Fed hikes rates by a quarter point, Bitcoin drops 0.48%


Bitcoin, the largest cryptocurrency by market capitalization, dropped 0.48% on Thursday, Hong Kong time, after the Federal Reserve’s Federal Open Market Committee said it would raise interest rates by 25 basis points, as widely expected. The latest rate bump brings the target range to 5%-5.25%, the highest since September 2007.

See related story: Bitcoin, Ether, Litecoin rise, BNB stumbles; US equity futures flat ahead of Fed interest rate decision

Fast facts

  • Bitcoin traded at US$28,452 as of 3:00 a.m. in Hong Kong, while most other top 10 cryptocurrencies by market capitalization traded mixed, according to CoinMarketCap data. 
  • Major stock indexes dropped following the announcement. The Dow Jones Industrial Average closed Wednesday down 0.8%, the S&P 500 0.7% and the Nasdaq Composite 0.5%. 
  • Fed Chair Jerome Powell said he remains committed to bringing inflation back down to around 2%. Inflation has been moderating in recent months, but pressures “continue to run high,” Powell added. The U.S. Bureau of Statistics said March inflation was at 5%. 
  • Powell said the Fed had not decided on whether it will stop its rate-hiking cycle. He added that decisions will be made on a meeting-by-meeting basis and that the central bank is “prepared to do more if greater monetary policy is warranted.”
  • This past weekend saw the latest development in bank failures. First Republic Bank, the 12th-largest bank by assets in the U.S., required a joint rescue by the Federal Deposit Insurance Corporation and JPMorgan. 

See related story: Crypto market dips ahead of US Fed meeting

Polygon developers get access to Google Cloud’s node service


Google Cloud has announced that its node hosting service, the Blockchain Node Engine, will be available for developers on the Polygon blockchain. 

See related story: Investment giant Franklin Templeton connects US$270 million fund to Polygon network

Fast facts

  • The  Blockchain Node Engine, previously limited to Ethereum and Solana, will allow developers to focus on building on Polygon without the need to configure or run their own nodes, Google Cloud said in a statement on Thursday during CoinDesk’s Consensus conference. 
  • Google Cloud will also provide startups backed by Polygon Ventures with benefits, including server hosting credits and access to its newly announced Web3 startup program.
  • Google Cloud, the cloud computing arm of internet giant Google, created its digital assets and Web3 engineering team last year. It has since established partnerships with a range of blockchains, including BNB Chain, Solana, Aptos, Tezos, Casper, and Celo.
  • Polygon’s Ethereum scaling technology is being used by global brands such as Starbucks and Mercedes-Benz.  
  • Polygon’s cryptocurrency, MATIC, rose 6.2% to US$1.02 in the 24 hours to 4:00 a.m. in Hong Kong. 

See related story: Google Cloud partners Coinbase for crypto payments, data services

Coinbase ups the ante with SEC, asking court to require crypto clarity from regulator


Coinbase, the largest cryptocurrency exchange in the U.S., sued the Securities and Exchange Commission (SEC) on Monday, asking that the regulator be required by a court to publicly respond to its July 2022 petition asking for clearer crypto regulation guidelines. 

See related story: SEC’s Gary Gensler dodges question on whether Ethereum is a security

Fast facts

  • Coinbase filed the action under the Administrative Procedure Act, which requires the SEC to respond to Coinbase’s July 2022 petition within a reasonable time. 
  • Coinbase’s July 2022 petition asked that the SEC propose and adopt clearer regulatory guidelines for the cryptocurrency industry in the U.S. through its formal rulemaking process. Over 1,700 entities and individuals have submitted comments on Coinbase’s petition, echoing the request for regulatory clarity, according to Coinbase
  • Coinbase Chief Legal Officer Paul Grewal wrote in a blog post that Coinbase is not asking the court to tell the SEC how to respond. “We are simply requesting that the Court order the SEC to respond at all, which they are legally obligated to do,” he said.
  • The SEC did not offer a specific public response to Coinbase’s petition last year, according to Coinbase. However, in recent months, the SEC has increased its enforcement actions and warnings against cryptocurrency exchanges, including Bittrex, Gemini, and Coinbase itself. 
  • Coinbase asked the SEC in the filing to formally clarify “which digital assets must be registered as securities or how the registration and other requirements designed decades ago for traditional securities apply to digital assets.”
  • Coinbase’s lawsuit against the SEC comes just over a month after the exchange received a Wells notice from the SEC, warning that it expected to sue the exchange over allegations of violating U.S. securities law.
  • During a congressional hearing last month, SEC chair Gensler said “regulations actually already exist” for crypto to be managed effectively under securities laws. 

See related story: SEC warns Coinbase of potential legal action over staking, separately targets Tron founder Sun

EU Parliament approves its first crypto regulation MiCA


The European Parliament has approved the Markets in Crypto-Assets Act (MiCA), a legislation that standardizes regulations and establishes harmonized rules for crypto assets across the European Union. The act, first introduced in 2020, awaits approval from the European Council before it can become effective regulation.

See related article: How Europe’s MiCA can pave the way for crypto’s revival

Fast facts

  • MiCA intends to provide legal certainty for the crypto industry and investors by setting guidelines for the operation, structure, and governance of digital asset token issuers. It also outlines rules on transparency and disclosure requirements for issuing and trading cryptocurrencies.
  • Once implemented, MiCA will require companies offering crypto-related services in the EU to register in one of the member states, allowing them to operate across the bloc.
  • Despite gaining preliminary approval last summer, MiCA does not include rules governing critical areas such as decentralized finance and non-fungible tokens, prompting calls for a MiCA 2 from figures like European Central Bank chief Christine Lagarde
  • MiCA mandates stablecoin issuers to maintain a sufficient local reserve to meet redemption requests in the event of mass withdrawals.
  • Mairead McGuinness, the European commissioner for financial services, said she expects the rules to start applying “from next year.” The rules on stablecoin will take effect in July 2024, while other requirements will be enforced from January 2025.
  • The EU also passed the Transfer of Funds rule, which obligates exchanges to share personal and transfer data on all crypto transactions with authorities upon request and report on self-hosted wallets that send over 1,000 euros (US$1,100). 

See related article: Bitcoin, proof-of-work ban removed from European Union’s MiCA

SEC’s Gary Gensler dodges question on whether Ethereum is a security


Securities and Exchange Commission (SEC) Chair Gary Gensler did not give a direct answer when asked whether Ether, the native cryptocurrency of the Ethereum blockchain, is a security or a commodity at a congressional oversight hearing on Tuesday. 

See related story: CFTC chair calls Ethereum a commodity, in contrast to SEC chair Gensler’s position

Fast facts

  • Gensler directly addressed the House Financial Services Committee (HFSC) for the first time since October 2021, which was before the collapse of FTX and crypto-friendly banks, including Signature, Silicon Valley Bank, and Silvergate. 
  • Gensler did not give a clear and direct answer to Congressman Patrick McHenry, the committee chairman, who asked if Ether, the second-largest cryptocurrency by market capitalization, is a security. 
  • “Actually, all securities are commodities under the Commodity Exchange Act. It’s that we are excluded commodities. But I would agree that a security cannot be also an excluded commodity and an included commodity,” responded Gensler.
  • Regulators and prosecutors have held contrasting views on how to classify Ether. The Attorney General of New York recently called it should be a security, but the Commodity Futures Trading Commission Chair Rostin Behnam argued that it is a commodity.
  • Gensler hinted on multiple occasions that he may view cryptocurrencies based on the proof-of-stake consensus mechanism, such as Ether, as securities.
  • In May 2022, Gensler publicly labeled Bitcoin, the world’s largest cryptocurrency by market cap, as a commodity. 
  • Gensler told the HFSC on Tuesday that the SEC needs more resources and bodies to regulate the crypto asset class.
  • Late last month, Gensler testified before the Subcommittee on Financial Services and General Government and requested US$2.4 billion in funding from Congress for the agency to intensify its cryptocurrency crackdown.

See related story: SEC chair Gensler: No plans to ban crypto, says it’s ‘up to Congress’

Bank of England says stablecoins need limits on use to prevent financial instability


The Bank of England (BoE) plans usage limits on stablecoins used for payments due to concerns the rapid introduction of such digital currencies could lead to financial instability, Deputy Governor Jon Cunliffe said in a speech on Monday.

See related article: UK seeks to regulate stablecoins for payments in new markets bill

Fast facts

  • In a speech at the Innovative Finance Global Summit, Cunliffe said while the central bank wants competition and innovation in payments, it needs to guard against “rapid, disruptive change that does not allow the financial system time to adjust and could therefore threaten financial stability.”  
  • Stablecoin regulations will fall under the Financial Services and Markets Bill, which will give the Bank powers to regulate operators of so-called systemic stablecoins – defined as types that have widespread usage – under standards equivalent to those applied for traditional payments and commercial bank money. The bill was introduced last July and is in its final stages of debate in Parliament.
  • Cunliffe’s remarks come just days after the U.S. House Financial Services Committee published a draft bill for a hearing on April 19 on regulating stablecoins backed by other currencies and researching a central bank digital currency (CBDC). 
  • Systemic stablecoins will need to be backed by “high quality and liquid assets” to ensure they can be redeemed for fiat money, at par value, and on-demand, Cunliffe said. The Bank is weighing either deposits or highly liquid securities or both as options to back up stablecoins.
  • However, under the U.K. bill, stablecoins will not receive protection against failure under the Financial Service Compensation Scheme, which offers deposit insurance to customers of commercial banks up to £85,000. 
  • The stablecoin rules will follow principles established by the Bank for International Settlements’ Committee on Payments and Market Infrastructure and the International Organization of Securities Commissions last year, Cunliffe added.
  • In May 2022, the Treasury published a consultation paper that outlines strategies to regulate stablecoins that can threaten financial stability following the collapse of the Terra Luna algorithmic stablecoin in the same month. 
  • The BoE is also considering a digital pound which is “likely to be needed if current trends in payments and money […] continue.” said Cunliffe in comments that reaffirm the Bank and Treasury’s plan to launch a CBDC. 

See related article: UK lawmakers vote to regulate digital assets as financial instruments

G7 plans to help developing countries introduce CBDCs


Japan’s top finance diplomat, Masato Kanda, announced on Tuesday that the Group of Seven (G7) nations will work together to help developing countries introduce central bank digital currencies (CBDCs) in line with international standards. 

See related story: G7 nations set to push for stricter cryptocurrency regulations at Japan summit in May

Fast facts

  • “We have to address risks from the development of CBDC by ensuring factors such as appropriate transparency and sound governance,” Kanda, who also serves as Japan’s vice finance minister for international affairs, said in a seminar in Washington, DC. 
  • Kanda stressed that CBDC will be a priority of this year’s summit, that the G7 nations “will consider how best to help developing countries introduce CBDC consistent with appropriate standards, including the G7 public policy principle for retail CBDC.” 
  • Kanda added that the collapse of the crypto exchange FTX last year was “a serious wake-up call” for policymakers to create regulation across borders. 
  • The G7 leaders from Britain, Canada, France, Germany, Italy, the U.S., and Japan will meet in Hiroshima, Japan, from May 19 to 21. This year’s G7 Summit is expected to advance crypto policy discussions and set global standards for CBDC implementation.
  • Japan, the elected chair of this year’s summit, recently approved a white paper on Web3 and crypto adoption, laying out recommendations for nurturing the crypto industry in the country. Since last year, Japan has announced concerted efforts to create a crypto-friendly environment, such as making moves to allow domestic investors to trade certain stablecoins issued overseas on local platforms.
  • Digital currencies have been attracting worldwide interest, with at least 114 countries exploring CBDCs, according to the Atlantic Council.
  • Outside of the G7, China has been at the forefront of CBDC development, with its digital yuan transactions surpassing 100 billion yuan ($13.9 billion) in October last year.

See related story: Japan’s finance ministry to launch panel to assess digital yen: NHK

US Treasury warns DeFi is being used for illicit transfers


Decentralized finance (DeFi) services threaten national security and need to comply with anti-money laundering and terrorist financing laws, the U.S. Treasury Department said in a report published on Thursday.

See related story: US Treasury says Congress needs to act to mitigate crypto risk to stability

Fast facts

  • The Treasury Department said that DeFi services which are non-compliant with anti-money laundering and countering the financing of terrorism (AML/CFT) controls pose the most significant risk of illicit finance, as they allow criminals to exploit their services with ease. 
  • DeFi services must comply with AML/CFT obligations, regardless of their claim to be “fully decentralized,” as they are still considered financial institutions under the Bank Secrecy Act (BSA), according to the report. 
  • “Our assessment finds that illicit actors, including criminals, scammers, and North Korean cyber actors, are using DeFi services in the process of laundering illicit funds.” Brian Nelson, the Treasury’s under secretary for terrorism and financial intelligence, said in a statement.
  • Nelsons added that the private sector should use the assessment findings to inform their risk mitigation strategies and take clear steps to prevent illicit actors from abusing decentralized finance services. 
  • The Treasury recommended the U.S. government enhance its existing supervision and enforcement by requiring DeFi services to adhere to the same anti-money laundering rules that banks and financial institutions must follow under the BSA. 
  • The department additionally called for more guidance for the private sector on DeFi compliance and to close regulatory gaps for platforms offering DeFi services. 
  • The report is a part of the Biden administration’s efforts to enforce a broader regulatory framework for digital assets. In March 2022, President Joe Biden signed an executive order directing federal agencies to assess the benefits and risks of digital assets. In Oct. 2022, the Treasury released a report on countering illicit finance risks from crypto assets.
  • U.S. regulators have recently been clamping down on cryptocurrency businesses, with the Securities and Exchange Commission and the Commodity Futures Trading Commission taking actions against major exchanges.

See related story: US Treasury seeks public opinion on digital asset risks

WonderFi, CoinSmart, Coinsquare to merge into Canada’s largest crypto trading platform


Three Canadian cryptocurrency companies announced a merger on Monday, creating Canada’s largest crypto asset trading platform with over 1.65 million registered users. 

Fast facts

  • See related story: Canada gives crypto companies 30 days to meet updated registration guidelines
  • The newly merged company “will have transacted over $17 billion since 2017 and have over $600 million in assets under custody,” according to the press release.
  • The deal will bring four of Canada’s 11 registered crypto trading platforms—CoinSmart, Coinsquare, and WonderFi-owned Bitbuy and Coinberry—under the same roof. 
  • The three companies are expected to be consolidated under Coinsquare, which became the first Canadian platform registered with the Investment Industry Regulatory Organization last October. 
  • “This combination will create a safe, secure, scalable, and regulated trading platform that can compete with the unregulated global exchanges still operating in Canada,” said Coinsquare CEO Martin Piszel.
  • The merger confirms separate plans the three companies have been working on in recent months. In January, WonderFi and Coinsquare were in talks about a possible merger. This came after Coinsquare terminated a previous agreement to acquire CoinSmart last September. 
  • In Feb 2023, the Canadian Securities Administrators published a notice that required unregistered crypto companies planning to operate in Canada to undertake a pre-registration process within 30 days to initiate their full registration and comply with the guidelines.
  • See related stories: Canada to examine risks from crypto, stablecoins, CBDCs in budget

Binance concealed ‘extensive’ ties to China: Financial Times


Binance, the world’s largest cryptocurrency exchange, reportedly hid ties to China for years despite claiming to have left the country following Beijing’s regulatory clampdown in 2017, according to internal documents cited by the Financial Times on Wednesday.  

See related story: Binance, Zhao sued by CFTC for alleged regulatory violations

Fast facts

  • Binance Chief Executive Officer Changpeng Zhao and other senior executives reportedly directed employees to conceal the company’s presence in China. The Financial Times reported that the company had a mainland office that was active until 2019 and a Chinese bank that was used for payrolls. 
  • Binance reportedly told employees in 2018 that their salaries would be disbursed via a bank in Shanghai, and in 2019, they were told to attend a tax session at an office in China.
  • The Financial Times also reported that employees were cautioned to only publicly acknowledge offices in Malta, Singapore and Uganda, while avoiding reference to other locations, including China.
  • The exchange has reportedly concealed its Chinese presence by including instructions in the onboarding documentation for new employees in China to install virtual private networks on their devices. 
  • “It is unfortunate that anonymous sources are citing ancient history (in crypto terms) and dramatically mischaracterizing events. This is not an accurate picture of Binance’s operations,” Binance said in a statement, according to the Financial Times. 
  • The Financial Times said it could not determine whether offices cited in the company’s internal communications were still active.
  • Binance did not immediately respond to Forkast’s inquiry.
  • Zhao said in a blog post published last September that Binance is not a Chinese company and has never been registered or incorporated in China. He added that only a “small number of customer service agents” remained in China by late-2018. 
  • China banned crypto exchanges from providing services in the country in 2017 and outlawed crypto trading and mining in 2021.
  • The U.S. Commodity Futures Trading Commission sued Binance on Monday over allegations that it illegally served clients in the U.S.

See related story: Binance to shut down yuan trading on C2C platform after China’s crypto ban

Binance, Zhao sued by CFTC for alleged regulatory violations


Binance, the world’s largest cryptocurrency exchange, and founder Changpeng Zhao have been sued by the U.S. Commodity Futures Trading Commission (CFTC) for allegedly violating derivative rules.

See related story: CFTC chair calls Ethereum a commodity, in contrast to SEC chair Gensler’s position

Fast facts

  • The CFTC filed a complaint on Monday against Binance, Zhao and former compliance chief Samuel Lim for allegedly breaking numerous violations of the Commodity Exchange Act and CFTC regulations.
  • The regulator accused Binance of disregarding “federal law essential to the integrity and vitality of the U.S. financial markets” by knowingly offering futures and derivative products without registering under the CFTC. 
  • Binance allegedly solicited both retail and institutional customers despite not having permission to operate in the U.S.
  • Binance and its executives allegedly instructed U.S.-based customers to use virtual private networks to obscure their locations and advised VIP users to open Binance accounts under the name of shell companies, according to the lawsuit. 
  • The CFTC cited Binance’s own documents to state that the platform earned US$63 million in fees from derivatives transactions in August 2020, and about 16% of its accounts were held by U.S. customers.
  • The lawsuit seeks monetary fines and an order to prevent the company from violating U.S. rules.
  • Zhao tweeted the number “4,” shortly after the lawsuit was made public, a reference to his Jan. 2 tweet, in which he said “4” means “ignore FUD, fake news, attacks, etc.”
  • The CFTC’s move follows the Securities and Exchange Commission issuing a Wells notice to Coinbase, warning the exchange of possible violations of U.S. securities law.

See related story: SEC warns Coinbase of potential legal action over staking, separately targets Tron founder Sun

Texas legislature introduces bill to attract Bitcoin-related businesses, protect interests of same


The Texas legislature introduced a bill on Tuesday to attract more Bitcoin-related businesses to the state and protect the rights of Bitcoin holders, miners, and developers, according to the text of the proposed legislation.

See related story: Bitcoin hashrate slumps to lowest in over five months amid 100-degree-plus weather in Texas

Fast facts

  • The bill will provide legal protection for those owning and engaging in Bitcoin-related activities, including the immunity afforded by censorship-resistant Bitcoin spending and the ability to store Bitcoin in an unhosted wallet without state interference.
  • Bitcoin miners will be free to engage in mining without restrictions from any law or resolution and to seek out any form of energy for securing the Bitcoin network, according to the bill. 
  • Texas will support individuals who code or develop on the Bitcoin network under Section 8, Article I of the Texas Constitution, which protects freedom of speech and the press. 
  • The bill cited the Chinese government’s banning of bitcoin mining and trading in 2021 has led to the quick migration of miners from China to the United States, particularly to Texas, due to the state’s crypto-friendly regulations and relatively low-cost electricity.
  • Texas has the fourth-highest Bitcoin hash rate, accounting for 14% of the total hash rate in the United States, according to Foundry USA, the biggest mining pool in North America and the fifth-largest globally.
  • In a related development, Florida Governor Ron DeSantis on March 20 proposed a bill to the local legislature to ban central bank digital currencies (CBDCs), both foreign and domestic, from being used in Florida, saying they can be used as a means of surveillance on citizens. CBDCs are issued and controlled by central banks, unlike stablecoins and cryptocurrencies like Bitcoin. 
  • Amid criticism of excessive energy use by Bitcoin miners, U.S. President Joe Biden on March 9 proposed a 30% tax on electricity use from cryptocurrency mining in his budget blueprint for Fiscal Year 2024.

See related story: China’s mining exodus flows to U.S. Is Texas the new promised land?

US, Germany shut ChipMixer for alleged ties to US$3 bln crypto laundering 


U.S. and German authorities announced Wednesday that they have shuttered ChipMixer, a cryptocurrency service that allegedly laundered more than US$3 billion in crypto since 2017.

See related stories: US$4B in money laundering happened on DEXs, bridges and coin swaps: Elliptic

Fast facts

  • ChipMixer has been used to launder more than US$3 billion in illicit transactions by ransomware groups, suspected North Korean hackers, and darknet market users since 2017, said the U.S. Department of Justice (DOJ).
  • Authorities from Germany and the U.S. have seized up to US$46.3 million in crypto from ChipMixer, according to the European Union Agency for Law Enforcement Cooperation (Europol).
  • ChipMixer, an unlicensed crypto mixer created in mid-2017, specialized in mixing or cutting trails related to virtual currency assets, Europol said. Coin mixers like ChipMixer allegedly allowed criminals to obfuscate the source of stolen cryptocurrency. 
  • The platform processed US$700 million in stolen funds in connection to two North Korean cyberattacks against the online game Axie Infinity and Horizon Bridge, said the DOJ. 
  • U.S. prosecutors in Philadelphia charged Minh Quốc Nguyễn, a 49-year-old from Vietnam, for operating an unlicensed money-transmitting business and identity theft. 
  • In May 2022, the U.S. Treasury Department imposed sanctions on virtual currency mixer Blender.io, accusing it of supporting North Korea’s money-laundering operations. In August of the same year, Tornado Cash was also sanctioned for allegedly laundering virtual currency worth US$7 billion.

See related story: India imposes money laundering regulations on crypto industry

Binance Suspends British pound deposits and withdrawals for UK customers


Binance, the world’s largest cryptocurrency exchange, has announced that it is halting its British pound deposits and withdrawals a month after it stopped dollar transfers.

See related article: Binance suspends international U.S. dollar transfers, CEO indicates issues with banks

Fast facts

  • Binance halted sterling deposits and withdrawals for new users on Monday and said that it would suspend such transactions for all customers on May 22.
  • Binance’s announcement comes after London-based payments firm Paysafe, a local partner of the exchange for fiat on and off-ramps, said it would stop providing sterling transfer services for U.K. users.
  • “We have concluded that the U.K. regulatory environment in relation to crypto is too challenging to offer this service at this time and so this is a prudent decision on our part taken in an abundance of caution,” Paysafe said in a statement on Tuesday.
  • In 2021, Binance temporarily suspended British pound transfers after the U.K. Financial Conduct Authority said the exchange wasn’t permitted to operate in the country. Its bank transfer service resumed through Paysafe in February 2022. 
  • Last month, the U.K. Treasury released a consultation paper, introducing a new crypto regulatory framework to regulate crypto activities under the same regime as traditional financial services.
  • On Feb. 8, Binance suspended U.S. dollar deposits and withdrawals after Signature Bank said it would limit the service. U.S. regulators shut Signature Bank over the weekend following the closure of Silicon Valley Bank.

See related article: Crypto Clarity Coming?

SEC shuts Miami hedge fund for alleged ties to US$100 mln crypto fraud 


The U.S. Securities and Exchange Commission (SEC) was granted emergency relief on Monday to freeze and appoint a receiver for the assets of Miami-based hedge fund BKCoin and one of its co-founders, Kevin Kang, in an alleged cryptocurrency fraud scheme.

See related article: U.S. banking regulators warn against cryptocurrency fraud, contagion risks

Fast facts

  • Kang and BKCoin allegedly used US$3.6 million worth of “Ponzi-like payments” to fund investors after raising US$100 million from at least 55 investors, the SEC said
  • The SEC also accused Kang of commingling with client assets to fund a personal splurge of at least US$371,000 on sporting tickets, vacations, and a “New York City apartment.” The agency said it is seeking permanent injunctions against BKCoin and Kang. 
  • Last October, BKCoin suspended Kang from employment and sued him for diverting US$12 million in cash and other assets from BKCoin’s multi-strategy funds. 
  • The SEC has been accelerating its crackdown on crypto-related fraud. It filed nine cyber enforcement actions related to crypto so far this year, compared to two actions filed over the same period in 2022. 
  • Illicit crypto transaction volume rose to an all-time high of US$20.1 billion in 2022. However, crypto scam revenue fell to US$5.9 billion from US$10.9 billion recorded in 2021 due to falling crypto prices, according to blockchain forensics firm Chainalysis.

See related article: Do Kwon, founder of collapsed Terra stablecoin, charged with fraud by U.S. securities regulator

Liquid staking TVL surpasses lending, becomes the second-largest among DeFi services


The total value of crypto assets locked in liquid staking services rose to US$14 billion on Monday to surpass lending protocols ahead of Ethereum’s Shanghai update. 

See related story: Shanghai Staking Surge

Fast facts

  • The recent surge makes liquid staking the second-largest service among decentralized finance (DeFi) protocols, according to DefiLlama data. Decentralized exchange protocols top the rankings with US$19.7 billion.
  • Liquid staking protocols allow users to receive derivative tokens such as Staked Ether on a 1:1 basis. These tokens allow users to lock their funds to generate yield. 
  • More than 16.5 million Ether (ETH) are staked in Ethereum, with 42% coming from liquid staking protocols, such as Lido Finance, Frax Ether and Rocket Pool.  Lido is responsible for 75% of the liquid staked ETH. 
  • Ethereum’s Shanghai upgrade, scheduled for next month, will allow investors to withdraw their locked Ether and accumulated interest for the first time. Ahead of the upgrade, Lido saw an inflow of  US$240 million in ETH last Saturday.
  • Lido’s governance token, LDO, is on a 200% rally this year. The governance tokens of rivals Rocket Pool and Frax are also up by 138% and 14%, respectively,  according to CoinMarketCap data. 

See related article: Go ahead and ban staking. Crypto investors will just go elsewhere

SEC may make it harder for hedge funds to work with crypto firms: Bloomberg


The U.S. Securities and Exchange Commission (SEC) plans to propose rule changes that would make it difficult for cryptocurrency firms to hold digital assets on their client’s behalf as “qualified custodians,” Bloomberg reported Tuesday.

See related article: Markets: Bitcoin slumps in broad sell off amid SEC charges against Kraken, regulation worries

Fast facts

  • Hedge funds, pension funds and other institutional investors in digital assets are required to use qualified custodial services to safeguard clients’ funds.
  • The proposed rule change would make it more difficult for cryptocurrency firms to become “qualified custodians” to hold digital assets on behalf of clients.
  • In 2020, the SEC opened a consultation to determine whether state chartered trust companies were qualified custodians. Many crypto asset custodians are state chartered trust companies, including Coinbase Custody Trust, Paxos Trust, and Fidelity Digital Assets. 
  • The new rule, which includes no-warning audits of custodial relationships, may require institutions to find other companies to safeguard the digital assets of clients, according to the Bloomberg report.
  • A five-member SEC panel will vote on Feb. 15 on whether the proposal will proceed to the next stage for public comments. 

See related article: Why the crypto sector needs radical transparency in the post-FTX world