Is a U.S. Dollar Backed by Bitcoin Possible?
Weekly News Recap: 🛑 CZ faces restrictions post-Binance settlement, 📰 U.S. Treasury targets Sinbad, 🌟 FTX's $744M asset sale, ⚖️ Celsius initiates selective withdrawals, and more!
In this episode of Unchained, presidential contender Vivek Ramaswamy delves into his unique perspective on cryptocurrency and blockchain technology.
Ramaswamy, known for his critical views on the current state of regulatory affairs, passionately argues against the ambiguity clouding the crypto industry. He highlights the urgency of clear regulations, emphasizing, "I think it is entirely and wholly unacceptable to live in a country where you have the person who leads the SEC unable to answer with clarity to Congress whether or not Ethereum, a widely used cryptocurrency, is or is not a security."
Ramaswamy's insights extend beyond criticism, as he unfolds his comprehensive crypto policy, advocating for the protection of innovation and financial autonomy, and discusses the potential of integrating Bitcoin into the U.S. dollar valuation.
Tune in to explore Ramaswamy's vision for a reformed approach to cryptocurrency regulation and innovation.
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Weekly News Recap
CZ Steps Down From Binance.US and Faces U.S. Restrictions
After the historic settlement last week between Binance and the U.S. Department of Justice, founder Changpeng "CZ" Zhao has stepped down as chairman of Binance.US's board of directors. This decision follows his guilty plea for violating the U.S. Bank Secrecy Act, leading to a $50 million penalty and his resignation as Binance CEO. Despite this, Zhao will maintain his economic interest in Binance.US.
Adding to Zhao's challenges, a federal judge has ruled that he cannot leave the U.S. for now, marking him as a "serious flight risk." This decision comes after Binance agreed to pay $4.3 billion in penalties for operating as an unlicensed money transmitting business and violating sanctions law.
In a perhaps not-so-surprising twist, former BitMEX CEO Arthur Hayes has come to Zhao's defense. In an essay that extensively quoted from the Hebrew and Christian Bible, Hayes questioned the severity of the treatment Zhao has received compared to traditional financial companies involved in similar wrongdoings. Hayes, who faced similar charges and received six months of house arrest, called the treatment of Zhao and Binance "absurd" and highlighted what he characterized as the arbitrary nature of punishment by the state.
CZ’s guilty plea certainly distinguishes him from the CEOs of traditional companies who escaped the Great Recession they helped cause with nary a lecture from the government. But it should also be noted that CZ’s personal wealth at the time this was recorded was estimated to be worth $25 billion according to the Bloomberg Billionaires Index. In other words, assuming Bloomberg’s Index is accurate, CZ’s company paid about 0.004 of his personal wealth.
FTX Gains Approval to Liquidate $744M in Trust Assets
On Wednesday, the new bosses at FTX, the beleaguered cryptocurrency exchange, received approval from a U.S. bankruptcy court to sell assets worth approximately $744 million. These assets include interests in various crypto funds, notably Grayscale and Bitwise trusts. The largest portion of these assets is nearly 22.3 million units of Grayscale's flagship Bitcoin fund GBTC, valued at around $597 million, followed by Grayscale's Ethereum Trust with 6.3 million units worth $87 million.
This development is part of FTX's ongoing bankruptcy proceedings, which began last November after the exchange filed for Chapter 11 bankruptcy, giving it the potential to reorganize and reopen. The court-appointed CEO, John Ray III, had previously testified to Congress about the "utter failure of corporate controls" and the misuse of funds by FTX and its affiliated trading firm, Alameda Research. The exchange's former CEO, Sam Bankman-Fried, was convicted of fraud and other charges earlier this month.
The sale of these assets is a critical step in addressing the bankruptcy claims, which have been trading at 60 to 65 cents on the dollar recently.
Surge in Crypto Fund Inflows and ETF Optimism Marks a Bullish Week in Crypto
This week was marked by significant optimism and activity in crypto markets, with a notable surge in investment inflows and developments among Exchange Traded Funds. CoinShares reported that weekly inflows into cryptocurrency investment products reached a 2023 high of $346 million, with Bitcoin accounting for about 90 percent. This week also marked the longest streak of inflows since the late 2021 bull market, indicating a robust resurgence in investor interest. Of course, that’s still very relative, with the broader ETF market experiencing $31 billion of inflows over a similar period.
Simultaneously, the crypto asset manager Pando Asset filed an application with the U.S. Securities and Exchange Commission (SEC) for a spot bitcoin ETF. The Chennai, India-based firm, joins a roster of 13 companies, including financial heavyweights BlackRock and Fidelity Investments, seeking regulatory approval for similar products. Though SEC chair Gary Gensler has become the man to hate in many corners of crypto, a growing list of his court losses seemingly has many optimistic. Bitcoin's price soared about 48% since early September and 126% since January.
Back in ETF-land, CoinDesk reports that Grayscale is updating the Grayscale Bitcoin Trust (GBTC) agreement to prepare for a potential conversion to a spot bitcoin ETF. At the same time, the SEC is seeking public feedback on whether to approve yet another ETF application from a mainstream firm—investment management giant, Franklin Templeton—indicating a possibly accelerated decision-making process.
In related news, ProShares' Bitcoin Strategy ETF (BITO) hit a record $1.47 billion in assets, further signaling rising institutional interest in Bitcoin.
Celsius Initiates Crypto Withdrawals for Select Claim Holders
The New York-based cryptocurrency lender Celsius, which filed for bankruptcy last summer, began allowing withdrawals for certain account holders on November 29. Customers of the Custody Program with "Class 6A General Custody Claims" and/or "Class 6B Withdrawable Custody Claims" can withdraw 72.5% of their crypto, minus transaction fees, according to a report by The Block, citing court documents. This opportunity is available until February 28, provided the investors did not previously participate in an assets custody settlement. However, customers who voted against the reorganization plan will not be part of this distribution. Their funds will be managed separately by the Litigation Administrator over the next six months.
This move follows Celsius's Chapter 11 bankruptcy filing in July 2022 and the subsequent approval of a settlement plan in March, allowing deposit account holders to recover a portion of their funds.
On a similar topic, Bloomberg cited the proverbial “people familiar with the matter” in a report that troubled crypto exchange Zipmex has proposed paying creditors 3.35 cents on the dollar, with potential to rise to 29.35 cents, amid restructuring and creditor pushback.
DCG Commits to $275 Million Repayment to Genesis
Digital Currency Group (DCG) has agreed to repay $275 million to its subsidiary, Genesis, by April 2024. This agreement comes as a resolution to a lawsuit filed by Genesis against DCG, seeking the repayment of $600 million in loans. The dispute began when Genesis made four loans totaling $500 million to DCG in 2022, which DCG later attempted to convert into open loans, meaning they could have been paid off at DCG’s leisure, a move Genesis says it did not consent to.
So far, DCG has repaid approximately $227.3 million, leaving a balance of $324.5 million. The agreed repayment of $275 million by next April is expected to provide Genesis with $200 million in value over the coming weeks.
U.S. Treasury Cracks Down on Crypto Mixer Sinbad
On Wednesday, the U.S. Treasury Department sanctioned Sinbad, a crypto mixer the Department alleges was used to conceal the origin and destination of hundreds of millions of dollars worth of bitcoin. The Department’s Office of Foreign Assets Control (OFAC) identified Sinbad as a "key money-laundering tool" used by the notorious Lazarus Group, which has been linked to the totalitarian North Korean government in numerous reports. The sanctions follow the revelation that Sinbad allegedly played a significant role in masking assets stolen from various sources, including Atomic Wallet, Axie Infinity, and Horizon Bridge. The Treasury underlined Lazarus Group's alleged use of such tactics to fund North Korea's ballistic missile program.
It’s unclear where Sinbad was based, and the site’s alleged creator, known as Mehdi, declined to share the location in a Wired report earlier this year. However, as part of the FBI’s seizure of Sinbad's site, the U.S. investigator indicated cooperation between U.S., Dutch, and Finnish law enforcement.
This development echoes the Treasury's previous sanctioning of Tornado Cash, a crypto mixer founded by an American and Russian and also used by Lazarus to launder money, according to an FBI report. London-based blockchain analytics firm Elliptic published a statement claiming that Sinbad is likely a reincarnation of Blender, the first crypto mixer to face OFAC sanctions. Deputy Secretary of the Treasury Wally Adeyemo emphasized the U.S. government's commitment to combating illicit activities in the digital asset sphere, saying in a statement: "While we encourage responsible innovation in the digital asset ecosystem, we will not hesitate to take action against illicit actors."
It should be noted that laundering stolen funds for a totalitarian government’s ballistic missile program isn’t the only reason why someone might want privacy. The FBI statement makes no mention of whether or not any non-criminals used Sinbad for humanitarian or other purposes.
KyberSwap Grapples With Extraordinary Hacker Demands
In a startling development, the hacker behind an alleged $48 million theft from KyberSwap, a decentralized finance market maker, issued an unprecedented demand for complete control of the company. The self-proclaimed "Kyber Director" sent an on-chain letter via an Ethereum transaction, insisting on full executive control over Kyber Network, the company behind KyberSwap. The demands extend to temporary authority over the company's governance DAO, access to all internal documents, and forfeiture of all assets, including intellectual property.
In return, the hacker promises a new era for the company, offering to double salaries for non-executive employees and provide a 12-month severance for those choosing to leave. The hacker also assured token holders and investors that he/she/ or they would personally manage a turnaround, hinting that the new “cryptographic project” would no longer be the “7th most popular DEX.” It was unclear if the hacker meant the decentralized exchange would become more popular, stop being a DEX altogether, or something else entirely.
This bizarre turn of events has left Kyber Network in a challenging position, as they contemplate their next steps amid this unprecedented situation.
Cosmos Hub's Founder Proposes AtomOne Fork
Cosmos Hub founder Jae Kwon has proposed a significant shift in the network's trajectory. This week, the platform’s governance token holders voted to reduce the inflation rate of Cosmos Hub's native token, ATOM, from around 14% to a maximum of 10%. Instead of accepting the vote and moving on, Kwon did the crypto equivalent of taking his ball home after the game didn’t go his way, proposing a blockchain fork that would create a new token.
Kwon's proposal, which he shared on social media, would turn AtomOne into a separate entity within the Cosmos ecosystem, potentially supporting both the existing ATOM and a new ATOM1 token. Some users, like X user @eggzNstaken, view the fork as a positive step towards diversification and security, while others, like @cosmonaut_joon, expressed concerns about the implications of not accepting the results of a democratic voting process.
The specifics of the AtomOne network, including its governance, tokenomics, and technical architecture, remain largely speculative. However, Kwon claims he wants to collaborate, even while not being willing to accept the result of the vote. These DEXes are starting to look an awful lot like politics as usual.