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Are Crypto Devs Under Threat? 🥶
Weekly News Recap: 📰 BlackRock's ETH ETF application, 🌟 FTX's legal tussles, ⚖️ Poloniex hacked, 🛑 Genesis and 3AC settlement, and more!
In the latest episode of Unchained, Peter Van Valkenburgh of Coin Center engages in a crucial discussion about the potential repercussions of the IRS's proposed broker rule.
He delves into the intricacies of how this rule could not only hinder the crypto industry but also intrude upon the security and privacy of its users. Van Valkenburgh emphasizes the importance of adopting technology-neutral standards in legal and policy areas and voices a strong concern over the rule's potential to compromise deeply held beliefs about privacy and civil liberties, arguing that it could force crypto developers to act against their core principles.
Weekly News Recap
BlackRock Files for Spot Ether ETF
BlackRock, the world's largest asset management firm, has made a significant move in the crypto market by applying for a spot Ethereum exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission. This groundbreaking step, named the iShares Ethereum Trust, is aimed at tracking the performance of Ethereum, the second-largest cryptocurrency by market cap, valued at $238 billion at the time of this recording. The initiative follows BlackRock's recent attempt to launch a Bitcoin ETF. At first glance, it may be somewhat surprising that the filing didn’t have a large impact on the price of Ether, which briefly rose by 2% to a high of $2,079, before stabilizing at around $1,983. But after weeks of rumors circulating about the filing, and an eight percent jump in price last week, it appears the enthusiasm was already priced in.
FTX and BlockFi Resume Claim Negotiations, FTX Sues Bybit
A U.S. judge has lifted the automatic stay on proceedings between beleaguered cryptocurrency exchanges FTX and BlockFi, allowing the latter to resume its claim negotiations. This move follows BlockFi's emergence from bankruptcy last month, with claims that FTX's collapse cost it over $1 billion. BlockFi had approximately $355 million tied up in FTX and was owed an additional $671 million by sister company, Alameda Research. The mediation between the two companies is set to begin next month.
In a related development, FTX has initiated legal action against Dubai-based cryptocurrency exchange Bybit, seeking to recover nearly $1 billion. The lawsuit alleges ByBit fraudulently withdrew funds just before FTX collapsed, marking another chapter in the ongoing turmoil in the crypto exchange landscape. While bitcoin first rose to prominence as a way to send money without middlemen, these legal battles underscore how the reliance on interconnected middlemen introduced nearly market-wide risk.
Ironically, the new owners of FTX appear to be continuing to play the markets. On Monday, wallets believed to be controlled by FTX transferred $13.5 million worth of Solana's SOL cryptocurrency to Binance and Wintermute, according to a CoinDesk report. The move coincided with a slowing down of SOL’s meteoric 150% price increase over the past month. Four million dollars worth of USDT were also moved.
Meanwhile, former generals in Sam Bankan-Fried’s collapsed empire launched a new crypto exchange dubbed ‘Backpack,’ according to a Wall Street Journal report last weekend. They claim they’ll be fixing the problems that led to the downfall of their former boss.
Poloniex Suffers $125M Hack
Hackers have allegedly stolen $125 million from prominent cryptocurrency exchange, Poloniex. In a tweet that looks more like an ad, the security firm that made the claim said the hackers targeted the exchange's hot wallets. The attack, which was confirmed by Tron creator Justin Sun, included some of the assets he created, along with Ethereum and Bitcoin. Poloniex quickly disabled its wallet services, according to a tweet from its customer service account. Sun offered a 5% bounty to anyone who helped them recover the assets.
As one would expect, Poloniex nearly instantly published a blog post trying to calm investors and committing to fully reimburse stolen funds. The letter signed, “The Poloniex Team,” claimed the exchange had engaged a “top-tier” security firm to enhance its security measures and that it was on the verge of restoring wallet services. It’s a good reminder to the industry prone to seemingly endless hacks that maybe these top-tier security pros should be on the team before their customers’ assets are robbed.
Cathie Wood Speculates on SEC Chair's Motives Behind Bitcoin ETF Hesitancy
This week, Cathie Wood, head of ARK Invest, suggested that SEC Chair Gary Gensler's reluctance to approve spot Bitcoin ETFs may be influenced by alleged ambitions to become the U.S. Treasury Secretary. Wood is far from an unbiased speaker though, having been behind one of the several pending applications.
She also challenged Gensler's concerns about market manipulation in Bitcoin, describing it as a "decentralized, transparent network" where activity is openly traceable. She further implied that Gensler, with his background in global economics, is likely aware of the transparency. Wood's strongly worded allegations add a new dimension to the ongoing debate over the approval of Bitcoin ETFs in the U.S. financial landscape.
Meanwhile, the SEC reported a “productive year” with increased enforcement actions in the crypto industry. Hilariously, of the 784 enforcement actions they mentioned, they specifically highlighted their work getting a famous person for hire, Kim Kardashian, who was fined a million dollars for failing to disclose she was paid to promote an Ethereum competitor.
Genesis And Three Arrows Capital Reach $33M Agreement for $1B in Claims
Bankrupt crypto lender Genesis reached an agreement with the collapsed hedge fund Three Arrows Capital (3AC) to pay a tiny fraction of the $1 billion in claims to resolve the dispute. Just $33 million. The proposal follows Genesis' filing for Chapter 11 bankruptcy protection earlier this year, owing creditors $3.4 billion. The settlement, detailed in court documents, is the result of "extensive negotiations" between Genesis and 3AC. It includes a mutual release of liability between the two long-bickering firms. Genesis, part of the Digital Currency Group, was exposed to both 3AC and the recently bankrupt FTX exchange. The company is now seeking court approval for this settlement, with a new court date set for November 30.
Fake BlackRock Filing Sparks Brief Surge and Fall in XRP
The price of XRP experienced a significant surge following a fake filing for a "BlackRock iShares XRP Trust" in Delaware. In fact, it was anything but. The filing, which appeared to indicate BlackRock's intention to launch an XRP-based fund, led to a 12% increase in XRP's price in just 30 minutes. However, BlackRock executives later confirmed the filing was fake.
This incident caused confusion and speculation in the market, with some still debating the authenticity of the filing hours later. Despite the initial spike, XRP eventually erased its gains from the day. According to a Decrypt report, the Delaware Office of the Secretary of State has informed the state Department of Justice about the bogus filing.
It’ll be interesting to see just exactly how the alleged fraudster got the seemingly authentic documents on the official Delaware site. It’s not a good look for the state, but could also be fuel for Gary Gensler to show the immaturity of crypto itself.
Market Faces Volatility
Crypto markets faced a tumultuous period this week with over $307 million in liquidations of leveraged crypto long positions, marking the largest amount since August 17, according to data from CoinGlass. This downturn was partly attributed to the fizzling momentum around the approval of Bitcoin and Ether ETFs. For context though, inflows into crypto investment products this year have surged, reaching over $1.1 billion, the third-highest level on record, according to CoinShares data. Bitcoin continued to lead with $240 million in inflows last week, totaling $1.08 billion this year. Ethereum also saw a significant increase, with $49 million in inflows.
Meanwhile, the Grayscale GBTC discount continues to narrow as the market reacts to the potential of spot Bitcoin and Ether ETFs. Up from an all-time low discount of 49%, the discount at the time of recording was about 13%.
Tokenization Wave Hits Finance
The tokenization landscape is witnessing exciting developments, with major financial institutions embracing this innovative approach.The venture arm of Standard Chartered bank has launched Libeara, a tokenization platform aiming to issue Singaporean Government bonds on chain—Ledger Insights reports they’re using the Stellar and Ethereum blockchains.
Simultaneously, the Monetary Authority of Singapore is spearheading tokenization pilots with financial heavyweights, JPMorgan, DBS, and BNY Mellon, signaling a strong institutional interest in the technology. The tests are being done for digital asset trades, payments, clearing and settlement, fund management and automated portfolio rebalancing. This initiative is expected to streamline processes and reduce costs, enhancing the efficiency of financial transactions.
In another development, Fnality, a fintech specializing in tokenized cash, raised $95 million in a funding round led by Goldman Sachs and BNP Paribas. That brings the total raised to about $160 million.
Lastly, an asset management startup, Superstate closed a $14 million Series A funding round. They aim to create a framework for compliant, tokenized registered investment funds, bridging traditional finance and blockchain technology.
Mickey Mouse Meets Blockchain
Disney is about to sprinkle some fairy dust on the NFT space—assuming their partner can get over some pending securities questions. Dapper Labs, the folks behind CryptoKitties and NBA Top Shot, are teaming up with the Mickey Mouse creator to launch Disney Pinnacle, an app where users can collect and trade something called a digital pin, which is presumably the source of the painful “Pinnacle” pun. Earlier this year, Dapper was sued by plaintiffs alleging it was violating securities laws, a lawsuit that is ongoing. Assuming there’s no hiccups along the way, the app is set to launch on iOS.
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