War on Crypto
Dear Bankless Nation,
This was a particularly wild and crazy week for crypto. The SEC made their most aggressive push yet against the crypto industry with multiple lawsuits filed and more action on the way. Oh yeah, and Do Kwon got arrested, as first reported by... Bankless.
For our weekly recap, we dig into:
- The War on Crypto
- $ARB finally drops
- Bank struggles
- Do Kwon arrested
- Crypto keeps launching
- Bankless Team
📅 Weekly Recap
1. The War on Crypto
The U.S. government’s war on crypto continues.
Coinbase announced Thursday that it was issued a Wells notice from the SEC with regards to “potential violations of securities law” on “an undefined portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet”. A Wells notice typically precedes a formal legal enforcement action from the SEC.
The largest U.S. crypto exchange claims that the recent SEC action comes despite multiple efforts to engage them, meeting with the SEC over 30 times over nine months, discussing potentially registering part of its business with the SEC and proposing registration models for crypto businesses to be compliant.
The FDIC announced Sunday that Flagstar Bank will “assume all of Signature Bank’s cash deposits except for those of crypto companies”, offering further confrimation of Barney Frank’s comments on CNBC last week that Signature’s seizure by the government was politically motivated by anti-crypto reasons.
After Coinbase, the SEC also served DeFi protocol Sushiswap and its CEO Jared Grey with a subpoena Tuesday. Grey is asking the DAO to avail a $3M USDT legal defense fund proposal to cover costs.
The SEC also charged Justin Sun with securities law violations, alleging the selling and airdropping of unregistered securities, fraud and market manipulation. Eight other celebrities including Lindsay Lohan, Jake Paul, Soulja Boy, Lil Yachty, Akon and Ne-Yo were also sued for illegally promoting TRX and BTT without necessary disclosures.
On a more promising note, XRP holders seem to be optimistic of a Ripple win in its SEC case. The legal battle that has gone on since December 2020, saw the SEC allege Ripple breaking securities laws for selling $1.3B worth of XRP.
Finally, the IRS is planning to treat NFTs as collectibles, taxing them like physical art “until further guidance is issued”.
2. $ARB finally drops
On Thursday, Arbitrum made its transition to a DAO by airdropping 12.75% of its total token supply to users and 137 DAOs. See the Arbitrum foundation official announcement.
A total of ~650K wallets claimed their airdrop, with GMX receiving the highest at 8 million tokens, followed by Uniswap, Sushiswap, Dopex and Curve. Both Arbitrum’s claim website and its block explorer Arbiscan crashed under heavy usage.
Arbitrum’s transaction usage hit an all-time-high at 1.3 million transactions on the day of its airdrop, with almost 900K active users.
Crypto Twitter's bench of analysts speculated that ARB would trade as high as $10 to as low as $0.30. ARB was priced at ~$8 on launch but it only took an hour for its price to dump to $1. As of Saturday, ARB’s price has settled at $1.22.
If you haven't done so yet, check your ARB eligibility and claim on Earnifi.
3. Bank struggles
The collapse of Silvergate and Silicon Valley Bank is spilling over to non-crypto banks. Swiss bank Credit Suisse was bought over by UBS Group for $3.2B in a government-assisted takeover.
First Republic Bank ($212B AUM) is facing its own bank run from mainly corporate depositors. 68% of First Republic’s deposits are uninsured as they are above the FDIC insurance limit of $250K. Like SVB, First Republic suffers from massive unrealized losses on its long-dated Treasury bonds. Its stock has plummeted almost 90% this month.
The ongoing banking crisis and speculation of impending hyperinflation has provided Twitter with an endless source of entertainment. Notably, Balaji Srinivasan is publicly making the near-impossible bet that the USD will hyperinflate within 90 days due to the U.S. government’s indirect bailout of insolvent banks, causing BTC to spike in value.
Take your money out of the banks, buy BTC, get off exchanges, and hodl tight – Balaji recommends. The best tweets highlighting American's impending financial ruin will even get a personal payout of $1,000 in BTC from Balaji himself.
Arthur Hayes agrees that Bitcoin’s price will go up due to the Fed’s new quasi-quantitative-easing Bank Term Funding Program (BTFP), but it won’t be $1M within 90 days.
4. Do Kwon arrested
Do Kwon has been arrested in Montenegro. The 31-year-old South Korean behind the $40B Terra ecosystem was detained at the Podgorica airport en route to Dubai with falsified Costa Rican passports.
Bloomberg reports that he’s been charged by US prosecutors for fraud.
5. Crypto keeps launching
- zkSync's zkEVM Era Mainnet Alpha is now live! 📰 Get started on zkSync Era with The Bankless Guide to zkSync. 📺 See also our Bankless interview with Alex Gluchowski, co-founder and creator of zkSync.
- Immutable and Polygon Labs partners in a Web3 gaming effort to launch Immutable zkEVM.
- Nexon, the gaming company behind MapleStory is coming to Polygon.
- Magic Eden is launching a marketplace for Bitcoin Ordinals.
- The popular EVE Online game is integrating blockchain tech.
- Aavegotchi launches Gotchichain on Polygon Supernets.
- Telegram lets users send USDT through chats.