Group items tagged

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).

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."

Rosetta is an open-source specification and set of tools that purports to make integrating with blockchains simpler, faster, and more reliable. For developers of new blockchain projects, the Rosetta interface makes it easier to ensure compatibility with exchanges that use Rosetta, and can dramatically speed up the time it takes exchanges to integrate with new blockchains and protect customer funds by ensuring specific security conditions are met. For the broader community of crypto developers, Rosetta makes it easier to build cross-blockchain applications such as block explorers, wallets and dapps.

Coinbase's Visa debit card offering has added support for ethereum-based DAI stablecoin.

Facebook's Novi launched its retail payment app yesterday (October 19) going with Paxos' USDP stablecoin as its transactional currency while it awaits regulatory approval for its own Diem stablecoin. However, almost immediately, US Senate Democrats addressed a letter to Facebook CEO Mark Zuckerberg questioning the company's credibility with crypto, and calling for the immediate discontinuance of the Novi pilot and a commitment not to bring Diem to market. Diem replied by clarifying that Diem is an independent organization with Facebook's Novi being just one of more than two dozen members of the Diem Association, so that Novi's pilot with Paxos is unrelated to Diem. The response went on to say that "When Diem comes to market [Diem] will do so having reflected the feedback of regulators from around the world and with confidence that Diem's payment system is secure, will protect consumers, and will combat financial crime."

In denying stablecoin issuer Terraform Labs' motion to dismiss a U.S. Securities and Exchange Commission (SEC) lawsuit, Judge Jed Rakoff, of the U.S. District Court for the Southern District of New York rejected the use of a ruling from fellow Judge Analisa Torres, who recently ruled that Ripple Labs - another defendant against the SEC - did not violate securities law in making XRP available on secondary platforms for retail investors to purchase. Rakoff rejected Torres' distinction between institutional sales and sales to retail investors on crypto exchanges, which he characterized as a misinterpretation of the Howey test used to determine if an asset is a security. https://storage.courtlistener.com/recap/gov.uscourts.nysd.594150/gov.uscourts.nysd.594150.51.0.pdf

BlackRock launched a new private spot Bitcoin (BTC) trust. The fund is only available to U.S. institutional investors and seeks to track the performance of Bitcoin, less the expenses and liabilities of the trust. Private investment trusts that do not solicit investments from retail investors do not need to register with regulatory authorities in the United States. But others, such as the Grayscale Bitcoin Investment Trust, can still become publicly traded (though not SEC-registered) on the over-the-counter markets.

Adam Levitin considers what would happen to customers' custodial holdings if a crypto-asset exchange in the United States were to fail. U.S. law gives substantial protection to the custodial holdings of securities, commodities, or cash deposits by securities or commodities brokers or banks, but no such regime exist for custodial holdings of crypto-assets. Instead, bankruptcy courts are likely to deem the custodial holdings to be property of the bankrupt exchange, rather than of its customers. The customers would merely be general unsecured creditors of the exchange, entitled only to a pro rata distribution of the exchange's residual assets after any secured or priority creditors had been repaid.