US dollar (USD) dominance continues to decline as wealthy investors and country leaders take steps to reduce their exposure to the currency. What are the potential consequences of such trends?
As the global economy struggles to get back on its feet after the COVID-19 pandemic, wealthy investors and nations are betting billions against US stocks amid growing recession fears. The move is a sign of the rising uncertainty about the future of the US economy, which has been hit hard by the pandemic.
One of the reasons for this trend is the view that the US stock market is overvalued and due for a correction. With stock prices at all-time highs, many investors and nations worry that a bubble is waiting to burst. As a result, they are looking to hedge their bets and protect their assets by shorting US stocks. Instead, using other safe havens to increase profitability.
Betting Against US Equity
Shorting is a common investment strategy that involves betting against a given asset. When investors short a stock, they borrow shares from someone who owns them and sell them at the current market price. They then hope to buy back the shares at a lower price in the future, return them to the original owner, and pocket the difference as a profit.
Short interest in the US stock market has increased in a few years. This indicates that many investors and nations are betting against the US stock market. In fact, short sellers won big last year as the broader market declined. Tallying $300 billion in mark-to-market profits on the average short interest of $973 billion.
Meanwhile, the broader banking sector contagion also played a part, as investors reduced exposure. According to March 2023 data from S3 Partner, short-selling banking stocks returned a 17.20% profit on an average short interest of $82.40 billion. Needless to say, US banking trends played a part here.
Countries Reducing USD Dominance
One of the nations that has been betting against US stocks is China. According to data from the US Treasury Department, China has been reducing its holdings of US Treasury bonds and buying more gold. This indicates China wants to diversify its holdings and reduce its exposure to American assets.
Another nation that has been betting against US stocks is Japan. In 2020, the Japanese government’s Pension Investment Fund, the world’s largest pension fund, reduced its holdings of US stocks from 25% to 21%. This was to reduce the fund’s risk and increase its returns.
Other countries, specifically in the Middle East, are leading the charge in 2023 to facilitate trade without US dollar interference. Also, five major emerging economies, Brazil, Russia, India, China, and South Africa, collectively known as BRICS, have taken such steps.
In a May 10 Bloomberg report, South Africa’s foreign minister asserted that the group would examine whether a new global currency would effectively allow them to disconnect from the US dollar. This can impact global USD dominance, putting the national currency in a “precarious position,” Kentucky Senator Rand Paul argues.
In his recent Fox interview, Paul says the government’s foreign and fiscal policies pushed BRICS and other nations to gang up on the American dollar.
Deep Pocket Investors Follow
Wealthy investors are also getting in on the action. For example, billionaire investor Carl Icahn recently revealed a significant short position in the US stock market. Icahn believes that the market is overvalued and due for a correction, and he has positioned himself to profit from any downturn.
More recently, United Arab Emirates Royal Group allegedly built a short position worth billions of dollars in US stocks. Here, the group shifted its portfolio into short-term US Treasuries and invested more in commodities and crypto. The Abu Dhabi Royal Group is a conglomerate of firms owned by the ruling family of Abu Dhabi, one of the seven emirates that make up the UAE.
Firms that the Abu Dhabi Royal Group owns include the Abu Dhabi Commercial Bank, the Abu Dhabi National Energy Company (TAQA), Emirates Palace Hotel, and the media company Sky News Arabia. The group also owns the Abu Dhabi United Group, which oversees the Manchester City Football Club operations in the English Premier League.
The Abu Dhabi Royal Group is among the most prominent and influential business entities in the UAE and the wider Middle East. Its vast resources and financial clout have enabled it to pursue ambitious projects and investments locally and internationally.
The growing trend of betting against US stocks is a sign of the rising worries about the future of the American economy. While the economy has shown signs of improvement in recent months, many challenges are ahead.
Inflation is a concern because it can lower the buying power of consumers and businesses. When prices rise, people and companies spend more money to buy the same goods and services, leading to lower economic growth and reduced company profitability.
Inflation can also lead to higher interest rates, making it more expensive for businesses to borrow money.
The Federal Reserve has indicated that it is prepared to tolerate higher inflation in the short term to support economic growth. However, if inflation continues to rise, the Fed may have to take action to control it. This could lead to higher interest rates and slow economic growth, harming the US stock market.
Overall, the growing trend of betting against US stocks is a sign of the rising uncertainty about the future of the US economy. As a result, investors and nations are hedging their bets and protecting their assets by shorting US stocks.
Crypto firms have faced immense pressure to comply with and adapt to ever-shifting regulations. Around 400 firms in the Baltic region have faced serious repercussions as a result of tightened oversight. They may have no choice but to head for the door in the face of stricter requirements, a new report suggests.
Many cryptocurrency firms have tried to avoid regulatory showdowns and stay compliant with the constantly evolving regulatory agenda. The cryptocurrency industry has operated in a regulatory gray area for many years. Thus, leading to increased scrutiny and enforcement actions from regulators worldwide. In Estonia, internal issues at some firms have come to light, prompting the regulatory watchdogs to jump in.
Crypto Firms and the Regulatory Climate
Cryptocurrency firms have taken myriad steps to avoid regulatory confrontation. Such as implementing robust compliance programs, performing due diligence on customers and partners, and adopting anti-money laundering (AML) and know-your-customer (KYC) measures. They also engage with regulators and industry associations to stay informed of regulatory developments and contribute to developing industry best practices.
Cryptocurrencies and blockchain technology have brought about a wave of innovation and disruption. Creating new opportunities for businesses and investors alike. However, with this growth has also come a rise in the number of crypto firms with questionable credentials, dodgy executives, and nonsensical business plans.
These firms often show a marked lack of transparency and accountability. Even a tendency to make exaggerated claims about the potential benefits of their products or services.
What Are the Red Flags to Consider?
Lack of Regulation: One of the most significant risks associated with crypto firms is more regulation and oversight. Many of these companies operate in unregulated or lightly regulated jurisdictions, making it difficult for investors to assess their credentials and track records.
Dodgy Executives: Another common problem with crypto firms is dodgy executives with a history of fraud or other criminal activities. These individuals may use their experience and reputation to lure in unsuspecting investors, only to disappear with their money once the business fails to deliver on its promises.
Nonsensical Business Plans: Some crypto firms also have business plans that don’t make sense or are based on questionable assumptions about the market or technology. For example, a company may claim to have developed a revolutionary new blockchain platform that can process millions of transactions per second, even though no evidence supports these claims.
Pump-and-Dump Schemes: Another common problem in the cryptocurrency industry is pump-and-dump schemes, in which individuals or groups artificially inflate the value of a particular cryptocurrency before selling off their holdings and leaving other investors with worthless assets.
Lack of Transparency: Finally, many crypto firms also need more transparency and accountability, making it easier for investors to assess the actual value of their investments. Some companies may refuse to disclose essential financial information or audit reports, while others may be involved in illegal activities such as money laundering or terrorist financing.
Forced Exit Due to Regulatory Conditions?
In some instances, strict compliance requirements have accelerated the exit of crypto firms or virtual asset service providers (VASPs) from a given region. One notable example is the case of BitMEX. A cryptocurrency derivatives exchange had to close its services to customers in the United States due to increased regulatory scrutiny.
In October 2020, the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ) filed charges against BitMEX. Alleging that the company had violated multiple regulations related to AML and KYC. The charges included failing to implement adequate AML procedures. Allowing US-based customers to trade on the platform without proper KYC verification. And operating an unregistered trading platform in the US.
As a result, BitMEX was forced to shut down its services for US customers and implement strict measures to address the regulatory concerns. The company also agreed to pay a $100 million fine to settle the charges and committed to enhancing its AML and KYC procedures to avoid future violations.
Another example is the case of Binance, one of the world’s largest cryptocurrency exchanges. The company has recently faced increased scrutiny from regulators in several countries. Including the UK, Japan, and Thailand, due to concerns about its compliance with AML and KYC laws.
In both of these cases, the strict rules imposed by regulators have had consequences. They have seriously affected the ability of crypto firms or VASPs to operate in a region. As regulatory scrutiny continues to intensify in the crypto space, companies are forced to exit. Or suspend their services to comply.
Strict Policies Hit Estonian Firms Hard
Almost 400 virtual asset service providers (VASPS) have voluntarily shut down or had their authorizations revoked in Estonia, per a May 9 report. This comes on the heels of the government’s newly enhanced Terrorist Financing Prevention and Anti-Money Laundering laws, which came into effect in March. Several issues were identified within local crypto firms, such as dodgy execs and nonsensical business plans.
Matis Mäeker, the Director of the Financial Intelligence Unit (FIU), questioned the motives of these crypto firms.
“In the applications, we found very many suspicious circumstances on various topics. This calls into question the credibility of the companies that wanted to do business here – their actual desire to provide services in Estonia or, vice versa, shows the desire of certain persons to use the Estonian economic and financial system for illegal activities.”
Virtual Asset Service Providers (VASPs) must comply with KYC requirements and cannot open anonymous accounts. The Transfer Rule in Europe’s Markets in Crypto-Assets bill requires exchanges to identify entities at both ends of a crypto transaction. Fines for breaches can reach $440,000.
In addition, firms must pay over $50,000 to establish a company and pay about $11,000 monthly.
Self-Analysis Is Key
Regulators across the globe are taking measures to help investors by removing bad actors. But, self-analysis is a must. Investors should take several steps to protect themselves to avoid falling victim to these crypto firms. These may include:
Conducting Due Diligence: Investors should perform thorough due diligence before investing in any cryptocurrency or blockchain-related business. Mainly on the company’s founders, management team, and business plan. They should also investigate the regulatory environment in which the company operates. As well as any potential legal or reputational risks.
Diversifying the Portfolio: To minimize risk, investors should consider diversifying their portfolio across multiple cryptocurrencies and blockchain-related assets. This can help to reduce the impact of any individual asset’s performance on their overall investment returns.
Seeking Professional Advice: Investors may also benefit from seeking advice from professional financial advisors or cryptocurrency experts. They can guide the best investment strategies and help identify potential risks and opportunities.
Being Wary of Unusually High Returns: As with any investment, investors should be wary of any claims of unusually high returns. As these are often signs of fraud or other illegal activities.
Staying Informed: Finally, investors should stay informed about the latest developments in the cryptocurrency industry. Including regulatory changes, technological advancements, and emerging trends. This can help them make informed investment decisions and avoid risks and opportunities.
Overall, investors must be cautious when dealing with crypto firms and associated regulations.
Cyber attacks continue to see a rise in the crypto sector and beyond. Here is a list of some of the worst hacks of the decade. After assessing and comparing the flaws that enabled them, it is crucial to improve cybersecurity for all firms.
Over the past decade, some of the most significant hacks have occurred in finance, healthcare, and government industries. The commonality among these attacks is that they were executed with the intent to steal valuable data, money, or other assets.
The attackers behind these attacks have been sophisticated, well-funded, and highly skilled in exploiting vulnerabilities in cybersecurity systems.
Here are some of the most prominent hacks from the current decade, what they have in common, and what lessons we can learn to improve cybersecurity in the crypto sector and beyond.
The list comprises the most significant hacks in the past decade, starting from 2013.
Major Exploits In the US
One of the most notable attacks of the decade occurred in 2013 when Target, a major US retailer, was hacked. The attackers stole the credit and debit card information of approximately 40 million customers and the personal information of another 70 million customers.
The attack was executed by exploiting a vulnerability in Target’s point-of-sale (POS) system. This allowed the attackers to steal customers’ information as they swiped their cards.
Moving on to some of the biggest hacks from 2014 and 2015 include the following:
Mt. Gox: In 2014, Mt. Gox, a Japan-based Bitcoin exchange, suffered a massive hack that lost 850,000 bitcoins. Worth around $450 million at the time.
Sony Pictures: In 2014, Sony Pictures was hacked. Resulting in the theft of confidential company information and releasing personal emails between executives.
Ashley Madison: In 2015, the online dating website Ashley Madison was hacked, releasing millions of users’ personal information.
Assessing the Attacks
These hacks have some commonalities. Firstly, they targeted high-profile companies that held sensitive information or a significant amount of cryptocurrency.
Secondly, the attackers used sophisticated tactics to gain access to the systems. In most cases, the hacks were detected when significant damage had already been done. The hacks from this period have several lessons to offer the cybersecurity industry.
One is the importance of implementing robust security measures to protect sensitive data. This includes using multi-factor authentication, encrypting data, and monitoring systems for unusual activity.
Another lesson is the need for better collaboration and information-sharing between organizations. In the case of the Mt. Gox hack, the company was slow to disclose the breach, which worsened the damage caused.
The incident highlights the importance of timely and transparent communication during a cyber-attack.
Alarming Surge in Cyberattacks
In 2016, the Bangladesh Bank heist became one of the largest cyberheists in history, with attackers stealing $81 million from the bank’s account at the Federal Reserve Bank of New York. The attackers accessed the bank’s SWIFT credentials and used them to send fraudulent payment orders to the Federal Reserve Bank.
Therefore, the lesson learned from this hack is that financial institutions must implement multi-factor authentication and strict access controls to protect their SWIFT credentials and prevent fraudulent transactions.
In 2017, Equifax, one of the largest credit reporting agencies in the US, was hacked, compromising the personal information of 143 million people. The attackers exploited a vulnerability in Equifax’s web application framework to access the company’s databases.
The lesson learned from this hack is that organizations must regularly patch vulnerabilities and implement robust security protocols to prevent unauthorized access to sensitive data.
Another significant hack occurred in 2018, when Coincheck, a Japanese cryptocurrency exchange, was hacked, resulting in the theft of approximately $530 million worth of NEM coins. The attackers accessed Coincheck’s hot wallet, which contained the private keys to access customers’ cryptocurrency.
The lesson learned from this hack is that cryptocurrency exchanges must implement strict security protocols, such as cold storage for private keys and multi-factor authentication, to protect customers’ assets.
Staggering Increase in Bad Actors’ Activity (2020 to 2023)
Big Names Involved in Hacks (2020)
In 2020, the SolarWinds hack became one of history’s most significant cybersecurity incidents. Attackers compromised the systems of multiple US government agencies, including the Department of Homeland Security and the Department of Defense.
The attackers gained access by compromising SolarWinds’ software supply chain, allowing them to insert malware into the company’s updates.
But the list goes on with significant exploits within the same period.
The Microsoft customer database hack in 2020 is particularly concerning as it compromised 250 million sensitive customer data, including email addresses and account information.
This incident underscores the importance of implementing robust security measures, including multi-factor authentication and regular security audits, to protect sensitive data.
The BlueKai hack in June 2020 is also significant as it allegedly compromised billions of records. This incident highlights the importance of implementing encryption and other security measures to protect data at rest and in transit.
Organizations should also prioritize monitoring their systems for any unusual activity, which can help detect and respond to cyber-attacks more quickly.
The Keepnet Labs breach in March 2020, with five billion records compromised, is another example of a significant cybersecurity incident.
This incident highlights the need for organizations to prioritize employee training and awareness to prevent phishing attacks, which are common tactics cybercriminals use to gain access to systems.
Furthermore, other renowned companies like Zoom, Facebook, and Zoom faced similar repercussions. The lesson learned from this hack is that organizations must prioritize supply chain security and implement rigorous vetting procedures to prevent the introduction of malicious software into their systems.
Hacks in 2021 and 2022 Inflicted Billions
One of the cryptocurrency sector’s biggest cyber hacks in 2021 was the hack of Poly Network, a decentralized finance (DeFi) platform, in August 2021.
Essentially, the attackers exploited a vulnerability in the platform’s code to steal over $600 million in cryptocurrency, including Ethereum, Binance Coin, and other tokens.
In July 2021, THORChain, a decentralized cross-chain liquidity protocol, suffered a hack that resulted in the theft of more than $7.60 million in cryptocurrency. The THORChain team worked closely with cybersecurity firms and other blockchain companies to investigate the hack and prevent further damage.
Additionally, the THORChain community launched a token swap to reimburse users who lost funds in the hack.
Another notable cybersecurity incident in the cryptocurrency sector was the hack of Colonial Pipeline in May 2021. While not directly related to the crypto industry, this hack shut down one of the largest oil pipelines in the United States.
It caused widespread fuel shortages and panic buying. The attackers could extort a ransom payment of $4.40 million in Bitcoin.
Mass Crypto Exploits Last Year
In 2022, unfortunately, crypto hacks made headlines. Cyber security hacks are a critical issue for crypto exchanges, which lost $20 billion to hacks in 2022.
More than half a billion dollars worth of ether and USD coins had been stolen from the Ronin Network on another platform. Also, the attackers could hack nodes, and the computers that process network transactions, according to Ronin.
The activity went unnoticed when a user could not withdraw funds and filed a report. The U.S. Treasury Department later linked the heist to the North Korean state-backed hacking collective Lazarus Group.
The next on the list is Wormhole Network exploits. On Feb. 2, an unknown hacker exploited a vulnerability in Wormhole Network, a bridging protocol allowing users to move cryptocurrencies and NFTs between multiple blockchains.
The total stolen amount totaled around $325 million. Other hacks involved Wintermute, Mango Markets, and BNB Smart Chain. The lost amounts were $160 million, $112 million, and $110 million, respectively.
In conclusion, the most significant hacks of the current decade have had some commonalities. The highly skilled, well-funded, and persistent actors targeted vulnerabilities in cybersecurity systems to steal valuable data and assets.
The lessons learned from these attacks include prioritizing cybersecurity, and implementing multi-factor authentication and access controls. As well as regularly patching vulnerabilities, implementing robust security protocols, and prioritizing supply chain security. Furthermore, investing in secure systems to protect sensitive data is vital.
Learning curves are crucial for the crypto sector, given the unique risks associated with cryptocurrency. Including the irreversibility of transactions and the potential for fraud and theft. By implementing these best practices, organizations can improve their cybersecurity posture and protect their assets and customers from malicious actors.
Furthermore, One of the critical principles of cryptocurrency is its decentralization, which means that users are responsible for securing their funds. Crypto exchanges must implement robust security measures to protect user funds, including cold storage, multi-factor authentication, and regular audits.
In Argentina, hyperinflation drives crypto adoption, with local exchanges recording high Bitcoin deal flow. However, the government’s response to the trends is to bar adoption of crypto. The central bank’s May 4 decision has wide ramifications.
Argentina has a long history of economic instability and high inflation, experiencing hyperinflationary episodes. One of the reasons hyperinflation can drive crypto adoption is that cryptocurrencies can offer a way for people to protect their savings and wealth from devaluation of the national currency. In the case of Argentina, the government has implemented various measures to control inflation. Such as currency controls and price freezes.
However, these measures have often failed to stabilize the economy, leading many people to look for alternative ways to store their wealth. Yet the government does not smile upon innovation.
Crypto Adoption in Argentina
Cryptocurrencies, such as Bitcoin and Ethereum, have become increasingly popular in Argentina as a way for people to protect their savings and investments from inflation. Unlike traditional fiat currencies, which can lose value rapidly during hyperinflation, cryptocurrencies are designed to be deflationary, with a limited supply that governments or central banks cannot easily manipulate.
Last month, Bitcoin price reached a record high in the Argentine peso (ARS), with the BTC exchange rate crossing over 6.59 million ARS, according to aggregated price data tracked by Google Finance. The statistics went up more than 100% year-to-date.
On the other hand, In March, inflation in the country soared by 104.30% on an annualized basis, following a 102.50% jump in the previous month. To make things worse, the Argentine central bank’s reserves have dropped by half to an estimated $1.30 billion since 2019.
Such instances have allowed locals to lower their dependence on the national currency. Instead, look for other decentralized safe havens such as Bitcoin. This is evident in the data below, which shows Bitcoin’s peer-to-peer weekly volume in Argentina.
Here, it reached a record high of nearly $30 million in March on the Paxful exchange.
Seeking the Safe Haven
Multiple reports of some cities in Argentina have emerged exploring using cryptocurrencies to address the economic challenges they face. For example, in 2021, the mayor of the city of Vicente Lopez announced plans to launch a local cryptocurrency to incentivize local commerce and promote economic development.
The idea behind the initiative is to offer a local currency that can be used within the city to encourage residents to shop at local businesses rather than purchasing goods and services from outside. The city is reportedly partnering with a blockchain company to develop the cryptocurrency, which is expected to launch later in the year.
Other cities in Argentina, such as San Lorenzo and Bahia Blanca, reportedly explored using cryptocurrencies to address economic challenges. Such as high inflation and a lack of access to traditional banking. In some cases, local governments pay employees in cryptocurrencies as a way to provide an alternative means of payment subject to a different level of control and inflationary pressures from the national currency.
It is worth noting, however, that the use of cryptocurrencies at the local level is still relatively new and untested. There are challenges and risks associated with these kinds of initiatives. For example, there may be legal and regulatory barriers to overcome, along with concerns about the security and stability of digital money.
Government Bars Crypto Despite Struggles
Argentina’s central bank issued a new resolution that effectively banned payment providers from offering services related to cryptocurrencies. The resolution, published on May 4, prohibits financial institutions and payment providers from participating in any activities that involve cryptocurrencies or facilitating payments through cryptocurrencies.
“Payment service providers that offer payment accounts […] may not carry out or facilitate operations with digital assets, including crypto assets, that are not regulated by the competent national authority and authorized by the Central Bank of the Argentine Republic,” said the resolution.
The move did foster wide speculation and uncertainty on social media platforms. For instance, Argentina’s fintech chamber urged the government to reconsider the decision. The organization stated, “It limits access to a technology that offers multiple benefits and opportunities for our society.”
Prominent leaders also have raised red flags on the global banking system. One of the leading names is Robert Kiyosaki. He encouraged using other mediums such as Gold, Silver, and Bitcoin.
Although many central banks have implemented monetary measures. Such as reducing interest rates and providing liquidity to banks to support economic activity and prevent a credit crunch. Governments have also rolled out fiscal stimulus measures, such as providing financial support to businesses and households, to help soften the impact of the pandemic on the economy.
But will it work to offset the brewing crisis in Argentina?
Web3 gaming continues to enjoy rapid growth compared to conventional gaming setups. However, given the highly damaging hacks in the past, how can users ensure safe adoption?
Gaming has come a long way since the early days of console and PC gaming. With the advent of new technologies such as blockchain and decentralized systems, we are witnessing a revolution in the field: Web3 gaming. Web3 is the next evolution of the internet, more decentralized, open, and transparent than Web2. With Web3 gaming, players can own their in-game assets, participate in the governance of game ecosystems, and earn real-world value for their gameplay.
But as the innovation continues to shine, the industry must not neglect safe adoption.
Advantages of Web3 Gaming
The first and most significant benefit of Web3 gaming is ownership. Traditionally, gamers don’t own the assets they collect and use in games. Game developers or publishers usually own these assets, which can be lost if the game shuts down or the developer goes out of business.
Web3 gaming changes this by using blockchain technology to create unique digital assets players own. These assets are stored in decentralized networks, making them independent of game developers or publishers. This means that players can buy, sell, and trade their assets freely, just like in the real world. It also means that players have more control over their assets and can decide how they are used within the game ecosystem.
The second benefit of Web3 gaming is the ability to participate in game governance. In traditional gaming, the game’s rules are set by developers, and players have little say in how the game is run. With Web3 gaming, players can participate in the governance of game ecosystems by using decentralized voting systems.
These systems allow players to propose and vote on changes to the game’s rules, economy, and even the game’s development itself. This gives players a sense of ownership and control over their game, leading to a more engaged and invested community.
The third benefit of Web3 gaming is the ability to earn real-world value for gameplay. With traditional gaming, players may earn in-game currency or rewards, but these have no real-world value. In Web3 gaming, players can earn cryptocurrency or other digital assets that can be traded for real-world money. This opens up new opportunities for players to earn a living by playing games, forming a new category of “play-to-earn” games. This also incentivizes players to stay engaged with the game and its ecosystem, driving growth and creating new revenue streams for developers.
Interoperability and Security
The fourth benefit of Web3 gaming is the potential for cross-game interoperability. In traditional gaming, each game is a closed ecosystem, and assets cannot be transferred between games. With Web3 gaming, assets are stored on decentralized networks, making it possible for assets to be shared between games. This results in new possibilities for game developers to collaborate and offer new gaming experiences that are not limited by the boundaries of individual games. It also means that players can use their assets across multiple games, increasing their value and creating new opportunities for gameplay.
The fifth benefit of Web3 gaming is transparency and security. In traditional gaming, players must trust game developers to run the game fairly and securely. With Web3 gaming, the game’s rules are transparent and enforceable through smart contracts. This means that players can trust that the game is running as intended and that their assets are secure. It also means that game developers can build trust with their players by providing transparency and accountability.
The Road to Mass Adoption
Despite such attributes, struggles continue to exist. Thus affecting the overall adoption rate. Per the November 25, 2022, survey, users still needed help to assess the latest innovation compared to conventional gamers. Besides that, the security concept remains a significant concern following major attacks last year.
Overall, boosting visibility and security can be essential to user adoption. To show support from the former, gaming platforms undertook initiatives to aid the cause. For instance, last month, Elixir Games announced the formation of a strategic partnership with Square Enix. The collaboration generated visibility and adoption of Web3 games among traditional gamers.
“The partnership will allow millions of gamers to explore quality Web3 games through a platform that hides Web3 technology under the hood and offers a simple, seamless experience to the traditional gamer,” the official announcement added.
Executives from both sides have shown optimism about aiding Web3 gaming’s mass adoption. And dealing with a top concern, that is, security.
Cybersecurity is a crucial factor in driving mainstream adoption of Web3 gaming. With the increasing use of blockchain technology and decentralized systems, Web3 gaming presents a unique set of cybersecurity challenges that must be addressed to ensure the safety and security of players and their assets.
Therefore, cybersecurity is critical in driving mainstream adoption of Web3 gaming. To shed more light on the concept, cybersecurity expert Steven Walbroehl, co-founder and CISO of Halborn, shared his thoughts with BeInCrypto.
To drive mainstream adoption of Web3 gaming, addressing cybersecurity concerns and providing players with a secure and trustworthy gaming experience is essential. This requires a multi-faceted approach, including secure coding practices, strong encryption, and robust network security measures.
“Web3 gaming is introducing for the first time models in gaming that are trying high-value in-game items to high-value off-chain assets. Concepts such as Play-to-Earn are making games a source of financial wealth. And when there is money to be made, there is money to be stolen. Cybersecurity is growing in importance as the threat continues to rise,” Walbroehl stated.
Past and Future Implications
One key aspect of Web3 gaming security is the use of blockchain technology. The decentralized nature of blockchain provides increased security, as it is much more difficult to manipulate or corrupt data stored on a blockchain network. Yet, the nascent industry still needs time to evolve.
Compared to traditional games, Web3 games can be hacked in different ways through cheating or modeling off of logic that breaks the core rules of the games. Such as exploiting bugs to gain revenue or stealing private keys for asset access. Walbroehl opined that this is similar in risk but fully dependent on the game’s logic and play format.
Nonetheless, the industry can learn from past instances. Talking about the future potential, Walbroehl asserted:
“I think it will move more towards Metaverse-style gaming once it becomes more user-friendly, as well as more gambling/betting/Play-to-Earn style games to attract a culture that wants to make a career from playing games. We will also see more and more ‘side-chain’ Layer 2 type of games since the main Layer 1 chain (Ethereum) can’t fully host a game due to speed/bandwidth and gas fees.”
By prioritizing cybersecurity, developers can help drive mainstream adoption of Web3 gaming and unlock the full potential of this exciting new technology.
Adopting artificial intelligence (AI) solutions in banking has become more mainstream in recent years. Banking institutions use AI to improve efficiency, enhance customer experiences, and stay competitive in a rapidly changing industry.
The use of AI solutions in banking has become more mainstream in recent years. Banks and financial institutions have been incorporating AI technology to improve efficiency, enhance customer experiences, and stay competitive in a fast-changing industry. What are the reasons for this trend, the benefits of AI adoption, and some examples of AI solutions in banking?
AI in Banking: Reasons for Adoption
One of the rationales for adopting AI in banking is the vast amount of data generated in the industry. Banks handle enormous amounts of data daily, from customer transaction data to market trends and regulatory requirements. AI can help banks analyze and process this data more efficiently, enabling them to make better decisions and boost their services. By using AI solutions, banks can also slash operational costs, as many manual processes can be automated, freeing up staff time for more complex tasks.
Another reason for adopting AI in banking is the growing demand for personalized services from customers. AI solutions can help banks analyze customer data and offer personalized services and recommendations based on their needs and preferences. This can improve the overall customer experience and increase customer loyalty. Adopting AI solutions in banking can benefit both banks and customers. Here are some of the main benefits:
Improved efficiency: AI solutions can automate many manual processes, such as data entry and analysis, enabling banks to process large amounts of data more quickly and accurately.
Enhanced customer experience: AI solutions can analyze customer data and provide personalized services and recommendations, improving the overall customer experience.
Better risk management: AI solutions can help banks identify and analyze risks in real time, enabling them to respond quickly and effectively.
Increased security: AI solutions can help banks detect and prevent fraud and other security threats, improving the safety of customer data and transactions.
Practical Examples of AI Solutions in Banking
Chatbots: Chatbots are a popular AI solution being used in banking. They can provide customers with instant support and quickly and efficiently answer their queries. Chatbots can also help customers with basic banking tasks, such as transferring money or checking account balances.
Fraud detection: AI solutions can help banks detect and prevent fraud in real time. For example, banks can use AI algorithms to analyze transaction data and identify suspicious activity, such as unusual transactions or spending patterns.
Predictive analytics: Predictive analytics is another AI solution being used in banking. It can help banks analyze customer data and predict their behavior, enabling them to offer personalized services and recommendations.
Loan underwriting: AI solutions can help banks automate the loan underwriting process, enabling them to process loan applications more quickly and accurately. This can reduce the time and cost of processing loan applications and improve the overall customer experience.
These are just some of the instances showing AI’s potential. Most banking institutions implemented the technology in business domains like risk management (56%) and revenue generation through new products and processes (52%).
Per a McKinsey 2020 report, “the potential for value creation is one of the largest across industries, as AI can potentially unlock $1 trillion of incremental value for banks, annually.”
Can AI Help During Banking Crisis
The ongoing banking crisis has created havoc in the financial sector. In the United States, multiple banks have come under fire. The list includes Silvergate, Silicon Valley Bank, Signature Bank, and First Republic Bank. In fact, more than 2,315 banks are currently sitting on assets worth less than their liabilities. Thus, requiring government or private market intervention. But the crisis has not been limited to the US.
There have been many banking crises throughout history. Some of the most notorious examples are the Great Depression of the 1930s, the savings and loan crisis in the United States in the 1980s and 1990s, and the global financial crisis of 2008. Banking crises can occur due to various factors, including excessive risk-taking by financial institutions, inadequate regulation, economic downturns, and external shocks such as natural disasters or geopolitical events.
AI has the potential to play a role in averting the next financial or banking crisis by detecting risks early, improving decision-making, and enhancing regulatory compliance.
Some Uses of AI
AI can analyze vast amounts of data from various sources, including financial statements, market trends, and news reports. By identifying patterns and anomalies, AI algorithms can detect potential risks and alert financial institutions to take appropriate action. Additionally , it can spot fraudulent transactions by analyzing historical data and detecting patterns inconsistent with normal behavior. This can help financial institutions detect and prevent fraudulent actions that could lead to financial losses.
AI can also help analyze credit risk by considering many factors, including historical data, market trends, and external factors, such as geopolitical risks. This can help banks and other financial institutions make more informed lending decisions, reducing the risk of loan defaults. Also, it can monitor regulatory compliance by analyzing vast amounts of data from various sources, including financial statements, customer records, and transactional data. This can help financial institutions identify compliance issues and take action before they become more serious problems.
Lastly, AI can analyze market trends and identify potential risks or opportunities. By providing real-time market insights, AI can help financial institutions make more informed investment decisions and curb the risk of market volatility. By analyzing massive volumes of data in real-time and giving decision-makers valuable insights, AI can assist in developing early warning systems that can spot possible problems in financial markets.
What Do Experts Think?
Experts still need to be convinced despite showcasing use cases and the potential to prevent such instances. For instance, Cathie Wood, the founder of ARK Invest, spoke in a podcast discussing the topic.
Herein, Wood asserted:
“AI is unlikely to fix the banking crisis, but the crisis – which is not over – is another sign that the Fed has gone too far. Many investors ask why we are optimistic. In our view, the equity and fixed income markets are discounting lower interest rates, a + for innovation!”
Other renowned tech leaders, such as Elon Musk, agree with Wood’s narrative about AI. Another software developer in the AI domain opined, “AI might not solve the banking crisis, but it’s an invaluable tool. The Fed’s aggressive rate hikes have consequences, but optimism prevails as markets anticipate rate adjustments. Lower interest rates could foster innovation, bolstering the economy.”
On the other hand, crypto assets such as Bitcoin also offer a path to tackle the banking crisis.
The rapid growth of the Bitcoin mining industry in Kazakhstan led to unforeseen consequences that strained the country’s energy infrastructure. Miners have needed help finding a balance with the local regulations.
Kazakhstan’s rapid ascent in the global Bitcoin mining industry was fueled by its abundant energy resources and favorable regulatory environment. The country quickly rose to become the second-largest producer of Bitcoin in the world in 2021, trailing only China.
However, this rapid growth also led to some unexpected consequences. The country’s energy infrastructure needed to be equipped to handle the massive surge in demand from Bitcoin miners. As a result, the country began to experience frequent power outages and electricity rationing. The situation reached a critical point in early 2022 when the Kazakh government imposed a nationwide power rationing program. The government said the measure was necessary to prevent the country’s energy infrastructure from collapsing.
Bitcoin Mining in Kazakhstan
Bitcoin mining is an energy-intensive process that requires massive amounts of electricity to power the computers that perform complex calculations to generate new bitcoins. In Kazakhstan, Bitcoin miners were drawn to the country’s abundant natural resources, including coal and natural gas, which could be used to generate cheap electricity.
In fact, just in 2021, Bitcoin mining capacity exploded from 500 MW in January to a peak of 1,500 MW in October. Its share of the global hashrate surged from 6% to 18%. “Kazakhstan had suddenly become a Bitcoin mining superpower,” a May 2 report from Hashrate Index added.
However, the sudden influx of Bitcoin mining operations strained the country’s energy grid. Many operations were located in remote areas not connected to the primary power grid. These operations relied on their generators to power their mining rigs, which placed even more strain on the country’s energy resources.
As a result, the country’s share of the global hashrate plummeted from a peak of 18% in October 2021 to only 4% in May 2023. Meanwhile, the mining capacity stood at 400MW, depicting a 73.33% drop, as shown in the graph above.
The government tried alleviating the energy grid’s strain by taxing Bitcoin mining operations. However, this move met with resistance from the industry, which argued that the tax would make it difficult for them to compete with other countries.
Understanding the Rise
Kazakhstan’s booming Bitcoin mining industry in 2020-2021 was fueled by several factors that created a perfect storm for the industry to thrive.
Firstly, Kazakhstan has abundant natural resources, including coal and natural gas, which can be used to generate cheap electricity. This was a major draw for miners, as mining Bitcoin is an energy-intensive process that requires massive amounts of electricity.
Notably, the Kazakh government caps electricity prices at between $0.02 and $0.03 per kWh. These price caps gave Kazakh miners access to globally competitive electricity prices.
Secondly, there was a massive demand for hosting services from Bitcoin mining companies as the industry grew globally. Kazakhstan had a favorable geographic location, with its proximity to China and Europe making it an attractive site for hosting. Therefore, the region witnessed a vast capital inflow from Western miners. Mainly looking for quick and cheap machine deployments during a bull market.
China Ban Plays a Part
Thirdly, access to cheap Chinese mining machines also played a role in the growth of the industry in Kazakhstan. China has been a dominant player in the global Bitcoin mining industry.
However, the ban ended such operations as miners’ exodus began to other regions. Many of the machines used in Kazakhstan were imported from China at a lower cost than other countries. In addition, unable to sell to the Chinese market anymore, the big rig manufacturers, particularly Canaan, started targeting the Kazakh market more aggressively.
Fourthly, Kazakhstan had a relatively loose regulatory environment and tax breaks for the industry, which made it an attractive location for Bitcoin miners. The government was keen to attract investment and create new jobs, and the bitcoin mining industry was seen as a way to achieve these goals.
These factors combined create the perfect breeding ground for the industry. However, the industry’s rapid growth also led to unforeseen consequences.
From Highs to Massive Lows
The situation in Kazakhstan highlights the challenges that arise when a country becomes too dependent on a single industry. In this case, the rapid growth of the Bitcoin mining industry led to an over-reliance on energy resources and a failure to adequately invest in the country’s energy infrastructure.
As a result, Kazakhstan’s Soviet-era electricity system had difficulties accommodating the sudden 1.5 GW demand growth from miners. Due to the sheer load, southern parts of the region suffered blackouts.
Additionally, regulatory tussles with the government led to hiccups in the operation. Kazakh grid operator KEGOC started cutting the provision of electricity to Bitcoin miners in the southern part of the country. Things went from bad to worse amid the power rationing program imposed by the government. This had a huge impact on the mining industry. Many operations were forced to shut down or reduce their output. It all led to a drop in the country’s global ranking for Bitcoin production.
Moreover, the government implemented a set of rules and regulations to centralize or control the operations. In 2019, the government announced that Bitcoin miners would be subject to a tax on their profits, calculated based on the amount of electricity used to mine bitcoin.
Recently, the government announced plans to introduce new crypto regulations to curb tax fraud and unlawful business operations. Kazakh President Kassym-Jomart Tokayev signed into law a draft bill that allows miners to tap into the national grid only when there’s a surplus. The country will distribute this surplus based on a bidding process, but only to licensed miners. This law came into effect on April 1, 2023.
Where Do Things Stand?
To reduce the possibility of tax evasion, crypto miners in Kazakhstan will be forced to sell at least 75% of their revenue via registered crypto exchanges. This rule, which aims to collect “information on the income of digital miners and digital mining pools for tax purposes,” will be effective from January 1, 2024, to January 1, 2025.
The Kazakh Bitcoin mining industry is at a crossroads following the latest regulation. Either the law will provide the stable regulatory environment needed for the industry to grow sustainably, or its stringent rules will euthanize what is left of the industry.
What is certain is that Kazakhstan has a power shortage that must be solved before the country’s Bitcoin mining industry can return to its former gigawatt glory.
Jaran Mellerud, a leading researcher at Hashrate Index, opines:
“The only way I see the Bitcoin mining industry in Kazakhstan substantially growing in the coming years is if miners develop their own generation capacity. This can be from various sources, but the biggest potential is in associated gas, wind, and solar.”
The experience of Kazakhstan should serve as a cautionary tale for other countries considering entering the Bitcoin mining industry. While the potential rewards can be great, severe risks are also involved. Governments must weigh the benefits and risks of allowing Bitcoin mining in their countries and ensure they have the infrastructure to handle the industry’s demands.
In addition to the country’s energy grid strain, Bitcoin mining has environmental implications. The process of generating new bitcoins requires vast amounts of energy, which contributes to climate change. This has led some countries, such as China, to crack down on Bitcoin mining operations to reduce their carbon footprint.
In response to the power rationing program in Kazakhstan, some Bitcoin mining operations have started to explore alternative energy sources. For example, some mining operations use solar power to generate electricity. However, this shift to renewable energy sources is still in its early stages and is not widespread.
Central Bank Digital Currencies (CBDCs) continue to gain exposure as countries conduct trials. Japan’s government has alluded publicly to the formation of a panel to assess the launch of a digital yen.
Japan’s pending launch of a digital yen is essential in the global race toward adoption of CBDCs. The move could have several benefits for the country, including reduced cash usage, greater financial inclusion, and a boost to the economy. However, several challenges are associated with launching a digital yen, including the impact on the banking sector and privacy concerns. Other countries will closely watch the success of the pilot program.
Understanding the CBDC
Japan rolls out its pilot program with other countries already far ahead. China has already launched its digital currency, the digital yuan, and is piloting it in several cities nationwide.
The Bank of Japan, the nation’s central bank, has done experiments on the key functions of CBDCs, such as issuance, distribution, and redemption, as well as the feasibility of their use in payments and settlements. The pilot program, initiated last month, will last a year, and will involve private companies.
Japan’s Finance Ministry has announced the formation of an expert panel to explore the feasibility of a digital yen. The board will include academics, economists, a lawyer, and a consumer group representative, who will meet regularly and compile a report by the end of this year.
Based on the results, the bank will decide whether to launch a digital currency by 2026. However, the leaders aren’t sure yet, per an April 14 Reuters report.
“We understand the BOJ’s study is making a steady headway,” a finance ministry official told Reuters. “However, we have not at all decided on whether Japan will issue a CBDC.”
The Bank of Japan has been exploring the possibility of a digital yen for some time now and has set up a research team to study the issue. Proof of concept tests have been underway since 2021, and the central bank published a CBDC paper in November 2020.
The bank believed the digital yen could enhance the convenience of payments, reduce costs, and increase financial inclusion. Even maintain the stability of the country’s financial system in the face of changes in the payment and settlement systems.
The move by Japan to launch a digital yen comes as many countries worldwide are exploring the possibility of CBDCs. The European Union, for example, is working on a digital euro, while the United States is studying the feasibility of a digital dollar. China, however, is the front-runner in the race, having already conducted pilot programs for its digital yuan.
The digital yuan is piloted in several Chinese cities, including Shenzhen, Suzhou, and Chengdu, and is being used for various purposes, including retail payments and government services. The pilot programs have been successful so far, and China plans to expand the use of the digital yuan to more cities.
What Are the Advantages?
Japan’s launch of a digital yen could benefit the country. One of the blessings could be the reduction of cash usage. Japan is known for its heavy use of cash. A digital yen could help reduce the amount of physical money in circulation, making it easier to combat money laundering and other illegal activities.
A digital yen could also help to increase financial inclusion in Japan. The country has a large elderly population, many of whom do not use digital payment methods. A digital yen could make it easier for these people to make payments and engage in other financial transactions.
Finally, a digital yen could boost Japan’s economy. The country has been struggling with low economic growth for many years. A digital yen could help stimulate the economy by increasing the efficiency of payments and easing transaction costs.
Challenges to Consider
However, serious challenges are also associated with launching a digital yen. One of the biggest is the potential impact on the banking sector. A digital yen could reduce the demand for bank deposits, which could, in turn, hurt banks’ profitability. This could lead to a contraction in the sector, negatively affecting the economy.
One of the main concerns about CBDCs is that they could lead to the erosion of privacy. CBDCs are digital currencies issued and backed by central banks, and as such, can be tracked and monitored more easily than cash transactions. This means that CBDCs could give governments and financial institutions unprecedented access to people’s financial data and activities.
Additionally, CBDCs might be used to implement negative interest rates or other forms of financial repression, further eroding privacy and individual autonomy. There is also the risk of cyberattacks and data breaches, which could expose sensitive financial data to bad actors.
To address these concerns, it will be necessary for central banks and governments to prioritize privacy and security in the design and rollout of CBDCs. This could involve strong encryption and security protocols and limiting the collection and use of personal data. It may also be necessary to establish legal frameworks that protect individuals’ privacy rights and prevent the misuse of CBDC data.
The Bank of Japan must address these concerns to gain public support for a digital yen.
A Tale of Two CBDCs
China is reportedly way ahead of the game on CBDCs. But China and Japan have profound political, social, economic, and cultural differences. Many have voiced concerns about the erosion of privacy that CBDCs may entail.
Japan has been exploring the possibility for several years, but has yet to announce concrete plans for its implementation. However, it is likely that Japan will not simply follow the lead of China, the United States, and the European Union but will instead pursue its path.
One factor influencing Japan’s approach to CBDCs is its unique economic and financial landscape. Japan’s rapidly aging population and shrinking workforce have put pressure on its financial system and raised concerns about its ability to maintain economic growth. In addition, Japan is a world leader in cash usage, with many individuals and businesses still preferring physical currency.
These factors suggest that Japan may take a cautious and deliberate approach to CBDCs, focusing on addressing its specific economic and financial challenges rather than simply following the lead of other countries. For example, Japan may explore using CBDCs to promote financial inclusion and support its aging population or address deflation and spur economic growth.
At the same time, Japan is an essential player in the global financial system and has close ties with other major economies, including China, the United States, and the European Union. Japan may therefore look to collaborate with these countries on developing and using CBDCs, while also pursuing its own approach.
Japan Promotes Innovation
Overall, while time will tell how Japan approaches CBDCs, the country will likely seek to balance its own specific needs and priorities with the broader trends and developments in the global financial system.
But Japan has promoted innovation. For instance, integrating non-fungible tokens (NFTs) to boost its economy. Even giving the green light to exchanges such as Binance to set up shop despite a troubled past in the region.
The Securities and Exchange Commission (SEC) continues to regulate the crypto space with increased vigilance. As cryptocurrencies grow in popularity, does the SEC successfully balance privacy and respect for innovation with the need to spot risks to investors?
Over the past few years, the SEC has tightened its regulatory oversight of cryptocurrency private funds. Admittedly, the SEC is responsible for regulating securities and investments in the United States. Private funds, such as hedge funds and private equity funds, are often exempt from many regulations that apply to publicly traded securities. However, private funds that invest in cryptocurrencies may still be subject to SEC oversight.
Concerns Over Private Funds
One of the concerns that the SEC has with cryptocurrency private funds is the potential for fraud and abuse. Cryptocurrencies are largely unregulated, which poses a risk that investors may be misled or defrauded.
Private funds investing in cryptocurrencies may be particularly vulnerable to these risks, as they often operate less transparently than publicly traded securities.
The SEC has taken several steps to ramp up its oversight of cryptocurrency private funds to address these issues. One of the ways that the SEC has done this is by requiring private funds that invest in cryptocurrencies to register. This means giving the SEC detailed information about the fund’s investment strategy, management, and performance.
In addition to registration, the SEC has also stepped up its enforcement efforts against cryptocurrency private funds that flout securities laws. This includes bringing civil actions against funds that fail to disclose material information to investors or engage in fraud. The SEC has also issued warning letters to cryptocurrency private funds that may violate securities laws.
Another area of concern for the SEC is the custody of cryptocurrencies. Because cryptocurrencies are digital assets, they are often held in online wallets or other digital storage solutions. These storage solutions may be vulnerable to hacking or other security breaches, which could result in the loss of investors’ assets.
Action Plan From the SEC
To address this concern, the SEC has issued guidance on confiscating cryptocurrencies. This guidance requires private funds that invest in cryptocurrencies to take reasonable steps to ensure the safekeeping of investors’ assets. This includes implementing cybersecurity measures to prevent hacking and other security breaches.
Over the years, the cohort has been on the regulatory radar. In fact, in 2018, the SEC examined as many as 100 hedge funds focused on crypto, according to a recent Wall Street Journal story. Fast forward to 2023, and the SEC publishes another set of amendments to raise transparency requirements for private and public securities.
Here, the SEC, on May 3, announced changes to Form PF, which registered private funds prepare and submit to keep the Financial Stability Oversight Council (FSOC) apprised of their operations and the general health and stability of the financial market.
Hedge funds, a category that includes crypto investing and trading platforms, must now file Form PF “upon the occurrence of certain reporting events that could indicate significant stress at a fund or investor harm.” These include extraordinary investment losses, margin and default events, and “events associated with withdrawals and redemptions,” among other triggers.
Notably, businesses catering to these private institutions have grown significantly. This is evident in the table below. It charts not just crypto-related funds but all varieties.
“Private funds today are ever more interconnected with our broader capital markets,” states SEC Chair Gary Gensler. Adding, they have nearly tripled in size in the last decade.
“This makes visibility into these funds ever more important. Today’s amendments to Form PF will enhance visibility into private funds and help protect investors and promote financial stability.”
What Is Form PF?
Form PF is a regulatory filing required by the SEC for certain private funds, including hedge funds and private equity funds. The filing intended to provide the SEC with information about the funds’ investment strategies, risk profiles, and other vital characteristics.
Form PF came into play in response to the 2008 financial crisis, highlighting the need for greater transparency and oversight of the financial system. The requirement applies to private funds that meet certain thresholds, such as funds with at least $150 million in assets under management (AUM) and funds that rely on certain exemptions from registration under the Investment Advisers Act.
Form PF aims to help the SEC better grasp the risks posed by private funds and inform its oversight of these funds. The information gathered via Form PF includes details about funds’ investment strategies, including the types of assets they invest, their leverage ratios, and their exposure to various markets.
In addition, Form PF requires private funds to offer information about their counterparties, including their prime brokers and other service providers. This is to help the SEC spot potential systemic risks and ensure that these counterparties adequately manage their own risks.
In theory, the information set down on Form PF is confidential and used only by the SEC. However, if necessary, the SEC may share the information with other regulatory or law enforcement agencies. A serious breach of privacy.
Changes for Hedge Funds and Private Equity
Hence, the agency has adopted a few critical changes. It will ask or, rather, force hedge funds with a minimum of $1.5 billion in AUM and private equity players to report “trigger events.” Such disclosures are required within 72 hours for the former. Also, quarterly or within 60 days of the fiscal quarter end for the latter.
On the public side, amendments related to the modernization of disclosure requirements for repurchasing an issuer’s equity securities —commonly known as “clawbacks”—will require issuers to disclose daily quantitative information. Notably, in 2021, buybacks amounted to nearly $950 billion and reportedly reached more than $1.25 trillion in 2022.
Keeping that in mind, SEC believes that such changes “will increase the transparency and integrity of this significant means by which issuers transact in their securities.”
Not everyone sees eye to eye with the regulators. Managed Funds Association (MFA), a US hedge fund trade group, asserts that the discussed amendments would pile on the pressure.
MFA President and CEO Bryan Corbett told BeInCrypto:
“We appreciate that the SEC has incorporated some of our suggestions, but we are concerned this final rule has the potential to exacerbate stress on funds, harm investors, and increase market volatility without commensurate benefit. It is disappointing that the SEC didn’t move both Form PF rules together to help reduce the implementation burden on managers.”
Questioning the Motive
All these motions could be the repercussions of past events that did catastrophic damage. It is hard to say whether the SEC’s increased regulatory focus on private and hedge funds is, precisely, a response to the implosion of FTX and its hedge fund Alameda. Or the rush for redemptions that some exchanges struggle to meet.
While these events may have contributed to the SEC’s regulatory priorities, they are likely only a part of a broader trend toward greater financial industry oversight. But private funds will operate less freely. Expect much more intensive regulatory oversight as a direct consequence of the new reporting requirement.
Whether the increased regulatory oversight of private and hedge funds is a measured and proportionate response is a matter of debate. Private and hedge funds operate in markets that are often less regulated and transparent than other types of investments. As a result, there is a more significant potential for fraud, abuse, and different types of misconduct.
In this context, the increased regulatory oversight of private and hedge funds is reasonable. Even a proportionate response to these risks.
In addition, the reporting requirements mean that private and hedge funds must comply with rules, including Form PF. Even provide regulators with important information about the funds’ investment strategies, risk profiles, and other vital characteristics.
This information can identify potential risks and inform regulatory oversight of these funds. In this sense, the increased regulatory oversight of private and hedge funds is a way to protect investors and the broader financial system.
On the other hand, critics argue that the tougher regulatory oversight of private and hedge funds is excessive and unnecessary. They say that private and hedge funds are essential to the financial markets. Increased regulation will stifle innovation and growth in these markets.
In addition, the reporting requirements imposed on private and hedge funds could be more manageable. If the funds had a bit more direct input into their drafting. As things stand, Form PF may discourage investment in these funds.
As more Ethereum (ETH) gets staked, there are growing concerns In the community that in-loss stakers could induce price volatility for the second-largest crypto network.
The Ethereum Merge upgrade was one of the most significant events that have occurred in the crypto industry. The upgrade set out to address critical Ethereum network issues such as scalability, security, and high fees.
It also introduced several new features, such as staking and sharding, enabling the network to process more transactions per second.
Benefits of Ethereum Shift to Proof of Stake
The Ethereum Merge upgrade involved transitioning from a proof of work (PoW) consensus algorithm to a proof of stake (PoS). This transition was implemented in several phases, with the first phase, known as the Beacon Chain, launched in December 2020. The Beacon Chain was essentially a new blockchain that ran parallel to the primary Ethereum blockchain at the time and was responsible for managing the PoS consensus algorithm.
One of the main benefits of the PoS consensus algorithm is that it requires validators to stake a certain amount of ETH to participate in the consensus process. Validators are rewarded ETH for verifying transactions and can be penalized (referred to as slashing) for performing invalid or malicious functions.
Ethereum’s Shapella (Shanghai) upgrade was successfully implemented last month. Shapella enabled the withdrawal of staked ETH and effectively finalized the network’s years-long transition to proof of stake. There are numerous ways in which validators can unstake, though the two main types of unstaking include partial and complete withdrawals.
Zooming in On ETH Stakers
While the PoS consensus algorithm has several benefits, it poses some risks for stakers. One of the main risks is that the value of the staked ETH can decline, leaving stakers underwater in their position.
ETH has fallen significantly since reaching an all-time high of over $4,800 in November 2021. It’s now trading back around the $1,860 mark at the time of writing.
Regardless of the price decline, ETH holders continue to support the network. This is evident given the notable increase in ETH staked since the Shapella upgrade, also known as Shanghai. In the last 24 hours, net deposits reached 104,682 ETH staked on Ethereum’s Beacon Chain.
The ETH staked through principal deposits accounts for 93.82% of 18.93 million in locked ETH. Here, staking activity overpowered withdrawals by a significant margin. But, the decline in price action and increase in staking has raised some concerns among experts. Loss-making ETH stakers could even pose a threat, according to analysts at Delphi Digital, a famed crypto research platform.
Looking at the specifics, the team shed some light on ‘underwater’ ETH stakers. Over 70% of stakers are down on their ETH positions in USD terms since staking. In fact, most ETH staking occurred between $1,600 and $3,500, while approximately 830,000 ETH was staked above $4,000.
In general, April witnessed the most significant amount of ETH staked in a single month.
As a matter of fact, it won’t be the first time ETH staking was the center of discussion. In the past, privacy concerns and centralization were two key issues.
What Could Happen Now?
The researchers considered both sides of the coin in their analysis. Talking about a downturn, a gradual but constant flow of ETH out of the network from solo stakers would not be out of the question. Furthermore, if the ETH price drops further, ‘we would see more price-sensitive stakers withdraw their stake and sell their ETH.’
The Delphi report noted,
“One would expect a sharp price drop in ETH to cause a decent chunk of ETH to unstake. It’s human nature to panic at moments like that.”
On the other hand, some could note the ‘limits on network staking withdrawals and used that as fuel for a mid-term bullish thesis.’ Overall, this price decline has had a significant impact on stakers. For many stakers, this means they are now underwater in their position and may have to wait several months or even years for the market to recover.
Some validators may have withdrawn their staked ETH to cut their losses, while others may not participate in the network. This decline in participation could weaken the network’s security as a result of a reduced validator count.
Optimism in The End
Despite these challenges, there are still reasons for optimism about the Ethereum Merge upgrade. It has addressed some of the significant issues that have plagued the Ethereum network, such as scalability, security, and high fees. The introduction of sharding may enable the network to process a much larger number of transactions per second. This could potentially help alleviate the issue of high fees.
Moreover, the Ethereum community is known for its resilience and creativity. Many community members are working on new projects and applications that could help drive the adoption of the network and increase the value of ETH. For example, several projects are exploring the use of Ethereum for decentralized finance (DeFi) applications, which could help to drive demand for ETH.
Artificial intelligence now has the potential to convert ‘non-invasive’ thoughts into texts. According to the latest report, researchers are leading the way toward achieving this milestone.
Artificial intelligence (AI) is increasingly used to translate brain activity into a continuous text stream. This has the potential to revolutionize the field of communication for those with severe neurological conditions. AI has great potential in interpreting brain activity, particularly in the context of neuroimaging techniques.
Tapping New Opportunities With AI
In the latest development, an AI-based semantic decoder showed innovative ways to translate brain activities into a continuous array of texts. For the very first time, this breakthrough would allow or convert ‘non-invasive’ thoughts into texts. This could significantly aid those struggling to communicate following a stroke or motor neuron disease.
Interpreting brain activity requires sophisticated data analysis techniques to extract meaningful information from complex and noisy data. AI algorithms can help to automate and streamline this process. This allows researchers to make more accurate and reliable inferences about brain function.
Herein, the decoder could accurately reconstruct speech while respondents listened to or imagined a story. Indeed a massive leap in innovation compared to past language decoding systems that incorporated surgical implants.
Renowned scientists have supported the latest development as it overcame the major obstacle. Frontrunning the research is Dr. Alexander Huth, a University of Texas-based neuroscientist added:
“For a non-invasive method, this is a real leap forward compared to what’s been done before, which is typically single words or short sentences.”
AI Overcoming Setbacks
Functional magnetic resonance imaging (fMRI) measures changes in blood flow to different areas of the brain, which can be used to infer neural activity. However, this process is relatively slow compared to the actual firing of neurons in the brain. The time resolution of fMRI is typically on the order of seconds, meaning it cannot capture rapid changes in brain activity. This makes it challenging to analyze brain activity in response “to natural speech because it gives a ‘mishmash of information’ spread over a few seconds,” according to the article from The Guardian.
The advent of large language models like OpenAI’s ChatGPT has been a significant development in artificial intelligence. These models are trained on vast amounts of text data, enabling them to generate human-like responses to a wide range of inputs. In this case, it allowed researchers to look at the semantic meaning of speech. That is, to understand the neuronal activity patterns corresponding to a string of words.
Following the breakthrough, the concerned group aims to bolster the utility of using the technique in other, more portable brain-imaging systems, such as functional near-infrared spectroscopy (fNIRS).
But again, security fears may arise following the rise in the latest innovation.
Regulatory developments affecting cryptocurrencies are gathering pace. Including the European Union, where MiCA has received a favorable vote, and the United Kingdom. But as the former speeds ahead, can the latter keep up?
As of January 1, 2021, the United Kingdom has officially left the European Union. The country is now free to set its own rules and regulations, including those related to cryptocurrencies. This means that the UK government can draft laws and regulations around using crypto. And also decide how to approach issues such as taxation, money laundering, and consumer protection. Here we compare the UK’s efforts to those of its former bloc.
Playing the Crypto Game
In truth, the UK had already taken steps to regulate crypto even before leaving the EU. In 2019, the Financial Conduct Authority (FCA) published key guidance. It clarified that cryptocurrencies could be classified as “security tokens,” “e-money tokens,” or “unregulated tokens,” depending on their characteristics and intended use.
The UK is sure to continue developing its regulatory framework for crypto. This may involve further guidance from the FCA or new legislation. It’s also possible that the UK could work with other countries to develop international standards. Will the nation struggle to catch up to the EU in regulating cryptos, or overtake the EU altogether?
New Crypto Regime
Last month, the European Union (EU) voted to develop a new framework for crypto, the Markets in Crypto-assets (MiCA) regulation. With 517 in favor and 38 against, this legislation aims to provide a full set of rules and regulations for digital assets. To promote investor protection, market integrity, and financial stability.
The MiCA framework will apply to all issuers, holders, and service providers involved in crypto. Including exchanges, wallet providers, and token issuers. The framework will require these entities to comply with various disclosure, governance, capital requirements, and customer protection rules. It will also establish a licensing regime for service providers overseen by national authorities.
The European Securities and Markets Authority, or ESMA, the executive branch of the EU, leads the MiCA regulation. Once in operation, all crypto service providers operating in the EU must comply with its rules. Or face penalties.
MiCA is the most detailed legal scheme for digital assets to date. The official blessing paves the way for MiCA to become law in 2024. Putting the EU a step ahead of its former member, the UK. Whereas regulatory savvy in the US lags behind.
Crypto Regulations in the UK
The UK needs to catch up to the EU in rolling out its crypto asset regulatory framework. But now that the UK has left the EU, it is free to devise its own rules for crypto. Separate from the MiCA system set up by the EU.
The UK government has said that it is committed to an effective legal framework. Aiming to protect consumers, promote innovation, and stop financial crime.
In a recent interview, London city minister and Economic Secretary to the Treasury Andrew Griffith predicted that the UK’s regulatory framework for cryptocurrencies would roll out within the next 12 months. This suggests that the UK government is busily developing its regulatory approach to digital assets. And is keen to do so in a timely manner.
Griffith takes an aggressive stand on the UK’s “high-quality” yet “progressive” financial laws. A Financial News report says he expects “broader” rules than the EU will enforce. Also, he expects that a central bank digital currency (CBDC) will come out. And that the UK will take the lead in its development and rollout. Although, given the complex technology and privacy issues, “it’s not going to happen overnight.”
The Financial Services and Markets Bill (FSMB) is expected to become law in the spring. It will introduce new powers for HM Treasury (HMT) to bring crypto assets within the UK financial services’ domain.
On February 1, 2023, HMT put out its brief on a legal regime for crypto assets. (Other than fiat-referenced stablecoins.) This latest brief builds on previous discussions and talks. Including a January 2021 paper that focused on stablecoins.
It also adds to other proposals in the FSMB to introduce a regime that will govern “digital settlement assets.” These are defined as fiat-backed stablecoins used for payments. Furthermore, leaders like Binance in the domain have openly hailed the crypto regulation. The report added:
“It’s our strong belief that a stable regulatory environment helps to support innovation and is essential to establishing trust in the industry, as well as long-term growth.”
The UK Treasury has said it wants to make the country a crypto hub. New rules are needed to restore confidence after a tough 2022. The country has a growing need as more people become curious about the niche asset class. And, again, a plan for the space can help remove bad actors.
London-based lobby group CryptoUK, in a discussion with BeInCrypto, stated:
“With the adoption of MiCA, the EU has solidified its position as a regulatory leader for years to come. While not flawless, MiCA is an extremely relevant regulatory stack that puts significant pressure on the UK and the US in terms of delivering operational clarity for crypto.”
Spot the Difference
It’s still too early to say precisely how the UK’s regulatory framework for crypto will differ from the EU’s MiCA, as the UK still needs to release full proposals. However, there are a few areas where the UK may choose to take a different path.
For example, the UK may be more friendly towards the crypto industry to promote innovation and attract investment. This could mean that the UK takes a more flexible licensing and regulation stance or offers crypto companies tax lures.
On the other hand, the UK may also choose to be tougher in some areas. Such as anti-money laundering (AML) and counter-terrorist financing (CTF) laws.
Legal and industry experts have offered a range of opinions on how the UK’s plan for crypto is likely to differ from MiCA.
Lawyers at the law firm Norton Rose Fulbright firm have shared an analysis with BeInCrypto. Their note provides a comparison of some of the critical areas of MiCA and the HMT Proposals. It applies to players in the EU and UK crypto asset markets. Including service providers, issuers, big and small investors.
Some experts suggest that the UK take a more principles-based approach, focusing on outcomes rather than prescriptive rules. Others suggest that the UK may prioritize consumer protection and AML/CTF laws, given its leaders’ commitment to fighting financial crime.
Nonetheless, the head of the trade body CryptoUK, Ian Taylor, asserts that the bill “puts significant jurisdictional pressure” on Britain and the US to pass their frameworks.
“It is important to have minimum global regulatory standards for the crypto industry, and MiCA serves as a benchmark here.”
Overall, regulators are likely to strive for a balance between supporting innovation and protecting the public. The UK is not part of the EU. It will follow its own criteria. Its crypto framework will evolve based on the needs of the industry and the broader economy.
The Securities and Exchange Commission (SEC)has freely made use of the Wells Notice. But Coinbase’s vigorous response to a recent notice has prompted some investors to criticize the exchange for its actions in Ripple’s legal entanglements. Coinbase did not give Ripple the benefit of the doubt, they say, and now it vocallydefends itself against similar charges. Whatever one’s view of this matter, the question stands. Should companies and exchanges let people know they are in the SEC’s crosshairs?
A Wells Notice can have dramatic reputational, legal, and financial repercussions for its target. For instance, Ripple suffered when Coinbase delisted XRP in January 2021 following Ripple’s receipt of a notice.
Fast forward to the present, and exchanges’ actions in regards to Wells Notices have drawn a range of speculations and concerns within the crypto community.
What a Wells Notice Means
A Wells Notice is a warning from the SEC that it intends to bring an enforcement action against a person or entity. It allows the recipient to respond to the SEC’s allegations before the enforcement action. The notice takes its name from John Wells, the SEC’s enforcement chief from 1972 to 1981.
Exchanges, as intermediaries in securities transactions, can receive Wells Notices in certain situations. For example, if an exchange is accused of facilitating manipulative trading or failing to enforce its own rules, the SEC may issue a Wells Notice. When the exchange receives it, a prompt response to the SEC is probably wise.
Clearly, a Wells Notice can have dramatic consequences for a firm’s reputation. But there is legal precedent holding that companies are not required to disclose the receipt of a Wells Notice.
Consider a 2012 ruling involving Goldman Sachs. The SEC had sent the company a Wells Notice related to an investigation into its mortgage-related securities. Goldman decided not to disclose the Wells Notice to its investors. Even the SEC did not pursue charges against the company.
Later, a shareholder lawsuit filed alleging that Goldman had failed to disclose the Wells Notice. Still, the court ultimately ruled in favor of the company. Finding that it had no legal obligation to inform others about the notice.
Repercussions of a Wells Notice
In theory, firms want to be transparent. But a Wells Notice can be a death knell for a company that has never been formally charged. Even one that is innocent of violating securities laws.
Receiving a Wells Notice can harm a company’s reputation, even when not charged with wrongdoing. The mere whisper of a pending SEC investigation can create negative publicity and FUD. It can affect a company’s stock price and investor confidence. In some cases, the mere receipt of a Wells Notice can be enough to lead to a loss of business. Or other negative consequences.
For example, the fintech firm Ripple faced repercussions when Coinbase delisted XRP in January 2021 following Ripple’s receipt of a notice. The delisting of XRP from Coinbase resulted directly from the Wells Notice Ripple received from the SEC in December 2020.
The notice alleged that XRP was a security and that Ripple had conducted an unregistered securities offering in violation of federal securities laws. This led to bad publicity for Ripple and XRP. Several other cryptocurrency exchanges and trading platforms followed Coinbase’s lead and delisted XRP.
The delisting had serious consequences for Ripple, as it reduced the liquidity and market value of XRP and made it more difficult for token holders to buy and sell it. In addition, the delisting raised questions about the legality and regulatory status of XRP and Ripple, which could have a long-term impact on the company’s and its token’s future.
However, delisting XRP does not necessarily mean that Ripple is guilty of the charges in the Wells Notice. The SEC has not decided whether XRP is a security or Ripple conducted an unregistered securities offering. Ripple has vigorously denied the allegations and has vowed to fight the SEC in court, and the case is ongoing.
Coinbase Faces Censures From XRP Holders
Ripple and its supporters have continued to argue that XRP is not a security. They say Ripple did not conduct an illegal securities offering. They have also criticized Coinbase and other exchanges for delisting XRP without a final determination from the SEC.
Their argument still holds in 2023, with Coinbase in receipt of a notice from the American regulators. Coinbase has hit back hard. The exchange published a post saying that it had asked the SEC to publish clarifications about rules, only to be served with a legal notice. Triggered in relation “to an undefined portion of our listed digital assets,” Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
In their response, Coinbase executives called for an open dialogue rather than litigation.
Coinbase CEO Brian Armstrong concluded that the company would defend itself and “stand up for the rule of law for everyone.” So, why did Coinbase move so swiftly against Ripple in 2021? Traders of Ripple’s token XRP are irritated at Coinbase for not re-listing the security. Given Coinbase’s heated response to the SEC over its Wells Notice.
Coinbase officials maintain that they complied with securities laws. This is precisely the point of contention in the XRP vs. SEC lawsuit. It was only because of the lawsuit that Coinbase said it was suspending the XRP trading pairs on its platform. Hence, when the exchange argues it did not list securities, some in turn insist that Coinbase should reinstate XRP.
Some experts vocally support Coinbase in its feud with the SEC. According to lawyer and digital assets enthusiast Bill Morgan, the Coinbase cryptocurrency exchange relied on the views of some senior staff of the SEC to justify its delisting of XRP as Ether and Bitcoin continue to trade on its platform.
Morgan has referenced the importance of Bitcoin and Ether trading on Coinbase as the reason the exchange would continue to defend its position. According to the lawyer, Coinbase’s draft registration statement showed that 65% of the trading on its platform in the six months up to June 2020 was Ethereum and Bitcoin.
Morgan believes that even if there was a proceeding in which the SEC named Bitcoin and Ethereum as securities, Coinbase would cease trading both digital assets only if wrecked financially. Hence, XRP was easier to sacrifice in the heat of the moment.
Focusing on SEC’s Action
While a Wells Notice is not a formal charge, it is severe. It means the SEC is at least considering an enforcement action. The purpose of a Wells Notice is to provide the recipient with an opportunity to respond beforehand. And, to present its case before the SEC takes any formal action. This is consistent with due process and the principles of fairness.
Plus, the SEC’s enforcement actions are subject to judicial review. And individuals or companies have the right to challenge the actions in court. Therefore, the SEC’s use of Wells Notices is not an extrajudicial process. Individuals or companies subject to enforcement action are not deprived of due process.
But the question of whether a company should disclose a Wells Notice is complex. Ultimately, whether to disclose a Wells Notice requires careful consideration of various factors. Including legal requirements, the potential impact on the company’s reputation and business operations, and the potential benefits of proactive disclosure. Companies should work closely with legal counsel and other advisors to assess the risks and benefits of exposure.
Here are some general guidelines on how exchanges should respond to Wells Notices:
Review the allegations carefully: The first step an exchange should take upon receiving a Wells Notice is to review the allegations. The exchange should understand what the SEC is accusing it of. What evidence has the SEC to support its claims? This will help the exchange determine the appropriate response.
Seek legal counsel: Exchanges should seek the advice of experienced securities lawyers as soon as possible after receiving a Wells Notice. Legal counsel can help the exchange assess the strength of the SEC’s case and develop a strategy for responding to the charges.
Conduct an internal investigation: If the allegations in the Wells Notice involve conduct by the exchange or its employees, the exchange should conduct an internal investigation. And determine whether the charges have merit. The results can help formulate a response to the SEC.
Respond to the SEC: The exchange should respond to the Wells notice within the time frame specified in the notice. The response should address each of the SEC’s allegations and provide any evidence or arguments that support the exchange’s position. The answer should be thorough, well-reasoned, and supported by documentary evidence where possible.
Consider settlement: If the exchange believes the SEC’s allegations have merit, it may consider settling with the SEC rather than litigating the case. Settlement can be less expensive and less time-consuming than litigation, and it can also help the exchange avoid negative publicity.
Be prepared for litigation: If the exchange decides to contest the SEC’s allegations, be ready for a long and costly legal battle. The exchange should have a plan for responding to discovery requests, filing motions, and preparing for trial.
Communicate with stakeholders: Finally, the exchange should let its stakeholders. Including investors, members, and regulators, know about the Wells notice and its response. The exchange should be transparent about the allegations and its efforts to address them.
Different countries and regions are pursuing separate strategies to help drive the next crypto bull run. Herewith a list of the top five jurisdictions contributing to crypto’s growth.
Crypto regulations vary significantly by country, with some more open to the development of crypto than others. The impact of pro-crypto regulation on the global crypto market depends on several factors, including the specific regulatory measures adopted and the extent to which nations enforce them.
Nonetheless, pro-crypto regulation can provide stability and legitimacy to the market. This may lure more institutional investors and traditional financial institutions to enter the space. The added investment and adoption can help fuel a crypto bull run.
Sources of the Bull Run
As they eagerly the next crypto bull market, investors or crypto enthusiasts can’t know when it will kick off. But some believe they do know where it will originate.
Back in February, Gemini cryptocurrency exchange co-founder Cameron Winklevoss said that the next crypto bull market would come from the East. This was a reference to the fact that Asian countries have been embracing crypto, introducing sensible regulations that could result in record levels of institutional investment.
According to Chainalysis, Central and Southern Asia and Oceania (CSAO) was the third largest cryptocurrency market in its index for 2022. Citizens there benefited from $932 billion in cryptocurrency market growth from July 2021 to June 2022.
Keeping this in mind, here are five countries that could be drivers of the next bull market. Along with predictions as to when they could be passing pro-crypto regulations, and which cryptocurrencies will benefit.
United Arab Emirates (UAE)
The first country to watch is the United Arab Emirates or UAE. The UAE introduced pro-crypto regulations in 2018 when announcing its blockchain strategy in 2021. However, it wasn’t until early 2022 that the crypto industry started to migrate to Emirate cities like Dubai. That’s because the UAE announced that it would be introducing a federal license for so-called virtual asset service providers or VASPs. Including cryptocurrency exchanges.
This federal license effectively combined all the crypto licenses the country had created by that point. In the following months, there was no shortage of headlines about businesses such as international schools accepting crypto payments and government agencies dabbling in metaverses and NFTs.
The UAE Ministry of Economy set up a virtual headquarters in a custom metaverse by the end of 2022. The UAE became a home to over one and a half thousand crypto projects and companies.
Other Emirate cities, such as Abu Dhabi, announced multi-billion dollar crypto initiatives earlier this year to get in on the rush. The UAE Minister for foreign trade said that crypto would play a significant role in UAE trade. The UAE’s crypto adoption also seemed to cause a stir in other Gulf countries, such as Oman, which revealed that it would be looking to introduce crypto regulations in the coming months.
Concerns Around the “Grey” List
Now, as bullish as the UAE’s crypto adoption has been, one minor issue has stifled the realization of its potential. That is banking access.
According to UAE crypto regulation analysts, pro-crypto regulation has yet to make UAE banks more comfortable opening accounts for crypto clients. This could be because the Financial Action Task Force or FATF put the UAE on its grey list in March. Greylisted means it is harder to transact with the global banking system.
It’s not ideal for crypto projects and companies seeking to cater to international clients, and is a big part of why the UAE has taken steps to get itself off the FATF’s list. Such efforts include tightening regulations around privacy coins and demanding more information from crypto projects and companies.
These revamped crypto regulations should make UAE banks more comfortable servicing crypto clients and, with some luck, also be enough to get the UAE off the grey list.
If both outcomes occur, it may finally open the floodgates for crypto capital in the country. The only caveat is that regulations are a hurdle to crypto investing in the UAE. There continues to be uncertainty about which cryptos are allowed under Islamic Law. For context, gambling is forbidden in Islam; it’s safe to say that much crypto investing is no different from gambling.
That’s why it makes sense that the UAE is especially keen on the metaverse and NFTs. The digital property aspect of these two crypto niches makes them more palatable from an Islamic perspective. As such, metaverse and NFTs cryptos could see the most marked inflows from the UAE’s ongoing crypto adoption.
This ties into the second country to watch: Saudi Arabia. In contrast to the UAE, the Saudi government banned banks from processing crypto-related transactions in 2018. The government also declared that crypto trading was illegal, but there are reportedly no penalties for those who trade. The absence of punishment is probably why a significant number of Saudi citizens hold and trade crypto.
According to a survey by KuCoin in May 2022, around 14% of Saudi adults had held or traded crypto in the last six months. Another 17% were interested in crypto.
Now the apparent popularity of crypto in Saudi Arabia has given rise to so-called Halal-approved crypto products, which began making headlines late last year. Around this time, the Saudi Central Bank announced that it had hired a crypto expert to assist in the country’s crypto policy.
With the emergence of Saudi Arabia’s Mega City and its possible crypto adoption, Binance already has boots on the ground in the country. This is evidence that the kingdom is seriously considering pro-crypto regulations, probably because it wants to compete with the other Gulf countries.
Further evidence lies in the unexpected announcement from earlier this year that the Saudi government had partnered with the crypto project Sandbox for metaverse development. This underscores the appeal of the metaverse and NFT niches to countries with Islamic customs and laws.
Relations With America
Although it’s still too soon to say if Saudi Arabia will adopt crypto to the extent of the UAE, geopolitics pushes the oil kingdom in that direction. As some may have heard, Saudi Arabia’s relationship with the United States is getting weaker while its relationship with China is getting stronger. Saudi Arabia is reportedly considering pricing some of its oil sales to China in yuan.
This is a big deal because Saudi Arabia is expected to price all its oil in US dollars. Pricing even just a portion of its oil in yuan would weaken the US dollar, upsetting the United States. Here’s where things get very interesting. The Saudi Riyal is pegged to the US dollar at a rate of 3.75 SAR to 1 USD. This has been the case since 1986. if Saudi Arabia were to do something to upset America, such as sell its oil in foreign currencies, Washington could retaliate by restricting Saudi Arabia’s access to USD.
The Saudi government seems to be hyper-aware of the situation. Hence, the Saudi Central Bank is weighing the development of a central bank digital currency or CBDC. A digital Saudi Riyal could allow Saudi Arabia to eliminate its currency’s dependence on the US dollar.
Late last year, Iran, another Islamic country, allowed businesses to use crypto for trade. China recently brokered a peace deal between Saudi Arabia and Iran. Iran might use crypto for trade with Saudi Arabia, making Saudis more comfortable doing the same. If Saudi Arabia does start using crypto for trade, the Gulf countries would likely follow suit. That’s because the currencies of most Gulf countries are also pegged to the US dollar.
The third jurisdiction on the list is Hong Kong, which is part of China. This highlights the importance of Hong Kong’s crypto adoption. It foreshadows China doing the same. For reference, China banned crypto in 2018 and stamped out what was left of the industry in 2021. Hong Kong was initially seen as a safe haven for Chinese crypto companies and projects, but this changed after the not-so-subtle takeover of the administrative state following mass protests in 2019 and 2020.
In late 2020 Hong Kong banned retail crypto trading and cracked down on the crypto industry. In early 2022 Hong Kong started targeting stablecoins, as they could undermine a Hong Kong CBDC. The fact that the Hong Kong dollar is pegged to the US dollar suggests that Hong Kong could likewise be trying to escape US influence with a CBDC.
In mid-2022, Hong Kong officials noted that some NFTs require additional regulations. This suggests that the region may not be as open to the metaverse and NFT niches as the UAE and Saudi Arabia. This could have something to do with China’s strict control of social media and desire to maintain it.
Unlike the People’s Republic of China, officials here considered legalizing retail crypto trading and investing by the end of 2022. Hong Kong has committed to attracting over 1,000 crypto companies and projects over the next three years.
Earlier this year, Hong Kong officials specified that they wanted to restrict retail crypto investment to the largest and most liquid cryptocurrencies. This suggests that cryptos like BTC and ETH could be the biggest beneficiaries when retail crypto trading and investing become legal this summer.
Supporting the Cause
Not surprisingly, the Chinese government has signed off on Hong Kong’s crypto plans. This is an understatement, given that Chinese banks are reportedly trying to provide banking services to crypto companies and projects in Hong Kong despite crypto being illegal on the mainland. Not only that, but Hong Kong banks have also begun offering crypto-to-fiat conversions to their clients.
Arthur Hayes, the former CEO of crypto derivatives giant BitMEX, believes the next crypto bull run may start when China moves back into the market, and Hong Kong has a vital part to play in this process. However, there are caveats. Hong Kong officials appear averse to everything except crypto investing. Non-CBDC stable coins will be off-limits, and DeFi will be restricted too.
All the above provides a segue to the fourth jurisdiction to watch, Singapore. Now, Singapore seems to have a love-hate relationship with cryptocurrency. The city-state denied hundreds of crypto licenses, banned crypto-related advertising, and even shut down crypto ATMs early last year. On the flip side, however, KPMG found that crypto investments in the tiny nation had increased by more than 13x in 2021.
Singaporean banks started expanding their services to retail investors in early 2022 and multiple large crypto companies, including Circle and Coinbase, got crypto licenses. Moreover, Singaporean companies have been exploring crypto payments, and the government explored tokenizing assets on Smart contract cryptocurrencies. Yet, between these bullish headlines, there’s been no shortage of crackdowns on the crypto industry.
Most of these crackdowns came after the collapse of the crypto hedge fund Three Arrows Capital, or 3AC, based in Singapore. Given that failure perhaps was caused by the implosion of Terra’s UST, stablecoins were among the crypto niches Singaporean regulators targeted. They also floated the idea of restricting the participation of retail investors in crypto but seem to have opted to introduce revamped crypto regulations for everyone instead.
Regulators worked on streamlining the screening process for crypto projects and companies seeking to secure bank accounts in the country. Needless to say, banking access is the biggest issue for the crypto industry, so this initiative could be very bullish.
Now there are two problems crypto could encounter in Singapore. The first is that the country experienced direct financial damage when FTX went bankrupt. This is because Singapore’s wealth fund Temasek lost around $275 million when the exchange went down. This has made Singapore skeptical of cryptocurrency exchanges in general, causing issues for Binance and others.
On the other hand, Singapore has been working closely with the Federal Reserve on a CBDC. This suggests that the country is more geopolitically aligned with the United States and is not trying to escape American influence using a CBDC as other countries seem to be doing. Which would explain why Singaporean authorities scrutinize Binance, not FTX, and why the country continues to flip-flop between accepting and rejecting crypto.
For anyone still unaware, Binance has faced much scrutiny from US regulators as of late, as has the rest of the crypto industry. This means Singapore’s impact on the crypto market could go either way. It could be positive if the country decides to compete with its neighbors on crypto regulations, but very harmful if the country chooses to follow in the footsteps of the United States.
The last country to watch is a wild card: France. At a glance, France is becoming the most crypto-friendly country in Europe outside Switzerland and possibly the most crypto-friendly in the West.
Since President Emmanuel Macron’s re-election in April last year, an avalanche of pro-crypto news has come out of France. For starters, Binance secured a digital asset registration in the country last May. This was a big deal because Binance has faced much scrutiny elsewhere in Europe. Last September, one of France’s largest banks began offering crypto custody services to institutional investors and then secured the same digital asset registration as Binance to provide even more crypto services.
This came as US banks started facing scrutiny for doing the same. Earlier this year, Binance partnered with a French company to test crypto payments in the country.
French regulators also announced that they would be revamping and introducing better crypto regulations. This is noteworthy because the EU is working on its crypto rules, and France is a front-runner. As an added plus, USDC stablecoin issuer Circle chose France to host its European headquarters.
Across the Region
Considering that Circle knows crypto regulations everywhere and has the money to set up anywhere, choosing France confirms that the country is highly pro-crypto. France’s stance seems to be an extension of the EU’s sentiment and the continent’s attempts to keep up economic growth in the face of terrible obstacles.
But again, France has faced pressure from other countries in the EU. If it goes down this pro-crypto path, this could even result in punishments.
Still, if France continues to go against the grain, it could inspire other countries to do the same, and not just in Europe. French is one of the world’s most widely spoken languages. More importantly, it’s spoken in many African and Middle Eastern countries actively trying to escape the US Dollar. It would be easy for such countries to follow in France’s footsteps.
The rising electricity rates in the United States have increased Bitcoin mining costs. As the electricity demand grows and expenses increase, Bitcoin miners face higher operating costs, reducing their profit margins.
Electricity is a crucial factor in the process of Bitcoin mining, which is the process of verifying transactions and adding them to the blockchain. As the Bitcoin network grows, so does the demand for electricity to power the mining process. The rising electricity rates in the United States have contributed to the increasing Bitcoin mining costs, making it less profitable for miners.
Energy Usage Across the Globe
The cost of electricity is a leading expense for Bitcoin miners, as the mining process requires a vast amount of energy. The Bitcoin Energy Consumption Index estimates that the Bitcoin network consumes more energy than the entire country of the Philippines. The electricity consumption is primarily driven by the need to power the specialized computer equipment used in the mining process, which requires vast energy.
The cost of electricity varies markedly across different states in the United States, with some having substantially higher electricity rates than others. For example, in Hawaii, the average residential electricity rate is around 30 cents per kilowatt hour, more than double the national average of about 13 cents per kilowatt hour. In contrast, states such as Washington and Louisiana have some of the lowest rates in the country, with average rates of around 8 cents per kilowatt-hour.
The higher electricity rates in some states have made it less profitable for Bitcoin miners to operate there. This is because the higher electricity costs raise the overall mining cost, eating into miners’ profits. As a result, some miners have had to shut down their operations or relocate to areas with lower electricity rates to stay profitable.
Another factor contributing to the rising electricity rates is the surge in electricity demand. As the population grows and more people use electricity, the need increases, driving up the cost. This increased demand has been particularly evident in places such as California, where the population has proliferated, leading to a strain on the state’s power grid and causing rolling blackouts.
Questioning the Sustainability Approach
The rising electricity rates have also led to concerns about the environmental impact of Bitcoin mining. As the Bitcoin network’s energy consumption grows, so does the carbon footprint of the mining process. This has led to criticisms of Bitcoin mining as an environmentally unsustainable practice, with some calling for more sustainable mining practices or a shift to alternative cryptocurrencies that are less energy-intensive.
To address these concerns, some Bitcoin miners have explored alternative energy sources, such as solar and wind power. By using renewable energy sources, miners can reduce their carbon footprint and potentially lower their overall electricity costs in areas where renewable energy is cheaper than traditional sources. However, using renewable sources for Bitcoin mining is still rare, and most miners rely on conventional energy sources such as coal and natural gas.
In addition to the rising electricity rates, other factors drive the increasing Bitcoin mining costs. These include the cost of specialized computer equipment, the difficulty of the mining process, and the price of Bitcoin itself. As prices fluctuate, so does the profitability of mining, and miners must continually adapt to changing market conditions to stay profitable.
Where Things Stand
In 2023, the electricity rate continues to reach new highs, which doesn’t come as a surprise. Bitcoin miners require at least $17,000 to produce one BTC in the United States versus the $5,000 to 10,000 range a year ago. This is according to the Bitcoin mining data resource Hashrate Index and Luxor.
From January 2022 to January 2023, the commercial electricity tariff surged at an average of 10.71% per US state. This is higher than the average consumer price index surge of 6.40%.
In addition, a relatively poor performance from the most prominent digital asset last year led to miners taking heavy losses. Mainly due to the increase in operational costs and lower returns.
Although Q1 2023 did see a change in the scenario. Bitcoin hashrate has been trending upwards from 2022 lows. According to data from CoinWarz, the latest BTC hashrate is 382.16 EH/s. This year, it recorded a new high of 296.8 EH/s on May 1. Mining companies, too, recorded a surge in their stocks as the market tried to recover.
Best to Worst State to Mine Bitcoin
Compiling all the insights from above, different geographic regions in the US have differing outcomes.
New Mexico has relatively cheap electricity prices, making it one of the more affordable states for Bitcoin mining. Per the Hashrate index report, New Mexico emerged as the most reasonable and, in turn, more profitable state for Bitcoin miners in Q1 at $16,850 to mint one BTC.
On the other hand, Hawaii has some of the highest electricity prices in the United States due to its isolated location and reliance on imported oil for power generation. Thus, Hawaii was the most expensive at around $114,590.
Some states undertook steps to protect miners from censure around the energy usage critics have faced over the years. Nonetheless, mining operations have taken a greener path to offset carbon footprints. In fact, the World Economic Forum (WEF) praised Bitcoin mining as one of the avenues for reducing emissions.
Overall, miners have witnessed ups and downs during their journey to mine Bitcoin. Energy deflation, or a decrease in the cost of energy, could boost miners’ profitability in the short term by reducing one of the most significant costs of Bitcoin mining: electricity. If energy prices decline, miners can use the same amount of energy to mine more Bitcoin, increasing their profit margins.
However, it’s important to note that energy deflation could also lead to increased competition in the mining industry. Lower energy costs make it more affordable for more people to mine Bitcoin. This could increase the hash rate, making it more difficult and expensive for individual miners to compete.
Furthermore, energy prices can be volatile and subject to geopolitical and market factors. While energy deflation may benefit miners in the short term, it’s essential to consider the long-term sustainability and viability of Bitcoin mining operations in the face of potential energy cost fluctuations.
Terra’s Do Kwon reportedly had millions of dollars in a Swiss-based Sygnum bank account. US officials want to take action. But complex jurisdictional issues arise with involvement from the Securities and Exchange Commission (SEC).
Swiss banks have a reputation for being a haven for investors and their strict privacy laws. While Swiss banking secrecy laws have been relaxed recently, the country’s banks are still known for their discretion and confidentiality. However, this reputation has also made Swiss banks a popular destination for those seeking to hide their assets, including funds acquired through illegal activities.
Regulators and prosecutors have faced difficulties in dealing with Swiss banks due to the complex nature of their operations and the strict privacy laws that govern them. Swiss banks typically have multiple subsidiaries and affiliated companies in different jurisdictions, making it difficult to trace the movement of funds and identify the individuals behind them.
The bank in question in the Terra and Do Kwon affair is Swiss-based Sygnum Bank, which offers custody, trading, and lending services for cryptocurrencies and other digital assets. It is one of several banks that operate in the rapidly growing crypto finance industry. While it is true that the bank holds billions of dollars in crypto assets, the bank is subject to Swiss banking laws and regulations, as well as international laws regarding anti-money laundering (AML) and counter-terrorist financing (CTF).
The Crypto Connection
Regulators have recognized the unique challenges posed by crypto finance, including the difficulty of tracking the movement of funds and identifying the individuals behind them. However, there have been efforts to establish regulatory frameworks and guidelines for the industry and ensure that it does not abet financial crimes.
Seoul prosecutors suspect that Terraform Labs and its co-founder, Do Kwon, still possess a great deal of money. A Swiss bank account held some 130 billion won ($100 million). This comes after recent legal action against ten associates of Terraform Labs. Including co-founder Shin Hyun-Seong, also known as Daniel Shin. On the other hand, Do Kwon, now under arrest over forged documents in Montenegro, was the alleged orchestrator in the $60 billion implosion of the Terra stablecoin and the collapse of its LUNA token.
South Korean prosecutors and the SEC see a Swiss bank account connection. According to a local journalist, following the February 16 indictment of Terraform Labs, Do Kwon and his associates allegedly transferred 10,000 bitcoin (BTC) to Sygnum Bank.
The Seoul Southern District Prosecutor’s Office has been closely monitoring the movement of Terra-linked Bitcoin and revealed this information during a press conference discussing the indictment.
However, lawyers representing Do Kwon argued that the SEC violated the law with its actions against the company and the bank. And asserted that American regulators acted outside their jurisdiction in the Terra case.
Identifying the Problems
When the SEC takes action against a bank registered in a foreign country. Several jurisdictional issues may arise, as in Terra’s case. These issues can complicate the legal process and make it difficult for the SEC to pursue its actions.
One of the jurisdictional issues is which country has authority over the bank in question. This can be particularly tricky if the bank operates in multiple countries or its activities cross international borders. In such cases, the SEC may need to work with other regulatory bodies, such as those in the bank’s home country, to coordinate its actions and ensure that its efforts do not conflict with those of other regulators.
A related issue is determining which laws and regulations govern the bank’s activities. This can be highly complicated if the bank is subject to different regulatory regimes in other countries. For example, a bank registered in a foreign country may be subject to US securities laws if it sells securities to US investors. Even if it is not registered with the SEC. At the same time, the bank is subject to the laws of its home country.
Another complex question is whether activities that are legal at home violate laws or regulations in other countries. For example, the bank may comply with the rules and regulations of its home country. Still, it may violate US securities laws if it sells securities to US investors without proper registration or disclosure. In such cases, the SEC may need to work with foreign regulators to figure out what actions to take.
World’s Financial Cop?
Additionally, what determines whether the SEC can bring an action against the bank? This may depend on the bank’s connections to the United States. Such as whether it has a physical presence there, and has done transactions with US investors. Or has engaged in other activities that could subject it to US jurisdiction. In some cases, the SEC may need to establish jurisdiction over the bank through legal proceedings in US courts.
Finally, the SEC may need to consider the potential impact of its actions on other countries and their regulatory regimes. For example, if the SEC takes action against a bank registered in a foreign country, that country may respond against US banks operating within its borders. This could lead to a tit-for-tat escalation of regulatory actions, ultimately harming the global financial system.
To address these jurisdictional issues, the SEC may need to work closely with foreign regulators and other stakeholders to coordinate its actions and ensure that its efforts are effective and appropriate. This may involve formal agreements and protocols for sharing information. Coordinating enforcement actions, and engaging in ongoing dialogue and cooperation with foreign regulators.
Playing the Global Hunting Game
The SEC takes a firm stance against foreign companies and individuals that violate US securities laws. Including companies listed on US stock exchanges or that issue securities to US investors. See Section 21(a)(2).
The agency has taken an increasingly active role in enforcing US securities laws globally in recent years. This has included pursuing cases against foreign companies that engage in fraudulent or manipulative activities. Further impacting US investors, individuals, and companies that violate US sanctions or engage in other forms of financial misconduct.
Critics have accused the SEC of acting as the “world’s financial cop.” Further overstepping its authority by pursuing cases that do not directly involve US investors or companies. They argue this can create tension with other countries and their regulatory agencies. This then leads to conflicts over jurisdiction and sovereignty.
Proponents of the SEC’s global enforcement efforts argue that they are necessary to protect US investors and ensure the integrity of the US financial system. They point out that financial misconduct often involves complex international transactions. Also, networks and that cooperation between regulatory agencies in different countries is necessary to combat these activities effectively.
Whether there can be life after death for a fallen crypto exchange, like FTX, is a complicated question. While the exchange faces huge challenges, including massive losses, it continues to sell its assets. Including, now, its crypto derivatives exchange LedgerX.
The future can look bleak when a firm, whether a crypto exchange or a conglomerate, goes bankrupt. In the case of FTX, the exchange sells off assets to try to make back some of the money it lost. But does this mean there is life after death for FTX? The answer is not simple and depends on several factors.
First, it’s crucial to know what bankruptcy means. Bankruptcy is a status that may (depending on local laws) offer legal protections allowing a company to restructure debts or liquidate assets to pay off creditors. The proceedings can get started voluntarily, by a company, or involuntarily by creditors.
FTX in Deep Waters
In the case of FTX, the exchange filed for bankruptcy voluntarily. According to reports, FTX suffered massive losses last November due to bad trades. The losses were so severe that FTX could not meet its financial obligations, and the exchange had to file for bankruptcy.
Since then, FTX has been selling off its assets to recoup some losses. The exchange has reportedly sold its stake in the Miami Heat NBA team, as well as its stake in the esports organization TSM. FTX has also sold some crypto holdings, including Bitcoin and Ethereum.
So, does this mean there is life after death for FTX? It’s possible, but several factors will determine the exchange’s fate.
One is the extent of FTX’s losses. If they were too severe, the exchange may simply not be able to recover. In this case, FTX may have to liquidate all its assets – not some of them. It may close its doors for good.
Another issue is the willingness of creditors to work with FTX. If creditors are willing to work with the exchange to restructure its debts, FTX may be able to emerge from bankruptcy with a viable business model. However, if creditors are willing to work with FTX, the exchange may be able to restructure its debts and may have to liquidate its assets.
A third factor is the competitive landscape of the crypto exchange industry. If FTX can emerge from bankruptcy, it will compete with other well-established exchanges like Binance, Coinbase, and Kraken. FTX must differentiate itself from these competitors and offer a unique value proposition to attract customers.
Light at the End of the Tunnel?
Despite these challenges, there are reasons to be optimistic about FTX’s future. One is the exchange’s leadership change. Now, FTX is led by CEO John Ray III, a bankruptcy specialist brought in to manage the exchange’s bankruptcy proceedings. He has experience in bankruptcy law and has worked on several high-profile insolvencies.
On Tuesday, FTX’s CEO John Ray III announced plans to sell the crypto derivatives exchange LedgerX to Miami International Holdings for $50 million. LedgerX is a regulated cryptocurrency derivatives trading platform acquired by FTX in 2020. This sale could help FTX recoup some of its losses. By divesting itself of LedgerX, FTX can streamline its operations and concentrate on rebuilding.
FTX will seek US bankruptcy court approval for the sale at a May 4 hearing.
“We are pleased to reach this agreement with MIH, which is an example of our continuing efforts to monetize assets to deliver recoveries to stakeholders,” FTX CEO John Ray said in a statement.
Additionally, FTX recovered over $5 billion in cash and liquid crypto assets. It continues to sell assets as part of that effort. FTX recently agreed to sell its stake in Web3 startup Mysten Labs for $95 million. But LedgerX is under Commodities Futures Trading Commission (CFTC) regulation, and the CFTC has warned consumers about the risks of exchange-traded products.
Are Serious Risks Involved?
The Commodities Futures Trading Commission (CFTC) regulates derivatives trading in the United States. LedgerX, the crypto derivatives exchange under the defunct company, is subject to this regulation. The CFTC has issued stern warnings in the past about the risks of exchange-traded products, including crypto derivatives.
Crypto derivatives are complex financial instruments that allow traders to speculate on the price movements of cryptocurrencies. They can be highly volatile and carry a significant risk of loss. The CFTC has warned consumers to be cautious when investing in these products and to consider their risk tolerance before trading carefully.
It’s worth noting that LedgerX is a regulated exchange that operates under the oversight of the CFTC. This means the exchange is subject to strict regulatory requirements, including capital requirements, reporting requirements, and compliance with anti-money laundering (AML) and know-your-customer (KYC) laws. These regulations are intended to protect investors and ensure the integrity of the derivatives market.
Despite these regulatory safeguards, crypto derivatives trading remains a high-risk activity. Traders who engage in it should be aware of the risks and invest only funds they can afford to lose.
But the real elephant in the room here is that LedgerX was part of Sam Bankman-Fried’s Ponzi scheme. The reputational concerns are considerable indeed. Especially after Storybook Brawl did not survive its association with FTX.
What Will Be Different?
It’s tough to say what Miami International Holdings’ (MIH) long-term plans are for LedgerX, as it has not made many public statements. But Miami International Holdings owns the Bermuda Stock Exchange and has a strong presence in Bermuda, where U.S. crypto ventures are relocating amid the SEC’s crackdown.
Given MIH’s bent, it may see LedgerX as a highly valuable asset in the growing crypto industry.
In recent years, Bermuda has become an increasingly popular destination for crypto ventures, as the country has established a regulatory framework friendly to blockchain-based businesses. In addition to owning the Bermuda Stock Exchange, MIH also operates the MIAX Options exchanges, regulated by the US Securities and Exchange Commission (SEC). This suggests that MIH has experience working in regulated environments. Even that it is well-positioned to navigate the complex regulatory landscape of the crypto industry.
At the same time, Miami International Holdings (MIH) is a global exchange holding company that operates and owns several exchanges. Including the MIAX Options Exchange and the MIAX Pearl Equities Exchange. MIH’s experience and expertise in operating traditional financial exchanges may give it an edge in managing a crypto exchange.
MIH has experience developing and implementing trading technology, risk management systems, and compliance frameworks. All of which are critical parts of a successful exchange. Additionally, MIH has a track record in managing multiple exchanges. Which suggests it has the operational expertise to launch and grow a new crypto exchange.
In a June 8, 2022, tweet, MIAX Exchange Group shared its formation of a joint alliance with Lukka for the development of a suite of proprietary crypto derivatives. The products would trade on MIH exchange platforms, using Lukka-sourced crypto data.
As MIH acquires LedgerX, it may seek to leverage its expertise to expand the exchange’s offerings and grow its user base. It may also explore opportunities to integrate LedgerX with other MIH-owned platforms or use the exchange as a launching pad for new crypto ventures.
Setting the Foundation (Again)
Overall, the development has induced mixed emotions regarding FTX and its users’ fate. Some don’t see a future in the exchange or a potential FTX rebound. On the other hand, some law firms do big business in crypto firm restructurings.
Norton Rose Fulbright, a British-American multinational law firm, makes this a selling point. The theme here is that a strategic plan can point the way forward, and things are never hopeless.
Restructuring in the context of a crypto firm can refer to myriad things. Such as mergers, acquisitions, divestitures, and spin-offs. Multiple factors can drive these changes, including market conditions, financial performance, regulatory changes, or strategic priorities.
Crypto experts say that the rapid pace of innovation and disruption can make it tough for firms to stay competitive. Hence, restructuring is a way to realign the company’s focus and resources. Even to shed non-core assets and increase efficiency.
However, others warn that restructuring can have negative consequences. Such as job losses, cultural disruptions, and loss of talent. Additionally, the decentralized nature of the crypto industry can make it hard to predict the impact of restructuring on stakeholders. Including investors, customers, and partners.
The debate overblockchain’s real-life utility is far from over, but many protocols continue to show promise through growth. Stellar and Mina are two such examples that show optimism in their 2023 quarterly reports.
Blockchain technology has gained momentum in recent years, and its adoption has increased significantly across various industries. The technology’s potential to improve transparency, security, and efficiency has caught the attention of many businesses and governments, leading to increased investment in blockchain-based solutions.
Stellar and Mina are two blockchain projects making waves in the industry. Stellar is a decentralized platform that enables fast and secure cross-border payments. At the same time, Mina is a lightweight blockchain that uses a unique consensus algorithm to ensure scalability and decentralization.
Both projects have recently released their quarterly reports, indicating a significant leap in blockchain adoption. Stellar’s report showed an increase in the number of accounts on the network in Q1 2023. Mina’s report highlighted its growing community, with over 150,000 unique wallet addresses created on the network in the period.
Stellar Q1 2023 Insights
The Stellar Development Foundation (SDF) released its Q1 2023 report on April 24, highlighting key metrics showcasing growth.
Firstly, Stellar (XLM) surpassed 1 billion in total operations processed on the network, registering a growth of 21.7%. It also saw a surge in total accounts, reaching more than 7.3 million. The increase represented a 15.8% increase from Q1 2022.
Total payments decreased by 62.59% YoY, with 56.9 million payments made in Q1 2023 compared to 152 million in Q1 2022. However, despite the decline in payments, the on-network transaction volume of relevant assets grew by 10.5% in the same period.
The concept of relevant assets on the Stellar network refers to tokens or digital assets with a specific use case or utility in the Stellar ecosystem. These relevant assets are used as indicators to measure the network’s usage and its ability to connect global financial systems.
For instance, a relevant asset on the Stellar network could be a stablecoin pegged to the U.S. dollar, allowing users to send and receive payments without worrying about the volatility of cryptocurrencies. The usage of this relevant asset would indicate how well the Stellar network is facilitating cross-border payments and connecting different financial systems.
Innovation Continues in 2023
One of the key developments on the network is Soroban following two crucial preview releases. It ‘continues to be a top priority, and each quarter brings SDF closer to mainnet launch.’
Soroban is a blockchain-based platform that aims to provide financial infrastructure for the underserved and unbanked population. The platform utilizes the Stellar blockchain to facilitate fast, secure, low-cost cross-border payments and other financial services.
Soroban’s development on the Stellar network is significant as it highlights its ability to support innovative projects that address financial inclusion and social impact. Soroban’s platform leverages Stellar’s capabilities to enable instant settlement and interoperability with other financial networks, making it easier for users to access and use financial services.
The development of Soroban on the Stellar network is an excellent example of how blockchain technology can be leveraged to solve real-world problems and bring financial services to underserved populations.
Additionally, the recent collaboration with American investment giant Franklin Templeton further boosted Stellar’s credibility. The New York-based investment firm’s OnChain U.S. Government Money Fund (FOBXX) went public on the Stellar network. The fund boasts over $270 million in assets under management.
Another Protocol Shows Promise
The Mina Protocol released a transparency report for Q1 2023, indicating significant growth and adoption of the blockchain project. The platform behind the Mina protocol showed growth across many metrics.
Unique accounts in the first quarter of 2023 showed a 7.57% increase from January to March. As of March 31, 2023, there were 153,279 individual accounts on the Mina ledger. Also, monthly block producers on Mina increased to 370 in March from 355 in the preceding month. Meanwhile, there were 911 commits to the Mina Github repositories in the first three months of 2023, with 80 unique contributors.
On the development front, the protocol redeployed the ‘Berkeley’ Testnet in January 2023. There’s ongoing work ‘in fixing bugs and vulnerabilities via the testnet, such as addressing potential DDOs attack vectors, with this latest testnet release in Q1.’
The Berkeley Testnet is a public test network that allows developers and users to test the functionality of the MINA protocol in a simulated environment. The test network is designed to mimic the leading Mina network but with a few key differences. For example, transactions on the Berkeley Testnet do not have any real-world value, so developers can test their applications without risking any actual funds.
Developers and users can interact with the Berkeley Testnet through the MINA command-line interface (CLI) or a web-based wallet explicitly designed for the test network. The web wallet allows users to create and manage testnet accounts, send and receive transactions, and explore the testnet blockchain.
Understanding the Protocol
The Mina Protocol is a lightweight, decentralized blockchain designed to address traditional blockchains’ scalability and decentralization challenges. It is built on a unique consensus algorithm called ‘SNARKs’ that allows the network to maintain its small size by compressing data and verifying transactions using mathematical proofs rather than relying on large nodes.
By maintaining a small size, the Mina Protocol enables faster transaction processing times, reducing the risk of centralization and increasing the network’s decentralization. It also allows for greater accessibility as it can be run on low-power devices, making it more accessible to a broader range of users.
The Mina Protocol also emphasizes privacy and security, using zero-knowledge proofs and its commitment to user data protection. It enables privacy-preserving smart contracts and allows users to control their data and maintain anonymity.
Mina has a growing community of developers and supporters. They believe in the project’s potential to transform the blockchain industry. Its lightweight design and focus on privacy and decentralization make it an attractive option for various applications, from financial services to healthcare.
These numbers indicate the growing interest and adoption of blockchain technology. Also, the potential for the technology to disrupt traditional industries.
As more businesses and individuals become familiar with the benefits of blockchain, the sector will likely continue to grow and develop.
The growth of the United Kingdom’s crypto industry is a testament to the increasing popularity of digital currencies. Especiallyas an accepted form of investment and payment. While challenges remain, the future looks bright for the UK’s cryptocurrency industry.
The cryptocurrency industry has undergone exponential growth over the last decade, with the UK leading the charge. According to a March 2021 report by digital asset investment firm CoinShares, the UK had the fastest-growing cryptocurrency industry globally in that year. That growth has not slowed.
The same report noted that the UK’s crypto industry had grown by over 450% in the prior two years alone. This is partly due to a supportive regulatory environment, which has allowed for the development and growth of various cryptocurrency businesses.
In contrast, the US cryptocurrency industry grew by 120% over the same period, while Switzerland’s grew by 80%. So what are the decisive factors giving a country an edge? Will 2023 see an even greater surge?
The UK and Crypto
The growth of the UK’s crypto industry can also be attributed to the country’s highly developed financial sector. Which has made it easier for cryptocurrency companies to access funding and resources. Additionally, the UK’s central location and highly skilled workforce have made it an attractive destination for cryptocurrency companies. Looking to expand their operations.
The UK is home to many cryptocurrency users and investors. Over three million cryptocurrency users are estimated in the UK, with a combined wealth of over £3 billion or $3.72 billion. This number is expected to grow as more individuals and businesses recognize the potential of cryptocurrencies as a legitimate asset class. Another survey by Fidelity Digital Assets found that nearly 80% of institutional investors surveyed in the UK view cryptocurrencies as a viable investment option.
Another factor driving the UK growth is mainstream businesses’ increasing adoption of digital currencies. For example, several large UK-based companies, including the food delivery giant Eat and the travel booking website Expedia, accept Bitcoin as a payment method.
This trend could continue as more businesses recognize the benefits of accepting cryptocurrencies. Such as lower transaction fees and faster payment processing times.
Continued Growth in 2023
The global crypto market is expected to gross $37.80 billion in revenue this year. That’s 105% more than in 2022, and almost half of that value will come from the United States, the world’s largest crypto market. Although the US market accounts for the largest share of global crypto revenues, another crypto market is growing significantly more. Not so surprisingly, given that America is losing crypto players to other jurisdictions due to regulatory uncertainty.
In fact, according to data compiled by BitcoinCasinos.com, the United Kingdom has the fastest-growing crypto industry among the top five markets. The revenue surged by a massive 125% YoY to $1.89 billion in 2023.
Over the past few years, the United Kingdom has become Europe’s most prominent crypto economy. Although far behind the most famous crypto markets in the total number of users and revenue, the UK saw Europe’s second-largest crypto trade value per user last year, following Italy.
The UK’s crypto trade per user statistic amounted to more than $91,700, 25% higher than in the United States. The latter saw nearly $73,300 worth of transactions.
Crypto User Penetration Rate
The UK’s cryptocurrency industry has the fastest-growing market size and the highest user penetration rate. Especially among the top five crypto markets globally, which include the United States, Switzerland, Germany, and France.
Two years ago, the UK crypto market had around 9.6 million users, with a 14.2% user penetration rate. Since then, the number of users has surged by 82% to 17.6 million, while the user penetration rate hit 25.70% in 2023. Per the shared report, the figure is expected to jump over 30% by 2025, with more than 21.30 million crypto users in the country.
The high user penetration rate grows from several factors, including the UK’s highly developed financial sector, making it easier for individuals to access cryptocurrencies. Additionally, the country’s relatively supportive regulatory climate has boosted confidence among investors and made cryptocurrencies more in reach for the general public.
Furthermore, the growth of the UK’s cryptocurrency industry goes hand in hand with a proliferation of cryptocurrency exchanges and trading platforms. Making it easier for individuals to buy, sell, and trade digital currencies. To support this, the Financial Conduct Authority (FCA) wants to collaborate with crypto companies to develop a regulatory framework for the industry.
The growth of the UK’s crypto industry has been challenging as well. One of the challenges facing cryptocurrency players in the UK is the need for clear regulations surrounding the industry.
While the UK has been relatively supportive of cryptocurrencies compared to other countries, there is still much uncertainty. Especially surrounding how to regulate digital currencies. This has led to some cryptocurrency firms needing more time to expand their operations in the UK. They are unsure how future regulatory changes will affect their business.
Another challenge is the ongoing debate over the environmental impact of cryptocurrencies. As mining cryptocurrencies such as Bitcoin requires a significant amount of energy, there are fears that the growing popularity of cryptocurrencies could fuel rapid climate change.
However, many cryptocurrency companies address these issues by investing in renewable energy sources and developing more energy-efficient mining methods. Despite these challenges, many expect the UK’s crypto industry to grow in the coming years. As more individuals and businesses recognize the potential of cryptocurrencies as a legitimate asset class, demand for digital currencies will increase.
In its escalating crypto crackdown, the Securities and Exchange Commission has appointed Eric Werner as its Fort Worth regional director. He’ll oversee not just Texas but a broad swath of the US West and Southwest.
Cryptocurrencies are digital assets that use cryptography to secure transactions and control the creation of new units. They are decentralized and operate independently of central banks and governments. Thus, making them highly attractive to people looking for an alternative to traditional finance.
While cryptocurrencies have gained popularity, they have also raised concerns among regulators and policymakers. One of the issues is the use of cryptocurrencies for illegal activities. Such as money laundering and terrorism financing, due to their anonymity and lack of regulation.
Clamping Down on the Industry
To address these concerns, the Securities and Exchange Commission (SEC) has taken a more active role in regulating cryptocurrencies in recent years. In 2017 and the years since, the SEC has taken a firm line that some cryptocurrencies, such as Bitcoin, should be treated as securities under federal law.
This means they are subject to the same regulations as traditional securities, such as stocks and bonds. Since then, the SEC has taken many enforcement actions against cryptocurrency players it believes have violated securities laws.
Also, since 2018, the Commission has targeted token sales and ICOs. A form of capital fundraising in crypto, which the agency views as unregistered securities sales. The SEC, under Chair Gary Gensler, has intensified the crackdown. Gensler has made it known that he believes that essentially every coin and token, other than Bitcoin, is an unregistered security.
The SEC’s regional directors oversee the agency’s enforcement and regulatory activities in their regions. Eric Werner, who has over 20 years of experience in securities enforcement, will now lead a broad swath of the US West and Southwest. Including Texas, which is home to many cryptocurrency companies.
“I am pleased that Eric will head the Fort Worth Regional Office,” said SEC Chair Gary Gensler. “In this new role, Eric will draw upon his wide range of experience from his more than 25 years with the SEC. I also would like to thank Marshall Gandy for serving as Acting Co-Director and for his continued work with the SEC.”
The appointment comes amid an escalating crackdown on cryptocurrencies. Given the hostile conditions across the country, this latest development is not likely to improve relations. Time will tell how Eric Werner’s appointment shapes the SEC’s enforcement activities in the cryptocurrency industry.
On one side, given his extensive experience in securities enforcement, it is likely that he will continue to prioritize the agency’s mission. Namely, to protect investors and maintain the integrity of the securities market. However, too much zeal can hinder growth and innovation.
Werner cut his teeth during Jay Clayton’s reign at the SEC. He has described how he first met Clayton in 2018 when the latter was having a heated argument about crypto and how to regulate it. Fast forward to 2022, when the new director played a role in a highly publicized SEC enforcement action against crypto assets.
Last October, Werner oversaw a highly publicized SEC enforcement action against what the agency called a “fraudulent and unregistered” crypto asset offering directed at Latino investors. Here, the SEC used an emergency action to shut down the offering and pursue legal action against those involved.
CryptoFX, a Texas company that Mauricio Chavez and Giorgio Benvenuto ran, faced regulatory heat. The official watchdogs accused the company and its owners of violating securities laws by fraudulently soliciting funds from inexperienced investors using the appeal of crypto.
Allegedly, they scooped $12 million through a crypto Ponzi, spending much of the money on a lavish lifestyle. The SEC alleged that CryptoFX made false promises of high returns and misled investors about the risks involved in their investment strategy.
It is worth noting that the SEC’s use of an emergency action here is not without precedent. The agency has used emergency actions in many high-profile cases. Including actions against Telegram and its initial coin offering (ICO).
The previous month, the US regulator announced emergency action against investment adviser BKCoin Management concerning an alleged fraud scheme. Here, the Miami-based firm raised $100 million from at least 55 investors, supposedly to plug into cryptocurrency. But instead, they allegedly used the funds to splurge on luxury items and make “Ponzi-like payments.”
The SEC can use emergency actions to shut down fraudulent or illegal activities that threaten investors, even without first providing the parties with notice and an opportunity to be heard. This is known as an “emergency cease-and-desist order.”
In the case of the fraudulent and unregistered crypto-asset offering above, the SEC used an emergency action to shut down the offering and pursue legal action against the individuals or companies involved.
Emergency actions are a tool that can help protect investors in extreme cases. However, they may be highly controversial, as parties involved will want to contest the allegations before an order’s issuance.
Concerns Brewing in Texas?
Some in the crypto industry want Texas to become a crypto hub. Is the appointment of Werner an attempt to kill the infant industry in its crib? What can investors in the West and Southwest expect from Werner following his promotion? Will there be more emergency actions? These are just some questions that arise following the latest appointment.
The blockchain industry has advocated for Texas to become a hub for cryptocurrency and other emerging technologies. This has come across in state officials’ recent legislative proposals and actions, such as Governor Greg Abbott’s of March 2021, expressing support for cryptocurrency innovation and blockchain technology in Texas. Primarily catering to miners.
Texas has a reputation for being a business-friendly state, with a low tax burden and a pro-growth environment that attracts entrepreneurs and investors. These factors, combined with the state’s technological infrastructure and favorable regulatory environment, make it an attractive location for blockchain companies looking to establish a presence in the United States.
Furthermore, Texas has several universities with solid computer science and engineering programs. This can provide a talented pool of graduates with the skills needed to support the growing blockchain industry.
However, as with any emerging technology, cryptocurrency and blockchain pose risks and challenges. Such as regulatory hurdles and the need to protect consumers from fraud and other abuse. As such, any efforts to establish Texas as a hub for cryptocurrency and blockchain must be carefully balanced with effective regulation and consumer protection measures. This is where SEC can infiltrate the crypto network using emergency actions. One way to overstep any remaining legal bounds and act like an authoritarian state agency.
BeInCrypto contacted Eric Werner’s office but had not received a response as this article went to press.
Overall, it is hard to predict the SEC’s and its regulators’ future actions. However, one might note that regulatory agencies such as the SEC have a mandate to protect investors and maintain fair and efficient markets. In the case of cryptocurrencies, there are concerns about fraud, manipulation, and other misconduct. Which the SEC is responsible for addressing.
While some may view emergency actions as an overstep of legal bounds, or as authoritarianism, such actions are typically for situations where there is an imminent threat to investors or markets and insufficient time to follow standard rulemaking procedures.
Emergency actions are also subject to legal review and can be challenged in court if found unsupported by law or outside the agency’s statutory authority.
Bermuda’s effort to establish itself as a crypto hub is a bold move that could pay off in the long run. Some firms and exchanges already seek to take advantage of Bermuda’s clear regulatory framework and fostering of innovation in the crypto industry.
Bermuda, an archipelago in the North Atlantic Ocean, is moving decisively to become a hub for cryptocurrency exchanges and firms. Known for its offshore insurance and reinsurance industry, the island nation flaunts its transparency around digital-asset regulation. Mainly to attract more crypto projects and players.
Bermuda has made efforts to lay down rules of the road for financial innovators. In 2018, it became one of the first jurisdictions to introduce a regulatory framework for initial coin offerings (ICOs). This required companies to obtain a license from the Bermuda Monetary Authority (BMA) before launching a token sale. The BMA also issued guidelines for digital asset custodians and virtual currency exchanges. Thereby outlining the requirements for companies in these sectors.
In 2020, Bermuda further solidified its commitment to crypto by passing the Digital Asset Business Act. This requires all digital asset businesses operating in Bermuda to register with the BMA and comply with strict anti-money laundering and anti-terrorism financing laws.
Luring Large Players
Bermuda’s efforts have not gone unnoticed by the crypto industry. The island nation has already attracted several high-profile crypto ventures, including the stablecoin issuer Circle, which relocated its headquarters to Bermuda in 2019. Binance, the largest cryptocurrency exchange by trading volume, also announced plans to set up an office in Bermuda in 2018.
Last week, as part of its plan to expand internationally, Coinbase was granted a license to provide services in Bermuda. The Bermuda Monetary Authority (BMA) gave the U.S. cryptocurrency exchange a Class F license. Thus allowing it to operate as a digital asset exchange in Bermuda.
Premier David Burt publicly praised the awarding of the license. He stated in an April 19 tweet, “I’m thrilled to see our island leading the ‘race to the top’ for regulation in this industry.”
Regulatory uncertainty at home remains the key reason why some firms choose Bermuda. Of late, crypto exchanges and companies have been leaving the U.S. for jurisdictions that regulate cryptocurrencies in a friendlier way.
Another player that could follow is Ripple. At present, the fintech firm remains locked in a legal battle with the US Securities and Exchange Commission (SEC), with a ruling potentially coming any day. CEO Brad Garlinghouse warned in July 2022 that the company would move to another country if it lost in its battle with the SEC. Meanwhile, crypto-lending startup BlockFi and crypto exchange Bittrex Inc. all have operations in Bermuda.
Understanding the Landscape
Bermuda’s push to become a crypto hub comes as the industry faces turmoil. The value of Bitcoin, the largest cryptocurrency by market capitalization, has experienced severe volatility in recent months. Dropping from an all-time high of nearly $65,000 in April 2021 to below $30,000. Other cryptocurrencies have also experienced swings in value, leading to increased scrutiny from regulators worldwide.
However, Bermuda’s regulatory framework helps it weather the storm. By establishing clear guidelines for digital asset businesses, the BMA provides certainty and stability that may be lacking in other jurisdictions. This could attract crypto firms looking for a stable regulatory environment, especially as officials in other countries take a more cautious approach to the industry.
“We are aware of the recent devaluation in the price of cryptocurrencies and remain confident that it does not threaten the island’s ability to become a crypto hub,” said Jason Hayward, Bermuda’s minister of economy and labor. “This industry downturn is likely to advance our goal and positively impact our long-term growth and role in this sector.”
Additionally, the region is one of the few jurisdictions worldwide that has enacted a comprehensive framework regulating cryptocurrency. Bermudan regulators say that their understanding of international business, which accounts for about 27% of the island’s economy and a trained local workforce, translates into a base for developing a thriving digital assets industry.
That puts Bermuda in competition with other jurisdictions hoping to lure players and businesses in the crypto industry.
Regulators here have adopted to unique approach. Uniting a pro-innovation stance with highly sophisticated risk analytics designed to thwart money laundering and terrorist financing. The BMA uses Chainalysis tools to try to ensure financial probity and regulatory compliance.
Bermuda’s focus on transparency and regulation may also help it attract institutional investors, who are increasingly interested in the crypto industry. High-profile institutional investors, including hedge funds and asset managers, have started investing in Bitcoin and other cryptocurrencies in recent years.
Not coincidentally, as Bermuda has expanded outward from its longtime identity as an insurance hub, transactional law firms like Walkers and Carey Olsen, traditionally strong in other offshore jurisdictions, have opened offices in Bermuda. These firms know which way the wind is blowing and want in on some very lucrative deals.
However, many institutional investors need more time to enter the crypto market amid regulatory uncertainty and volatility. By providing a clear regulatory framework, Bermuda could attract these investors and help drive growth in the crypto industry.
Other global financial hubs are looking at the Bermudan example. Those with decided views on the matter include representatives of Conyers, an offshore law firm. Apart from Bermuda, several leading offshore financial centers, including the Cayman Islands and the British Virgin Islands (BVI), “have carved out their niches as popular and effective structuring jurisdictions for this growing and dynamic industry,” Conyers lawyers said recently.
Each of these jurisdictions purports to offer several benefits.
a tax-neutral platform
sound legislative and judicial systems based on English common law principles
stable, commercially minded governments
flexible corporate structures
experienced and responsive professional advisory and support services
Concerns and Challenges
Bermuda’s push to become a crypto hub presents challenges.
The island nation is a relatively small market, with a population of around 64,000 people. This means it may be difficult for crypto firms to achieve significant scale in Bermuda alone. While Bermuda has successfully developed a regulatory framework favorable to the digital asset industry, it is still a relatively small jurisdiction with a limited impact on global financial markets. But, of course, firms and exchanges registering in Bermuda will hardly do the bulk of their transactions locally.
Other major financial centers, such as New York, London, and Hong Kong, may continue to play a more significant role in shaping global financial regulation. Jurisdictions such as Singapore and Switzerland compete to become international crypto hubs and have established themselves as attractive destinations for crypto firms.
Furthermore, while Bermuda’s regulatory approach may serve as a model for other jurisdictions, each country has unique challenges and regulatory priorities. What works for Bermuda may not be the best fit for all players. Different jurisdictions will likely develop their approaches to regulating the crypto industry based on unique circumstances.
However, Bermuda’s focus on transparency and regulation, favorable tax policies, and well-established financial services industry could give it an edge. If Bermuda can continue attracting high-profile crypto projects and firms, it could become a dynamic player in the global crypto industry.
The popularity of meme coins has led to a surge in price manipulation and other fraudulent activities. Deployers are known to accumulate large amounts of the coins before adding liquidity to the market, which can cause the price to skyrocket and leave unsuspecting investors with worthless coins.
Meme coins have gained popularity in recent years. People often make these coins as a joke or for fun, and they typically have little to no practical use. Despite this, meme coins have become a hit, with many people investing in them in hopes of a quick profit.
However, the dark side of meme coins will not go away. Many deployers of these coins have been accumulating large amounts of funds before adding liquidity to the market. This behavior can lead to price manipulation and other bad outcomes.
Understanding the “Memecoin” Frenzy
Launching meme coins with little to no development behind them is one of the problems here. This means they are vulnerable to price manipulation, as there is often no real-world value to support their price. Furthermore, launching such coins with a limited supply can make them vulnerable to price manipulation.
A tactic deployers use is accumulating a large amount of the coins before adding liquidity to the market. They do this by buying up large volumes of the coin from early investors or using bots to inflate the price. Once the deployer has gotten a significant number of the coin, they can add liquidity to the market, which can cause the price to skyrocket. This price manipulation can be devastating for unwitting investors. Many people need to grasp the risks involved in investing in meme coins, since they can lose a fortune when the price crashes.
Meme coins often lack regulation by any governing body, presenting another problem. This means there is no oversight to bar price manipulation or other fraudulent activities. Additionally, because many meme coins launch anonymously, holding the deployer accountable for any wrongdoing can be hard.
In some cases, deployers of meme coins have used their influence to pump the coin’s price and then sell their holdings for a significant profit. This can cause the price to crash, leaving investors with worthless coins. In extreme cases, deployers of meme coins have engaged in exit scams, where they disappear with the investors’ funds.
Examining Live Cases
Some MEME coin deployers have accumulated many funds before increasing liquidity. This means that there is a possibility of manipulation by a specific group. For instance, a Twitter profile with the handle ‘X-explore’ raised concerns about the behavior exhibited by different cohorts.
Herein, meme coins with similar behavior include WOJAK, TRAD, and NEET. Here are a few examples:
Token name: WOJAK with deployer address: 0x8591F46A5E9B081289a3CFC4b5381F3c6e88389B
Another one is TRAD with deployer addresses: 0x4fE6ac27C8B992356D5fB8547b1dEb2540efA34E
Additionally, the frog-themed PEPE token saw one lucky buyer turn a $250 investment into an on-paper profit of over $1 million. Saw a massive meme coin surge led by the newly-launched PEPE. The resulting “meme coin frenzy” entailed high trading volumes snarling up the Ethereum network. Another fellow meme coin that witnessed a surge is REKT, which rose by 90% in a day.
These are just some instances where similar meme coins can lure investors trying to get instant profits. However, caution is in order. Most meme coins have little to no fundamental value and trade entirely on popularity. Meme coins issue in large quantities with market prices of less than a cent to make them look cheaper and attract potential buyers.
Low-liquidity tokens and meme coins can pose issues for investors. These coins often launch with a limited supply and may need more trading activity on cryptocurrency exchanges. As a result, buying or selling these coins at a fair price can take time, leading to severe price fluctuations and other issues.
One of the issues with low liquidity tokens and meme coins is that they are vulnerable to price manipulation. Because there is little trading activity, it can be easy for a single investor or group of investors to manipulate the coin’s price. This can lead to big losses for other investors unaware of what is happening.
Additionally, low-liquidity tokens and meme coins can be tricky to sell. If there are no buyers, investors may end up holding onto the coin for an extended time, which can be risky. In some cases, investors may have to sell the coin at a loss, which can wreck their portfolio.
Another area for improvement with low liquidity tokens and meme coins has to do with real-world value. Many of these coins are launched as a joke or for fun and may have little practical use. This can make it hard for investors to determine whether the coin is a good investment or not.
Finally, low-liquidity tokens and meme coins can be vulnerable to hacking and other cybersecurity risks. These coins need strong security measures to protect investors’ funds since they often launch with little to no development. This can make it easy for hackers to steal the coins and leave investors with huge losses.
Take Precautions and DYOR
Users must do their due diligence before investing in any cryptocurrency to protect themselves from the risks associated with meme coins. This means researching the coin and the deployer to determine whether they have a solid track record or will likely engage in price manipulation or other fraudulent activities.
Additionally, it is essential to diversify your cryptocurrency portfolio. Investing in various coins can help lower risk and protect you from losses if one coin experiences a price drop.
Finally, it is essential to remember that investing in cryptocurrency is inherently risky. While some meme coins may offer the potential for big returns, they also come with a high level of risk. As with any investment, it is essential to carefully consider the risks and rewards before investing your money.
Bitcoin halving is a critical event in the cryptocurrency ecosystem that affects market sentiment, miners’ profitability, and innovation. With just one year to go, analysts weigh in with varying predictions.
Bitcoin halving is a seismic event in the cryptocurrency ecosystem that occurs once every four years. It is an automated process built into the Bitcoin network’s code, which reduces the reward for mining new Bitcoin blocks by 50%. The halving process is crucial to the network’s security and stability and has a huge impact on the cryptocurrency market.
The impact of halving on market sentiment, miners’ profitability, and innovation in the crypto ecosystem has driven a surge in anticipation. With just one year left before the event, experts and investors in the crypto industry are closely monitoring its potential impact on the market.
Bitcoin halving, a fundamental mechanism in Bitcoin’s protocol, profoundly affects market sentiment, creating a new supply shortage. A Bitcoin halving is set to take place every 210,000 blocks. So far, three Bitcoin halvings have occurred with dates, one in 2012, another in 2016, and the last in 2020. The countdown shown below is for the next halving set to occur in 2024.
This reduction in mining rewards will further limit the number of new BTC entering the market. Consequently, this potentially drives up the price as demand grows amid decreasing supply. Thus, breeding a scarcity mindset among investors.
The reduced supply makes Bitcoin more valuable and attractive to investors, leading to a significant price surge. In the two previous halvings, the price of Bitcoin significantly increased (more than 1000%) within a year after the event.
This surge in price attracts more investors and media attention, leading to increased adoption and awareness of cryptocurrencies. However, the price surge is often followed by a significant correction as the market adjusts to the new supply-demand dynamics. This is evident in comparatively muted gains in percentage terms for the current cycle compared to past events.
Other Factors to Consider
The reduction in mining rewards has a direct impact on miners’ profitability. Mining is the process of validating transactions and creating new blocks, and miners are rewarded with bitcoin for their efforts. When the mining reward is halved, miners receive half the bitcoin for the same amount of work, which reduces their profitability.
Currently, the mining reward stands at 6.25 BTC per block. After the next halving event, which is expected to occur in 2024, the mining reward will fall to 3.125 BTC per block. As a result, miners may need to adjust their operations to remain profitable. They may need to upgrade their hardware or switch to more efficient mining algorithms. Additionally, some miners may need to shut down their operations entirely if they are no longer profitable.
Bitcoin halving can also drive innovation in the crypto ecosystem. Reducing mining rewards incentivizes developers to create new solutions to improve the network’s efficiency and security. For example, the introduction of the Lightning Network, a layer-two solution that facilitates fast and cheap Bitcoin transactions, was partially driven by the need to reduce the network’s congestion and transaction fees.
Additionally, Bitcoin halving events directly or indirectly also triggered new sustainable ways that use different mining algorithms or consensus mechanisms. Given the censures against high-energy mining operations, eco-friendly mining may offer unique features and benefits.
Experts Weigh In
The largest digital asset has climbed 67% since December 31 in a partial revival from an epic rout in 2022. While the token is struggling below $30,000, halving can trigger a further price incline. Different crypto analysts have portrayed their predictions for the upcoming event.
“Bitcoin cycles bottom around 12-18 months prior to the halving, and this cycle structure looks similar to the past ones, albeit many things have changed. While the network is vastly stronger, Bitcoin has never endured a prolonged severe economic contraction.”
Meanwhile, Markus Thielen, research head at Matrixport, predicted that Bitcoin will reach around $65,623 by April 2024. This is more than double the current price.
Other renowned analysts have aired their views on the same concept. Some even gave a staggering price surge prediction following financial instability in America. On a subtler note, the latest trend around artificial intelligence (AI) also has a prediction regarding Bitcoin’s price. Herein, taking the value to more than $100,000- have a look:
Redditors Have a Go
BeInCrypto reached out to Reddit users in one of the popular channels (r/CryptoCurrency). The aim is to understand Redditors’ perception of the anticipated price surge, allegedly taking Bitcoin to over $50,000. The responses are as follows:
One of the users found the stated value as a “realistic outcome.”
“This is, for me, the most realistic outcome. Even though we can’t predict anything for sure since the past years were quite insane. When you zoom out on graphs, you can clearly see we’re not anywhere near a breakout.”
Another user took a different approach to answering the question.
“If you just take a glance at history, we should expect to crab with pumps and corrections the rest of 2023, well into 2024 (past the halving). The bull cycle should return in late 2024 and into 2025, and profits can be taken near the tail end of 2025.”
The same user added, “We have never had crypto through a recession, historical inflation, wars, anti-crypto regulation. So this time may be ‘different,’ and a blow-off top may be off the table. In any case, we are still in the accumulation/fire sale zone right now.”
Expectations vs. Reality
Bitcoin halving is a critical event in the cryptocurrency ecosystem that significantly impacts market sentiment, miners’ profitability, and innovation. The reduction in mining rewards creates scarcity and drives up the price of Bitcoin, leading to increased adoption and awareness of cryptocurrencies.
Contrarily, the price expectations may or may not hold. The price of Bitcoin, like any other asset, is subject to various factors that can influence its value, such as supply and demand, market sentiment, economic conditions, government regulations, and technological developments. Historically, halving events have been associated with increases in the price of Bitcoin due to the reduction in the supply of new bitcoins entering the market.
However, past performance does not necessarily indicate future results, and there is no guarantee that this trend will continue.
Blockchain technology has played a crucial part in achieving sustainability. Crypto platforms, such as Ripple, are pursuing projects in the spirit of Earth Day celebrations.
The world faces an unprecedented challenge in the ongoing climate crisis. The impacts of climate change are already visible in the form of extreme weather events. Even rising sea levels and melting ice caps. As the world celebrates Earth Day, it is essential to chart a way forward. What role does crypto play?
Sustainability Remains Key
To mitigate the impact of climate change, the global community has set ambitious goals to reduce greenhouse gas emissions. Such as the Paris Agreement, which aims to keep global warming well below 2°C above pre-industrial levels. Also, efforts to limit the temperature increase to 1.5°C are critical.
Achieving these goals requires a sharp reduction in carbon emissions, by implementing carbon markets. In this case, sustainable crypto solutions and the underlying blockchain technology are aiding in achieving this goal.
Carbon markets are a mechanism that prices carbon emissions, allowing organizations to trade carbon credits. Carbon credits entail the right to emit some carbon dioxide (CO2) or other greenhouse gases. Organizations that emit less carbon than their allotted allowance can sell their excess credits to organizations that emit more than their allowance. This offers a financial incentive for organizations to reduce their carbon emissions. Further, it can help reduce overall carbon emissions by rewarding companies that reduce their carbon footprint.
The Underlying Technology
Blockchain technology could revolutionize the carbon market by providing transparency, security, and accountability. The immutable nature of the technology makes it ideal for tracking carbon credits. Thus, ensuring that they are not double-counted or fraudulently created. This can help ensure the carbon market is transparent and reliable. Essential for building trust in the system and encouraging investment in carbon reduction projects.
Blockchain can also help streamline the carbon credit verification process, which is complex and time-consuming. By creating a digital ledger that tracks carbon credits from creation to retirement, blockchain technology can offer a secure and efficient way to verify the validity of carbon credits. This can help reduce the cost and time needed to verify carbon credits. Making it easier for small and medium-sized enterprises (SMEs) to participate in the carbon market.
In addition, blockchain technology can provide a way to create a global carbon ledger that tracks carbon emissions and credits across borders. This can help foster a more unified and transparent carbon market, making trading carbon credits across different jurisdictions easier. This is particularly important given the global nature of the climate crisis. As emissions reductions in one country can impact the global climate.
Finally, blockchain technology can provide a way to incentivize the development of carbon reduction projects. For instance, by allowing organizations to tokenize the reduction in carbon emissions. By making a digital token that represents the reduction in carbon emissions achieved by a project, organizations can provide a way for investors to participate in the carbon market and contribute to global emissions reductions. This can help boost investment in carbon reduction projects, which is essential for achieving the goals of the Paris Agreement.
Crypto Solution Helping the Cause
Per a report, sustainable blockchain can help remove 50B metric tons of CO2 from the earth’s atmosphere by 2050. Leading players play an integral role here in achieving the stated statistic. One of the leading names is the Blockchain-based fintech company, Ripple. Namely, the firm aims to help over 3.70 billion people who are either unbanked or underbanked worldwide. At the same time, it seeks to help the environment reduce carbon footprints.
As co-founders and active members of the Crypto Climate Accord and WEF’s Crypto Impact and Sustainability Initiative, Ripple commits to a low-carbon future for the crypto industry and the global economy.
Ripple’s XRP Ledger is a blockchain-based platform that aims to aid the unbanked population by facilitating low-cost, fast, secure cross-border payments. The platform allows users to transfer value across borders instantly without intermediaries such as banks, which can be costly and time-consuming for many people who need access to traditional financial services.
In 2021, Ripple announced that the XRP Ledger had become the world’s first major carbon-neutral blockchain network. The company achieved this by partnering with Energy Web Foundation to purchase carbon offsets that mitigate the environmental impact of its energy consumption. The company plans to achieve carbon neutrality by 2030 by lowering emissions, using green energy, and investing in inventive carbon removal projects.
“Blockchain has a vital role to play in achieving a zero-net emissions energy future. Ripple is taking the lead to ensure fintech is part of the effort to build a sustainable world that is not only transformative for banks and consumers but also beneficial for the planet,” Jules Kortenhorst, CEO of Rocky Mountain Institute, added.
Several blockchain-based carbon markets, such as the AirCarbon Exchange and the Climatecoin Foundation, are already in operation. These platforms use blockchain technology to create a transparent and secure carbon market, allowing organizations to buy and sell carbon credits.
Obstacles on the Path
However, several challenges must be addressed before blockchain-based carbon markets can achieve their full potential. One of the issues here is the need for more standardization in the carbon market.
Countries and regions have different standards for measuring and reporting carbon emissions, making creating a global carbon ledger difficult. To address this challenge, there needs to be greater collaboration and standardization in how carbon emissions are measured and reported. Another challenge is the need for a regulatory framework for blockchain-based carbon markets. The existing regulatory framework for carbon markets is designed for traditional carbon markets, and it may not be suitable for blockchain-based needs.
To address this challenge, regulators and blockchain-based carbon market operators must work together to develop a regulatory framework suitable for blockchain’s unique features.
Blockchain gaming has witnessed a surge in adoption rates globally. ‘Play-to-earn’ crypto games primarily have provided ways to engage users, but are there any drawbacks to this model?
The concept of blockchain gaming has been around since the early days of cryptocurrencies, but it is only in recent years that it has started to gain traction.
One of the major drivers behind the growth of blockchain gaming is the play-to-earn (P2E) model. This model has transformed gaming from a leisure activity to a means of earning money. This obviously attracts a much broader range of people to the sector.
Assessing the Model
The play-to-earn model is based on the idea that gamers can earn rewards through cryptocurrency for playing particular games. These rewards can then be traded on exchanges for other cryptocurrencies or fiat currencies. The P2E model has become particularly popular in countries where there are limited job opportunities or where the cost of living is high. In these countries, blockchain gaming has become a viable way for people to earn a living.
One of the key benefits of the P2E model is that it is decentralized. This means there is no central authority controlling the flow of rewards or determining the value of the cryptocurrency. Instead, the value of the cryptocurrency is determined by the market, which is driven by supply and demand. This has created a new type of economy where gamers can earn a living without being tied to a specific employer or location.
Another advantage of the P2E model is that it has created new opportunities for game developers. Developers can create more immersive and engaging games by incorporating blockchain technology into their games. They can also offer players the chance to earn rewards, increasing the game’s popularity and attracting new players.
The Polaris Market Research Blockchain Gaming Report shows that the total transaction volume for blockchain games reached $5.41 billion in 2022 and is expected to grow at a CAGR of 68.90% during their forecast period.
Public interest in cryptocurrency and everything tied to the digital landscape has seen exponential growth in recent years, garnering interest from long-term investors, traders, and global brands. The power of Web3 has been blurring the lines between physical and virtual, allowing people to earn money digitally through online games.
Crypto gambling platform Cryptogambling.tv conducted a study using data from Google Keyword Planner to reveal the most popular games to earn cryptocurrency based on monthly search volume from the last 12 months. The results were exclusively shared with BeInCrypto via mail.
Most Googled Online Games to Earn Cryptocurrency
One of the most popular blockchain games that use the P2E model is Axie Infinity. This game allows players to own and battle creatures called Axies. Players can earn rewards through a cryptocurrency called Small Love Potion (SLP) for playing the game. SLP can then be traded on exchanges for other cryptocurrencies or fiat currencies.
Per the shared data, Axie Infinity had an estimated average of 535,202 searches per month. Axie Infinity has become particularly popular in the Philippines, where it has become a means of earning a living for many people. The game has created a new type of economy, where players can earn rewards for playing the game and then use those rewards to pay for their daily expenses.
The success of Axie Infinity has led to the development of other blockchain games that use the P2E model. These games include My Neighbor Alice, The Sandbox, and Splinterlands. These games allow players to earn rewards in the form of cryptocurrency for playing the game.
An exclusive quote shared with BeInCrypto asserted, ‘Axie Infinity’s colorful theme and multi-platform compatibility have undeniably contributed to its popularity over the last few years. The game features cute digital creatures that can be trained and used for battle, like those games on retro gaming consoles. The only difference now is that you can earn money by playing it from your mobile device.’
“The power of cryptocurrency has truly impacted the financial technology industry, and it is now impacting the gaming industry. People can now not only game for the experience’s joy but also earn money for themselves.”
Other Leading Games On the List
Second on the list is virtual metaverse SecondLive, with a 496,313 average monthly search volume. The Windows, Mac, and Android-compatible game allows users to create avatars and roam around an open virtual space. Herein, they can build their lifestyle of choice. Users can buy and sell items within the game’s online marketplace using BNB, which can be traded for other fiat currencies.
Ranking in third place is Stepn, a ‘move-to-earn’ mobile game where users can earn cryptocurrency by walking, jogging, or running. Thereby promoting a healthy lifestyle while also earning money. The web3 app boasts an estimated average search volume of 478,794 on Google over the past 12 months.
Other platforms are listed in the table below:
The growth of the blockchain gaming market has attracted the attention of investors. In 2021, the market capitalization of the blockchain gaming industry was estimated to be around $4 billion. Investors are particularly interested in the P2E model, which can create a new economy unrelated to traditional financial institutions.
Pros and Cons of the Play-to-Earn Model
The play-to-earn (P2E) model has transformed the gaming industry by creating a new economy where gamers can earn a living by playing games. The decentralized nature of the P2E model has created new opportunities for game developers and attracted investors’ attention. Blockchain gaming market growth is expected to continue. The P2E model will likely play a significant role in the gaming industry’s future.
The play-to-earn model has become popular in blockchain gaming due to the potential for players to earn cryptocurrency rewards for playing games. However, as with any market, those always prioritize profit over creating enjoyable experiences for players. As more and more projects enter the market, there is a risk that the focus will shift toward maximizing rewards rather than creating engaging gameplay. Another potential drawback of P2E games is that they may become too complex or challenging for casual players to enjoy. Players may need to invest significant time and effort into mastering the game mechanics and accumulating assets to earn rewards. This could be a turn-off for those looking for a more casual gaming experience.
Developers must balance rewarding players for their time and skill while creating a fun and engaging gaming experience. This can attract both hardcore gamers and casual players who may be less interested in earning rewards but still want to enjoy playing the game.
Binance CEO Changpeng Zhao draws complementary roles between centralized finance (CeFI) and decentralized finance (DeFi). But how can the market balance these imperatives while respecting the crypto market’s inherently decentralized character?
The cryptocurrency market has come a long way since its inception. Initially, it was an entirely decentralized space with peer-to-peer transactions and no central authority. However, with the rise of centralized exchanges, the market has become more centralized, leading to a debate between CeFi and DeFi.
Centralized finance (CeFi) refers to financial institutions or exchanges that operate within a centralized framework. On the other hand, decentralized finance (DeFi) refers to a system of financial applications and protocols that run on a decentralized blockchain network.
Both CeFi and DeFi have their strengths and weaknesses. While CeFi is more user-friendly and offers greater liquidity, DeFi is more transparent and gives users greater control over their assets. Nonetheless, the global macroeconomy, including the traditional financial and cryptocurrency markets, has had a problematic past. The crypto sector has faced multiple instances of crashes, hacks, scams, and bankruptcies.
Finding a Balance—Is There a Way?
One big bankruptcy disaster that shook the world was the fall of FTX, the second-largest CeFi-based crypto exchange after Binance. Since then, CeFi has been tugged under heavy scrutiny and criticism. To strike a balance between the two, the market needs to find a way to leverage the strengths of both while mitigating their weaknesses.
One way to achieve this is by bridging the gap between CeFi and DeFi through decentralized exchanges (DEXs). DEXs allow users to trade cryptocurrencies without intermediaries, making them a crucial part of the DeFi ecosystem. However, the challenge with DEXs is that they need more liquidity, which is where CeFi comes in.
Integrating with CeFi allows DEXs to access greater liquidity and offer users a better trading experience. This integration can happen in two ways. The first is through centralized order books, where orders are processed through a centralized entity that matches buy and sell orders. The second is through liquidity pools, where users can pool their assets together to create a market for trading.
Another way to strike a balance between CeFi and DeFi is by leveraging decentralized finance infrastructure. Decentralized infrastructure, such as oracles and identity verification, can be used by both CeFi and DeFi platforms. For example, CeFi platforms can use oracles to access real-time market data, and DeFi platforms can use identity verification to prevent fraudulent activities.
Can the Market Achieve a Balance?
The integration of CeFi and DeFi can also be achieved through tokenization. Tokenization creates digital tokens representing assets like stocks, bonds, or real estate. It further allows traditional assets to be traded on blockchain networks, making them more accessible to investors and traders. Tokenization can also be used to create hybrid financial products that combine the features of CeFi and DeFi.
For example, a hybrid product can use a centralized platform to offer greater liquidity while leveraging a decentralized network to provide transparency and security.
Finally, the market can strike a balance between CeFi and DeFi by promoting interoperability. Interoperability refers to the ability of different blockchain networks to communicate and share data. By promoting interoperability, CeFi, and DeFi platforms can work together to offer users a seamless trading experience.
Interoperability can also help to reduce the risks associated with centralized platforms, such as hacks and fraud. By integrating with DeFi protocols, CeFi platforms can benefit from the security and transparency of blockchain networks, reducing the risk of fraud and hacking.
Binance Head Shares His Take on the Matter
Changpeng Zhao, the colorful and often elusive CEO of Binance, gave his take regarding this matter. He spoke virtually at the Hong Kong Web3 Conference. Key topics of the fireside with CZ included asset security, trust, user experience, regulation, CeFi vs. DeFi, mass adoption, and the industry’s future.
Firstly, the interviewer brought up the debate of security being stronger in CeFi or its decentralized counterpart. Zhao stated:
“CeFi and DeFi have different characteristics; one is not safer than the other. For both CeFi and DeFi, there is a need to take security measures into consideration.”
Speaking further, he suggested the need for transparency for a CeFi company. This can be achieved by conducting a thorough proof of reserves. This helps in verifying through the blockchain that users’ funds are safe.
On the contrary, in DeFi, securing private keys to wallets is crucial. But some still remain vulnerable due to the complexity that’s required. ‘Both CeFi and DeFi have different characteristics regarding risk and security. We shouldn’t take a one-sided view that one is better than the other,’ he added.
Nevertheless, in the current point, the difference exists. One of the main criticisms of CeFi is that it runs counter to the decentralized ethos of cryptocurrencies. Last year’s collapses added more support that hindered CeFi’s credibility. However, Zhao thinks otherwise.
“CeFi is not against DeFi. Neither should DeFi be against anybody. In a purely decentralized space, everyone would be for themselves. When you form projects and initiatives, that is centralization. There will always be pockets of centralization, even within the decentralized space.”
The largest crypto exchange by volume has faced scrutiny surrounding its transparency. Regulators have jumped on the opportunity to target the exchange without fail. For instance, Binance is under investigation in Brazil by the Federal Prosecutor’s Office and Federal Police, according to a report in Valor Econômico newspaper. The cryptocurrency exchange has allegedly been helping clients evade a stop order on cryptocurrency derivatives investments.
To enhance trust among users and related stakeholders, CeFi and crypto companies can take several steps:
Transparency: CeFi companies should provide transparent and accurate information about their services, fees, and security measures. They should also disclose any potential risks and vulnerabilities associated with their services.
Security: CeFi companies should prioritize the safety of their users’ assets and data. This includes implementing robust security measures such as two-factor authentication, encryption, and cold storage.
Regulatory Compliance: CeFi companies should comply with relevant regulations and obtain licenses to operate in their jurisdictions. This can help increase trust among users and regulators.
Customer Support: CeFi companies should provide timely and effective customer support to address any issues or concerns their users raise.
Community Engagement: CeFi companies should engage with their user communities through social media, forums, and other channels. This can help build trust and establish a positive reputation for the company.
By taking these steps, CeFi and crypto companies can enhance trust among users and related stakeholders, which can help drive adoption and growth in the industry.
Looking at the Future
Apart from discussing CeFi and DeFi, the interviewee also gave insight regarding factors influencing crypto adoption and emphasized regulation as the key element.
He also pointed to signs that many countries are adopting and clarifying regulations, which could help usher in a new golden age for crypto.
Bitcoin and the Decentralized Finance (DeFi) ecosystem enjoyed some positive outcomes in the first quarter of 2023. Thereby moving away from the bearish sentiments of 2022. But can the momentum continue in Q2 2023?
The cryptocurrency market has come a long way since the early days of Bitcoin’s launch in 2009. Over the past few years, the market has seen massive growth, with more investors and traders entering the space than ever. This has led to a significant increase in the value of cryptocurrencies, despite the periodic bearish sentiments.
In this case, the crypto market showed massive growth in the first quarter of 2023, thwarting some of the bearish sentiments of 2022. However, time will tell what’s next for the market in Q2.
Factors That Helped
One reason for the growth of the crypto market is the increasing adoption of cryptocurrencies by mainstream institutions. More companies are now accepting cryptocurrencies as a form of payment, and governments worldwide are starting to recognize the uses of blockchain technology. This increased acceptance has helped to legitimize the crypto market, making it a more attractive investment option for many.
Another factor driving the growth is the increasing use of cryptocurrencies as a store of value. With traditional fiat currencies subject to inflation, many people are turning to cryptocurrencies to protect their wealth. This has driven demand for cryptocurrencies, which has boosted their value.
Furthermore, the rise of decentralized finance (DeFi) has played a in the growth of the crypto market. DeFi platforms allow people to access financial services in a decentralized manner without intermediaries such as banks. This has opened up opportunities for people long excluded from traditional financial systems. As more people become aware of the benefits of DeFi, the demand for cryptocurrencies will likely continue to grow.
The growth of the crypto market is a testament to the increasing use of blockchain technology and decentralized finance. While the market is subject to occasional bearish sentiments, the long-term trend is upward.
Strong Start in 2023
The 2023 Q1 Crypto Report, shared with BeInCrypto, is the work of CoinGecko. It provides an in-depth analysis of the crypto market during the first quarter of 2023. The report covers various facets of the market, including market capitalization, trading volume, and the performance of individual cryptocurrencies.
According to the report, the broader cryptocurrency markets have enjoyed a quarter of resurgence, with overall market capitalization reaching $1.20 trillion at the end of Q1. CoinGecko highlights a 48.90%, $406 billion gain from the cryptocurrency market cap of $829 billion at the end of 2022.
Per the graph above, the average daily trading volume also surged. Herein, note the increase of 30% QoQ from -33% in the last quarter of 2022 to a total of $77 billion in 2023 Q1. Speaking on this matter, the CoinGecko team asserted:
“Trading volume saw an upswing in January 2023, when the market started rallying. It then spiked momentarily in early March due to increased volatility from the banking crisis, before tapering off in late March, when Binance removed part of their zero-fee trading incentives for BTC.”
Bitcoin primarily drives the market, showcasing a surge during the abovementioned period. In fact, BTC emerged as the best-performing asset of Q1 2023, with gains of 72.40%. Thereby outperforming rival asset classes such as the Nasdaq index and gold, which marked 15.70% and 8.40% gains, respectively.
Not so surprisingly, regions have started to distance themselves from crude oil. Hence the notable decline. The fall was attributed to United States inflation statistics, which cited a reduction in oil demand.
Furthermore, the report notes that decentralized finance (DeFi) continues to be a driver of the crypto market. The cohort skyrocketed more than 65% in the first quarter, “translating to $29.60 billion in gains, mainly driven by liquid staking governance token performance.”
Herein, the latter witnessed a jump of around 210%, reaching almost $18 billion combined total value locked (TVL). Needless to say, Ethereum’s much-awaited Shapella upgrade aided the mammoth hike.
Decentralized Exchanges DEXs continue to lead the DeFi ecosystem. Especially in current times, amid regulators’ crackdown on centralized counterparts (CEXs) worldwide, DEXs saw their growth outpace that of CEXs by nearly two times.
Nevertheless, regulatory uncertainty remains a challenge for the crypto market. Given the surge in DEXs, regulators can initiate rules and regulations to curb innovation.
Concerns Eroding Trust
It is also worth noting that the crypto market is highly volatile, with prices often subject to significant fluctuations. While this can be a source of concern for some investors, it also presents opportunities for traders who can profit from price movements. As such, the volatility of the crypto market has played a significant role in attracting new investors and traders to the space. Crypto prices tend to have a direct relationship with events. The first quarter of 2023 is no different.
Despite occasional bearish sentiments, the long-term trend of the crypto market has been growth. As the world becomes increasingly digital and decentralized, cryptocurrencies will likely play an essential role in the financial system.
However, investors need to be aware of the risks associated with investing in cryptocurrencies, including the possibility of significant price swings and the potential for fraud and scams.
Intel cancels the Bitcoin mining chip series, the Blockscale 1000 ASIC, for its Smartphones. It has barely been a year since the series’ rollout. Is artificial intelligence (AI) driving a strategic shift?
The tech industry is constantly evolving, and it is no surprise that the current landscape vastly differs from a few years ago. The advent of blockchain technology sparked much excitement in the tech industry. Many believe in its revolutionary potential. However, the crypto winter has shaken faith in blockchain tech. Thus, significantly impacting the industry.
The crypto winter refers to a significant decline in the value of cryptocurrencies. Particularly Bitcoin, which suffered in late 2017 and continued into 2018. This decline went hand in hand with a loss of faith in blockchain technology, which many had hoped would drive the next wave of innovation.
New Sherriff in Town
One reason for the decline in faith in blockchain was a slew of high-profile scams and fraud. Many investors lost fortunes in these scams, leading to a loss of trust in the technology. Additionally, the hype around blockchain technology led to many companies launching projects without understanding the technology, leading to failures.
Another factor contributing to the crisis of faith was the need for real-world use cases. While a few successful projects use blockchain technology, such as Bitcoin and Ethereum, relatively few examples of blockchain technology are used to solve real-world problems.
In contrast, AI has become a hot new investment in the tech industry. AI has been around for a while, but recent advances have driven renewed interest and investment. AI has the potential to revolutionize various sectors, from healthcare to finance to transportation, making it a popular area of investment for many companies.
One of the factors in the renewed interest in AI is the success of companies such as Google and Amazon, which have used AI to improve their products and services. Google, for example, uses AI to hone its search results and to develop new products such as Google Assistant. Amazon uses AI to make its recommendations and devise new products like Alexa.
The Shift in Innovation
Additionally, many real-world use cases for AI lead to increased technology investment. For example, AI can detect fraud in financial transactions, diagnose diseases in healthcare, and optimize supply-chain management in logistics.
The shift in focus from blockchain technology to AI has also led to many tech companies tightening their belts and shaking off less-than-core businesses. This is because AI is seen as a core area for many companies, and they are investing heavily in technology to gain a competitive edge. This has led to several companies divesting non-core businesses to focus on AI.
One example is IBM, which divested its managed infrastructure services business to focus on cloud computing and AI. Another example is Intel, which sold its NAND memory business to SK Hynix to focus on AI and other core areas.
The shift towards AI has also entailed a focus on talent acquisition as companies look to hire the best AI talent to drive innovation in the field. This has led to increased competition for AI talent, and many companies offer attractive packages to attract top talent.
Killing the Crypto Chip
Intel announced that it is discontinuing the development of its Blockscale 1000 ASIC mining chip series for Bitcoin. The decision was made because the company has decided not to pursue any future generations of the chips. This marks the end of Intel’s brief foray into the Bitcoin mining market.
The Blockscale chips were to be high-performance mining chips for Bitcoin. Aiming to make mining more accessible to individual miners. And work in conjunction with mining software to perform the complex calculations required to mine new bitcoins.
However, the development of the Blockscale chips has been beset with delays and setbacks. Such as a chipmaker giant dropping the project altogether without announcing a new chip to succeed it. Intel dodged a question from Tom’s Hardware about whether it would exit the Bitcoin ASIC business, saying:
“We continue to monitor market opportunities.”
The company has cited several reasons for the decision, including the high costs of developing the chips and the low demand for them.
Crypto Out, AI In?
Intel’s decision to discontinue the Blockscale chips is unsurprising, given the challenges the Bitcoin mining market has faced in recent years. The high cost of mining equipment and the increasing difficulty of mining new bitcoins have made it difficult for individual miners to compete with large mining operations.
Additionally, the Bitcoin mining market has become increasingly centralized, with a few large mining operations controlling a significant portion of the network’s computing power. This has led to concerns about the security and decentralization of the network. Indeed, Intel feels the heat from the escalating regulatory attack on crypto. For that reason as well as factors mentioned above, some firms may choose to distance themselves.
At the same time, Bitcoin has performed unexpectedly well, reaching the $30,000 threshold. Yet an April 19 report in The Verge noted that Intel might be looking at AI.
Integration of the Latest Technology
The chipmaking giant is well-positioned to benefit from the growing demand for AI. After some digging, BeInCrypto found some interesting things. The company has a strong track record in developing and manufacturing high-performance chips, and AI is a natural extension of its core business.
AI applications require potent chips that can process large amounts of data quickly and efficiently. Intel has invested heavily in developing chips specifically designed for AI applications, such as its Nervana Neural Network Processor (NNP).
The Nervana NNP is designed to accelerate the training and inference of deep neural networks, a key technology in AI applications such as computer vision and natural language processing. The chip is optimized for high-performance computing and can process large amounts of data in parallel, making it ideal for AI applications.
In addition to developing specialized AI chips, Intel has also been working on integrating AI into its existing products. The company’s processors are increasingly designed with AI in mind, with features such as vector processing and integrated neural network accelerators.
AI Flying High
Intel has also invested in software tools and libraries, making it easier for developers to merge AI into their applications. For example, the company has developed the OpenVINO toolkit, which allows developers to optimize their AI applications for Intel hardware.
Intel’s focus on AI is already paying off. The company has reported strong growth in its data-centric businesses, which include AI and other high-performance computing applications. In the fourth quarter of 2021, Intel’s data-centric businesses generated $9.90 billion in revenue, a jump of 11% year-over-year.
Looking ahead, the demand for AI technology is only expected to grow. AI applications are in development across various industries, from healthcare and finance to retail and transportation. The market for AI hardware and software may reach $500 billion by 2025, according to a report from McKinsey & Company.
As a leader in the chipmaking industry, Intel is well positioned to benefit from this growth. The company has a strong track record in developing and manufacturing high-performance chips, and its focus on AI is helping to position it for success in the growing AI market. Other players within the industry have supported the innovation by incorporating it within their businesses.
Nvidia Corporation’s Chief Technology Officer, Michael Kagan, has criticized the cryptocurrency industry. Namely, stating that it does not provide anything valuable to society. Although Nvidia’s processors sell to the crypto industry, Kagan believes processing power’s use in artificial intelligence chatbots like ChatGPT is more beneficial than mining crypto.
Meanwhile, renowned figures like Elon Musk censured the use of artificial intelligence.
The Coming Backlash?
Intel’s sudden shift and scrapping of Bitcoin plans can raise concerns as a company providing value for its consumers and clients. Did the company choose the route following regulatory pressure? The US government has taken steps to sideline Bitcoin mining industries for years now. Coincidentally, Intel’s decision may align with regulators’ goals.
There are a few instances where Intel’s (secret) actions faced backlash. One of the most significant examples was the “Meltdown” and “Spectre” security vulnerabilities discovered in Intel’s processors in 2018. These vulnerabilities allowed attackers to access sensitive information, such as passwords and encryption keys, from the memory of affected devices.
The discovery of these vulnerabilities led to widespread concern among consumers and clients. Further, it raised questions about Intel’s security protocols and testing procedures.
Another example is the delay in releasing Intel’s 10nm processors. Initially expected to launch in 2016 but delayed multiple times until the eventual release in 2019. The delay bred frustration among consumers and clients, who eagerly awaited the release of the more powerful and energy-efficient processors. The delay also allowed Intel’s competitors, such as AMD, to gain market share and up their market value.
Additionally, there are concerns about Intel’s pricing strategies. Some consumers and clients accuse the company of charging high prices for its processors compared to its competitors. This has led some clients and consumers to look for alternative chip providers for their computing needs.
Non-fungible tokens, or NFTs, present a new and exciting investment opportunity. But it’s essential to approach them with caution and do your research before investing.
Non-fungible tokens (NFTs) have become a hot topic in art and digital assets in recent years. NFTs are unique digital assets stored on a blockchain, making them immutable and impossible to duplicate. They are often used to represent digital art, music, videos, and other types of creative content, and they are bought and sold using cryptocurrencies like Bitcoin or Ethereum.
One of the biggest draws of NFTs is their potential as a financial asset. Many people see NFTs as a new type of investment, similar to buying stocks or real estate. Some NFTs have sold for millions of dollars, and investors hope to profit by buying and selling NFTs at the right time.
However, investing in NFTs is not without risk. The market for NFTs is still relatively new, and much volatility and speculation are involved. Prices can rise and fall rapidly, and predicting which NFTs will hold their value over time can be challenging.
Deep-Dive Into NFTs
One way to mitigate the risk of investing in NFTs is to do research and invest only in projects and artists with a proven track record. Look for NFTs backed by reputable galleries or auction houses or created by established artists with a loyal following. One can also look at the underlying technology and the blockchain that the NFT is stored on to assess its authenticity and long-term viability.
Another factor to consider when investing in NFTs is the market’s liquidity. NFTs are less liquid than other assets like stocks or bonds, so it can be challenging to sell NFTs if one needs to access funds quickly. The holder may need to hold onto the NFT for a long time before he or she can sell it for a profit, and there is always the risk that the market will crash before you have a chance to sell.
Despite these risks, many people are still excited about the potential of NFTs as a new type of investment. NFTs can disrupt traditional markets and provide new opportunities for artists and creators to monetize their work. They also offer a new way for investors to diversify their portfolios and potentially make a profit.
For instance, following the success of the first iteration, former US President Donald Trump announced on his social media platform Truth Social the launch of the second set of NFT collection cards. Each is priced at $99, issued on Polygon, with a total of 47,000 pieces.
One area where NFTs are particularly promising is in gaming and virtual worlds. NFTs can represent in-game items or virtual real estate, and players can buy, sell, and trade these items on a blockchain. This can create new economies within virtual worlds, where players can earn real money by participating in the game.
NFTs also have the potential to democratize the art world by allowing artists to sell their work directly to collectors without the need for intermediaries like galleries or auction houses. This could help level the playing field for emerging artists who have traditionally struggled to get their work in front of a wider audience.
Overall, in the long term, NFTs can be beneficial for several reasons.
Firstly, NFTs are unique digital assets verified on a blockchain, making them rare and valuable. Holding onto an NFT for an extended period can increase the asset’s value as demand grows, just like traditional art or collectibles. This can result in a potential profit for the owner if they choose to sell the NFT later.
Secondly, NFTs can have sentimental or emotional value to the owner, such as owning a piece of artwork or a memorable moment in a video game. By holding onto the NFT, the owner can continue to enjoy and appreciate the asset. Thirdly, some NFTs can also provide ongoing benefits or rewards to the owner, such as access to exclusive content or events. By holding onto the NFT, the owner can continue to reap these benefits.
Long-Term Effect as a Financial Investment
NFTs’ popularity and interest as potential financial assets have surged. Many people are investing in NFTs, not only for unique digital assets but also for their potential long-term profit.
In a report shared with BeInCrypto, BitcoinCasinos.com noted that 39% of NFT buyers are motivated by the long-term profit factor.
The analysis also found that three out of four NFT holders consider how much utility a collection offers before buying. In addition, 68.80% of buyers said they purchase an NFT because they want to join the community, indicating that people are using their investments to support projects and ideas they believe in.
Lastly, personal enthusiasm for a collection’s business model and artwork was cited as a reason to purchase.
Speaking to BeInCrypto, BitcoinCasinos betting expert Edith Reads opined:
“It appears that NFT buyers are quite savvy when it comes to their investments, carefully factoring in not only the utility of a given collection but also its potential resale value. As such, many NFT holders have been able to take advantage of this emerging market and turn a profit over time.”
Despite the promising narratives, the NFT market value did recently take a massive hit. Various factors have acted as an obstacle to further innovation and adoption. One of the factors is security risks.
NFTs are often stored on blockchain networks susceptible to hacks and cyber-attacks. If a hacker gains access to a user’s private key, they could steal or transfer the NFT to another account. Of late, NFT whale Franklin deleted his Twitter account. Earlier, he said that due to personal gambling and a hack, he lost more than 2600 ETH.
Lawyers for plaintiffs in the FTX lawsuit have just served NBA star Shaquille O’Neal with papers naming him as a defendant. However, this latest development has drawn mixed reactions.
In recent years, celebrity endorsements have become a popular marketing strategy among brands to increase their visibility and credibility. But with the rise of social media influencers and the growing importance of transparency in advertising, there have been cases where brands and their spokespersons have faced legal action for not disclosing paid endorsements.
The Federal Trade Commission (FTC) has issued guidelines for brands and influencers on disclosing sponsored content. Some litigious actions, taken by consumers or competitors against a brand’s spokesperson, are overreach designed to intimidate promotions. Which are normal and unactionable for most financial products and services.
Celebs With a Mass Following Build Traction
The use of celebrity endorsements can be highly effective in increasing brand awareness and sales. However, when a celebrity endorses a product or service without disclosing his or her relationship with the brand, advertising is misleading and deceptive. The FTC requires that any endorsement made in exchange for compensation be disclosed to the public. Whether on social media or in traditional advertising.
Failure to disclose can result in legal action against the brand and the spokesperson. While these guidelines are essential in maintaining transparency and honesty in advertising, some legal actions against a spokesperson may be seen as an overreach.
In most cases, litigation overreach occurs when legal action targets practices considered normal and unactionable. In the case of paid endorsements, some lawsuits against a spokesperson are an attempt to chill. Further, such intimidation does not go over well in the advertising industry.
Holding brands and their spokespersons accountable for transparent advertising practices is vital. Yet legal action against a spokesperson for a paid endorsement can be seen as overreach.
But will that be the case with the ongoing FTX promotion fiasco?
What Is The FTX Connection?
The lawsuit against defunct exchange FTX celebrity promoters for promoting cryptocurrencies that may be unregistered securities is ongoing. Adam Moskowitz, the lawyer handling a class action lawsuit against FTX promoters, is seeking $5 billion in damages. The litigation targets various high-profile influencers.
It is important to note that in the United States, the Securities and Exchange Commission (SEC) regulates the sale of securities. It requires companies that issue securities to register with the agency or get an exemption.
While a number of promoters were served as part of the litigation, NBA superstar Shaquille O’Neal is feeling the heat. Lawyers for plaintiffs in the FTX lawsuit served the former NBA player with papers naming him a defendant. By its own admission, the Moskowitz law firm, representing investors in the fallen exchange, spent many weeks harassing O’Neal. Whom it accused of “running from us for months,” as the firm tried to serve the papers.
Leading the Lawsuit
An Oklahoma native filed the class-action lawsuit: Edwin Garrison, an FTX customer. His famed attorneys are Adam Moskowitz and David Boies. The suit names several high-profile celebrities for endorsing FTX, such as Tom Brady, Steph Curry, Larry David, and more.
O’Neal is the only one among several celebrities roped in by the Sam Bankman-Fried-led platform. Nonetheless, the suit emphasizes that O’Neal stands out among the “FTX celebrities,” referring those who endorsed FTX.
The law firm has stated that O’Neal has been “running” from them “for three months” and should show courtesy and honor by allowing its process servers to deliver the legal complaint so that he can defend his “actions in this matter.“ In fact, lawyers tried to reach O’Neal by leaving comments on his social media platforms, including Twitter and Instagram. Earlier this month, a judge denied a motion to allow O’Neal to be served electronically.
Clarifying the Motive
In a recent interview, O’Neal said that FTX paid him to appear in a commercial and he did not break any law. Herein, O’Neal stated that he was “just a paid spokesperson” and had no involvement in the company’s operations or financial decisions. O’Neal acknowledged that he knew the risks of investing in cryptocurrencies but believed that FTX was a reputable company.
“A lot of people think I’m involved, but I was just a paid spokesperson for a commercial,” O’Neal said.
While this may be the case, the plaintiff clearly disagrees. Attorney Adam Moskowitz, replying to BeInCrypto’s request for comment, stated:
“You promote an unregistered security for financial benefit; you are liable for all the rescissory damages.”
Overall, the FTX collapse and the involvement of celebrity promoters such as O’Neal have raised questions about the regulation of cryptocurrencies and the role of celebrity endorsements in the industry. While celebrities can bring attention and credibility to a brand or product, they also carry a significant risk if the company engages in fraudulent or illegal activities.
Legal experts have voiced frustrations around the efforts to pin O’Neal down. Daniel Dubin, an attorney at Alston & Bird, told BeInCrypto:
“This is a volatile area, and people need to do their own research. [This ruling] sets the right tone for this type of litigation. You don’t want to excuse someone for investing in something they should’ve known to be a bad investment.”
Celebrities Have Their Say
Amid the chaos, defendants voiced their opinions in an April 18 report. Celebrity promoters for FTX argued that investors with accounts closed or restricted by the exchange do not have the legal standing to sue. But promoters Shaquille O’Neal, Kevin Durant, and Tom Brady are the target of investors who claim they suffered financial losses due to FTX closing or restricting their accounts.
FTX’s celebrity promoters argued, in their filing, that the investors’ claims are based on contractual and regulatory issues. Only the exchange and regulators can address this. The promoters stated that they had no involvement in the operational or regulatory decisions of FTX. Therefore, they are not liable for any losses suffered by investors. They promoted the exchange and its products in return for financial rewards. Further arguing in their filing that they not involved in any wrongdoing and had no control over the exchange’s operations. They contend that the investors’ claims against them are meritless and the judge should dismiss them.
What Is At Stake Here?
On March 9, United States District Judge Kevin Moore considered dismissing both O’Neal and tennis athlete Naomi Osaki from the lawsuit after pointing out the unclear basis for their inclusion. A paperless order issued by Moore gave FTX customers until December 2023 to justify the inclusion in the lawsuit.
In conclusion, it is essential to maintain transparency and honesty in advertising practices. But some legal actions taken against a brand’s spokesperson are overreach, designed to intimidate promotions considered normal and unactionable for most financial products and services.
Litigious actions to chill and intimidate promotional practices can have a chilling effect on creativity and innovation in the advertising industry. Hence, achieving transparency in advertising while avoiding litigious overreach is crucial.