Tuesday June 6, 2023
Crypto markets felt a shock yesterday morning when it was revealed that the SEC had sued Binance and CEO Changpeng Zhao (“CZ”) for security law violations. The SEC is accusing Binance of wash trading and alleging that Binance allowed US customers to trade on the Binance.com platform and that while the company claims Binance.US is an independent trading operation, Zhao and Binance secretly control the US platform.
My feelings are mixed on this announcement. While troubling news, this should be no shock to BitDigest readers as I have been calling for this regulatory crackdown to occur since early 2019. Binance has continually attempted to operate ‘outside of the lines’ and has chosen a practice of apologizing rather than asking for permission with global regulators. Over the past couple of years Binance has made changes and attempted to improve its regulatory standing especially in the US, but they continue to operate in global markets without the necessary licenses.
Adding a lawsuit against the largest global exchange to its ongoing battle with Coinbase and Ripple will eventually force the Gary Gensler lead SEC to clearly define their regulatory stance and finally provide the clarity the US market has been asking for. This is good news.
The other positive news is that this announcement is what many people have considered to be the last major shoe to drop concerning company failures in the nascent crypto ecosystem.
I am not sure what will happen to Binance. They may be fined – in the US and elsewhere – and CZ recently appointed a new senior leader in Richard Teng so he may be open to stepping into an Executive Chairman role and handing over his reigns as CEO. The company will now be pressured to obtain global licenses and I think Binance.US may face a TikTok scenario where US lawmakers look to force the company to hand over control of the US-based subsidiary to a truly independent US entity.
The next year may become a real turning point for the US crypto industry. We will hopefully reach resolutions on many of the bankrupt lenders,, and the series of SEC charges against US operating companies will force regulatory clarity and possibly even allow a spot bitcoin ETF. Against this background, bitcoin continues to operate with out error. Blockchain hype has been passed to AI, and the availability of venture capital is lessening. Companies will still need to establish themselves based on their business strategies and solve problems rather than search for problems, and we still need greater adoption. It’s time for our attention to move from headline news to operating excellence and build the next generation of business successes.
To support claims of excessive hype across “AI”, I wanted to share that we just received our first pitch from a digital asset company that added AI to their name but did not having any mentioned of AI or machine learning in their pitch or business process. It reminded me of Long Blockchain, a beverage company that suddenly changed its name from Long Island Iced Tea Corp in 2017 hoping to ride the crypto craze.
BitDigest will not be published tomorrow and will be back on Thursday June 8th.
◾ The SEC sued Binance and CEO Changpeng Zhao of mishandling customer funds, misleading investors and regulators, and breaking securities rules. (SEC.gov)
◾ The IMF’s Gita Gopinath warned that AI could drive “substantial disruptions in labour markets” and is calling for “policymakers to move quickly” and put regulations in place. (FT)
◾ The Genesis Bankruptcy judge agreed to extend the mediation period until June 16th. (Coindesk)
Government & NGO Actions
◾ EC Vice President Vera Jourova warned AI technologies can “raise fresh challenges for the fight against disinformation” causing “new risks and the potential for negative consequences for society.” (Bloomberg)
◾ Representatives Brad Sherman (D-CA) and Stephen Lynch (D-MA) issued a letter to the IRS seeking for the agency to bring the crypto industry under full tax compliance. (House.gov)
◾ The UK’s Shadow Secretary for Digital, Culture, Media and Sport is calling for AI tools to be licensed by arms-length governmental bodies in the same way as medicines or nuclear power. (Theguardian)
◾ The FBI issued a warning that malicious actors are using deep fake photos to target victims. (Ic3.gov)
◾ The Commodity Futures Trading Commission approved the CBOE to provide clearing services for digital asset futures on a margined basis. (CFTC)
Public Company Releases
◾ Argo Blockchain (ARBK) generated revenue of $11.4 million and a adjusted EBITDA loss of $1.6 million in Q1’23. (Accesswire)
◾ Bit Digital (BTBT) produced 113 bitcoin in May. (PRNewswire)
◾ TeraWulf (WULF) mined 323 bitcoin at an average hash rate of 3.9 EH/s in May. (Globenewswire)
◾ Riot Platforms (RIOT) produced 676 bitcoin (10.5 EH/s) selling 600 in May. (Riotplatforms)
Restructuring, Losses and Legal News
◾ A Florida judicial panel agreed to consolidate a series of class action lawsuits against FTX financial backers and celebrity endorsers by customers of the failed cryptocurrency exchange. (Bloomberg)
◾ FTX’s request to join the Genesis mediation talk was declined by the bankruptcy judge. (Bloomberg)
◾ Crypto hedge fund ARCA cut 30% of its staff. (Coindesk)
AI Announcements
◾ Elon Musk believes the Chinese government will impose regulations on the AI industry across its country. (Reuters)
Protocols, Applications & Business News
◾ Binance responded to the SEC charges saying it was “disappointed” and that “from the start [the exchange had] actively cooperated with the SEC’s investigations and have worked hard to answer their questions and address their concerns.” (Binance)
◾ Russian bank Rosbank is offering clients an option to use cryptocurrencies for international settlements. (News.bitcoin)
◾ Crypto exchange OKE is partnering with regulated digital asset custody service provider Komainu to offer secure 24/7 trading of segregated assets under custody. (Globenewswire)
◾ A former minority owner of the Minnesota Vikings was sentenced to 75 months in prison and ordered to forfeit $740 million and pay $53 million in restitution for his role in helping crypto exchanges avoid money-laundering rules. (Bloomberg)
Metaverse Briefings & Activations
◾ Apple (AAPL) introduced Vision Pro, its long await mixed reality glasses and what it considers to be a new category in spatial computing. (Apple)
Market Data
◾ The SEC has now accused 61 cryptocurrencies of being securities. (Cointelegraph)
◾ Traders withdrew over $778 million in crypto from Binance over the past 24 hours. (Twitter)