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| Here is a quick look at the hits from the week's latest Inside Cryptocurrency newsletter: - ⚖️ Kraken's new legal motion requesting the dismissal of the top U.S. securities regulator's lawsuit against it,
- 💰 Reddit's investment in Bitcoin, Ether, and Polygon through its excess cash reserves,
- 📉 A 5% plummet in the AVAX price following a five-hour outage on the Avalanche blockchain network, and more.
Enjoy your reading, and have a great weekend! Doğa
p/dogayurduneri | |
| 1 | | The U.S.-based crypto exchange Kraken has asked a U.S. court to dismiss the lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against it. In the motion, the exchange pointed out that the SEC went beyond the limits of its jurisdiction through the lawsuit, stating that the agency does not have the authority to regulate all speculative investments. More: - The SEC sued Kraken in November last year, accusing it of commingling up to $33B of customer funds with its own corporate assets and operating without registration.
- The filing claimed that Kraken paid its expenses from bank accounts holding customer funds at certain times in the past.
- The regulator also argued that the platform operates as an exchange, broker-dealer, and clearinghouse at the same time without registration, although these three functions should be separated as required by law.
- Besides, the agency labeled a range of tokens listed on Kraken as unregistered securities, alleging that the exchange violates securities laws.
- In response, Kraken stated that the SEC consistently urged crypto exchanges to register with it without any clear path or law for registration.
- In its latest motion, the exchange also said the SEC's approach sees a broad range of ordinary assets, such as sports memorabilia, trading cards, expensive watches, or even diamonds, as securities, granting the agency boundless authority over commerce.
- Through the motion, the platform joined several rival crypto exchanges that have filed similar motions to ask for the dismissal of the SEC's lawsuits against them.
Zoom Out: - The SEC and Kraken entered another legal conflict in February 2023 when the regulator accused the exchange of offering unregistered securities through its staking service.
- At the time, Kraken had to halt the operations of the service for U.S. customers and pay a $30M fine to settle with the SEC.
- Within the past year, many other crypto exchanges, such as Coinbase, Binance, Gemini, and Bittrex, also faced increased scrutiny and lawsuits by the SEC as the agency claims jurisdiction over the market.
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What the numbers say: The Avalanche blockchain network's native token, AVAX, has recently experienced a sudden price decline. The token's value plummeted by over 5% on Friday, retreating to as low as $35.38 from the $37 level a day earlier. The latest price decrease also brought the popular cryptocurrency's value loss over the past week to over 10%. The token later saw a slight recovery, though it failed to return to the previous day's prices. Relevance: The decline in the AVAX price followed a five-hour outage on the Avalanche blockchain. On Friday, the blockchain's primary network experienced block production issues that prevented produced blocks from being accepted on the primary network for a few hours. The issue further caused the network to halt. Following the outage, Kevin Sekniqi, the co-founder of Ava Labs, the entity behind Avalanche, said the team started investigating the issue, clarifying that the halt stemmed from a code-related bug unrelated to performance handling. Sekniqi later also added that the network's developers deployed a fix to return the network to its normal operations. The issue was fixed shortly after the deployment, bringing Avalanche online again. However, the five-hour crisis caused a slight decline in AVAX's price. Brands that should care: Rival blockchain network Solana also experienced a similar outage on its main network in early February, which caused a halt in the block progression. Following the five-hour outage, the issue was fixed through an upgrade and restart on the network, returning the blockchain to its normal operations. At the time, the outage on Solana similarly caused a brief price decline in the network's native token, SOL. | | | |
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| 3 | | Popular social media platform Reddit has disclosed that it invested some of its excess cash reserves in various cryptocurrencies in an initial public offering (IPO) filing submitted to the U.S. Securities and Exchange Commission (SEC). The filing pointed out that the firm has added small amounts of Bitcoin (BTC) and Ether (ETH), the two largest cryptocurrencies by market cap, to its treasury since 2022 by converting its excess cash. More: - Reddit said it would only hold cryptocurrencies not labeled as a security by the SEC in its treasury.
- The SEC classifies all cryptocurrencies, other than Bitcoin, as securities in light of the current chair Gary Gensler's approach.
- The social media firm also revealed that it has experimented with blockchain technology by purchasing additional ETH and Polygon (MATIC) tokens to use the two cryptocurrencies as a payment method for the sales of certain virtual goods in the future.
- The firm added that its product and engineering team similarly holds cryptocurrencies for specific use cases without disclosing the type and amount of these assets.
- Besides, the company underlined that it sees significant potential in blockchain technologies, though it is not sure that business and consumer adoption will continue.
- On the other hand, Reddit mainly submitted its plans to go public in the filing.
- If the registration gets over the regulator's review process, Reddit will be able to list its shares on the New York Stock Exchange (NYSE) under the ticker "RDDT," making them available for purchase by the general public.
Zoom Out: - In 2020, Reddit also launched a blockchain-based rewards service dubbed Community Points that rewarded users with points in the form of crypto tokens for positive engagement and sent these points to the Reddit Vault crypto wallets.
- Users could spend these points to purchase badges and exclusive items for their avatars.
- In October this year, the firm shut down the service, citing scalability issues.
- Also, the platform launched a Reddit Avatars NFT collection in July 2022 in partnership with Polygon Labs, the firm behind the Polygon blockchain, allowing holders to use the NFTs as their Reddit profile pictures.
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| 4 | | Bankrupt crypto exchange FTX has received court approval to sell its 7.84% stake in Anthropic, an AI firm launched by former OpenAI employees in 2021. The upcoming sale is expected to add more than $1B to FTX's existing $6.4B cash reserve. More: - The approval will see FTX offloading its entire stake in the firm through an auction or a private sale.
- FTX and its sister company, Alameda Research, invested more than $500M in Anthropic in April 2022, nearly seven months before the bankruptcy.
- However, the new management released a report last year revealing that some of the company's venture capital (VC) investments were funded with commingled customer deposits.
- The bankrupt firm's stake in Anthropic is predicted to be currently worth around $1.17B since recent reports claimed that the AI firm raised new funding at a valuation of $15B.
- On the other hand, the green light came nearly 20 days after FTX filed a legal motion, requesting the bankruptcy court to allow it to sell its stake in Anthropic.
- The motion was part of the new management's wider efforts to recover more funds, increase its cash, and fully repay customers.
- In late January, FTX attorney Andrew Dietderich told the bankruptcy judge that FTX aims to fully reimburse customers and creditors who can prove their losses, announcing that the bankrupt firm abandoned its plans to relaunch its crypto exchange.
Zoom Out: - FTX, previously the third-largest crypto exchange, filed for Chapter 11 bankruptcy in November 2022, with all 130 entities under the roof of FTX Group.
- The downfall followed the claims that the former CEO, Sam Bankman-Fried (SBF), used customer funds in FTX to compensate for losses at Alameda Research.
- In November 2023, SBF was found guilty of all seven criminal charges brought by U.S. prosecutors against him, including wire fraud, money laundering, and misappropriation of customer funds, after a month-long trial process.
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| 5 | | The Council of the European Union (EU) and the European Parliament (EP), the two legislative bodies under the roof of the EU, have selected Frankfurt, Germany, as the headquarters of the bloc's new Anti-Money Laundering Authority (AMLA), which will directly oversee the crypto market. The agency will mainly be responsible for ensuring that all the entities offering financial services in the EU comply with the region's anti-money laundering and counter-terrorism financing requirements. More: - The AMLA will have the authority to supervise high-risk and cross-border financial services firms, including crypto companies.
- The body will have over 400 staff members and start its operations by mid-2025.
- The authority's general board will include representatives from regulatory agencies and financial intelligence units of all 27 member states of the EU while its executive board will be comprised of a chair and five independent full-time members.
- The agency will collaborate with member states' financial intelligence units and regulators while carrying out its task.
- The European Central Bank (ECB) is similarly based in Frankfurt.
- The alternative locations included Brussels, Dublin, Madrid, Paris, Rome, Riga, Vilnius, and Vienna.
Zoom Out: - The EP also approved the region's long-awaited crypto regulations, Markets in Crypto Assets (MiCA), with a final vote in April 2023 after three years of development.
- The law's provisions related to stablecoins will come into effect as of July 2024, while other aspects regarding the crypto asset service providers will enter into force as of January 2025.
- Besides, the European Banking Authority (EBA), the banking watchdog of the EU, recently extended its anti-money laundering and counter-terrorism financing rules to cover the region's crypto companies, requiring crypto firms to implement the same measures as other financial institutions.
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| 6 | | A group of Swiss researchers has recently released the results of an empirical study, finding that blockchain outperformed all other technology sectors, including AI and cloud computing, in information security by key metrics of startup investments. The study was funded by the Swiss government-owned Cyber-Defence Campus. More: - The research team used the Crunchbase data between 2010 and 2022, which covers information on funding rounds and initial public offerings (IPOs), to measure the performance of startup investments.
- The missing data was compensated using machine learning technologies.
- The results showed that investments in blockchain security startups generated 177.27% returns, a much higher rate than the other 18 sectors, including AI, machine learning, and cloud computing.
- The closest follower of blockchain became AI, with 66.25% annualized returns.
- The researchers underlined that these figures do not represent the broader sectors, which also involve products and services unrelated to security.
- The team pointed out that blockchain was also the fastest-growing security investment sector.
- According to the study, blockchain startups moved from their first recorded funding round to their initial public offering in less than three and a half years on average, while other sectors' average vary between four and 10 years.
- Besides, the team suggested that the performance of security startups in the blockchain sector was mainly driven by investors' massive interest in cryptocurrencies.
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| 7 | | Quick Hits: - Binance Charity, the philanthropic arm of the largest crypto exchange by trading volume, has partnered with the non-profit organization Superhumans Foundation to launch educational initiatives that would help Ukrainian citizens affected by the ongoing war with Russia.
- The NFTs minted on the Solana blockchain network have surpassed $5B in all-time sales volume.
- England's Law Commission, responsible for reviewing and recommending changes to laws in the country, has launched a consultation on a draft bill that would classify crypto as property.
- Jeff Zirlin, a co-founder of the Ethereum-based Ronin network, has lost around $9.5M in Ether (ETH) after two crypto wallet addresses belonging to him were hacked.
- Digital asset-focused investment firm Valkyrie's chief investment officer, Steven McClurg, has forecasted that spot Ether exchange-traded funds (ETFs) may not be approved in the U.S. within the next one or two years.
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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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