Bankrupt Crypto Company Celsius Could Get New Life From Wall Street (WSJ)
Two Wall Street heavyweights are locked in a bidding war for bankrupt cryptocurrency lender Celsius Network. Apollo Global Management and senior executives at distressed-debt specialist Fortress Investment Group are each backing competing groups that aim to restart Celsius under new management, people familiar with the matter said. Each proposal would kick in around $50 million to help Celsius resume some operations as a publicly traded company owned mostly by its creditors, according to people familiar with the matter and investor presentations viewed by The Wall Street Journal.
CFTC Chair Says DeFi Crypto Exchanges Will Be Regulated Even if They Are ‘Just Code' (The Block)
Commodity Futures Trading Commission Chair Rostin Behnam said decentralized crypto exchanges will be regulated either by the CFTC or the Securities and Exchange Commission even if they are based on “self-effectuating” protocols that are “just code,” in a conversation for Bloomberg’s Odd Lots podcast. Behnam was asked on the podcast — recorded at the annual ISDA meeting in Chicago a few days ago — whether regulation could apply to DeFi exchanges, which can operate autonomously or with very little human involvement. Many people in crypto believe that because some market platforms can exist in a completely decentralized way that they are therefore immune to regulation or impossible to regulate via law. That’s not so, Behnam said.
Coinbase Officially Opens Subscription Service; Expands Reach Outside U.S. (CoinDesk)
Crypto exchange Coinbase (COIN) took its zero-fee subscription service Coinbase One out of beta testing and expanded it from just the U.S. to also include the U.K., Germany and Ireland. For $29.99 per month, customers don’t pay trading fees and also get higher staking rewards, according to a Thursday statement. The service had been in beta testing since 2021. Coinbase aims to further widen its international reach, with plans to offer Coinbase One in 35 countries, according to an email from the company to CoinDesk. This comes after CEO Brian Armstrong indicated last month that Coinbase would consider moving away from the U.S. if the regulatory environment did not become clearer.
Visa Taps Ethereum’s Goerli Testnet to Experiment With Account Abstraction (The Block)
Global payments giant Visa delved further into the world of Ethereum, this time experimenting on the blockchain's Goerli testnet with smart contracts aimed at transaction-free payments with the help of account abstraction. Visa deployed two sets of "Paymaster" smart contracts to leverage account abstraction, which expands the capabilities of such contracts to user accounts and allows wallets to autonomously perform complex tasks and manage transaction costs on behalf of other accounts. The company detailed their testing in a report.
HK Recruits Firms From HSBC to Visa to Test Digital Currency (Bloomberg)
HSBC Holdings Plc, the local unit of Bank of China Ltd., e-payment provider Alipay and Visa Inc. are among 16 firms that signed up to a pilot program for the e-HKD, the Hong Kong Monetary Authority said in a statement Thursday. The trial will explore e-HKD’s potential use in six areas including offline payments. Hong Kong, which is also pushing to burnish its image as a fintech hub, is the latest place to experiment with central bank digital currencies in response to rise of Bitcoin and other cryptocurrencies.
U.S. Hearing Highlights Stablecoin Rift in Competing House Bills (CoinDesk)
U.S. lawmakers aren’t yet able to reach across the chasm between Republicans and Democrats’ very different ideas for how to oversee stablecoins, despite notes of hope from both sides evident in a Thursday hearing of the House Financial Services Committee’s digital assets panel. One of the fundamental divides is a stronger position for state regulators in a version of proposed legislation advocated by Rep. French Hill (R-Ark.), the subcommittee’s chairman, and a lead role for the Federal Reserve in the Democratic proposal pushed by Rep. Maxine Waters (D-Calif.), the ranking Democrat on the overall committee. But Hill opened the hearing with a call-back to a previous statement from Waters that the lawmakers were “starting from scratch” this year after getting close to a compromise version last year.
Bitcoin Miner Bit Digital Adds Machines in Iceland Before Possible U.S. Tax Crackdown (WSJ)
New York-based Bit Digital is expanding its operations to Iceland in a bid to hedge the bitcoin-mining company’s regulatory risk amid a proposed a crypto-mining tax from the Biden administration. Samir Tabar, chief executive of Nasdaq-listed Bit Digital, told The Wall Street Journal that the company bought 2,500 new bitcoin-mining machines for $5 million last week and will house them in Iceland, the company’s first time sending new computers outside the U.S. in two years. The company plans to announce the move at the Bitcoin 2023 conference in Miami on Thursday.
Tether to Invest up to 15% Of Its Profits in Bitcoin (The Block)
Tether, issuer of the world's largest stablecoin, will invest up to 15% of its profits in bitcoin as it shifts its reserves towards crypto and away from U.S. government debt. Tether will make regular purchases and self-custody all of its bitcoin holdings, the company said in a statement. It held $1.5 billion in bitcoin as of the end of the first quarter, accounting for about 2% of its reserves. About 85% were held in cash, cash equivalents and other short-term deposits — mainly Treasury bills. The news comes a few days after Tether reported $1.5 billion in net profit for the first quarter. The stablecoin issuer will now buy bitcoin on a regular basis and further increase its holdings, but it "anticipates that the current and future BTC holdings in its reserves will not exceed the Shareholder Capital Cushion and will further strengthen and diversify the reserves."
Filecoin Price Drops After SEC Asks Grayscale to Withdraw Application to Make Trust Reporting (CoinDesk)
The U.S. Securities and Exchange Commission (SEC) asked Grayscale to withdraw its application to make its Filecoin (FIL) Trust product more like a public company, the asset manager revealed Wednesday. Grayscale had voluntarily filed a Form 10 to make its Filecoin Trust product a reporting company under which it would have been required to file quarterly and annual reports. The SEC has now asked Grayscale withdraw that application. Grayscale said in a press release that it had received a comment letter from the federal securities regulator saying FIL "meets the definition of a security."
Citadel Securities Alleges Ex-Employees Stole Trade Secrets (Bloomberg)
Citadel Securities sued a pair of former employees after they broke off to form a market-making firm for cryptocurrencies. The company claims Leonard Lancia and Alex Casimo started raising capital and building their high-frequency trading firm, Portofino Technologies, while still working at Citadel Securities with access to proprietary information, according to a complaint filed Wednesday. It is seeking a trial to determine the extent of monetary damages and potential restitution.
USDC Issuer Circle Moves $8.7B to Repo Agreements to Protect Reserves From U.S. Government Default (CoinDesk)
Stablecoin issuer Circle Internet Financial is rebalancing the reserves backing the $30 billion USD Coin (USDC) as it braces for the risk of a U.S. government debt default. The Circle Reserve Fund, managed by global investment management giant BlackRock, added $8.7 billion in overnight repurchase (repo) agreements to the portfolio as of May 16, according to the fund’s website. The so-called tri-party repo agreements involve banking giants such as BNP Paribas, Goldman Sachs, Barclays and Royal Bank of Canada. Overnight repo transactions are effectively short-term collateralized loans. The borrower is selling a security – in this case, U.S. Treasurys – for cash, and agrees to buy back the collateral the next day for a slightly higher price. What’s really happening, though, is that big institutional investors with cash to spare are parking that with Wall Street dealers that need funding.
Ripple to Buy Crypto Custody Provider Metaco for $250 Million (WSJ)
Blockchain company Ripple agreed to buy Swiss-based crypto custody provider Metaco in a cash-and-stock deal valued at $250 million. The deal allows Ripple—which markets itself as a payments-focused crypto firm—to expand into the institutional crypto custody market. Lausanne, Switzerland-based Metaco employs about 100 people and on its website counts traditional banks including Citi and BNP Paribas as clients. In an interview, Ripple CEO Brad Garlinghouse offered fresh details on the Securities and Exchange Commission's 2020 suit against the company, which said Ripple illegally raised almost $1.4 billion by selling XRP in violation of investor-protection rules.
Ledger Bats Back Criticism of New Wallet Recovery Service (CoinDesk)
Crypto wallet maker Ledger came under fire this week for its new “Ledger Recover” feature, with some posters on Twitter arguing that the service – which stores encrypted user seed phrases with third-party custodians – undermines Ledger’s stated commitment to privacy and security. During a Twitter Space session, Ledger CEO Pascal Gauthier defended the offering. “You’re saying this is not what customers want. Actually, this is what future customers want,” he said. “This is the way that the next hundreds of millions of people will actually onboard to crypto.”
Coinbase Expands Singapore Services Amid International Expansion Drive (The Block)
Coinbase Global, the crypto exchange operator, is extending the range of services it offers customers in Singapore. The move comes as Coinbase takes steps to bolster its international presence, in direct response to a crackdown by regulators in the U.S. — where the company is based. “The message here is the world is sort of moving on with or without the U.S. and we are very committed as a global company to keep moving forward on international expansion,” said Hassan Ahmed, country director for Singapore at Coinbase.
SEC Can't Seal Docs Tied to Hinman's Ether Speech, Judge in Ripple Suit Rules (CoinDesk)
A federal judge ruled that the U.S. Securities and Exchange Commission cannot seal documents tied to former official William Hinman's 2018 speech on crypto and securities to Ripple in the regulator's ongoing lawsuit against the company closely associated with the XRP cryptocurrency. District Judge Analisa Torres, of the U.S. District Court for the Southern District of New York, ruled that the documents tied to that speech, in which the former SEC Director of Corporation Finance stated that in his view, ether was not a security, cannot be sealed in a court order. A magistrate judge in the same court, Sarah Netburn, first ruled in January 2022 that those documents needed to be turned over to Ripple as part of the ongoing discovery process.
Crypto Trading Should Be Regulated Like Gambling, UK Panel Says (Bloomberg)
Retail investing in unbacked cryptoassets like Bitcoin should be regulated like gambling because they are highly volatile and have ‘no intrinsic value,’ an influential panel of UK lawmakers said. The Treasury Select Committee, a cross-party group of members of Parliament, ‘strongly recommended’ such treatment for trading of digital tokens in a report published Wednesday.
Jump Trading Did Secret Deal to Prop Up TerraUSD Stablecoin, SEC Says (WSJ)
U.S. high-speed trading giant Jump Trading entered a secret deal to prop up the TerraUSD cryptocurrency a year before the coin’s collapse, new court filings show, highlighting the ties between Chicago-based Jump and disgraced crypto mogul Do Kwon. The Securities and Exchange Commission posted the court filings late Friday as part of its fraud lawsuit against Mr. Kwon and his company, Terraform Labs. The filings confirm that Jump was the unnamed U.S. trading firm in the SEC’s lawsuit that made some $1 billion in profit through its dealings with Terraform Labs, according to the SEC.
The SEC Calls Coinbase’s Suit Over Digital Asset Rules Petition ‘Baseless' (The Block)
The Securities and Exchange Commission responded to Coinbase’s lawsuit seeking a response to the company’s petition for new digital asset regulations, arguing that the commission is under no obligation to issue new regulations and Coinbase has no standing to sue the agency. At the heart of the lawsuit is the longstanding dispute between the crypto industry and markets regulator over which digital assets should be considered security investments, subject to existing registration and transparency requirements, or exempted on the argument that they don’t fall neatly into those existing laws.
Lido Finance Passes Vote to Activate Withdrawals on Ethereum With V2 Upgrade (The Block)
The largest liquid staking protocol on Ethereum, Lido Finance, has upgraded to version 2 — a critical change that enables users to withdraw ether from the platform. The move to version 2 was passed through an on-chain vote with community members deliberating over the proposal. The governance vote number 156, initiated on May 12, was ratified today on the Aragon platform. The vote to approve upgrade finalized at 1:15 pm ET today. The upgrade comes hot on the heels of the Shapella hard fork last month that allowed staking validators to withdraw ether. Lido required an extra month to facilitate withdrawals due to multiple security audits.
U.S. DOJ's Crypto Enforcement Director Promises Crackdown on Illicit Behavior on Exchanges (CoinDesk)
The U.S. Department of Justice's (DOJ) head of crypto enforcement has promised a crackdown on illicit behaviour on trading platforms, the Financial Times (FT) reported on Monday. Eun Young Choi, director of the National Cryptocurrency Enforcement Team (NCET), said the DOJ is targeting crypto exchanges that allow "criminal actors to easily profit from their crimes and cash out," as a means of fighting crypto crime which she said has grown "significantly" in the last four years. Choi added that the department's focus is on businesses that sidestep anti-money laundering or know-your-customer rules or who do not engage in thorough compliance and risk mitigation.
OpenAI CEO's Crypto Project Worldcoin Eyes $100M in Fresh Funding (Decrypt)
Worldcoin, the iris-scanning crypto project helmed by OpenAI CEO Sam Altman, continues to attract investors despite yet having left beta. Citing three people with knowledge of the deal, the Financial Times reported that Worldcoin is "in advanced talks" on a new round of financing worth around $100 million. The round is backed by both existing and new investors, according to one of the people. Worldcoin’s previous investment round included funding from venture capital firms Andreessen Horowitz (a16z) and Khosla Ventures, bringing the project’s valuation to $3 billion. It also closed an a16z-led $25 million Series A funding round in October 2021, with other investors including the likes of Digital Currency Group, Coinbase Ventures, and Multicoin.
U.S. Prosecutors Drop Extortion Charges Against Early Adviser to Ethereum Network (CoinDesk)
Criminal extortion charges against Steven Nerayoff, an early adviser to the Ethereum network, were dismissed by a New York judge on May 5, ending a three-and-a-half year legal battle that included explosive allegations he made against U.S. investigators. The dismissal, entered by U.S. District Court Judge Margo Brodie, chief judge of the Eastern District of New York (EDNY), comes six weeks after federal prosecutors moved to drop their case against Nerayoff, admitting in a March 20 court filing that they had obtained material exculpatory evidence and were otherwise “unable to prove the charges in the Indictment beyond a reasonable doubt.”
Binance Announces Exit from Canada, Citing Regulatory Tensions (CoinDesk)
Crypto exchange Binance has announced that it would cease operations in Canada, citing the challenging regulatory environment. “We had high hopes for the rest of the Canadian blockchain industry,” the company said in a Friday tweet. “Unfortunately, new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time.” In February, the Canadian Securities Administrators (CSA) revealed new guidance that prohibited crypto asset trading platforms within the country from allowing customers to buy or deposit stablecoins without the CSA’s prior approval. Obtaining approval would require the crypto trading platform to pass the CSA’s various due diligence checks.
Coinbase Fills New Advisory Council With Former US Lawmakers (The Block)
Coinbase, the crypto exchange in a bitter dispute with the U.S. Securities and Exchange Commission, is launching a new advisory panel and filling it with former U.S. lawmakers. Dubbed the Global Advisory Council, the group will “help navigate the complex and evolving landscape of the crypto industry, and strengthen relationships with strategic stakeholders around the world,” Coinbase said in a statement. Initial members will include former U.S. Senator Patrick Toomey, in addition to former U.S. Congressmen Tim Ryan and Sean Patrick Maloney. Additionally, Chris Lehane, an executive from venture-capital firm Haun Ventures, and John Anzalone, the founder of Impact Research Polling, will also participate.
Microsoft, Goldman Sachs, and Other Big Firms Back Launch of Financial Blockchain (Decrypt)
Financial firms like Deloitte, S&P Global, and Moody’s have come together to support the launch of the Canton Network, a blockchain designed to streamline financial markets with Web3 tech. The network aims to provide companies with decentralized infrastructure that could make transactions more efficient, linking financial systems together and allowing them to operate in a synchronized way, participants said in a press release. “Assets, data, and cash can synchronize freely across applications,” they said. “This creates opportunities for financial institutions to offer new innovative products to their clients while enhancing their efficiency and risk management.”
Crypto VC Paradigm Buys Coinbase Shares Worth $50 Million (The Block)
Crypto venture capital firm Paradigm, an existing investor in Coinbase, bought more shares in the exchange operator earlier this week worth around $50 million. The share purchase was reported by Paradigm co-founder Fred Ehrsam to the U.S. Securities and Exchange Commission on Thursday, according to a regulatory filing. Ehrsam was also co-founder of Coinbase from 2012 to 2017 and is currently a board director at the company. Specifically, Paradigm's entity Paradigm One LP bought 810,000 Coinbase shares at an average price of $61 on Tuesday and Wednesday. After the transactions, two Paradigm entities — Paradigm One LP and Paradigm Fund LP — now hold a total of 4.5 million Coinbase shares, per the filing. Ehrsam also owns 1.1 million shares of Coinbase via the Frederick Ernest Ehrsam III Living Trust.