DCG and Gemini Drag their Dispute, Coinbase Draws Lobbyists’ Support and More Regulation Headlines

https://www.securities.io/?p=233819

The US digital assets industry delivered more legal developments this week in the separate disputes involving Coinbase, Ripple Labs and Gemini exchange. Here are the details:

US SEC is conceiving an appeal to the court’s decision in the Ripple Labs case

The SEC vs. Ripple case regained the spotlight this week as the US Securities and Exchange Commission confirmed, in documents submitted on Aug 9, its intent to seek an interlocutory appeal to the Second Circuit Court of Appeals.

The appeal, if allowed, will further delay a final resolution in the dispute culminating from the SEC’s complaint against the company, its CEO Brad Garlinghouse and co-founder Chris Larsen in December 2020. Wednesday’s somewhat expected move comes less than a month after Judge Torres ruled on the XRP (XRP) token classification. Torres determined on July 13 that the contentious sales of the Ripple-issued XRP token on public exchanges were essentially ‘blind’ purchases and thus didn’t violate federal securities laws.

In June, the Gensler-chaired agency asserted in two lawsuits against Binance and Coinbase that most cryptocurrencies, except Bitcoin and Ethereum, were unregistered securities. Ripple Labs’ chief legal officer Stuart Alderoty shared brief thoughts on the latest SEC request, which seeks to address some “differences of opinion,” adding that the firm would file its response in the coming days.

Motivated by the partial victory of Ripple from Torres’ July ruling, institutional investors have recently renewed their interest in XRP. Digital assets research firm Fineqia observed in its Aug 8 report on global Exchange Traded Products (ETPs) that XRP-linked ETPs have recorded a significant swell in terms of assets under management (AUM). While the eventual outcome of the case remains elusive, upcoming events nonetheless present a potential catalyst for XRP price action.

To learn more about Ripple, check out our Investing in Ripple guide.

Gemini’s Winklevoss responds to DCG’s motion to dismiss

In related news, lawyers for Digital Currency Group (DCG) on Thursday filed a motion to dismiss an earlier July 7 suit from Gemini which alleged fraud on the part of the company and its CEO Barry Silbert. The Winklevoss-owned exchange previously faulted the pair for making “misleading and incomplete representations” regarding the now-failed Earn lending service operated by DCG subsidiary Genesis as part of a business partnership announced in February 2021.

“The Complaint is a hodgepodge of conclusory allegations against non-defendant Genesis, all belied by the fact that Gemini has not filed these spectacular claims in the Genesis bankruptcy,” DCG’s legal representation wrote.

CEO Barry Silbert also argued in the filing with the US District Court for the Southern District of New York that the liabilities from Gemini’s Earn were an obligation to Genesis, not the conglomerate. The exchange claims it lent customer funds (to Genesis), which have since been accessible after the firm halted withdrawals last November and eventually declared bankrupt on Jan 19.

Gemini co-founder Cameron Winklevoss remarked on the submitted motion in a post on X, describing the arguments therein as baseless.

“When a company you own says you wrote a $1.1 billion check that you know you didn’t write, yes, you have a duty to correct this,” Winklevoss posted, adding, “Good luck making these arguments to a jury of your peers. See you in court.”

Gemini and Genesis face a civil lawsuit from the SEC which alleged in January that the Earn program they jointly operated offered the public unregistered securities.

US Senator and other lobbying organizations throw weight behind Coinbase

Elsewhere this week, Coinbase exchange, the defendant in charges brought forward by the SEC in June, saw public support from several industry lobbying individuals and groups. US Senator Cynthia Lummis filed an amicus brief supporting the exchange’s recent motion to dismiss the SEC lawsuit on Friday. The Crypto Council for Innovation, Blockchain Association, and Chamber of Digital Commerce also showed support by filing a joint amicus brief on the same day.

“This is no run-of-the-mill enforcement case. Through this case the SEC seeks primary influence over economic, political, and legal questions under active consideration by Congress and multiple agencies,” a section of the brief filed on behalf of Lummis read.

The series of implosions in the crypto industry last year, starting with the collapse of Three Arrows Capital, has accelerated efforts to advance crypto regulations in the US. Several lawmakers, including Lummis – who recognized the same – have in recent months brought forward bills looking to address the lack of clarity in some ambiguous regulatory aspects of the crypto industry, such as the jurisdiction and authority of the SEC and CFTC.

“Each of these bills recognizes that the crypto industry does not fit entirely within existing securities laws and transcends the current statutory powers of the SEC. The multitude of interests at stake require a holistic approach beyond the scope of a single agency, including approaches taken around the world. Congress is attuned to these important considerations,” the brief added.

Coinbase filed its motion to dismiss the complaint from the SEC on Aug 4, claiming that the SEC “violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws” by pursuing it. The string of amicus brief filings notably came less than 24 hours after the US securities watchdog settled with Bittrex on similar charges.

Bittrex settles with SEC for offering US customers access to unregistered securities

The SEC on Thursday said it had settled with Bittrex (and former CEO William Shihara), which agreed to a cumulative settlement payment of $24 million.

“In addition, Bittrex and Bittrex Global agreed to pay, on a joint and several basis, disgorgement of $14.4 million, prejudgment interest of $4 million, and a civil penalty of $5.6 million, for a total monetary payment of $24 million,” the SEC said in the press release.

The exchange previously filed for bankruptcy in early May, weeks being sued by the securities regulator, which simultaneously claimed it operated as an unregistered broker, exchange and clearing agency and also sold unregistered securities. The April complaint followed a March communication from the Seattle-based exchange on pulling out of the US market.

“Bittrex worked [for years] with token issuers to ‘scrub’ their online statements of any indicia that they were investment contracts—all in an effort to evade the federal securities laws. They failed,” Gurbir S. Grewal, director of the SEC Division of Enforcement, said.

In July, the exchange’s US affiliate asked customers holding funds on the platform to complete withdrawal by Aug 31, having begun customer payouts in mid-June. Last October, the US Treasury’s Office of Foreign Assets Control and Financial Crimes Enforcement accused Bittrex of violating sanctions programs between March and December 2017, resulting in the company paying a $29 million settlement.

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Binance Seeks AML Compliance in Taiwan Amid Exits from European Markets

https://www.securities.io/binance-seeks-aml-compliance-in-taiwan-amid-exits-from-european-markets/

Binance is applying to become compliant with Taiwan’s anti-money laundering (AML) rules; a local media reported this week citing sources familiar with the developments. The leading crypto exchange intends to register under the East Asian country’s Money Laundering Control Act, per the sources who followed proceedings of a closed-door meeting held on Tuesday with the Taiwan Financial Supervisory Commission (FSC).

The financial markets regulator reportedly informed attendees, including representatives for crypto service providers serving locals, that Binance is securing registration in line with the AML guidelines. The FSC effected its AML laws applying to all virtual assets services providers (VASPs) in July 2021, with the guidance representing the sole regulated aspect of its crypto industry to date.

Worth noting, Binance has been expanding in Asia while simultaneously abandoning most of its European markets either through voluntary withdrawals or rejections from regulators. The exchange unveiled its Japan-serving unit, Binance Japan, at the start of August. Binance Japan obtained licensing from the Japan Financial Services Agency through its acquisition of Sakura Exchange BitCoin for an undisclosed amount last November.

Digital assets guidance in Taiwan

The FSC previously informed the public on March 30 that it was looking to establish a framework for crypto trading and payments for VASPs with a timeline of publishing the guidelines before October. Local industry experts noted that the commission would likely adopt the same strict approach regulating traditional financial institutions to overseeing digital asset platforms. Such an approach would require VASPs to maintain separate reserves for their crypto assets and those from their clients.

The rules would also likely mandate annual audits of these asset reserves by accounting firms which could be a huge bummer for most crypto companies as accounting firms have shown reluctance to take on crypto clients.

In April, a group of Taiwanese lawmakers presented an amendment to establish a crypto regulatory division within the FSC to further rein in the crypto industry. Local news outlet Economic Daily reported on April 26 that the new unit would, in particular, deal with crypto-related issues separate from those addressed by the currently existing four bureaus in charge of banking, securities and futures, insurance and auditing.

News outlet separately Forkast reported in July 2022 that the FSC had asked banks and credit card agencies not to support credit cards as a payment means for virtual assets services. The commission explicitly notified its local banking industry not to take on VASPs as merchants while giving card acquirers a three-month window to comply.

MICA alignment preparations in EU

Meanwhile in Europe, France’s securities regulator, the Autorité des Marchés Financiers (AMF), amended its existing crypto licensing regime to align with a broader pan-European framework based on Markets in Crypto-Assets (MiCA) which was approved in April. Under MiCA, crypto companies only need regulatory approval in one EU nation to serve all 27 in the single market.

Still, approval of crypto firms in some jurisdictions like France and Germany might need going through additional hoops due to the strict registration requirements in place. In contrast, other EU member states like Italy and Spain have hardly considered more guidelines beyond the minimum requirements stipulated by the EU’s anti-money laundering directive AMLD5.

France’s enhanced registration framework for DASPs

The provisions of General Regulation and updated digital asset service providers (DASPs) policy announced by the AMF on Thursday will take effect starting Jan 2024 ahead of the second and third levels of MiCA coming into play later in 2024 and 2025. DASPs looking to set up full custodial, exchange, and crypto trading operations in the country will be required to comply with the ‘enhanced’ requirements.

They will also be obligated to institute “security and internal control systems, systems for managing conflicts of interest” and disclose “accurate and non-misleading information, public pricing policies.” Thus far, only one firm, SG-Forge, has been licensed to provide all crypto services recognized by the principal financial authority (AMF), which serves as the stock market regulator in France. Though Binance is registered with the French regulator, it is yet to secure licensing which represents the highest form of regulatory certification.

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Post Vyper Exploit – Binance Labs Makes $5M Investment to Curve as Aave Seeks to Reshape Exposure to CRV

https://www.securities.io/post-vyper-exploit-binance-labs-makes-5m-investment-to-curve-as-aave-seeks-to-reshape-exposure-to-crv/

Popular stablecoin-focused decentralized exchange (DEX) Curve Finance made headlines last month after it suffered a $73.5M drain on some of its pools at the end of July through a series of attacks exploiting a smart contract programming vulnerability.

The incident exposed several risks and brought huge implications in the space, thus sparking concerns from DeFi users questioning the viability and future of Curve Finance. Here is the latest:

Aave community to vote on a pair of governance proposals in response to Curve incident

Aave DAO, this week, brought forward two proposals in response to the recent near-liquidation threat posed by a lending position held by Curve founder Michael Egorov.

Egorov held a substantial borrowing position on Aave v2 against collateral of ~34% of CRV’s total market capital, which came under pressure following the July 30 exploit on the stableswap project.

The Curve founder managed to shore up support and successfully raise funds through OTC deals with at least 30 counterparties, including Wintermute and Tron, which helped clear a huge portion of his debt.  Still, his position has remained a contentious matter.

The latest proposals presented by Chaos Labs, an on-chain risk management team, aim to lower Aave’s liquidation threshold to Curve DAO (CRV) by 6% and disable borrowing of Curve’s native CRV token on the Ethereum V2 and Polygon V3 markets. Voting on the pair began on Thursday and will conclude on Aug 12.  Aave’s AAVE token was at the time of writing changing hands at $66.78 – down 4.36 in the last 30 days.

AAVE/USD chart

Meanwhile, the voting period for a separate proposal in the ecosystem, which recommends the acquisition of CRV using Tether (USDT) from the Aave DAO treasury, elapsed today. The proposal was initiated on Aug 3 and specifically called for the ecosystem’s treasury to purchase as much as $2 million worth of CRV from Curve.

Aave Chan founder Marc Zeller, who authored the proposal, noted that the move will “support the DeFi ecosystem and position Aave DAO strategically in the Curve wars, benefiting GHO secondary liquidity.” The voting results at the time of writing showed that quorum had been reached early Friday, with 57.81% of voters (370,359 AAVE) voting in favor of the aCRV OTC deal.

To learn more about Aave, check out our Investing in Aave guide.

Binance Labs injects $5 million to Curve DAO ecosystem

Binance Labs announced on Thursday a strategic collaboration with Curve entailing an initial $5 million investment in Curve DAO (CRV) as part of its efforts to support the Ethereum-native DEX protocol.

“Curve is the largest stableswap, and as a key protocol in DeFi it has contributed to the steady growth of the space in 2023. Given the recent events that have impacted the protocol, Binance Labs has offered our full support to Curve through our investment and strategic collaboration,” Binance Labs Head Yi He said.

Binance Labs’ announcement delivered a slight boost to CRV price action, with the token moving up to $0.61 from less than 50 cents after news of the exploit surfaced.

CRV/USD chart

Curve, on its part, will also explore a potential deployment to BNB Smart Chain in a possible alignment, although neither party revealed details of the timeline.

“BNB Chain has earned a significant presence in DeFi, and is well positioned to deploy Curve’s current and future products on its chain,” Curve founder Michael Egorov remarked on the arrangement.

Curve Finance asset recovery update

Curve’s team, jointly with teams from other affected protocols, including Metronome, previously proposed a joint 10% bug bounty as reward to the hacker in exchange for returning the rest of the funds. The exploiter seemingly heed and returned as much as 73% of the funds drained from various pools on Aug 4, averting a potential contagion.

Lending platform Alchemix whose alETH-ETH pool was drained $13.6 million in Ethereum derivatives confirmed receiving 4,820.55 Alchemix ETH (alETH). NFT protocol JPEG’d, which lost around $11.5 million, also received 5,495 Ether and communicated that it would view the incident as a white-hat rescue, thus not pursuing any legal action.

Last week, Curve opened a public bounty of 10% of the yet-to-be-reclaimed funds, roughly ~$1.85 million, to anyone offering information leading to the discovery of the identity of the exploiters. Notwithstanding the blow to its ecosystem, Curve still ranks second among DEXs behind Uniswap with a total value locked of $2.4 billion per DeFi Llama data.

To learn more about Curve DAO, check out our Investing in Curve DAO guide.

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PancakeSwap Expands to Arbitrum One in Continued Pursuit of Multichain DeFi Vision

https://www.securities.io/pancakeswap-expands-to-arbitrum-one-in-continued-pursuit-of-multichain-defi-vision/

PancakeSwap is now available on Arbitrum One after confirming its expansion to the Ethereum Layer 2 on Wednesday as part of its goal to launch on several chains .

PancakeSwap deploys on sixth chain

The decentralized exchange (DEX) protocol said it will start by introducing swap and liquidity provisioning features on Arbitrum One, followed by the integration of the Farms as well as IFO features in later weeks. PancakeSwap hopes its expansion will help drive mass adoption of DeFi by reaching a wider audience and attracting new users.

“We are thrilled to announce that we are expanding our exceptional product offerings to Arbitrum One. This exciting move allows users to experience the utmost user-friendliness and industry-lowest fees on the Arbitrum network.” the project’s Chefs team wrote.

In June, the BNB Chain-native DEX launched v3 on Polygon zkEVM mainnet beta marking the fifth chain it is supported on after previous deployments on Ethereum and Aptos and zkSync Era. PancakeSwap ranks third in TVL among DEX projects, with $1.485 billion worth of tokens locked on its platform behind Uniswap and Curve DEX per DefiLlama data.

To learn more about PancakeSwap, check out our Investing in PancakeSwap guide.

SpiritSwap looking for a new team to take over

In other news, Fantom-based decentralized exchange (DEX) SpiritSwap notified users on Wednesday that it will be permanently winding down operations at the end of the month following the treasury drain blow suffered from Multichain exposure. SpiritSwap DAO said it is looking to secure new ownership for the project by September, failure to which it will halt operations.

The DEX, founded in April 2021, grew to reach a total value locked (TVL) of $374 million in January 2022 but has seen a huge chunk of the figure evaporate due to its links to exploited cross-chain router protocol. Multichain suspended operations in a July announcement that also confirmed prior reports of the arrest of cofounder and CEO, Zhaojun He in China.

Last month, another Fantom-based project Geist Finance communicated a shutdown with no plans to reopen lending and borrowing, citing losses from the Multichain exploit. The development team behind the lending protocol paused contracts on July 6 before switching to ‘withdraw and repay only’ on July 9.

To learn more about Fantom, check out our Investing in Fantom guide.

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DeLabs’ y00ts Plans Migration to Ethereum, Just Months After Landing on Polygon

https://www.securities.io/?p=233335

Formerly a Solana-native project, the generative NFT art collection y00ts earlier this year received a $3 million non-equity grant from Polygon’s partnership fund to help it migrate into its ecosystem. The Los Angeles-based startup DeLabs (creators of y00ts) said it would use the funds to expand its hiring efforts and establish a crypto incubator to support its NFTs. Alongside y00ts, DeLabs moved its other flagship project, DeGods, from Solana to the Ethereum blockchain.

Solana to Polygon to Ethereum

In a new update sent yesterday, DeLabs founder Rohun Vora (Frank) confirmed that y00ts is set to migrate again, this time to the Ethereum mainnet as it is just time to unite the DeGods & y00ts communities.

Frank lauded the exceptional partnership y00ts had established with Polygon Labs. He justified y00ts’ decision to align itself with the same blockchain as DeGods while expressing an appreciation for the opportunity to collaborate with the multitude of outstanding and dedicated professionals at Polygon Labs.

To learn more about Solana and Polygon, check out our Solana vs Polygon guide.

Frank also teased the upcoming Season III, focused explicitly on DeGods NFTs. y00ts said that it will refund the entire grant amount allocated by Polygon Labs as it moves into its new home, though a date for the transition has yet to be listed.

Polygon to reallocate the y00ts funds into its NFT community

On its part, Polygon Labs has announced that a portion of the refunded capital, totaling $1 million, would be directed towards empowering “Polygon-native builders and creators,” with the specifics of this allocation to be disclosed in due course. Polygon co-founder Sandeep Nailwal highlighted the remarkable expansion the Polygon PFP ecosystem has seen as he lauded the instrumental role played by DeLabs in tripling the size of this community this year alone.

He added that Polygon’s commitment to nurturing its PFP community further would be fortified through reinvestment of the y00ts funds, as the chain is dedicated to supporting native creators and ventures that have demonstrated the foresight and determination to advance NFTs, not just as an artistic expression, but also as an instrument of limitless utility.

To learn more about Ethereum visit our Investing in Ethereum guide.

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Miners’ Q2 Report Cards – Bitdeer, CleanSpark, Marathon Digital, Riot Platforms and more

https://www.securities.io/miners-q2-report-cards-bitdeer-cleanspark-marathon-digital-riot-platforms-and-more/

More publicly-traded companies have continued reporting their second-quarter financial results this week. Here is a recap of the latest quarterly earnings reports from crypto mining firms and other developments in the mining industry:

CleanSpark saw a remarkable third quarter in terms of growth and revenue

Bitcoin miner CleanSpark shared its third quarter FY 2023 results on Wednesday, reporting a revenue of $45.5 million against a net loss of $14.2 million. The quarterly revenue figure represented a substantial uptick compared to the same period in 2022, when the company tracked a revenue of $31 million. The Nevada-based mining firm also shared an update on its plan to realize a hash rate target of 16 EH/s by the end of the year from the current 9 EH/s capacity.

CFO Gary Vecchiarelli hailed the firm’s flexible balance sheet, which consists of cash and bitcoin assets, as a critical element in pursuing its growth strategy. CleanSpark controlled a deployed fleet of more than 87,000 units per its July mining and operations update. The unaudited report also showed it mined 575 BTC across the month, bringing its total BTC holdings at the end of the month to 1,061 BTC. In the coming months, the company plans to expand its campus site in Sandersville in a move that will add 6 EH/s to its total hash rate.

­­Marathon Digital achieved 18.8 EH/s in July and an average of 17.7 EH/s in Q2

Meanwhile, Marathon Digital Holdings has continued cementing its position as the biggest publicly traded Bitcoin miner, as evidenced by its substantial self-mining hashrate. Marathon reported an operational computational power equivalent to 17.7 EH/s as of the end of June. This upstaged the previous leader in the public mining sector, Core Scientific, whose installed mining machines summed to 15 EH/s, and moving into July, Marathon’s hashrate surged further to reach 18.8 EH/s.

Core Scientific remains entangled in the labyrinth of bankruptcy proceedings since December 2022, with its self-mining hashrate showing marginal shifts since the filing.

Notwithstanding the challenges posed by unfavorable weather and operational disruptions seen last year, Marathon has embarked on a spree to integrate more Bitcoin miners in 2023. This vigorous endeavor has nearly tripled the operational hashrate, attaining the notable milestone of 15 EH/s in May. Marathon’s Q2 performance report released earlier this week showed that it hit $81.8 million in revenue during the quarter, a 228% increase from the same period the previous year. The average energized hash rate across the three months was 17.7 EH/s.

Core Scientific’s restructuring plan would see Bitmain take a stake in the firm

In related news, court documents filed on Tuesday indicated that Core Scientific’s bankruptcy process is tending towards an agreement with two notable players of the crypto space – miner Bitmain and Anchorage Digital, a major crypto platform. This week’s development comes as Core Scientific reshapes its structure, with an updated reorganization plan awaiting the nod from creditors. However, it’s crucial to note that a host of settlements detailed in the plan are contingent on court approval.

According to official filings in the bankruptcy court, Core Scientific is planning to acquire an impressive 27,000 units of the potent Bitmain Antminer S19j XPs, an air-cooled model with substantial power. The price tag is a hefty $77.1 million, and this venture will be financed through a mix of $23 million in cash and a considerable $54 million in equity. This unique financial blend effectively slashes Core Scientific’s immediate capital requirements by $30 million.

The said investment by Bitmain would mark its first-ever stake in a publicly listed mining entity. Creditors who had extended financial support to Core Scientific for equipment procurement now face two choices. They can either transition their claims fully into equity or choose a more secure path by engaging in debt with the emerging company at 80% of their claim’s value.

Anchorage Digital, which held a $29 million loan when bankruptcy struck, is seemingly the only one inclined towards the equity route. The remaining creditors (likely to lean towards the secure debt option) are BlockFi, Barings, Mass Mutual Asset Finance, Trinity Capital, and 36th Street Capital Partners, holding a combined loan portfolio of around $193 million as of the Petition date.

Novogratz’s Galaxy Digital records a significant decline in trading revenue

The second quarter financial report of the Mike Novogratz-led Galaxy Digital presented a nuanced picture of an evolving landscape, despite the challenges stemming from the crypto credit crisis and industry-wide bankruptcies. Galaxy saw a $46 million net loss, and its trading activity was hammered, facing a substantial decline of 54% in revenue from the previous quarter. Liquidity challenges, regulatory uncertainties, and dwindling volumes across exchanges all contributed to this slump.

While Galaxy Digital’s lending business declined in quarterly loan originations, its loan book remains substantial at $550 million, giving the company a competitive edge in the current post-credit crisis environment. Traders seeking leverage have limited options, and Galaxy Digital presents an attractive proposition for these potential counterparties.

Another of the standout achievements in Q2 for Galaxy Digital was a 619% increase in revenue from its asset management unit, reaching $33.8 million. The revenue surge was fueled by gains in the venture side and inflows into active and passive funds. Galaxy Digital’s mining activities thrived, with revenue hitting $15.4 million. The acquisition of the Helios Bitcoin mining facility and an emphasis on low energy costs contributed to a healthy 64% direct margin as the company continues its strategic expansion towards diversifying its portfolio.

Bitcoin spot ETF talk

Mike Novogratz’s perspective on a potential Bitcoin ETF in the US is that approval will come within the next six months, citing sources at BlackRock and Invesco. This development will reshape how crypto is offered as several contenders seek to gain a foothold in the market upon approval.

However, the prospect of a Bitcoin ETF’s endorsement raised inquiries regarding the SEC’s position on crypto. Analysts believe that a verdict favoring Grayscale, in its ongoing tussle with the SEC, could pave the way for concurrent endorsements of spot Bitcoin ETFs, potentially accelerating the schedule for the said timeline.

Bitdeer establishes an even stronger footing in Bhutan with a new mining facility

Jihan Wu’s Bitdeer has been making inroads into the Himalayan kingdom of Bhutan, aiming to leverage its abundant share of energy supply. Among the initiatives it has pursued was a collaboration with Bhutan’s state-owned investment company Druk Holding and Investments, targeting to establish a $500 million fund to facilitate mining operations. It followed up with the Bitdeer Green Bitcoin Fund last month.

Bitdeer revealed this week that it has completed a new mining facility in the nation. This latest operational update disclosed that about 15,000 fresh mining machines arrived at its Gedu data center in the country last month, with around 11,000 units already operational and stable. The mining company said 23,000 of the recently acquired mining rigs had been delivered to the Gedu facility.

It expects that once the entire batch of the newly procured mining machines is activated, they will collectively yield a hash rate of about 2.5 EH/s. CEO Matt Linghui Kong highlighted the substantial progress achieved on operational and infrastructure fronts. Particularly, the company mined 220 Bitcoin through the self-mining business in July, indicating an impressive 41% increase compared to the previous year.

Riot Platforms posted quarterly revenue of almost $77 million in Q2

Colorado-headquartered Riot also posted its Q2 financial results on Wednesday, revealing revenue of $76.7 million and a trimmed net loss of $27.7 million in Q2. The core Bitcoin mining operations contributed $49.7 million, while the engineering exploits and data center hosting business generated $19.3 million and $7.7 million respectively. The second-quarter revenue slightly surpassed the quarterly figure of ~$72 million from the year-ago period.

Riot’s bitcoin production increased by 27% from the same period the previous year as the company mined 1,775 BTC across the second quarter as a result of more deployment of mining units.  It additionally earned $13.5 million in power curtailment credits – a notable increase from $5.7 million in Q2 2022 per the Aug 9 company’s earnings report. The miner also logged an adjusted earnings per share loss of $0.17 against analyst estimates of $0.20.

“The scale of our vertically integrated operations and financial strength allowed us to execute on our power strategy at unmatched scale this quarter, driving our average cost to mine to $8,389 per Bitcoin in the second quarter, compared to an average Bitcoin price of $28,024,” Riot CEO Jason Les remarked.

The company’s mining facility posted a record hash rate of 10.7 EH/s. Riot targets a self-mining hash rate capacity of 12.5 EH/s in Q4, having missed the initial second half of 2023 timeline. The miner expects to manage a self-mining hash rate capacity of 20.1 EH/s by mid-2024 and 35.4 EH/s in 2025.

“[For] the next phase of our growth, Riot signed a long-term purchase agreement with MicroBT to acquire 33,280 next-generation miners, with an option to purchase an additional 66,560 miners on the same price and terms. The miners are designed from the ground up for immersion cooling, will be manufactured in the United States, and will add 7.6 EH/s in capacity for Riot by mid-2024.”

Though Riot anticipates more challenges in the industry down the road, the company execs assured that the company is set to benefit from the “period of consolidation” ahead of its competitors thanks to its strong financial position and liquidity.

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Bitstamp to Suspend Trading of Major Crypto Tokens in the US

https://www.securities.io/bitstamp-to-suspend-trading-of-major-crypto-tokens-in-the-us/

In a Tuesday announcement, Bitstamp exchange communicated to its US-based customers plans to cease the trading of several major altcoins on its platform.

The permanent suspension set to come into effect on Aug 29 will affect more than half a dozen tokens including native tokens for Polygon (MATIC), Solana (SOL), and Near Protocol (NEAR). Others include Chiliz’ CHZ, the native tokens for non-fungible token (NFT) video game Axie Infinity as well as tokens for the metaverse projects Decentraland (MANA) and Sandbox (SAND).

“To ensure a smooth transition during the trade halt, we kindly request our users to promptly execute any desired buy or sell orders involving the affected assets before August 29, 2023. After this deadline, trading activities related to the tokens will be permanently disabled on the Bitstamp platform,” Bitstamp advised in the Aug 8 announcement.

Though users will not be able to execute trades involving the affected tokens beyond the specified date, the exchange clarified that they will still be able to hold and withdraw affected tokens.

Regulatory pressure on trading platforms in the US

In June, several trading platforms including Robinhood and eToro announced that they will delist ADA, MATIC, SOL in the US after the US Securities and Exchange Commission (SEC) determined that the tokens among others are unregistered securities in separate lawsuits against Binance and Coinbase.

“At Bitstamp, we have a comprehensive framework in place to continuously evaluate the cryptocurrencies we provide, taking into account the dynamic regulatory environment. Considering recent developments, we are making some changes to our crypto offerings—specifically for our customers residing in the United States,” the exchange team conveyed.

Bitstamp’s decision to disable trading of the tokens comes less than a day since London-headquartered neobank and fintech outfit Revolut said it will pull the plug on its US operations in October citing lack of regulatory clarity.

Expansion into Asia and Europe

Bitstamp is one of the oldest cryptocurrency exchanges having been founded more than a decade ago. The Luxembourg-headquartered exchange was reported to be in plans to raise capital to fund its plan to expand into Asia and European markets earlier this week.

“Our current and exclusive priority is to raise money through strategic investors to accelerate Bitstamp’s growth by providing new products and services to retail and institutional crypto customers.” CEO, Jean-Baptiste Graftieaux, told Bloomberg.

Part of the funds raised from the funding round which began in late June per sources cited by Bloomberg will specifically be used to launch derivatives trading in Europe early next year.

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Aptos Labs Inks Partnership Exploring Innovative Solutions with Microsoft

https://www.securities.io/aptos-labs-inks-partnership-exploring-innovative-solutions-with-microsoft/

Multinational tech corporation Microsoft today announced a partnership with Aptos Labs, the development team behind scalability-focused independent layer 1 platform Aptos. The strategic collaboration will explore various shared areas of interests including virtual central bank-backed currencies (CBDCs), digital payments and tokenization.

Utilizing each other’s resources to support developers and users

Aptos Labs will leverage Microsoft’s Azure Open AI to facilitate the onboarding of new users. The team specifically plans to launch Aptos Assistant, a ‘user-friendly and secure’ chatbot with digital assistant service capabilities to provide solutions and resources in response to user inquiries about the blockchain and broader ecosystem.

“By fusing Aptos Labs’ technology with the Microsoft Azure Open AI Service capabilities, we aim to democratize the use of blockchain enabling users to seamlessly onboard to web3 and innovators to develop new exciting decentralized applications using AI.” Microsoft’s AI and emerging technologies GM, Rashmi Misra, remarked.

In addition to Aptos running validator nodes on Azure, the companies jointly conveyed that the partnership will focus primarily on Microsoft’s artificial intelligence infrastructure for development purposes.

Intersection of AI and blockchain

The partnership will also see GitHub add Aptos’ native programming language Move into its code auto-complete enabling model Copilot. Worth noting, Aptos Labs’ founding team is made of former Meta employees who previously contributed to now-dumped permissioned blockchain stablecoin payment project Diem.

“Aptos Labs’ team of AI experts, PhDs and Web3 developers are working directly with Microsoft […]. to train models, integrate AI technology into the Aptos Assistant and GitHub elements integrating with Aptos’ blockchain, and determine the best resources for developers and casual visitors who want to learn more about building on Aptos – or ask questions about the Aptos ecosystem, more broadly,” a spokesperson told CoinDesk.

Microsoft’s partnership with Aptos Labs adds to several of the tech giant’s initiatives in AI having earlier announced a massive investment to the tune of $10 billion into Open AI. Crunchbase previously reported that AI startups secured around $25 billion from venture capital firms and other investing entities in the first half of this year.

Aptos Labs chief, Mo Shaikh, also hailed the potential breakthroughs entailing a convergence of the two technologies which could ultimately influence the evolution of the internet.

“Together with Microsoft, our shared vision is to ensure that this technology is accessible to more people and organizations than ever before.” Shaikh said.

The latest display of AI and blockchain tech convergence strikes as an ambitious development and advancement from recently-announced integrations like deployment of Chat GPT-based chatbots on blockchain ecosystems.

APT price action as token unlock event nears

Aptos mainnet went live to a rocky start in October 2022 as the network struggled to attain its claimed throughput of up to 160,000 transactions per second. Still, it is among the fastest blockchains going by its < 1 second time-to-finality. Aptos' native token APT posted double-digit gains setting a three-week high marginally below $8 minutes after the news of partnership before erasing some of the gains.

APT/USD August price chart

The APT/USD pair was at the time of writing trading above $7.30 – up 11% on the day. APT has in the last week been trading in a tight range around $6.70 ahead of its scheduled token unlock event on Friday that presents a potential selling pressure trigger. The upcoming event succeeding a previous one in July will similarly see around 4.5 million APT tokens (slightly over 2% of the circulating supply) distributed in two allocations – 3.21 million tokens to the community and 1.33 million tokens to the Foundation.

To learn more about Aptos, check out our Investing in Aptos guide.

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Revolut Ceases US Operations Citing Over Regulatory Uncertainty

https://www.securities.io/?p=233173

Renowned neobank and fintech company Revolut today communicated to its US-based customers that it will be suspending their access to its crypto services. In a statement, the UK-based digital bank said its decision to suspend operations was compelled by the lack of regulatory clarity in the market.

The two-phase suspension process will see buying crypto tokens on the platform disabled from Sept 2. Selling, holding and general access to the platform will then be deactivated by Oct 3, the bank conveyed to local clients. Revolut implied that its exit from the US market isn’t permanent and that it hopes to return in future.

“As a result of the evolving regulatory environment and the uncertainties around the crypto market in the US, we have taken the difficult decision, together with our US banking partner, to suspend access to cryptocurrencies through Revolut in the US,” a spokesperson told Reuters.

The US Securities and Exchange Commission (SEC) has, in recent months, intensified scrutiny on crypto companies whilst taking action against those it deems non-compliant with industry regulations. The agency announced successive lawsuits against Binance and Coinbase in June for similar allegations of offering unregistered securities. The commission also ruled that a dozen crypto tokens, including Cardano (ADA), Solana (SOL) and Polygon (MATIC), are securities.

Following the SEC determination, several trading platforms, including Revolut, delisted the featured tokens. The fintech company asked US holders of ADA, MATIC and SOL tokens to sell them before Sept 18 or see their holdings liquidated on Oct 3.

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Q2 Earnings Wrap – Coinbase, Block, MicroStrategy and Robinhood Post Mixed Results

https://www.securities.io/q2-earnings-wrap-coinbase-block-microstrategy-and-robinhood-post-mixed-results/

Here is a recap of Q2 report cards from renowned companies in the digital assets industry

Coinbase delivers lackluster Q2 results, transaction revenue and trading volumes took a hit

Leading crypto exchange Coinbase on Thursday released its much-anticipated financial and operation update for the second quarter.

The exchange’s gross revenue across the three-month period totaled $708 million, representing an 8% drop from $808 million in Q1. Net revenue similarly fell 10% in the period to $663 million. Transaction revenue in Q2 dipped 13% quarter-over-quarter to $327 million – constituting $310 million from $14 billion in consumer trading volume and $17 million from $78 billion in institutional trading volume. The underwhelming Q2 results showed that the exchange suffered a net loss of $97 million.

“Q2 was a strong quarter of execution for Coinbase and marked continued progress in our journey to build a company that is increasingly efficient and financially disciplined,” Coinbase said in its shareholders’ letter.

The company attributed the shrink in revenue to lower trading volumes and noted it had buffed up its balance sheet having surpassed $5.5 billion in USD resources entailing cash, cash equivalents and USD Coin. For context, the exchange platform logged a trading volume of $217 billion in last year’s corresponding quarter. Meanwhile, the total interest income dropped from $241 million to $201 million. USDC stablecoin interest income contracted to $151 million from $199 million in the first quarter partially due to the deteriorating stablecoin’s market cap.

Ongoing legal woes

Coinbase has been involved in a dispute with the US Securities and Exchange Commission which filed a lawsuit against the exchange in June. Last month, Coinbase CEO Brian Armstrong had a private meeting with a group of Democrats in Washington to discuss among others crypto legislation.

“This quarter also represented progress for crypto regulation, both in the U.S. and globally […] In the US, we’re beginning to see a pathway for bipartisan legislation that could enshrine consumer protections and an equitable market structure framework, while also recognizing the importance of keeping crypto innovation,” the exchange wrote.

Coinbase reported roughly $110 million in transaction revenue in the just concluded month and expects the subscription and services revenue in the current quarter to remain around the same range as $335 million in Q2. The exchange expects to post better figures having cut costs and positioned itself well to advance crypto economy.

COIN stock YTD performance

Coinbase (COIN) share price is up about 170% since the start of the year despite a largely disappointing first-quarter. Investors have in recent months taken a liking to the stock, with the price peaking last month (year-to-date) amid its legal battle with the US SEC.

Regulatory issues

In a recent case concerning Terraform Labs, Judge Jed Rakoff of the US District Court for the Southern District of New York dismissed the application of the ruling issued by Judge Analisa Torres. Previously, Judge Torres had determined that the XRP issuer Ripple Labs did not breach securities regulations by offering XRP on exchanges.

The implications of Judge Rakoff’s declaration could be problematic for Coinbase, as it has a case to answer regarding accusations of operating an unregistered national securities exchange. On its end, the exchange plans to seek dismissal of SEC’s case “in its entirety” later today. Coinbase chief legal officer Paul Grewal assured investors during a Thursday earnings call that the exchange is confident in its arguments filed with the court on Jul 20.

“With respect to litigation with the SEC, I want to be very clear — we do think we can win, we expect to win,” he said.

Upcoming Base launch

Coinbase provided more details on its layer 2 network Base on Thursday communicating that it will be available to the public next week. The exchange also unveiled Ethereum bridging functionality on the network built on the OP software stack. Base previously went live in July with access only granted to developers.

MicroStrategy still resilient on its Bitcoin strategy even as spot ETFs ship in

Earlier this week, enterprise analytics firm MicroStrategy released its financial results on Tuesday, disclosing that it purchased 12,333 Bitcoin over the course of Q2. As of June 30, its total holdings reached 152,333 Bitcoin, with a carrying value of $2.3 billion and a market value of $4.6 billion.

MSTR stock YTD performance

The earnings report also noted that the company recorded an impairment charge of $24.1 million for its Bitcoin holdings during that quarter, a significant decline from a charge of $917.8 million reported over the same period last year. Last month, MicroStrategy accumulated another 467 Bitcoin for $14.4 million.

Unrelenting on the Bitcoin strategy despite the onset of spot ETFs

In an earnings call on the same day, MicroStrategy exec chairman Michael Saylor said that the company would remain an attractive option for investors looking to enter the Bitcoin market, reaffirming its commitment to continually stacking more Bitcoin, including the potential proceeds from a planned $750 million share sale. He added that MicroStrategy will maintain its position as a particular Bitcoin operating strategy, even with the potential for incoming ETFs to pull significant capital from prominent hedge funds and sovereign entities.

Block second-quarter financial results beat analysts’ estimates

Financial services and payments company Block separately posted its Q2 earnings on Thursday, topping earnings expectations from analyst. The Dorsey-led tech conglomerate reported an increase in revenue across the quarter against a challenging economic environment. Block’s net revenue of $5.53 billion in Q2 was markedly higher the $4.4 billion figure from the same period in 2022.

Bitcoin sales made a significant contribution

A significant chunk of its Q2 net revenue (~$2.4 billion) came from Bitcoin – its second-quarter Bitcoin revenue grew by 34% compared to the same period last year.

“The year-over-year increase in Bitcoin revenue and gross profit was driven by an increase in the quantity of Bitcoin sold to customers, partially offset by a decrease in the average market price of Bitcoin compared to the prior-year period,” the company said in a letter to shareholders.

Cash App, the company’s payments app service launched in Oct. 2013, logged a 37% increase in gross profit to $968 million on the year – $44 million generated from Bitcoin sales on the platform.

SQ stock YTD performance

Meanwhile its Square business reported an $888 million gross profit. Block also took no impairment losses on its Bitcoin (BTC) holdings in the quarter and first half of the year – the company made BTC purchases of $50 million and $170 million in Q4 2020 and Q1 2021 respectively.

“As of June 30, 2023, the fair value of our investment in Bitcoin was $245 million based on observable market prices, which was $142 million greater than the carrying value of the investment after cumulative impairment charges,” the earnings report read.

The digital payment and related services firm also tracked a 27% year-over-year swell in gross profit which totaled $1.87 billion.

Robinhood overturned Q1 losses even with an 18% drop in crypto revenue

California-based online brokerage company Robinhood shared financial results for the last quarter on Wednesday, revealing that it achieved profitability for the first time since going public. It reported a Generally Accepted Accounting Principles (GAAP) net income of $25 million, a noteworthy shift from the substantial $511 million loss incurred in Q1. Jason Warnick, the CFO, attributed this milestone to the team’s dedicated work in transforming the business and improving Robinhood’s position to create value for shareholders.

Transaction-based revenue fell, but total net revenue is up

Robinhood revealed that for the quarter ending Jun 30, its transaction-based revenue amounted to $31 million, an 18% decrease from the previous quarter. This is equivalent to 16% of the overall trading revenue, which includes options and equities, and witnessed a sequential 7% drop. Still, the company beat Q2 analyst estimates to hit GAAP earnings per share of $0.03 on a total net revenue of $486 million.

HOOD stock YTD performance

The brokerage and investment firm saw a spike in its crypto assets under custody, growing from $8.4 billion in December 2022 to $11.5 billion. Overall, the total assets under custody rose by 13% in the last quarter, reaching an impressive $89 billion, catapulted by a surge in equity valuations and consistent net deposits. Net deposits for the quarter cumulated to $4.1 billion, translating to an impressive annualized growth rate of 21%. Also, the firm’s net deposits over the past 12 months soared by 25% to $16.1 billion.

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HashKey Wins Exchange License to Offer Crypto Retail Trading in Hong Kong

https://www.securities.io/hashkey-wins-exchange-license-to-offer-crypto-retail-trading-in-hong-kong/

Hong-Kong based digital asset firm HashKey has today launched a crypto over-the-counter (OTC) trading service, HashKey Brokerage, after being awarded an exchange license to offer crypto trading at a retail level by the city state’s regulator, the exchange firm said on Thursday.

HashKey’s virtual asset exchange operations previously focused on professional investors whom it offered crypto exposure. Retailers can now, too, access specific ‘high-value’ tokens, including Bitcoin and Ethereum. Though the approval had yet to be confirmed by the Securities and Futures Commission (SFC) at press time, the announcement makes HashKey the first entity to be permitted to serve retailers under the new Virtual Asset Service Provider (VASP) licensing regime.

“HashKey Exchange, a licensed virtual asset exchange in Hong Kong, has upgraded its Type 1 & 7 Licenses to offer retail services. Now, all users can enjoy a safe and simple trading experience!” HashKey posted on X.

The local exchange unit, which operates under HashKey Group, previously featured in a voluntary licensing program – alongside fellow digital assets trading platform OSL – before upgrading its Type 1 and Type 7 licenses. HashKey Group, the parent company, earlier this year disclosed plans to enter Hong Kong as a regulated exchange giving a Q2 timeline. The Asia-based financial services group was also reported to be in early talks to raise up to $200 million at a $1 billion valuation in May to fund its foray into Hong Kong.

OSL, the digital assets subsidiary of BC Group, was previously awarded only approval-in-principle for its applications for Type 1 (securities) and Type 7 (automated trading service) licenses. Keith Choy, interim head of intermediaries at Hong Kong’s Securities and Futures Commission (SFC), asserted earlier this year that a Type 7 license is mandatory for operators of platforms looking to offer trading of virtual assets categorized as securities or futures per the SFO.

Hong Kong’s new digital assets regulatory framework

Hong Kong’s crypto regulatory framework went into effect on Jun 1 as part of efforts to attract investors and transform the local market into a global financial hub. The new mandatory rules require that crypto trading platforms obtain a license to serve retail investors. The city also urged local banking firms to welcome strategic and business partnerships with crypto firms looking to establish a regional presence. While Hong Kong appeared to have attracted several firms, including leading industry names like Huobi, OKX and Amber Group, the interest in its emerging market is still yet to materialize.

Earlier this year, the city’s plan to become a leading player got a boost from innovation venture Plutus VC which sought to establish the ProDigital Fund. The firm said in March that it had already received commitments amounting to $30 million in the half-year fundraising period and intended to raise $100 million by the close of 2023. The initiative will comply to Hong Kong’s policies, and the duo of Ng and Shi hopes to grow its reach into other regions, including Australia, Singapore, Europe, and the US.

ProDigital Future will invest in a range of Web3 startups in their initial phases of growth, particularly those in the tech industry that have affiliations with China and are moving towards Web3.

China closed doors to crypto but opened those leading to Web3 innovation

In contrast to the picture in Hong Kong, mainland China has maintained its previously-enforced ban on crypto activities of any kind. Beijing, however, released a White Paper exploring Web3 development and innovation in May. The Beijing Municipal Science and Technology Commission, in collaboration with the Zhongguancun Science and Technology Park Management Committee, unveiled the paper at the Zhongguancun Forum on May 27.

It defined Web3 as an inevitable evolution of the internet, centered on an immersive three-dimensional realm fusing reality and virtual reality via highly interactive experiences. The paper explored the challenges and plans to foster innovation and development of decentralized blockchain technologies, the metaverse, and non-fungible tokens (NFTs) built on the new iteration of the internet. Binance CEO Changpeng Zhao noted the interesting timing of the development, while Tron’s Justin Sun commended China’s forward-thinking endeavor to embrace Web3 as an essential step towards recognizing the transformative capabilities of these technologies.

How far gone is the Web3 evolution?

The research paper dissected Web3 into four layers: the infrastructure layer, encompassing technologies like artificial intelligence and blockchain; the interactive terminal layer, consisting of equipment and technical support for interacting with both real and virtual worlds; the platform tool layer, providing technical support for the creation of digital environments, and the application layer for delivering application services.

In exploring the industrial development landscape, Beijing identified generative artificial intelligence, XR interactive terminals, and content production tool platforms as crucial areas of research and innovation within Web3.  It further recognized that technology giants, including Apple, Meta, Microsoft, Google, Nvidia, Baidu, Byte Jump, Tencent, and other prominent domestic and international players, are at the fore of shaping and advancing the industry.

China is still in the race for the ‘crypto crown’

Beijing posited that though the United States spearheads the development of Web3, Europe places significant emphasis on privacy protection, while Japan and South Korea strive to establish themselves as industry leaders. On the domestic front, Chinese local governments are engaged in planning and development efforts.

More than 30 provinces and cities have issued support policies, with particular enthusiasm seen in Beijing, Shanghai, Guangzhou, Hangzhou, and among others. A return of favorable legislation supported by funds injected by wealthy mainland Chinese investors could propel it to the top spot for crypto companies, which could, in turn, prove bullish for crypto markets.

Earlier this week, the WSJ reported that China makes up the largest market to Binance, the world’s leading exchange, though crypto activity is outlawed in the country.

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Big Money Eyes Ether ETFs, Up to Six Investment Firms File With The SEC

https://www.securities.io/big-money-eyes-ether-etfs-up-to-six-investment-firms-file-with-the-sec/

Following the hype that came after investment management giant BlackRock filed with the SEC to offer a Bitcoin ETF mid-June, Ethereum exchange-traded funds (ETFs) have recently seen similarly broad interest. Financial giants have in recent days rushed to capture this potential market space.

Ether ETFs are taking center stage, spearheaded by Volatility Shares, which officially filed for the Ether Strategy ETF on Jul 28, following the significant recognition it saw in June when it introduced the 2x Bitcoin Strategy ETF (debutant leveraged cryptocurrency ETF in the United States).

If approved by the securities regulator, the Volatility Shares Ether fund would be the first of its kind in the US, with the company’s offering potentially launching on Oct 12, the expected 75 days after the filing was done.

What followed Volatility Shares has been a flurry of applications, with another five asset managers filing within 24 hours, with the ProShares Short Ether Strategy ETF, VanEck Ethereum Strategy ETF, Grayscale Ethereum Futures ETF, Bitwise Ethereum Strategy ETF, and Roundhill Ether Strategy ETF all submitted by Aug 1.

ProShares said its Short Ether Strategy ETF would have an investment approach centered on daily contracts to profit from losses in the S&P CME Ether Futures index. On the other hand, VanEck’s investment strategy would revolve around Ether futures contracts, aiming to maintain exposure to Ether’s value equivalent to 100% of the fund’s total assets, while Grayscale’s fund would dominantly invest in front-month Ether futures, which are contracts boasting the shortest time to maturity.

Grayscale filed for a Bitcoin ETF too

Grayscale, which last Thursday, in a letter to the SEC, emphasized the need for equal treatment of all applicants (proposed simultaneous approval of all spot bitcoin ETF filings), accompanied its Ether ETF filing with a proposal to list the shares of Grayscale Global Bitcoin Composite ETF on New York Stock Exchange Arca.

Previously, the SEC rejected Grayscale’s attempt to convert its flagship Grayscale Bitcoin Trust (GBTC) into an ETF, and the firm sued the regulator for it.

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Binance Accused of Maintaining Presence in China Despite Domestic Ban on Crypto

https://www.securities.io/binance-accused-of-maintaining-presence-in-china-despite-domestic-ban-on-crypto/

Following an earlier ban on initial coin offerings (ICOs) in 2017, China’s central bank tightened its clampdown on digital assets by declaring crypto-related activities illegal and enforcing a blanket ban on crypto operations in 2021. Internal records on milestones as recent as May, however, show that Binance has maintained a substantial grip on the China market.

Binance didn’t entirely abandon the Chinese market

The material cited by the Wall Street Journal on Tuesday indicated that China’s $90 billion spot and futures market volume across May make its Binance’s biggest regional market ahead of South Korea. The latter had $1.39 billion in spot volume and $56.9 billion in futures volume by comparison. Turkey, Vietnam, and the British Virgin Islands, on the other hand, ranked third, fourth and fifth, respectively.

Notably, futures trading accounted for the bulk of the monthly volume contributing $80.6 billion, per the WSJ report, which further noted that 911,650 out of its 5.6 million China-based users were active during this period.

A former employee who viewed the documents also pointed out that about 100,000 users from its Chinese customer base on the exchange as of January were ‘politically exposed persons.’ The designation refers to officials or their associates who are typically treated to more scrutiny by authorities or banking institutions due to their potential or risk of involvement in illegal financial dealings.

For context, Binance had around 128 million users globally and logged a combined spot and bitcoin futures trading volume of ~$670 billion in May. WSJ also suggested that Binance aided Chinese users in circumventing the geographical checks in place by obliquely redirecting them to the international platform. The latest report surfaces at a time Binance is facing increased regulatory scrutiny on some of the markets it operates around the globe.

Separately, the Information reported that Binance considered shutting down its US exchange subsidiary as part of a plan to protect operations on the main platforms.

The news outlet said the board of directors of Binance.US voted on ending the US business at the time of looming probes but failed to reach a unanimous agreement. Binance.US CEO Brian Shroder opposed decision which was supported by others in the board of directors in the board for which Binance CEO CZ serves as chair. Zhao declined to comment on the accuracy of the report.

Contrastingly, Binance officially marked its re-entry into the Japanese market this week – a day after the exchange’s local subsidiary received an Operational MVP license from Dubai’s regulator.

Binance to debut BNB offerings to Japanese users as it launches a local subsidiary

Terming Japan a leader in the Web3 regulatory environment, Binance CEO Changpeng Zhao revealed during a video appearance on Asia’s leading Web3 conference WebX last Tuesday that the exchange was set to resume operations in the country.

News outlet Coinpost reported on Tuesday that Binance seemingly seeks to bolster the crypto scene in the Asian country, offering a comprehensive basket of as much as 34 tokens to customers, besting major local exchanges, including Bitbank, GMO Coin, and Coincheck.

Crypto investors will have the opportunity to choose from offerings including (SOL), Aster (ASTR), Avalanche (AVAX), and Axie (AXS), but BNB will take center stage. Binance will offer the stablecoin to customers in Japan for the first time after the digital offerings recently became regulated there.

In addition to spot trading and asset sales, the local exchange will introduce a “Simple Earn (credit crypto assets)” option and a marketplace for non-fungible tokens (NFTs).

Unlike its competitors, Binance Japan does not intend to support leveraged trading, which involves repeatedly buying and selling assets using borrowed funds, as offering this service in the country would require the firm to fulfill strict requirements to obtain a Type 1 Financial Instruments Business license. Existing clients in Japan can transfer their accounts to the local branch starting Aug 14.

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Nomura’s Laser Digital Secures VASP License to Operate in Dubai

https://www.securities.io/nomuras-laser-digital-secures-vasp-license-to-operate-in-dubai/

Japanese financial services group Nomura is set to launch a trading and asset management businesses in Dubai through its subsidiary Laser Digital FZE which received a green light from the emirate’s Virtual Asset Regulatory Authority (VARA) on Tuesday. The subsidiary firm, which currently operates out of Dubai and London, will provide broker-dealer as well as management and investment services to institutional investors exploring digital assets.

“VARA’s thorough and consultative process provides institutional investors with the assurance they require to engage in this asset class. With the license now in place, we are looking forward to Laser’s growth over the coming years” Nomura’s Co-Head of Global Markets EMEA Mohideen said.

The Switzerland-based firm didn’t provide a specific timeline for its plans to launch over-the-counter trading services and other digital-asset investment products but hinted the developments will unfold in coming months. Binance announced on Monday it had cleared the third step in becoming fully licensed by the regulator.

The acquisition of a Virtual Asset Service Provider (VASP) license has seen Laser Digital join a growing list of firms that have set up shop in the UAE market following the introduction of a new crypto regime earlier this year. Nomura, the parent company, is one of the giant traditional finance firms that have been drawn into the digital assets space in recent years undeterred by the wave of negative developments and uncertainty.

Despite hailing from a mainstream financial background, the investment banking and securities company has advanced several initiatives around digital assets including the launch of the crypto-focused arm last year.

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COMP and AAVE in Red as BTC Loses Support at $29K, Tainting ‘Green’ July Record

https://www.securities.io/comp-and-aave-in-red-as-btc-loses-support-at-29k-tainting-green-july-record/

Bitcoin price fell sharply late Monday after an early quiet market display, confirming a somewhat-expected red monthly close.

Bitcoin and Ether still subdued heading into new month

The flagship cryptocurrency printed three successive red candles on the BTC/USD 1-hr chart in the last three hours of the day and set a month-low of $28,801 per CoinMarketCap data. Monday’s close represented a 4% decline across the month – the first in any July since 2019.

BTC/USD chart. Source: TradingView

Bitcoin (BTC) started bouncing higher hours into the new month and was trading marginally above $28,900 at the time of writing. Perceptibly, Bitcoin has been muted in the current range for several weeks with many traders retreating to await the next price volatility triggers.

Rocket Pool (RPL) trades in green as most alts cool

The majority of altcoins including Ethereum have posted equally lackluster performances during this period. Ether (ETH) dropped to a four week-low of $1,818 late Monday before recovering slowly to $1,834 where it was spotted at press time. Rocket Pool (RPL) has stood out as the only notable top gainer among mid and large cap alts on Tuesday, trading 11.64% higher in the last 24 hours.

To learn more about Rocket Pool, check out our Investing in Rocket Pool guide.

Compound (COMP) and Aave (AAVE) have, on the other hand, registered the biggest losses on the day – down 14% and 10% respectively in the same period. The declines observed across the lending protocol tokens are a ripple effect of the exploit on Curve Finance. Curve founder Michael Egorov holds a significant ~$168 million lending position on Aave against CRV tokens which has put the tokens under pressure.

To learn more about Compound, visit our Investing in Compound guide.

Market outlook delivers mild sense of calm

Europe-based digital assets investment firm CoinShares earlier observed that crypto asset investment products had a dull week with minor outflows of $21 million. Remarkably, sentiment among speculators has in contrast remained supportive notwithstanding the latest marketwide dip. The crypto fear and greed index has moved up by three points this week and was at a neutral 53 points on Tuesday.

Fear and Greed index graph

The losses tracked in the crypto market this week come on the heels of an exploit on popular DEX protocol Curve Finance which saw ~$42 million stolen from its stablecoin pools on Sunday. Concerns around the state of the DeFi niche rose further following early Tuesday reports of an attack on the LeetSwap DEX running on Coinbase’s layer 2 network, Base.

NFT trading activity declined sharply in July

In the NFTs niche, sales and trading volumes contracted in July across all top six blockchains. NFT sales fell by 23% on Ethereum, 49% on Bitcoin’s Ordinals ecosystem, 51% on Solana, 41% on Polygon, 14% on BNB Chain and 10% on ImmutableX per CryptoSlam data.

The combined NFT sales volume in July totaled $493 million down from $643 million and $711 million in June and May respectively. The total number of unique participants – buyers and sellers – remained fairly unchanged.

NFT sales in June and July. Source: CryptoSlam

Despite tracking successive daily inscriptions record in July, the hype around Ordinals has continued fading. The daily Ordinal inscriptions count logged a new daily record of more than 422,000 over the weekend. Still, sales volumes have been depressed by declining demand and low prices.

Ordinals daily and cumulative inscriptions. Source: Dune Analytics

The Ordinals trading volume across July cumulated to just shy of $65 million, a pronounced decline from $120 million in June 2023. The numbers of unique sellers and buyers shrunk as well from over 54,000 for each side in June to 29,093 sellers and 27,335 buyers last month.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.

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IRS Tax Bulletin Suggests Crypto Staking Rewards are Taxable

https://www.securities.io/irs-tax-bulletin-suggests-crypto-staking-rewards-are-taxable-income/

In a ruling issued on Monday, the Internal Revenue Service (IRS) said rewards obtained through staking are taxable once the user has received the tokens.

The US federal revenue service will require taxpayers to recognize and count staking rewards as part of their gross income per Revenue Ruling 2023-14. The tax authority’s guidance on income earned from staking digital assets will apply to taxpayers using a cash method of accounting and in the year the rewards are received.

Investors earning rewards through validation in proof-of-stake blockchains either directly or through centralized exchange entities are effectively required to include the value of the staking earnings under their income.

“The fair market value is determined as of the date and time the taxpayer gains dominion and control over the validation rewards,” a section of the ruling’s legal background clarified.

The IRS defined dominion as an investor assuming control of the distributed rewards and being able to authorize the sale or swapping of the crypto rewards. Monday’s update mirrors previous guidance on how to treat rewards in proof-of-work networks. The agency previously subjected these crypto-mining rewards to taxation under income and capital gains.

On social platforms, the IRS tax determination for crypto-staking was broadly met with criticism and disapproval.

“While the ruling is therefore unsurprising, it’s still disappointing,” one commentator wrote on X.

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DEXes Update – Curve, Uniswap, PancakeSwap and LeetSwap

https://www.securities.io/dexes-update-curve-uniswap-pancakeswap-and-leetswap/

Here is the latest around decentralized exchanges and their activity across July.

CRV token slides double-digits in the aftermath of exploit on Curve Finance

In the latest exploit incident this month, decentralized exchange liquidity pool Curve Finance was exploited to the tune of $52 million on Sunday. A bug exposed several stablecoin pools on the platform on the decentralized exchange to a series of attacks, the first of which was reported at around 9:30 am ET. The exploit also affected other decentralized finance (DeFi) projects including Ellipsis which said some stablecoin pools with BNB were affected.

In addition to the exploit of JPEG’d’s pETH-ETH liquidity pool for $11.4 million, blockchain auditing and analytic teams also traced four other attacks on Alchemix’s alETH-ETH pool which saw an outflow of $13.6 million, the CRV/ETH pool drained $25 million and Metronome’s sETH-ETH pool that was drained $1.6 million. Alchemix paused several contracts to prevent the exploiter from swapping its synthetic ether derivative, alETH, alETH for native ETH.

Malfunctioning reentrancy locks

The attackers exploited a vulnerability in particular versions (v0.2.15, 0.2.16 and 0.3.0) of the compiler for Vyper, the programming language Curve used for multiple contracts. Affected versions of Vyper incorrectly implemented the re-entrancy guard which ensures smart contracts are not susceptible to re-entrancy exploits by locking them and preventing multiple functions from being simultaneously called. In a deleted tweet, the official Curve Twitter handle appeared to blame JPEG’d developers for the exploit.

A pseudonymous MEV bot operator ‘c0ffebabe.eth’ front ran the attack on the CRV-ETH liquidity pool and recovered nearly 2,879 Ether (ETH) worth over $5 million to Curve Finance. The weekend’s exploit resulted in a record day pay out for MEV operators post-Merge as a total of 6,006 ETH was paid in maximum extractable value (MEV) block rewards, mevboost.pics MEV dashboard shows. Another observer on X, Eric Conner, noted that the day also returned some of the largest MEV reward blocks in Ethereum’s history.

Following reports of the incident on the stablecoin-focused decentralized exchange, Upbit notified users that it has suspended deposits and withdrawals of CRV tokens. Binance CEO CZ remarked on the incident, assuring that the Vyper vulnerability didn’t affect its platforms use the latest version of smart contract coding language.

“Curve getting exploited. Risk of bad debt and liquidations in the ecosystem. This might seem like an ‘it’s over’ moment, but perhaps it’s just this cycles Black Thursday – the last crash before the bull market, with everything coming back 100x stronger,” MakerDAO co-founder Rune Christensen wrote.

Despite shedding more than $1 billion liquidity coming off the weekend, Curve is still the second-largest DEX with a total-value locked (TVL) volume of $1.611 billion, behind Uniswap which leads with $3.8 billion.

Meanwhile, Curve governance (CRV) token is down 12.4% and was trading at $0.64 – slightly higher than Sunday’s low of $0.58.

Though the price of CRV fell in reaction the reports on both DEXs and CEXs, it remained just above 55 cents on the latter platforms thanks to the centralized exchange price feed. Curve employs Chainlink’s oracle system which at any given moment leverages several price feeds.

“Yesterday was an unfortunate setback for Curve and DeFi. Curve’s team is one of the best in the space and I would expect nothing less than coming out strong in due course,” Aave CEO Stani Kulechov wrote.

Leading DEX on Coinbase’s L2 Base LeetSwap halts trading amid reports of an exploit

LeetSwap said in a tweet on Monday that it had halted trading due to pool liquidity being compromised with on-chain trackers showing roughly 340 ETH was drained.

As our DEX is forked from Solidly, our factory had a security pause function,” LeetSwap team posted. “We noticed that some pool liquidity might have been compromised and we temporarily stopped the trading to investigate.”

The latest incident follows reports of Bald, a the recently hyped meme coin, crumbling after the project developer pulled an exit scam siphoning 6,800 ETH from the token’s liquidity pool on LeetSwap.

Curve Finance and LeetSwap exploits follows an earlier successful attempt affecting Multichain where roughly $125 million worth of assets were drained from bridging protocol leading to the platform to announce ceasing operations. PeckShieldAlert page noted on Monday that the multichain drainer had begun transferred some of the funds. The exploiter swapped 220 WBTC (~$6.5m) them for ~6.4M USDT and then transferred ~2.85M USDT to 6 separate addresses. The drainer also executed three tranfers of 100 WBTC.

On-chain records complied by CertiK show that July has been the worst month in terms of crypto hacks and exploits with traders losing $303M across the month. Flash loans and exit scams (rug pulls) accounted for $8.7 million and $8.6 million respectively. Web3 outlet De.Fi separately pointed out that only $6.15 million from crypto hacks and exploits in July was recovered.

PancakeSwap to share trading-fee revenue with CAKE token stakers

PancakeSwap is now available on five blockchains after launching on the zkSync Era blockchain last Thursday. The expansion to zkSync Era aligned with the DEX’s multichain goal to accumulate a large user base and bump its protocol revenue. It also marked a fifth chain where the DEX is available having deployed on BNB chain, Ethereum, Polygon zkEVM and Aptos already.

PancakeSwap was launched in 2020 on the BNB chain and has grown to become the second-largest decentralized exchange by TVL market share behind Uniswap. Last month, PancakeSwap expanded to Polygon zkEVM after its v3 officially launched on the zkEVM Mainnet Beta allowing users to directly access Swap and Liquidity Provision functionalities in a smooth experience.

The DEX confirmed today that it will share trading-fee revenue with stakers of its native CAKE token as a long-term initiative to nurture growth on the ecosystem. The additional rewards will see fixed-term CAKE stakers receive 5% of the trading fee revenues from all v3 pairs in the 0.01% and 0.05% fee tiers which contribute 80-90% of the v3 trading volumes.

The weekly revenue-sharing program is applicable to all chains and will start with a first distribution on Aug. 9. Users who will have staked before Aug. 2 will be eligible to claim trading fee rewards in this round while those following after Aug. 2 and before Aug. 9 will claim their rewards in the second round on Aug. 16. Stakers from June and July will also be able to lay claim to the additional rewards. PancakeSwap had a total value locked of $1.57 billion at writing per DeFi Llama data.

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Proposal to Transition Layer 1 Celo to an Ethereum Layer 2 Passes

https://www.securities.io/proposal-to-transition-layer-1-celo-to-an-ethereum-layer-2-passes/

Celo blockchain is preparing to upgrade from its current layer 1 status and become an Ethereum layer 2 after its community passed a proposal outlining the migration plans on Monday.

A total of 131 addresses voted on the upgrade value proposition’s temperature check proposed on Jul 22 with only two voting against alongside a sole abstaining address. Celo developers previously noted on the blockchain’s governance forum that the necessary change would improve security multifold whilst enhancing compatibility and cross-community interaction between the two networks.

Celo as an L2

The decision to ditch its independent blockchain and return ‘home’ is expected to benefit in terms of simplified liquidity while it mulls more future upgrades to become “a highly scalable validium-based zkEVM.’ In its prior July 16 announcement post on X, the carbon-negative blockchain said the migration process would initially leverage OP Stack as the architecture enabling the transition.

“Key differentiators are (i) a decentralized sequencer powered by Celo’s existing validator set (ii) off-chain data availability via Eigen Layer and EigenDA (operated by Ethereum node operators) and (iii) a design retaining Celo’s 1-block finality,” Celo said.

Notably, implementation of the technical upgrade only affects validators and developers – end users or holders of the native CELO token will perceive any changes. Though validators maintain their traditional responsibilities in the new ecosystem, their role will effectively morph into sequencers.

“Thanks to validators, Celo will be based on one of the first (if not the first) decentralized sequencer and deliver 1-block finality on a L2. The one change for both validators and full node operators would be the need to also run an Ethereum node (or access to a trusted one) since any L2 node needs to observe the L1 (Ethereum) to derive the canonical chain,” developers of the mobile-first EVM-compatible platform explained in the indicative on-chain governance proposal.

Several crypto enthusiasts expressed their views, mostly positive, on the migration news including Ethereum co-creator Vitalik Buterin who welcomed the project in a comment made under the initial mid-July Celo migration post.

Celo’s CELO token. Source: TradingView

Celo’s CELO token was trading 4.61% in the green on Monday with cumulative gains of just under 15% in the last 30 days.

To learn more about Celo, check out our Investing in Celo guide.

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Tether’s Net Profit in Q2 Shrunk by Nearly Half Compared to Q1

https://www.securities.io/tethers-net-profit-in-q2-shrunk-by-nearly-half-compared-to-q1/

Tether, the issuer of USDT stablecoin, today released its attestation report for the second quarter (between April 2023 and June 2023), reporting a net profit of $850 million and excess reserves of ~$3.2 billion. Markedly, the reported net figure is significantly lower than the profit of $1.5 billion the stablecoin issuer recorded in the preceding quarter. The company’s consolidated total assets across Q2 weighed around $86.5 billion against liabilities of $83 billion as of the end of the quarter.

“Excess reserves are the company’s own profits — not distributed to shareholders and which the company has decided to keep on top of the 100% reserves that Tether maintains to back all the outstanding tokens.” the company said in the Jul 31 press release.

Tether’s current excess reserves of nearly $3.3 billion top the Q1 figure of $2.44 billion. The USDT issuer clarified that it tracked a significant 30% quarter-over-quarter increase in operational profits, which totaled over $1 billion in the quarter ending June 2023.  Tether also revealed a share buyback amounting to $115 million “made to further strengthen the shareholder group, and other investments in energy-related initiatives financed from the profits”, which it said justified the discrepancies between the quoted profit figure and the excess reserves swell.

“The investment in energy-related initiatives are not included in the Consolidated Reserves Report (CRR) as these are not considered by Tether as an eligible reserve for the token in circulation.”

The latest edition of the attestation report from Tether also assured that its reserve is very liquid – 85% held in either cash or cash equivalents.

“Transparency is not just a buzzword for us; it is the cornerstone of our philosophy […] we remain dedicated to embracing accountability, enhancing risk management and security, leading by example,” Tether CTO Paolo Ardoino said on Monday. “That’s why in this quarter, Tether’s USDT token in circulation surpassed its previous all-time high.”

To learn more about USDT, check out our Investing in Tether guide.

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Dubai’s VARA Approves Binance to Offer Virtual Asset Exchange Services

https://www.securities.io/dubais-vara-approves-binance-to-offer-virtual-asset-exchange-services/

Binance is set to begin virtual assets-related operations in Dubai next month after securing an Operational Minimum Viable Product (MVP) license from the local regulator, it announced on Monday. The approval from the Virtual Assets Regulatory Authority (VARA) is the first of its kind giving the exchange’s Dubai subsidiary, Binance FZE, a first-mover advantage in the United Arab Emirates jurisdiction.

The CZ-led exchange previously secured a Provisional MVP license last March and a preparatory MVP license six months later in September. The latest MVP status will allow Binance FZE to deliver regulated exchange and broker-dealer services to eligible market participants under VARA-designated standards.

“Operating within this regulated ecosystem, we are committed to ensuring secure and seamless customer migration, with robust Know-Your-Customer and Customer-Due-Diligence as part of the rigorous onboarding remediation as stipulated by VARA,” Richard Teng, Head of Regional Markets at Binance, said. “Our priority is to be able to operate this first fully regulated exchange in, and from Dubai, in a FATF-compliant ecosystem, setting the stage for global scalability with uncompromised user assurance.”

Dubai’s recent accelerated efforts to make the Emirates a global digital assets hub have appealed to several crypto firms, including exchanges. Companies intending to set shop in Dubai must complete a four-stage licensing process that involves a demonstration of commitment, responsible intent and due diligent practices Binance has concluded three stages, pending the Full Market Product (FMP) status that succeeds the MVP status.

“With this operational MVP license, all users onboarded through this platform can expect access to a trusted and regulated service that prioritizes security alongside compliance with highly specialized, tier-one virtual asset regulations under VARA.” Alexander Chehade, Binance Dubai’s General Manager, said.

Binance’s approval in Dubai comes days after the exchange suffered setbacks in other jurisdictions – the exchange withdrew its application to earn licensure by the German financial regulator BaFin. Binance’s employees in Australia were also investigated by local authorities who searched the offices last month.

In a Web3 conference held in Tokyo last week, CEO Changpeng Zhao communicated that Binance is planning to re-enter Japan in August. The return comes two years after the exchange suspended full services, citing a warning from the domestic market’s regulator (FSA).

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Crypto Markets Shake Off Macro Pressure in July Amid Pursuit for Regulatory Clarity

https://www.securities.io/crypto-markets-shake-off-macro-pressure-in-july-amid-pursuit-for-regulatory-clarity/

Bitcoin briefly slipped below $29K last Monday for the first time since Jun 21 before rising modestly later in the week on Wednesday after the US monetary policy decision announcement. The Fed delivered a widely-expected 25 basis points increase to the benchmark rate after the conclusion of the Federal Open Market Committee (FOMC) meeting.

The priced-in hike brought the target range for the federal funds rate between 5.25% and 5.5% – the highest since 2001. The adjustment also represented the eleventh interest rate hike over the last 17 meetings and a resumption of the trend after a break in June. Range-bound action in the market reflected uncertainty following reports of the US SEC planning to appeal the court’s decision in its case vs. Ripple Labs. In coming weeks, US jobs data pose a potential macro catalyst for risk assets.

Meanwhile in Japan, the central bank (BOJ) announced a tweak to its bond-buying yield curve control (YCC) program on Friday. The Bank of Japan adjusted the hard cap on the 10-yr Japanese government bond yield to 100 basis points (bps) from 50 basis points. This hawkish shift reflecting the bank’s commitment to a loose pro-liquidity policy pushed Japanese and US bond yields north.

Bitcoin set for its second red monthly close in July

A cocktail of mild catalysts, including macro developments in the US and other global markets, saw Bitcoin fall sharply on Friday and retreat to $29,200, where it steadied heading into the weekend. Most altcoins similarly fell south, eating away at their Thursday gains and remaining unchanged on Saturday.

In Sunday’s market action, Bitcoin rose sharply towards $29,400 in the morning hours before further advancing to challenge Thursday highs.

BTC/USD chart. Source: TradingView

Bitcoin registered 12% in monthly gains across June to seal a green quarter as BTC price rose 7.2% across Q2 per Coinglass data. With less than 36 hours left in July, Bitcoin is poised to print its second red monthly candle this year. Bitcoin fell 7% across May to record the first monthly loss of the year after a massive first quarter.

Rocket Pool (RPL), Fantom (FTM), and ApeCoin (APE) have lost most value among mid and large-cap altcoins thus far in July – down 20%, 19% and 14%, respectively in the last 30 days.

RPL, FTM, APE price chart

Render (RNDR) and Stack (STX) have also dropped by double digits in the same period.

Trending altcoins

Optimism (OP) and Bitcoin SV (BSV) have posted the biggest gains in the last 24 hours, 11% and 8%, respectively, among the top 100 cryptocurrencies in market cap rankings. Sunday has also seen a resurgence of meme coin frenzy due to speculative price action around tokens like BALD, COIN, and BASED that recently went live on Base. Worth noting, Coinbase’s Ethereum layer-2 network is yet to be officially launched.

MakerDAO’s governance token (MKR) was another trending alt this week, thriving on the vast transfers of Maker (MKR). Research-driven tech VC firm Paradigm Capital moved 3,000 MKR tokens on Wednesday after fellow VC firm a16z, which deposited $9.7 million of its MKR holdings to Coinbase last weekend. In March, Paradigm executed a similar move from two wallets, transferring 26,625 MKR tokens ahead of sale on Coinbase.

Institutional interest in alts

CCData captured in its report that institutional investments have been building up their allocations into Ripple (XRP), Stellar (XLM) and Solana (SOL) products. Markedly, products based on XLM have seen recorded 63% higher inflows this year to $17.3 million in assets under management. Those focused on XRP and SOL have equally tracked double-digit increases of 33.2% to $65.7 million and 55.7% and $87.8 million.

XLM, SOL and XRP performance in July

Stellar Lumens (XLM) recent momentum comes on the back of a Wednesday research report from the Stellar Foundation showcasing the blockchain’s off-ramps dominance. XLM is up 52% this month, while SOL and XRP have gained 49% and 30%, respectively, in the last 30 days.

Memecoins – DOGE and SHIB

Twitter owner Elon Musk announced last Monday that the social platform would be rebranding from Twitter to X alongside changes to its logo – from the blue bird logo to the letter X. He also updated his Twitter location to feature the symbol “Д associated with Dogecoin. The changes reignited speculations that the meme token could be integrated into the rebranded ‘everything app’ for payments.

In April, Musk teased DOGE payments on the platform in a tweet proposing it as an option for subscription to Twitter Blue. Dogecoin (DOGE) rallied double-digits on Tuesday, marking the largest daily gains in more than three months. CoinMarketCap data shows DOGE has rallied 11% in the last 7 days and 24% in the last 30 days.

DOGE and SHIB price chart

Shiba Inu (SHIB) has equally been trending this month, fueled by the hype around its Shibarium blockchain’s Ethereum bridge going live on testing. The bridge between the soon-to-be-launched Shiba Inu-based layer two and Ethereum is the latest attempt by the dog-themed project to evolve past its meme coin status. Shibarium developers have previously suggested exploring the metaverse and gaming applications to create utilization for tokens like bone, shib and leash.

House committees pass crypto bills meant to bring regulatory clarity

Last week, two House committees endorsed legislation meant to bring the US crypto industry under proper regulatory oversight.   The Financial Services Committee voted to advance the Financial Innovation Technology for the 21st Century Act, which seeks to define a regulatory framework for digital assets, on Wednesday. The Agriculture Committee also gave its green light on the joint bill on Thursday afternoon.

The market structure bill prior narrowly secured bipartisan approval in the Financial Services Committee the evening before. A group of committee members from both political sides found fault with the bill, which seeks to empower the Commodity Futures Trading Commission (CFTC) with more authority, arguing that it would create more confusion. The Democrat critics also showed dissatisfaction with the provisions of the bill as it would undermine consumer protections preserved by the securities laws making investors even more exposed to fraud.

Separately, the Financial Services Committee passed Rep. Tom Emmer’s Blockchain Regulatory Certainty Act on Wednesday. Emmer, the majority whip, previously proposed the legislation last session, but the bill didn’t graduate from the committee.

Stablecoin legislation

The House Financial Services Committee convened again on Thursday, passing a regulatory framework for stablecoins in talks involving congressional Democrats, Republican counterparts and the White House. The bipartisan negotiations around the payment stablecoins bill broke down on Thursday’s markup as Chair Patrick McHenry inculpated the White House for objecting to some provisions and not showing urgency.

The partisan clash also involved committee Democrats led by the agency’s ranking member Maxine Waters and Stephen Lynch, who faulted the Republicans for lacking patience and railroading parties involved in the process. Nonetheless, the version of the stablecoin bill eventually settled upon was approved by the committee in a vote concluding 34-16, which referred the bill to the House floor.

Cyberattack disclosure rules

In other news last week, the US SEC adopted rules requiring registered public companies, including those operating in the digital assets industry, to disclose any major cybersecurity incidents within four days of breaches being deemed ‘material.’ For cases where the admission is considered a potential national security risk, listed companies will be allowed to petition to postpone the same. The incoming rules also mandate registrants to report on how they manage cybersecurity-related risks.

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Worldcoin Debut Hands Optimism Short-term Boost against Arbitrum

https://www.securities.io/worldcoin-debut-hands-optimism-short-term-boost-against-arbitrum/

Ethereum layer-2 network Optimism recorded a swell in network activity this week as the number of daily transactions surged to 844,290 on Tuesday, surpassing rival network Arbitrum, which registered 630,534 on the same day. Optimism (OP) tracked higher figures than Arbitrum again on Wednesday – 808,942 transactions against 664,821 transactions on the latter network.

Optimism and Arbitrum daily transactions comparison. Source: Dune Analytics

The spike in daily transactions has been chiefly driven by the hype around Worldcoin, which launched its mainnet earlier this week despite the controversy surrounding the AI-influenced crypto project. Nonetheless, Worldcoin has attracted thousands of holders in the first week of its protocol launching after completing the migration to the OP mainnet.

To learn more about Worldcoin, check out our Investing in Worldcoin guide.

The Worldcoin Foundation, the governing body for the Worldcoin ecosystem, previously announced in May that its development team, including early protocol contributors at Tools for Humanity (TFH), would build a scalable blockchain ecosystem for the ecosystem on the OP Stack. The commitment involved the migration of World ID and World App wallet to OP mainnet, followed by the token’s trading debut this week.

Optimism separately implemented its Bedrock hard fork in June as part of efforts to improve proof modularity and make it a multi-client ecosystem in preparation for evolving the network into a Superchain

Optimism DeFi ecosystem

The upgrade brought several changes to the layer-2 scaling solution, including lowering gas fees and significantly reducing the deposit confirmation times. Despite tracking notable milestones in recent months, Optimism is still dwarfed by Arbitrum in total value locked (TVL) with $919 million against Arbitrum’s $2.1 billion TVL figure, according to DeFi Llama.

Arbitrum DeFi ecosystem. Source: DeFi Llama

To learn more about Arbitrum, check out our Investing in Arbitrum guide.

Dune Analytics data further shows Arbitrum has maintained its lead over Optimism in number of daily active addresses by chain over the past six months.

Optimism and Arbitrum active addresses comparison.

Optimism’s native token (OP) was trading slightly below $1.50 on Friday, down 4.95% in the past 24 hours as holders brace for potential selling pressure from an upcoming token unlock over the weekend.

OP/USD price chart. Source: TradingView

A total of 24.16 million OP tokens will be unloaded to core contributors and investors on Sunday per its vesting schedule.

To learn more about Optimism, check out our Investing in Optimism guide.

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Palm Network Plans Transition to Polygon by Creating a Supernet

https://www.securities.io/palm-network-plans-transition-to-polygon-by-creating-a-supernet/

NFT-optimized blockchain project, Palm Network, has today revealed plans to transition to a Polygon-based ‘Supernets’ chain while maintaining its existing Layer 1 blockchain infrastructure.

The network’s launch of a proof-of-stake sidechain within the Polygon ecosystem will start next Tuesday as part of a two-phase expansion to Polygon. The first phase involves the integration of a proof-of-stake sidechain to replace the proof-of-authority (PoA) consensus mechanism by August, followed by the actual migration to layer two Supernets to complete the new Web3 creators’ platform.

The choice of Polygon was influenced by the high speed, security, and scalability merits of the Supernets, which support the ConsenSys-backed firm’s goal to become a zkEVM multiprover. The transition will also improve interoperability with Ethereum and Polygon 2.0 – the latter which has been teased as an ecosystem of several Layer 2 chains. Notably, Palm Network joins Web3 gaming firm Immutable and decentralized exchange platform IDEX which have too opted for Supernets for their separate initiatives.

To learn more about Polygon, check out our Investing in Polygon guide.

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Canada’s OSFI Opens Consultation on Capital Guidelines for Banks and Insurers Holding Crypto

https://www.securities.io/canadas-osfi-opens-consultation-on-capital-guidelines-for-banks-and-insurers-holding-crypto/

Canada’s financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), today proposed an update to its existing capital and liquidity take on cryptocurrencies.

The OSFI announced separate draft guidelines for registered institutions that accept deposits, which include banks and another for institutions offering insurance, on the capital treatment of crypto exposure. The agency justified that the changes “reflect an evolving risk environment and international developments” in a Wednesday announcement.

“Deposit-taking institutions and insurers need clarity on how to treat crypto-asset exposures when it comes to capital and liquidity. We look forward to giving them this clarity through these new guidelines that reflect industry input and international standards.” Peter Routledge, Superintendent of Financial Institutions, said.

The banking proposal reflects the December 2022 Basel Committee on Banking Supervision (BCBS) merits. The insurance guidelines similarly incorporate the relevant elements of the BCBS standard with changes to accommodate the local insurance industry. Both guidelines in the new bank capital rules for crypto holdings detail four classifications of cryptocurrencies and the capital treatment for each.

The public consultations on two draft guidelines for banks and insurers will be open until Sept 20. If approved, the guidelines will be implemented in early 2025 to replace the in-effect interim advisory on the regulatory treatment of crypto exposure introduced last August.

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Binance CEO and Former Exec Line Up Motions to Dismiss CFTC Complaint

https://www.securities.io/binance-ceo-and-former-exec-line-up-motions-to-dismiss-cftc-complaint/

Binance and its founder Changpeng Zhao are planning to seek dismissal of the complaint brought against the exchange by the Commodity Futures Trading Commission (CFTC), a Monday court filing suggests. The US commodities regulator alleged in a prior filing to the Illinois District Court that the exchange violated various elements of the Commodity Exchange Act between July 2019 and the time it took action.

The legal dispute has, however, remained somewhat obscure since the classification of digital assets in the US is still unclear. Cryptocurrencies have not been explicitly classified as either securities or commodities. Per the Reuters report, the defendants in the CFTC complaint – the exchange, its CEO CZ and former Chief Compliance Officer Samuel Lim – intend to file separate motions to dismiss when they submit their response later this Thursday.

“The Foreign Binance Entities and Zhao intend to file a joint Motion to Dismiss the Complaint. Lim intends to file a separate Motion to Dismiss the Complaint, and join parts of the motion filed by the Foreign Binance Entities and Zhao,” a section of the filing reads.

Their attorneys also requested the court for permission to exceed the page limit on the supporting briefs “given the complexity of the CFTC’s Complaint and the number of arguments Defendants anticipate making in support of their Motions to Dismiss.”

“Defendants respectfully request an expansion of the page limit allowed by Local Rule 7.1 up to 50 pages collectively for the two Memoranda of Law, which is 25 pages less than the combined total of 75 pages that the Defendants would be entitled to under Local Rule 7.1 if they each separately moved to dismiss the CFTC’s Complaint.”

Binance and CZ are separately defendants in a lawsuit brought forward by the US Securities and Exchange Commission (SEC) last month. The domestic securities regulator accused Zhao of mismanaging exchange (customer) funds and the exchange of offering securities without seeking prior registration. The SEC additionally took issue with the exchange’s operations as it knowingly allowed US residents to access its international platform.

The exchange is also under investigation by the US Department of Justice, whose national security division seeks to determine whether Russians used the platform to circumvent sanctions imposed by the European Union and the US government in relation to Ukraine’s invasion. The DoJ inquiry into Binance in May followed April reports of the exchange quietly lifting restrictions and resuming operation in Russia after previously halting support for deposits from Russia-issued MasterCard and Visa cards.

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Worldcoin Unveils Mainnet, Native WLD Token Surges 55% on Trading Debut

https://www.securities.io/worldcoin-unveils-mainnet-native-wld-token-surges-55-on-trading-debut/

Worldcoin, the divisive digital identity project backed by Open AI CEO Sam Altman, has today launched its mainnet, a statement shared by its co-founders via the project’s Twitter account confirmed. Worldcoin launched unofficially in March along with a waitlist for its Worldcoin software development kit (SDK) before releasing a gas-free crypto wallet, World App, for verified users on May 8.

An identity and financial network

The Worldcoin protocol is at the base of an eponymous public network that entails World ID – a privacy-preserving digital identity that proves a user’s unique personhood. Earlier this month, its developers said the beta version of the project had recorded onboarded more than 2 million users via sign-ups to World ID.

In addition to the decentralized digital passport of sorts, the ecosystem also features the World App – a wallet service through which users can execute purchases and transfers using fiat or digital assets. During the beta stage, new users were offered free WLD tokens after verifying their identities by scanning their irises using the biometric device called ‘the Orb.’  Worldcoin developers said the scans are key in ensuring that a person can only have a single Worldcoin ID.

Worldcoin’s development team, San Francisco and Berlin-based Tools for Humanity, reportedly closed a Series C round led by Blockchain Capital barely three weeks later on May 25, through which it raised $115 million to fund its ecosystem. Specifically, the team said it planned to advance its World ID and World App, which operates on Polygon.

To learn more about Polygon, check out our Investing in Polygon guide.

Mainnet launch and tokenomics model

Per its tokenomics documentation, WLD has an initial supply of 10 billion, with roughly 75% allocated to its community, 13.5% to Tools for Humanity investors and 9.8% to the development team.

“It seems that people who have undergone iris authentication can now claim WLD on Optimism. Currently, over 90,000 individuals are eligible to claim, with the majority able to claim around 25 tokens each,” on-chain insights tool Scopescan reported on Monday.

Notably, the blockchain mainnet and token launches follow the Worldcoin protocol’s migration to the OP mainnet – a transition process that began in February. The startup on Monday revealed plans to create 1,500 Orbs to be deployed by the end of the year in more than 35 cities across 20 countries so as to expedite user sign-ups.

Mixed reception and criticism

That said, the project has drawn mixed reactions from internet users on social platforms, with some opposing its heavily AI-influenced approach that poses privacy risks. Nonetheless, Worldcoin developers denied that the project stores users’ data presenting in justification that the data is only used to generate a zero-knowledge proof that verifies that the user is human.

“At no time should a corporation or state own any part of the global financial system,” Ex-Twitter CEO Jack Dorsey wrote in a tweet, questioning the project’s unconventional approach.

The beta phase of the project also predominantly focused on the global south, with most sign-up figures coming from cities like Barcelona, Berlin, Buenos Aires, Seoul, and Tokyo.

To learn more about Optimism, check out our Investing in Optimism guide.

Debut on exchanges

Major exchanges, including Huobi, Bybit, OKX, and Binance, have listed the token on their trading platform with plans to allow withdrawals as early as tomorrow. Other exchanges like Bitget, BitMart, Bitrue, Bithumb, and KuCoin have also communicated WLD listing.

WLD token debut (UTC +3 hrs)

The WLD token was trading at $2.60 – 56% in the green at the time of reporting.

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Bitcoin (BTC) Bulls Concede to $30K Hurdle as Mask Network (MASK) Leads Gainers

https://www.securities.io/bitcoin-btc-bulls-concede-to-30k-hurdle-as-mask-network-mask-leads-gainers/

Bitcoin (BTC) swiftly climbed past $30,100 early on Thursday as bulls made another attempt to overcome the barrier at $30,000 in the face of gradually depreciating momentum. Like other unsuccessful prior efforts this week, the move was accompanied by harsh rejection to familiar grounds below the psychological resistance. Markedly, the price of the flagship asset has, on each day this week, retreated towards late June levels of $29,690.

Bitcoin neutralized heading into the weekend, altcoins cool off

Despite multiple attempts to recover from the midweek one-month low range, Bitcoin has thus far failed to flip the $30K level to support. Ethereum corrected in tandem, losing grip of the elusive $2,000 mark, and was changing hands at $1,890 at press time. Other larger cap altcoins, which recorded modest rallies last week – and some this week – have cooled down for the most part. The trio of Polygon (MATIC), Solana (SOL) and Cardano (ADA) has remained unchanged on Friday.

Meanwhile, XRP has remained top among many speculators’ watchlists. XRP (XRP) price enjoyed a massive upswing after the ruling last Thursday before registering mild gains over the weekend and some more this week. The US District Court of the Southern District of New York ruled that XRP sales to other buyers, except institutional investors to whom more than $700 million worth of XRP were sold, didn’t violate securities laws.

The payments-focused token broke past $0.80 on Tuesday for the first time since March 2022 but gave up the gains during Wednesday and Thursday trading sessions. The XRP/USD pair was spotted at $0.78 when writing – up 57% in the last 30 days per CoinMarketCap data.

MASK and MKR tokens impress on the daily chart

Maker’s governance token MKR is the day’s top gainer, trading 12.50% in the green ahead of Chainlink (LINK), whose price moved up by a similar margin during Thursday’s period. The latter’s gains came on the back of bullish news of the introduction of the CCIP protocol and represented the first successful breach of the $8 level in three months.

To learn more about Maker, check out our Investing in Maker guide.

The positive price action around Maker (MKR) follows early Friday reports of two major transactions involving the token.  MKR briefly traded above $1,200 at the peak of the surge but has since lost part of the momentum and moved lower to $1,140. This week, the lending protocol activated Smart Burn Engine, a token buyback program that rids part of MKR supply from the market by periodically allocating DAI stablecoin from Maker’s surplus buffer.

“The main difference between the Smart Burn Engine and the previous burn design is that in the new Smart Burn Engine, MKR tokens will be accumulated in the form of Univ2 LP tokens instead of being acquired and burned. In addition, Surplus Auctions (flaps) will be replaced by Dss Flappers 25,” the proposal explains.

XDC Network’s XDC is another among the best performing alts, having gained 6.50% in the last 24 hours. Mask Network’s MASK has registered double digit gains during the same period and was last trading at $4.10. Conversely, Stellar (XLM) has tracked a notable decline among large-cap alts, down 6.80% on Friday evening.

To learn more about MASK, check out our Investing in Mask Network guide

Arkham token (ARKM) debuts on Binance

In other market headlines this week, Binance completed the public sale of Arkham (ARKM) tokens, whose allocation to participants was based on the amount of BNB staked by the user during the six-day subscription period. Binance also opened trading for several ARKM pairs on its platform after concluding the sale for on-chain analytics provider Arkham Intelligence.

The blockchain intelligence firm controversially unveiled what it termed ‘the first on-chain intelligence exchange’ on July 10, where users can buy or sell data related to the blockchain address owners. The public token sale held on Binance Launchpad reached the hard limit of $2.5 million with a 4.92 ARKM tokens per BNB conversion rate.

The exchange reported that more than 110,000 users took part in the Arkham subscription launchpad committing a total of 10.18 million BNB. The token sold for $0.05 ahead of going live, with investors allowed a maximum allocation of $15,000. On the exchange, the token debuted at $0.75 but has since slid to $0.6275 with a market cap of $94 million at writing. Notably, around 850 million tokens remain locked and will be distributed over eight years.

Upcoming token unlocks

Other crypto and DeFi projects with pending token unlock schedules have, too, caught the attention of many traders. Web3 domains and digital identities platform SPACE ID is set to unload more than 15 million ID tokens, representing 5.3% of the circulating supply, across four allocations in a few hours.

Axie Infinity’s upcoming AXS token unlock involving 3.43 million AXS tokens (stake rewards) will follow on Saturday. Later next week, Ethereum-based layer two protocol Optimism will see a total of 24.16 million OP tokens enter into circulation. Optimism’s OP token unlock will entail two allocations – 12.75 million to core contributors and 11.41 million to investors.

To learn more about Axie Infinity, check out our Investing in Axie Infinity guide.

Macro update

Though the market has exhausted momentum from the XRP ruling, the industry is still keen on the Ripple case ruling. The SEC chair Gary Gensler declined to respond to whether the commission intends to appeal the split decision in the enforcement case against Ripple Labs.

This week’s sluggish display also confirms that market participants across the board have moved to the sidelines, cautiously watching macro developments from the sidelines. In focus is next week’s meeting of the Fed’s policy-setting Federal Open Market Committee (FOMC) meeting, where markets have priced in a 99.8% chance of another 25 basis point rate adjustment per data from CME FedWatch Tool.

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House Republican Committees Eye Digital Assets Market Overhaul in New Oversight Bill

https://www.securities.io/house-republican-committees-eye-digital-assets-market-overhaul-in-new-oversight-bill/

A group of US House Republicans on Thursday formally delivered on a crypto oversight bill meant to bring more clarity to the digital assets sector with respect to investor protection. The 212-page submission, whose draft was previewed last month, seeks to establish a regulatory framework guiding the provisional registration of crypto companies with relevant authorities.

Tweaks to June’s draft version

The updated version retained focused on the regulatory roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It proposed that the SEC and CFTC hold joint rulemaking powers, i.e., formulate and issue digital asset rules that guide entities operating trading avenues. The former authority will focus on digital assets securities, while digital commodities markets such as exchanges and broker-dealers will be under the latter’s supervision.

The bill also defined a new disclosure regime for digital asset issuers and a clear guidance process for digital assets that start as securities but evolve into commodities.

“Currently, neither the CFTC nor SEC has the authority to register and regulate entities engaged in a non-security digital asset, or digital commodity, spot transactions. The CFTC only has the authority to prosecute those entities if the CFTC believes the entity has committed fraud or manipulation related to a non-security digital asset, or digital commodity, spot transaction,” the House Republicans justified in the explainer.

The House Financial Services and Agriculture Committees are expected to deliberate on the bill next week and decide on it progression to the full House floor. The Financial Services Committee will be first to have at its part on Wednesday, while the Agriculture Committee will debate its scope the next day. Notwithstanding the recommendations for joint oversight of the sector where the SEC and CFTC have independent scopes, the bill will likely see opposition in Congress.

House Democrats have, on past occasions, called for the SEC to have greater authority than Thursday’s bill provides. It is worth noting that the latest Republican efforts match up to the bipartisan Responsible Financial Innovation Act (RFIA), whose proposal was submitted to the Senate last Wednesday.

UK government doesn’t intend to regulate crypto as gambling, warns of misalignment

Meanwhile in the UK, the Finance Ministry rejected a proposal introduced in May, seeking to regulate crypto trading activities like gambling.

Economic Secretary to the HM Treasury Andrew Griffith disagreed with the recommendation to treat “retail trading and investment activity in unbacked crypto assets as gambling rather than as a financial service” which was presented by the Parliament’s Treasury Select Committee. The committee previously implied in May that the likes of Bitcoin and Ether are unbacked assets that lack intrinsic value and bear significant risks to the public.

Perceiving crypto trading activity as gambling, Griffiths said, is discordant with existing guidance from global and European Union standard-setting bodies. Last October, the UK Financial Stability Board published guidelines for regulating the digital assets sector in a consultative document and recently outlined more standards. Separately, the International Organization of Securities Commissions (IOSCO) brought forth the world’s first set of rules for the crypto sector in May.

The Economic Secretary also noted that regulating the industry under the gambling umbrella doesn’t comprehensively address risks such as market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.”

Following last month’s approval in the UK upper chamber of Parliament, King Charles assented to a bill bringing cryptocurrencies and stablecoins under the scope of payments rules in late June. The Financial Services and Markets Bill Act empowers regulators in their bid to carry supervisory oversight over digital assets and other financial systems. The landmark legislative piece saw amendments during its discussion in Parliament – notable among them stipulations to treat crypto as a regulated activity and supervise advertisements from local crypto service providers.

This week, the UK’s Financial Conduct Authority said it plans to shape the prudential requirements for crypto firms. The regulator conveyed in its annual report released Thursday that it will consult on the rules after receiving the green light to act on them from the Treasury and Parliament.

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Coinbase to Dissolve its Lending Product, Customers Have Four Months to Repay Loans

https://www.securities.io/?p=231300

Coinbase has today confirmed plans to permanently wind down its lending product for retail customers, Coinbase Borrow, in coming months. In a previous May communication, the exchange said it would no longer provide new loans while active ones would remain so until their maturity as part of changes following a re-evaluation of its products.

Thursday reports convey that Coinbase now wants to conclude the Borrow program, which allowed retail users to obtain fiat loans using Bitcoin held by them (as much as 30% of their holdings) for collateral. While active, the lending offering facilitated the BTC-backed loans for sums of up to $1 million. The exchange extended a four-month repayment window (until Nov. 20) for loan holders to settle their outstanding figures, after which the customers’ collateral will be automatically sold to clear the same.

Coinbase has been the subject of intense scrutiny by the US Securities and Exchange Commission (SEC) in recent months. The securities regulator charged the exchange for “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency” early last month.Top of FormBottom of Form

Markedly, the lending program’s breakoff will neither affect Coinbase Prime nor the institutional customers. The California-based exchange noted that going forward, it plans to shift its focus towards offerings that meet its user base’s demands.

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Bipartisan Bill to Regulate DeFi Draws Industry-wide Backlash

https://www.securities.io/bipartisan-bill-to-regulate-defi-draws-industry-wide-backlash/

A bipartisan group of four Senators led by Sen. Jack Reed, this week, introduced a bill that would require decentralized finance (DeFi) services to comply with the same guidelines applicable to banking, brokerage and other traditional firms like casinos. The bill – whose full text is yet to be released at the time of compiling – places direct liability on those who control DeFi projects if found guilty of failing to report or thwart money laundering activity on their services.

The trio of Senators Mark Warner, Mitt Romney, and Mike Rounds cosponsored the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act. For projects without controlling entities or individuals, the lawmakers proposed that individuals or entities with an investment stake of “more than $25 million in developing the project” be held liable.

The scope of the bill also includes crypto ATM operators with updated requirements for them to verify the identities of transaction counterparties.

Redefining the reach of Anti-Money Laundering and Know Your Customer rules

The CANSEE Act will, in some respects, strengthen the Treasury Department’s ability to enforce its authority. Markedly, the bill read on the Senate floor late Tuesday is the latest effort by legislators to combat crypto crime. The legislation additionally wants to give the US Treasury Department more authority – illicit financial activity outside the banking sector should be reported.

“This legislation bolsters the Treasury Department’s tools to protect our national and economic security. Drug cartels, sex traffickers, and the like shouldn’t be able to use DeFi platforms to avoid justice,” Reed said.

The heightened scrutiny of DeFi protocols comes on the back of claims that the niche has evolved to avenues facilitating money laundering and sanctions.

“As new technologies like cryptocurrency increasingly enable new ways to conduct financial transactions, it is critical to extend Treasury’s authority to crack down on illicit financial activity that may occur outside the banking sector,” the briefing document read.

Various sects of the crypto community faulted the bill for being vague and one that could likely stymie DeFi development in the US. In the previous session, the Senate duo of Elizabeth Warren and Roger Marshall unsuccessfully submitted a bipartisan bill to update AML rules so that they can encompass the entire digital assets sector.

Warren and Marshall’s bid sought to restrict financial institutions’ access to enabling technologies and offerings like privacy-focused coins and coin mixers. Its implementation would see the AML rules apply to digital asset wallet providers, network validators and other blockchain ecosystem players. Though the duo’s legislative proposal was presented to the floor in December, it failed to advance. Earlier in February though, the Senators said they planned to bring back the Digital Asset Anti-Money Laundering Act.

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