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| Hey Insider! Welcome to the week's second Inside Cryptocurrency newsletter! Today’s issue again covers some of the most prominent stories hitting the headlines in the crypto market, including the U.S. securities regulator's first enforcement action targeting NFTs, Indian crypto exchange CoinSwitch's decision to reduce its headcount, Digital Currency Group’s in-principle deal with the creditors of Genesis to resolve claims, and more. Enjoy your reading, and if you find this newsletter useful, please share it with your friends and colleagues! Doğa
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| 1 | | The U.S. Securities and Exchange Commission (SEC) has taken a new enforcement action against Los Angeles-based media and entertainment company Impact Theory LLC, alleging the firm of offering unregistered securities in the form of NFTs. The move marked the SEC's first enforcement action targeting NFTs. More: - The SEC stated that Impact Theory made about $30M from hundreds of investors through its NFTs sales.
- The agency pointed out that the offerings should have been registered with the SEC.
- Impact Theory has agreed to pay more than $6M and a cease-and-desist order to settle the SEC's allegations, accepting halting its NFT operations.
- The company, best known for its podcast contents, said they remain optimistic for the future of the NFT industry in the U.S. and hope the country remains the global home of innovation.
- The firm released 20,000 NFTs dubbed Founder's Keys, which gave holders access to Impact Theory's exclusive offerings like discounts and events, at three levels of rarity in 2021.
Zoom Out: - The SEC classifies all digital assets other than Bitcoin (BTC) as securities in the light of current chair Gary Gensler's approach, claiming jurisdiction over the crypto market.
- Within the last several months alone, many crypto exchanges, including Binance, Coinbase, Kraken, Gemini, and Bittrex, faced increased scrutiny by the SEC over alleged securities law violations.
Q: Do you expect the U.S. Securities and Exchange Commission (SEC) to increase and expand its crackdown on the digital asset industry even more? Join the conversation here. |     | |
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What the numbers say: Bitcoin (BTC) mining firm Canaan has recently revealed its financial results for Q2. The report has shown that the company's crypto mining revenue increased in the second three-month period of the year by 105.1% on an annual basis. The figure also showed a 43.3% surge compared to the previous quarter. The company generated $15.9M from Bitcoin mining in Q2, up from $11.1M in Q1 and $7.8M in the same period last year. Besides, the firm's mining revenue experienced a steady surge over the past year. Relevance: On the other hand, the data compiled by AltIndex recently showed that the market cap of the top five crypto mining companies, including Canaan, declined by $2.8B in August within less than a month. The report pointed out that the combined market cap of the five firms dropped from $9.53B in July to $6.73B, with a 30% decrease. The massive loss in the combined market cap was attributed to the recent sell-off trend that saw more than $1B of positions liquidated in the centralized crypto exchanges (CEX) within 24 hours earlier in August, causing a plummet in prices of Bitcoin (BTC) and Ether (ETH). Brands that should care: The top five crypto mining firms by market cap include Marathon Digital, Riot Blockchain, Cipher Mining, and Hut 8 Mining, ahead of Canaan. | | | |
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| 3 | | U.S.-based crypto conglomerate Digital Currency Group (DCG) has reached an in-principle agreement with the creditors of its bankrupt crypto lender subsidy, Genesis Global, to resolve the claims in the ongoing bankruptcy case. The deal is expected to pave the way for repayments up to 90% for creditors. More: - The filing has pointed out that the agreement could result in 70% to 90% recoveries in U.S. dollars (USD) for unsecured creditors and 65% to 90% recovery in in-kind assets based on the denomination of the digital asset.
- All the recoveries will depend on market pricing and the final agreement.
- DCG will also repay its existing liabilities to Genesis Global in two parts: $328.8M with a two-year maturity and $830M with a seven-year maturity.
- Also, the firm will pay another $275M in four installments for the May 2023 maturities after the partial repayments.
- The crypto-focused venture capital (VC) firm's liabilities include approximately $630M in unsecured loans due in May 2023 and $1.1B under an unsecured promissory note due in 2032.
Zoom Out: - Genesis Global filed for bankruptcy in January 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 bankruptcy filings showed that the lender owed more than $3.5B to its top 50 creditors, including crypto exchange Gemini.
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| 4 | | Binance, the largest crypto exchange by trading volume, has directed users in Belgium to Binance Poland sp. z o.o., its Polish unit registered with the regulatory authorities in Poland, as it exits the Belgian market. The platform said the unit would comply with regulatory requirements for residents of Belgium who want to access Binance's services. More: - The move came two months after Belgium's financial market regulator, the Financial Services and Markets Authority (FSMA), ordered Binance to halt its operations in the country.
- The agency cited violations of the local anti-money laundering (AML) and counter-terrorism financing rules.
- At the time, the Belgian regulator also said Binance could operate in the country through a legal entity regulated by the law of another member state of the European Economic Area (EEA), including Poland.
- Binance underlined that some users may need to submit documentation in accordance with the identity verification measures for Poland rather than Belgium.
Zoom Out: - The popular crypto exchange has recently come under increased scrutiny by regulators in many other parts of the world, including the U.S., Australia, and France.
- Over the past months, the platform also had to withdraw from several markets in the West, such as Canada, Austria, the Netherlands, Cyprus, the U.K., and Germany, mainly due to compliance issues.
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| 5 | | Indian crypto exchange CoinSwitch has reduced the headcount of its customer support team by 44 people, citing low market activity. The company said the job cuts impacted less than 7% of its total employees, adding that the customer support team still has 82 members. More: - A company spokesperson stated that the 44 members of the team voluntarily resigned from their roles after a detailed discussion with their managers earlier in August.
- The platform has offered severance and additional benefits to laid-off employees for up to four months, depending on their tenure.
- The spokesperson also underlined that they would be happy to welcome back impacted employees when market volumes grow again and once they are ready to open new roles.
- Over the past year, many members of CoinSwitch's customer support team have already been moved to other roles based on their skills.
- Before the mass layoff, the firm had around 640 employees in total.
- The company raised $260M in October 2021 in a funding round led by Andreessen Horowitz and Coinbase Ventures at a valuation of $2B.
Zoom Out: - Indian crypto exchanges have experienced a decline in trading volumes by more than 90% since the government started imposing a 30% tax on crypto profits and a 1% tax on crypto transactions in July last year.
- Most recently, another Indian crypto exchange, CoinDCX, also decided to cut 12% of its headcount, laying off 71 employees, after seeing a significant revenue drop stemming from the market downturn.
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| 6 | | In its new guidelines titled Virtual Asset Real-Name Account Operation Guidelines, the Korea Federation of Banks (KFB) has announced that it would require South Korean crypto exchanges to hold at least 3 billion won (~$2.26M) in reserves in bank accounts as of Sept. 1. The required reserves will serve as an emergency fund to be used in case of an unexpected incident, such as a cybersecurity attack. More: - The requirement for the minimum reserve of $2.26B will only apply to smaller crypto exchanges.
- Much bigger crypto trading platforms, including Upbit, Korbit, and Bithumb, will have to store the equivalent of 30% of their daily average deposits in reserves.
- The local crypto exchanges will be able to use these reserves to meet their liability for damages to users if a risk occurs.
- The maximum size of funds held in reserves will be limited to 20 billion won (~$15M).
- The KFB also plans to start implementing additional safety measures, including identity verification requirements and authentication for transfers, as of the beginning of 2024.
Zoom Out: - The country has increased its crackdown on the crypto industry, especially after the collapse of the multi-billion dollar Terra ecosystem founded by South Korea-rooted personalities last year.
- In June, South Korea's National Assembly passed legislation dubbed the Virtual Assets Act to better protect crypto investors.
- The legislation has authorized the Financial Services Commission (FSC) and the Bank of Korea to supervise the crypto service providers and virtual asset custodians and to enforce penalties in case of a potential violation.
- Last month, FSC, South Korea's financial market regulator, also announced that it would mandate domestic companies issuing or holding cryptocurrencies to report their virtual assets in their financial statements as of January next year.
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- Coinbase, the largest U.S. crypto exchange, has announced that it fixed an issue causing some Coinbase Wallet users to see zero balances in their accounts.
- Crypto exchange Binance has removed Venezuela's biggest bank, Banco de Venezuela, from payment options in its peer-to-peer (P2P) payments service after delisting sanctioned Russian banks from the same offering.
- Automation tooling project Clockwork, built on the Solana blockchain network, has halted its operations, citing limited commercial upside.
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Term of the Day White-collar crime: A white-collar crime is committed by someone of a higher social or economic status in the course of their occupation, motivated by financial gain. Question of the Week Do you share details about your salary with your coworkers? Join the conversation |
INSIDE CRYPTOCURRENCY LEADERBOARD (30 DAYS) |
 | 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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