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Tag: cryptocurrencies

  • Sega Bins Blockchain Plans, Calls F2P Games ‘Boring’

    Sega Bins Blockchain Plans, Calls F2P Games ‘Boring’

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    In April 2021, at the height of Web 3 Mania, Sega was one of the biggest companies to pledge its future to the scam that was “play to earn”. Now, just two years later and after the ass has completely fallen out of that market, Sega has had a change of heart.

    This Mini Sega Arcade Cabinet Packed With Retro Games Would Make A Great Gift

    As we wrote at the time, in a story with the headline ‘Sega Wants To Sell NFTs, Can Fuck Right Off’:

    Sega Japan announced earlier today that it will be getting into the NFT business, partnering with (and buying a stake in) a company called Double Jump Tokyo, with plans to not only sell character-related tokens, but NFTs in future games as well.

    The announcement is thin on details, but as Pocket Gamer reports, Sega hopes this “will be the start of a sequential expansion into a variety of content, including IPs currently in development and new IPs to be released in the future.”

    Those plans are now mostly done for. In an interview with Bloomberg, Sega’s co-Chief Operating Officer Shuji Utsumi has said the company will now “withhold its biggest franchises from third-party blockchain gaming projects to avoid devaluing its content”, and will also be “shelving plans to develop its own games in that genre at least for now”.

    “We’re looking into whether this technology is really going to take off in this industry, after all”, Utsumi told the site, adding that while its “biggest franchises” are off the table, “lesser known” properties like Three Kingdoms and Virtua Fighter will still be seeing some NFT tie-ins, albeit from third-party providers.

    His best quote, however, is where he bluntly says “The action in play-to-earn games is boring. What’s the point if games are no fun?” My guy, we were telling you that in 2021, glad you finally came around.

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    Luke Plunkett

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  • SEC sues Binance and CEO Zhao for breaking US securities rules

    SEC sues Binance and CEO Zhao for breaking US securities rules

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    The US Securities and Exchange Commission accused Binance Holdings and its Chief Executive Officer Changpeng Zhao of mishandling customer funds, misleading investors and regulators, and breaking securities rules. 

    In a 136-page complaint filed Monday in US federal court in Washington, the SEC laid out a range of alleged violations against the world’s biggest crypto exchange and its leader. For years, they flouted investor protection rules, the watchdog said. The case from Wall Street’s main regulator adds to legal headaches for Zhao and Binance. 

    “Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” SEC Chair Gary Gensler said in a statement. “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”

    Binance called the complaint “disappointing,” saying it had engaged with the SEC in good-faith negotiations to settle the matter. The exchange also said that the SEC was misguided in not providing clarity over rules for digital assets. 

    “While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis,” the firm said. “We intend to defend our platform vigorously.”

    Among other allegations, the SEC said that two Binance-linked tokens, BNB and BUSD, were securities that the firm improperly offered and sold. The SEC alleged that Binance and its US affiliate weren’t actually independent from each other and improperly functioned as an exchange, broker-dealer, and clearing agency without registering with the agency. 

    “While Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes,” the SEC said in its complaint.

    The case follows a lawsuit from the US derivatives watchdog in March that alleges Binance and Zhao routinely broke its rules. At the time, the exchange and Zhao defended their compliance efforts and called the lawsuit by the Commodity Futures Trading Commission disappointing, while also pledging to keep working with regulators. The derivatives regulator also alleged that Binance worked to evade US regulations, a claim that the SEC repeated in its Monday complaint. 

    Alleged wash trading

    The SEC on Monday also alleged that the “purposeful efforts to evade U.S. regulatory oversight while simultaneously providing securities-related services to U.S. customers put the safety of billions of dollars of U.S. investor capital at risk and at Binance’s and Zhao’s mercy.”

    In addition, the agency accused Binance of misleading investors about controls in place at the US entity to prevent manipulative trading. “The supposed controls were virtually non-existent,” the lawsuit said, alleging that from at least September 2019 until June 2022, Sigma Chain — a trading firm owned and controlled by Zhao — used wash trading to artificially inflate Binance.US’s trading volume.

    The regulator also said that Binance moved and mixed customer funds improperly. Billions of dollars of those funds went to a bank account for an entity called Merit Peak Limited that was controlled by Zhao. Funds from that entity were then transferred to a third party and then appeared to be used to buy and sell crypto, the SEC said.

    The SEC also claimed that by 2021 at least $145 million was transferred from Binance.US to a Sigma Chain account. Another $45 million was deposited into the account from a Nevada-based trust company connected to the US platform. Sigma Chain used $11 million from the account to purchase a yacht, the agency alleged.

    The SEC has for months been probing whether Binance illegally sold digital coins as the exchange was getting off the ground in 2017, Bloomberg has reported. The token, which is known as BNB, is now among the world’s largest.

    A virtual currency may fall under the SEC’s remit if investors buy it to fund a company or project with the intention of profiting from those efforts. That determination is based on a 1946 US Supreme Court decision defining investment contracts. 

    In the lawsuit, the SEC also alleged that certain tokens — including SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI — traded on Binance.com and Binance.US were offered and sold as securities, a move that could have wide implications for other exchanges that offer these tokens.

    —With assistance from Tom Schoenberg, Muyao Shen, Yueqi Yang and Stephanie Stoughton.

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  • Bitcoin faces fresh challenges after debt deal moves forward, Citigroup warns

    Bitcoin faces fresh challenges after debt deal moves forward, Citigroup warns

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    “Crypto markets were not immune to fears of the U.S. defaulting on its debt, selling off on negative developments and rallying on headlines suggesting progress,” say Citi research analysts.

    Dan Kitwood/Photographer: Dan Kitwood/Getty

    Just when markets appear to be moving past the months-long drama around the U.S. debt ceiling, holders of risky assets such as cryptocurrencies are likely facing a fresh challenge while the Treasury looks to rebuild its depleted cash balance with an estimated $1 trillion Treasury-bill deluge.

    “The impending reserve drawdown, due to the [Treasury General Account] rebuild, may prove to be a headwind,” Citi Research strategists including Alex Saunders wrote in a note.

    Citi analyzed the performance of risky assets during drawdowns and found that they were vulnerable to higher volatility and weaker returns. As such, the near-term outlook doesn’t seem too rosy for Bitcoin and Ether. “Both coins average negative returns in these scenarios, and BTC has significantly underperformed in the median case,” the strategists wrote Thursday.

    The TGA, which keeps money for the Treasury, ballooned during the pandemic. It expanded again last year and is now about as low as it has ever been. Treasury, as a result, will need to replenish its dwindling cash buffer to maintain its ability to pay its obligations through bill sales, estimated at well over $1 trillion by the end of the third quarter. This supply burst may drain liquidity from the banking sector and raise short-term funding rates against an economy many say is likely to fall into recession.

    This doesn’t bode well for digital-asset investors, who were just recovering from fears of a no-deal scenario for the U.S. debt ceiling. While Bitcoin edged higher on Friday, it’s still hovering around the $27,000-mark that it has failed to break away from for several weeks. 

    “Crypto markets were not immune to fears of the U.S. defaulting on its debt, selling off on negative developments and rallying on headlines suggesting progress,” the strategists said. They added that crypto has typically “fared well” amid issues concerning traditional financial institutions, citing the banking turmoil in March, a period in which Bitcoin outperformed. But perhaps risks of an institution such as the U.S. government defaulting “doesn’t paint a favorable outlook for decentralized digital assets.”

    To illustrate, the strategists used the Cboe Volatility Index, or VIX, as an indicator of the market’s fear to gauge whether a resolution would be passed before hitting the ceiling. And whenever equity market concerns were eased, that’s when Bitcoin outperformed.

    “While in theory the potential default of an institution as impactful as the U.S. government would bode well for decentralized technologies and systems, this may not currently be the case given that the crypto industry is still in its infancy and regulation has yet to be well-defined,” they wrote. “Another theory is that not raising the debt ceiling would lead to reduced U.S. government debt and a lower fiscal deficit, and provide more credibility to fiat, particularly the dollar.”

    On Friday, the Senate passed legislation to suspend the U.S. debt ceiling and impose restraints on government spending through the 2024 election. The measure now goes to President Joe Biden, who forged the deal with House Speaker Kevin McCarthy and plans to sign it just days ahead of a looming U.S. default. 

    Year-to-date, Bitcoin has rebounded some 60% after starting the year at around $16,500. Such optimism comes after 2022’s 64% drop, its second-worst year in its history. It rose about 1% to $27,178 as of 3:32 p.m. in New York, and is marginally higher from last Friday.

    Bitcoin’s support hovers around $26,500, said Fiona Cincotta, senior market analyst at City Index, adding that a break below $25,000 could mean a deeper sell-off. 

    “The problem is the macro backdrop, which is relatively uncertain going forward with recessionary fears,” she said. “I think what we’ll be looking for to make Bitcoin shine is a nice dovish pivot from the Federal Reserve. That might be the tide where we will see another decent leg higher.”

    Range-bound trading has been Bitcoin’s defining characteristic of late, with its 30-day volatility reigning low at 1.8%, staying firm within its two-month-long trading range. Despite growing short-term volatility, options implied volatility trended lower over the past week, according to K33’s Bendik Schei and Vetle Lunde. Even so, Bitcoin exchange-traded products continued to see steady outflows while Bitcoin volumes — spot and futures — are trending lower. 

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  • Could bitcoin and gold be haven buys as debt-ceiling fears mount? Here’s what recent trading patterns suggest.

    Could bitcoin and gold be haven buys as debt-ceiling fears mount? Here’s what recent trading patterns suggest.

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    Welcome back to Distributed Ledger. This is Frances Yue, reporter at MarketWatch.

    Fears are brewing in financial markets that the U.S. lawmakers won’t be able to reach an agreement to raise the country’s debt limit by X date, or the date that the U.S. government is unable to meet its debt obligations.  

    Analysts at JPMorgan Chase & Co.
    JPM,
    +0.94%
    on Wednesday said they see the odds of debt ceiling negotiators failing to reach a deal by early June at “around 25% and rising.” 

    Concerns around a technical default of U.S. government debt have contributed to volatility across financial markets, sending Treasury bills maturing in the first eight days of June above 6%. Yields on such bills briefly topped 7% on Thursday. 

    As investors search for havens from such tumult, gold and bitcoin are often cited as potential refuges. 

    Still, gold futures have been retreating since the most-active contract reached its second-highest settlement on record on May 4. 

    Bitcoin, which rallied almost 60% so far this year, have also posted lackluster performance for the past few weeks, down 5.8% over the past month. 

    Are gold and bitcoin effective hedges against a technical default of U.S. government debt? Why are we not seeing a rally as the X date approaches? I caught up with several analysts to ask their views.

    Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, gold, or this newsletter.  

    Is gold the haven?


    FactSet

    “Generally speaking, gold thrives when there are periods of uncertainty,” said Rhona O’Connell, analyst at StoneX Group. “But if you take that uncertainty too far, then we get to stages where people are sitting on their hands and not really doing very much and that’s what’s happened here.”

    Gold futures for June delivery 
    GC00,
    +0.09%
    GCM23,
    +0.09%
     on Thursday declined by $20.90, or 1.1%, to $1,943.70 per ounce on Comex, with prices for the most-active contract posting their lowest finish since March 21, according to FactSet data.

    As gold futures price retreat to below $2,000, “I suppose it’s arguable that the bulls might be a bit disappointed,” said O’Connell.  But there’s “bound to be a retreat” with gold’s price premium building over the past few weeks, according to O’Connell. 

    “The fact that gold hasn’t managed to climb any higher given the potential seriousness of the economic consequences should no agreement be reached before the June deadline reflects a prevailing view that ultimately the markets believe some middle ground can be found in time,” Rupert Rowling, analyst at Kinesis Money, wrote in a recent note.

    Still, gold’s price stays elevated at levels that were not seen many times in history.

    What about bitcoin?

    Considering the rally bitcoin had so far this year, it’s “not crazy to see a little bit of pullback, according to Steven Lubka, a managing director at Swan Bitcoin. 

    Bitcoin gained almost 60% so far this year while still down over 60% from its all-time high in 2021.

    Still, if the U.S. ends up defaulting on its debt, and “everyone freaks out, bitcoin could do very well in that scenario,” Lubka said, citing bitcoin’s limited supply, decentralized and non-sovereign properties.

    However, not everyone agrees. There is not enough evidence to support the claim that bitcoin could serve as a hedge against the debt ceiling tumult, according to Lapo Guadagnuolo, director at S&P Global Ratings. 

    “We can’t make that argument because we don’t see that in the data,” Guadagnuolo said. 

    A rising dollar

    The recent strength of the U.S. dollar have also weighed on bitcoin and gold.

    On Thursday, the ICE U.S. Dollar Index
    DXY,
    -0.02%    ,
     which measures the currency’s strength against a basket of six major rivals, climbed above 104 to its highest level since March 17, according to Dow Jones market data.

    Although a technical default of U.S. government debt could hurt the dollar’s reputation in the long term, it might have little bearing on the immediate reaction, which would resemble a knee-jerk move higher, as my colleague Joseph Adinolfi elaborated here. 

    As gold is mostly denominated in U.S. dollar and bitcoin’s main trading pairs are dollar-denominated stablecoins, a strong dollar could weigh on both assets. 

    Still, the debt ceiling debacle in the long term could strengthen the narrative around bitcoin and gold, as “the governance of the worlds fiat system comes into question,” according to Greg Magadini, director of derivatives at Amberdata.

    Crypto in a snap

    Bitcoin lost 2.8% in the past week and was trading at around $26,360 on Thursday, according to CoinDesk data. Ether declined 0.9% in the same period to around $1,805

    Biggest Gainers

    		 Price

    		 %7-day return
    marumaruNFT

    		 $0.26

    		 201%
    Render

    		 $2.70

    		 19.5%
    Kava

    		 $1.10

    		 14.3%
    TRON

    		 $0.08

    		 10.6%
    Huobi

    		 $3.12

    		 8.4%
    Source: CoinGecko
    Biggest Decliners

    		 Price

    		 %7-day return
    GMX

    		 $52.68

    		 -14.6%
    Sui

    		 $0.99

    		 -13.3%
    Fantom

    		 $0.33

    		 -10.1%
    Stacks

    		 $0.59

    		 -9.7%
    Optimism

    		 $1.62

    		 -9.7%
    Source: CoinGecko

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  • America’s Multi-Trillion Dollar Banking Problem | Entrepreneur

    America’s Multi-Trillion Dollar Banking Problem | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    If you’re reading this, you’ve probably come across some of the recent turmoil within the United States banking system. Most notably, we’ve seen the collapse of several notable banking institutions, which include the likes of Silicon Valley Bank, Silvergate Bank and Signature Bank.

    To date, the overwhelming majority of the blame for these recent failures has been assigned to the excessive risk and volatility associated with the emerging cryptocurrency (crypto) industry and early-stage companies when in all actuality, the primary driver of these failures stems from an age-old flaw of our banking system. Specifically, the bank failures of today were somewhat predestined, given bank runs are a known, well-understood threat to the health of any fractional reserve banking system.

    Now, more than ever, is the time for the American people to fight to lessen our archaic banking system. After all, we’re the ones who suffer the most, not the ultra-wealthy.

    Related: Why the American Dream is Dead

    What is a fractional reserve banking system?

    In the simplest of terms, a fractional reserve banking system allows banking institutions to lend out a certain percentage of the customer deposits that sit on the bank’s balance sheet. The reason why a bank might do this is simple: free money. For a nominal interest rate due back to its depositors, banks are able to borrow funds and generate substantial returns from a myriad of investments. You might ask what regulations are in place to ensure that your money is there should you choose to initiate a withdrawal, so let’s go through a quick history lesson.

    In 1913, the Federal Reserve Act set out to accomplish a couple of key items:

    1. Creation of the Federal Reserve Banks (in aggregate, the Federal Reserve System)
    2. Set minimum reserve requirements for banks (set at 13%, 10% or 7%, depending on the type of institution)

    Fast forward to mid-century, and minimum reserve requirements increased marginally (up to 17.5% for certain banks) before settling within the 8-10% range from the 1970s to the 2010s. Most recently, in 2020, reserve requirements were abolished and replaced with the Interest on Reserve Balances (IORB) system, where banks were paid interest for funds that sat on their balance sheet, incentivizing them to lend fewer customer deposits. Crazy, right?

    In case you’re wondering how much interest banks were paid for sitting on customer deposits, it was 0.15% (or 15bps) from 2020 until early 2022, when the Federal Reserve started to hike rates. See where I’m going with this? In a world where shareholders are in constant search of yield, the opportunity cost of sitting on reserves when the S&P 500 (or even real estate) pays high single-digit returns on an annual basis incentivizes risk-taking, which benefits the nation’s elite at the expense of deposits (everyday Americans).

    Related: You Might Not Know That You’re a High-Risk Customer for Mainstream Banks

    What you’ve been told

    One important item to note is that fractional reserve banking systems don’t solely benefit banking institutions. In fact, fractional reserve banking is one of the biggest drivers of economic growth — businesses can scale and produce more products while consumers can more easily access capital. Credit cards, mortgages, auto loans and small business loans are all made possible by the reshuffling of customer deposits. It’s genuinely one of the greatest innovations of modern finance; however, it doesn’t come without its risks. Unfortunately, many of those risks aren’t well known to the general public.

    More likely than not, you’ve been told to ‘rest assured’ that the banking system is ‘fine.’ More likely than not, you’ve been told that the biggest risk to the United States financial system is the crypto industry. More likely than not, you’ve been told that decentralized frameworks are breeding grounds for fraudulent activity when in all actuality, it’s the centralized nature of our banking system that enforces the need for consistent over-regulation due to incentives that always seem to be misaligned.

    Fractional reserve banking is a key pillar that brought us into the 21st century, but with how much the economy has grown over the past century, we must start to migrate to new banking frameworks. In particular, frameworks that better mitigate excessive risk-taking and function whether or not the general public trusts it.

    Related: Bank Problems = Bearish Thumb on Stock Market Scale

    What you need to hear

    Banks are centralized organizations with the sole mission of increasing profits, and within centralized infrastructures, checks and balances are often put aside in exchange for speed and efficiency. Shareholders pressure banks to produce profits while banks pressure regulators and lawmakers for looser regulation which forces an infinitely small subset of people to make some tough decisions that impact the well-being of the common person who, by the way, knows very little about what happens to their money as soon as they deposit a paycheck.

    For this system to work, the common person must put immense trust in the powers that be to good actors. Should depositors at scale initiate withdrawals, banks are at risk of not having enough funds to process requests. And because there’s minimal visibility in a bank’s position at any given time, Americans are forced to blindly trust that their money will be there when they need it.

    Crypto and, more specifically, self-custody solves this problem as your assets truly become your assets when you custody them yourself. Decentralized ecosystems completely eliminate the risk of a bank run but also eliminate the most efficient financing that a bank could ever get. And I already know what you might be thinking: “What about credit cards and mortgages?” Decentralized finance, or ‘DeFi’ for short, ushers in a new paradigm where these types of transactions can be facilitated through smart contract logic that is auditable and public.

    The threat the crypto industry poses to the traditional financial system is palpable. Because of that, we’ve been, nefariously, sold the narrative that crypto enables fraud when in reality, it’s hard to commit a financial crime in crypto frameworks because every event is public and lives on the blockchain.

    Moreover, the media often fixates on the financial crime that does occur within the crypto industry, as evidenced by the fixation and coverage of the Sam Bankman-Fried and FTX fraud cases. Ironically, traditional banks have cases outstanding that dwarf the financial fraud that has occurred within the crypto industry. Moreover, it’s because of centralization and opacity that lives within the traditional banking system that allows for implicative decisions to be made, which in turn, hurts those who partake in the system.

    Conclusion

    Now, more than ever, it is time to be skeptical about the ways in which we live our daily lives. For the longest time, we’ve been forced to assume the risks that come with traditional finance because of a lack of better financial systems. And as with any major structural change, friction and great resistance is to be expected. After all, despite being a multi-trillion dollar problem on our hands, the United States financial system is also a trillion-dollar market opportunity that could shrink materially should crypto and other decentralized frameworks be implemented. TLDR: traditional finance won’t go down without a fight.

    That said, it’s on us to protect ourselves, and the first step we can take toward financial freedom is education – do your best to learn more about what’s at stake while raising awareness among those around you. If you want to go fast, go alone. If you want to go far, go together.

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    Solo Ceesay

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  • Amidst a Regression, Here’s How Cryptocurrency Will Impact the Financial Sector | Entrepreneur

    Amidst a Regression, Here’s How Cryptocurrency Will Impact the Financial Sector | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The creation of cryptocurrency has brought a revolution to the financial market. Without any physical equivalent, a huge infrastructure was created in which billions of dollars were invested. Of course, it doesn’t end there. Digital currencies will take their place in economic history more than once.

    There are severe preconditions for that, but they also have weaknesses. Let’s examine if we can expect crypto projects to replace the traditional banking system or if this is just an ever-optimistic vision.

    Current crypto position in global finance

    In most areas, traditional financial tools are still prevalent. Payments with cryptocurrencies are very complicated because there is insufficient infrastructure. Transfers to bank cards are available, but paying for purchases with crypto funds at the store is still impossible. The corporate segment is loosely involved in the crypto market, and people keep using classical bank loans and receiving a salary in the form of fiat money.

    But that is the point of the enormous potential for the development of crypto, especially since it has several undeniable advantages:

    1. Decentralization entails a lack of boundaries for financial operations and customer service, wherever they are. This is the most significant difference between the crypto market and the classic one, where some local restrictions often bind companies.
    2. Crypto operations pass almost instantly, and the cost of billions of dollars in transfer can be cents. And all this without compromising safety!
    3. There is a whole layer of people who already use cryptocurrency as storage for savings. One can keep money in a bank account, but there may be restrictions on its use. Keeping the cash could be a problem when exporting funds to other regions. Cryptocurrencies allow one to hold and manage money wherever the person is located.
    4. It’s not yet possible to completely get rid of anonymity. This is at the same time, a strength and a weakness. A person can make transactions and maintain confidentiality in good order. But it may also be used by organizations raising funds for illegal operations. Conditions will be tightened; companies will be regulated. But there will still be space for actions that are difficult to track.

    Related: 5 Tips for Using Cryptocurrency in Your Small Business

    Such a much-needed regulation

    It took the crypto market ten years to form. While it wasn’t huge, regulators didn’t get much attention. When the market has grown, some concerns have been raised. Almost anyone can create a website, pretend to be a crypto bank, then take all the money and just dissolve.

    Not so long ago, the market suffered a collapse of Luna, Celsius and even FTX. People lost more than $100,000,000,000! Cryptocurrencies stopped being just toys. Therefore, regulators must keep track of assets and balances, how companies use them, and in which countries such services are provided. Сentralized services have legal entities, an understandable product in the territory of a particular region. Decentralized services may exist without a legal entity at all.

    The crypto industry is set to be very much regulated in the next 3-4 years. Some companies will leave the market, and the remaining ones will be even stronger. There will be standards — in the first place — for central banks, various depositaries and requirements for opening an account and mandatory declaration of cryptocurrencies. A lot will happen in the decentralized part of the market, but a little more slowly because this sphere is much smaller in volume.

    As long as it’s currently an unregulated arena, there are so many doubts and prejudices. But companies and people are going to realize in which system of coordinates they live and be legally able to keep, exchange, sell and issue cryptocurrencies.

    Related: 5 Things to Know Before You Invest in Cryptocurrency

    Skepticism and how to beat it

    Most people perceive cryptocurrencies as an instrument to increase revenue — the truth of this may be growing quickly. But the market is much broader than tokens. Speaking of cryptocurrencies, here’s how they can be divided:

    • Stablecoins that are pegged to fiat currencies: euro, dollar, yen, and so on.
    • Cryptocurrencies that are tied to the tokenomics of some products. This is comparable to the release of the company to IPO: when it goes public, the value of shares depends on the company’s financial and production indicators. The better results, the more sales of tokens and the price.
    • Digital assets that are pegged to any real objects. It’s so-called tokenization. Everything may be tokenized: art, metals, properties, etc. This is indeed an opportunity for centralized sales of products that couldn’t be split or sold before.

    The same regulation will help to set aside skepticism about all the crypto mentioned above products. And when people realize that everything is strictly within the law, no funny business, they will begin to trust the market more.

    Related: 5 Bear Market Lessons From a Crypto Entrepreneur

    Expected changes in the coming decade

    Over the next 10-15 years, cryptocurrencies will play a crucial role in most of the world, probably in the following directions:

    • International settlements. Cryptocurrencies have a high level of transaction reliability, primarily through blockchain technology. It has already prevented many adverse events due to the possibility of rolling back operations. There are still many other technologies that are being created for more safety. So, it’s highly expected that transactions will become more convenient, transparent and less expensive.
    • Сreating a CBDC. More than 20 countries already produce central bank digital currencies and follow a path to complete untethering of classic money. Thus, wide-ranging opportunities open up to expand control for states and banks worldwide. Most of them will switch to using CBDC and blockchain in conducting transactions. As for ordinary people, it’s impossible to say unequivocally if it’s good or not.
    • Replacement of traditional banking. The rapid development of crypto technologies ensures the provision of services by companies worldwide and the ability to become financial institutions for many of them. So far, such companies don’t provide services related to lending, deposits, various crypto accounts, and transactions. There are a lot of platforms with millions or even tens of millions of users. But, if we look at total cryptocurrency’s penetration, obviously that it’s a privilege of just 3-4% of the population. Banks will go over to the side of crypto technologies or leave the market.

    The active audience of the crypto market is quickly growing, and there is no button or ‘reverse gear’ that can stop its development. However, you must not expect that regular money will cease to exist several years later. But it is quite real that our children will increasingly use cryptocurrencies in their youth.

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    Vladimir Gorbunov

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  • Banks knock CBDC as a potential drain on deposits

    Banks knock CBDC as a potential drain on deposits

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    “As we have evaluated the likely impacts of issuing a CBDC it has become clear that the purported benefits of a CBDC are uncertain and unlikely to be realized, while the costs are real and acute,” the American Bankers Association wrote the Federal Reserve.

    Samuel Corum/Bloomberg

    Banks worry a digital dollar would threaten their ability to attract and retain deposits and undermine their ability to fund loans, according to a Federal Reserve report released this week.

    In January of 2022, the Fed published a white paper on what a U.S. central bank digital currency, or CBDC, might look like and sought public comment on nearly two dozen questions about potential risks, benefits and structural considerations. On Thursday, it released a summary of the more than 2,000 responses it received from financial institutions, their trade associations, academics, members of the general public and others.

    Views about the prospects for a CBDC ranged from enthusiastic to skeptical to vehemently opposed. 

    Banking associations at both the state and national level supported the Fed’s efforts to gather information about a digital dollar before moving forward but complained that a CBDC would not be in the best interest of the industry or the country.

    “As we have evaluated the likely impacts of issuing a CBDC it has become clear that the purported benefits of a CBDC are uncertain and unlikely to be realized, while the costs are real and acute,” the American Bankers Association wrote in its comment letter. “Based on this analysis, we do not see a compelling case for a CBDC in the United States today.”

    The Fed report comes as politicians and conspiracy theorists stoke fears and misconceptions about the central bank’s interest in a digital dollar.

    The Fed is not actively considering creating a digital dollar, and it has noted that it would like some form of authorization from Congress and the White House before rolling one out. The responses gathered will inform the Fed’s ongoing research into CBDCs, which includes initiatives at the Federal Reserve banks of Boston and New York.

    The comments were based on the assumption that a U.S. digital dollar would be intermediated, meaning customers would keep their holdings at commercial banks rather than maintain accounts directly at the Fed. Some have worried about the implications of a direct-to-consumer CBDC for privacy and implementation of monetary policy, but Fed leaders have repeatedly said they do not want to be in the retail banking business.

    Still, banks worry about the specifics of this arrangement. Because they might have to hold digital dollars in custody-like accounts, banks would not be able to treat these holdings as deposits, meaning they couldn’t use them to make loans. Not only would that arrangement force banks to incur an uncompensated cost, the Bank Policy Institute noted in its letter, it also would limit banks’ ability to extend credit.

    “Any transfer of a dollar deposit from a commercial bank or credit union to a CBDC is a dollar unavailable for lending to businesses or consumers,” BPI wrote in its letter. “We believe that there is a widespread popular misconception on this point, which the Federal Reserve should strive to rectify.”

    In particular, banks fear a shift from traditional deposits to digital dollars would be felt most acutely in markets served by small banks, which rely on individual deposits more than their larger peers. If the Fed were to pay interest on money held in digital dollars, this could supercharge the flow of holdings from traditional bank accounts to a CBDC, several groups noted.

    “As proposed, the CBDC will be a government-backed competitor to bank retail deposits, which count for 71% of bank funding today,” the Texas Bankers Association wrote. “The loss of this funding source will severely limit credit availability to businesses and consumers.”

    Another drawback to the model outlined by the Fed, according to industry groups, is the burden it would put on banks to maintain cybersecurity, combat money laundering and protect customers’ individual information, all at a considerable cost. 

    Some say current advancements already in the works by both the government — including the Fed’s forthcoming instant-payment system FedNow — and the private sector — such as tokenization and stablecoins — already provide many of the potential benefits CBDC-proponents are seeking.

    “Concurrently, the growth of open banking, open finance and the ascendency of neobanks will increase competition and support a more inclusive financial system,” Mastercard wrote in its comment letter. “Therefore, while a CBDC is one approach to reducing frictions in payments and supporting a more inclusive financial system, it is not the only means of doing so.”

    Other commenters praised a CBDC’s potential to open up the digital economy to the unbanked, make banking more affordable and preserve the dollar’s standing as the preferred settlement basis for cross-border transactions and the world’s reserve currency.

    Merchant groups, for example, see a digital dollar creating more competition for current payment providers and thus drive down their costs. 

    Phyllis Meyerson and David Walker, heads of the consulting firm Tiller Endeavors and consultants on the Fed’s faster payments advisory groups, added that a Fed-issued CBDC could help facilitate payments both domestically and across borders in ways that current payments systems cannot. 

    “While there are several defensive reasons to pursue CBDC, such as international and nonbank competition in digital currencies and the risk of evolving, unregulated payment options, the primary opportunity before us is the creation of a payment system to support a global economy,” they wrote. “None of our current payment systems satisfy this growing need.”

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  • SEC’s Gensler directly links crypto and bank failures

    SEC’s Gensler directly links crypto and bank failures

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    Crypto companies “have chosen to be noncompliant and not provide investors with confidence and protections, and it undermines the $100 trillion capital markets,” SEC Chairman Gary Gensler told the House Financial Services Committee on Tuesday.

    Al Drago/Photographer: Al Drago/Bloomberg

    WASHINGTON — Securities and Exchange Commission Chairman Gary Gensler tied together cryptocurrencies and the recent banking crisis as he asked Congress for more resources to police the crypto market. 

    “Silvergate and Signature [banks] were engaged in the crypto business — I mean some would say that they were crypto-backed,” Gensler testified at a House Financial Services Committee hearing Tuesday.

    The loss of deposits linked to cryptocurrency clients are widely believed to have contributed to Silvergate’s decision to close and the failure of Signature. Federal regulators took unusual steps to try to prevent a loss of public confidence in the banking system after the collapse of those two banks and Silicon Valley Bank last month.

    Gensler emphasized that the crisis showed that the regulated banking sector and the less-regulated crypto market have mutual exposures that have to be addressed.

    “Silicon Valley Bank, actually when it failed, you saw the country’s — the world’s — second-leading stablecoin had $3 billion dollars involved there, depegged, so it’s interesting just how this was all part of this crypto narrative as well.” 

    The stablecoin company Circle has confirmed that it held $3.3 billion of its $40 billion USD Coin reserves at Silicon Valley Bank, which failed on March 10. 

    While the SEC has the authority it needs to police crypto market, Gensler says, the agency “could use more resources.” 

    “The dedicated staff of this agency has done remarkable work with limited resources,” Gensler said in his prepared remarks. “In the face of significant growth in registrants, more individual investor involvement in our markets, and increased complexity, the SEC’s headcount actually shrunk from 2016 through last year. With Congress’s help, our headcount this year now is approximately 3% larger than in 2016. I support the President’s FY 2024 request of $2.436 billion, to put us on a better track for the future.” 

    In its budget request, the SEC asked for funding for 5,475 new positions, some of which would increase the agency’s oversight of crypto assets, including policing the market for noncompliant and fraudulent activity. 

    “I think this is a field that, in the main, is built up around noncompliance, and that’s their business model,” Gensler said at the hearing. “They have chosen to be noncompliant and not provide investors with confidence and protections, and it undermines the $100 trillion capital markets.” 

    Gensler’s appearance was his first before the committee since Republicans took control of the House in January. They had little to say on Gensler’s call for more resources.

    But Rep. Patrick McHenry, R-N.C., the chairman of the panel, has said that he intends to scrutinize the SEC and Gensler’s leadership of the agency as part of an aggressive oversight agenda. 

    “As you can see, we’re under new management and a new Congress,” McHenry said. “So please get comfortable.” 

    McHenry suggested he would use the committee’s subpoena power or other methods to get information that Republicans say the SEC has withheld from Congress.

    “If you continue to thwart this institution by ignoring our requests and providing incomplete responses, we will be left with no choice but to pursue all avenues to compel the information or documents we need,” he said. 

    Republicans criticized what they called uncertainty over whether crypto assets should be classified as a security or a commodity, as well as the agency’s proposed rulemaking around climate risk disclosures. The plan would include what’s called a Scope 3 requirement, which might present a challenge for banks if they’re required to report emissions that stem from business-related assets and activities not owned or controlled by firms. For banks, it likely would mean requiring the collection of climate data from all the companies they lend to or invest in.

    Regarding the failed Silicon Valley and Signature banks, Gensler said that the SEC has “initiated discussions” with the other five agencies responsible for finalizing an unfinished part of the Dodd-Frank Act that would give the Federal Deposit Insurance Corp. the ability to claw back some compensation from the executives of failed banks. 

    “I’m committed to getting this done,” Gensler said. 

    Rep. Andy Barr, R-Ky., the chairman of the subcommittee on financial institutions, questioned Gensler on an SEC staff bulletin that he said prevents banks from serving as custodians for crypto assets. Gensler defended the bulletin. 

    “I’m actually quite proud of the staff that put out that staff accounting bulletin, because what they said was public companies, not just banks, needed to put on their balance sheet their customers’ crypto, because what we found in bankruptcy court, Celsius bankruptcy and others, in bankruptcy investors just stand in line,” Gensler said. 

    When Barr asked if bank regulators were consulted beforehand, Gensler said that the agency discussed the issue with them “subsequently.” 

    “There was significant dialogue beforehand with the accounting profession and the big four [accounting firms] and others, because this question kept coming up, but there has been consultation about this with the bank regulators subsequently,” he said. 

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    Claire Williams

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  • Coinbase, Newmont, Tilray, Hexo, Virgin Orbit, and More Stock Market Movers

    Coinbase, Newmont, Tilray, Hexo, Virgin Orbit, and More Stock Market Movers

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    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

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  • FTX founder Sam Bankman-Fried charged with bribing Chinese government officials: court document

    FTX founder Sam Bankman-Fried charged with bribing Chinese government officials: court document

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    Sam Bankman-Fried, the founder and former chief executive of bankrupt crypto exchange FTX, is facing new charges for bribery, according to an indictment on March 28.

    It claims Bankman-Fried in 2021 transferred over $40 million worth of cryptocurrency to Chinese government officials. The founder allegedly made the transfer to “influence and induce them to unfreeze the accounts” of Alameda Research, which contained over $1 billion in cryptocurrency that Beijing had frozen, according to the document.

    The indictment contains 12 charges that Bankman-Fried previously was facing, plus the additional one for conspiracy to violate the Foreign Corrupt Practices Act, bringing the new tally to a 13-count indictment.

    Bankman-Fried’s lawyer didn’t immediately respond to a MarketWatch request for comment.

    Bankman-Fried has been restricted from using messaging apps, but prosecutors and Bankman-Fried’s attorneys have asked U.S. District Judge Lewis Kaplan to approve a new set of proposed restrictions that would limit his access to electronic devices and the internet.

    He has pleaded not guilty to eight counts over the collapse of FTX and is currently under house arrest with his parents in Palo Alto, Calif.

    U.S. District Judge Lewis Kaplan set a new hearing for Thursday.

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  • 5 Reasons Why Crypto Projects Need PR in a Downturn | Entrepreneur

    5 Reasons Why Crypto Projects Need PR in a Downturn | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    In economic downturns, companies will cut costs, tighten the belt and retreat. It’s ingrained in human DNA, because those who didn’t adapt didn’t survive. But with both the personal and the economic, merely shrinking or hiding is not enough.

    The data is in. Research proves that those who maintain — or even increase — their PR spends do best in such times. They are also best positioned for the better times, too. Some of the biggest changes in crypto have come in bear markets. For those positioned to take advantage, there are opportunities in the lean times.

    Related: How To Utilize PR During A Recession

    1. Don’t cut your signal when sailing in choppy waters

    For those responding to such moments as if truly a crisis or emergency, the last thing you want to do is reduce ties to the world. Cutting PR at such times is a little like being stranded and ignoring the radio or flare sitting next to you. PR pros are a lifeline — a crucial resource to be tapped, not saved for another time.

    It is at such times that evolutionary pressures come most into play, such as the “survival of the fittest.” This includes the concept of “adaptation.” It may not be enough to sit still until the storm passes, relying on previously amassed “fitness.” It’s a time when selective pressures are brought to bear, sorting the reactive and dynamic from the complacent. And that process can be a brutal one, rewarding only a few.

    2. Ensure the glass is seen as half full

    It may also be a time when it becomes necessary, due to market pressures, to relay bad news to audiences. This could be about enforced price increases, reductions in headcount, lengthening delivery times and so on.

    Delivering such messages is fraught with reputational risk, including giving the accidental impression of going out of business. PR pros can help navigate with strategies and storylines that deliver difficult messages within broader contexts that emphasize a more optimistic long-term positioning.

    Difficult messaging can be delivered within the context of milestones, positioning the information within a wider context of development and progress. As ever, care should be taken to avoid the insincere and the contrived. But such well-crafted campaigns in such times can ensure that the “glass” is at least seen as half full.

    Related: Why Maintaining a Strong Media Presence is Key to Succeeding in an Economic Downturn

    3. The opportunity to boost “share of voice”

    Much more than crisis management and sweetening difficult pills, PR can unlock opportunities in such times. Bear markets and recessions trigger cuts in PR and marketing budgets, which reduces industry noise. For those happy not to cut, this is an opportunity to stand out, with far less effort than usual.

    The added association for your audience is that, unlike your competitors, you are transmitting the message of going strong. It’s an opportunity to leave a lasting impression, overtake competing narratives and establish your project as an industry leader. As others cut their PR efforts, journalists will also be on the lookout for content.

    Like the “cash is king” strategy of those investors who avoid taking positions when prices are high and conserve their cash for market dips, PR likewise can go a lot further at such times. At such quieter times, without changing a thing in PR spend or strategy, a project or company’s share of voice (SOV) instantly grows as competitors cut costs. Such times are opportunities for those more willing, or better positioned, to adopt proactive tactics.

    4. Brand loyalty fends off the bear

    Crypto projects in a bear market are susceptible to losing a section of supporters who are apt to sell their currency and disappear. This causes many problems, not least low liquidity. To retain supporters, long-term brand loyalty must be established.

    Creating and maintaining a community of supporters is one of the best strategies for weathering downturns. One need only look at Ethereum’s online community. Even when token value has plummeted or the developer team missed crucial deadlines, the community remained strong. Hiring a PR team to build and maintain such a community may be vital to surviving bear markets, as well as optimizing at other times.

    Ensuring your brand is protected means being smart about budgetary changes and being open to variations in the usual strategy. PR is actually a budget-friendly strategy for maintaining relevance during downturns. While PR and marketing are often grouped together, the distinction becomes crucial at such times. PR can yield earned media, for example, rather than the paid media of marketing. Sacrificing PR at such times means going silent to your audience, potentially also sacrificing essential lifelines of trust and brand loyalty.

    Unlike with advertising, earned media is an evergreen investment, potentially living on far past the bear market, perhaps for years on end. Those who maintain PR at such times tend to not just survive the downturns, but come out stronger than competitors when the good times return.

    Related: How Great Entrepreneurs Find Ways to Win During Economic Downturns

    5. The data is clear

    Though it may seem counterintuitive, the companies that maintain their PR investment during downturns, even those who increase it, tend to be the winners. There’s also plenty of research to prove it.

    Those cutting costs more than competitors have the lowest probability (just 21%) of pulling ahead of rivals when times improve, according to a recession study published in a 2010 Harvard Business Review article. The same study shows that 9% of companies actually come out stronger than ever from such times.

    In another study (Field & Binet, 2008), researchers found that cutting budgets may help safeguard short-term profits, but it comes at a post-recession cost to brand and profits. Once again, they found that it’s those increasing investments that are best positioned to achieve long-term profitability, gaining a larger share of voice against their competitors.

    A measured and balanced approach

    It’s easy to attract attention in a bull market, but bear markets sort the wheat from the chaff. The right PR professionals are skilled in securing vital coverage at such times. This is the time when the audience needs to hear from projects the most.

    The decision to reduce, maintain or increase PR efforts during such times should be based on a careful analysis of the project’s financial situation, market position and long-term goals. An adaptive, measured approach that balances resources with the need to maintain a strong brand presence is proven to be the best strategy in tough times.

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    Valeriya Minaeva

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  • Dow tumbles over 400 points in final hour of trade as investors await monthly employment report

    Dow tumbles over 400 points in final hour of trade as investors await monthly employment report

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    U.S. stocks extended losses in the final hour of trade on Thursday, while awaiting Friday’s February employment data that could help decide how large an interest rate hike the Federal Reserve will impose at its next meeting in two weeks.

    Financial sector stocks were particularly hard hit along with cryptocurrencies after Silvergate Capital Corp., collapsed overnight amid growing scrutiny in Washington. Other financial stocks fell, dragged down by SVB Financial Group, which fell by a record amount.

    How are stocks trading
    • The S&P 500
      SPX,
      -1.85%
      dropped 56 points, or 1.4%, to 3,936

    • Dow Jones Industrial Average
      DJIA,
      -1.66%
      was off 412 points, or 1.3%, to 32,387

    • Nasdaq Composite
      COMP,
      -2.05%
      declined by 174 points, or 1.5%, to 11,399

    Both the S&P 500 and Nasdaq finished higher on Wednesday, with only the Dow finishing in the red, while all three indexes remained on track for weekly losses. A weekly drop for the S&P 500 would mark its fourth such pullback in five weeks.

    What’s driving markets

    U.S. stocks trimmed earlier gains and extended losses on Thursday afternoon after trading modestly higher after the open when the latest weekly jobless claims data showed an unexpectedly large uptick in the number of Americans filing for unemployment benefits.

    The number of Americans who applied for unemployment benefits in early March jumped to a 10-week high of 211,000, the highest level since Christmas. That’s higher than the 195,000 new applicants that economists polled by the Wall Street Journal had anticipated.

    Economists said the data suggest that the labor market might be starting to slow, which is seen as a necessary prerequisite for driving inflation back to the Fed’s 2% target.

    “The labor market might just be on the cusp of an inflection point,” said Peter Boockvar, chief investment officer of Bleakley Financial Group, in emailed commentary.

    Investors are now looking ahead to Friday’s closely watched February jobs report from the Department of Labor. Economists polled by the Wall Street Journal expect 225,000 jobs were created last month after 517,000 new jobs were created in January, a number that was much higher than economists had anticipated.

    “If we do get the expected 200,000, or really anything between say 180,000 and 240,000, this would be a return to the prior trend and would signal that last month was indeed a one-off,” said Brad McMillan, chief investment officer of Commonwealth Financial Network, in emailed comments.

    “That would be perceived as a positive by the Fed and markets, suggesting that inflation may start moderating again but is still high enough to allow for continued economic growth.”

    See: Wall Street sees smaller 225,000 increase in U.S. jobs in February. A much larger gain might spur stiffer Fed rate hike.

    The Russell 2000
    RUT,
    -2.75%    ,
    the small-cap index, is on pace to close below its 50-day moving average for the first time since January 9, 2023, according to Dow Jones Market Data.

    Regional bank stocks underperformed on Thursday. Shares of Silicon Valley Bank parent company SVB Financial Group
    SIVB,
    -60.41%
    plummeted more than 61% after the company disclosed large losses from securities sales and a stock offering meant to provide a boost to its balance sheet. SVB is on pace to book the biggest one-day selloff since the dotcom boom, while its trading was halted for volatility multiple times, according to Dow Jones Market Data.

    Signature Bank 
    SBNY,
    -12.18%
     shares dropped 11.2%undefined

    The KBW Bank Index
    BKX,
    -7.70%
    of 24 leading banks slumped 7.1%, on pace for its worst day since June 26, 2020, according to Dow Jones Market Data. SPDR S&P Bank ETF
    KBE,
    -7.30%
    was down 6.5%.

    See: SVB Financial’s stock suffers biggest drop in 25 years after large losses on securities sales, equity offering

    Treasury yields fell with the yield on the 2-year note BX:TMUBMUSD02Yslipped to 4.885% from 5.064% on Wednesday. 

    Stocks suffered earlier in the week after Powell said during testimony on Capitol Hill that rates would likely need to rise even further than market participants had expected. However, the main indexes saw some relief after the Fed chief clarified that policymakers hadn’t yet decided on the size of the next rate hike.

    Investors have already digested several reports on the labor market this week, including a report on the number of job openings, which showed that the number of Americans quitting their jobs had fallen below 4 million in January for the first time in 19 months.

    “The big picture is that the labor market is easing, but it’s still tighter than it was before the pandemic,” said Sonu Varghese, a global macro strategist at Carson Group.

    See: Bad economic data won’t be good for stocks, but good data will be even worse, this JPMorgan technical strategist says

    Companies in focus

    — Jamie Chisholm contributed to this article

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  • Silvergate Discontinues a Key Service. It’s a Big Deal.

    Silvergate Discontinues a Key Service. It’s a Big Deal.

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    Silvergate Discontinues a Key Service. It’s a Big Deal.

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  • Silvergate’s big crypto losses feed watchdogs’ worst fears

    Silvergate’s big crypto losses feed watchdogs’ worst fears

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    For months, U.S. authorities have been racing to sever ties between banks and risky crypto ventures, worried the financial system could someday suffer serious losses. They may have been too late.

    In the starkest warning yet by a U.S. bank catering to the sector, Silvergate Capital said Wednesday it needs more time to assess the extent of damage to its finances stemming from last year’s crypto rout — including whether it can remain viable. The shares plunged about 30% in premarket trading on Thursday.  

    The firm, which already reported a $1 billion loss for the fourth quarter, said that figure could climb higher. The company is still tallying the cost of rapidly selling assets to repay advances from the Federal Home Loan Bank System. It may also need to mark down the value of some remaining holdings.

    That could result in “being less than well-capitalized,” La Jolla, California-based Silvergate wrote in a regulatory filing. “The company is evaluating the impact that these subsequent events have on its ability to continue as a going concern.”

    Such an admission by a lender with federally insured deposits and more than $11 billion in assets will add to a debate among U.S. lawmakers and regulators over whether banks can manage the risks associated with digital assets. 

    For a time, Silvergate excited its shareholders with what seemed like a novel approach: soaking up cash deposits from crypto ventures to invest in more staid securities. But when Sam Bankman-Fried’s FTX empire collapsed in November, the bank’s customers withdrew en masse to weather the storm, forcing it to unload holdings at a loss.

    “It confirms the fears that many regulators have had,” said Todd Baker, a senior fellow at Columbia University’s Richman Center for Business, Law and Public Policy. “If this bank fails, it’s going to be held up as an example of why banks should be extremely conservative in dealing with crypto companies.”

    And even if that doesn’t happen, Silvergate’s travails will stoke even greater caution on the part of regulators, he said.

    Regulators’ Warnings

    Indeed, a U.S. crackdown has already begun.

    In early January, three top financial regulators — the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. — issued a blunt warning to banks that crypto-related risks that can’t be controlled shouldn’t be allowed to infect the banking system. 

    Later that month, the Fed piled on with a policy statement as it turned down a bid by crypto firm Custodia Bank to get coveted access to the central bank’s payment system. And last month, Bloomberg reported that Binance Holdings, the world’s largest cryptocurrency exchange, was mulling whether to end its relationships with U.S. partners amid the stricter regulatory regime.

    Meanwhile, the Securities and Exchange Commission targeted stablecoin issuers and so-called staking, a practice of generating yield by holding tokens.

    Silvergate waded deeper into the U.S. policy debate when it revealed in early January how it was stabilizing its balance sheet after selling billions in assets to pay depositors. By the end of last year the firm held $4.3 billion in short-term Federal Home Loan Bank advances, a program originally set up under President Herbert Hoover to bolster mortgage lending. 
    The bank said Wednesday it sold more securities in January and February to pay off those advances, potentially exacerbating its losses.

    “All advances were at all times fully collateralized while they were outstanding,” the Federal Home Loan Bank of San Francisco said in a statement Wednesday.

    Market Rout

    Silvergate’s stock tumbled more than 88% last year, first as crypto prices slid and later as FTX collapsed. The shares have been on a roller coaster ever since — at one point swinging by more than 50% in a single day — as investors struggled to gauge the company’s prospects for reviving.

    The stock rose in mid-January as the company outlined steps for moving on. But at the end of the month, a bipartisan group of U.S. senators accused Silvergate of being “evasive” about the extent of its ties to FTX and Bankman-Fried’s Alameda Research investing arm. And days later, Bloomberg broke the news that the Justice Department’s fraud unit is looking into the bank’s dealings with FTX and Alameda.

    On Wednesday, Silvergate listed the Justice Department’s probe and increased regulatory scrutiny among factors that could ultimately affect financial results.

    Its legacy in the crypto market, and the broader regulatory crackdown, could also complicate any efforts to find a buyer.

    The bank’s troubles, in turn, might have implications for cryptocurrencies.

    Its current predicament will make other banks all the more reluctant to work with crypto ventures, resulting in a chilling effect on that industry, said Henry Elder, head of decentralized finance at digital-asset manager Wave Financial.

    “They were the crypto bank,” Elder said. “You are certainly not going to see anyone come out as a crypto bank until there’s more clarity.”

    —With assistance from Olga Kharif.

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  • Illinois officials unveil proposals to widen regulatory powers

    Illinois officials unveil proposals to widen regulatory powers

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    Illinois financial regulators argue that three legislative proposals introduced this month are necessary to protect consumers and small-business borrowers from unscrupulous companies.

    John Zich/Bloomberg

    Financial regulators in Illinois have unveiled a sweeping legislative package that’s intended to enhance consumer protections while also creating a regulatory framework for digital-asset firms.

    The measures draw on numerous ideas that have been enacted in recent years by Democratic lawmakers in New York and California, as well as by congressional Democrats. 

    One bill would require digital-asset exchanges and related businesses to obtain a license to operate in Illinois. Another proposal would create new disclosure requirements for providers of small-business financing. And a third bill would expand the authority of the Illinois Department of Financial and Professional Regulation, which officials said will help the agency to target bad actors.

    “You can’t scroll through your phone these days without seeing a headline about the latest tech scam or cryptocurrency collapse wiping out someone’s savings,” David DeCarlo, the state agency’s regulatory innovation officer, said Tuesday in a press release.

    In addition to boosting consumer protections, the bills would force less-regulated financial companies to compete on more equal regulatory footing with Illinois banks and credit unions, state officials argue.

    Still, the legislative proposals drew a mixed response Wednesday from the Illinois Bankers Association.

    Ben Jackson, the trade group’s executive vice president for government relations, offered positive comments about the proposal for licensing of digital-asset businesses that do business in Illinois.

    That proposal is modeled on the so-called BitLicense requirement that New York state regulators enacted in 2015. Similar legislation was introduced two years ago in Illinois, but it failed to get across the finish line, despite support from the Illinois Bankers Association.

    Jackson was more critical of the other two measures, which would require more disclosure in connection with small-business financing and expand state regulators’ consumer protection authority.

    The former bill draws from small-business financing disclosure laws that were passed in recent years in California and New York.

    The latter measure would allow the Department of Financial and Professional Regulation to adopt rules in connection with so-called unfair, deceptive or abusive acts or practices. That language is modeled on legal authority that Congress granted to the Consumer Financial Protection Bureau more than a decade ago over the banking industry’s opposition.

    Jackson expressed general support for adding protections from predatory lenders, but he likened the Illinois proposals to trying to kill a gnat with a sledgehammer. “It’s overkill,” he said.

    He also expressed disappointment that the Illinois regulators did not collaborate more with industry groups in developing the legislation.

    “I think that this package of bills shows a departure from that collaborative relationship that we’ve had in the past,” he said. “And I’m very hopeful that we can rectify that and move forward together.”

    The Illinois Credit Union League is reviewing specific pieces of legislation that have the state agency’s backing, according to a spokesperson for the trade group who declined to comment further.

    During an interview Tuesday, state officials indicated that financial industry groups will likely support some parts of the legislative package and oppose other parts.

    “We’re having conversations with them, like we do with all different stakeholders,” said Chase Rehwinkel, state banking director at the Department of Financial and Professional Regulation. “I don’t think we’re at a point yet where we know exactly where they’re going to stand at the end of the day.”

    Illinois officials argued that the legislative proposals are necessary to protect both consumers and small-business borrowers from unscrupulous companies.

    “The Small Business Truth in Lending Act will help make small-business owners aware of the terms they’re signing up for when they take out a loan,” Christopher Slaby, a spokesman for the department, said in an email.

    “These kinds of basic disclosures are made available to consumers under existing federal law, and small-business owners deserve similar protections,” Slaby added. “It’s an approach that’s working for small-business owners in California and New York, and we can do the same for our small businesses in Illinois.”

    All three measures were introduced this month by Democratic lawmakers. If they pass both the Illinois House and Senate, they will go to the desk of Democratic Gov. J.B. Pritzker.

    “We’re pretty optimistic that we’re in good shape to get through here,” Rehwinkel said.

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    Kevin Wack

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  • Walmart, Home Depot, Meta, DocuSign, Medtronic, and More Stock Market Movers

    Walmart, Home Depot, Meta, DocuSign, Medtronic, and More Stock Market Movers

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    https://www.barrons.com/articles/stock-market-movers-5b0c54ae

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  • 4 Lessons We All Should Learn from the Crypto Implosion

    4 Lessons We All Should Learn from the Crypto Implosion

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    Opinions expressed by Entrepreneur contributors are their own.

    I recently opened an office in Miami, and I love it. It’s simple — just a common area and a conference room — but modern and right by the water. It has a big storage area at the entrance, which I first considered converting into another conference room. But it had an odd electrical setup, so I asked my contractor about its history.

    According to him, between the electrical work, air conditioning units and security, the space had likely been a crypto trading office. He was sure of it. Then, I realized I had seen that setup before.

    In Miami, crypto is everywhere, with servers running so much data they require their own air conditioning units. When FTX collapsed, and the crypto market lost billions, Miami felt its impact. I knew a lot of people — friends and business associates — who went from making so much money on paper to now, hurting.

    Fortunately, I managed to stay out of it. Sure, I was interested. A few people I knew made a lot of money on crypto, which made it tempting. Still, I could hear my dad’s voice, chiming in with that old chestnut, “when in doubt, don’t.”

    These are the lessons I learned from this crypto collapse by following his sage advice.

    Related: ‘I’m Sorry. That’s The Biggest Thing.’ Sam Bankman-Fried and Cryptoworld Lose Big in FTX Meltdown, Company Files For Bankruptcy.

    Count the doubts

    I was never against the idea of crypto. Some of the fundamentals I find attractive — the blockchain creating supposed self-control rather than a Big Brother-ish federal banking agency. In the same way Web 3.0 promises to keep the Googles of the world from tracking our every digital move, crypto has its positives.

    But I was also wary of the negatives. While I knew many people in Miami personally involved in crypto, there were always enough people in my life not accepting it that I never fully understood how it could be trading at such high values. The process of cashing out seemed too complicated, and it reminded me of the old “pump-and-dump” stock trading scams.

    I also heeded Warren Buffett’s many doubts about the future of cryptocurrency, calling it “rat poison squared.” His arguments made sense: Apartments produce rent, land produces food, but crypto produces nothing tangible. If an expert like Buffett would turn down all of the bitcoin in the world for $25, a less experienced investor should certainly take inventory of their doubts before making any significant investments.

    Related: Now That Crypto Has Crashed, What’s Next for the Metaverse?

    Invest in what you know

    Let’s compare crypto with AI: I was uncomfortable exploring both technologies at first because I didn’t fully understand them. As the AI trend grew into a direction business was inevitably heading, I made efforts to learn about it. I found people who were able to give me straightforward explanations that allowed me to understand the technology. Since I could understand it, that made it easier for me to confidently invest in it.

    Crypto specialists, on the other hand, never came close to providing such clarity. Mining crypto is an abstract process, so I called upon the best person I knew in the field to explain it to me. Even still, the details were fuzzy and I would unlikely be able to re-explain it to anyone else. What I did understand was how much energy it required, which sounded crazy and unsustainable to me. Since that was my primary takeaway, I decided against investing.

    Crypto is notoriously difficult to understand. Yet still, without a full picture of what they are buying, people are willing to invest. A 2021 survey of 750 investors found that only 16.9% “fully understood” its value and potential, while 33.5% had “zero knowledge” or a level of understanding they described as “emerging.” Many simply invested because it seemed popular and they feared missing out.

    Trust me, I understand how easy it can be to jump on a bandwagon. I remember one new technology starting to take off — though I barely remember what it was anymore — but it was so hot that a friend insisted I get in on it. So, I did. Without even knowing what the company produced, I put money into it. I didn’t want to be left out of the next big thing. So what happened? I lost big. Fortunately, it wasn’t that much money, but it taught me never to invest in what I didn’t fully understand.

    Related: 5 Ways to Navigate Today’s Investing Challenges

    Pay attention to the people most involved

    Something about Sam Bankman-Fried, founder and former FTX CEO, put me off from the start. To me, SBF had all the markings of a scammer. He was dishing out financial support to the most prominent political names and getting his company’s name atop the Miami Heat stadium. He came into an industry full of what I saw as so many doubts with too much money, swagger, and confidence.

    I may not know who was using my office for crypto mining before I moved in, but I know someone did, and I wonder if they contributed to the industry’s increased rate of cyber attacks, scams and bankruptcies. Bad characters have been around forever — from the northern carpetbaggers taking advantage of the war-torn south to the Ponzi scheme record-holder, Bernie Madoff — but in crypto, they seem abundant. If you don’t feel comfortable with the people behind something, don’t invest in it.

    Related: 7 Things to Know Before Investing in Cryptocurrencies

    When risk is everywhere, be more careful

    When someone asks for guidance toward a safe investment, I always recommend land. No one is making any more of it, and it’s tangible property that, unlike stocks, we can make use of while holding its value. But still, land can lose value or suffer damage. A couple of weeks ago, I was driving down the west coast of Florida, where so many people who had lost their homes were rebuilding after hurricane Ian.

    In some form or another, everything comes with risk, so when an investment seems extra risky from the start, we should be even more careful about our decisions. Invest in understanding the fundamentals of a new technology first and take a more calculated risk. Learn as much as possible and write out any doubts throughout the process. If the doubts are all you understand by the end, then maybe you should rethink your investment.

    This crash may not be the death of crypto, but the industry certainly has a rough time ahead. It will be even harder now to get people on the bandwagon, and the federal government will likely increase its efforts to control it. But it should be a big wake-up call to investors to be warier of technological allure. This crypto implosion will not be the last to burn investors, but by learning lessons from it, we can better avoid this kind of massive damage the next time.

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    Jan Risi

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  • Is Cryptocurrency a Good Investment in 2023?

    Is Cryptocurrency a Good Investment in 2023?

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    Opinions expressed by Entrepreneur contributors are their own.

    How much will bitcoin or any altcoin cost in 2023? Great question. Even professional traders cannot foresee the price of crypto due to multiple impact factors. But as an investor, I want to reflect on something else. Are those who have already buried the crypt right, or is last year’s market crash not the end?

    Related: Now that Crypto Has Crashed, What’s Next for The Metaverse?

    Bugatti for bitcoin — failed

    In February 2021, the capitalization of bitcoin exceeded $1 trillion for the first time. The first cryptocurrency grew by 900% in a year and traded for $54,000 per coin.

    Despite the record price, there was no release from investors. For example, the Square payment service, owned by Jack Dorsey, then bought over three thousand bitcoins.

    Amid the rising bitcoin price, in March 2021, the founder of the Kraken cryptocurrency exchange, Jesse Powell, made a sensational forecast: by the end of 2022, one bitcoin can buy a Lamborghini, and in 2023, a Bugatti.

    The forecast failed: today, you can only buy a Kia Rio or a Mitsubishi Mirage for a bitcoin. And this is after the boom of ETFs, NFTs, DeFi and stablecoins. So what went wrong?

    Related: Everything You Need to Know About NFTs and Cryptocurrency

    High-interest rates — done

    In 2022, the growth rates of blockchain technology remained high. For example, we witnessed the Ethereum protocol modernization: now, instead of the Proof-of-work algorithm, the blockchain uses Proof-of-stake. After the change, the network will consume 99.95% less energy.

    However, this event was overshadowed by others — the bankruptcies of the Terra project, Voyager Digital and Celsius Network crypto banks, Three Arrows Capital hedge fund, BlockFi and FTX exchanges.

    Also, inflation in the US reached 7% in 2022, just as in the early 1980s. To curb inflation, the Federal Reserve raised rates seven times a year. The base rate is between 4.25% and 4.5%, the highest mark in 15 years.

    The Fed’s policy affected the value of risky assets, namely stocks and crypto. The dollar strengthens as interest rates rise, but risky assets fall. Due to this and the bankruptcy of key crypto projects, the cryptocurrency market collapsed. The media again started talking about the onset of crypto winter — a decrease in the cost of all coins and a long bearish trend.

    But I disagree that due to the fall (over the past year, according to the Coinmarketcap charts, market capitalization has more than halved – from $2 trillion to $800 billion), this segment can be put to rest.

    Regarding crypto, price fluctuations are the last thing you should focus on. I look at less obvious factors to understand the market prospects.

    Venture capital impact

    The activity of venture capitalists decreased significantly in late 2022. This information can make beginners panic, but let’s read the news more carefully.

    How did the timing of entry into projects change the enthusiasm of investors? Seed and early-stage crypto startups received larger checks in 2022. Investors are buying up young startups, meaning the game is not over, and funds will be poured into the sector.

    Besides, the cryptocurrency market is only developing. You can fail in school but enter college on the first try. So the failure of 2022 is not a sentence, but only growing pains.

    Related: Decentralized Venture Capital Will Transform Startup Investing Forever

    Development of Web3

    Web3 is a new blockchain-based decentralized and tokenized incarnation of the internet. It is both financial applications and NFTs. But the most dynamic segment of Web3 is blockchain games.

    The crypto winter did not affect the growth of gaming programs based on distributed ledger technology: in 2022, the number of transactions in gaming blockchains increased by 94%.

    It is such a strong trend that only full-on electricity cuts across the planet can bring it down. So the entire blockchain sector will become less speculative and more practice-oriented.

    Return of NFTs

    After COVID-19, even people far from business learned that the most affected sectors actively recovered after the crisis. This is precisely what should happen with the NFT segment.

    Over 2022, it decreased by 97%. But the fall is not a trend — unlike the arrival of big players in this market. NFTs were launched as part of a loyalty program by the giant Starbucks. By year’s end, the list of majors that launched NFTs was replenished with Reddit, Meta, Nike, Disney and Coca-Cola.

    All these companies invested in developing their own projects based on Web3 and will continue to develop them in 2023. My guess, other companies will pick up the trend, so the NFT market revival is only a matter of time.

    Related: 5 Ways to Maintain and Expand Your Wealth During the Cryptocurrency Dip

    Accumulation trend

    In December 2013, on the Bitcointalk forum, a user, GameKyuubi wrote a post with a typo in the title – “I AM HODLING.” He criticized traders who use bitcoin to get rich, contrasting their position with his own — to keep the crypto even when market signals indicate a need to get rid of the asset.

    The term HODL became a meme, and the change in the number of hodlers became the data for analytical platforms to evaluate the development of the industry.

    New statistics from Glassnode demonstrate a sharp increase in the accumulation addresses in the Bitcoin blockchain. These hodler wallets have received at least two transfers in the past seven years. Yet, funds were never withdrawn from these addresses.

    The number of such wallets reached almost 800,000 — increasing by 18% during the year. The figures show that the number of committed users of the service is growing.

    Hodlers don’t make money off bitcoin. They believe in its potential as a universal means of payment. And user growth is a significant factor in the global adoption of bitcoin. I am sure that while some faithfully accumulate crypto and those who develop the blockchain and projects based on it, seasonal and annual jumps are just ripples in a pond. The most exciting things happen in the depths.

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    Yura Lazebnikov

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  • How NFTs Work — and How They Could Prove Profitable for Your Business

    How NFTs Work — and How They Could Prove Profitable for Your Business

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    Opinions expressed by Entrepreneur contributors are their own.

    2022 was an interesting year for NFTs (non-fungible tokens), to say the least. This was the year that saw public knowledge of NFTs go beyond Bitcoin and other cryptocurrencies to the field of digital collectibles, such as art and photographs.

    But while buying art and other collectibles may be getting most of the attention from the general public, they result in some of the more practical (and profitable) business applications getting overlooked. In reality, NFTs can have a variety of practical applications that help organizations achieve their existing business goals.

    First things first: How do NFTs work?

    NFTs are is cryptographic assets that are based on blockchain technology. The non-fungible aspect is important, as it gives NFTs distinctive properties that mean they cannot be replaced or replicated. They are unique, and can’t be manipulated or forged. Most often, we see NFTs in connection with digital assets, such as art, sports cards, games and other collectibles, where the blockchain provides a certificate of authenticity.

    NFTs can be bought and sold on the market, with pricing based on market demand, just like a physical product. However, the unique data that is part of the NFT makes it easy to validate ownership and verify the authenticity of the token.

    NFTs are also used to represent ownership details, memberships and more — and these varied use cases have proven key to business applications.

    Related: Here’s a Beginner’s Guide to Crypto, NFTs, and the Metaverse

    Linking digital tokens to physical benefits

    One key to generating business growth via NFTs is linking the tokens to a physical, real-world product or experience. As the report Brands in Web3 Q3 2022 by NFT Tech highlights, fashion brand Tiffany & Co. was able to turn NFTs into a set of exclusive physical goods. The company partnered with CryptoPunks to create an exclusive line of 250 “NFTiffs” pendants. Priced for 30 ETH (roughly $50,000 at the time), the unique pendants sold out in 22 minutes.

    Another example comes from the Australian Open. In 2022, the Australian Open launched a highly successful metaverse initiative of minting AO Art Ball NFTs that linked to data from live matches. This was paired with virtually hosting the Australian Open in a 3D virtual reality platform to provide an unprecedented level of access to one of tennis’s largest events.

    While the initial launch was successful in and of itself, the Australian Open’s commitment to this NFT initiative is poised to be even greater in 2023, with the announcement that holders of each Art Ball NFT will receive two complimentary seven-day Ground Passes to AO23’s finals week. Art Ball holders also gain access to additional exclusive experiences, such as streams and viewing suites through the “SuperSight” fan experience and access to other United Cup matches.

    With both Tiffany & Co. and the Australian Open, linking NFTs to real-world products or experiences proved to be a highly successful method for deepening relationships with their target audience.

    In addition, when NFTs are used in this way, they invite mass market participation, turning fans into financially-incentivized brand ambassadors who enjoy a high level of utility — and of course, can seamlessly trade their digital assets for real-world cash.

    Related: Putting the Intangible Into Your NFT Project

    Reaching new demographics

    NFTs don’t just help brands strengthen relationships with their existing customers — quite often, they can prove key to reaching a new audience entirely.

    Case in point: For quite some time, clothing brand Polo Ralph Lauren has seen its primary customer base largely concentrated among older adults, while younger demographics like millennials and Gen Z have been less interested in the clothing brand.

    In 2021 and 2022, however, Ralph Lauren made a full-fledged commitment to digital initiatives such as NFTs and the metaverse. These included launching a “phygital” fashion collection in Fortnite, as well as an exclusive digital clothing connection through the game Roblox.

    These digitally-focused efforts were a major success for the brand. As reported by Vogue Business, Polo Ralph Lauren saw its third-quarter revenue increase by 27% after the launch of its Roblox collection — with that growth largely driven by a 58% increase in the acquisition of new digital customers.

    In this case, strategic implementation of digital assets allowed Ralph Lauren to reach a younger target demographic in metaverse-style spaces where they would have the greatest appeal and potential impact.

    When done right, NFT initiatives can help revive sales and reinvigorate a brand’s image, making it more relevant and appealing in today’s competitive market.

    Using NFTs wisely for your business goals

    As these examples illustrate, the potential use cases for NFTs go well beyond selling digital art. With a strategic approach, businesses can use NFTs to find new ways to engage with younger, more tech-oriented demographics. NFT-based projects can help position your company as an innovator at the forefront of disrupting the marketplace.

    That being said, any business investment in NFTs should be done strategically. Major NFT failures in 2022 garnered a lot of media attention, and should serve as a powerful reminder for businesses as they enter this space. All investments in NFT should be done with the interests of the end customer in mind.

    When you focus on how your target audience could realistically benefit from your use of NFTs, you will be able to identify strategies that have true staying power, and that will build greater rapport between your brand and its most tech-savvy customers.

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    Lucas Miller

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  • There’s So Much More to NFTs and Web3 Than the FTX Crash

    There’s So Much More to NFTs and Web3 Than the FTX Crash

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    Opinions expressed by Entrepreneur contributors are their own.

    When was the last time you looked at a work of art online and thought, even for a second, about what file type it was? Whether the image you see is a JPEG or GIF rarely matters to anyone except for professionals in the media industry, where file types have different properties, qualities and sizes. For the average content consumer, it doesn’t matter at all.

    Now ask yourself: Why are NFTs any different?

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    Matt Cimaglia

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