Crypto Bank Silvergate to Shut Down, Repay Deposits (WSJ)
The crypto meltdown has claimed its first big casualty in the mainstream financial system: Silvergate Capital Corp. The California lender, one of the crypto market’s top banks, said it would wind down and return all deposits following a run that forced it to sell off assets at a steep loss to cover billions of dollars of withdrawals. Silvergate “is also considering how best to resolve claims and preserve the residual value of its assets,” the bank said in a news release Wednesday. Silvergate catered to companies in the crypto business. It helped institutional investors move dollars in and out of crypto-trading platforms through its Silvergate Exchange Network, which it stopped operating last week."
Crypto Layoffs and Bankruptcies in 2023: Here’s the List to Watch (WSJ)
"The crisis roiling the crypto industry has continued to spread to a number of companies since the run on the stablecoin terraUSD last spring. Many of the biggest crypto lenders have fallen following customer withdrawals, risky practices and lack of regulation. The bankruptcy filings, in particular, have underscored how intertwined many of the industry players were. Investors flocked from crypto to safer asset classes in response to the Federal Reserve’s continued rate increases. There are several continuing bankruptcy proceedings from 2022: FTX, Blockfi, Celsius and Voyager."
NY Attorney General Says Ether Is a Security in KuCoin Suit (Bloomberg)
"New York Attorney General Letitia James is taking another swing at the digital asset industry with a lawsuit against KuCoin, one of the largest and most popular crypto exchanges. James alleges KuCoin cannot legitimately claim to be an exchange because it isn’t registered with the US Securities and Exchange Commission or properly designated by the Commodity Futures Trading Commission as required under New York law. “Today’s action is the latest in our efforts to rein in shadowy cryptocurrency companies and bring order to the industry,” James said in a statement."
U.S. DOJ Appeals New York Judge’s Decision to Approve Voyager’s Sale to Binance.US (CoinDesk)
"The U.S. Department of Justice (DOJ) filed an appeal late Thursday evening challenging a bankruptcy court judge’s decision to allow Binance.US’ billion-dollar plan to acquire the assets of bankrupt crypto lender Voyager Digital. The appeal, which was filed by the U.S. Trustee’s Office – an arm of the DOJ responsible for overseeing bankruptcies – comes just one day after Judge Michael Wiles of the Southern District Court in New York approved the deal after a contentious, four-day-long marathon hearing. Regulators, including the U.S. Securities and Exchange Commission (SEC) and various state regulators, have been staunchly opposed to the proposed deal. Last month, the SEC filed an objection to the purchase of Voyager, arguing that Binance.US may be violating federal securities laws by operating an unregistered securities exchange in the U.S."
Crypto Flash Crash on Huobi Spurs Sun to Inject $100 Million (Bloomberg)
"China-born crypto mogul Justin Sun sought to counter concerns about the strength of the Huobi exchange, one of the largest trading venues in digital assets, after a flash crash in the platform’s native token. The virtual coin, known as HT, rapidly halved in price at one point on Thursday before paring a chunk of the losses, data from CoinGecko show. It’s down 21% over the past 24 hours amid a wider tumble in crypto and equity markets."
U.S. Treasury Department Proposes 30% Excise Tax on Crypto Mining Firms (CoinDesk)
"The U.S. Treasury Department has proposed a 30% excise tax on the cost of powering crypto mining facilities. A provision in the department’s “Greenbook,” its list of tax proposals and explanations for the U.S. President’s budget proposal, would create a phased-in excise tax based on the costs of the electricity used in crypto mining, imposed on the companies “using computing resources” to mine cryptocurrencies. These companies would also be required to report how much electricity they use and what type of power was tapped. The tax would be phased in over the next three years, increasing 10% each year."
Federal Reserve Setting Up New Squad of Crypto Specialists (CoinDesk)
"The Federal Reserve is putting together a “specialized team of experts” to help it supervise the crypto sector, Michael Barr, the central bank’s vice chairman for supervision, said Thursday. The Fed’s top regulatory official said the digital-assets specialists are needed to “help us learn from new developments and make sure we're up to date on innovation in this sector.” Barr, the Fed official with the most potential influence over how the central bank regulates and supervises crypto, echoed the comments of Fed Chairman Jerome Powell this week that the banking regulator is hoping to preserve crypto innovations as it moves forward to put up guardrails."
Silvergate Plans to Wind Down Bank Operations and Liquidate (Bloomberg)
"Silvergate Capital Corp. plans to wind down operations and liquidate its bank after the crypto industry’s meltdown sapped the company’s financial strength, sending shares plunging. “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward,” the company said in a statement late Wednesday. “The bank’s wind-down and liquidation plan includes full repayment of all deposits.”"
U.S. Government's $1B Bitcoin Transfer Spooks Investors, Bitcoin Dips (CoinDesk)
"U.S. authorities transferred $1 billion worth of bitcoin (BTC) recovered from a dark web hack to new wallet addresses, including one owned by Coinbase, on Wednesday, stoking investor fears that intense sell pressures could drive down the token's price. Authorities moved the bitcoin in three transactions, according to data from blockchain security firm PeckShield. Nearly 10,000 bitcoin were sent to Coinbase-controlled wallets, while roughly $41,000 tokens were directed to government-controlled wallets."
OpenSea, ConsenSys Among Prized Crypto Startups With Shares Available at Big Discounts (The Block)
"As the crypto industry suffers, decacorns can be yours at mere unicorn prices. Shares in numerous private crypto startups are currently being offered at sizable discounts on Birel.io, a platform that specializes in such secondary market transactions, Birel's Richard Freemanson confirmed. Those startups include Alchemy, Blockchain.com, Chainalysis, Kraken, ConsenSys, Blockdaemon, CoinDCX and OpenSea — collectively worth around $70 billion at the time of their most recent fundraises, all of which came in 2022."
CFTC Head Says Stablecoins Are in Agency’s Jurisdiction Without ‘Clear Direction From Congress' (The Block)
"The head of the Commodity Futures Trading Commission views most stablecoins as commodities, barring new law that could change their classification. "Not withstanding that, they are a commodity, and we have to police that market without a clear direction from Congress that they're some other type of asset," CFTC Chair Rostin Behnam told reporters Wednesday, following an appearance before the Senate Agriculture Committee. "Based on the cases that we've brought around stablecoins, I think that there's a strong legal argument that USDC and other similar stablecoins would be commodities," unless Congress tells regulators otherwise."
Gemini Exchange Says It Still Has Relationship With JPMorgan (Bloomberg)
"Gemini, the cryptocurrency exchange owned by Cameron and Tyler Winklevoss, said its banking relationship with JPMorgan Chase & Co.remains intact. Gemini’s statement came in a tweet Wednesday after CoinDesk reported that the banking giant was ending its relationship with the exchange. The bank took on Gemini and Coinbase Inc. as customers in early 2020 after conducting due diligence for months on the firms. Coinbase still uses JPMorgan as one of its banking partners."
US Court Questions SEC’s Rejection of Grayscale’s Bitcoin Fund Proposal (Reuters)
"U.S. federal appellate court judges questioned on Tuesday whether the U.S. Securities and Exchange Commission (SEC) was correct to reject Grayscale Investment's application for a spot bitcoin exchange-traded fund, since the agency had previously approved bitcoin futures products. The SEC rejected Grayscale Investment LLC’s application to convert its flagship spot Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF) last June, arguing the proposal did not meet anti-fraud and investor protection standards."
Silvergate Is in Talks With FDIC Officials on Ways to Salvage Bank (Bloomberg)
"US regulators have been sent to the headquarters of Silvergate Capital Corp., as the troubled crypto-friendly bank looks for a way to stay in business. Federal Deposit Insurance Corp. officials have been discussing with management ways to avoid a shutdown, according to people familiar with the matter. One possible option involves lining up crypto-industry investors to help Silvergate shore up its liquidity, said one of the people. FDIC examiners arrived at the firm’s La Jolla, California, offices last week, the people said."
Stablecoin Issuer MakerDAO Proposes Additional $750M U.S. Treasury Purchase (CoinDesk)
"MakerDAO, the decentralized autonomous organization (DAO) behind the DAI stablecoin, is reviewing a proposal that would allocate an additional $750 million to invest in U.S. Treasurys as it looks to take advantage of a favorable yield environment. If passed, the resolution would add to the $500 million approved in October, bringing the ceiling to $1.25 billion. The new proposal would have the DAO investing in six-month U.S. Treasurys using a ladder strategy with a biweekly rollover, meaning the purchased notes will have maturities that are equally split over the full period. The strategy would be flexible and Maker could move to a more complex or different ladder scheme, if needed."
Binance.US Gets Green Light to Buy Voyager Digital Assets (The Block)
"Binance.US can buy failed crypto lender Voyager Digital’s assets, a federal judge confirmed after a four-day marathon hearing that stretched from last week to this one. Judge Michael Wiles confirmed Voyager’s modified restructuring plan on Tuesday, which includes the $1 billion deal with Binance.US. The plan faced objections from the Securities and Exchange Commission, other regulators and some individual creditors who raised issues about Binance.US. Wiles acknowledged the concerns but said he had not seen actual evidence that suggested Binance.US should be denied."
Powell Boosts Warning on Crypto Industry and Its ‘Turmoil’ (Bloomberg)
"Federal Reserve Chairman Jerome Powell is again warning US banks about the risks of getting involved in the digital-asset industry. Powell on Tuesday laid out a series of concerns he has with crypto, and said lenders the regulator oversees must be “taking great care” when engaging with it. He added that the central bank didn’t want to prevent innovation. “We don’t want regulation to stifle innovation in a way that just favors incumbents and that kind of thing,” he said during a hearing before the Senate Banking Committee. “But, like everyone else, we’re watching what’s been happening in the crypto space and what we see is quite a lot of turmoil, we see fraud, we see a lack of transparency, we see run risk.”"
FTX’s Alameda Sues Grayscale Over Fees, Redemptions From Crypto Trusts (Bloomberg)
"Alameda Research, the trading arm of the bankrupt digital-asset exchange FTX, filed a lawsuit against Grayscale Investments alleging 'exorbitant management fees' and accusing Grayscale of 'improperly preventing redemptions' from the Bitcoin and Ether trusts it manages. 'We will continue to use every tool we can to maximize recoveries for FTX customers and creditors,' John J. Ray III, chief executive officer and chief restructuring officer for FTX, said in the statement. 'Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban.'"
FTX Bankruptcy Special Counsel, Advisers Bill $38M for January (CoinDesk)
"The army of professionals working on the FTX bankruptcy case has billed a collective $38 million plus expenses for the month of January, according to court records. Bankruptcy administrators have retained law firm Sullivan & Cromwell as counsel. They have also retained Quinn Emmanuel Urquhart & Sullivan as well as Landis Rath & Cobb to act as special counsel for the proceedings. Consultancy AlixPartners was retained to primarily conduct forensic analysis on decentralized finance (DeFi) products and tokens in FTX’s possession."
Tether's USDT Stablecoin Market Share Rises to Highest Level in 15 Months (CoinDesk)
"The dominance of Tether’s USDT is rising among stablecoins amid an ongoing shakeup of the $136 billion stablecoin market. USDT’s market share among stablecoins surpassed 54% on Monday, data from CoinGecko shows. This is the largest market share Tether’s stablecoin has reached since late November 2021, after the crypto bull market reached its apex. Tether’s gain came mostly at the expense of rival Binance USD, which has been in rapid decline since its issuer, Paxos, announced on Feb. 13 that it would halt minting new BUSD tokens due to pressure from the New York Department of Financial Services, the state’s top regulator. Since then, BUSD has shrunk below $9 billion from a $16 billion market capitalization."
Ethereum L2 Scroll Reaches $1.8 Billion Valuation in New Funding Round (The Block)
"Scroll, an Ethereum Layer 2 network that uses zk-rollups technology, raised $50 million in a new funding round. Investors in the round included Polychain Capital, Sequoia China, Bain Capital Crypto, Moore Capital Management, Variant Fund, Newman Capital, IOSG Ventures and Qiming Venture Partners, Scroll said Monday. Scroll declined to comment on the valuation and the structure of the round, but a source with direct knowledge of the matter told The Block that the round brings Scroll's valuation to $1.8 billion."
U.S. Banking Watchdog: You Can’t Trust Crypto Firms Until They Get Federal Oversight (CoinDesk)
"It may be difficult to trust a crypto company that isn't federally supervised, a key bank regulator said Monday. As it stands, there’s no way for people to know which crypto firms they can rely on, said Michael Hsu, the acting head of the U.S. Office of the Comptroller of the Currency (OCC). “We won't be able to know which players are trustworthy and which aren't until a credible third party, like a consolidated home country supervisor, can meaningfully oversee them,” Hsu said in remarks prepared for delivery at an Institute of International Bankers event in Washington, D.C. “Currently, no crypto platforms are subject to consolidated supervision. Not one.”"
Silvergate Shuts Crypto Payments Network It Once Hyped (Bloomberg)
"Silvergate Capital Corp. discontinued the payments network that has served as a vital hub for investors in the cryptocurrency industry, days after the firm raised questions about its own viability. ‘Effective immediately Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network,’ the firm said Friday on its website. ‘All other deposit-related services remain operational.’"
Coinbase Purchases One River Digital in Move Into Asset Management Business (The Block)
"Crypto exchange Coinbase is buying crypto asset manager One River Digital Asset Management. "Coinbase and ORDAM share an ethos grounded in prudent risk management, a trait which has enabled both firms to successfully navigate the recent market turmoil," the company said in a statement. One River Digital Asset Management is a subsidiary of hedge firm One River Asset Management, which was founded by Eric Peters in 2013. The firm will be renamed Coinbase Asset Management, and Peters will serve as its CEO and chief investment officer. It will operate as an independent business and wholly-owned subsidiary of Coinbase, the company said."
Multicoin Capital’s Hedge Fund Lost 91.4% Last Year, Investor Letter Reveals (CoinDesk)
"Multicoin Capital’s hedge fund lost 91.4% of its value in 2022, according to a copy of the firm’s annual investor letter viewed by CoinDesk. The letter attributed last year’s decline to a turbulent year for cryptocurrencies, as well as direct and indirect impact from the collapse of crypto exchange FTX. “While the fund successfully dodged the catastrophic implosions of LUNA and Three Arrows Capital earlier in the year, we didn’t avoid the explosive revelations about FTX nor the subsequent contagion that spread across the market,” said the letter. “After a remarkable year in 2021, our performance in 2022 was the worst since inception.”"
Lido’s LDO Token Sinks 10% Following Rumors Crypto Staking Service Received SEC Notice (CoinDesk)
"Lido’s LDO token tanked 10% on Saturday following a rumor the U.S. Securities and Exchange Commission (SEC) served the largest Ethereum staking service with a Wells Notice. A Lido spokesperson declined to comment on whether the protocol had received a notice. A Wells Notice is a letter from the SEC detailing charges it is considering bringing against a recipient. On Friday, David Hoffman of the "Bankless" crypto podcast said that he’d heard Lido and other crypto projects had been served with Wells Notices, an assertion he later retracted."
Bybit Halts Deposits via USD Bank Transfer, Citing Partner ‘Service Outages' (The Block)
"Crypto exchange Bybit stopped USD deposits via bank transfer, citing "service outages" from a partner. "Effective immediately, USD deposits via wire transfer (SWIFT) and wire transfer (for U.S. banks) are no longer available," said a company announcement on Saturday. The Block reached out to a Bybit representative for further comment but had not heard back by time of publication. Bybit continued to stress that USD deposits via the crypto wallet Advcash or credit card purchases of cryptocurrencies were still available on the exchange."