Hello! Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.
Crypto exchange Coinbase
MINT
said Wednesday it received a notice from Wells from the Securities and Exchange Commission that could lead to formal charges.
The SEC’s Wells notice covered an unspecified portion of the exchange’s publicly traded digital assets, the staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet, Coinbase Chief Legal Officer Paul Grewal wrote in a blog post.
Coinbase will continue to offer its products and services as usual, Grewal said.
While it’s not the first time the SEC has issued a Wells notice or filed suit against a crypto company, the move is particularly significant as Coinbase is the largest crypto exchange in the US and arguably the most regulated, according to participants from the industry.
Still bitcoin
BTCUSD
prices seem to be holding up well. The crypto is trading above $28,000 on Thursday after falling Wednesday as the Federal Reserve raised its key interest rate by a quarter of a percentage point as widely expected, while Fed Chairman Jerome Powell said it is “the most likely case” that the central bank would refrain from cutting its key interest rate this year.
Again, find me on Twitter at @FrancesYue_ to share thoughts about crypto, this newsletter or your personal digital asset stories.
Coinbase receives word from Wells
The SEC staff told Coinbase that they have identified possible violations of securities laws, but did not provide many details, according to Grewal.
An SEC representative declined to comment.
The vast majority of cryptocurrencies in circulation are securities that must be overseen by the SEC, the agency’s chairman, Gary Gensler, previously said.
While details surrounding the SEC’s notice remain unclear, the agency’s move could hurt institutional interest in the already-battered crypto industry, said Kavita Gupta, founder and general partner of Delta Blockchain Fund.
But if the SEC eventually takes enforcement action against Coinbase and the exchange opts for litigation, it could push for more clarity in crypto regulation, said Alex Thorn, chief of research at Galaxy Digital. “The SEC will have to make strong arguments for them in court,” Thorn said. Digital asset companies have long complained that the SEC was not providing enough clarity on crypto regulation and demanding new rules for the fledgling industry, while regulators said digital assets are subject to existing laws.
However, court cases can take years to conclude and the ruling does not always guarantee any regulatory clarity, although the court usually decides in favor of one party. “A statement can be made that is so narrow that it doesn’t actually provide clarity,” said Thorn.
If Coinbase loses the battle with the SEC, “it means the crypto industry is over in the US,” Delta’s Gupta said.
US regulators have redoubled their efforts to increase oversight of the crypto industry after several major companies collapsed last year, resulting in billions of investor losses.
In February, the SEC sued Kraken for failing to register its eviction program. The exchange ended the program in the US and paid $30 million in fines to settle the charges, without admitting or denying the allegations.
Meanwhile, the New York Department of Financial Services ordered stablecoin publisher Paxos to stop minting BUSD, a stablecoin issued by Paxos and branded by the world’s largest crypto exchange Binance. Paxos also received notice from Wells from the SEC, which is considering recommending an action alleging that Paxos has not registered BUSD as a security.
SEC is suing Justin Sun
The SEC on Wednesday charged Justin Sun, founder of blockchain Tron, with selling unregistered crypto securities and fraudulently manipulating the secondary market for Tronix, the blockchain’s native token.
The agency also charged eight celebrities, including actress Lindsay Lohan, social media personality Jake Paul, porn star Kendra Lust, and musicians Lil Yachty, Austin Mahone, Soulja Boy, Ne-Yo, and Akon, for touting Tronix and another token BitTorrent. without disclosing that they were compensated for it and the amount of their compensation, according to a statement Wednesday.
With the exception of Soulja Boy and Mahone, the six other celebrities settled with the SEC, agreeing to pay a total of $400,000 in disgorgement, interest and fines, without admitting or denying the regulator’s findings.
MarketWatch’s Chris Matthews wrote more about it here.
Execute Kwon’s arrest
A man believed to be Do Kwon, founder of Terraform Labs, which was linked to a crypto implosion worth more than $40 billion last year, has been arrested in Montenegro, according to Interior Minister Filip Adzec.
Kwon was detained at Podgorica airport with forged documents and is wanted by authorities in South Korea, the US and Singapore, Adzec tweeted Thursday. “We are awaiting official confirmation of identity,” he wrote.
The alleged arrest came just over a month after the SEC charged Terraform and Kwon with orchestrating multi-billion dollar crypto asset fraud. Last year, blockchain Terra’s stablecoin TerraUSD and its sister crypto Luna collapsed, wiping out more than $40 billion in market value and sparking a chain reaction that ripped through the crypto industry.
Anushree Dave from MarketWatch wrote more here.
Cryptograms in an instant
Bitcoin was up more than 11% over the past week, trading around $28,670 on Thursday, according to data from CoinDesk. Ether gained 5% over the same period to around $1,843.
| Biggest winners | Price | %7 days return |
| Mask network | $5.83 | 51% |
| Conflux | $0.39 | 40% |
| Stacks | $1.21 | 37% |
| Phantom | $0.50 | 28.5% |
| XRP | $0.46 | 25.5% |
| Source: CoinGecko |
| Biggest fallers | Price | %7 days return |
| Ton coin | $2.23 | -11% |
| Maker | $692.60 | -7.9% |
| Huobi | $3.71 | -6.8% |
| bittorrent | $0.0000006 | -4.1% |
| Cosmos hub | $11.97 | -4.1% |
| Source: CoinGecko |
Crypto companies, funds
Shares of Coinbase Global Inc.
MINT
was down 12% for the week to about $65.78. MicroStrategy Inc.
MSTR
down 4% on the week so far to $256.70.
Crypto mining company Riot Blockchain Inc.
REVOLT
rose 14.2% to $9.25 as of Thursday. Shares of competitor Marathon Digital Holdings Inc.
MARA
rose 0.8% last week to $8.22. Ebang International Holdings Inc.
EBON
traded up 1.3% last week to about $6.80.
Overstock.com Inc. Shares
SHOP
rose 1% over the week to $19.60.
Shares of Block Inc.
SQ
,
formerly known as Square, was down 17% year-to-date to $61.16 for the week. Tesla Inc.
TSLA
shares rose 6.2% to $191.20.
from PayPal Holdings Inc
PYPL
the stock fell 1.1% over the week, trading around $72.20. from Nvidia Corp
NVDA
was up 4.8% last week to $269.60.
Advanced Micro Devices Inc.
amd
shares were up 1.9% to $99.75 for the week.
Among crypto funds, ProShares Bitcoin Strategy
SMALL
rose 4.6% over the week to $17.20 Thursday, while counterpart Short Bitcoin Strategy ETF
ARE
retreated 5.1% to $21.26. Valkyrie Bitcoin Strategy ETF
BTF
gained 4.8% to $11.00 last week, as VanEck Bitcoin Strategy ETF
XBTF
rose 2.6% to $27.52.
Grayscale Bitcoin Trust
GBTC
rose 7.2% over the past five days to $15.83 on Thursday.
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