP’s sale as an unregistered security. Litigation around the allegations has cost the company roughly $200 million.
This weekend, a meeting of the G7 leaders will likely include discussions around a unified policy framework for CBDCs. The International Monetary Fund and the World Bank Group will launch a CBDC handbook at a meeting later this year.
CBDC Push Could Kill Cash and Privacy, Critics Argue
Not everyone is thrilled about the emergence of central bank digital currencies, though.
The state of Florida recently banned CBDCs to protect residents’ privacy. Bitcoin investor Kevin O’Learysaid that such concerns are unfounded since the U.S. government can already surveil transactions.
However, a CBDC could forcibly reduce the use of physical cash and its accompanying anonymity.
Swiss citizens recently triggered a plebiscite to strengthen the constitutional importance of cash to curb the spread of digital currencies.
Countries With the Most Cash Per Capita | Source: Bloomberg
The central bank argues that demand for a retail CBDC would force the central bank to expand its balance sheet and assume more risk.
Federal Reserve Governor Christopher Waller said last year that a migration to a digital dollar would do little to influence a company’s choice to transact with the U.S. He also cited concerns around money laundering that a CBDC may not easily overcome.
“The technological advantages of a U.S. CBDC would have a hard time overcoming long-standing payments frictions without violating international financial integrity standards.”
Ripple’s CBDC platform launch dovetails with its offensive to end the crypto winter and expand its international presence. The payments platform announced it bought Swiss crypto custody firm Metaco using assets on its balance sheet on Wednesday.
Binance lost access to Australian dollar transfers via its PayID payment portal as banks narrowed payment options.
A spokesperson said Australians could not transfer fiat to Binance or withdraw funds to their bank account using PayID.
Binance Australian Business Under Increasing Pressure
Customers can still buy and sell crypto with credit and debit cards and withdraw Australian dollars in the near term. Binance Australia said it was “working hard” to find another payment provider. It reassured customers their funds are safe.
Crypto traders on Binance face difficult decisions amid tightening global scrutiny on crypto businesses.
The Australian Securities and Investments Commission (ASIC) recently canceled Binance Australia’s derivatives license. The license allowed the exchange to offer derivatives and foreign exchange products to wholesale traders.
The watchdog had previously scrutinized how Binance identifies between retail and wholesale customers.
In the U.S., the Commodity Futures Trading Commission (CFTC) accused Binance of helping its U.S. customers illegally access its derivatives trading desk.
The CFTC requires any derivatives exchange to register according to the Commodity Exchange Act. The agency regulates Bitcoin and Ethereum futures contracts in the U.S.
Binance lost 18% of its global market share to Asian exchanges since dropping its zero-fee spot trading promotion in March. Its global share of spot trading volume dropped to 46.3% in April, according to CCData.
Scams Prompt Tighter Aussie Rules as Revolut Jumps on Bandwagon
Crypto firms face headwinds from global regulators trying to curb money laundering.
Australia’s Westpac Banking Corp. started testing new customer protections for cryptocurrency payments. The bank sees a future for crypto exchanges in the financial industry but cautions that criminals are increasingly scamming people through overseas exchanges.
The bank added that by the time customers realize they have been scammed, their money has crossed the border, making it difficult to recover.
Westpac did not say whether it banned Binance, though other firms have retained banking access.
London’s Revolut has launched new payments-focused accounts for Australian business clients. It also allows Australian customers to buy and sell crypto and seeks a banking license to promote brand confidence.
The permit requires, among other things, a risk management system for local and international transactions. This license could lend credence to the crypto services Revolut offers by reducing counterparty risk.
Crypto firms in Europe must soon comply with the Transfer of Funds Rule in Europe’s new Markets-in-Crypto Assets regulation. The law compels platforms to report parties on both ends of a transaction. Exchanges have at least 18 months to comply with the new standard.
Metropolitan Bank in the U.S. exited the crypto industry amid U.S. regulatory risk and the asset class’s value proposition to its business.
Exchanges face increasing uncertainty if the U.S. Securities Exchange Commission refuses to change its regulation-by-enforcement approach, leaving companies uncertain whether they will be the next domino to fall.
USDT stablecoin issuer Tether minimized exposure to banks by taking out billions of dollars worth of bank deposits in the first three months of 2023.
Tether announced in a May 15 press release that it withdrew over $4.8 billion in bank deposits in Q1 2023.
Tether Minimized Exposure to Banks
According to the document, the stablecoin issuer now has $481 million in bank deposits after keeping $5.3 billion in banks at the start of the year.
Tether said it minimized exposure to banks to protect itself from bank collapses despite holding deposits at different institutions. It did not specify the institutions holding deposits but attributed its decision to withdraw to its competitors’ plights amid the recent banking crisis.
Tether also withdrew deposits after seeing the plight of rivals holding too much money in bank deposits.
According to the press release, Tether sent the $4.8 billion to U.S. Treasuries and overnight repos secured by Treasuries. It now holds $7.5 billion in overnight repos.
The company also revealed precious metal and crypto reserves. According to public data, Tether keeps 4% of its USDT reserves in gold and about 1.8% in Bitcoin (BTC).
Circle Restores Lost USDC Peg
Tether may have distanced itself from banks because of the simultaneous collapses of several U.S. financial institutions. Three American banks, Silvergate Capital, Silicon Valley Bank (SVB), and Signature Bank, failed within one week in March.
The USDC stablecoin lost its peg to the U.S. dollar after news surfaced that its issuer held $3.3 billion in reserves at Silicon Valley Bank. Later, USDC regained 7% to snap back to $1.
SVB played a significant role for venture capital firms investing in the cryptocurrency industry. The bank’s clients included Andreessen Horowitz (a16z), Pantera Capital, Sequoia Capital, Blockchain Capital, Dragonfly Capital, and Castle Island Ventures.
Find the latest cryptocurrency news, analytics, and forecasts on our Telegram channel.
Crypto payments firm Ripple has bought Swiss custody firm Metaco for $250 million as Swiss citizens vote to imbue cash with greater constitutional heft.
Metaco helps institutions store, trade, and manage digital currencies.
Ripple Wants to End Crypto Winter With Swiss Purchase
Ripple purchased Metaco with $250 million from its balance sheet to potentially trigger a departure from the crypto winter, Ripple CEO Brad Garlinghouse said. The payments firm is now the only shareholder.
Metaco CEO Adrien Treccani said,
“This deal will enable Metaco to leverage Ripple’s scale and market strength to reach our goals and deliver value to our clients at a faster pace. We look forward to continuing to serve unprecedented levels of institutional demand with the utmost excellence in delivery, as our clients have come to expect.”
Notable Metaco clients include UnionBank of the Philippines, DBS, and VP Bank.
Keeping institutional assets separate from customer assets became an industry imperative after the collapse of FTX.
The Ripple deal comes amid central bank and broader national hostility to retail digital currency payments.
Campaigners from the Swiss Freedom Movement triggered a plebiscite that today prompted the Swiss Federal Council to consider elevating cash’s importance to the constitutional level.
Roughly 157,000 campaigners voted to trigger the plebiscite, exceeding the minimum 100,000 threshold.
The finance and justice ministries will present a draft referendum in three months.
The Swiss National Bank is investigating a wholesale digital currency, but senior employees have rejected a retail franc. SNB vice-president Martin Schlegel argued that one of the bank’s primary responsibilities is managing national cash flow.
Swiss citizens hold the largest cash per capita at $11,824, with most of the money kept in 1,000 Swiss franc notes. Last year, they settled 29% of transactions in cash.
The Swiss franc experienced 3% annual inflation in February, appreciating 13% against the euro since 2021. Comparatively, U.S. inflation was 4.9% in April, still above the Federal Reserve’s 2% target.
The move towards cash bucks global trends toward a unified digital currency policy G7 leaders will likely discuss this week. The International Monetary Fund and the World Bank Group will release a CBDC handbook later this year.
The SNB previously argued that lowering risk transfer from commercial banks to central banks is a challenge that negates some of a CBDC’s benefits.
It showed that higher demand for a CBDC could see the central bank take on more risk by increasing its reserves.
U.S. Senator Elizabeth Warren wants to claw back bonuses paid to bank executives whose poor risk mismanagement allegedly caused the recent banking crisis.
Warren asked bank executives if they would return the $60 million they earned after implementing weaker controls.
Senator Warren Says Executives Ignored Glaring Risks to Earn $60M
She said it was wrong that others should pay for risky activities executives used to enrich themselves.
Silicon Valley Bank executive Gregory W. Becker reportedly earned $40 million after Congress allowed the bank to assume more risk.
In addition, the bank ignored 17 Federal Reserve (Fed) warnings addressing liquidity risk management, weak governance, and capital planning as Becker allegedly enriched himself. Becker confirmed he earned $40 million since 2019.
Warren also asked crypto-friendly Signature Bank former chairman Scott Shay if he would return the $20 million he earned while ignoring liquidity issues that resulted in a $2.5 billion Federal Deposit Insurance Corporation (FDIC) rescue. Shay said he didn’t plan on returning the funds.
Senator Lummis also accused Shay of deflecting blame onto regulators and digital assets depositors for the bank’s March liquidity crisis.
Depositors pulled money from Silicon Valley Bank and Signature Bank after crypto’s flagship Silvergate Bank closed its doors. Both banks sold securities at significant losses to create liquidity for withdrawals.
The collapses rattled confidence in the U.S. banking system and sent jitters through U.S. crypto platforms. Circle’s USDC stablecoin lost its peg after it revealed frozen deposits at SVB. Investment platforms MaiCapital and Digital Asset Capital Management were forced to onboard offshore banking partners.
Politicians Set in Motion Bills to Enforce Stricter Bank Rules
Several politicians, including Warren, blame the failures on relaxed capital and liquidity requirements for smaller banks.
In 2019, 50 Republican and 17 Democratic senators voted to repeal certain aspects of the Dodd-Frank Act, allowing smaller banks to take on more risk.
According to Warren, Becker aggressively lobbied Congress to overturn elements of the Dodd-Frank Act to let Silicon Valley Bank take on more risk.
Consequently, the Massachusetts senator and U.S. Representative Katie Porter have introduced a new bill to restore stricter regulations.
The new Secure Viable Banking Act would compel banks with $50 billion or more in assets to come under the oversight of the Fed and comply with Dodd-Frank stress tests.
Warren confirmed she and three other lawmakers also introduced a bill to limit “crazy paychecks.”
U.S. Representative Andy Barr argues that low long-term interest rates and government overspending encouraged inflation which led to the collapse.
“The underlying causes [were] basic fiscal and monetary policy errors and a failure — not of a lack of regulation — but inadequate bank supervision. The regulators need to do some soul-searching about extracurricular political errands they are on instead of basic nuts and bolts bank supervision.”
Warren’s bill will likely face opposition from House Republicans and Senate Republicans’ intentional prolonging of debate around the bill.
Five altcoin projects, including Oasis and Yuga Labs, will release $167 million in locked tokens into their projects’ supplies this week, which could lead to major selloffs.
BitDAO (BIT), ApeCoin (APE), 1inch (1INCH), Oasis Network (ROSE), and ImmutableX (IMX) will release 420 million tokens to their respective token supply in the market.
ApeCoin, ROSE, and IMX Will Likely See Price Movements
ApeCoin, issued by ApeDAO, will release about $91 million of APE on May 17, while decentralized exchange aggregator 1inch will unlock about 21,000 1INCH tokens worth about $8,891 on May 18.
Oasis Network, which runs a consensus and ParaTime layer to increase transaction throughput, will release almost 200,000,000 ROSE tokens on May 19.
Web3 gaming platform ImmutableX will add 18 million tokens to its circulating supply on Thursday, worth roughly $13.6 million at press time.
The effect of token unlocks depends on the contribution of the unlocked tokens to the number of assets in circulation.
Yesterday, BitDAO unlocked 187,499,999.36 tokens, about 2% of the total supply. This token release caused the token price to rise from below $0.50 to above $0.52, suggesting high demand for the token.
Before unlocks, traders usually sell crypto anticipating a major supply shock, causing its price to drop. A price increase points to demand that counteracts the increased supply.
ApeCoin’s release will contribute 1.56% to the token’s intended supply, while Oasis Network will add almost 2% to the total supply. ImmutableX will see 0.9% of the IMX supply added to the circulating supply.
These tokens will likely see more pronounced price movement than the 1INCH unlock, which only contributes 0.001% of the supply.
APE’s price fell to $3.42 at press time after peaking at $3.46 at 9:35 p.m. Eastern Time as investors brace for tomorrow’s unlock.
Scheduled Unlocks Balance Supply and Demand
Crypto projects release tokens according to vesting schedules determined by the project team at its inception. The projects release tokens for different participants, including early investors and members of their decentralized autonomous organizations.
If timed correctly, vesting schedules can tightly control an asset’s supply and demand and ensure its price stability.
Like stock vesting schedules in traditional finance, token unlocks reward long-term backers. Token holders eligible for an unlock cannot access their tokens before the scheduled release date. Projects lock tokens for an average of about 1-5 years.
Vesting schedules assure investors that the project’s founders will not execute a rug pull and leave them with nothing.
MetaBirkins artist Mason Rothschild is disputing his Hermès non-fungible token (NFT) copyright infringement rulingby questioning an earlier ruling.
Rothschild’s lawyer argues that a California judge incorrectly ruled that artist Ryder Ripps violated the Bored Apes’ trademark.
Hermès Lawyers Dismiss Intangible Goods Argument
The artist maintains that the intangibility of his Hermès MetaBirkin bag NFT precludes it from falling under the Lanham Act, the piece of legislation governing copyright infringement.
He disputes the recent ruling that Ripps illegally copied Bored Ape NFTs, which, despite being intangible, are still goods with respect to the Lanham Act.
He argues that the ruling from a Dastar Corp vs. Twentieth Century Fox Film Corp case in 2023 confirmed that the Lanham Act only applies to confusion about the origins of tangible goods, excluding art.
“Yuga Labs’ use of the ‘Bored Ape’ mark identifies the creators of the Bored Ape images; the NFTs convey unique ownership of the image. Nothing about the use of that mark conveys information about the NFT as a tangible thing, only its relation to an intangible artwork.”
Hermès lawyers said that Rothschild simply reiterates arguments a California court previously rejected regarding the Bored Ape case. The plaintiff noted that Rothschild’s view of the trademark would allow widespread infringement.
BIRKIN Handbag and MetaBirkin NFTs | Source: Lexology
In February, the firm originally convinced a New York jury that Rothschild violated intellectual property laws.
MetaBirkins Case Makes Way for BAYC Ruling
Last Month, U.S. District Judge John Walter ruled that Ripps and Jeremy Cahen broke federal laws by appending the Bored Ape logo to sell copycat NFTS.
Yuga Labsaccused the duo of earning $500 million through a pump-and-dump scheme selling fake Bored Ape tokens. The pair built social media confidence in the collection using Yuga Lab’s trademarks.
Bored ApeYacht Club NFTs are a high-profile collection of cartoon apes that became a status symbol during the 2021 crypto bull market.
The U.S. Securities and Exchange Commission (SEC) alleges that Jump Trading earned $1.2 billion from a deal to boost Terra’s liquidity before it collapsed.
The agency filed court papers Friday naming Jump as the anonymous beneficiary mentioned in its civil suit against Kwon in December.
Jump Earned Big During Terra Luna Bull Market
Jump allegedly bought “tens of millions” of dollars in the LUNA (now LUNC) coin to restore the broken dollar peg of its sister coin TerraUSD (UST). Kwon said Terra maintained its $1 value algorithmically rather than through Jump’s contribution.
According to SEC court filings, Kwon confidentially revealed Jump’s investment in 2020 to investors in Terraform Labs, the entity backing TerraUSD.
An email outlined a three-year agreement with crypto-linked Jump affiliate Tai Mo Shan. LUNA’s price increased from $0.20 in 2020 to above $90 in 2022, allegedly earning Jump over $1 billion.
In response to the charges, Kwon’s lawyers said Jump’s LUNA buys only accounted for 6% of Terraform’s transactions used to restore UST’s peg.
TerraUSD fell to mere pennies in May 2022 after large weekend withdrawals broke its dollar peg, sending itself and its sister coin, LUNA, tumbling. The two assets algorithmically kept TerraUSD at $1.
The SEC and the U.S. Department of Justice have charged Kwon with the $40 billion collapse of TerraUSD. The Stanford alumnus remains under Montenegrin house arrest pending a passport fraud trial.
Kwon’s lawyers will likely only formally respond to the criminal charges if the United States extradites the former crypto boss. They have asked U.S. courts to dismiss civil charges they believe the SEC didn’t have the jurisdiction to bring.
Jump Crypto CEO Admits Company Offered Liquidity to New Projects
Terraform Labs investors recently sued Jump Trading and its boss Kanav Kariya, following rumors on social media that Jump was the unnamed partner in the original SEC suit.
The lawsuit alleges Jump’s LUNA buys from Terraform broke the U.S. Commodity Exchange Act and other Commodity Futures Trading Commission (CTFC) rules. The CFTC regulates derivatives in the U.S., including futures and options that Jump offers.
Investors allege that Jump’s Solana validator and acquiring a wormhole bridge boosted its UST business artificially.
Quant trading firm Jump Trading started investing in crypto through a new arm called Jump Crypto in 2021. Jump Crypto builds blockchain software and tooling and contributes liquidity to crypto markets.
In 2021, Kariya said that projects had asked the firm to inject liquidity and drive early participation. The firm also voted in Terra governance proposals surrounding the stablecoin’s liquidity.
Digital monetary policy for central bank digital currencies (CBDCs) will be a top priority for global leaders at the Group of Seven summit being held in Hiroshima this week.
The leaders will discuss crypto rules for money laundering and CBDCs’ roles in improved payments efficiency and financial inclusion.
G7 Leaders Will Tap FSB’s Recommendations for Crypto Regulations
Leaders from Japan, the U.S., the U.K., Canada, France, Germany, and Italy will meet in Hiroshima City this week to discuss crypto, CBDCs, and other matters of global importance. These include climate change, nuclear disarmament, and the Russia-Ukraine war.
At a meeting earlier this month, the leaders committed to applying new crypto regulations from the July 2023 Financial Stability Board recommendations.
They also support the crypto Financial Action Task Force’s Travel Rule that imposes reporting requirements on digital asset service providers for all crypto transactions.
Europe’s new Markets in Crypto-Assets (MiCA) regulation implements the amended Travel Rule in its Transfer of Funds rule. MiCA will become effective from October 2024 or early 2023 in three of the G7 nations.
G7 decision-makers will also discuss a unified framework for central bank digital currencies. The new policy will welcome guidance from the International Monetary Fund’s CBDC handbook.
The document is due for release at the IMF and World Bank Group’s meetings later this year.
The summit will occur at the Grand Prince Hotel from May 19 to May 21, 2023.
Challenges of Unified Approach to Government Currency
A unified digital currency system would need rules to function within and outside its originating country. Unlike private cryptocurrencies, which are essentially borderless, governments must define how their CBDC can be used.
Digital wallets need specific rules on allowed transactions based on global money laundering standards. A recent European Central Bank (ECB) survey found that Europeans consider transactions between peers a critical digital wallet feature, rendering compliance a key consideration.
Samsung recently agreed to partner with the Bank of Korea to test instant person-to-person transfers. An earlier central bank pilot exposed the money laundering compliance challenges of linking multiple CBDCs for remittances. The bank prioritized compliance over user privacy.
A U.K. bank official recently floated the idea of real-time digital wholesale pound settlements. It plans to launch a new real-time gross settlement system next year to enable fast interbank transactions and clearing.
The U.S. will also pilot its FedNow instant settlement system in July, while the European central bank recently released its third progress report on a potential digital euro.
Fundstrat researcher Tom Lee says positive inflation news can overturn prevailing bearish market sentiments.
An AAII survey says about 40% of institutional investors expect stocks to decline over the next six months despite bullish market indicators.
Short-Term Sentiment is Contrarian
The AAII sentiment survey is contrarian, meaning that investors have earned higher-than-expected returns after periods of low optimism. Sentiment surveys often inform short-term trading.
Lee believes that cooling inflation aided by falling housing costs should ease investor concerns. He predicted that the S&P 500 would rise 14% in the next year rather than fall 15% as investors expect.
Stocks seesawed on Monday morning as markets prepared for President Joe Biden’s debt ceiling talks.
Bitcoin (BTC) recovered to $27,400 after falling to $26,500 on Friday, with Ethereum (ETH) up 1.45% to $1,830. It has not consolidated any gains above $30,000 since breaking above that level in April.
Lee’s last prediction that the S&P 500 would hit a record high last year failed to materialize as the index had its worst year since 2008.
Falling inflation suggests that the Federal Reserve (Fed) may pause increases which could be a boon for equities and crypto given their recent correlation.
Stocks and crypto defied expectations and rallied after the April U.S. jobs report revealed an increase in hourly wage growth.
A decrease in the three-month employment average drove the rally. The Fed views decreasing job numbers as signs that interest rate hikes are cooling the economy.
Despite bullish indicators, Bank of America recently predicted that the American economy could enter a recession this quarter.
Oil prices have recently stabilized after four bearish weeks as investors contemplated the U.S. debt ceiling and slowing economic growth in China.
Fed chair Jerome Powell suggested that a U.S. recession was avoidable earlier this month.
Amazon wants to use artificial intelligence (AI) to minimize the distance between its goods and customers.
The e-commerce giant wants to avoid long-distance delivery by using AI to predict inventory for regional warehouses.
AI Will Ratchet up Amazon Automation
The new technology could analyze data patterns to quicken receiving times to same or next-day delivery. The company already stocks 74% of orders in regional warehouses. Robots help Amazon fulfill 75% of orders by performing repetitive tasks.
Earlier this year, Goldman Sachs predicted automation could cost the labor market 300 million jobs. Amazon suggests that automation will promote jobs needing high levels of human judgment.
However, AI could soon render even specialized professions obsolete.
Google recently unveiled the latest version of its AI assistant Bard capable of writing computer software, while its new large language model PaLM 2 matched clinicians’ ability in a medical exam.
The firm can also audibly and visually translate English video lectures for a limited client set.
But creative professions also face mounting pressure from generative AI tools.
AI recently created a synthetic song performed by Drake and The Weekend, while other tools can create art blending styles from different eras.
Music labels also have asked Spotify to prevent AI tools from scraping data to create songs like the recent synthetic hit by Drake and The Weekend.
Crypto Shows No Signs of Suffering
However, businesses also see an upside.
According to Gartner, the number of firms deploying AI grew by 270% in the four years ending in 2022. E-commerce led the way, followed by fintech and online media.
China’s Alibaba used AI to reduce delivery errors in its logistics department by 40%. In addition to lowering operational costs, AI helps Amazon earn 35% of its revenue from personalized recommendations. AI voice searches also enable quick purchases.
Decision-makers expect the market for conversational AI tools like ChatGPT to grow to $14 billion by 2025. Chatbots comprise a significant chunk of AI adoption in e-commerce.
However, the AI hype has not come at the expense of e-commerce interest in crypto.
Amazon’s cloud-computing business announced a recent partnership with Ava Labs to promote the institutional adoption of cryptocurrencies.
A recently-leaked email suggested that Amazon could soon offer non-fungible tokens (NFTs) in line with a 2022 statement by CEO Andy Jassy. However, the link to the NFT gallery in the e-mail appeared to be broken.
Over 85% of U.S. merchants surveyed by Deloitte see catering to crypto customers as a top priority despite the crypto winter. Ownership reached 420 million in 2023, roughly following the trend of internet adoption.
A 2022 BitPay report suggests that 35% of tech-driven consumers prefer a merchant offering crypto payments. About a quarter of that group said they would switch to a retailer offering crypto.
Samsung has signed a memorandum of understanding with South Korea’s central bank to research an offline central bank digital currency (CBDC).
The two entities agreed to continue CBDC research in a signing ceremony in Suwon, South Korea. The CBDC will test offline wire transfers and payments using Samsung Galaxy devices.
South Korea Wants to Simplify Cross-Border Settlements
While not necessarily legally binding, a memorandum of understanding helps clarify the expectations of both parties before they sign a contract.
It forms the basis for future negotiations. Electronics giant Samsung previously partnered with the Bank of Korea to pilot NFC payments between Galaxy devices.
Galaxy smartphones and watches boost payment security and reliability through an embedded Secure Element security chip. An eSE is a relatively expensive smartphone component resilient to physical and side-channel attacks.
The Korean central bank tested cross-border remittances linking multiple CBDCs in 2021 and 2022. Its governor Chang Yong Rhee said in a September 2022 speech that the test prioritized compliance over privacy.
The central bank set up a virtual anti-money laundering and counter-terrorism financing mechanism to collect transaction data.
Rhee said crypto’s distributed ledger technology could not scale to accommodate CBDC transaction volumes.
Bitcoin’s blockchain can handle seven transactions per second, while Ethereum processes about 30. Scaling solutions like Bitcoin’s Lightning Network can theoretically process up to a million transactions per second but experiences low adoption. The pilot could handle up to 2,000 transactions per second.
South Korea’s crypto regulation could become effective later this year.
Offline CBDCs Protect Against Denial of Service
Central banks favor an offline CBDC’s financial inclusion, resilience, and resemblance to cash. Offline payments accommodate residents in low-network coverage areas and permit ATMs to transfer funds to a digital wallet.
According to a Bank for International Settlements handbook, an offline CBDC can dispense with the need to maintain a persistent connection to a centralized ledger.
It can support instant peer-to-peer value settlement with or without an intermittent connection to a central ledger. An alternative architecture could enable offline value transfer, which the central bank settles online.
Offline CBDCs can protect users from civil or political unrest, depriving them of network access and the ability to spend money. The architecture must allow the user to distinguish offline and online balances to prevent double-spending.
In a recent pilot, farmers in Nigeria could apply for aid using an NFC system that captured their identities in remote locations for later upload to a server.
The server could entitle qualifying farmers to fertilizer discounts by appending vouchers to their records.
Binance lost 18% of its spot trading market share to Asian exchanges by May 6 after lifting zero fee trading in March.
Analytics firm Kaiko estimates that Binance’s share of spot trading declined from 73% to 51% after it rescinded its zero-fee trading policy.
Asian Exchanges Absorb Volume as Traders Appear to De-Risk
Accordingly, rival exchanges saw an uptick, with Huobi gaining 8% of the volume and OKX 4%. South Korean exchanges saw their share increase from below 8% to roughly 14%.
Early signs pointed to the South Korean exchange Upbit as the beneficiary of Binance’s loss of market share. By the end of April, its market share has risen almost 2% in 2023.
Despite the falloff, Binance’s overall market dominance is relatively secure, with Coinbase and Upbit only accounting for about 10% of global trading volumes.
However, investors may have been spooked by the recent lawsuit by the U.S. Commodity Futures Trading Commission (CTFC) against Binance.
Cici Lo, founder of blockchain advisory firm Venn Link Partners, argued that investors concerned about the safety of funds on Binance migrated to other platforms to de-risk.
The CFTC has accused Binance, its former CEO Samuel Lim and CEO Changpeng Zhao of coaching U.S. market makers to bypass legal restrictions to trade derivatives on Binance.
Sentiments toward crypto soured around the collapses of several crypto firms last year.
The bear market saw trading volumes rapidly decline, with Coinbase recording a $402 billion annual decrease in Q1.
Exchanges turned to alternate revenue streams to remain well-capitalized, including Ethereum staking and subscription services, and in the case of Binance, zero trading fees for most spot pairs.
Binance’s promotion lasted roughly seven months, contributing to impressive Bitcoin (BTC) volumes for a bear market.
The dropoff may now paint a more realistic picture of where consumers are. Binance’s retraction saw market-wide BTC trading volumes plummet to levels accurately representing a bear market.
Its market share has now fallen to its lowest level since October 2022.
However, the exchange’s volume was boosted by zero-fee trading on the BTC/TUSD pair making up 50% of Binance’s trading volume. Trading volume for BTC/TUSD pair surpassed all other stablecoin pairs in April.
Tether reportedly bought 52,670 Bitcoin (BTC) with the interest it earned from government Treasuries backing its USDT stablecoin.
The returns from its government Treasuries have risen substantially amid a roughly 500-basis point hike in the federal funds rate in the last 13 months.
Tether Confidence Booms Amid Rival Woes
In addition to Bitcoin, the firm holds $3.3 billion worth of gold bars and $140 million in corporate bonds.
USDT issuance has also increased despite the opportunity for investors to earn higher returns at banks. There is now $83 billion worth of USDT in circulation, revealing a healthy desire for digital dollars outside the U.S. banking system.
Crypto investors buy stablecoins to trade digital assets without a dollar bank transfer. Stablecoin issuers keep the value of their assets at $1 through on-chain or off-chain assets.
USDT issuance benefited from a regulatory clampdown on rival stablecoin BUSD, which New York regulators ordered Paxos to stop minting.
Its rival Circle suffered a blow when it lost access to deposits backing its stablecoin at a failed bank over the weekend of March 10.
Tether denied exposure to Silvergate Capital after the firm filed for voluntary liquidation.
Tether mints one USDT for every dollar deposit it receives. It uses the deposits to buy liquid financial instruments it can sell if customers redeem their USDT. It does not insure customer deposits.
The firm has been criticized for excessive USDT printing. It recently authorized about $1 billion USDT for cross-chain swaps and future mints.
Tether Rides Wave of Fed Policy to $1.5 Billion Profit
Twitter user girevik blamed the Federal Reserve (Fed) and the U.S. Treasury for aiding Tether’s Bitcoin purchases by increasing interest rates to 16-year highs.
Tether holds a significant portion of its USDT reserves in T-bills sold by the U.S. Treasury at a discount or face value. A buyer can redeem the bill before its maturation date of four to 52 weeks.
The interest earned depends on how close the redemption date is to the maturation date. Higher interest rates affect the discount prices of bills and how much profit the buyer can realize on redemption.
Tether earned $1.5 billion profit from Treasury returns boosted by rising rates in Q1 2023.
The Wall Street Journal recently wrote a scathing piece accusing Tether of using shell companies to access U.S. banks after Wells Fargo stopped providing banking services in 2018.
Tether denied the charges. It previously claimed it is registered with the Financial Crimes Enforcement Network and follows the bureau’s money laundering rules.
A new Irish Banking and Payments Federation (BPFI) survey has revealed that crypto investments in Ireland are more popular with younger Irish citizens who consult online sources more than fund managers.
Roughly 16% of Irish adults aged 18-34 invest in cryptocurrencies, compared to only 3% of citizens aged 55 and over.
Authorities Caution Investing in Crypto in Ireland
Young crypto investors depend on informal investment channels, while older citizens rely on investment managers and banks. Older people prefer investing in bonds and investment funds, while stocks and shares are universally popular.
According to the World Economic Forum, the preference for stocks and bonds over crypto is seen in most European countries.
Last year, authorities arrested an elderly Irish woman for providing unauthorized financial advice violating the Investment Intermediary Act of 1995.
According to the law, entities cannot offer advice on crypto investments in Ireland without approval from the Central Bank.
Irish Central Bank Governor Gabriel Makhlouf recently challenged calling unbacked crypto an investment.
“The purchase of such products can be similar to purchasing a lottery ticket: you might win, but you probably won’t. And describing it as ‘investment‘ is, needless to say, an abuse of the word; ‘Ponzi schemes’ might be more accurate.”
However, he conceded that crypto is not “going away” and urged European Union policy action to protect consumers.
The BPFI advises investors to balance digital information sources with advice from banks or brokers to mitigate risks.
Last year, the bank authorized Coinbase to be a crypto custodian for institutional investors. The approval came after the bank approved Coinbase’s anti-money laundering and other compliance policies.
European Investment Firms Need Clear Rules, Says Bank
Investors differ from HODLers in that they include crypto in a diversified portfolio rather than holding large amounts of crypto they expect to appreciate in the long term.
However, fund managers can adopt HODL strategies for their clients. They can also create a fund investing in funds with crypto allocations, as is the case in Luxembourg.
According to Société Générale, European investment managers dipping into crypto need formal procedures and communication guidelines to define interactions between regulated players.
Last year U.S. lawmakers and the Labor Department criticized pension fund managers’ plans to include crypto in client portfolios.
Recent debate around pension reforms in France inspired some in the crypto community to advocate moving an entire portfolio to Bitcoin.
The European Union’s Markets in Crypto-Assets bill does not specifically address the fiduciary duties of fund managers investing in crypto.
It is, however, more advanced than U.S. crypto legislation, the lack of which, according to Kevin O’Leary, has discouraged institutional investment.
Crypto microblogger Inmortal recently tweeted his three potential Bitcoin (BTC) price scenarios over the next one to two years.
The first scenario assumes that BTC be range-bound until this fall. Price action will become “extremely boring” crypto investors by moving in the $20,000-30,000 range.
Active growth of BTC will start in the fourth quarter of 2023. The analyst predicts that it will break through the $30,000 level and move toward $48,000 during this period.
Inmortal’s First 2023 Bitcoin Scenario | Source: Inmortal
In his second scenario, Inmortal does not exclude a retest of the $25,000 level after an extended consolidation near $29,000.
The analyst expects BTC to increase between the end of 2023 and the beginning of 2024. The prediction implies a repetition of the cryptocurrency’s 2016 patterns.
Inmortal’s Second 2023 Bitcoin Scenario | Source: Inmortal
Inmortal predicts a “roller coaster” in his third Bitcoin forecast with an update of the local top and a later decline.
In this scenario, the next breakout above $30,000 could occur in the late 2023 and early 2024 period and can be the starting point for further growth.
Inmortal’s Third 2023 Bitcoin Scenario | Source: Inmortal
The analysts assigned a 60-70% probability for the first outcome, a 50% probability for the second, and a 30-40% possibility for the third.
BeInCrypto editors recently published 2023 Bitcoin predictions shared by experts.
We investigate Bitcoin’s (BTC) price fall below the $27,000 support area and whether the largest cryptocurrency can recover.
The Bitcoin (BTC) price fell below $27,000 following a daily bounce amid cool U.S. inflation numbers. At press time, the largest cryptocurrency by market capitalization recovered its position and traded at around $27,460.
Did U.S. Government Sell Bitcoin?
As expected, the decline started a cascade of liquidations. Coinglass reported $47 million in long-position liquidations in one hour.
Crypto community members quickly blamed the decline on a potential BTC sale by the U.S. government. A similar selloff occurred when Twitter user @tier10k inaccurately reported the movement of funds in the U.S. government and Mt. Gox wallets.
However, this time, the panic was avoided. On-chain analyst @ZachXBT clarified that addresses linked with the authorities did not perform any transactions.
Blockchain analytics platform Arkham Intelligence denied rumors that user labels marking addresses caused the problem. Its interface allows you to add labels to wallets and change data sets manually, a feature one of its clients may have abused.
The company said it only identified seven Bitcoin wallets linked to the U.S. government, with none involved in transactions.
Businesses can use special virtual accounts to make crypto-to-fiat payments across Europe.
Nilos is offering crypto payment accounts through a partnership with card issuer Modulr.
Crypto Payment Rails Live on Despite Silvergate Collapse
A business can originate and settle a crypto payment in seven seconds using a special crypto-friendly payment account. A special account converts the user’s crypto into fiat before transmission.
The backbone of Nilos is the Single Euro Payments Area (SEPA) and the Faster Payment rails. Nilos’ settlement speed complies with SEPA requirements for transactions between EU and certain non-EU member countries to clear within 10 seconds.
Modulr enables those holding wallets from electronic monetary institution Nebeus to send fiat converted from crypto to special IBAN accounts in Europe.
The payments infrastructure provider also enables Zumo users to fund their crypto wallets through direct settlement from their bank accounts. Zumo is a wallet service provider based in Edinburgh, U.K.
Crypto firms in the U.S. had to explore alternative rails to convert between crypto and fiat after Silvergate Bank and Signature Bank collapses. Silvergate enabled its customers to exchange crypto for fiat through the Silvergate Exchange Network.
After Silvergate filed for voluntary liquidation, other banks with similar payment networks welcomed crypto customers. USDC issuer Circle used Cross River Financial’s 24/7 crypto-to-fiat Real-Time Payments System for stablecoin settlements.
Another user of Cross River’s infrastructure is Coinbase, the largest crypto exchange in the U.S.
Could Banks Win the Imminent Real-Time Settlement War?
Restrictions associated with the COVID-19 pandemic accelerated developments around instant payments.
The Bank of England tested a new real-time system that synchronized the flow of assets in two separate ledgers. The pilot foreshadows a new Real-Time Gross Settlement system enabling fast interbank transfers going live next year.
In July, the U.S. Federal Reserve (Fed) will trial instant interbank transfers through its FedLine network. These systems enable transacting parties to manage cash flow, among other things.
Both stand to lay the groundwork for a central bank digital currency that could dent the value proposition of fast P2P crypto payment networks like Lightning.
Bitcoin’s Lightning Network allows cheap and fast payments between nodes across a channel. Transactions do not need to tolerate long waiting times typically associated with payments on the base Bitcoin network.
Another benefit of the Lightning Network is its ability to enable micropayments. This means users can send and receive minimal amounts of Bitcoin. This was previously impossible due to the high fees associated with on-chain transactions.
With the Lightning Network, users can send and receive payments as small as a few satoshis, making it possible to pay for things like articles, videos, and other digital content with Bitcoin.
And transaction throughput on Lightning is higher than Visa and Mastercard at one million transactions per second.
Its speed is offset by the challenge of securing Bitcoin in a Lightning wallet for locking into a payment channel. Users may consider opening a bank account at a FedNow institution as safer and easier than funding a Lightning wallet.
Google announced at its I/O 2023 conference that it would roll out new artificial intelligence (AI) tools to create content and write code that could aid crypto theft.
It will expand its AI-driven email Smart Reply email tool with newer large language models to generate messages you can refine using ChatGPT-like prompts.
Bard Can Now Identify and Fix Software Bugs
Its PaLM 2 language model, developed by the newly formed Google DeepMind, can identify and suggest fixes to software bugs. Its ChatGPT-like conversational AI assistant, Bard, can write and interpret Python code.
A computer can execute steps in Python code in real time without understanding the whole program.
Alphabet’s CEO Sundar Pichai said the company is developing watermarking and metadata tools to identify synthetic content. Watermarking will embed certain bits of information in files in a way that will survive “modest editing.”
Users can use assess the genuineness of content through metadata offering additional context for its creation. Pichai said Google will release these tools soon.
Python Script Bard Generated by Bard | Source: Google
The company reassured the public that a new video translation tool that matches lip movements with translated audio would only be used with approved partners.
As AI becomes ubiquitous, Elon Musk and other tech executives have cautioned against further training of math models. President Joe Biden has warned tech companies of the dangers of AI, with a Senate Committee announcing an AI oversight hearing next week.
How Scammers Can Steal Crypto From Smart Contracts
While tools governing responsible AI use mature, scammers can use tools like Smart Compose to elicit personal information using genuine-looking phishing emails.
These emails can be crafted to mimic the style and tenor of emails companies send to customers. Spam filters looking for poorly-crafted phishing emails may also find it harder to distinguish genuine emails from fake ones.
Additionally, scammers can steal personally identifiable information through malicious code Bard writes. Criminals can sell this information for crypto through fraud shops or darknet marketplaces.
Top 25 Darknet Marketplaces and Fraud Shops | Source: Chainalysis
Bard could also identify smart contract bugs that criminals can use to steal crypto or money. Pending tighter security measures, cross-chain bridges offer criminals a prime target. Google will roll out the assistant in over 180 countries and territories in English.
Cybersecurity firm AnChain.ai uses machine learning to analyze smart contract code for bugs.
Previously, criminals bought Google Ads leading to websites prompting customers to enter sensitive information. The scammers entice victims through urgency or lucrative opportunities and use their credentials to drain wallets on crypto exchanges.
The U.S. House Financial Services and Agriculture Committees have met to consider changes to existing legislation to address crypto disclosures and dispel regulatory uncertainty.
The committees, chaired by Senator Patrick McHenry and Representative Glenn Thompson, heard testimonies from Kraken, Web3, TradFi, and regulatory personnel.
Regulators Spar Around SEC Disclosure Regime
Rather than advancing new U.S. crypto legislation, the hearing entitled The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Asset Markets mulled supplementing existing laws with crypto amendments.
It follows an April 27 Agriculture subcommittee hearing views on regulating crypto spot markets.
McHenry confirmed in his opening statement,
“The purpose here is to make law for us to give assurance to the marketplace and to consumers to close regulatory gaps…to harness innovation and enable consumer protection [and to] ensure that the [Commodity Futures Trading Commission] and the Securities Exchange Commission (SEC) will work together to ensure that consumers are protected unlike what is currently happening.”
In his opening statement, Agriculture Committee member Representative Dusty Johnson affirmed the potential of blockchain technology.
“We know that digital assets and the blockchain technology holds real promise…I think all of us know the current uncertainty does not serve us well. It doesn’t serve the marketplace.”
Johnson previously filed a Resolution to support blockchain and digital assets. The Resolution establishes the House’s view that the SEC’s process to identify securities needs revision.
The Resolution further argues that the SEC’s current disclosure scheme cannot capture digital asset features an investor needs to make informed decisions. Kraken’s chief legal officer Marco Santori captured a similar sentiment in his opening remarks.
However, Representative Stephen Lynch countered that crypto advocates criticize SEC disclosure regimes because they know their businesses do not comply with “orderly markets and investor protection law.”
“Rather than comply with existing rules, various cryptocurrency firms have engaged in a legal battle against the SEC.”
He pointed out that the SEC had “prevailed” in its 130 cases against the crypto industry.
Earlier this year, the agency sued Kraken for offering its Ethereum staking products as unregistered securities. The firm settled with the SEC without admitting nor denying guilt.
A court recently ordered the SEC to respond to Coinbase‘s request for regulatory clarity. The SEC had previously issued Coinbase a Wells Notice threatening enforcement against unregistered securities listings.
Don’t Expect US Crypto Legislation Soon, Says Commissioner
Speaking at the Financial Times Crypto and Digital Assets Summit in London, SEC Commissioner Hester Peirce is not optimistic about U.S. crypto legislation any time soon.
However, she pointed out the U.S. could mine Europe’s Markets-in-Crypto-Assets regulation for regulatory clues. The European Union recently passed the MiCA bill. The legislation defines asset disclosure requirements and money laundering rules for crypto exchanges, among other things.
Harvard researcher Timothy Massad advocated a Self-Regulatory Organization involving the SEC and the CFTC at the hearing. The United States Congress would sanction the SRO.
In Europe, firms with licenses in one EU member state can operate in the remaining 26. Local regulators handle license applications, while the European Banking Authority and the European Securities Authority enforce compliance with MiCA rules.
Bitcoin (BTC) incurs slight upside volatility as U.S. Consumer Price Index (CPI) for April misses estimates, which may strengthen the case for a Federal Reserve (Fed) rate hike pause later this year.
The asset usually shows volatility from roughly six hours before the U.S. CPI announcement. However, like the S&P 500 and Dow Jones, it traded fairly flat in premarket trading.
Cryptos Trade Flat, But Analysts Are Cautious
Its current price is around $27,981, buoyed 1.2% by lower-than-expected 4.9% headline inflation, Ethereum (ETH) is also muted at $1,840, according to Coingecko. Lower cap cryptos like Cardano and Dogecoin were down 0.2% and 0.5%.
Analysts estimated April’s annual U.S. headline CPI to be steady at 5%, with the core inflation, excluding volatile food and energy prices, going up to 5.5%.
Despite combining in lower, headline inflation is still far off the Fed’s 2% target. Core inflation matched expectations, coming in at 5.5% annually and rising 0.4% monthly.
After the news, Bitcoin, whose 30-day correlation with the Nasdaq has reached 0.5, tracked U.S. futures upward. Treasury yields fell.
According to the MSCI World Index, which fell 0.1% this morning, most stocks have traded sideways in the past month, awaiting news from the Federal Reserve.
The Fed said on May 4 that future rate hikes would depend on forthcoming data. It has increased interest rates by about 500 basis points in the last 14 months. Last month’s nonfarm payrolls report revealed hourly wage increases that may encourage more increases.
At press time, markets still expect a rate pause at the Fed’s next meeting.
New York Fed Does Not Foresee Rate Cuts
New York Fed president John Williams said yesterday he doesn’t expect inflation to reach 2% before the next two years.
Furthermore, his baseline forecasts do not predict any rate cuts this year.
“Because of the lag between policy actions and their effects, it will take time for the [Federal Open Market Committee’s] actions to restore balance to the economy and return inflation to our 2% target.”
Asian stocks declined this morning as investors offloaded risk positions ahead of the CPI news. Tech stocks started the slide as an index tracking Chinese state enterprises fell over 1%. Shares of Tencent Holdings recorded their third straight day of decline.
A British citizen has pleaded guilty to computer intrusion and stealing cryptocurrencies using SIM-swap fraud.
Joseph James O’Connor and accomplices hacked the Twitter accounts of names like Elon Musk and Michael Bloomberg in 2020 to send a Bitcoin link promising high returns quickly.
Twitter Scam Through SIM Swap Fraud
The attack differed from other impersonation scams in that they used the actual accounts of high-profile people.
The fraudsters also stole $794,000 in crypto through a SIM-swap fraud affecting three executives of a wallet company. These intrusions allowed them to drain crypto from two clients’ wallets.
They then laundered the funds through various transactions and converted some to Bitcoin. Some stolen crypto went to a personal exchange account in O’Connor’s name.
O’Connor, aka PlugwalkJoe, also hacked a Snapchat account through a SIM swap and endangered one of his victims through swatting attacks.
Swatting attacks direct law enforcement action against victims through emergency calls implicating the victim in a crime.
O’Connor faces 77 years in jail after pleading guilty to cybercrime, including the conspiracy to commit computer intrusion, extortive communications, and making threatening communications.
Last year, hackers misappropriated Bitcoin investor Kevin O’Leary’s account to offer Bitcoin and Ethereum giveaways.
O’Connor’s Twitter Scam Was Unsophisticated, Experts Say
American intelligence originally surmised the hack to be the work of an individual. Alex Stamos of the Stanford Internet Observatory said that a request for Bitcoin donations belied an unsophisticated scam.
During the hack investigation, the New York Times confirmed the involvement of four individuals by linking their social media accounts with their crypto addresses.
According to the Times, pseudonymous Discord user Kirk allegedly sold Twitter handles for Bitcoin to prove his access to Twitter’s internals.
O’Connor allegedly bought the handle “@6,” saying at the time,
“They can come arrest me. I would laugh at them. I haven’t done anything.”
He will be sentenced on June 23 and must forfeit his stolen crypto.
The Oracle of Omaha, whose opinion many regards as an economic health barometer, suggests that businesses’ performance could decline, leading to a short-term stock decrease. This decline could spur a crypto price correction because of the Nasdaq’s correlation with cryptos.
Speaking at a Berkshire Hathaway shareholder meeting in Nebraska, Buffet said many firms would report lower earnings caused by discounts after their COVID-19 inventory build-up.
Oracle of Omaha Predicts Lower Earnings After Dumping $13 Billion in Stocks
The Oracle of Omaha surmised:
“In the general economy, the feedback we get is that, I would say, perhaps the majority of our businesses will actually report lower earnings this year than last year.”
Apple Inc. saw declines in iPad, Mac, and wearables revenue in Q2, despite iPhone revenue growing 2% year-over-year. The iPhone maker comprises almost half of the Berkshire empire’s stock portfolio.
Services, Apple’s second-largest segment after the iPhone, experienced a third straight quarter of mid-single-digit growth. As a result, Apple’s total revenue declined 3% annually, marking two consecutive quarters of revenue decline.
Q1 profits of Berkshire investment Chevron Corp were down 40% from quarterly profits last year. Analysts expect quarterly earnings of Occidental Petroleum to fall 38% to $1.30 per share when it reports earnings later Tuesday.
Berkshire increased its stake in the firm earlier this year.
Berkshire Hathaway is sitting on $130.6 billion in cash after selling $13.3 billion in shares in Q1. It repurchased some of its own stock and invested $2.9 billion in other companies.
Interest rates boosted returns from Treasury bills and bank deposits from $164 million last year to $1.1 billion this year.
Despite earlier investments in Goldman Sachs and Bank of America, Buffet did not reveal any intentions to help alleviate the current U.S. banking crisis.
Nasdaq Correlation Could See Cryptos Trend Downward
Buffet’s business partner Charlie Munger said last month that investors should brace for lower stock market returns amid higher interest rates.
Earlier this month, the Federal Reserve (Fed) increased interest rates by 25 basis points to 5-5.25%, but hinted at a future pause.
The 30-day correlation between Bitcoin and the Nasdaq rose to around 0.5 at the end of April. This tracking implies that Buffet’s and Munger’s prediction of an economic slowdown could accompany a crypto slide.
A correlation coefficient closer to one means that the Nasdaq and Bitcoin performances dovetail almost perfectly.
BTC 30-Day Correlation With Stocks, Gold, and Dollar | Source: K33 Research
Furthermore, a larger stock market decline will impact the performances of larger-cap cryptos tracking Bitcoin.
BTC Correlation With ETH and BNB | Source: K33 Research
Other macro pressures could depress crypto prices, such as U.S. regulatory uncertainty discouraging institutional investment.
Despite getting a boost from the collapse of several U.S. banks earlier this year, Bitcoin needs this investment to break out beyond its current trading range, according to Kevin O’Leary.
Bitcoin lost substantial liquidity after the collapse of FTX and Alameda Research last year.
PayPal has disclosed $1 billion of crypto holdings in its quarterly earnings report filed with the U.S. Securities and Exchange Commission (SEC).
The fintech owns $499 million in Bitcoin (BTC), $362 million in Ethereum (ETH), and $82 million in Bitcoin Cash (BCH) and Litecoin (LTC). Its holdings have risen over 30% since Q4 2022.
PayPal’s Business Threatened by High Interest Rates
PayPal posted adjusted profits of $1.17 per share, up from 88 cents last year, while its revenue rose 10% to $7 billion.
The company slashed its operating margin expansion forecast from 125 to 100 basis points, sending shares sliding 5% in late trading yesterday. Investors suspect the firm’s checkout button cash cow has been losing market share to Apple.
And high interest rates have limited expensive purchases for many, especially low-income clients.
PayPal customers can buy, hold, sell, receive, and send crypto assets and use sale proceeds at checkout. PayPal entrusts custody and safekeeping of crypto assets to third-party trusts. Notable trust firms include Gemini and Coinbase Custody.
Venmo, which PayPal acquired in 2013, allows customers to send Bitcoin, Ethereum, Litecoin, and Bitcoin Cash to other users and external wallets. Venmo users can also send crypto to PayPal wallets. All Venmo crypto transactions are irreversible.
Earlier this year, PayPal reportedly halted stablecoin development while New York regulators investigated its partner, Paxos.
Payment Providers Drive Crypto Adoption
Trusted payment providers can drive crypto adoption beyond the crypto faithful.
U.S.-based MetaMask wallet holders can buy crypto using PayPal and help onboard users onto Web3, while PayPal debit card customers can purchase crypto on Coinbase.
PayPal competitor Stripe allows crypto companies to buy crypto with fiat. It has an in-game widget to enable gamers to fund wallets.
Mastercard’s EVP of blockchain said the industry is considering blockchain’s next use case. The payments giant recently launched infrastructure and standards to certify transactions between customers and businesses using blockchain networks.
Mastercard rival Visa announced a new project to drive mass stablecoin adoption on public blockchains. Before that, Visa partnered with Circle to offer USDC transactions on certain credit cards.
Almost 200 crypto exchanges in Estonia have withdrawn applications after the introduction of a new Money Laundering and Terrorist Financing Prevention Act.
The country’s Financial Intelligence Unit (FIU) rejected a similar number of applications for poor translations and board members with questionable credentials. Many exchanges could not verifiably demonstrate ties to Estonia.
Strict Compliance Requirements May Have Accelerated Estonian Exit
FIU director Matis Maeker questioned whether these applications genuinely sought to serve Estonians or establish a presence for illegal transactions.
Companies had until June 3 to renew their licenses. Now, laws tightening consumer protection and money laundering compliance have seen at least 200 companies voluntarily rescind renewal applications.
While the reasons for the departures are not explicit, smaller exchanges may have found it difficult to comply with startup, minimum capital, and compliance requirements.
The new laws, enacted in March 2022, compel virtual asset service providers to hold capital reserves commensurate with their services, from a minimum of $137,255 to $384,314.
Virtual Asset Service Providers (VASPs) must also comply with KYC requirements and cannot open anonymous accounts.
The Transfer Rule in Europe’s Markets in Crypto-Assets bill requires exchanges to identify entities at both ends of a crypto transaction. Fines for breaches can reach $440,000.
In addition, firms must pay over $50,000 to establish a company and pay about $11,000 monthly.
The 2022 laws add to 2017 requirements for only a compliance officer, an Estonian director, and a physical presence. A 2020 revision called for a resident director, a local office, and a $3,700 fee. The 2020 revisions saw many firms exit.
The government stated in January 2022 they would release new crypto regulations to lessen crime risk. It had reported increased queries and requests from international law enforcement about money laundering and scams.
Big Exchanges Still Offer Services in Estonia
According to Chainalysis’ 2021 Geography of Cryptocurrency Report, Estonians mainly transact in ETH or wrapped ETH.
Central, Northern, and Western European Transactions By Cryptocurrency | Source: Chainalysis
Estonian laws distinguish between companies providing fiat on and off-ramps for crypto, those transferring funds between crypto wallets, wallet service providers, and those offering initial coin offerings.
Notable crypto firms offering services in Estonia include exchanges Coinbase, Binance, and Kraken. CryptoWallet.com, a wallet service provider, recently successfully renewed its license.
Top 5 Services Receiving Funds from Central, Northern, and Western Europe | Source: Chainalysis
OSOM Finance, which offered a proprietary crypto algorithm, has shut down its Estonian operations.
