A standard week in crypto. The SEC is going after Binance. With 136 pages of pretty spectacularly scathing allegations. At least the person writing the court docs has a sense of humour. Meanwhile, US lawmakers are fighting for regulatory clarity, whilst the UAE is just pressing on and making itself as welcoming as it possibly can to the many crypto companies who now/ will soon need a new country to call home. Oh, and Elon Musk has unsurprisingly been slapped with an insider trading lawsuit regarding alleged (blatant, not my words) price manipulation of Japanese dog Shiba Inu memecoin Dogecoin.
US lawmakers aim for crypto regulatory clarity, crack down on SEC
The SEC is going after Binance. And at the same time has named a bunch of other tokens as securities.. As we have come to expect with these court docs, the words are scathing. Some of the terms used to describe Binance’s alleged actions include ‘blatant disregard of the federal securities laws and the investor and market protections these laws provide’, ‘enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk’ -Ouch. Also, they allege Binance ‘unlawfully solicited U.S. investors to buy, sell, and trade crypto asset securities through unregistered trading platforms’, ‘engaged in multiple unregistered offers and sales of crypto asset securities and other investment schemes’ and ‘defrauded equity, retail, and institutional investors about purported surveillance and controls over manipulative trading on the Binance .US Platform, which were in fact virtually non-existent’. And on. For 136 pages. This isn’t new, they’re going after the biggest, lowest hanging fruit first. But doesn’t bode too well for the rest of the industry in the US… or for other tokens… Binance posted in a blog “We intend to defend our platform vigorously,” adding that “because Binance is not a U.S. exchange, the SEC’s actions are limited in reach.”
US lawmakers aim for crypto regulatory clarity, crack down on SEC
(Some) US lawmakers have realised the US needs some regulatory clarity if it stands a hope of staying ahead. The House Financial Services Committee and House Agriculture Committee have released a draft discussion proposing a regulatory framework for specific crypto assets to be classified as digital commodities. This draft bill could prevent the US SEC from denying registration to digital asset trading platforms as regulated alternative trading systems. It also allows these platforms to offer “digital commodities and payment stablecoins”. The proposed legislation calls for a much needed (and long overdue) detailed analysis of the classification of decentralised firms by the SEC. It also suggests rules be modified to allow broker-dealers to custody digital assets under specific conditions. Paul Grewal, Coinbase’s chief legal officer, praised the draft bill but suggested a thorough review before a formal introduction.
UAE central bank issues AML/CTF guidance for dealing with virtual assets
Meanwhile, the United Arab Emirates is trying to get ready to deal with all things digital assets. Its Central Bank is introducing updated guidelines for financial institutions dealing with virtual assets, including cryptocurrencies and NFTs. The guidelines focus on anti-money laundering and counter-terrorism financing and address the risks related to transactions involving virtual assets and their service providers. They aim to make sure licensed financial institutions do all necessary due diligence and use increased scrutiny when interacting with virtual assets customers. These guidelines will be implemented within a month and apply to all financial institutions. Clear regulation is good regulation, and currently, it’s UAE 1: US & UK, 0.
Elon Musk hit with dogecoin insider trading lawsuit
Elon Musk is facing accusations of insider trading in a proposed class action lawsuit. Investors allege he knowingly manipulated the price of Dogecoin for personal gain. The complaint, filed in a Manhattan federal court, claims that “Musk and his company, Tesla, wrongfully profited to the tune of billions of dollars on the backs of millions of working Americans” by promoting the meme cryptocurrency. The recently amended complaint, the third revision since the lawsuit began in June, introduces a new allegation that Musk sold approximately $124 million worth of Dogecoin following a change in Twitter’s logo to a Shiba Inu dog in April, resulting in a 30% increase in the token’s price. Musk has been a vocal supporter of Dogecoin, calling himself “The Dogefather” on Twitter and claiming that the token is “the future of currency” on Saturday Night Live. It won’t help his case that he a) got a Shiba Inu puppy then b) promoted that rather widely on social media, which c) had a direct (alleged) impact on the price of Shiba Inc themed meme coins.
Tether Market Cap Climbs to All-Time High of $83.2B, As Stablecoin Market Sinks
Tether’s USDT stablecoin has regained its all-time high market capitalisation of $83.2 billion. Other stablecoins have lost value. Tether’s surge contradicts a 14-month downturn in the now $129 billion stablecoin market, and matches its prior peak from over a year ago. Unlike other stablecoins, Tether has recovered $18 billion in losses following the collapse of Terra’s stablecoin in 2022. USDT has seen an influx of users, boosting its market share to its highest in 22 months, due to its perceived safety. Tether CTO Paolo Ardoino, highlighted the token’s growing use for payments in the developing world, constituting about 40% of all activity, as a significant contributing factor towards this rise. All good, except that Tether has been heavily criticised for lack of transparency over its reserve assets and has a pending lawsuit alleging market manipulation. Analyst Conor Ryder stated, “Tether’s rise suggests peg stability is far more important for most stablecoin holders than issuer transparency.”
Tether Makes Foray into Renewable Energy; to Mine BTC in Uruguay
Tether gets its share of news, generally focused around its backing or alleged lack thereof. Companies will invest heavily in PR- greenwashing or otherwise. Not saying there is any correlation in those two sentences. Tether has announced it is investing in renewable energy production in Uruguay for Bitcoin mining, as part of its strategy to diversify its USDT reserves. Uruguay already generates more than 94% of its electricity from renewable sources. Tether says it is also recruiting energy sector experts in the region to assist with its plans. This move follows Tether’s recent financial report disclosure that it held $1.5 billion in Bitcoin as part of its USDT reserves, and that it aims to use 15% of its net profits to acquire more Bitcoin to back the stablecoin. What the rest of Tether’s $83 billion market cap is backed by isn’t abundantly clear.
FTX Collapse Triggered 41% Spike in UK Crypto Fraud
Crypto fraud in the UK is up. It’s reached a record high of £306 million ($411 million) in the 12 months leading up to March 31, up 41% from the previous year. The collapse of FTX accounted for about a third of that. £115.6 million was reported lost to fraud in November 2022 alone, the month FTX declared bankruptcy. The reported figures may also encompass pyramid schemes exposed by the rapid fall in cryptocurrency values following FTX’s bankruptcy. “Ponzi schemes often collapse following a significant crash in asset values, liquidity, or inward investment, making it impossible for the schemes to continue,” the report notes. Despite this, there are signs that the effect of crypto fraud could be diminishing. Both the number and value of fraud reports fell from December 2022 to March 2023 compared to the previous year. This may suggest that investors are becoming more cautious or more knowledgeable about fraud risks, or just that the crypto market downturn resulted in less crypto investment.
Some SBF charges will be dropped if Bahamas objects, US prosecutors say
US prosecutors may drop some of the charges against former FTX CEO Sam Bankman-Fried, if the Bahamas government opposes them, according to a document filed recently in the US District Court for the Southern District of New York. In response to a defence motion aiming to dismiss certain charges, prosecutors said they will proceed with certain new charges only if the Bahamas consents to trial on these charges, and will not proceed if their request is denied. SBF’s defence had argued that some charges, including those relating to bribing Chinese officials and breaching campaign finance laws, were not included in the original indictment, and thus violated the extradition treaty between the U.S. and the Bahamas. Prosecutors maintain that the treaty allows for charging a defendant with additional crimes post-extradition, as long as they’re not tried or punished for these without the extraditing country’s consent. They’re now seeking a waiver from the Bahamas to allow them to pursue three of these charges. If the Bahamas denies this waiver, the charges will be dropped. SBFgate isn’t going away….
Qatar slammed for not taking enough action against crypto companies
The FATF (Financial Action Task Force), a global watchdog against money laundering and terrorist financing, has criticised the Qatar Central Bank for inadequately enforcing its regulations on virtual asset service providers. The FATF noted that Qatar needs to better combat evolving forms of criminal activity, including sanctioning virtual asset service providers noting “It (Qatar) needs to improve understanding of more complex forms of money laundering and terrorist financing”. Despite banning virtual asset service providers, Qatar is investigating potential uses for a central bank digital currency (never good) and as of June last year is in the “foundation stage” of issuing one. Its central bank is examining the pros and cons, along with the suitable technology and platform.
PayPal Ventures Leads $52M Round for Crypto Firm Magic
PayPal has invested in crypto wallet-as-a-service provider Magic in a $52 million funding round led by PayPal Ventures. The raise will be used to increase Magic’s functionalities and to extend its reach into the EU and Asia-Pacific regions. “Magic is facilitating the mass adoption of Web3 with a safe and simple solution,” said Alan Du, partner at PayPal Ventures. He said Magic’s wallet creation service could help companies reach millions of users and onboard those new to Web3. San Francisco-based Magic, founded in 2018, provides enterprise-grade solutions that assist companies in safely and easily integrating customers into Web3. Its non-custodial wallet creation infrastructure features a software development kit (SDK) that can be incorporated into a company’s code, allowing users to create new wallets using existing emails, social media accounts, or SMS. Crypto wallets have tended to do well out of funding rounds. It’s long been said that the first crypto wallet that really nails a seamless user experience will do well, and dominate. PayPal knows what it’s doing here. Since the company started offering crypto on its platform, visits to its app went up, massively. People don’t tend to check banking or PayPal apps for anything over than making specific payments. People tend to check crypto wallets or apps all the time, thanks to its volatility.
Bitcoin still beats AI all time high on Google searches
Search interest for “AI” has reached an all-time high on Google, but is still behind the peak levels of interest Bitcoin reached in December 2017. Recent AI searches have surpassed buzzworthy search topics including crypto and the Metaverse. AI’s recent months, since ChatGPT became public hype number 1, got AI to a Google Trends score of 89, but it’s yet to reach Bitcoin’s peak score of 100 from December 2017. This data focuses on US search trends. In China, where crypto is banned and Google search is restricted, AI has consistently received more search interest than Bitcoin since May 2013.
Researchers propose new scheme to help courts test de-anonymised blockchain data
Researchers have published a preprint paper proposing ways investigators and courts can validate de-anonymised data from the Bitcoin blockchain. The paper from Friedrich-Alexander-Universität Erlangen-Nürnberg gives guidelines for undertaking, verifying, and presenting investigations involving crypto transactions, applicable generally, though the focus is on German and US legal systems. The team identifies the main bottleneck in such investigations as legal, not technological. I.e. what everyone actually working in the space has been saying all along. Law enforcement has the necessary tools for initial blockchain analysis, but this provides circumstantial evidence only. Validating this evidence requires linking on-chain activity to off-chain activity, like asking an exchange to reveal the identity or bank details of users suspected of illegal activity, which not all are willing to do and not all will do in the time frame needed. Currently, there is no standard practice for determining and discussing the reliability of these analysis results. The researchers warn that such investigations risk infringing suspects’ rights due to legal constraints. In both Germany and the US, prosecutors must show a degree of evidence of guilt before they can obtain a warrant for invasive probes like surveillance or arrests, which takes time, hence why many/ most hackers still get away with their spoils.
Elliptic Brings ChatGPT to Crypto to Power Deeper, Faster Risk Detection
Crypto analytics provider Elliptic is integrating ChatGPT into their off-chain intelligence and research efforts. Integrating the AI into Elliptic’s proprietary offering covering over 97% of crypto transactions by trading volume, will enable its researchers and investigators to synthesise and organise intelligence on new risk factors far more quickly and in larger volumes than humans alone ever could. This will enhance the team’s ability to focus on accuracy and scalability by organising the data. “Integrating ChatGPT allows us to scale up our intelligence, giving our customers a view on risk they can’t get anywhere else”, says Jackson Hull, Elliptic’s CTO.
Nansen to Lay Off 30% of Staff, CEO Cites Challenging Market Conditions
Blockchain analytics platform Nansen is restructuring, by cutting its workforce by 30%. CEO Alex Svanevik gave two key reasons. First, during the boom years, Nansen expanded (too) rapidly to capitalise on opportunities, but this expansion saw the company veering away from its core strategy. Now, it plans to refocus on what it does best, doing fewer things but doing them better. Second, the crypto sector has had a tough year, which hasn’t just affected Nansen. Many crypto and digital assets companies have made similar announcements to weather the ‘crypto winter’.
Olive-Oil Producer Issues First Euro-Stablecoin-Denominated Bond on DeFi Platform
Even olive oil is getting into stablecoins. Lamar Olive Oil is issuing an on-chain bond using Switzerland-based DeFi platform, Obligate. This bond marks the first issuance denominated in what Obligate claims to be the only EU-regulated crypto stablecoin, Membrane Finance’s EUROe. The aim of the blockchain-based bond is to provide a safe and more transparent way of issuing, tracking and settling debt. Smart contracts replace the role of traditional bond issuance and paying agent.
Hacked Twitter Account of OpenAI CTO Promotes Crypto Scam
The Chief Technology Officer of OpenAI, Mira Murati, had her Twitter account hacked to promote a crypto scam. The scam involved a phishing link mimicking OpenAI’s ChatGPT almost exactly except for the addition of some prompts connecting to a crypto wallet. It promoted an airdrop of a fake ERC-20 token called OPENAI. Fraudulent airdrops are frequently used to get malware or other phishing links into victims’ devices, which can then be used to drain victims’ wallets of crypto. Despite being live for an hour and viewed nearly 80,000 times, there is no indication of anyone falling for the scam. The fraudsters took measures to prevent community warnings by limiting comments on the post, however, several prominent Twitter users still managed to alert the community about the scam before anyone fell for it. Her’s isn’t the only profile to be used to promote a crypto scam, it happens often and is a reminder to not trust anything.
Nike NFTs to make their way into EA Sports games and its millions of fans
NFTs are getting their next boost into the mainstream thanks to Nike. Nike’s NFT platform .Swoosh is set to integrate with global sports platform EA Sports games, the portfolio of which includes FIFA, Madden NFL series, and NBA Live series. This will allow Nike’s virtual clothing and footwear to feature in these games. Although it’s unclear which game titles will incorporate these ‘virtual creations’, EA Sports’ Nike NFTs will likely be customisable in-game wearable accessories for player avatars. The .swoosh NFT platform was launched in November 2022, with its first NFT collection debuting in early 2023. Nike is smart in getting into the virtual gear game early. It might not take off, but estimates are that the virtual clothes and extras market will be worth a lot.