FBI Raids the Home of FTX Executive Ryan Salame

https://cryptobriefing.com/fbi-raids-the-home-of-ftx-executive-ryan-salame/

Key Takeaways

  • The FBI raided former FTX executive Ryan Salame’s home yesterday.
  • Salame made $24 million in campaign contributions to U.S. politicians during the midterm elections.
  • Sam Bankman-Fried has already been accused of violating campaign finance laws.

Former FTX Digital Markets co-CEO Ryan Salame is being investigated for the role he played in Sam Bankman-Fried’s empire. He is currently under scrutiny for the $24 million in political contributions he made during the 2022 midterm elections.

Violating Campaign Finance Laws

The fallout from FTX’s collapse continues.

According to the New York Times, the Federal Bureau of Investigation raided the $4 million Washington D.C. home of former FTX executive Ryan Salame on Thursday morning. 

Salame joined FTX sister company Alameda Research as head of OTC trading in November 2019. He then became co-CEO of FTX Digital Markets—FTX’s Bahamian business entity—shortly after the company moved from Hong Kong to the Bahamas, in 2021. The FTX bankruptcy team has claimed that, as one of Sam Bankman-Fried’s most trusted advisors, Salame pocketed at least $87 million in bonuses and loans from Alameda.

Salame is under scrutiny for donating over $24 million in campaign contributions to U.S. politicians during the 2022 midterm elections. The Justice Department alleges that FTX executives (most notably Salame, FTX co-founder Sam Bankman-Fried, and former FTX head of engineering Nishad Singh) made over $90 million in donations with funds originally belonging to FTX customers. While Bankman-Fried publicly donated $46.5 million in the last two years to political entities associated with the Democratic Party, Salame made contributions to Republican candidates on Bankman-Fried’s behalf. 

Prosecutors have yet to file any charges against Salame. Bankman-Fried himself has been handed thirteen criminal charges, including fraud, conspiracy, violation of campaign finance laws, and violation of anti-bribery provisions. He is currently pleading not guilty to all counts. Other members of Bankman-Fried’s inner circle—including Singh, FTX co-founder Gary Wang, and former Alameda Research Caroline Ellison—have pleaded guilty to various fraud and money laundering charges, and are reportedly cooperating with U.S. authorities.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Binance US Terminates $1B Voyager Acquisition Deal

https://cryptobriefing.com/binance-us-terminates-1b-voyager-acquisition-deal/

Key Takeaways

  • Binance.US is pulling out of the Voyager acquisition deal.
  • The company blamed the “hostile and uncertain regulatory climate in the U.S.” for the decision.
  • Voyager will distribute cash and crypto to its customers through its own platform.

Binance.US has decided to pull out of its $1 billion acquisition deal for Voyager, citing a “hostile and uncertain” regulatory environment.

Acquisition Deal Nuked

Voyager creditors can’t catch a break.

The bankrupt crypto lending company announced on Twitter yesterday that it had received a letter from Binance.US indicating that it would terminate its purchase agreement of Voyager assets.

Voyager Digital filed for Chapter 11 bankruptcy protection in July 2022, shortly after crypto hedge fund Three Arrows Capital defaulted on a $650 million loan to the company. Voyager subsequently decided to auction its crypto assets as part of its restructuring plan, with FTX emerging as the highest bidder. When FTX’s implosion forced Voyager to seek a new buyer, the company struck a $1 billion buyout deal with Binance.US.

The acquisition of Voyager assets by Binance.US met fierce opposition from regulators. Both the Securities and Exchange Commission and U.S. Attorney Damian Williams filed motions to delay the buyout, which were rejected by the court. 

Binance CEO Changpeng “CZ” Zhao hinted on Twitter that Binance’s sudden decision may indeed have been due to regulatory pressure. When crypto personality Hsaka tweeted “[In before] Binance pulling out of the Voyager deal is part of the conditions of an imminent settlement with the CFTC,” Zhao responded to the post with a shrug emoji.

“While our hope throughout this [acquisition] process was to help Voyager’s customers access their crypto in kind, the hostile and uncertain regulatory climate in the U.S. has introduced an unpredictable operating environment impacting the entire American business community,” a Binance spokesperson told crypto news outlet The Block.

Voyager indicated that, per its court-approved restructuring plan, it will now distribute cash and crypto directly to clients through its own platform. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Terra Classic Isn’t a Security, Says South Korean Court

https://cryptobriefing.com/terra-classic-isnt-a-security-says-south-korean-court/

Key Takeaways

  • LUNA (now LUNC) should not be considered a security, according to the Seoul Southern District Court
  • “It is difficult to view Luna Coin as a financial investment product regulated by the Capital Markets Act,” the court stated.
  • Previous courts had used cautious terminology when discussing LUNA’s regulatory status.

Terra’s native cryptocurrency, LUNC, was deemed not a security by the Seoul Southern District Court in a court case involving former Terraform Labs co-CEO Hyun-seong Shin.

Not Regulated by the Capital Markets Act

South Korean authorities are making headway in their regulatory classification of cryptocurrencies.

According to local news outlet Ilyo Shinmun, the Seoul Southern District Court is claiming that Terra’s native cryptocurrency, LUNC (formerly LUNA), should not be considered a security. “It is difficult to view Luna Coin as a financial investment product regulated by the Capital Markets Act,” the court stated in a case involving former Terraform Labs co-CEO Hyun-seong Shin.

Up until now, Southern District Courts had floated rather cautious terminology when discussing LUNA’s regulatory status, using phrases such “there is room for dispute in legal principles” and “it is questionable whether the Capital Market Act can be applied [to LUNA]”. Ilyo Shinmun, however, reports that the most recent decision uses an expression that categorically refutes the possibility of LUNA being regulated as a security.

The court also firmly dismissed an appeal by prosecutors against a prior decision to dismiss a confiscation request for Shin’s assets. Prosecution had initially requested to seize Shin’s property—most of which consists of real-estate spread out across South Korea—on the grounds that the property itself had been acquired thanks to criminal activity. The court had dismissed the request for confiscation by arguing that it was “difficult to see that the property subject to the claim [was] a property acquired by a crime or an asset derived from it.”

Last Friday, Terra frontman Do Kwon filed to dismiss charges brought to him by the United States Securities and Exchange Commission, arguing that the U.S. regulatory agency lacked the jurisdiction to sue him. Kwon is currently being held in Montenegro, where he faces charges for document forgery. Both the United States and South Korea have expressed their intention to extradite him for prosecution.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Coinbase to Potentially Launch an Offshore Derivatives Platform

https://cryptobriefing.com/?p=124044

Key Takeaways

  • Coinbase has acquired a regulatory license to operate in Bermuda.
  • The company reportedly plans on using the license to launch a derivatives platform.
  • CEO Brian Armstrong has indicated that Coinbase may end up relocating due to the hostile regulatory climate in the United States.

Coinbase may be planning to use its newly acquired regulatory license to operate in Bermuda to launch a derivatives exchange.

Coinbase Bermuda

Coinbase is planning on expanding its operations worldwide.

The leading U.S.-based crypto exchange announced in a blog post on Wednesday that it had acquired a regulatory license to operate in Bermuda.  

According to a report from Fortune, the company is planning on using its freshly-acquired license to launch a crypto derivatives platform—possibly as soon as next week. While Coinbase’s blog post did not mention any such project, Bloomberg and The Block both reported in March that Coinbase was looking to offer crypto perpetual swaps on an offshore platform. 

“Bermuda was one of the first financial centers to pass comprehensive digital assets regulation in 2018, and its regulatory environment is long known for a high level of rigor, transparency, compliance, and cooperation,” stated Coinbase in the post. “Bermuda was chosen as one of our international hubs as the BMA is a highly respected and experienced financial regulator that is led by a world-class executive team and board of directors.”

The company indicated that it was expanding its presence worldwide, including in Singapore, Brazil, Canada, the United Arab Emirates, the United Kingdom, and the European Union. 

Coinbase’s international expansion is taking place with a backdrop of regulatory uncertainty in the United States. Coinbase CEO Brian Armstrong has repeatedly decried the Securities and Exchange Commission’s lack of cooperation with regards to establishing a clear regulatory framework for the industry to comply with. The SEC, for its part, has already communicated to Coinbase that it intends to bring legal action against the company.

Armstrong admitted this week that Coinbase would consider relocating to a friendlier jurisdiction if the regulatory climate in the U.S. failed to improve.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

VC Firm Andreessen Horowitz Releases New Optimism Rollup Client

https://cryptobriefing.com/?p=124021

Key Takeaways

  • Andreessen Horowitz is releasing a new OP Stack rollup client called Magi.
  • Magi is written in Rust, contrary to OP Labs’ existing client, op-node, which is written in Go.
  • The firm acknowledged that Magi is still months away from being a viable alternative to op-node.

Venture Capital firm a16z is aiming to diversify Optimism’s rollup clients with a client of its own. 

Magi and op-node

Andreessen Horowitz is launching new infrastructure on Optimism.

The venture capital firm announced today that it was releasing Magi, a OP Stack rollup client written in Rust. 

Optimism is a Layer 2 solution that aims to help Ethereum scale up its throughput capabilities. Instead of processing each and every Ethereum transaction on the mainnet itself—which leads to congestion of the blockchain, slow transaction confirmations, and high fees—Optimism provides a way for Ethereum to outsource computational data.

OP Stack is the standardized, open-source development stack that powers Optimism; it’s essentially the toolbox that allows the creation of decentralized applications (dApps) on the Layer 2 solution. According to a16z engineer Noah Citron, Magi aims to provide more diversity to Optimism rollup clients—the software that allows developers to interact with a blockchain network. So far, only one client exists on Optimism: op-node, maintained by OP Labs and written in the Go programming language. 

“Magi aims to be an independently developed, drop-in replacement for op-node, adding to the rollup’s client diversity,” wrote Citron. “We hope that building out this new, Rust-based client will encourage greater safety and liveliness throughout the OP Stack, and bring more contributors into the ecosystem.” 

Citron indicated that Magi was still in development and would likely take months to become a viable alternative to op-node. He also stated that Magi’s development was made with the help of the OP Labs team. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

The SEC Sues Bittrex for Operating Unregulated Securities Exchange

https://cryptobriefing.com/?p=123999

Key Takeaways

  • The SEC is suing Bittrex and its former CEO, William Shihara.
  • The agency is accusing Bittrex of operating an unregulated securities exchange, broker, and clearing agency.
  • The SEC also claimed Bittrex instructed crypto projects to scrub public statements which could bring the attention of regulatory agencies.

The SEC’s war on crypto rages on. The regulator filed civil charges today against Bittrex for operating as a national securities exchange without being properly registered.

Scrubbing Problematic Statements

Yet another crypto company has fallen prey to the SEC’s predatory eye.

The U.S. Securities and Exchange Commission announced today that it was charging crypto exchange Bittrex and former CEO William Shihara for allegedly operating an unregistered national securities exchange, broker, and clearing agency. The SEC is also suing Bittrex foreign affiliate, Bittrex Global, for failing to register as a national securities exchange.

The SEC claimed in its complaint that Bittrex facilitated the buying and selling of cryptocurrencies which the agency believes to be securities—including OMG, DASH, ALGO, TKN, NGC, and IHT. 

According to the SEC, Bittrex and Shihara instructed the teams behind these cryptocurrencies to scrub “problematic statements” they’d publicly made in the past which they believed could bring the attention of a regulatory agency—such as the SEC itself. Price predictions, expectations of profit, and other investment-related terms were ordered for deletion before the assets could be listed on Bittrex. 

“Today’s action, yet again, makes plain that the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity,” stated SEC Chair Gary Gensler. “As alleged in our complaint, Bittrex and issuers that it worked with knew the rules that applied to them but went to great lengths to evade them by directing issuer-applicants to ‘scrub‘ offering materials of information indicating that certain crypto assets were securities.”

Bittrex Global responded to the civil lawsuit by claiming that it never served any U.S. customers and had “taken pains” to forbid U.S. residents from using the exchange. It also criticized the SEC for not seeking to engage with the company before suing. “Bittrex Global was willing to work productively with the SEC—as we do with all regulators—to explain our position. It has become clear that the SEC is not interested in such discussions.”

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other crypto assets.

Ethereum’s Shanghai Upgrade is Live

https://cryptobriefing.com/ethereums-shanghai-upgrade-is-live/

Key Takeaways

  • Ethereum underwent the Shanghai upgrade late last night.
  • The network has now enabled validators to withdraw their staked ETH.
  • About 17.4 million ETH is currently staked.

The long-awaited Shanghai upgrade is now live on Ethereum, meaning that validators can now withdraw their staked ETH from the network at their leisure. 

A Historic Moment for Ethereum

Ethereum reached another milestone last night.

The Ethereum network underwent its long-awaited Shanghai upgrade on Wednesday 12. The hard fork was triggered at 22:27 UTC—when the blockchain hit block height 6209536—and finalized at around 22:42 UTC.  

Last year Ethereum transitioned from a Proof-of-Work consensus mechanism to Proof-of-Stake, an event known in the crypto community as the Merge. In Proof-of-Work, miners earn the right to produce blocks by solving highly complex equations—which requires vast computational power. Proof-of-Stake, on the other hand, allows validators to simply lock up 32 ETH in the network to obtain the same privileges. 

While Ethereum successfully completed the Merge on September 15, validators were still unable to withdraw their staked ETH, as the team wanted to ensure the network was steady post-Merge before enabling staking outflows. Last night’s upgrade finally allowed validators to either stake or unstake their funds. In other words, Ethereum’s transition to Proof-of-Stake is officially complete.

According to TokenUnlocks, the Ethereum network currently has 17.4 million ETH (worth roughly $34.7 billion) staked, which is about 15.4% of the total ETH supply. Approximately 902,860 ETH ($1.8 billion) is currently pending withdrawal. Despite the amount of ETH capable of potentially flooding the market on short notice, ETH itself is up 4.33% on the day and trading for roughly $2,000—prices not seen since August 2022. 

“We’re in a stage where the hardest and fastest parts of the Ethereum protocol’s transition are basically over,” said Ethereum creator Vitalik Buterin during a livestream of the event. “Very significant things still need to be done, but those very significant things can be safely done at a slower pace.”

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

SushiSwap to Make Exploit Victims Whole

https://cryptobriefing.com/sushiswap-to-make-exploit-victims-whole/

Key Takeaways

  • SushiSwap was hacked on April 9.
  • Attackers were able to siphon funds directly from the wallets of recent users of the protocol.
  • SushiSwap is planning on helping victims recover their funds.

Victims of the SushiSwap exploit have a chance of getting their funds back, whether they were preemptively taken by white hat hackers, or stolen by malicious actors.

Returning User Funds

SushiSwap has a plan to make its users whole.

The Ethereum-based decentralized exchange indicated on Twitter today that users that were affected by the protocol’s attack last weekend would be able to recover their funds.

SushiSwap is a decentralized finance project that enables its users to trade cryptocurrencies without needing to rely on a third party. On April 9, a fault in the protocol’s RouteProcessor2 smart contract allowed an exploiter to siphon tokens from users who’d previously approved the faulty contract. 

It’s currently unclear how much was actually taken, as groups of white hat hackers quickly mobilized to pre-emptively siphon user funds in order to secure them from malicious parties. However, the attacker was able to steal at least 1,800 ETH (worth over $3.3 million at the time of the exploit) from a single SushiSwap user. 

According to SushiSwap, the faulty smart contract was only deployed “in the last ten days”, meaning that users that hadn’t interacted with the protocol since April 2 were not impacted by the exploit. The exchange’s team highly encouraged users to revoke protocol approvals in any case, as a “good security practice.”

SushiSwap indicated that users whose funds had been swept by white hat security teams would be able to claim their funds shortly. The exchange’s development team is currently building a Merkle Claim contract to which users will be able to connect their wallets in order to receive their funds.

Users whose funds were siphoned by attackers will need to submit an email to the SushiSwap security team including transaction IDs and blockchain data for the lost funds. The team indicated that the process would take longer to process as a manual verification of the data would be necessary. “Our goal is to return all user funds to legitimate claimants. We appreciate everyone’s patience and understand your frustration as we work through returning funds to affected users,” the protocol stated.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

With BTC above $30K, MicroStrategy Is Back in the Green

https://cryptobriefing.com/with-btc-above-30k-microstrategy-is-back-in-the-green/

Key Takeaways

  • Bitcoin is trading above $30,000.
  • MicroStrategy has an average purchase price of $29,803 per bitcoin
  • The company currently holds 140,000 BTC, a sum worth over $4.2 billion at the time of writing.

MicroStrategy co-founder Michael Saylor’s bitcoin position is no longer underwater. With Bitcoin trading for roughly $30,200, and an average purchase price of $29,803 per bitcoin, Saylor is now officially in the green.

$4.2 Billion in BTC

Bitcoin’s recent price performance is good news for one of its biggest advocates.

The top cryptocurrency pushed past the $30,000 mark late last night, reaching levels unseen since June 2022. At the time of writing, BTC was trading for roughly $30,200—slightly above MicroStrategy’s average purchase price of $29,803 per bitcoin.

MicroStrategy is a business intelligence software company. In August 2020, MicroStratregy co-founder (and then-CEO) Michael Saylor announced for the first time that the company had converted some of its cash holdings into bitcoin due to inflation concerns. Saylor followed through with numerous other bitcoin purchases and became notorious for his relentless Bitcoin advocacy. “Go mortgage your house and buy more Bitcoin,” he famously stated in 2021. 

MicroStrategy kept accumulating bitcoin after prices plunged. As recently as March 27, the company had acquired another 6,455 BTC for approximately $150 million, for an average price of $23,238 per coin; a week later, MicroStrategy purchased an additional 1,045 BTC for roughly $29 million at an average price of $28,016 per coin. The company currently holds 140,000 BTC, a sum worth over $4.2 billion at the time of writing. 

Saylor stepped down from his position as CEO of MicroStrategy in August 2022. He was replaced by MicroStrategy president Phong Le. Saylor retained his position as the company’s executive chairman, in charge of focusing on “Bitcoin acquisition strategy and related Bitcoin advocacy initiatives.” 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

U.S. Treasury Misunderstands DeFi AML Compliance Requirements: Coin Center

https://cryptobriefing.com/?p=123952

Key Takeaways

  • Coin Center has responded to the U.S. Treasury’s “DeFi Illicit Finance Risk Assessment” report.
  • The crypto advocacy group criticized the Treasury for assuming that all DeFi protocols failed to comply with AML regulations.
  • However, it praised the report for acknowledging that DeFi presented very little risk of illicit activity compared to the traditional banking sector.

The U.S. Treasury believes that DeFi protocols are de facto non-compliant with AML regulations. Coin Center issued a report challenging that notion.

Responding to the Treasury’s Claims

The U.S. Treasury Department issued a “DeFi Illicit Finance Risk Assessment” report yesterday. The crypto industry is now providing its response.

Today crypto advocacy organization Coin Center released an analysis of the Treasury’s report. The article, entitled “Treasury’s new DeFi risk assessment relies on ill-fitting frameworks and makes potentially unconstitutional recommendations,” claims that the Treasury’s stance tends to take as a given that all decentralized finance protocols are non-compliant with anti-money laundering regulations.

According to Coin Center, the biggest problem with the Treasury’s report is that it assumes that every single DeFi project is failing to comply with the Bank Secrecy Act—regardless of whether the protocol is actually obligated to comply. Coin Center argued that the government, instead of lumping all DeFi protocols together, should begin differentiating projects by the services they provide. For example, a protocol that enables commodities derivatives trading and a protocol that enables the transmission of currencies should comply with different AML regulations.

Coin Center also criticized the report for repeatedly demeaning the notion of “non-custodial” protocols, which would exempt DeFi developers from needing to comply with BSA regulations. The report “leaves the reader to suspect that these persons have found some insidiously clever loophole rather than merely gone and exercised constitutional rights to publish innovative research and software,” claimed the advocacy group.

Nevertheless, Coin Center praised the report for acknowledging that most of illicit finance isn’t conducted by using DeFi protocols, but through the traditional banking sector. For example, non-compliant international centralized crypto exchanges—such as FTX—have been shown to present much bigger money laundering risks.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Binance to Shut Down its Australian Derivatives Services

https://cryptobriefing.com/?p=123945

Key Takeaways

  • Binance is terminating its Australian financial services license.
  • Australian residents will have until April 21 to wind down open positions.
  • Binance CEO Changpeng Zhao indicated that only 104 clients would be affected by the change.

Binance’s Australian financial services license is being terminated, meaning that Australian residents will no longer be able to open derivatives positions on the exchange.

104 Users Impacted

Binance has its hands full with regulators all around the world.

The Australian Securities and Investments Commission announced today that leading global crypto exchange Binance would no longer allow Australian clients to hold trade crypto derivatives. 

According to the press release, ASIC received yesterday a request from Oztures Trading Pty Ltd—trading as Binance Australia Derivatives—to terminate its Australian financial services license. The decision to terminate derivatives trading for Australian residents was therefore made by Binance itself. 

Starting April 14, Australian residents will no longer be able to open new derivatives positions on the platform, or increase existing ones. All remaining open positions will be closed by Binance on April 21. 

ASIC indicated that it had been conducting a “targeted review” of Binance’s business in Australia. “It is critically important that AFS licensees classify retail and wholesale clients in accordance with the law,” stated ASIC chair Joe Longo. “Retail clients trading in crypto derivatives are afforded important rights and consumer protections under financial services laws in Australia, including access to external dispute resolution through the Australian Financial Complaints Authority.” 

Binance stipulated, in the terms of cancellation of its license, for the decision not to have any impact on the exchange’s requirement to continue as a member of Australian Financial Complaints Authority until April 2024.  

Binance CEO Changpeng “CZ” Zhao took to Twitter to indicate that Binance’s loss of license would only impact 104 users, and that the decision had no impact on Binance’s Australian spot trading platform.  

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

MicroStrategy’s Bitcoin Stack Reaches 140,000 BTC

https://cryptobriefing.com/?p=123931

Key Takeaways

  • MicroStrategy acquired 1,045 BTC over the past week.
  • The company now holds 140,000 BTC.
  • It recently paid off its $205 million loan to Silvergate Bank at a 22% discount.

MicroStrategy grew its bitcoin stack yet again. The company now holds 140,000 BTC, worth $3.9 billion at today’s prices.

An Extra 1,045 BTC

Michael Saylor keeps adding to his Bitcoin bet.

The MicroStrategy co-founder announced today on Twitter that the company had purchased an additional 1,045 BTC for roughly $29 million at an average price of $28,016 per coin. MicroStrategy now holds 140,000 BTC, a sum worth $3.9 billion at the time of writing. Saylor indicated in his tweet that MicroStrategy’s average price of acquisition was $29,803 per bitcoin.

MicroStrategy declared last week that it had paid off its $205 million loan to Silvergate Bank following the bank’s sudden demise. The loan was collateralized with 34,619 of the company’s bitcoin holdings, as well as a $5 million cash reserve held at Silvergate. Because the loan had a scheduled maturity date of March 2025, MicroStrategy managed to enter an agreement with Silvergate to pay its dues early for only $161 million, a 22% discount. 

The same day, MicroStrategy announced that it had acquired an additional 6,455 BTC for approximately $150 million, for an average price of approximately $23,238 per coin.

Saylor stepped down from his position as CEO of MicroStrategy in August 2022. He is now the company’s executive chairman, with a single-minded focus on “Bitcoin acquisition strategy and related Bitcoin advocacy initiatives.” MicroStrategy president Phong Le replaced Saylor as CEO and took over the management of the company’s day-to-day operations.

Saylor was also accused of tax fraud by Washington D.C. Attorney General Karl Racine in August 2022. The District of Columbia is alleging that Saylor never paid income taxes despite living in the district for over 10 years. MicroStrategy was sued as well for “conspiring to help [Saylor] evade taxes he legally owes on hundreds of millions of dollars he’s earned while living in DC.” Saylor lost a bid to dismiss the claims in March 2023.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

NFT Decentralized Exchange Collection.xyz Launches on Ethereum

https://cryptobriefing.com/?p=123920

Key Takeaways

  • A new NFT decentralized exchange, Collection.xyz, is launching on Ethereum.
  • Contrary to first generation NFT marketplaces, Collection.xyz features an AMM mechanism.
  • The protocol aims to make the purchase and sale of NFTs more efficient.

Collection.xyz is looking to make NFT trading a smoother experience thanks to its innovative automated market mechanism.

An Essential Building Block

The NFT market is increasingly adopting DeFi components.

A new NFT decentralized exchange, Collection.xyz, is launching today on Ethereum.

Contrary to first generation NFT marketplaces like OpenSea or LooksRare, Collection.xyz sports liquidity pools and automated market maker (AMM) features—just like DeFi protocols such as Uniswap or Curve. Users provide either NFTs or ETH to these pools and receive tokens as rewards. This mechanism allows traders, in turn, to automate the purchase and sale of NFTs in bulk without intermediaries.

Collection.xyz also offers customized trading options, which include the possibility for traders of specifying which NFTs they want to accept (for example, only NFTs with unique traits, or super-rare NFTs, or NFTs trading above floor price). Users can also target specific NFTs ID numbers within the collection. 

“We developed Collection.xyz as an essential building block for the NFTFi industry,” stated Collection.xyz co-founder Spencer Yang. By enabling composability between Collection.xyz and other protocols, users can create endless combinations and new transaction possibilities such as collaterizing their liquidity pool position to borrow against, buying NFTs and paying later or depositing their LP tokens in other yield protocols to stack for yield.”

Furthermore, Collection.xyz aims to make “community-driven curation” a priority, meaning that the protocol will seek to involve NFT community members in market-making activities. The decentralized exchange also claims to offer a solution to the NFT royalties debate by linking royalties payout to the liquidity in the creator’s collection’s pools. 

Collection.xyz has been audited by ABDK Consulting, which counts Uniswap, GMX, ZKSpace, CitaDAO and Sudoswap as some of its clients.

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

The DOJ Is Liquidating its Seized Silk Road Bitcoin Stash

https://cryptobriefing.com/?p=123912

Key Takeaways

  • The U.S. government has begun liquidating the bitcoin it seized from Silk Road exploiter James Zhong.
  • The DOJ already sold 9,861 BTC on March 14, netting $215.5 million.
  • It plans on selling the remaining 41,490 BTC in four installments over the course of the year.

On-chain analysts noticed at the beginning of the month that the U.S. government was moving funds it had seized from Silk Road exploiter James Zhong. It turns out that the DOJ was maneuvering to sell some of the stash.

Dumping Silk Road Bitcoin

The U.S. government is selling some of its bitcoin holdings.

A new filing from the United States Department of Justice indicates that some of the bitcoin seized by authorities from Silk Road exploiter James Zhong has already been sold.

According to the document, the government held at one point a total of 51,351 BTC (worth approximately $1.4 billion at today’s prices) in connection to Silk Road—the majority of which came from Zhong. Of these holdings, 9,861 BTC were sold on March 14, netting the DOJ over $215.5 million. The filing states that the government paid roughly $215,738 in fees for the transaction. It plans to sell the remaining 41,490 BTC ($1.1 billion) in four more installments over the course of the calendar year—though it will wait until Zhong’s sentencing to liquidate the second batch. 

Zhong is accused of defrauding darknet marketplace Silk Road by exploiting the platform’s withdrawal mechanism in September 2012. U.S. authorities managed to seize Zhong’s stash of 50,676 BTC in November 2021. Zhong pleaded guilty to one count of wire fraud in November 2022. Though he faces up to 20 years in jail, he recently asked the court to spare him prison time, on account of his difficult childhood, autism, and the fact that his crime was victimless. He is scheduled for sentencing on April 14.

It’s highly likely that the government used Coinbase to sell its 9,861 BTC. On-chain analysts noticed at the beginning of March that wallets associated with seized Silk Road funds had moved approximately 49,000 BTC to various fresh addresses. One of these addresses was identified as belonging to crypto exchange Coinbase; it received 9,825 BTC on March 7. 

The DOJ’s use of Coinbase is atypical, as the government has historically preferred liquidating seized digital assets through public auctions. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Sam Bankman-Fried Is Using Alameda Funds to Pay for His Legal Bills: Report

https://cryptobriefing.com/?p=123898

Key Takeaways

  • Sam Bankman-Fried is reportedly paying for his legal fees with $11.7 million he gave to his father.
  • He made the gift in 2021 by using his lifetime estate and gift tax exemption.
  • The money originally came from an Alameda loan.

Sam Bankman-Fried claimed to have only $100,000 to his name in the immediate aftermath of the FTX collapse. So how is he bankrolling his legal defense?

A $11.7 Million Gift

As Sam Bankman-Fried’s legal difficulties keep increasing, observers have been wondering how he has been able to afford his legal counsel. 

According to a new report from Forbes, former FTX CEO Sam Bankman-Fried has been paying for his legal bills with funds originally belonging to Alameda Research. 

Bankman-Fried reportedly borrowed over $10 million from Alameda in 2021 and arranged to give the money to his father, Joseph Bankman, by using his lifetime estate and gift tax exemption. According to Forbes, the tax-free gift—believed to have been worth $11.7 million—has been used to pay for Bankman-Fried’s defense. “I’ll be spending substantially all of my resources on Sam’s defense,” Bankman previously stated. Bankman-Fried’s parents have already leveraged their multi-million dollar Palo Alto property to help secure the disgraced crypto founder’s $250 million bail package.

Bankman-Fried has retained the services of Mark Cohen and Christian Everdell of Cohen & Gresser, who previously represented Ghislaine Maxwell during her sex-trafficking trial. His legal bills are likely to reach several millions of dollars. 

The FTX co-founder had previously attempted to take control of his 56 million Robinhood shares (currently worth approximately $507 million) and use them to pay for his bills. However, the Department of Justice seized the shares as they were suspected of having been purchased with FTX customer funds. It’s likely that Bankman-Fried’s lifetime gift to his father was also made using client assets. 

Bankman-Fried has further asked to use his FTX insurance policy to cover his legal bills. The new management at FTX has refused his request.

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Bankman-Fried Accused of Bribing Chinese Government Officials

https://cryptobriefing.com/?p=123890

Key Takeaways

  • Sam Bankman-Fried allegedly bribed Chinese officials to unfreeze Alameda funds on Chinese crypto exchanges.
  • Prosecutors claim he transferred at least $40 million to unblock funds.
  • Bankman-Fried is already being charged with twelve other counts.

U.S. prosecutors believe that Sam Bankman-Fried resorted to bribery in order to unfreeze over $1 billion worth of Alameda Research’s crypto funds from Chinese exchanges in 2021.

$40 Million Bribe

Sam Bankman-Fried’s case keeps getting worse and worse.

Today U.S. prosecutors unveiled a new charge against the former FTX CEO. Bankman-Fried is being accused of giving Chinese government officials at least $40 million in bribes in 2021.

According to the indictment, the purpose of the bribe was to influence Chinese officials into unfreezing two Alameda Research trading accounts that contained over $1 billion in cryptocurrencies. The filing indicates that the trading accounts were hosted on two of China’s largest crypto exchanges, though the exchanges themselves aren’t named. The funds were reportedly frozen due to an investigation regarding an Alameda counterparty.

Prosecutors claim that Bankman-Fried attempted to unfreeze the funds through a variety of means, including lobbying, direct communication with exchanges, and fraudulently opening new accounts on these exchanges by using the personal information of people unassociated with FTX or Alameda and then trying to move the frozen funds to these new accounts. Bankman-Fried eventually ordered the transfer of $40 million in cryptocurrency to a private wallet, in multiple installments. At around the same time, Alameda’s funds were unfrozen. 

Bankman-Fried is now being charged with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act. He is already being charged with 12 other counts, including wire fraud, securities fraud, commodities fraud, bank fraud, operating an unlicensed money transmitter, and conspiracy to make unlawful political contributions.

Three of Bankman-Fried’s closest associates—FTX co-founder Gary Wang, Alameda Research CEO Caroline Ellison, and FTX head of engineering Nishad Singh—have already pleaded guilty to various fraud charges and are reportedly cooperating with law enforcement. 

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Binance Sued by the CFTC

https://cryptobriefing.com/?p=123887

Key Takeaways

  • The CFTC is suing Binance.
  • The regulator claims Binance is offering commodities trading services to U.S. customers.
  • It also believes that Binance helped its clients circumvent U.S. compliance controls.

The CFTC filed a 74-page complaint against Binance today at the U.S. District Court for the Northern District of Illinois. It claims the company is engaging in jurisdictional arbitrage in order to offer commodities trading services to its U.S. customers.

Regulatory Arbitrage

Binance is in hot waters with regulators again.

Today the United States Commodity Futures Trading Commission sued the leading global crypto exchange and its CEO, Changpeng “CZ” Zhao, for its alleged numerous violations of the Commodity Exchange Act and CFTC regulations.

According to the regulator, Binance purposefully ignored CEA provisions by engaging in regulatory arbitrage strategies—meaning that the company circumvented U.S. law and restrictions by basing itself in friendlier jurisdictions. While Binance was originally founded in China, the firm currently does not have official headquarters anywhere. 

“Today’s enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors,” said CFTC Chairman Rostin Behnam in a press release. “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance.”

The CFTC alleges that Binance has been unlawfully providing commodities trading services to U.S. customers since 2019. Interestingly, the regulator explicitly named BTC, ETH, and LTC among these commodities. Securities and Exchange Commission Chair Gary Gensler, however, claimed in February that every cryptocurrency other than Bitcoin was a security.

The CFTC further claimed that Binance had instructed U.S. employees and customers on how to circumvent the exchange’s compliance controls. The agency is seeking disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further commodities law violations. 

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Do Kwon Faces New Charges in U.S. and Montenegro

https://cryptobriefing.com/?p=123876

Key Takeaways

  • Do Kwon is facing new charges in the United States and Montenegro.
  • U.S. prosecutors are charging him with eight counts of fraud, while Montenegrin police are charging him with document forgery.
  • Kwon was arrested yesterday in Montenegro, at Podgorica airport.

Do Kwon is being accused by U.S. prosecutors of committing commodities fraud, securities fraud, wire fraud, and engaging in market manipulation.

Eight Counts of Fraud

Do Kwon’s legal troubles keep worsening.

Yesterday the United States Department of Justice filed a complaint against Terra frontman Do Kwon, charging him with eight different counts of fraud: conspiracy to defraud, two counts of commodities fraud, two counts of securities fraud, two counts of wire fraud, and engaging in market manipulation. The DOJ is seeking Kwon’s extradition to the U.S., according to CoinDesk.

Kwon was apprehended yesterday in Montenegro, at Podgorica airport. Local media reported that the Terraform Labs CEO was attempting to board a flight to Dubai by using a fake Costa Rican passport. He was also carrying South Korean and Belgian travel documents.

Kwon’s arrest was made public by Montenegrin Minister of Internal Affairs Filip Adžić, who announced on Twitter that Montenegrin police had detained “a person suspected of being one of the most wanted fugitives, South Korean citizen Do Kwon.” South Korean authorities later confirmed Kwon’s identity through photographic data and fingerprint information.

In addition to the new charges brought to him by U.S. prosecutors, Kwon is also facing criminal charges in Montenegro for document forgery. He is due to appear today at Podgorica’s Higher Court for an extradition request hearing. It is unclear whether Kwon will be extradited to South Korea or the United States; however, his arrest was originally conducted on a South Korean warrant.

Prior to his capture, Kwon had repeatedly stated that he was “not on the run”, despite Interpol issuing a red notice for him in September—effectively making him a wanted man in 195 different nations. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Federal Reserve Hikes Rates Up by 25 Basis Points Despite Banking Turmoil

https://cryptobriefing.com/?p=123852

Key Takeaways

  • The Federal Reserve has raised rates up by 0.25%
  • Federal interest rates now sit in a range between 4.75% to 5%.
  • The Fed’s decision comes shortly after the second biggest banking failure in U.S. history.

Despite Silicon Valley Bank’s implosion, the Federal Reserve has elected to keep tightening monetary conditions in the United States.

4.75% to 5% range

The Federal Reserve is pushing on in its fight against inflation.

The U.S. central bank announced today during the Federal Open Market Committee that it would be raising federal interest rates by 25 basis points, bringing them to a range of 4.75% to 5%. 

After being criticized for not taking inflation fears seriously, the Fed began aggressively hiking federal interest rates in March 2022. By doing so, the central bank raised the cost of borrowing, which in turn strengthened the value of the U.S. dollar. At first the Fed raised rates at a fast pace—enacting multiple 75 basis point raises in quick succession—throughout 2022, but slowed down at the end of the year, only raising rates by 50 basis points in December and 25 basis points in February 2023.

Nevertheless, according to the latest CPI print, inflation is still at 6% year-on-year, well above Federal Reserve Chair Jerome Powell’s oft stated goal of 2%. Powell indicated on March 7 that the central bank was therefore considering a resumption of aggressive rate hikes.

However, the collapse of Silicon Valley Bank (and distress of other regional banks) prompted concerns about the resiliency of the U.S. banking sector in a high-interest rate environment, as the Federal Reserve was forced to step in and guarantee depositors would be made whole. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Governor Ron DeSantis Wants to Outlaw CBDCs in Florida

https://cryptobriefing.com/?p=123827

Key Takeaways

  • Florida Governor Ron DeSantis wants to prevent CBDCs from being forced onto Florida residents.
  • He announced yesterday his intention to ban anti-CBDC legislation.
  • DeSantis claimed that the U.S. government’s efforts to create a CBDC were about “surveillance and control.”

Florida Governor Ron DeSantis is looking to take steps to prevent residents of the Sunshine State from having CBDCs imposed on them.

Surveillance and Control

Central bank digital currencies are facing growing opposition in the United States.

Florida Governor and presidential candidate Ron DeSantis announced yesterday his intention to pass comprehensive legislation prohibiting the federal government from forcing Florida residents to use CBDCs.

According to a press release, the legislation would seek to protect consumers and businesses by forbidding CBDCs (whether issued by the U.S. government or by a foreign nation) from being used as money in Florida. The legislation would also call on like-minded states to adopt similar prohibitions in order to fight back against the technology on a worldwide scale.

“The Biden administration’s efforts to inject a centralized bank digital currency is about surveillance and control,” stated DeSantis. “Today’s announcement will protect Florida consumers and businesses from the reckless adoption of a ‘centralized digital dollar’ which will stifle innovation and promote government-sanctioned surveillance. Florida will not side with economic central planners; we will not adopt policies that threaten personal economic freedom and security.”

DeSantis has previously expressed a positive view of cryptocurrencies—even declaring in March 2022 that Floridian state agencies were working on a way for residents to pay their taxes in crypto.

The U.S. government has hinted on numerous occasions that it was looking to build and deploy a digital dollar, with Federal Reserve Chair Jerome Powell stating in June 2022 that “in light of the tremendous growth in crypto assets and stablecoins, the Federal Reserve is examining whether a U.S. central bank digital currency would improve on an already safe and efficient domestic payments system.” 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Flagstar Acquires Signature Bank—Except for its Crypto Business

https://cryptobriefing.com/?p=123815

Key Takeaways

  • The FDIC announced yesterday that New York Community Bancorp would purchase Signature Bank through its subsidiary, Flagstar.
  • However, Flagstar’s bid excludes Signature Bank’s crypto clients.
  • Signature Bank board member Barney Frank believes regulators shut down the institution to “send the message that crypto is toxic”.

Flagstar is taking over Signature Bank’s operations, but crypto companies will no longer be able to use the institution, the FDIC claimed in a press release yesterday.

Digital Banking Business Excluded

Signature Bank has found a new home.

The Federal Deposit Insurance Corporation (FDIC) announced yesterday that New York Community Bancorp had acquired crypto-friendly bank Signature Bank through its subsidiary, Flagstar Bank.

The FDIC indicated that all former branches of Signature Bank would operate as usual, during their normal business hours, from March 20 onwards. Existing Signature Bank customers were told to keep using their local branches until further notice.

However, the FDIC declared that “Flagstar Bank’s bid did not include approximately $4 billion of deposits related to the former Signature Bank’s digital banking business,” meaning that crypto companies are unlikely to be able to keep using the institution’s banking services. The regulator stated its intention to return the $4 billion of crypto deposits to the businesses themselves. 

The decision to exclude crypto companies is noteworthy. Former congressman and Signature Bank board member Barney Frank claimed last week that regulators had closed Signature Bank for political reasons and not fundamental ones. “I believe the regulators, especially the New York state regulators, wanted to send the message that crypto is toxic,” he said. Reuters later reported that bidders for the closed bank were forced by regulators to agree to give up on the bank’s crypto business—a claim which FDIC officials denied.

Prominent members of the crypto community believe that the U.S. government is currently attempting to cut off the industry from the banking sector—a strategy reminiscent of the Obama administration’s treatment of online poker. Last Wednesday House Majority Whip Tom Emmer (R-MN) sent a letter to the FDIC questioning whether regulators had been “weaponizing their authorities over the last several months to purge legal digital asset entities and opportunities from the United States.”

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Arbitrum Airdrop Finally Announced

https://cryptobriefing.com/?p=123794

Key Takeaways

  • Arbitrum is airdropping a native token.
  • Airdrop eligibility is based on numerous factors, including multi-month usage of Arbitrum One or Arbitrum Nova.
  • The airdrop will be claimable on March 23.

After months of feverish anticipation, Arbitrum is finally ready to airdrop a native token—ARB. Here’s what you need to know.

Airdrop Claimable by March 23

The Arbitrum community is rejoicing.

Ethereum Layer 2 solution Arbitrum finally announced today that it would be airdropping its long-awaited governance token, ARB, to early users of the network.

“After years of development and nearly 18 months running on mainnet, The Arbitrum Foundation is extremely excited to announce the launch of DAO governance for the Arbitrum One and Arbitrum Nova networks, a massive leap forward in the decentralization of the two networks,” stated the project.

Eligibility for the airdrop was determined by a number of factors: bridging to Arbitrum One or Arbitrum Nova, transacting on the network over the span of several months, interacting with multiple smart contracts, conducting transactions over of $10,000 in value, and providing over $10,000 in liquidity to various protocols. The completion of any one of these steps guarantees users a portion of the ARB airdrop, with the size of the allocation increasing based on the number of fulfilled criteria.

Although users can already check on the official website whether they qualified, the airdrop will only be claimable on March 23. Arbitrum indicated that 11.62% of the total token supply would be used for the airdrop: the Arbitrum DAO treasury will receive 42.78% of the supply, the team and its advisors 26.94%, investors 17.53%, and DAOs in the Arbitrum ecosystem 1.13%. 

Arbitrum is one of many crypto projects—such as Optimism, Polygon, zkSync, and StarkNet—aiming to make transactions on the Ethereum network more affordable by outsourcing computational data and subsequently sending validity proofs back to the mainnet. The scheme saves block space and allows for transactions to be bundled together, further reducing the amount of data committed to mainnet while splitting gas fees between many users.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

House Majority Whip Questions FDIC Over Crypto Banking “Purge”

https://cryptobriefing.com/house-majority-whip-questions-fdic-over-crypto-banking-purge/

Key Takeaways

  • House Majority Whip Tom Emmer questioned FDIC Chairman Martin Gruenberg over Operation Choke Point 2.0.
  • Emmer cited in his letter multiple instances in which federal regulators had pressured banks to stop providing their services to crypto companies.
  • Emmer called the regulatory strategy “lazy and destructive.”

Rep. Tom Emmer sent a letter sharply questioning FDIC Chairman Gruenberg following reports that federal regulators were attempting to cut off the crypto industry from the banking sector.

A Lazy and Destructive Regulatory Strategy

Crypto has important allies in Congress.

Today House Majority Whip Tom Emmer (R-MN) sent a letter asking Federal Deposit Insurance Corporation Chairman Martin Gruenberg to address rumors that the FDIC and other federal entities had been pressuring the banking sector to stop providing services to the crypto industry.

“Recent reports indicate that Federal financial regulators have effectively weaponized their authorities over the last several months to purge legal digital asset entities and opportunities from the United States,” stated the letter. Emmer went on to list several instances—including a joint statement made on January 3 by the Federal Reserve, FDIC, and OCC discouraging banks from holding crypto or providing services to crypto companies on a “safety and soundness” basis—in which the Biden administration appeared to have unlawfully targeted the crypto industry.

“The Administration’s demonstrated effort to choke off digital assets from the United States financial system is a lazy and destructive regulatory strategy that is stagnating innovation and subjecting American users of digital assets to less sophisticated regulatory jurisdictions,” said Emmer.

The congressman proceeded to ask point-blank whether the FDIC had instructed banks not to provide services to crypto companies, and whether the regulator had threatened banks with more “onerous” supervision should they not comply with instructions. The FDIC was given until May 24 to answer.

Tom Emmer has proved himself one of crypto’s staunchest allies in Congress over the past year. In July 2022 Emmer slammed the Securities and Exchange Commission for its “power hungry” approach to crypto regulation; he also sent a letter questioning the Treasury’s motives for banning privacy protocol Tornado Cash.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Binance Halts GBP Deposits and Withdrawals

https://cryptobriefing.com/?p=123776

Key Takeaways

  • Binance is suspending all British pound deposits and withdrawals.
  • The exchange already halted U.S. dollar transfers last month.
  • Binance claims that only 1% of its users will be impacted by the change.

Only a month after halting U.S. dollar bank transfers, Binance is now being forced to cease processing British pound deposits and withdrawals as well. 

Only 1% of Users Impacted

Crypto companies keep struggling with their banking partners.

Global leading crypto exchange Binance will be suspending British pound deposits and withdrawals in the upcoming week. The changes have already come into effect for new users, while existing users will have until May 22 before seeing the service shut down.

“Paysafe, our fiat partner that provides GBP deposit and withdrawal services via bank transfers and via card to Binance users, has advised us that they will no longer be able to provide these services from May 22, 2023,” a Binance spokesperson told CoinDesk.

Last month, Binance announced that it would suspend deposits and withdrawals of U.S. dollars through bank transfers. The exchange indicated back then that the suspension would only affect 0.01% of its monthly active users. This time around, it stated that the GBP change would impact less than 1% of its users. The company assured that it was working to restart both services as soon as possible.

Binance’s suspension of GBP and USD transfers are likely due to banking woes. According to lead Bitcoin advocate Nic Carter, the U.S. government may be trying to crack down on the crypto industry by cutting it off from the banking sector—a strategy Carter termed Operation Choke Point 2.0. Carter claims that the scheme involves putting pressure on banking institutions to avoid providing their services to crypto companies on a “safety and soundness” basis.

Despite these headwinds, Binance made over $504 billion of spot trading volume in February—more than 61% of the entire market share.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Circle’s USDC Regains $1 Peg After Tumultuous Weekend

https://cryptobriefing.com/circles-usdc-regains-1-peg-after-tumultuous-weekend/

Key Takeaways

  • Circle’s USDC is trading for $1 again.
  • The stablecoin broke its peg late on Friday after Circle revealed it was exposed to Silicon Valley Bank.
  • The U.S. government stepped in to assure all SVB depositors would be made whole.

After breaking its peg over the weekend and trading as low as $0.87, Circle’s USDC stablecoin is now at $1 again.

1 USDC for $0.87

All eyes are on USDC as the banking crisis rages on.

Circle’s USDC regained its $1 peg earlier today after a tumultuous weekend that saw the second largest stablecoin by market capitalization fall to $0.87.

Stablecoins are cryptocurrencies designed to stay at parity with a government-issued currency, such as the U.S. dollar or the euro. In USDC’s case, parity is achieved and maintained by backing every token with 1:1 dollar reserves.

However, Circle disclosed late on Friday that, out of its $40 billion in reserves, $3.3 billion remained stuck at Silicon Valley Bank. Silicon Valley Bank experienced a bank run shortly after announcing on Wednesday that it was taking extraordinary and immediate steps to shore up its finances—including selling $21 billion of its most liquid assets, borrowing $15 billion, and raising cash by organizing an emergency sale of its stock. The FDIC forced the bank to close down on Friday.

Circle’s disclosure—compounded by the firm’s inability to directly redeem USDC over the weekend because of the banking system’s working hours—sent USDC plunging as low as $0.87, per Coingecko data. However, Circle CEO Jeremy Allaire took to Twitter on Saturday to assure that the firm would indeed be redeeming USDC tokens on a 1:1 basis on Monday morning as normal. The statement helped USDC rebound to $0.94.

USDC fully regained its peg shortly after the U.S. government announced it would take steps to ensure all Silicon Valley Bank depositors would be made whole. Allaire responded to the news by stating that Circle would be moving all of its remaining Silicon Valley Bank deposits to BNY Mellon—another of Circle’s banking partners. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Silicon Valley Bank Closed Down, Regional Bank Stocks Trading Halted

https://cryptobriefing.com/?p=123753

Key Takeaways

  • Silicon Valley Bank was closed by the California Department of Financial Protection.
  • Trading for several regional banks—including crypto-friendly Signature Bank—was halted after the stocks experienced severe volatility.
  • Silicon Valley Bank announced on Wednesday that it had taken extraordinary steps to shore up its finances.

Silicon Valley Bank, the 18th largest bank in the U.S. by total assets, was closed down by regulators today after it suffered a bank run.  

Biggest Bank Failure Since the Great Recession

The banking sector is taking a hit.

Early on Friday, the California Department of Financial Protection and Innovation announced the closure of Silicon Valley Bank. All FDIC-insured deposits were transferred from SVB to the Deposit Insurance National Bank of Santa Clara. The FDIC indicated that all insured depositors would have full access to their insured deposits by March 13, while uninsured depositors would receive certificates for the amounts of their uninsured funds.

Trading for several regional bank stocks—including SVB, Signature Bank, First Republic Bank, PacWest Bancorp, and Western Alliance Bancorp—had already been halted following the news of Silicon Valley Bank’s liquidity issues.

At the time of writing, SVB was down 67% on the weekly, Signature Bank 27%, First Republic 30%, PacWest Bancorp 37%, and Western Alliance by 29%. 

Silicon Valley Bank unexpectedly announced on Wednesday that it was taking extraordinary and immediate steps to shore up its finances. The bank disclosed that it had sold off $21 billion of its most liquid assets, borrowed $15 billion, and attempted to raise cash by organizing an emergency sale of its stock. 

The news sparked a wave of withdrawals Thursday as tech startups—which compose the overwhelming majority of the bank’s customers—sought to move their funds to a safer place. According to CNBC, SVB Financial (Silicon Valley Bank’s parent company), having failed to raise sufficient capital to shore up its operations, then began seeking to sell itself. At the time of its closure, Silicon Valley Bank was the 18th largest bank in the U.S. by total assets.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Crypto Friendly Bank Silvergate Shuts Down

https://cryptobriefing.com/?p=123748

Key Takeaways

  • Silvergate Bank announced yesterday it would be voluntarily undergoing liquidation.
  • The bank assured that all customer deposits would be fully repaid.
  • Silvergate had previously informed the SEC that it was “less than well-capitalized”.

Silvergate Bank is winding down operations, but it assured that all customer deposits would be fully repaid.

Traditional Banking Risks

Another pillar of the crypto industry has succumbed.

Silvergate Capital Corporation, the holding company for Silvergate Bank, announced yesterday its intent to completely wind down operations. 

The bank indicated in its press release that it would be voluntarily undergoing liquidation “in an orderly manner and in accordance with applicable regulatory processes.” The bank stated that all customer deposits would be fully repaid, and that it was currently figuring out how to resolve claims and preserve the value of its assets.

Silvergate told the Securities and Exchange Commission at the beginning of the month that it was perhaps “less than well-capitalized” and that it was “reevaluating its business”. The company also admitted to being uncertain about its ability to continue operating. The news sent shockwaves through the crypto industry, with major firms such as Coinbase, Paxos, Circle, Galaxy Digital, and CBOE all quickly announcing they were pausing transactions to and from Silvergate.

Shortly thereafter, Silvergate made the decision to discontinue the Silvergate Exchange Network (SEN), which it used to enable customers to exchange government-issued currencies for cryptocurrencies.

Silvergate had previously disclosed a $1.05 billion loss in the fourth quarter of 2022 due to the “crisis of confidence” the crypto industry experienced following FTX’s collapse. However, former FDIC chair Sheila Bair told Bloomberg yesterday that “Silvergate’s troubles [were] as much if not more about traditional banking risks—lack of diversification, maturity mismatches—as it is about its exposure to crypto.” 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

U.S. Government Moves $1B of Seized Silk Road BTC, Prompting Liquidation Fears

https://cryptobriefing.com/?p=123741

Key Takeaways

  • A wallet associated with seized Silk Road funds moved $1.08 billion in BTC.
  • The address moved 39,174 BTC to two new wallets, and 9,825 BTC to a wallet reportedly belonging to Coinbase.
  • The funds were originally seized from Silk Road exploiter James Zhong in November 2021.

The DOJ may have sent some of the seized Silk Road funds to Coinbase, but that doesn’t mean they’re about to liquidate.

$1.08 Billion in BTC

It appears that some of Silk Road’s bitcoins are on the move.

On-chain data shows that a Bitcoin wallet address associated with the U.S. government moved approximately 49,000 BTC yesterday—a sum worth roughly $1.08 billion at the time of writing. 

The address, which begins with BC1QMX, transferred about 9,000 BTC ($199 million) to an address beginning in BC1QE, then 30,174 BTC ($667 million) to a second address beginning in BC1QF, and 9,825 BTC ($217 million) to a third address starting in 367YO. A little over 825 bitcoins ($18 million) remain in the original address.

According to on-chain security firm PeckShield, the original address belongs to the U.S. government, which uses the wallet to store some of the 50,676 BTC ($1.12 billion) it seized from Silk Road exploiter James Zhong in November 2021. Zhong obtained the sum by exploiting the darknet marketplace’s withdrawal mechanism in September 2012. He pleaded guilty to one count of wire fraud in November 2022. 

The first two addresses, which received a combined total of 39,174 BTC, were freshly created. However, PeckShield identified the third address (367YO) as belonging to U.S.-based crypto exchange Coinbase. Bitcoin on-chain analytics firm Glassnode and on-chain analytics firm Lookonchain both echoed PeckShield’s findings. Crypto Briefing was unable to independently verify wallet ownership.

The moving funds prompted speculation on Twitter that the Department of Justice may be seeking to sell some of the bitcoins it sent to Coinbase. That seems unlikely, however, as the U.S. government has historically elected to liquidate its bitcoin holdings through public auctions. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Powell Warns Fed Could Get Aggressive With Rates Hikes Again

https://cryptobriefing.com/?p=123733

Key Takeaways

  • Federal Reserve Chair Jerome Powell announced today the central bank was likely to raise interest rates higher than initially expected.
  • He also indicated that rate hikes may come at a faster pace.
  • The U.S. economy is showing signs of persistent inflation.

Persistent signs of inflation are forcing the Federal Reserve to contemplate more aggressive rate hikes.

Higher and Faster

The Fed may not have tamed inflation just yet.

Federal Reserve Chair Jerome Powell announced today that the central bank was likely to raise federal interest rates higher than previously thought, and at a faster pace than initially believed, due to signs of persistent inflation in the U.S. economy. 

“Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” Powell told the Senate Banking Committee. “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

The Federal Reserve began hiking rates in March 2022, raising them from 0% to the 4.50% to 4.75% range within a year. After a series of 75 basis point hikes, the central bank decided to only raise rates by 50 basis points in December and 25 basis points in January, signaling a potential cooldown in pace. Powell’s comments, however, indicate that the Federal Reserve is ready to potentially become aggressive in its approach once again. 

Markets only mildly reacted to the news. At the time of writing, the DXY is up 0.98%, while the S&P500 is down 0.96%, the Nasdaq 0.63%, and the Dow 0.90%. BTC and ETH are holding well, with the top cryptocurrency having only slid by 0.45%, and the top smart contract platform by 0.49%. 

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

Kraken to Launch its Own Bank “Very Soon”

https://cryptobriefing.com/?p=123728

Key Takeaways

  • Kraken Bank is on track to launch soon, according to Kraken chief legal officer Marco Santori.
  • Kraken originally won its bank charter approval in 2020.
  • The bank, fully online, will provide “comprehensive deposit-taking, custody and fiduciary services for digital assets.”

The crypto industry may be suffering from a regulatory crackdown in the U.S., but that’s not preventing Kraken from seeking to launch its own bank.

Kraken Bank

The current regulatory climate isn’t scaring Kraken. 

The crypto exchange’s chief legal officer Marco Santori confirmed on The Scoop podcast that Kraken would soon be launching its own bank. “Kraken Bank is very much on track to launch, very soon,” he stated. “We’re going to have those pens with the little ball chains. We’re going to order thousands of them and attach them to the desks of Wall Street banks everywhere. With our logo.”

Kraken initially secured the State of Wyoming’s approval to form a Special Purpose Depository Institution (SPDI) in 2020. According to the company, Kraken Bank was the “first digital asset company in U.S. history to receive a bank charter recognized under federal and state law,” and will be the first regulated U.S. bank to provide “comprehensive deposit-taking, custody and fiduciary services for digital assets.”

Kraken Bank, headquartered in Cheyenne, was originally scheduled to launch in 2021, and then to launch in phases through 2022. Santori’s comments suggest that, despite setbacks and delays, Kraken Bank may finally be within reach. The bank indicated that its services would first be rolled out to existing U.S.-based Kraken clients, with a potential international expansion in the future. The bank is not planning on providing in-person services, instead keeping all operations online and via mobile devices.

Santori also addressed the regulatory crackdown the crypto industry is currently facing in the United States. Kraken recently reached a $30 million settlement with the Securities and Exchange Commission over its staking program, which it was ordered to shut down in the U.S. Crypto leaders have also accused the government of trying to cut off the crypto industry from the banking industry by putting pressure on banks themselves.  

“We’re returning to an era where banks are going to be very cautious as to what accounts they open,” said Santori. “Wall Street is going to be fine. Kraken and Coinbase are going to be okay. But the guy or gal who has a new idea about how to provide infrastructure to the crypto economy, it’s going to be a really tough road over the next few years for them. No question.”

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.