The banking industry has been facing risks from uninsured deposit withdrawals, with almost 190 banks at a potential risk of impairment to insured depositors and potentially $300 billion of insured depositors at risk, as revealed by economists’ analysis. In the meantime, Representative Tom Emmer has warned the FDIC that its actions to purge legal crypto activity from the US are “deeply inappropriate” and could lead to broader financial instability. Furthermore, the US Federal Reserve announced a review of the supervision and regulation of Silicon Valley Bank in light of its failure, which will be released for public review by May 1.
The MBCA’s request to extend deposit insurance is aimed at reducing the risk of bank failures, which could potentially harm the entire banking industry. The proposal to fund the insurance program by raising deposit-insurance assessment on lenders who opt to participate in the increased coverage is a significant move towards ensuring stability in the banking industry. The economists’ analysis shows that there is a potential risk to insured depositors if uninsured depositors decide to withdraw their deposits. If this occurs, almost 190 banks would be at risk, and insured depositors could face a potential loss of up to $300 billion.
Representative Tom Emmer’s letter to the FDIC Chair raises concerns over reports that the FDIC is “weaponizing recent instability” in the banking sector to “purge legal crypto activity” from the US. Emmer argues that these actions are “deeply inappropriate” and could lead to broader financial instability. This concern over broader financial instability is further highlighted by the Federal Reserve’s announcement of a review of the supervision and regulation of Silicon Valley Bank in light of its failure. The review’s public release by May 1 shows that the Federal Reserve is taking steps to ensure that the banking industry remains stable and secure.
In conclusion, the MBCA’s request for an extension of deposit insurance is an important step towards ensuring stability in the banking industry. The proposal to fund the insurance program by raising deposit-insurance assessment on lenders who opt to participate in the increased coverage could provide banks with the necessary funds to ensure that they can meet the demands of their customers. The concern over broader financial instability, raised by Representative Tom Emmer, and the Federal Reserve’s review of the supervision and regulation of Silicon Valley Bank, highlights the need for continued vigilance to ensure the stability and security of the banking industry.
On March 10, the activities of Silicon Valley Bank UK were terminated by order of the Bank of England (BoE), which said that the bank did not provide any “critical services” in support of the financial system. Once this event occurred, HSBC purchased the bank for the very cheap price of one pound. But, just a few days following the purchase, HSBC gave its approval for bonuses of several millions of pounds to be given to workers and top executives of Silicon Valley Bank UK.
It was emphasized by the sources that the bonuses would not have been paid out if Silicon Valley Bank UK had not been purchased in a financially sound manner. The exact amounts of the bonuses that were given to Erin Platts, CEO of Silicon Valley Bank UK, and her senior colleagues are unknown at this time; however, insiders have emphasized that the payments were a signal of HSBC’s confidence in the talent base at Silicon Valley Bank UK as well as an effort to retain key staff.
As a result of the BoE’s announcement that it intends to place Silicon Valley Bank UK into a “bank insolvency procedure,” the bank was required to cease making payments and accepting deposits. Prior to this, Silicon Valley Bank UK was instrumental in the growth and support of the innovative economy in the UK. In the meanwhile, the United States banking arm of Silicon Valley Bank has been taken over by the government. In the meantime, Silicon Valley Bank’s parent company, SVB Financial Group, has filed for protection under Chapter 11 bankruptcy while it searches for purchasers for its other assets.
SVB Group’s chief restructuring officer William Kosturos stated that the Chapter 11 process will allow the group to “preserve value” as it evaluates strategic alternatives for its prized businesses and assets. Kosturos stated that the group will be able to “preserve value” if it goes through with the process. Notwithstanding this, both SVB Capital and SVB Securities will continue to do business as usual, both under the direction of their own separate teams.
The DeFi world was rocked when Euler Finance fell victim to the biggest DeFi hack of 2023, with $197 million in funds stolen. Since then, the crypto community has been closely following the on-chain movements of the stolen funds, hoping to track down the attacker. Blockchain investigator Chainalysis recently identified that 100 ETH from the stolen funds was transferred to an address linked to North Korea.
The hacker responsible for the Euler Finance hack also transferred 3,000 ETH to Euler’s deployer account without disclosing their intent. However, no other transfers have been made at the time of writing, leaving many in the crypto community speculating whether the hacker was trolling or if they genuinely considered accepting Euler Finance’s bounty reward of $20 million.
While Chainalysis has linked the stolen funds to North Korea, it has also highlighted the possibility of misdirection by other hackers. It is unclear whether North Korea is actually involved in the hack or if the hacker was simply using the address to throw investigators off their trail.
The Euler Finance hack has raised questions about the security of DeFi platforms, as Euler Labs CEO Michael Bentley expressed disappointment in the hack, revealing that ten separate audits over two years had assured its security. The fact that the hacker was still able to access and steal the funds has highlighted the need for stronger security measures in DeFi platforms.
The use of DeFi platforms has skyrocketed in recent years, and the potential rewards have attracted many hackers seeking to exploit vulnerabilities in the system. This has led to an increase in DeFi hacks, with many experts calling for stronger security measures to protect investors’ funds. The Euler Finance hack serves as a reminder that even with multiple security audits, DeFi platforms are not immune to hacks, and investors should exercise caution when investing in these platforms.
FTX was one of the most important cryptocurrency exchanges prior to its failure, which coincided with the creator and CEO, Sam Bankman-Fried, resigning from his position. The platform’s image, on the other hand, was damaged by charges of the theft of cash belonging to its users. Despite this, it was revealed that Bankman-Fried was attempting to have FTX subject to government regulation in an email exchange from May of 2022 that was stolen.
According to the Washington Examiner, Bankman-Fried contacted Martin Gruenberg, the chairman of the Federal Deposit Insurance Corporation (FDIC), in May 2022 and invited him to a meeting on June 13, 2022. This communication was made possible by Mark Wetjen, a former commissioner of the Commodities Futures Trading Commission (CFTC) who had only just started working for FTX US in the role of head of policy and regulatory strategy.
Based on the flow of emails, it was clear that Bankman-Fried was attempting to “promote discourse” and “starting examining” the prospect of FDIC regulation for FTX. This action was probably taken as a reaction to the rising regulatory scrutiny that bitcoin exchanges in the United States are now under. On the other hand, it is not known whether or not the meeting with Gruenberg actually took place, nor can it be established whether or not FTX was successful in its attempt to get federal regulation.
The failure of FTX in November 2022 may be attributed to a number of issues, including claims of fraudulent activity and poor management. In the wake of the collapse, Bankman-Fried stepped down from his position as CEO, although he continues to be a significant role in the bitcoin sector. Bankman-attempts Fried’s to seek government regulation for the exchange may have been a symptom of his intention to establish FTX as a reputable and trustworthy platform, notwithstanding the controversy that surrounds FTX.
A man entering Signature Bank in New York City on March 12, 2023.
Reuters
Two of the banks that were friendliest to the crypto sector and the biggest bank for tech startups all failed in less than a week. While cryptocurrency prices rallied Sunday night after the federal government stepped in to provide a backstop for depositors in two of the banks, the events sparked instability in the stablecoin market.
Silvergate Capital, a central lender to the crypto industry, said on Wednesday that it would be winding down operations and liquidating its bank. Silicon Valley Bank, a major lender to startups, collapsed on Friday after depositors withdrew more than $42 billion following the bank’s Wednesday statement that it needed to raise $2.25 billion to shore up its balance sheet. Signature, which also had a strong crypto focus but was much larger than Silvergate, was seized on Sunday evening by banking regulators.
Signature and Silvergate were the two main banks for crypto companies, and nearly half of all U.S. venture-backed startups kept cash with Silicon Valley Bank, including crypto-friendly venture capital funds and some digital asset firms.
The federal government stepped in on Sunday to guarantee all deposits for SVB and Signature depositors, adding confidence and sparking a small rally in the crypto markets. Both bitcoin and ether are nearly 10% higher in the last 24 hours.
According to Nic Carter of Castle Island Ventures, the government’s willingness to backstop both banks signifies that it’s back in the mode of providing liquidity, rather than tightening, and loose monetary policy has historically proven to be a boon for cryptocurrencies and other speculative asset classes.
But the instability once again showed the vulnerability of stablecoins, a subset of the crypto ecosystem investors can typically rely on to maintain a set price. Stablecoins are supposed to be pegged to the value of a real-world asset, such as a fiat currency like the U.S. dollar or a commodity like gold. But unusual financial conditions can cause them to drop below their pegged value.
A lot of crypto’s problems in the last year originated in the stablecoin sector, beginning with TerraUSD’s collapse last May. Meanwhile, regulators have been homing in on stablecoins in the last few weeks. Binance’s dollar-pegged stablecoin, BUSD, saw massive outflows after New York regulators and the Securities and Exchange Commission applied pressure on its issuer, Paxos.
Over the weekend, confidence in this sector again took a hit as USDC – the second-most liquid U.S. dollar-pegged stablecoin – lost its peg, dropping below 87 cents at one point on Saturday after its issuer, Circle, admitted to having $3.3 billion banked with SVB. Within the digital assets ecosystem, Circle has long been regarded as one of the adults in the room, boasting close connections and backing from the world of traditional finance. It raised $850 million from investors like BlackRock and Fidelity and had long said it planned to go public.
DAI, another popular dollar-pegged virtual currency that is partially backed by USDC, traded as low as 90 cents on Saturday. Both Coinbase and Binance temporarily paused USDC-to-dollar conversions.
On Saturday, some traders began swapping their USDC and DAI for tether, the world’s biggest stablecoin with a market value of more than $72 billion. Tether’s issuing company did not have any exposure to SVB and it’s currently trading above its $1 peg as traders flock to safer pastures, even though tether’s business practices have been called into question, as have the state of its reserves.
The stablecoin market began to rebound as of Sunday evening after Circle released a blog post saying that it would “cover any shortfall using corporate resources.” Both USDC and DAI have since shifted back toward their dollar peg.
Now that it is clear that SVB depositors will be made whole, Carter tells CNBC that he expects USDC to trade at par.
In the long run, the shutdown of the crypto banking trifecta could present problems for bitcoin, the world’s largest cryptocurrency, with a market value of $422 billion.
The Silvergate Exchange Network (SEN) and Signature’s Signet were real-time payment platforms that crypto customers considered core offerings. Both allowed commercial clients to make payments 24 hours a day, seven days a week, through their respective instant settlement services.
“Bitcoin liquidity and crypto liquidity overall will be somewhat impaired because Signet and SEN were key for firms to get fiat in on the weekend,” said Carter, who added that he is hopeful that customer banks will step in to fill the void left by SEN and Signet.
“These were the two most bitcoin-friendly banks, supporting the lion’s share of fiat settlement for bitcoin trades between trading counterparties in the U.S.,” wrote Mike Brock in a post on social media app Damus. Brock is the CEO of TBD at Block, a unit which focuses on cryptocurrency and decentralized finance.
Although Carter thinks the Fed stepping in to guarantee depositors of SVB will prevent a larger bank run on Monday, he says it is still dispiriting to see the three largest crypto-friendly banks taken offline in a matter of days.
“There are very few options now for crypto firms and the industry will be strapped for liquidity until new banks step in,” said Carter.
Mike Bucella, a longtime investor and executive in the crypto space, says that many in the industry are pivoting to Mercury and Axos, two other banks that cater to startups. Meanwhile, Circle has already publicly said that it is shifting is assets to BNY Mellon now that Signature bank is closing.
“Near-term, crypto banking in North America is a tough place,” said Bucella. “However there is a long tail of challenger banks that may take up that slack.”
Cairo — Egyptians who invested in a cryptocurrency mining app were hit last week with the daunting realization that the incredible profits they thought they were making all boiled down to fiction. The platform, called Hoggpool, was launched in August.
In a promotional video, a man introduced the company with a claim that it was founded in Colorado in 2019 and was investing in cutting-edge industries, from “life sciences technology” to “space tech and blockchain.” He called it “one of the leading energy providers worldwide” and said it offered “cryptocurrency mining at all levels.”
A screengrab from a YouTube video shows a man promoting an investment company called Hoggpool to Egyptians. The company was the target of raids by Egyptian police, who arrested 29 individuals in early March 2023 in connection with the cryptocurrency scam.
Potential investors were offered various plans starting from only about $10, with a fixed profit promised of $1 per day over a specific period. The investment options ranged up to an $800 crypto-mining “machine” with a $55 per-day payout.
Hoggpool told investors they could withdraw their money daily, minus a 15% tax, or wait until the end of the month and withdraw all their returns tax-free.
To Tarek Abd El-Barr, who works in medical supplies, it sounded like an incredible opportunity.
“They said they were ‘workers in mining,’” he told CBS News. “No one in Egypt knows what mining coins is. We don’t know anything about these things. We thought it was electronic investing — that they were like Amazon or Microsoft.”
Pyramid and Ponzi schemes are nothing new in Egypt, but cryptocurrency scams are. Receptions, parties and meetings held by the people behind Hoggpool, in fancy hotels and other venues, gave users the impression that it was all aboveboard.
Lawyers and victims told CBS News that ads on social media platforms lured some in, but for many, it was acquaintances who had already been hooked.
A photo shared with CBS News by Egyptian lawyer Hussein El-Faham shows people attending an event organized by the Hoggpool company in Cairo, Egypt. Egyptian police announced on March 4, 2023, that 29 people had been arrested in connection to the cryptocurrency investment scam.
Courtesy of Hussein El-Faham
Abd El-Barr’s brother-in-law, who was using the app and seeing consistent profits, convinced him to join. Skeptical at first, he started with an investment of just 6,000 Egyptian pounds (about $200) in February. It seemed to work as promised, as such scams often do, and he got his money back with profits, so he tripled his investment.
The platform’s biggest and final offer was a new “deposit funds” feature, with which users were told they could earn as much as five times the value of their existing investment in just five days. Abd El-Barr was skeptical again, but as it had worked thus far, he went ahead and took the risk, throwing all of his savings into the app.
On February 27, when he tried to withdraw his money, it didn’t work. Two days later, on March 1, the app stopped working completely and the website vanished.
“Many people took loans from banks to invest in it. I used my car instalment money. Now I have missed two installments and the bank is calling me,” he said.
Dozens of videos of people sharing their stories and crying out for help quickly flooded the internet.
A photo posted on Facebook by Egypt’s Ministry of Interior on March 4, 2023, shows some of the 29 people arrested in connection with a cryptocurrency investment scam that saw unwitting investors robbed of hundreds of thousands of dollars, according to Egyptian police.
Egyptian Ministry of Interior
On Saturday, Egyptian authorities announced the arrest of 29 suspects, including 13 foreign nationals, in connection with the scam. Police seized 95 phones, 3,367 SIM cards and about $194,000 worth of Egyptian and foreign currency as they made the arrests, the Ministry of Interior said in a statement. It said the culprits used 88 digital currency wallets to collect the money, then divided it into 9,965 e-wallets and converted it into bitcoin before transferring it into accounts around the world.
The statement said the suspects had bilked unsuspecting investors of at least 19 million pounds, or about $615,000, but many in Egypt believe the real total was likely much higher.
Lawyer Abdulaziz Hussein told CBS News he was representing more than 1,000 victims of the scam in Cairo alone, but that as many as 800,000 people around the country may have fallen prey to the scheme, losing as much as 6 billion pounds in total — the equivalent of about $194 million.
Cryptocurrency trading is illegal in Egypt, and another lawyer representing some of the victims said that had likely kept many from reporting the crime.
“Some of the victims might turn into suspects if the investigations prove they knew what they were doing was illegal,” said Mahmoud El-Semri.
It is hard to tell how many of the victims might have continued investing, and recruiting others, with knowledge that the scheme involved banned cryptocurrency, especially as most appear to have joined through recommendations from friends or family — people they trusted and who, in many cases, probably meant well.
“Most people didn’t look into the details of how this works, we just understood they would invest the money in programing,” Hussein El-Faham, a lawyer who was swept up in the scam himself, told CBS News.
He said it was an elaborate scam that looked and sounded legitimate, complete with forged documentation.
A falsified document purporting to show the Hoggpool company’s U.S. business credentials was shared with CBS News by Egyptian lawyer Hussein El-Faham, who was swept up in the cryptocurrency scam himself.
Courtesy of Hussein El-Faham
El-Faham said he and others heard warnings about it being a scam, but as the app initially continued paying out money as promised, it was easy to dismiss those reports. The people behind the app even used the warnings of fraud as a marketing tool, he said.
El-Faham shared a screenshot with CBS News that showed the scammers warning users of “fake” apps, asking them — in poorly written Arabic — to “please be cautious, those scammers have a low-tech level, and they are stupid enough to copy our system layout. Keep your eyes open.”
El-Faham lost about $6,000 to the scheme.
Dr. Sarah Zain, a physiotherapist, told CBS News she had her doubts about the app even as she used it, as it appeared to be an unsustainable business model, but she thought it would take longer to fall apart. She didn’t get her money out in time and ended up losing more than $7,000, which she said she needed for an upcoming surgery.
“A friend of mine and her family invested two million pounds (about $65,000), she is not talking to anyone now,” she said. “I can’t believe we were that stupid! They did brainwash us.”
Zain also put some blame on the government for allowing the scammers to operate openly for months.
Crypto could be in for a sideways month as inflation concerns come back into focus. Bitcoin and ether are starting the new trading month on a positive note – following a relatively flat month – each rising less than 1% Wednesday. Meanwhile, the stock market extended its slide from the previous session. Their modest February gains pale in comparison to their big January surge, but many investors still see it as a winning month. Bitcoin eked out a monthly gain of 0.8% and ether inched up 2.5%, while all of the major stock averages posted losses for February . “Bitcoin’s been the beneficiary of a flight-to-quality within crypto,” said Callie Cox, U.S. investment analyst at eToro. “If you’re a stock investor, you could see bitcoin as this growth engine without obvious cashflows. But if you’re a crypto investor that’s been crushed by a dramatic selloff in an altcoin, bitcoin could be seen as this blue-chip store of value.” “It’s all relative, but from a portfolio strategy perspective, you can’t overlook the inherent risks in crypto,” she added. “We still think bitcoin could struggle in a high-inflation, high-rate environment.” Bitcoin’s correlation with stocks has pulled back in 2023. However, Katie Stockton, a chart analyst and founder of Fairlead Strategies, told CNBC earlier this week that with equities now declining, she expects that correlation to return . Meanwhile, Rob Ginsberg, a technical analyst at Wolfe Research, noted that bitcoin and the U.S. dollar index have been moving higher together, although they typically move inversely. “It’s likely one will have to give. In the near term, our bet is on the dollar pulling back,” he said Wednesday. “It’s an interesting tape out there to say the least,” he added, noting the higher dollar and rates, deteriorating commodities and choppy equities. “Even with the recent overbought pullback, crypto continues to hang in there and consolidate.” He also said that while it “feels like the fun is over, the charts say differently.” “We’re buyers of this pullback and see it as a healthy response to their recent overbought conditions. If we’re right and more upside lies ahead in the near term, it’s tough to think crypto isn’t a major beneficiary.” What to watch Though industry developments accounted for much of the trading action in February, the Fed’s fight against inflation is still very much in focus, Kruger said. He cited inflation as well as regulation and institutional adoption – two big price drivers in February – as the key catalysts going into March. Bitcoin and ether suffered a brief drop of 6% and 8.5%, respectively, after U.S. regulators came out with a series of enforcement actions against crypto companies. Long-term investors see regulation as a positive development ultimately, but it can put pressure on prices in the near term, Kruger said. “These things do bring some uncertainty into the equation, and uncertainty quite often can be, you know, kind of negative,” he said. Cox said she has her eye on the big economic reports as well as the Fed’s next policy meeting, which begins March 21. “As we move into March, there could continue to be this push-and-pull between high rates and decent economic growth,” she said. “Investors’ main worry over the past few weeks has been the re-emergence of rising inflation, and how the Fed will respond to it. We may need to see more evidence that inflation is coming down to the Fed’s liking before we can resume the rally we saw in January.” Breaking past $25,000 Although bitcoin held up in February, investors are unsure when to expect a rocket ship rally . Stockton and Joel Kruger, market strategist at LMAX Group, both emphasized $25,000 as the level top to give more meaning to its gains. It’s currently trading at about $23,400, according to Coin Metrics. “While we poked above it on this latest run up in February, we just couldn’t establish above,” he said. “While we’re below $25,200 there still is the possibility that this market continues to pull back and consolidate and that we’re not yet ready to see that big breakout.” “Everything’s been constructive and we held up well, but we really … need to see a weekly close above that high to start to feel really encouraged about the outlook,” he added.
Sam Bankman-Fried, co-founder of FTX Cryptocurrency Derivatives Exchange, arrives at court in New York, US, on Thursday, Feb. 16, 2023.
Yuki Iwamura | Bloomberg | Getty Images
FTX ex-engineering head Nishad Singh pleaded guilty to criminal charges in New York on Tuesday, becoming the latest member of Sam Bankman-Fried’s former leadership team to agree to a deal.
The six charges against Singh include conspiracy to commit securities fraud, conspiracy to commit money laundering and conspiracy to violate campaign finance laws. FTX spiraled into bankruptcy in November after the crypto exchange, founded by Bankman-Fried, couldn’t meet customers’ withdrawal demands.
“Today’s guilty plea underscores once again that the crimes at FTX were vast in scope and consequence,” Manhattan U.S. Attorney Damian Williams said in a statement. “They rocked our financial markets with a multibillion dollar fraud. And they corrupted our politics with tens of millions of dollars in illegal straw campaign contributions. These crimes demand swift and certain justice and that is exactly what we are seeking in the Southern District of New York.”
The Securities and Exchange Commission, as well as the Commodity Futures Trading Commission both filed related civil complaints against Singh on Tuesday. Singh has agreed to settle with the CFTC, a court filing suggests.
Prior to Singh’s guilty plea with prosecutors, FTX co-founder Gary Wang and former Alameda Research co-CEO Caroline Ellison both pleaded guilty in December to federal charges in the Southern District of New York.
Alameda was a hedge fund and trading firm also controlled by Bankman-Fried. Prosecutors allege that customer deposits at FTX were sent to sister company Alameda, which faced billions of dollars in investment losses.
In December, Bankman-Fried was charged with eight criminal accounts, including securities fraud and money laundering. He was hit last week with four additional charges, including ones related to commodities fraud and making unlawful political contributions. He’s released on a $250 million bond while awaiting trial.
A representative for Bankman-Fried declined to comment.
Two of the charges against Singh are related to wire fraud and another is conspiracy to commit commodities fraud.
— CNBC’s David Sucherman contributed to this report.
According to a page that can be found on the official website of Sotheby’s, the original manuscript of Neil Stephenson’s Snow Crash, the novel that is credited with coining the phrase “metaverse,” will be put up for sale. The auction is a part of a series dubbed “Infocalypse” that will take place on February 23. The series will feature both physical and digital goods linked to the well-known novel.
Lot 2 of the series contains the original manuscript that was written. It is “wrapped in original Xerox 4200 Paper,” it is sealed with masking tape, and it has “corrections and notations throughout written in blue ink by Neal Stephenson in his hand.” Additionally, the author has inscribed the title of the book on the spine of the book using a sharpie marker.
In addition, there is a “updated typesetting document” up for auction in Lot 4 of the sale. This is a later version that was revised and supplemented by the author with extra handwritten notations and alterations.
Other real-world items are also being sold at auction as part of this series. These include the original painting that was used as the cover art for the 1993 mass-market paperback edition of the book; a leather jacket that was going to be used in a video promotion for the graphic novel; slides that were used for the concept of the graphic novel; and a real sword that was inspired by the one that the book’s protagonist wielded.
In addition to these tangible artifacts, the series will also include non-fiction tales (NFTs) of digital art that were created in response to the graphic book idea that came before Snow Crash.
The dystopian novel Snow Crash was first released in 1992 and takes place in a world where the majority of people reside in cramped storage facilities. The main character, Hiro, is a pizza delivery worker who needs to battle robbers in order to deliver pizzas to customers. The story chronicles his adventures. Hiro doesn’t have much of a social life since he spends all of his free time in a virtual world known as “the Metaverse,” which is a place where people go to get away from the stress of ordinary life. The inhabitants of the Metaverse, however, are transformed into “nothing more than a jittering cloud of negative digital karma” due to a computer virus. The journey that Hiro takes through the book to discover a cure for the virus is the driving force behind the story’s action.
According to the Washington Post, the book has racked up sales of more than one million copies on the continent of North America alone. Since the publication of the book, enthusiasts of virtual reality have been increasingly using Stephenson’s term “metaverse” to describe the developing virtual world that is being created by virtual reality technology. In recent years, the term has become a buzzword that is frequently searched for online.
The growth of the metaverse has provided some people with new job prospects and has contributed to the transformation of Web3 gaming.
The Cash App business section of Jack Dorsey’s payment startup, Block Inc., reported Bitcoin (BTC) revenue of $1.83 billion in the fourth quarter, which is a 7% decrease from the same period last year.
Block attributed the reduction in Bitcoin income to the decline in the price of BTC during the year, which was reported in its quarterly and full-year results on February 23. Bitcoin’s price dropped by nearly 65 percent throughout the course of 2022.
Due to the decrease in sales, Cash App’s Bitcoin gross profit decreased by 25% year-on-year, coming in at $35 million for the quarter. This was the lowest quarterly total since the company began reporting Bitcoin earnings.
Block’s Cash App is an application for processing payments made using mobile phones. On October 25th, functionality for transactions made via the Bitcoin Lightning Network was enabled to Cash App. It does this by offering Bitcoin sales to its consumers via the app, which brings in money.
In the entire year of 2022, Cash App made $7.11 billion in Bitcoin revenue and $156 million in Bitcoin gross profit, representing decreases of 29% and 28%, respectively, when compared to 2021’s figures.
In the meanwhile, Block Inc. reported a significantly increased net loss for the quarter, coming in at $114 million. This is compared to a loss of $77 million in 2021. When compared to the same period of the previous year, its adjusted profits before interest, tax, depreciation, and amortization (EBITDA) rose to $281 million, or a 53% rise. The aggregate amount of revenue during the period was $4.65 billion.
Following the release of the results report, the after-hours trading of Block’s shares resulted in a significant price increase.
The increase in the company’s gross profit, which was up 40% in Q4 compared to the same period the previous year and also above expert estimates, has been ascribed by some analysts to the surge in revenue.
Custodia Bank, a bank that deals in cryptocurrencies, asked the United States Federal Reserve to reconsider its membership application to the Federal Reserve System. However, the United States Federal Reserve turned down this request. A district court has allowed a lawsuit between Custodia Bank and the United States Federal Reserve to continue.
Custodia’s application “was inconsistent with the requisite elements under the law,” according to an earlier decision made by the Federal Reserve Board, which was cited in the central bank’s announcement on February 23 on the denial of membership.
The Federal Reserve rejected Custodia’s membership application in January, about four years after the company first submitted the request in 2019. Applicants have the right, according to the regulations of the board, to request that membership choices be reconsidered.
The reason the Fed gave for rejecting Custodia’s application was that the company’s management structure was “insufficient.”
In addition to this, it referred to a joint statement that it had prepared jointly with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. In this declaration, it said that cryptocurrencies were “inconsistent with safe and sound banking practices.”
Custodia has said that it would want to become a member of the Federal Reserve System in order to be subject to the same regulations that are imposed on conventional banks. In addition, this would pave the way for other cryptocurrency institutions to be subject to the same stringent requirements.
This week, on February 22, a judge in a district court in Wyoming dismissed a petition by the Federal Reserve board to dismiss a complaint filed by Custodia about a delay of more than two years in the opening of a master account with the Federal Reserve.
With a master account, Custodia would be able to access the payment systems of the Federal Reserve without having to use any other banks as intermediaries. Custodia’s request for a master account with the Fed was turned down on January 27, more than two years after the company first submitted its request for the account in October 2020.
After that, the Fed made a motion to dismiss the case since the account rejection rendered the complaint meaningless. Custodia, on the other hand, submitted a proposed amended complaint to the court on February 17, alleging that the Federal Reserve unfairly singled out and rejected its application as part of a “concentrated and coordinated” effort with the administration of President Joe Biden and requesting that the court reverse the decision.
Nathan Miller, a spokeswoman for Custodia, was quoted as saying in a statement that was released on February 17 that the case “zeroes in on the main legal issue: whether Congress ever authorized the Fed jurisdiction to determine master accounts at all.” He also said that the Fed “pressed the hand” of the cryptocurrency bank, stating that the institution “tried every avenue to find a sensible route ahead.”
A deadline of March 1 has been set by the judge for Custodia to submit its first revised complaint to the court.
According to Jeremy Allaire, founder and CEO of Circle, the United States Securities and Exchange Commission is not the suitable institution to oversee stablecoins.
The chief executive officer of Circle provided his opinions on the SEC and its recent actions to crack down on the cryptocurrency sector, including the stablecoin issuer Paxos, in an interview that took place on February 24 with Bloomberg.
Allaire seems to have taken issue with the SEC’s emphasis on stablecoins, stating that dollar-pegged “payment stablecoins” should be subject to the supervision of a banking authority rather than the SEC. This seems to be the case.
“I don’t think the SEC is the regulator for stablecoins,” said Allaire, adding, “There is a reason why everywhere in the world, including the U.S., the government is specifically saying payment stablecoins are a payment system and banking regulator activity.” “I don’t think the SEC is the regulator for stablecoins.”
Following the delivery of a Wells notice to Paxos, which is the issuer of Binance USD (BUSD), Circle affirmed the previous week that it had not been the subject of an investigation by the SEC.
“There are plenty of varieties, as we like to say, not all stablecoins are made equal,” Allaire stated. He continued by saying, “But, obviously, from a policy standpoint, the consistent position throughout the globe is that this is a payment system, prudential regulator area.”
However, the CEO of Circle said that he generally supported a recent proposal made by the SEC regarding cryptocurrency custody. This plan would make it far more difficult for exchanges to become custodians.
We believe that having competent custodians who are able to offer the right control structures as well as bankruptcy protections and other things is a very crucial and highly useful component of the market system.
USD Coin, which is issued by Circle, is the second-largest stablecoin in circulation worldwide (USDC). Its market share is 31% thanks to its circulating supply of $42.2 billion, which provides it that percentage. According to CoinGecko’s data, Tether continues to be the most popular stable cryptocurrency, with a supply of $70.6 billion and a market share of 52%.
On February 23, Allaire expressed his agreement with SEC Commissioner Hester Peirce’s statement that the agency need to consult with Congress. Some people argue that the Securities and Exchange Commission has been taking matters of crypto rules and enforcement into its own hands due to the absence of law in this area.
According to the article, Circle is planning to increase its staff by as much as 25 percent, breaking the typical trend of layoffs in the cryptocurrency industry.
The Ethereum community appears to have a bullish view of Coinbase’s newly announced layer-2 network, Base, which has been described as a “massive confidence vote” and a “watershed moment” for the blockchain network. This has been described as a “massive confidence vote” and a “watershed moment” for the blockchain network.
Protected by Ethereum and driven by Optimism’s layer-2 network, Base’s long-term objective is to evolve into a network that facilitates the development of decentralized applications (DApps) for use on blockchains. According to the chief executive officer of Coinbase, Brian Armstrong, the layer-2 network is now in the testnet phase.
Members of the cryptocurrency community such as Ryan Sean Adams, host of the Bankless Show, are of the opinion that the move “is a massive vote of confidence for Ethereum.” If this is proven to be the case, it could set a precedent for cryptocurrency companies and financial institutions to use Ethereum as their preferred settlement layer.
Since its founding in 2012, Coinbase has amassed roughly 110 million verified users and has worked with 245,000 businesses across more than 100 countries. According to CoinGecko, its cryptocurrency exchange is the second biggest in the world in terms of trading volume. The first place goes to Binance.
“This alone will 10x the overall number of crypto native users,” Adams said, adding that “if Coinbase converts 20% of its 110 million verified users to Layer 2 users in the future years,” this alone will 10x the entire number of verified users.
Adam also praised Coinbase for its decision to open-source Base, and he is of the opinion that the newly introduced layer-2 network would result in an increased demand for block space on Ethereum.
In the meantime, Sebastien Guillemot, co-founder of blockchain infrastructure company dcSpark, suggested that Coinbase made a wise decision to go with a layer 2 as opposed to an independent sidechain, noting that “almost all” cryptocurrency transactions and value locked on Ethereum resides on layer 2s these days. Guillemot was referring to the fact that “almost all” cryptocurrency transactions and value locked on Ethereum resides on layer 2s.
In a tweet dated February 23, Ryan Watkins, co-founder of the cryptocurrency-focused hedge fund Syncracy Capital, referred to the announcement as a “watershed moment” in the ecosystem of Ethereum rollups. He went on to say that there was “probably no one better” positioned than Coinbase to get Ethereum’s next 10 million consumers and institutions on board.
However, there were some bears among the bulls.
Gabriel Shapiro, general counsel of investment firm Delphi Labs, explained in a Twitter post dated February 23 that launching a centralized layer-2 network “opens the door” to unwarranted scrutiny from the SEC. He was referring to the fact that the SEC has the authority to investigate investment firms.
“A centralized L2 that trades lots of tokens any number of which could be alleged securities, or does lots of DeFi transactions that arguably might alleged to be regulated (security swaps etc), opens the door to the SEC making new kinds of secondary market claims,” wrote Shapiro, adding that “imo, this will accelerate the SEC’s “secondary market” agenda re: blockchain securities issues, because they can’t let an SEC registrant “get away with” potential violations and
Concerns raised by Shapiro come at a time when the SEC has lately ramped up its enforcement operations against a number of stablecoin issuers and service providers of staking services.
Following its victory in the state Senate, a piece of legislation pertaining to cryptocurrency mining rights and regulations that would prohibit discrimination against crypto miners is one step closer to becoming a reality.
The proposed laws would protect mining that takes place “at home” and strip local governments of the power to use zoning laws to stop crypto mining operations. They would also enshrine a “right to mine digital assets” and prohibit “discriminatory” electricity rates from being charged to cryptocurrency miners.
In addition to this, it forbids the imposition of additional taxes on the use of cryptocurrencies as a method of payment and proposes classifying “digital assets,” which include cryptocurrencies and nonfungible tokens, as “personal property,” in the same category as other financial products like stocks and bonds.
On February 23, the measure received a vote of 37 in favor and 13 against in the state Senate. It will now be considered for passage in the House of Representatives. In the event that it is also approved there, the last stage would be for it to be signed into law by Governor Greg Gianforte, who has the option to either sign the measure into law or veto the bill.
Mining “provides good economic value” and has the ability to “stabilize the grid and provide income for infrastructure enhancements,” as stated in the law, which outlines that Montana wants to “protect the right to mine” cryptocurrency and “provide legal clarity” for miners.
The text of the law was drafted with the assistance of the Satoshi Action Fund, which is an organization that advocates for Bitcoin (BTC).
In April of 2019, the county of Missoula in the state of Montana established regulations that forced miners to operate only in light and heavy industrial areas and compelled miners to solely utilize renewable energy. These regulations were enacted. The zoning regulation of the county would be overturned if the bill were to be enacted.
A similar law that seeks to protect crypto miners from discrimination was approved by the Mississippi state Senate at the beginning of February and is now making its way to the Mississippi House of Representatives.
In the meanwhile, the Digital Asset Mining Protection Act of Missouri was submitted to the state legislature in the middle of January with the intention of safeguarding the legal rights of cryptocurrency miners.
Following the resumption of withdrawals on February 21st, the Japanese unit of the defunct cryptocurrency company FTX has stated that thousands of customers have transferred their business elsewhere.
FTX Japan said in a statement made on February 22 that customers of both the exchange and those at Liquid Global had withdrawn around 6.6 billion yen (which was equivalent to approximately $50 million at the time of publishing) in cryptocurrency and fiat cash. The cryptocurrency company reports that 7,026 account holders have transferred cash from FTX Japan to Liquid, that 5,697 transactions have included cryptocurrencies, and that 1,947 customers have withdrawn fiat currency.
The cryptocurrency company said on February 20 that in order to make withdrawals, users of FTX Japan would first need to authenticate the amounts in their accounts and then transfer those funds to a Liquid account. For the first time in more than three months, withdrawals started up again around three in the morning UTC on February 21.
When its parent business filed for bankruptcy in November 2022, FTX Japan was part of the action. At that time, the corporation froze the assets of around 9 million members, denying them access to millions of dollars’ worth of funds. According to a report by NHK at the time, FTX Japan had around 19.6 billion yen in cash when it suspended operations. This is equivalent to more than $138 million, which leads one to believe that there may be over $90 million remaining for consumers as of February 22.
Since November, the majority of FTX consumers, including those at FTX US, have been unable to withdraw their assets because of the bankruptcy processes that have been going on in the United States. The matter is now being heard in the United States Bankruptcy Court for the District of Delaware, where the judge has already ruled against a move to appoint an independent examiner on the grounds that doing so would be prohibitively expensive.
Following the announcement that the Hong Kong government intends to infuse 50 million Hong Kong dollars ($6.4 million) into Web3 as part of the city’s budget for the 2023-24 fiscal year, cryptocurrency exchange Gate.io is getting ready to build a presence in Hong Kong.
On February 22nd, Gate Group announced that it would be applying for a cryptocurrency license in Hong Kong, which will enable it to establish “Gate HK.” Hippo Financial Services, the local subsidiary of the corporation, was awarded a license in August 2022 to allow it to offer custody services for virtual assets.
In a budget address on February 22, the Hong Kong finance secretary, Paul Chan, pledged financing relating to Web3 as well as the formation of a crypto task force. This news comes at the same time.
He went on to say that Web3 had “great potential,” and that the Special Administrative Region of China is obligated to keep up with its “constant growth.”
“It is imperative that we stay current with the times and make the most of this priceless chance to drive innovation forward.”
Chan said that the monies will be used to expedite “the growth of the Web3 ecosystem” by organising “workshops for young people,” holding international seminars, and boosting commercial collaboration.
Because of the legislation that the government has enacted around cryptocurrencies, he said that a “big number” of businesses are contemplating opening up shop in the city. Dr. Han Lin, the founder of Gate Group, referred to Hong Kong as both “a worldwide strategic market” and a “hub” because of its “industry-leading regulatory system.”
On February 20th, Hong Kong announced its intentions, which included a new licensing framework as well as a proposal to provide retail traders access to approved cryptocurrency platforms.
Chan has said that he “will organize and head a task force” on the creation of virtual assets in response to the surge in commercial interest. This task force will be comprised of individuals from financial regulators, market actors, and “relevant policy bureaux.”
According to Chan, the purpose of the task group is to “offer suggestions on the sustainable and responsible growth of the industry.”
In October, Hong Kong launched crypto-friendly policy frameworks in an effort to govern the business inside the city. This was the first step in the city’s quest to achieve status as a worldwide centre for the cryptocurrency industry.
The city’s unique status enables it to have its own laws and government, despite the fact that it is located inside a territory that is part of China. However, there are reports that authorities in Beijing are covertly supporting the region’s crypto aspirations. This would appear to be in contradiction to China’s prohibition on cryptocurrencies, but the push that Hong Kong is making in the cryptocurrency space.
A federal grand jury in the District of Oregon has handed down indictments against the individuals who are believed to have been the masterminds behind the “global Ponzi” scam known as Forsage, which is said to have generated $340 million.
According to a statement released by the Department of Justice (DOJ) on February 22, the four Russian founders, Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov, have been formally accused of having key roles in the scheme that raised approximately $340 million from victim-investors. This information comes from the formal accusation.
U.S. Attorney Natalie Wight for the District of Oregon stated that “today’s indictment is the result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars.” She also stated that “bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies.”
Forsage promoted itself as a low-risk, decentralized financial platform that was based on the Ethereum blockchain and offered customers the opportunity to create passive income over the long term. Blockchain analytics, on the other hand, allegedly shown that eighty percent of Forsage “investors” got back less money than they had initially contributed.
Analysis of the smart contracts, as reported by the Department of Justice (DOJ), indicated that monies that were obtained when new investors acquired “slots” in Forsage’s smart contracts were routed to older investors, which is consistent with the definition of a “Ponzi scheme.”
Forsage has an active Twitter account, on which they recently posted a thread saying that community members who take part in “The Ambassador Program” will be able to receive monthly incentives by accomplishing certain activities. The tweet was published on February 22.
The Securities and Exchange Commission filed charges of fraud and selling unregistered securities against the company’s four founders and seven promoters on August 1. At the time, acting chief of the SEC’s Crypto Assets and Cyber Unit Carolyn Welshhans said: “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
Back in 2020, the Philippines Securities and Exchange Commission had also raised concerns about Forsage, indicating that it may be a Ponzi scheme. However, one month later, the platform remained the second-most popular decentralized application (DApp) on the Ethereum blockchain.
When a prosecutor brings criminal charges against an individual or group and accuses them of committing an offense, this is referred to as a charge. However, an indictment is filed by a grand jury if prosecutors are successful in persuading a majority of the grand jury members that a formal accusation is warranted following an investigation.
The use of grand juries is widespread practice in the prosecution of significant federal and state criminal crimes.
A fundamental developer of the Ethereum ecosystem said that since the debut of the Beacon Chain on December 1, 2020, there have only been 226 validators sliced out of a total of 524,060 validators, which is barely 0.04% of the total. This information was provided by the developer. Slashing happens when a validator breaks the rules that govern the proof-of-stake consensus. This often results in the removal of the validator from the network and the loss of a part of the Ether (ETH) that was pledged as collateral. The Ethereum core developer known as “Superphiz” pointed out these low cutting rates in a tweet on February 23. He said that staking ETH should not be a worry since the probabilities of having it slashed are very low.
In addition, Superphiz suggested a total of four up-and-coming best practices as a means of lowering the chance of being reduced even more. Because many slashings are the result of unsuccessful system migrations, one of these procedures is erasing any existing chain data on older staking machines and then reinstalling and reformatting the validator. Additionally, Superphiz advised use a technique known as “doppelganger identification,” which examines the validator’s keys to see whether or not they are operational before beginning the validation process.
The purpose of these steps is to make the process of staking ETH more safe and to convince users that the chance of having their stakes lowered is quite low. Staking Ethereum is an essential component of the Ethereum network since it contributes to the network’s overall security and offers a passive revenue opportunity to users who donate Ether. The move from a proof-of-work consensus algorithm to a proof-of-stake consensus algorithm is scheduled to take place as part of the next Ethereum 2.0 update. This change is expected to make staking ETH even more significant.
Users should have trust in staking their Ethereum (ETH) because to the low rate of slashing that occurs within the Ethereum ecosystem as well as the best practices that are advised by Superphiz. Users have the ability to further mitigate the risks associated with staking and contribute to the overall security of the Ethereum network by following the established best practices and taking the required safeguards.
Former billionaire Sam Bankman-Fried, the founder of befallen crypto exchange FTX, has been charged with four new criminal counts including allegations of illegal political donations and bank fraud.
Forbes sits with Alexis Ohanian at his Florida home to discuss the future of crypto following the fallout of FTX. The Reddit cofounder makes the argument for hard-to-seize assets before discussing his latest venture, Seven Seven Six, and more.
