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U.S.-based Gemini crypto exchange plans to open an offshore derivatives platform, joining other U.S. trading platforms like Coinbase in looking abroad, as the U.S. regulatory environment gets tougher. The first product at the new Gemini Foundation division will be a perpetual bitcoin (BTC) contract denominated in Gemini dollars (GUSD), followed by a perpetual ether (ETH) contract also linked to GUSD.

Grayscale, the asset manager running the world's largest bitcoin fund, said that it won't share its proof of reserves with customers. "Due to security concerns, we do not make such on-chain wallet information and confirmation data publicly available through a cryptographic proof-of-reserve, or other advanced cryptographic accounting procedure." As I mentioned yesterday, the market value of Grayscale's $10.5 billion Bitcoin Trust (GBTC) is trading at record low discounts to the price of Bitcoin (BTC). Grayscale said each of its digital asset products is set up as a "separate legal entity" and reiterated that those digital asset products are "stored under the custody of Coinbase Custody Trust Company that the "laws, regulations, and documents that define Grayscale's digital asset products prohibit the digital assets underlying the products from being lent, borrowed, or otherwise encumbered."

US-based cryptocurrency exchanges including Coinbase, FTX US, and Binance.US are overseen on a state-by-state basis as money transmitters. MoneyGram, PayPal and Western are regulated as money transmitters, and starting in the 2010s, crypto exchanges were subsumed under it.  Money transmitter laws are known for lax security requirements, slim capital requirements, an insufficient "ring fencing" of customer funds in the case of bankruptcy and an overly permissive list of investments to which transmitters can deploy their customers' funds. Isn't it about time that crypto exchanges were put under SEC or CFTC oversight?

OXT Research has taken steps to confirm Grayscale's self-reported Bitcoin (BTC) holdings that back its GBTC closed-end fund, based on public data and blockchain forensics. It confirmed that the approximate balance of 633,000 BTC held was held at Coinbase Custody, to conclude that Grayscale's self-reporting is credible. OXT Research speculates that Grayscale might not want to disclose their addresses is that they want to avoid providing information about who their most used counterparties are, which could be its parent (DCG) and Genesis Trading, which is teetering on the edge of bankruptcy.

"All ether that's touched Tornado Cash is now tainted. US-touching crypto exchanges, such as Coinbase, will be expected to block tainted ether. Infura, the ConsenSys API that almost all Ethereum transactions go through, is also blocking ether that touched these addresses. Alchemy, a similar API, is doing the same. [Crypto Briefing] Circle, which issues the USDC stablecoin, has blacklisted all Tornado Cash addresses, and frozen 75,000 USDC."

BlackRock has applied to become the first U.S. spot-Bitcoin exchange-traded fund (ETF), according to a filing with the U.S. Securities and Exchange Commission (SEC). Coinbase would act as custodian for the iShares Bitcoin Trust securities, and they would trade on NASDAQ exchange if approved. However, it will be a long shot, as the SEC has denied all previous similar applications, citing market concerns and a lack of investor protections, among other things. https://www.sec.gov/Archives/edgar/data/1980994/000143774923017574/bit20230608_s1.htm

"The idea of crypto exceptionalism begins with the belief that crypto assets are fundamentally different from any sort of financial asset that preceded them. And so existing laws and regulations are inappropriate, (or "inapt," as described by Coinbase) and new rulemaking is required. This sounds right, at least on the surface, but it's a myth."

The U.S. Securities and Exchange Commission (SEC) is suing Kraken, one of the world's largest crypto exchanges, for illegally operating as a securities exchange without first registering with the regulator. In June, the SEC filed similar lawsuits against Binance and Coinbase, and both are defending against the regulator's claims, as will Kraken. Unique to the Kraken lawsuit are claims that it created a "significant risk" by commingling up to $33 billion in customer crypto with its own corporate assets, quoting Kraken's independent auditor. The SEC listed a number of crypto-assets it deemed to be unregistered securities, which the lawsuit alleges Kraken took a direct role in promoting to the investing public (ADA, AXS, ALGO, ATOM, CHZ, COTI, DASH, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, SAND, and SO).

Stablecoins are often discussed with regard to their "stability." It is usually questioned whether a stablecoin is sufficiently backed with money or other assets. Undoubtedly, it is a very important aspect of stablecoin value. But, does it make sense if the legal terms of a stablecoin do not give you, the stablecoin holder, the legal right to redeem that digital record on blockchain for fiat currency? This article aims to look into the legal terms of the two largest stablecoins - Tether (USDT) by Tether and USD Coin (USDC) by Centre Consortium, established by Coinbase and Circle - to answer the question: Do they owe you anything? The short answer is no.

"Bitfinexed thinks the USD being stuck at Binance is why the price of bitcoin has gone from $16,000 a few weeks ago to over $20,000. Bitcoin trading is that thin, and the bitcoin price is pretty much set at Binance. When you can't get cash off an exchange, you trade whatever you've got for bitcoin, so you can move it to Coinbase and cash out. The demand pushes up the price."

A Reuters analysis of Binance's corporate filings shows that the core of the business remains mostly hidden from public view. Binance declines to say where Binance.com is based. It doesn't disclose basic financial information such as revenue, profit and cash reserves. The company has its own crypto coin, but doesn't reveal what role it plays on its balance sheet. It lends customers money against their crypto assets and lets them trade on margin, with borrowed funds. But it doesn't detail how big those bets are, how exposed Binance is to that risk, or the full extent of its reserves to finance withdrawals. Binance is not required to publish detailed financial statements because it is not a public company, unlike U.S. rival Coinbase, which is listed on the Nasdaq. Nor has Binance raised outside capital since 2018, industry data show, which means it hasn't had to share financial information with external investors since then. And as Reuters reported in October, Binance has actively avoided oversight. Zhao approved a plan by lieutenants to "insulate" Binance's main operation from U.S. regulatory scrutiny by setting up a new American exchange, according to company messages and interviews with former employees, advisers and business associates. Zhao denied signing off on the plan and said the unit was set up with advice from top law firms.

"The crisis that has engulfed crypto in the last year is a crisis of fractional reserve banking. Silvergate Bank and Signature Bank NY were fractional reserve banks. So too were Celsius Network, Voyager, BlockFi, Babel Finance and FTX. And still standing are the crypto fractional reserve banks Coinbase, Gemini, Binance, Nexo, MakerDAO, Tether, Circle, and, I would argue, every one of the DeFi staking pools. All of these are doing some variety of fractional reserve banking. Custodia Bank and Kraken Finance claim to be full-reserve banks - but 100% reserve backing for deposits is both hard to prove and not a guarantee of safety. What do I mean by "fractional reserve banking"? My definition might surprise you. For me, fractional reserve banking simply means that the composition of a bank's assets is less liquid than that of its liabilities."

The Centre for Economic Policy Research (CEPR) published an article that documents the prominence of wash trading on unregulated centralized cryptocurrency exchanges. A wash trade is a form of market manipulation in which an entity simultaneously sells and buys the same or very similar financial instruments to mislead the market or regulators. Over 70% of reported volume on unregulated crypto exchanges consists of such trades versus minimal amounts on regulated exchanges such as Bitstamp and Coinbase (the paper doesn't reveal the names of the unregulated exchanges it studied).

The U.S. Securities and Exchange Commission (SEC) will not be taking enforcement action against Robinhood Crypto. This follows the SEC issuing a Wells Notice last year warning of impending legal action relating to crypto custody, cryptocurrency listings and platform operations. Under acting SEC Chair Mark Uyeda, several crypto related cases have been dropped or paused. It recently dropped the investigation into NFT platform OpenSea and on Friday Coinbase said its SEC court case would end, subject to Commissioner approval. Earlier this month the SEC paused its case against Binance. Plus, it withdrew its appeal in its attempt to expand the definition of brokers to include liquidity providers.

The U.S. Securities and Exchange Commission (SEC) has dropped its investigation into Uniswap Labs, the Brooklyn-based company behind the decentralized protocol of the same name. The SEC's decision to close its investigation into Uniswap Labs is the latest in a wave of similarly-dropped investigations into crypto companies, including Robinhood Crypto and non-fungible token marketplace OpenSea. The SEC has also agreed to drop its case against Coinbase, pending approval from the agency's commissioners, according to the crypto exchange.

Forbes published an article by Christian Catalini that examines the intensifying competition in the stablecoin market, where companies like PayPal, Coinbase, Circle, Tether, and even traditional financial giants like Visa and Mastercard are vying for dominance. Drawing an analogy to the commoditization of electricity, Catalini argues that stablecoins risk becoming undifferentiated utilities, with margins squeezed by competition and regulatory pressures. The two primary revenue levers for issuers -- reserve yields and transaction fees -- are both under threat as users demand higher returns and payment rails become commoditized. The "stablecoin sandwich" model (converting local currency to stablecoins for cross-border transfers, then back to local currency) represents current momentum, but Catalini predicts that only institutions closest to central banking, like banks themselves, will ultimately have the cost advantage in minting stablecoins. He concludes that the real winners won't necessarily be those creating the best stablecoins, but rather those controlling the distribution channels-the wallets, apps, and merchant relationships-through which these digital currencies flow.

The Commodity Futures Trading Commission will hold a CEO Forum of industry-leading firms to discuss the launch of the CFTC's digital asset markets pilot program for tokenized non-cash collateral such as stablecoins. Participants will include Circle, Coinbase, Crypto.com, MoonPay and Ripple. Further information on the CEO Forum will be released once details are finalized.

FEI is a reserve-backed stablecoin that works through a direct incentive method, in which FEI can give users bonuses or charge fees for making trades that help it maintain its dollar peg. Users can buy FEI from the protocol, and the protocol takes those assets in reserve. The asset traded belongs to the Fei protocol after the trade. The assets in reserve could even be under-collateralized, and the assets would be deployed elsewhere, such as on the secondary market or - later - in yield-generating projects. Fei's "genesis launch" is set for March 22, when users will be able to post ETH to get FEI tokens. Early participants in the sale and in the protocol's liquidity pools on DeFi exchange Uniswap will be incentivized with TRIBE, the project's governance token.

Binance on Monday began allowing its non-U.S. based users to trade a tokenized version of Tesla Inc. stock, joining a growing list of cryptocurrency exchanges that are setting their sights on the world of traditional finance.

"Multiple crypto exchanges are experiencing outages today amid a steep price drop for many crypto assets. The venues report heavy traffic crashing platforms and high network use congesting the Ethereum network, resulting in withdrawal delays."