Tag: ftx

FTX Says Banks Earlier Raised Questions About FTX-Affiliated Hedge Fund’s Wire Activity

Certain banks working with FTX founder Sam Bankman-Fried’s trading firm Alameda Research raised questions about the firm’s wire activity as early as 2020, according to a report released by FTX on Monday.

Some banks began rejecting wires to or from Alameda the same year that the cryptocurrency exchange scrambled to access the US banking system, the report said.

Federal prosecutors have alleged that Bankman-Fried stole billions of dollars in customer funds to plug losses at Alameda. FTX, which filed for bankruptcy in November after Bankman-Fried resigned as CEO, has estimated that approximately $8.7 billion (nearly Rs. 71,300 crore) in customer assets were misappropriated from the exchange.

Bankman-Fried has pleaded not guilty to 13 counts of fraud and conspiracy. He has previously said that when FTX did not have a bank account, some customers wired money to Alameda and were credited on FTX. Bankman-Fried did not immediately respond to a request for comment on the report.

In 2020, certain banks working with Alameda pressed the firm on its wire transfers, according to the report.

One bank representative wrote to Alameda about references to FTX in the company’s wire activity and asked whether the account was being used to settle trades on FTX. An Alameda employee responded that while customers “occasionally confuse FTX and Alameda,” all wires through the account were to settle trades with Alameda, according to the report.

The Alameda employee’s response was false, FTX said on Monday. In 2020 alone, one of Alameda’s accounts received more than $250 billion (nearly Rs. 20,49,900 crore) in deposits from FTX customers and more than $4 billion (nearly Rs. 32,800 crore) from other Alameda accounts that were funded in part by customer deposits, the report said.

Bankman-Fried, a 31-year-old former billionaire, rode a boom in digital assets to accumulate an estimated net worth of $26 billion (nearly Rs. 2,13,200 crore), and became an influential political and philanthropic donor before FTX declared bankruptcy.

© Thomson Reuters 2023

Affiliate links may be automatically generated – see our ethics statement for details.

Check out our Latest News and Follow us at Facebook

Original Source

Crypto Investors Grow Cautious After Sudden Collapse of Exchanges Last Year

Cryptocurrency investors have grown more cautious about who they do business with, after being burned last year by sudden collapses of Celsius Network, Voyager Digital, FTX and others, and fearing a regulatory crackdown will put more pressure on remaining firms.

The recent crypto platform bankruptcies trapped customer assets now worth around $34 billion (nearly Rs. 2,78,600 crore), according to Xclaim, which allows creditors to trade such claims.

To protect themselves, institutional crypto investors are switching to exchanges that offer stronger asset protection, boosting due diligence on trading partners, and executing trades in smaller chunks, among other new risk management measures, according to executives and industry data.

“Investors in this asset class have learned their lessons the hard way and now are being much much more picky about who to deal with,” said Samed Bouaynaya, a digital asset portfolio manager at London-based hedge fund Altana Wealth.

Binance.US and Coinbase Global are the latest crypto exchanges to come under scrutiny after the US Securities and Exchange Commission (SEC) sued the pair for allegedly breaching its rules, and industry executives expect more enforcement actions. Binance and Coinbase deny the regulator’s allegations.

Altana now prioritises exchanges that allow it to settle and hold its assets with independent third-party custodians such as the UK’s Copper and US-based Fireblocks. Because Binance does not give Altana that option, the hedge fund rarely leaves balances at Binance overnight, said Bouaynaya.

Binance did not respond to a request for comment but said in a statement last week that “customer funds are always safe.”

Anatoly Crachilov, chief executive of London-based Nickel Digital Asset Management, said nearly all its trading now takes place on exchanges that allow off-exchange settlement, meaning the assets are settled and held separately from the exchange, compared with 5 percent prior to the collapse of FTX.

Declining exchange balances of stablecoins and ether suggest that users are removing their assets from exchanges, although it is difficult to gauge what proportion of assets are moving to custody solutions, said Martin Lee, data journalist at blockchain tracker Nansen.

Spokespeople for Fireblocks and Copper said they were seeing a jump in demand for their services.

Greg Tusar, head of Coinbase’s institutional products, said Coinbase had taken a number of steps to ensure its clients’ assets are safe, including providing user agreements across all of its products guaranteeing clients’ continued rights as owner of those assets in the unlikely event of a bankruptcy.

“There definitely is a sense that people in general are focused on counterparty credit and counterparty risk. We feel like we’re broadly the beneficiary of that.”

‘Uncomfortable’ Binance exposure

Investors piled into cryptocurrencies when interest rates were low, pushing the market to a peak value of $3 trillion (nearly Rs. 2,45,78,100 crore) in 2021. But they turned cautious as rates rose, causing prices to slump and triggering fatal liquidity crunches for several crypto firms. The value of the crypto market has fallen to around $1.1 trillion (nearly Rs. 90,12,000 crore), according to CoinGecko data.

European crypto asset manager CoinShares ramped up its counterparty due diligence in the collapse of FTX. It now quizzes trading partners about their operations, cybersecurity set-up, credit exposure, and exposure to various cryptocurrencies, said CEO Jean-Marie Mognetti.

And while previously CoinShares tiered marketplaces as red, amber or green, the system is “very simple now,” said Mognetti. “It’s like red or green. There is no more amber.”

The crypto industry remains risky with highly volatile assets. Financial regulators like the SEC say many crypto companies flout applicable rules, meaning risk management still lags the traditional financial sector.

While the SEC crackdown on Binance.US has raised questions over its future, traders say dealing with Binance is unavoidable. It is the world’s largest exchange with around 60 percent of trading volumes globally, according to Kaiko data.

Binance’s U.S. affiliate said on Thursday last week it was halting dollar deposits. Two days earlier, the SEC asked a court to freeze its assets. The SEC alleged that Binance and its CEO Changpeng Zhao secretly controlled and diverted customers’ assets.

“This is inevitably risk we’re all carrying in crypto – we have uncomfortable concentration risk on one large exchange called Binance,” said Nickel’s Crachilov.

He warned that any more dramatic exchange failures “would perhaps inflict a nuclear crypto winter”.

When dealing with the riskiest exchanges, US-based crypto investor Arca tries to minimize its exposure by breaking up big trades into small chunks, said Wes Hansen, Arca’s director of trading and operations, without naming specific companies.

Its counterparty information requests are “much more intense and more often,” while the company also monitors Twitter for intelligence on which firms might be in trouble, said Hansen.

“Everyone’s just so scared in the market right now,” he added.

© Thomson Reuters 2023

Affiliate links may be automatically generated – see our ethics statement for details.

Check out our Latest News and Follow us at Facebook

Original Source

Bankrupt Crypto Lender Voyager Digital Hopeful to Provide 35 Percent Customer Payout

Crypto lender Voyager Digital said Wednesday that customers will recover about 35 percent of their cryptocurrency deposits as the company winds down its operations after a failed buyout attempt by crypto exchange Binance.US.

US Bankruptcy Judge Michael Wiles approved Voyager’s proposed liquidation plan at a court hearing in Manhattan on Wednesday, allowing the company to return about $1.33 billion (nearly Rs. 11,000 crore) in crypto assets to customers and end its efforts to reorganize under Chapter 11.

Voyager filed for bankruptcy protection in July, citing volatility in cryptocurrency markets and a default on a large loan made to crypto hedge fund Three Arrows Capital (3AC).

Voyager suffered through two failed sale attempts during its bankruptcy. It initially sought to sell its assets for $1.42 billion (nearly Rs. 11,700 crore) to FTX, a deal that failed when FTX imploded in November. Binance.US stepped in with a $1.3 billion offer, but called off the deal on April 25, citing a “hostile and uncertain regulatory climate.”

Voyager customers’ recovery hopes are highly dependent on the outcome of litigation with FTX, which is seeking to claw back $445.8 million (nearly Rs. 3,670 crore) in loan repayments made to Voyager before FTX collapsed into bankruptcy.

If Voyager fully prevails in the FTX litigation, customers’ expected recovery would be 63.74 percent, according to Voyager’s court filings.

Voyager intends to repay customers with the same type of cryptocurrency that they had in their accounts. For deposits held in unsupported cryptocurrencies that cannot be withdrawn from Voyager’s platform and for Voyager’s proprietary VGX token, Voyager will instead repay customers using the stablecoin USDC.

Voyager was one of several crypto lenders to file for bankruptcy in 2022 after a boom in the COVID-19 pandemic. Others were Celsius Network, BlockFi, and Genesis Global Capital.

© Thomson Reuters 2023

OnePlus recently launched its first tablet in India, the OnePlus Pad, which is only sold in a Halo Green colour option. With this tablet, OnePlus has stepped into a new territory that’s dominated by Apple’s iPad. We discuss this and more on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.
Affiliate links may be automatically generated – see our ethics statement for details.

Check out our Latest News and Follow us at Facebook

Original Source

Large Withdrawals by Crypto Whales Responsible for US Banking Crisis: Federal Reserve Bank of Chicago

The back-to-back downfalls of promising crypto projects last year has been blamed for causing the ongoing banking crisis in the US by the Federal Reserve Bank of Chicago (FRBC). In a fresh analysis, the FRBC has said large withdrawals by institutional crypto investors stirred a liquidity crisis so severe that it left the traditional banking system in the US gasping for breath. Last month itself, three banks in the US shut their businesses owing to the liquidity crunch.

The downfalls of BlockFi, Celsius, FTX, Genesis (in partnership with Gemini), and Voyager Digital have been named as the most impactful crisis creators in FRBC’s report.

The collapse of Terra, that brought the crypto market to a standstill in May 2022, was the trigger point of severe turbulence for other players of the sector.

Terra’s native stablecoin UST lost its equivalence to the US dollar that risked the finances of its holders. This had caused the crash of Terra. At the time Terra’s LUNA and UST tokens reportedly lost around $45 billion (roughly Rs. 3,70,004 crore) within three days.

Several crypto firms resorted to laying off members of their staff just in order to keep their businesses afloat.

Eventually, crypto-related firms like Three Arrows Capital, Celsius, and Voyager ended up filing for bankruptcy after recording large outflows of funds.

“The number of customers each firm had as of its bankruptcy filing in figure 1 likely understates each one’s peak customer count, since the popularity of crypto-asset platforms declined during the early months of 2022 and customers left during the runs described throughout this article,” the FRBC said in its report.

“To draw customers, these platforms offered and marketed high-yield investment products with the ability to withdraw funds on demand. They used customers’ funds for illiquid and risky investments (e.g., in 3AC or the Anchor protocol) in attempts to generate the high returns promised to their customers. In response to negative shocks, customers had an incentive to run in order to avoid taking losses that would be borne by others,” the report added.

Within the first two weeks last month, the US witnessed three large crypto-friendly banks crumble under market pressure. Regulators who approved the closure of these banks said their unstable business status could have posed severe threat to the US economy.

To mitigate the financially damaging after-effect on the market, US authorities were quick to announce that all custodians linked to the collapsed banks would have access to their funds.

“Overall, while crypto-asset activities are sometimes described as unregulated, it may be more accurate to describe many crypto-asset firms as attempting to avoid the existing regulatory system—which would have required them to provide important disclosures about the financial risks of their products, including those that led the platforms to file for bankruptcy,” the FRBC study noted.

At present, the crypto market as well as the overall financial sector is undergoing a volatile run. In addition, the consecutive interest rate hikes from the Fed in the US have added to the prevailing pressure on the financial market, including the crypto sector.

The valuation of the crypto sector has dropped significantly from its highest point of $3 trillion (roughly Rs. 2,46,86,250 crore) to its current capitalisation of $1.14 trillion (roughly Rs. 93,54,177 crore), as per CoinMarketCap.

Google I/O 2023 saw the search giant repeatedly tell us that it cares about AI, alongside the launch of its first foldable phone and Pixel-branded tablet. This year, the company is going to supercharge its apps, services, and Android operating system with AI technology. We discuss this and more on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.
Affiliate links may be automatically generated – see our ethics statement for details.

Check out our Latest News and Follow us at Facebook

Original Source

Coinbase, SEC on Collision Course for ‘Existential’ Clash Over Crypto Industry

Coinbase debuted on the US stock market on April 14, 2021 — the same day US senators confirmed Gary Gensler to lead the Securities and Exchange Commission (SEC), the country’s top markets regulator.

Gensler, who has called the crypto sector a “Wild West” riddled with fraud, is now embroiled in a battle with the world’s largest publicly-traded crypto firm over a core debate: whether digital assets are investment contracts akin to stocks or bonds that should be regulated by the SEC.

Friction between crypto proponents and the regulator have been brewing under Gensler’s leadership, with both sides growing increasingly loud in their criticisms.

The escalating tension exploded into public view on Wednesday when Coinbase CEO Brian Armstrong and the company’s chief legal officer Paul Grewal posted online that the firm had been told that SEC staff intend to recommend enforcement action, adding that Coinbase was willing to fight it in court.

Coinbase shares have tumbled 14 percent since Wednesday’s disclosure.

SEC and Coinbase spokespeople declined to comment. For months, the two have been in discussions over regulation and the agency’s investigation into Coinbase, according to two sources.

In July, the firm disclosed an SEC probe into its asset listing processes, staking programs and yield-generating products.

Discussions between the SEC and Coinbase broke down in recent weeks, with one source saying the two sides had moved “further apart.” The SEC appears to be going after Coinbase’s entire business as operating outside of US laws, the source said.

The crypto industry believes it operates in a regulatory gray area not governed by existing US securities laws — and that new legislation is needed to regulate the industry.

“We continue to think rulemaking and legislation are better tools for defining the law for our industry than enforcement actions,” Coinbase’s Grewal said on Wednesday. “But if necessary, we welcome the opportunity for Coinbase and the broader crypto community to get clarity in court.”

Prior to Gensler’s arrival, the SEC engaged in targeted enforcement, but the Democratic chair has ratcheted up focus on crypto platforms themselves. The SEC’s crackdown on crypto gathered pace after November’s collapse of Sam Bankman-Fried’s FTX exchange.

Gensler has raised questions over whether crypto firms rely on a business model that is fundamentally non-compliant with the law, adding that crypto intermediaries provide a range of functions, such as operating as an exchange, broker-dealer, clearing agent and custodian, that should be regulated by the SEC.

“This is probably existential for Coinbase,” said Joshua White, a finance professor at Vanderbilt University. “It’s perhaps existential for the industry, at least in the U.S.”

The SEC on Thursday issued an investor alert warning that firms offering crypto asset securities may not be complying with US laws.

Kristin Smith, the CEO of the Blockchain Association, voiced the crypto industry association’s support for Coinbase, noting: “The SEC doesn’t make the law – it only makes allegations, which ultimately must be tested in the courts.”

The SEC has gone to court against many crypto firms, including a case against San Francisco-based crypto and cross-border payments company Ripple Labs that some say could offer clarity on when a digital asset is considered a security.

But the SEC and Coinbase debate over an “unspecified portion” of its listed digital assets sets the stage for a more expansive and potentially defining courtroom battle. Coinbase’s website lists over 150 crypto assets for trading.

Coinbase flagged potential regulatory risks when it filed to go public in 2021, and noted on Wednesday that its staking and exchange services are “largely unchanged” since then.

“There couldn’t be a more significant development for crypto markets and crypto investors,” said Philip Moustakis, former SEC enforcement lawyer and partner with Seward and Kissel LLP in New York.

© Thomson Reuters 2023

The newly launched Oppo Find N2 Flip is the first foldable from the company to debut in India. But does it have what it takes to compete with the Samsung Galaxy Z Flip 4? We discuss this on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

 

Affiliate links may be automatically generated – see our ethics statement for details.

Check out our Latest News and Follow us at Facebook

Original Source

Coinbase Acquires One River Digital Asset Management to Beef Up Services

Coinbase has acquired One River Digital Asset Management (ORDAM), the cryptocurrency exchange said on Friday as it aims to beef up services and take advantage of weak valuations of digital asset companies.

The company did not disclose the financial details of the deal, in which ORDAM will become Coinbase Asset Management and operate as a fully-owned unit of Coinbase.

ORDAM is a digital asset manager that provides institutional clients exposure to digital assets through investment products.

Eric Peters will continue to serve as chief executive of Coinbase Asset Management as well as One River Asset Management, the parent company of ORDAM.

“Coinbase and ORDAM share an ethos grounded in prudent risk management, a trait which has enabled both firms to successfully navigate the recent market turmoil,” Coinbase said in a blog.

Meanwhile, last month Coinbase Global reported a fourth-quarter loss, as trading volume at the cryptocurrency exchange came under pressure from an industry-wide downturn triggered by a string of high-profile bankruptcies.

The digital assets market suffered from dour sentiment over the last year, but the biggest blow to the sector came from the bankruptcy of Sam Bankman-Fried’s major crypto exchange FTX in November.

“In the wake of FTX and other crypto company failures, we have seen increased regulatory scrutiny,” Chief Executive Brian Armstrong said on a call with analysts but added the development will ultimately benefit Coinbase. 

Amid the market downturn, trading volume at the crypto exchange plunged to $145 billion (roughly Rs. 12,00,000 crore) in the fourth quarter, compared with $547 billion (roughly Rs. 45,30,665 crore) a year earlier.

© Thomson Reuters 2023

The OnePlus 11 5G was launched at the company’s Cloud 11 launch event which also saw the debut of several other devices. We discuss this new handset and all of OnePlus’ new hardware on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.
Affiliate links may be automatically generated – see our ethics statement for details.

For details of the latest launches and news from Samsung, Xiaomi, Realme, OnePlus, Oppo and other companies at the Mobile World Congress in Barcelona, visit our MWC 2023 hub.

Check out our Latest News and Follow us at Facebook

Original Source

Crypto Lender Silvergate’s Shares Slumps 29 Percent as Firm Delays Annual Report in Wake of FTX Fallout

Shares of Silvergate Capital Corp slumped 29 percent in premarket trading on Thursday, after the cryptocurrency-focused lender warned it was delaying its annual report and said it was evaluating its ability to operate as a going concern.

Silvergate (SI.N) reported a $1 billion (roughly Rs. 8,21,300 crore) loss for the fourth quarter as investors raced to withdraw deposits in the wake of crypto exchange FTX’s bankruptcy, and the firm’s troubles highlight the fragility of confidence in digital assets.

The company said it would be unable to meet an extended March 16 deadline for submitting its annual report. It also said, in a filing to the Securities and Exchange Commission, that it had sold additional debt securities to repay debts this year and that further loss mean the bank could be “less than well capitalized”.

Silvergate “is evaluating the impact that these subsequent events have on its ability to continue as a going concern,” it said. “The Company is currently in the process of re-evaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.”

JP Morgan downgraded its rating on Silvergate’s stock to “underweight” from “neutral” and withdrew its price target, saying the sale of additional securities suggests that the firm is facing continued liquidity challenges.

“We now see elevated risk of further downside in SI shares given the outstanding risk that the bank is unable to remain a going concern,” JP Morgan analysts said in a research note.

Silvergate’s shares were trading at $9.57 (roughly Rs. 785) before the opening bell – on track to open at their lowest in nearly three years if losses continued. The stock has plummeted about 96 percent from its record-high close in November 2021.

Federal prosecutors in Washington are probing the La Jolla, California-based company and its dealings with FTX and trading firm Alameda Research. In January, three U.S. senators asked Silvergate for details about its risk management and FTX.

Wayne Huang, co-founder and CEO of XREX, a global USD-crypto exchange headquartered in Taipei, said the issues highlighted how interconnected and vulnerable crypto banking had become.

“This accentuates the importance of having a robust banking network for crypto firms, instead of the over-reliance on just several banks,” he said. Wider digital asset markets were relatively calm, though Bitcoin made little advance despite a drop in the U.S. dollar, last buying $23,457 (roughly Rs. 1926523).

“From what we gather, most crypto companies have had to already find banking elsewhere, hence we believe the damage is likely already done in terms of implications to the wider crypto market,” said Matthew Dibb, chief investment officer at cryptocurrency asset manager Astronaut Capital.

Global cryptocurrency exchange Binance had secret access to an account at Silvergate belonging to its purportedly independent U.S. partner and transferred large sums of money from the account to a trading firm managed by Binance CEO Changpeng Zhao, Reuters reported last month.

© Thomson Reuters 2023

After facing headwinds in India last year, Xiaomi is all set to take on the competition in 2023. What are the company’s plans for its wide product portfolio and its Make in India commitment in the country? We discuss this and more on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.
Affiliate links may be automatically generated – see our ethics statement for details.

For details of the latest launches and news from Samsung, Xiaomi, Realme, OnePlus, Oppo and other companies at the Mobile World Congress in Barcelona, visit our MWC 2023 hub.

Check out our Latest News and Follow us at Facebook

Original Source

Binance, Its US Partner Being Questioned for Regulatory Compliance and Finances

Three US Senators have asked giant cryptocurrency exchange Binance and its US partner Binance.US for information about their regulatory compliance and finances, citing a series of investigations by Reuters and some other media reports, according to a letter released on Wednesday.

In the letter, Democrats Elizabeth Warren and Chris Van Hollen along with Republican Roger Marshall, called on Binance “to provide transparency about potentially illegal business practice,” adding that the exchange and its related entities “have purposefully evaded regulators, moved assets to criminals and sanctions evaders, and hidden basic financial information from its customers and the public.

In a statement, Binance said that “a lot of misinformation has been spread about our company” but that “we appreciate the senators’ request” and that it will provide information to help them better understand the firm.

The senators also questioned the legitimacy of the company’s business and the safety of customers’ assets, in the letter addressed to Binance CEO Changpeng Zhao and Binance.US CEO Brian Shroder.

The collapse of rival crypto exchange FTX, whose founder Sam Bankman-Fried has been charged with fraud, “underscored the need for real transparency and accountability in the crypto industry,” the senators wrote.

Warren and Van Hollen are members of the Senate Banking Committee.

The letter cited Reuters articles from last year that found that Binance intentionally kept weak anti-money laundering controls, processed over $10 billion (nearly Rs. 82,400 crore) in payments for criminals and companies seeking to evade US sanctions, and plotted to evade regulators in the United States and elsewhere.

The letter also cited a Reuters report this February that Binance had secret access to Binance.US’s bank account and was able to move $400 million (nearly Rs. 3,300 crore)  to an account held by a trading firm managed by Zhao.

Binance.US publicly maintains that it is entirely independent of the global Binance.com exchange and operates as its “US partner.” However, Reuters has reported that, in fact, Binance created Binance.US as a de facto subsidiary to draw the scrutiny of US regulators away from Binance.com.

Binance has previously disputed Reuters’ articles, calling the illicit-fund calculations inaccurate and the descriptions of its compliance controls “outdated.” The exchange has said it is “driving higher industry standards” and seeking to “further improve our ability to detect illegal crypto activity on our platform.” A Binance.US spokeswoman said in February that “only Binance.US employees have access” to its bank accounts.

In the letter, first reported by the Wall Street Journal, the senators requested Binance and Binance.US provide documents and answers to their questions by March 16.

The senators are seeking information about the companies’ balance sheets, US-based users, anti-money laundering policies. They want written policies regarding Binance and Binance.US’s relationship.

© Thomson Reuters 2023

 

Affiliate links may be automatically generated – see our ethics statement for details.

For details of the latest launches and news from Samsung, Xiaomi, Realme, OnePlus, Oppo and other companies at the Mobile World Congress in Barcelona, visit our MWC 2023 hub.

Check out our Latest News and Follow us at Facebook

Original Source

Binance’s US Partner Confirms Role of Trading Platform in Operating CEO Zhao’s Firm

The US partner of global cryptocurrency exchange Binance has confirmed that a trading firm managed by Binance CEO Changpeng Zhao operated as a market maker on its platform.

Reuters reported on Thursday that Binance had secret access to a bank account belonging to its purportedly independent US partner and transferred large sums of money from the account to the trading firm, Merit Peak.

“While there was a market making firm named Merit Peak that operated on the Binance.US platform, it stopped all activity on the platform in 2021,” Binance.US said in a tweet on Thursday after the Reuters story was published. It did not elaborate on when in 2021 the activity ceased, or comment on Zhao’s role at the trading firm.

The global Binance exchange is not licensed to operate in the United States but the transfers to Merit Peak revealed by Reuters suggest that Binance controlled the finances of Binance.US, despite saying publicly that the American entity is “fully independent” and operates as its “US partner.”

Binance transferred over $400 million (nearly Rs. 3,310 crore) from the account at California-based Silvergate Bank to Merit Peak between January and March 2021, Reuters reported on Thursday.

Before that story‘s publication, Binance.US had told Reuters that “Merit Peak is neither trading nor providing any kind of services on the Binance.US platform,” without giving further details.

Binance.US’s executives were concerned by the outflows from the Silvergate account to Merit Peak because the transfers were taking place without their knowledge, according to the messages reviewed by Reuters.

A spokesperson for the global Binance exchange, which did not respond to Reuters’ questions for the article on Thursday, told crypto news outlet CoinDesk that the transfers were “a Binance.US issue.”

The activities of crypto platforms’ market makers — firms that typically buy and sell assets at exchanges to deepen trading volumes — have come under growing scrutiny from US financial regulators since the collapse of major exchange FTX in November.

‘Tremendous Burden’

Zhao has not directly addressed the report, but on Friday he tweeted, “Remember 4,” tagging a previous post in which he listed his “Do’s and Don’ts” for 2023. The fourth item on the list was “Ignore FUD, fake news, attacks,” using an acronym for “fear, uncertainty and doubt” often used in crypto in relation to news perceived as negative.

The day before Reuters’ article, Binance’s chief strategy officer, Patrick Hillmann, told the Wall Street Journal and Bloomberg that Binance expected to pay penalties to resolve US investigations into the company. Hillmann said Binance had been built by software engineers unfamiliar with laws and rules on bribery and corruption, money laundering and economic sanctions, but earlier “gaps” in its regulatory compliance had since been closed.

“It’s a tremendous burden,” Hillmann told Bloomberg. “We just want to put it behind us.”

Hillmann did not respond to detailed questions Reuters sent him for the article that was published on Thursday.

Regulators are concerned that some market makers have received undisclosed special treatment from crypto exchanges that may disadvantage customers.

The US Securities and Exchange Commission accused FTX founder Sam Bankman-Fried in December of granting “special privileges” to his trading firm Alameda Research, allowing him to siphon off billions of dollars in FTX customer money. Bankman-Fried has pleaded not guilty.

The bankruptcy in 2022 of a string of major crypto firms has also stoked calls from politicians for greater clarity on how regulators assess ties between US banking and the cryptocurrency sector.

In December, US Senators Elizabeth Warren and Tina Smith wrote to top financial regulators including US Federal Reserve Chair Jerome Powell, asking about their assessment of the risks to banks and the banking system stemming from exposure to crypto. The letter cited Silvergate Capital Corp as among the banks that “relied heavily on their crypto customers.”

Shares in Silvergate Capital Corp, Silvergate Bank’s parent company, fell sharply on the Reuters report, closing down over 22 percent. They have lost nearly 90 percent of their value since hitting an all-time high in November 2021.

© Thomson Reuters 2023

 

 

Affiliate links may be automatically generated – see our ethics statement for details.



Check out our Latest News and Follow us at Facebook

Original Source

FTX Collapse Has Put Spotlight on Vulnerabilities in Crypto Ecosystem: Economic Survey 2022-23

The recent collapse of the crypto exchange FTX and the ensuing sell-off in the crypto markets have placed a spotlight on the vulnerabilities in the crypto ecosystem, the Economic Survey 2022-23 presented in Parliament said on Tuesday.

Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because it has no intrinsic cashflows attached to them.

US regulators have disqualified Bitcoin, Ether and various other crypto assets as securities.

A rare joint statement by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) on January 3, 2023, highlighted their concerns about crypto-asset risks to the banking system, it noted.

The geographically pervasive nature of the crypto ecosystem necessitates a common approach to the regulation of these volatile instruments, and the global response to cryptos is evolving, it said.

Observing that crypto assets are new forms of digital assets implemented using cryptographic techniques, the survey said its market has been very volatile, with its total valuation swinging from almost $3 trillion (nearly Rs. 2,45,35,900 crore) in November 2021 to less than $1 trillion (nearly Rs. 81,78,500 crore) in January 2023.

The volatility of the crypto asset ecosystem has brought to the forefront their fragile backing and governance problems, as well as the increasing complexity and non-transparency, it said.

With related financial stability risks rising, the issue of crypto asset regulation has recently moved up the policy agenda of many nations. International fora like OECD and G20 are discussing a globally coordinated approach to regulating crypto assets, it noted.

Monitoring and regulating cryptocurrencies have been tricky, and regulators across the globe find it challenging to keep track of the new and emerging issues in the fast-moving uncharted field, it said.

While crypto assets were apparently designed to disintermediate traditional financial services, this has created new unregulated intermediating entities, it said, adding the promise of decentralisation has yet to be realised in practice.

New centralised intermediaries, such as crypto asset exchanges, wallet providers, and crypto conglomerates, require users to trust centralised entities, it said.

The increasing importance of these entities could force regulators to consider them as systemic financial market infrastructures (FMIs), it said, adding still, the fact that they are yet largely unregulated is a cause for concern globally.

Interestingly, it said, holdings of crypto assets are primarily concentrated in the hands of a few ‘whales’.

Estimates show that around 85 percent of all circulating Bitcoins are held by 4.5 percent of entities, and the underlying protocols used to create crypto assets may also conflict with other public policy objectives, for instance, the massive energy intensity of ‘mining’ crypto assets.

There are minimal global standards applicable to unbacked crypto assets, which do not currently mitigate all risks and vulnerabilities, it said.

“Even as Standard-Setting Bodies (SSBs) have been making efforts to adjust and develop standards, these remain mainly focused on specific issues (financial integrity), sectors (payments, securities and banking), products (global stablecoins), or entities designated as systemic by domestic authorities,” it said.

Thus, there are regulatory gaps at each stage when crypto assets are issued, transferred, exchanged, or stored by non-bank entities. Crypto’s cross-sector and crossborder nature limits the effectiveness of uncoordinated national approaches, it said.

The terminology used to describe the different activities, products and stakeholders is not globally harmonised. The term “crypto asset” itself refers to a broad spectrum of digital products that may need the attention of multiple domestic regulators based on their actual or intended use. 

 

Affiliate links may be automatically generated – see our ethics statement for details.

Check out our Latest News and Follow us at Facebook

Original Source

Exit mobile version