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| Here is a quick look at the hits from the week's latest Inside Cryptocurrency newsletter: - Genesis Global's settlement deal with the New York Attorney General to resolve a case,
- U.S. senators' letter to the top U.S. securities regulator's chair over concerns about the agency's unethical conduct in crypto enforcement actions,
- Kraken's registration with the Netherlands' central bank, and more.
Enjoy your reading, and have a great weekend! Doğa
p/dogayurduneri | |
| 1 | | Bankrupt crypto lender Genesis Global has settled a lawsuit brought by New York Attorney General Letitia James, the U.S. state's top law enforcement officer, against it over the Gemini Earn crypto lending program, which the firm operated jointly with the U.S.-based crypto exchange Gemini. As part of the settlement, the lender agreed to repay the funds, which could otherwise go to state regulators, to former Earn customers and Genesis Global creditors. More: - The settlement will also see Genesis Global stop operating in New York.
- James sued Genesis Global, its parent company Digital Currency Group (DCG), and Gemini in October last year, accusing them of defrauding customers for $1.1B by failing to disclose the risks of the Gemini Earn program.
- However, James later revised the restitution she sought to $3B, stating that thousands of additional investors claimed they had been misled about the product's safety.
- The Gemini Earn service, launched in 2021, allowed Gemini users to lend their crypto assets to Genesis to earn interest.
- However, the joint program was halted following Genesis Global's bankruptcy, causing some customer funds to be stuck.
- The settlement deal is still subject to the approval of a bankruptcy judge and only resolved allegations against Genesis Global.
- On the other hand, the latest deal followed several other settlement agreements by Genesis Global with state regulators.
- Earlier in February, the bankrupt lender also agreed to pay a $21M civil penalty to settle a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) for violating securities laws by offering unregistered securities through Gemini Earn.
- The lender's derivatives trading unit, Genesis Global Trading, agreed to pay a $8M fine last month to settle with the New York Department of Financial Services (NYDFS), the U.S. state's financial regulator.
Zoom Out: - Genesis Global filed for bankruptcy in January last year after freezing withdrawals in November 2022, mainly due to its exposure to the collapses of the crypto exchange FTX and crypto hedge fund Three Arrows Capital (3AC).
- The firm's efforts to settle with regulators have accelerated amid its expectations of receiving approval from the bankruptcy court for its repayment plan on Feb. 14.
- DCG and its CEO, Barry Silbert, also currently face another lawsuit filed by Gemini over the failure of the Earn program, with accusations of fraud and deception.
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| 2 | | 
What the numbers say: The price of Bitcoin (BTC), the largest cryptocurrency by market cap, briefly surpassed the $48,000 mark on Friday, hitting a nearly one-month high. The token increased its daily price gain to over 6% through the latest rally. Then, the popular cryptocurrency started hovering above $47,000 without seeing a major decline, though it failed to hold on to the $48,000 level. The last time Bitcoin surpassed $48,000 was on Jan. 11, a day after 11 spot Bitcoin exchange-traded fund (ETF) applications were approved by the Securities and Exchange Commission (SEC) in the U.S. Relevance: Analysts attributed the latest price rally in Bitcoin to the massive investor interest and inflows in the U.S.-based spot Bitcoin ETFs, which began trading on Jan. 11. Since their launch, the funds have attracted a net $8B inflow. The new products allow retail and institutional investors in the U.S. to get exposure to Bitcoin through traditional brokerage accounts without dealing with crypto-native platforms that have come under scrutiny by regulators over the past years. Industry leaders pointed out that the upcoming halving event, expected to happen in April or May, is also triggering a price increase in Bitcoin. The inflation-easing process will decrease the miners' Bitcoin mining reward by half, reducing the number of new Bitcoins entering the network by 50%. Analysts believe the event will cause a major price surge in Bitcoin in the long term since it would ultimately reduce the total amount of tokens in circulation. Brands that should care: Many crypto mining companies, including CleanSpark, Marathon Digital, Riot Platforms, Canaan, and Hive Digital Technologies, have recently made attempts to increase the computing power of their facilities and their total mining capacity ahead of halving to ensure that they are well-prepared for the drop in rewards, and indirectly, in revenue. | | | |
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| 3 | | Five U.S. senators on the Senate Banking Committee have questioned the U.S. Securities and Exchange Commission's (SEC) reliability in the ongoing crypto enforcement actions in a letter to the agency's chair, Gary Gensler. In the letter, senators expressed their concerns about the SEC's conduct in the case against Utah-based crypto company Digital Licensing Inc., which operates as DEBT Box. More: - The letter pointed out that the incident suggests other enforcement actions brought by the regulator may deserve scrutiny, regardless of whether the SEC staff deliberately misrepresented evidence or unknowingly presented false information in the DEBT Box case.
- The senators also said it is unconscionable that any federal agency, especially one maintaining its regulatory mission through enforcement actions rather than rulemaking, operates in such an unethical and unprofessional manner.
- The five Republican senators stated that the SEC's solution of mandatory staff training and reshuffling personnel may not be sufficient.
- The letter came two months after Judge Robert Shelby discovered that the SEC made deceptive statements in its case against DEBT Box.
- At the time, Judge Shelby said the evidence presented by the SEC to convince the court to freeze DEBT Box's assets was inaccurate, the firm was not moving to Dubai, no bank account was closed, and the alleged $720,000 overseas transfer was domestic.
- Last month, the SEC also admitted its lawyers made inaccurate statements in court and requested the judge to dismiss the lawsuit without prejudice, which would allow it to refile the case.
Zoom Out: - The SEC took enforcement action against DEBT Box in August 2023, accusing the firm of conducting a $50M fraudulent crypto scheme by selling unregistered securities under the name of node licenses.
- Several other lawmakers also previously criticized Gensler and the SEC for accusing crypto firms of noncompliance and taking enforcement actions without establishing a clear regulatory framework for the industry participants to follow.
- Over the past several years, many crypto firms, including Coinbase, Binance, Ripple, Gemini, Kraken, and Bittrex, came under increased scrutiny by the SEC over alleged securities law violations.
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| 4 | | The U.S.-based crypto exchange Kraken announced that it is now registered as a virtual asset service provider with the De Nederlandsche Bank (DNB), the Dutch central bank. The registration will allow the platform to offer its exchange, transfer, custody, and digital wallet services for virtual assets to retail and institutional customers in the Netherlands in compliance with local regulations. More: - The move marked Kraken's fourth license in Europe after the ones in Spain, Italy, and Ireland.
- The platform also offers crypto services in Belgium through a licensed subsidiary.
- Kraken accelerated its global expansion efforts as it sought more regulatory clarity like many other U.S.-based crypto trading platforms, including Coinbase, Kraken, and Gemini, especially after U.S. regulators increased their crackdown on the crypto exchanges.
- In October last year, the firm also announced its plans to acquire a Netherlands-based crypto exchange, Coin Meester B.V. (BCM), to strengthen its presence in the Dutch market.
- The acquisition deal is still pending regulatory approval.
Zoom Out: - On the other hand, several crypto exchanges, such as Binance, Bitpanda, and Gemini, had to withdraw from the Netherlands in recent months, citing their inability to meet the DNB's requirements on crypto trading platforms.
- However, nearly 40 virtual asset service providers, including Coinbase, Crypto.com, BitPay, and eToro, are currently registered with the DNB.
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| 5 | | Layer-2 blockchain network Optimism has announced that it would halt Ether (ETH) withdrawals for one hour on Feb. 15 to test an upgraded incident response system. The test will aim to enhance the ability to security incidents across different chains within the Optimism ecosystem in a coordinated way. More: - The pause will affect the ETH withdrawals from the Layer-2 network to the Ethereum main network.
- The withdrawals of the Ethereum-based ERC-20 tokens and NFTs are also expected to pause during the test.
- However, the move will not impact deposits from the main network to the Layer-2 network and normal transactions.
- During the pause, Optimism will share updates on its network status page.
- The upgrade will add a new feature to the incident response system, which could simultaneously stop withdrawals on all blockchains within the Optimism ecosystem.
- Currently, the system only supports the pause of withdrawals on a single chain.
- The new feature has already gone live on Optimism's test network, and the upcoming one-hour test will check whether it works in a live environment.
Zoom Out: - Layer-2 networks aim to improve speed and reduce transaction fees by removing transaction data from the main blockchain, compressing it, and then re-posting it to the original chain.
- Optimism comprises an ecosystem of Layer-2 chains, collectively dubbed the Superchain.
- The ecosystem's flagship network is OP Mainnet, while it also includes other popular networks like Base and Zora.
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| 6 | | Blockchain-based esports tournament platform Community Gaming has partnered with Tools For Humanity, the firm building the Orb devices of Sam Altman's crypto project, Worldcoin. The partnership will see the platform integrating Worldcoin's World ID feature into its infrastructure, allowing tournament organizers to require players to verify their identity before participating in competitions. More: - Worldcoin scans the irises of its users through biometric imaging devices dubbed the Orb, verifying them in person to prove their identity, humanness, and uniqueness securely and privately.
- Verified users receive a World ID that they can use to validate their identity across various games and apps, as well as Worldcoin's native token, WLD, in some countries.
- However, Community Gaming's integration will not require the use of an Orb device since it would use a lower level of security, and esports players will be able to simply verify themselves through a mobile device.
- The integration will be entirely optional for tournament organizers.
- Besides, the tournaments adopting World ID will require players to obtain a World ID before registering and add a badge to the account pages of verified players.
- The feature is expected to be useful in tournaments manipulated by players seeking to create multiple accounts in a single event to catch an unfair advantage.
- Community Gaming will begin rolling out the feature in the upcoming weeks, starting with tournaments in Latin America, and the games whose tournaments will host World ID will include PUBG, Marvel Snap, Axie Infinity, and Free Fire.
Zoom Out: - Sam Altman is most famous for his CEO position in OpenAI, the AI research lab behind the popular AI-powered chatbot ChatGPT.
- Since its launch, the Worldcoin project has come under scrutiny by data watchdogs in many countries, including the U.K., Hong Kong, France, Germany, Kenya, and Argentina, over data protection and privacy concerns.
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- Popular NFT artist Michael Joseph Winkelmann, known professionally as Beeple, has defined the tech giant Apple's new Vision Pro headset as a product with zero market fit.
- Bankrupt crypto firm Terraform Labs' former chief financial officer, Han Chang-joon, has been taken into custody in South Korea and charged with fraudulent marketing several days after being extradited from Montenegro.
- A risk assessment report from the U.S. Treasury Department has shown that virtual assets still represent a small portion of all funds used for money laundering compared to fiat currencies.
- Abu Dhabi Global Market (ADGM), an international financial center in Abu Dhabi, has partnered with the Solana Foundation, a nonprofit organization dedicated to the growth of the Solana blockchain, to boost the development of blockchain technology in the region.
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 | Staff Writer | | Doga is a tech and science editor who has been writing news for nearly 10 years. She worked for leading tech platforms and mainstrem media channels as an editor and presenter throughout his career. Then, she carried her know-how to more than one platform. She is a part-time cat lover and binge-watcher, and also fond of science, space, and emerging tech. She always has a story to tell. She is a bit addict to the laughter and -unfortunately- the '90s culture. | | This newsletter was edited by Aaron Crutchfield | |
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