Category: Cryptocurrency

Crypto scores landmark US legal win with Grayscale ETF ruling

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Grayscale Investments LLC won a key legal fight in its push to launch a Bitcoin exchange-traded fund, bringing the crypto industry to the precipice of tapping billions of dollars from everyday investors.

The firm’s court victory over the US Securities and Exchange Commission in a three-judge appeals panel in Washington represents a watershed moment for the largest cryptocurrency. Advocates say an ETF based on spot Bitcoin prices would result in a gush of retail cash.

The SEC, which has thus far only allowed crypto ETFs based on futures because it says they are safer, is reviewing the decision. The agency could still fight the ruling, either by asking a full slate of judges on the DC Circuit Court of Appeals, or the US Supreme Court to review the decision.

Meanwhile, the decision injects significant momentum into Grayscale’s yearslong push. It’s also a stinging rebuke of Chair Gary Gensler’s bid to clamp down on the industry.

Also Read: Coinbase receives green light for cryptocurrency futures trading in US

Investors welcomed the news. The Grayscale Bitcoin Trust rallied as much as 21 percent and Bitcoin surged by as much as 8.3 percent.

Grayscale has said converting to an ETF would help it unlock billions of dollars in value for investors in its $16.2 billion trust by making it easier to create and redeem shares. The trust’s closed-end structure doesn’t allow for investors to redeem shares when prices fall, causing it to trade at steep discounts to its underlying Bitcoin. As an ETF, it could create and redeem shares to keep up with changing demand.

Tuesday’s ruling is the second recent high-profile court defeat for the SEC over its stance on crypto. The agency is fighting a federal judge’s ruling that offerings of Ripple Labs’ XRP token were not securities when sold to the general public.

Grayscale’s win may have the most sweeping impact yet. Some of the biggest and most established names in finance have recently filed applications with the SEC to launch Bitcoin ETFs.

In a statement, Grayscale called the decision “a monumental step forward for American investors.”

Also Read: Binance files for protective order against the US Securities and Exchange Commission

Owen Lau, analyst at Oppenheimer & Co, said in a phone interview that the ruling adds to momentum for the digital-asset industry following the Ripple case.

“There’s huge optimism baking into the market right now,” he said.

The SEC rejected Grayscale’s conversion proposal in 2022, arguing that an ETF based on Bitcoin lacked adequate oversight to detect fraud. Grayscale sued to overturn the decision accusing the SEC of discriminating against its product, while approving similar Bitcoin futures ETFs.

Also Read: Legal Digest | Group privacy, confusing trademark, cash seizure and more

‘Arbitrary and Capricious’
“The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,” wrote Judge Neomi Rao.

In its opinion, the court said that Grayscale “advanced substantial evidence” that its product was similar to Bitcoin futures ETFs approved by the SEC, the opinion read. The underlying assets of both types of products are closely correlated and the surveillance sharing agreements with the Chicago Mercantile Exchange are “identical.”

During a hearing on the case in March, the judges grilled the SEC about its decision and seemed to side with Grayscale’s argument that the underlying markets for spot Bitcoin and Bitcoin futures pose the same risk for fraud and manipulation.

The SEC has 45 days to ask a full sitting of the DC Circuit to reconsider what the three-judge panel decided on Tuesday. If the appeals court declines to take it up, the SEC would then have 90 days to petition the US Supreme Court to hear the case.

The case is Grayscale v. SEC, 22-1142, US Court of Appeals for the District of Columbia Circuit.

Also Read: JPMorgan sees ‘limited downside’ for crypto near term after Bitcoin’s recent rout

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

JPMorgan sees ‘limited downside’ for crypto near term after Bitcoin’s recent rout

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The recent selloff in crypto markets is likely near an end, with long-position liquidations “largely behind us,” according to a research report by JPMorgan Chase & Co.

The fading of some positive legal and regulatory news induced a wave of selling in recent weeks that is “still reverberating,” though the unwinding appears to be at its end phase, based on open interest in CME Bitcoin futures contracts, analysts including Nikolaos Panigirtzoglou wrote on Thursday. A decline in open interest – the number of unsettled and active future contracts trading on exchanges – typically indicates a price trend is losing strength.

“As a result, we see limited downside for crypto markets over the near term,” they said.

Bitcoin, the largest crypto token, was down 0.2% at around $25,980 as of 11:30 a.m. in New York on Friday. In the past two weeks, it has fallen almost 12% after trading sideways for about a month.

Earlier in the summer, Bitcoin got a burst from several developments seen as positive for the industry. Most notably, traders took heart from a flurry of applications, led by BlackRock Inc., to launch what would be the first US exchange-traded funds tied to the spot price of the token. A district court decision seen as favorable to Ripple Labs in its legal fight with the Securities and Exchange Commission also buoyed the broader market.

Some of the enthusiasm around that news is now fading, as traders settle in to wait for a decision on spot Bitcoin ETF approvals and the SEC prepares an appeal against the court decision on Ripple, with an outcome in the case not expected “until next year,” the analysts said. That induces a “new round of legal uncertainty” for crypto markets, making them sensitive to any further developments.

The pullback was also partly due to a broader correction in risk assets such as equities, induced by “frothy positioning in tech, higher US real yields and growth concerns about China,” the note said.

On Friday, risk assets wobbled slightly after Federal Reserve Chairman Jerome Powell signaled the US central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is on a convincing path toward policy makers’ target.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Coinbase receives green light for cryptocurrency futures trading in US

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Coinbase Global said on Wednesday it had secured approval to offer cryptocurrency futures to U.S. retail customers, scoring a major regulatory win even as the crypto exchange battles a lawsuit from the Securities and Exchange Commission (SEC).

Shares of the company climbed 5.5 percent to $83.52 in premarket trading. The approval was granted by the National Futures Association (NFA), a self-regulatory organisation designated by the Commodity Futures Trading Commission (CFTC).

“This is a critical milestone that reaffirms our commitment to operate a regulated and compliant business,” Coinbase said.

The company has openly criticised the SEC, which in a June lawsuit accused Coinbase of operating illegally because it had failed to register as an exchange.

CEO Brian Armstrong has also said more U.S. crypto companies could move offshore due to a hostile regulatory environment and that SEC Chair Gary Gensler’s enforcement-first approach could stifle innovation in the industry.

The NFA approval, which came nearly two years after Coinbase filed its application, could allow the company to expand into a largely untapped market.

The global derivatives market represents almost 80 percent of the entire crypto market, with leveraged bets on futures and other derivatives often at the root of volatility in the wider market.

In July, crypto derivatives trading volumes globally totaled about $1.85 trillion, according to research firm CCData.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Binance files for protective order against the US Securities and Exchange Commission

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Cryptocurrency firm Binance late on Monday filed for a protective court order against the US Securities and Exchange Commission (SEC) claiming the agency’s requests for the company’s communications are “overbroad” and “unduly burdensome”, as per a Reuters report.

In June, the US SEC and Binance reached an agreement in court that lets the world’s largest cryptocurrency exchange continue to operate in the United States as it battles SEC fraud charges.

The SEC said that Binance broke US laws by operating as an unregistered securities exchange. It filed similar charges against the world’s other top cryptocurrency exchange, Coinbase, nearly simultaneously.

But Binance and its CEO, Changpeng Zhao, face additional charges of diverting customer funds – concealing the fact that it was commingling billions of dollars in investor assets and sending them to a third party that Zhao also owned.

As a result, the SEC asked that the assets of Binance’s US platform be frozen.

– With inputs from Reuters and AP

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

FTX founder Sam Bankman-Fried sent to jail over witness tampering

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A US judge sided with a request by federal prosecutors to revoke the bail of FTX founder Sam Bankman-Fried over alleged witness tampering. Bankman-Fried headed to jail on Friday after being remanded to custody directly from a court hearing in New York.

Bankman Fried’s request for delayed detention pending an appeal was denied by Judge Lewis Kaplan. Unless the appeal is successful, Bankman-Fried is likely to remain in custody until his criminal trial begins on October 2.

“My conclusion is there is probable cause to believe the defendant tried to tamper with witnesses at least twice,” said Judge Kaplan during his ruling.

The government requested that Bankman-Fried be remanded to a jail in Putnam, New York, where he’d have access to a laptop with internet access for defense preparation, as opposed to sending him to Brooklyn’s Metropolitan Detention Center, the facility closest to the courthouse that has limited internet access for prisoners.

Bankman-Fried’s parents were both in the gallery. His mother had her face buried in her hands for much of Judge Kaplan’s lengthy ruling.

Since his arrest in December, Bankman-Fried had been out on a $250 million bail package which requires him to remain at his parents’ Palo Alto, California house.

Judge Kaplan previously issued a direct and stern warning to Bankman-Fried in July over his conversations with the media.

Lawyers representing the former FTX chief stipulated that with Bankman-Fried jailed, he would not be able to properly prepare for his trial due to the mountainous amounts of discovery documents only accessible via a computer with internet access.

The prosecution has had to cull charges twice to comply with an extradition agreement inked with The Bahamas – where Bankman-Fried was previously held in custody. The government told the Judge in a letter that next week it plans to file a new superseding indictment.

(With Inputs From Agencies.)

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

US state banks need Fed nod for crypto transactions, as per new norms

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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US state banks will need to get a written supervisory non-objection before engaging in any issuance, holding or transaction of cryptocurrency, including dollar tokens, according to a new directive issued by the US Federal Reserve.

The banks will be required to demonstrate, to the satisfaction of Federal Reserve supervisors, that it has controls in place to conduct the activity in a safe and sound manner.

As per the new direction, a bank wishing to engage in dollar token transactions will need to intimate its Fed supervisory contact of its intention to do the same, and the supervisory contact may follow up with the bank to seek additional information to better understand the proposal and the control framework that the bank has put in place. The bank will further be under strict monitoring by the Fed in regards to these activities.

To obtain a written notification of supervisory nonobjection, a state member bank should demonstrate that it has established appropriate risk management practices for the proposed activities, including having adequate systems in place to identify, measure, monitor, and control the risks of its activities, and the ability to do so on an ongoing basis.

The Fed’s move comes as part of its regulatory action on all things crypto, according to ex-SEC official John Reed Stark, and is aimed at the likes of PayPal which recently launched PYUSD stablecoin, which is backed by dollar deposits, US treasuries and cash equivalents.

These regulatory guidelines would be challenging for banks as they will have to showcase their ability to identify, measure, monitor and control the related risks that money laundering and cybersecurity vulnerabilities would pose. Additionally, Fed will also test banks’ capacity to control substantial redemptions in a short period of time and their cybersecurity infrastructure.

“The Fed’s new supervisory program is also designated to oversee the activities of the banks it supervises relating to blockchain technology and tech-driven non-bank partnerships, with the aim of complementing its existing supervisory process and strengthening the oversight of tech-driven activities,” Reed Stark said.

The objective of the programme is to have an oversight over banks while providing them a balance of financial innovation and risk management practices, he stated.

The aim of the programme is similar to the role of regulatory bodies like the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) that have increased their activities to regulate crypto related activities by financial institutions.

The financial institutions venturing into the crypto industry like PayPal with its PYUSD stablecoin, will have to navigate through regulatory norms to ensure compliance while trying to gain trust of both regulator and consumers.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Payments firm PayPal launches stablecoin in crypto push

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Payments firm PayPal on Monday launched a U.S. dollar stablecoin in a bid to boost the adoption of digital currencies for payments and transfers.

The stablecoin, known as PayPal USD, is backed by U.S. dollar deposits and short-term U.S Treasuries, and will be issued by Paxos Trust Co, according to the company.

PayPal’s shares rose 1.4 percent to $63.66.

Stablecoins are cryptocurrencies designed to be protected from the wild volatility that makes it difficult to use digital assets for payments or as a store of value.

PayPal USD is pegged to the dollar and will gradually be available to the company’s customers in the United States, the digital payments firm said.

Last month a U.S. congressional committee failed to come to an agreement on a bill to establish a federal regulatory framework for stablecoins.

Visa had said in 2021 that it will allow the use of the cryptocurrency USD Coin to settle transactions on its payment network.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Coinbase ask US federal judge to dismiss SEC’s lawsuit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Coinbase Global on Friday asked a judge to end the U.S. Securities and Exchange Commission’s lawsuit accusing the world’s largest publicly traded cryptocurrency exchange of violating federal securities laws.

In a filing in federal court in Manhattan, Coinbase said the SEC had no authority to pursue its lawsuit because the digital assets and services it objected to did not qualify as securities, and said the agency has overreached.

“Our core argument is simple – we do not offer ‘investment contracts’ as that term has been construed by decades of Supreme Court and other binding precedent,” Coinbase Chief Legal Officer Paul Grewal said in a post on X, formerly Twitter.

A spokesperson for the SEC declined to comment beyond their public filings.

Coinbase was sued by the SEC in June, and accused of operating illegally as a national securities exchange, broker and clearing agency without registering with the regulator.

Growing friction between the crypto sector and the top U.S. markets regulator has escalated amid a series of lawsuits the SEC has filed against the world’s largest crypto platforms.

Also Read: Coinbase revenue beat estimates, executives expect to win battle with SEC

The SEC has said the platforms needed to register and operate in a manner akin those dealing in stocks or bonds, while the crypto sector says that new legislation is needed. Firms are closely watching the litigation between the SEC and Coinbase, with some onlookers deeming it an “existential” clash.

In the last month, two federal judges in Manhattan diverged, in SEC lawsuits against crypto firms Ripple Labs and Terraform, over whether the regulator overstepped its authority by trying to regulate the sector.

Coinbase leaned on the recent Ripple matter in Friday’s filing, noting the SEC’s lawsuit hinges on the type of transactions that the judge deemed outside of the regulator’s jurisdiction.

Shares of Coinbase fell 3.8 percent on Friday.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Founder of bankrupt crypto lender Celsius must face NY fraud lawsuit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Alex Mashinsky, the founder and former chief of the now-bankrupt cryptocurrency lender Celsius Network, must face a lawsuit by New York Attorney General Letitia James accusing him of civil fraud, a Manhattan state court judge ruled on Friday.

Justice Margaret Chan said the attorney general sufficiently alleged that Mashinsky defrauded investors by touting Celsius as a safe alternative to banks and concealing its risks, including hundreds of millions of dollars of investment losses.

Chan also said James could pursue some claims under the Martin Act, a powerful state securities law, and that the ”earned interest accounts” that Celsius offered customers qualified as securities under state law.

The attorney general’s lawsuit ”supports a reasonable inference that the harm suffered by investors flowed, at least in part, from Mashinsky’s alleged misrepresentations made in New York concerning Celsius’ overall financial health and investment safety,” Chan wrote in a 25-page decision.

Mashinsky has separately pleaded not guilty to criminal fraud charges brought by the U.S. Department of Justice tied to Celsius’ demise.

He also faces related civil lawsuits by the U.S. Securities and Exchange Commission, U.S. Commodity Futures Trading Commission and U.S. Federal Trade Commission.

Lawyers for Mashinsky in the New York civil case did not immediately respond to requests for comment.

James, in a statement, said the decision ”should serve as another reminder to crypto companies that we will use the full extent of the law against those who defraud investors.”

Cryptocurrency lenders such as Hoboken, New Jersey-based Celsius grew rapidly as digital asset prices surged higher during the COVID-19 pandemic.

The lenders promised easy loan access and high-interest rates to depositors, and lent tokens to institutional investors, hoping to profit from the difference.

Celsius was founded in 2017 and had offered 17 percent interest on some deposits, but had a $1.19 billion balance sheet deficit when it sought Chapter 11 protection in July 2022, according to regulators and court filings.

The bankruptcy came one month after Celsius froze withdrawals and transfers for its 1.7 million customers, citing what it called ”extreme” market conditions.

The case is New York v. Mashinsky, New York State Supreme Court, New York County, No. 450040/2023.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Coinbase revenue beat estimates, executives expect to win battle with SEC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Coinbase Global beat second-quarter revenue expectations on Thursday on higher interest income while its executives said the crypto exchange expects to win its legal battle with the U.S. securities regulator.

The company and its rival Binance were sued by the US Securities and Exchange Commission in June. It alleged that Coinbase traded at least 13 crypto assets that are securities without registering them with the regulator.

The SEC action marked a dramatic escalation of a crackdown on the crypto industry.

“With respect to the litigation with the SEC, I want to be very clear, we do think we can win. We expect to win,” said Chief Legal Officer Paul Grewal in a post-earnings call.

Shares in Coinbase were last down 1.2 percent in volatile extended trading. The stock has seen a blistering rally this year, gaining 156 percent amid renewed retail interest and sector-wide tech rebound.

Oppenheimer analyst Owen Lau said the initial investor enthusiasm over the results got subdued as they dug deeper and realized guidance was in line with expectations.

The crypto exchange expects third-quarter subscription and services revenue of at least $300 million, compared with estimates of $336.15 million.

Coinbase reported revenue of $707.9 million in the second quarter, beating estimates of $663 million, according to Refinitiv data.

Interest income in the quarter surged to $201.4 million from $32.5 million a year ago.

“In Q2, crypto volatility, which is a key input into our trading business, continued to decline, and it reached multi-year lows,” said finance head Alesia Haas.

Trading volumes in the quarter dropped to $92 billion from $217 billion a year ago, while its loss narrowed to $97 million from $1.09 billion in the same period in 2022.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow