A Crypto Side Door: Buying a ‘Digital Residency’ in Palau for $248 (WSJ)
The tiny Pacific island nation of Palau, best known for its diving spots, has been trying to make waves in the virtual world. For $248, a person can get a “digital residency” there for one year—without ever visiting. The residency has caught the attention of crypto traders searching for side doors to access platforms banned in their countries of residence as a crackdown on digital assets continues in places such as the U.S., China and Canada. Changpeng Zhao, the founder of crypto exchange giant Binance, was an initial promoter of the program, although Binance told The Wall Street Journal it dropped further association after conducting due diligence. Americans aren’t allowed to use Binance because the exchange doesn’t have a U.S. license to operate.
Crypto Exchange Binance.US Avoids Broad Asset Freeze (WSJ)
A U.S. district judge ordered Binance’s American exchange to keep all assets in the U.S. and limit spending to expenses needed for regular operations. The order falls short of the Securities and Exchange Commission’s original request for a broad asset freeze. Earlier this week, a federal court judge questioned what evidence the agency had to support claims that customer funds were leaving the country. Binance.US had said that a broad asset freeze would cripple its business. “Although we maintain that the SEC’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms,” a Binance spokesperson said.
FTX Sues Ex-Clinton Aide’s Investment Firm for $700 Million (Reuters)
Bankrupt crypto exchange FTX on Thursday sued a former aide to Hillary Clinton and the former aide's investment firm, seeking to claw back $700 million in investments allegedly made with misappropriated FTX funds. FTX said its founder Sam Bankman-Fried was a "profligate patron" who showered Michael Kives, his firm K5 Global, and K5 co-founder Bryan Baum with cash as part of an ongoing scheme to fraudulently use company assets for personal gain, according to a complaint filed in Wilmington, Delaware, bankruptcy court.
Japan’s Biggest Bank MUFG Is in Talks to Issue Global Stablecoin (Bloomberg)
Mitsubishi UFJ Financial Group Inc. is in talks with companies behind popular global stablecoins as well as other firms about issuing such tokens via the Japanese banking giant’s blockchain platform. Japan’s stablecoin law, one of the first among major economies, became operative on June 1 and in effect means that only the nation’s licensed banks, registered money transfer agents and trust companies can issue the tokens.
Prime Trust Has 'Shortfall of Customer Funds,' Nevada Regulator Says (CoinDesk)
Crypto custody firm Prime Trust has "a shortfall in customer funds" and was unable to meet all withdrawal requests this month, the Nevada Department of Business and Industry said Thursday. The Department's Financial Institutions Division (FID), which oversees state-regulated trust companies, ordered Prime Trust to cease all activities which violate Nevada regulations, alleging that the company's "overall financial condition ... has considerably deteriorated to a critically deficient level." Prime Trust is "operating at a substantial deficit" or may even be insolvent, the order said.
BitGo Cancels Prime Trust Acquisition, Users Report Frozen Withdrawals (Decrypt)
Cryptocurrency custodian BitGo is pulling out of acquisition talks with rival Prime Trust, putting the short-lived deal to an end. BitGo announced the decision to walk away in a tweet on Thursday. Without going into specifics, the company said the decision was "not made lightly", and that it was committed to business as usual. "After considerable effort and work to find a path forward with Prime Trust, BitGo has made the hard decision to terminate its acquisition of Prime Trust,” read the tweet.
OPNX Files Defamation Lawsuit Against Mike Dudas, Issues Justice Tokens (CoinDesk)
OPNX, the bankruptcy claims exchange tied to the founders of defunct hedge fund Three Arrows Capital, has filed a defamation lawsuit against venture capitalist Mike Dudas, according to Three Arrows co-founder Kyle Davies and New York State court records. In a summons notice filed in early June, OPNX alleged Dudas published defamatory comments about the company between February and March 2023, around the time that Davies and his partner Su Zhu unveiled their exchange venture. The document does not specify what Dudas’ defamatory comments were. Dudas, a well-known persona in the cryptocurrency industry, runs 6th Man Ventures and formerly helmed The Block, a crypto media outlet.
WisdomTree, Invesco and Blackrock Are Now All Gunning for a Bitcoin ETF (The Block)
The race to launch a spot bitcoin exchange-traded fund (ETF) in the United States is heating up, with two issuers submitting new filings to the Securities and Exchange Commission for products tied to the cryptocurrency. Asset management firm WisdomTree submitted a filing for the WisdomTree Bitcoin Trust late on Tuesday for a fund that would trade on Cboe. $1.4 trillion asset manager Invesco also submitted an application for its own spot bitcoin ETF, dubbed the Invesco Galaxy Bitcoin ETF. Both firms have attempted to launch a bitcoin ETF in the past — previously having their efforts squashed by the SEC. Invesco first filed for a spot bitcoin ETF with Mike Novogratz's Galaxy Digital in 2021. WisdomTree also submitted a previous filing in 2021.
U.S. House Committee to Vote on Crypto, Stablecoin Legislation in July (The Block)
A U.S. congressional committee drafting new rules for digital assets plans to debate, and likely advance, two proposed new laws in the second week of July. House Financial Services Committee Chair Patrick McHenry, R-N.C., told his panel this morning that he plans to hold a session on debating, changing, and likely advancing legislation that would create a more distinct pathway for digital assets to transition from security investments to commodities, which have lower reporting and regulatory requirements, along with other market structure-related provisions. McHenry and Rep. Glenn 'GT' Thompson, R-Pa., the Republican chair of the House Agriculture Committee, drafted the legislation, though it will need support from Democrats in the Senate and President Joe Biden’s signature in order to become law.
Singapore Proposes Standards for ‘Purpose-Bound’ Digital Money (Bloomberg)
Singapore’s central bank has proposed a common protocol to specify conditions for the use of digital currencies as financial institutions trial the use of purpose-bound money in the city-state. The Monetary Authority of Singapore on Wednesday published a whitepaper detailing technical specifications on the life cycle of purpose-bound money, as well as how arrangements could be programmed such that money is transferred only upon fulfillment of service or terms of use, the regulator said in a statement.
MakerDAO Purchases $700 Million in Treasury Bonds, Grows Holdings to $1.2 Billion (The Block)
MakerDAO, the core development organization behind the DAI stablecoin, completed the purchase of over $700 million in U.S. Treasury bonds. Following $500 million bond purchase in October 2022, the organization's total bond holdings now sits at $1.2 billion. MakerDAO invested in the bonds as a way to increase exposure to low-risk, liquid traditional assets. The digital asset manager Monetalis Clydesdale Vault, born from the DeFi lender Monetalis Group, completed the purchase on behalf of MakerDAO, according to a statement.
Bankrupt Hedge Fund 3AC's Return as a VC Stirring Up Crypto Community (CoinDesk)
Three Arrows Capital (3AC)is stirring up the crypto community again, this time with a surprise comeback using the same name, only in the guise of a venture capital (VC) firm. On Wednesday OPNX, the bankruptcy claims exchange co-founded by CoinFLEX executives and two people behind the defunct hedge fund Three Arrows Capital (3AC), announced that they have a new partner: 3AC Ventures. The partners will “invest in projects building in the OPNX ecosystem and working toward a decentralized future,” OPNX tweeted. 3AC Ventures even has a website that says the new firm "is focused on superior risk-adjusted returns without leverage.” The hedge fund 3AC collapsed last year after suffering heavy losses during the implosion of Terra’s LUNA stablecoin.
Crypto Exchange Backed by Citadel Securities, Fidelity, Schwab Starts Operations (WSJ)
A new cryptocurrency exchange backed by Citadel Securities, Fidelity Investments and Charles Schwab is seeking business from brokers and investors interested in digital assets but wary of troubles at FTX and Binance. The venture, EDX Markets, quietly began executing trades in recent weeks. EDX released a statement about the launch Tuesday, nine months after its backers unveiled their plans for the crypto marketplace. The launch shows that some Wall Street firms remain interested in crypto despite a regulatory onslaught by the Securities and Exchange Commission and a market that has cooled off substantially over the past 18 months.
Deutsche Bank Applies for Digital Asset License Amid Growth Push (Bloomberg)
'We’re building out our digital assets and custody business,' David Lynne, who runs the lender’s commercial banking unit, said at a conference Tuesday. 'We just put our application into the Bafin for the digital asset license,' he said, referring to Germany’s securities watchdog. The move is part of a wider strategy to increase fee income at Deutsche Bank’s corporate bank, Lynne said. It also mirrors efforts at Deutsche Bank’s investment arm DWS Group to expand income from offerings linked to digital assets.
FTX Paid Over $120 Million in Advisor Fees Between February 1 and April 30 (The Block)
The legal and advisory costs for bankrupt crypto exchange FTX are mounting. Filings submitted on June 15 by FTX's advisors show that fees and expenses for the period between February 1 and April 30 totaled $121.8 million, according to data compiled by The Block Research. FTX lawyers at Sullivan & Cromwell billed the bankrupt exchange $37.6 million for the period, amounting to 30.9% of all fees and expenses. Investment banking firm Jefferies billed the lowest amount, making up 0.6% of the total fees and expenses.
Japan’s Crypto Exchanges Are Pushing for Looser Margin Trading Rules to Help the Sector Grow (Bloomberg)
Japan’s crypto exchanges are pushing for a relaxation of curbs on margin trading, unbowed by last year’s global digital-asset market crash. Many people in the industry want permitted leverage for retail investors of four to 10 times whereas currently customers can at most double exposure via borrowing, according to the Japan Virtual & Crypto Assets Exchange Association.
Fidelity Rumored to Make “Seismic” Crypto Move Soon (CryptoSlate)
Fidelity is rumored to be planning a “seismic move” in the crypto markets, according to Andrew Parish, co-founder of Arch Public. The asset management firm describes itself as “crypto-curious,” having mined Bitcoin since 2014. By 2018 it launched a separate cryptocurrency-dedicated business – Fidelity Digital Assets (FDA,) which has since received a New York Trust Charter and launched its European operations in 2020. Examples of FDA initiatives include its Fidelity Crypto offering – enabling users to trade Bitcoin and Ethereum alongside traditional stocks – pushing for 401(k) digital asset investing.
Crypto.com Operates Internal Proprietary Trading Desks (The Block)
Crypto exchange Crypto.com has been operating internal proprietary trading teams, according to a report by the Financial Times. Citing five anonymous sources, the business publication reported Monday that the Singapore-based exchange has attempted to obfuscate the trading operations, with one source telling the FT that employees were requested by management to "say there is no internal market maker type operation." Crypto.com denied any improper relationship between the internal trading operation, which it described as an internal market maker, and its exchange. People familiar with the operations told the FT the desks trade on Crypto.com's exchange as well as other venues with the goal of making money "and not facilitating an exchange."
UK Crypto, Stablecoin Laws Approved by Parliament's Upper House (CoinDesk)
U.K. parliamentarians have voted through a new bill that could recognize crypto as a regulated activity in the country. The approval of the Financial Services and Markets Bill (FSMB) on Monday by Parliament’s upper chamber, the House of Lords, means the bill is going to enter the final stages before it is put into law. The wide-ranging bill, spanning over 340 pages, was introduced in July to take advantage of Brexit freedoms and give regulators more power over the U.K. financial system. While the original bill included a proposal to regulate stablecoins under the country’s payments rules, amendments to treat all crypto as a regulated activity and measures to supervise crypto promotions were added later as the bill progressed through Parliament.
Binance Deregisters in UK Amid Regulatory Woes (The Block)
Binance Markets Limited (BML), the United Kingdom-based subsidiary of Binance, has canceled its registration with the Financial Conduct Authority (FCA). The UK watchdog confirmed that BML is not permitted to undertake any regulated activity in the United Kingdom following the cancellation of BML's permissions, according to a June 7 update on its website. “Binance Markets Limited has recently submitted a cancellation request of their FCA permissions which was completed on 30 May 2023 and is reflected on the FCA Register,” it said. “Following the completion of the cancellation of permissions the firm is no longer authorised by the FCA. No other entity in the Binance Group holds any form of UK authorization or registration to conduct regulated business in the UK.”
Crypto Community Donates $1M to Sleuth ZachXBT After Defamation Lawsuit (CoinDesk)
Crypto community and prominent businesses have donated over $1 million in various stablecoins and tokens to ZachXBT as the popular blockchain sleuth prepares to fight defamation charges. Data from the on-chain analytics tool Nansen show ZachXBT received USD Coin (USDC), tether (USDT), dai (DAI) – and even memecoins such as JESUS and PEPE – from hundreds of wallets. Backers include crypto exchanges Binance, security firm CertiK, and Tron creator Justin Sun, among others. Most of these funds were received on the Ethereum blockchain, with smaller amounts sent from Arbitrum, BNB Chain, Optimism, Polygon and Fantom based tokens.
Ethereum Developers Consider Raising Max Validator Limit From 32 to 2,048 ETH (The Block)
Ethereum’s core developers are considering a proposal that suggests raising the maximum validator balance from the current 32 ether (ETH) to 2,048 ETH per validator. This proposal concerns an increase in the maximum validator stake, while the minimum would remain at 32 ETH. As it stands, Ethereum validators are subject to an effective balance cap set at both the minimum and maximum of 32 ETH. This forces large-scale staking operations to spin up multiple validators if they want to earn yield on any amount greater than this. Unsurprisingly, this practice has led to a big increase in the number of validators. There are currently 600,000 active validators and an additional 90,000 awaiting activation in the queue.