Hashdex tips spot Bitcoin ETFs to trade by Q2, followed by Ethereum

December 5, 2023 Coin Telegraph

2024

Hashdex's head of product for the U.S. and Europe says the exact timing for a spot Bitcoin ETF is unclear but predicts it to start by the second quarter of 2024.

Hashdex, one of the 13 asset managers vying for spot Bitcoin (BTC) exchange-traded fund, expects to see the first spot Bitcoin ETF in the United States land by the second quarter of 2024, followed by a spot Ether (ETH) ETF.

“The exact timing of a spot Bitcoin ETF in the U.S. remains unclear, but in 2023, the narrative around this product switched from a question of ‘if’ to a matter of ‘when,’” said Hashdex’s U.S.

“We believe U.S. investors will have access to a spot Bitcoin ETF by the second quarter of the new year and that a spot Ether ETF is likely to follow.”

Hashdex is one of the 13 asset managers with a spot Bitcoin ETF bid before the Securities and Exchange Commission. It has also pitched a hybrid Ether ETF that holds both futures and spot contracts to the same regulator.

⚡️ In our latest Hash Insider

Hashdex releases our 2024 #Crypto Investment Outlook
#SEC continues its work on #spot #bitcoin ETFs
UK asset managers given go-ahead to launch ‘tokenized’ funds

& more!https://t.co/O8uESoYJ03
— Hashdex (@hashdex) December 4, 2023

While Bloomberg ETF analysts James Seyffart and Eric Balchunas have pinned 90% odds that spot Bitcoin ETFs will be approved in the days leading up to Jan.

Seyffart noted in November that “there could be weeks or even months between approval and launch.”

What Scott said: There are TWO paths that need to be completed for an ETF launch. Possible and even likely that there could be weeks or even months between approval & launch https://t.co/LZSdutmlT8 pic.twitter.com/7OLj5HjSDy
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SEC continues to delay decisions on crypto ETFs: Law Decoded

October 2, 2023 Coin Telegraph

China

The latest delays came two weeks before the second deadline for many applicants.

Despite United States Representatives Mike Flood, Wiley Nickel, Tom Emmer and Ritchie Torres calling on the Securities and Exchange Commission (SEC) to immediately approve the listing of spot Bitcoin (BTC) exchange-traded funds (ETFs), the agency once again delayed its decision.

When it comes to spot Ether (ETH) ETFs from VanEck and ARK 21Shares, the SEC delayed making decisions until Dec. 25 and Jan. 10, respectively, while GlobalX will have to wait until Nov. 21 for the commission’s decision. It also delayed deciding on the spot Bitcoin ETF applications of Invesco, Bitwise and Valkyrie until mid-January.

The latest delays came two weeks earlier than the scheduled second deadline date for many applicants, who had been expecting to hear from the securities regulator by Oct. 16–19. The timing of the delays may have been related to the narrowly avoided U.S. government shutdown, which would have disrupted the country’s financial regulators and other federal agencies.

Bitwise Asset Management reacted to the delay of its spot Bitcoin ETF with an amended application, responding to the SEC’s objections to the product. In its amended application, Bitwise engaged with what the SEC called “the ‘mixed’ or ‘inconclusive’ academic record” on the lead-lag relationship between BTC futures and spot markets.

Another Chinese court recognized Bitcoin as property

The Shanghai No.2 Intermediate People’s Court in China has recognized Bitcoin as a unique and non-replicable digital asset while acknowledging its scarcity and inherent value. According to the court’s report, digital currencies such as Bitcoin stand out as unique and non-replicable internet technology products. The report states that among a sea of digital currencies, Bitcoin is different and unique from other digital assets. It has key currency features such as scalability, ease of circulation, storage and payment.

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Taiwan bans unregistered foreign crypto exchanges

Taiwan’s Financial Supervisory Commission (FSC) formulated the critical points for regulating Taiwan’s cryptocurrency market, releasing industry guidelines for virtual asset service providers (VASP) operating in the country. In the guidelines, the authority mentioned standard industry-wide rules like separating exchange treasury assets from customer assets and reviewing mechanisms for listing and delisting virtual assets.

The FSC also required foreign VASPs to refrain from providing their services in Taiwan without obtaining necessary approvals from the regulator: Overseas virtual asset platform operators are not allowed to provide business within the territory of the country [...] unless they have been registered in accordance with the law.”

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Hong Kong will list “suspicious” crypto platforms

The Securities and Futures Commission (SFC) of Hong Kong will publish a list of all licensed, deemed licensed, closing down, and application-pending virtual asset trading platforms (VATPs) to better help members of the public identify potentially unregulated VATPs doing business in Hong Kong. The SFC said it will also keep a dedicated list of “suspicious VATPs,” featured in an easily accessible and prominent part of the regulators’ website.

The new rules come immediately after the ongoing JPEX crypto exchange scandal, an affair that local media outlets describe as one of the worst cases of financial fraud ever to hit the region. JPEX stands accused of promoting its services to Hong Kong residents despite not having applied for a license in the country.

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FTX’s $3.4B crypto liquidation: What it means for crypto markets

September 29, 2023 Coin Telegraph

FTX’s .4B crypto liquidation: What it means for crypto markets

Coin Telegraph

Bankrupt crypto exchange FTX has been approved to liquidate nearly $3.4 billion worth of crypto assets, creating a sense of panic among crypto investors, but experts say the phased liquidation schedule will ensure market stability.

The FTX bankruptcy lawsuit reached a key juncture in the second week of September after the United States Bankruptcy Court for the District of Delaware approved the sale of $3.4 billion worth of crypto assets.

The court also approved $1.3 billion in brokerage and government-recovered assets as part of the liquidation process, with $2.6 billion in cash bringing the total tally to $7.1 billion in liquid assets.

Among the different cryptocurrencies set for liquidation, Solana (SOL) tops the pile with a value of $1.16 billion, and Bitcoin (BTC) is the second-largest asset held, valued at $560 million.

*Graph from a stakeholder update outlining the worth of assets based on Aug. 31 prices. Source: United States Bankruptcy Court*

Other assets to be liquidated include $192 million in Ether (ETH), $137 million in Aptos (APT), $120 million in Tether (USDT), $119 million in XRP (XRP), $49 million in Biconomy Exchange Token (BIT), $46 million in Stargate Finance (STG), $41 million in Wrapped Bitcoin (WBTC) and $37 million in Wrapped Ethereum (WETH).

Bitcoin, Ether and insider-affiliated tokens can only be sold after giving a 10 days advance notice to U.S. trustees appointed by the Department of Justice. The court also permitted hedging options for these assets.

The allowance for hedging is significant because FTX can use various financial instruments, such as futures, options and perpetual swaps to offset the losses.

The ruling drew industry-wide attention due to the significant amount of crypto assets approved for sale, with many questioning the potential impact on the crypto market.

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Joshua Garcia, partner at Web3-focused legal firm Ketsal, told Cointelegraph that determining whether the liquidation was the right decision is challenging. He said that bankruptcy courts have to focus on what is good for creditors, and creditors may care more about the recovery of funds rather than a potential slump in the price of the assets being liquidated.

“Whether or not this decision impacts the token price is perhaps not the court’s primary concern. The potential or imagined market impact may mean nothing to a judge or creditors committee if it doesn’t make creditors whole, at least in the eyes of the court. The concern here is millions of users suffered substantial losses due to FTX’s actions. Making victims as whole as possible is the top priority.”

The discovery of billions of dollars of liquid assets also relieved many creditors in the case.

Blake Harris, an asset protection attorney, believes unearthing liquid assets can be a game-changer in the FTX bankruptcy case. He told Cointelegraph that the newfound liquid assets “could offer more flexibility in asset management, allowing for a strategic approach that balances immediate legal requirements with broader market implications,” adding that “the discovery of such assets could provide some relief in terms of meeting immediate financial obligations, but it’s also essential to consider how these assets will be managed moving forward to prevent similar situations in the future.”

Market analysts predicted that Solana and Aptos prices have the highest chance of facing price volatility after liquidation based on each token’s daily trading volume.

How much of an impact will FTX’s liquidation have on the market?#SOL (81%) and #APT (74%) will have the most impact when you look at the daily trading volume of each token#BTC, #XRP, and #BNB liquidations will have very little impact on the market as each are 1% or less of… pic.twitter.com/XXIoZbKfBm
— Velvet.Capital (@Velvet_Capital) September 17, 2023

FTX liquidation won’t risk a crypto market cascade

The bankruptcy court has taken measures to ensure that the liquidation of FTX assets won’t become a burden for the crypto market.

The court order permits FTX to sell digital assets through an investment adviser in weekly batches in accordance with pre-established rules. Galaxy Digital has been entrusted with liquidating the assets and maximizing returns for FTX’s creditors while ensuring market stability.

The court also permitted FTX “to utilize staking options available through their qualified custodians using their respective private validators if the Debtors determine in the reasonable exercise of their business judgment that such activities are in the best interests of their estates.”

In the first week, there will be a $50 million cap on the sale of assets, followed by a $100 million cap in the succeeding weeks. The cap can be increased up to $200 million per week with the previous written consent of the creditors’ committee and ad hoc committee after court approval.

Anthony Panebianco, a commercial business litigator, told Cointelegraph that legally, a court may permit a debtor to liquidate its assets “outside the normal scope of business” in order to maximize the value from the sale to repay creditors, adding:

“The interesting part is that the court took an additional step to look at the general marketplace for the assets it is granting liquidation of. That is, the court is looking at protecting both creditors and non-creditors of FTX by the manner in which it has ordered the liquidation process.”

He also highlighted the different liquidation strategies for BTC and ETH. He said the “court-approved hedging arrangements for Bitcoin and Ether are subject to certain investment guidelines,” adding that “the court did not include Solana in these eligible assets for hedging arrangements, likely because of FTX’s large position in Solana. All three appear to be eligible for staking arrangements, again with oversight.”

Among all crypto assets held by FTX slated for liquidation, Solana became a major point of discussion owing to the $1.1 billion of the asset on the bankrupt crypto exchange’s balance sheet. According to market analysts, people considering a short position should be wary of the unlock period of the tokens held by FTX, with a complete unlock in 2028.

Looking at FTX’s SOL staking unlock schedule, a significant chunk of these tokens will slowly make their way to the market via linear vesting or scheduled unlocks until 2028, with the largest unlock scheduled for March 2025. Most of the SOL is locked in staking contracts.

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The linear vesting program offers a simple mechanism to gradually release a token balance over certain periods.

Currently, only 24% of the total $1.16 billion SOL tokens have been unlocked. Apart from Solana, Aptos tokens are also 100% locked and will be unlocked in phases over the next few years.

Solana unlocking schedule. Source: An Ape’s Prologue/X

In its own analysis, Coinbase crypto exchange said that the scheduled and phased liquidation will keep the market stable, noting the strict controls in place for selling certain “insider-affiliated” tokens and a major part of FTX’s SOL holdings locked up until around 2025 due to the token’s vesting schedule.

While many experts state that markets are more or less safe amid the FTX liquidation, the exchange’s saga is far from over, with former CEO Sam Bankman-Fried’s legal team sparring with prosecutors for special conditions ahead of the trial.

Moreover, the exchange’s alleged illegal behavior has dealt a significant blow to public trust in the crypto ecosystem.

Binance exit aftershock: Can one resignation tip the crypto trust scales?

September 25, 2023 Coin Telegraph

Binance

The announcement of yet another top figure departing Binance coincided with an increased outflow of funds from the crypto platform. But can one executive resignation really have such an impact?

On Sept. 13, news broke of yet another high-level executive parting ways with Binance.US.

This time, it was none other than Brian Shroder, the CEO and president of the exchange, who, after two years in the hot seat, was heading for a “deserved break,” as Binance CEO Changpeng “CZ” Zhao was quick to announce on X (formerly Twitter) that same day.

There has been some speculation regarding recent management changes at @BinanceUS. Brian Shroder is taking a deserved break after accomplishing what he set out to do when he joined two years ago. Under his leadership, https://t.co/hSHrrlF7o7 raised capital, improved its product…
— CZ Binance (@cz_binance) September 15, 2023

The news coincided with the announcement that around 100 people had also lost their jobs that day — about a third of the workforce.

A massive outflow of funds followed, with the highest being just over $66 million in a single transaction. Zhao was keen to underline that Shroder’s departure was amicable and that he had achieved everything he had set out to do.

“Ignore the FUD,” was the call from the parapets, the common plea for calm when any kind of disruption occurs.

In an industry strained and battered by tales of fraud and wrongdoing, however, this call went unheeded once again. The days since the news broke have seen significant outflows from Binance to platforms such as Jump, AU21 Capital, QCP Capital and Wintermute.

Once again, it raises issues that have long dogged the cryptosphere, chiefly those of influence and trust. There are few other sectors where layoffs or a change at the top of a company can have such an impact.

Such things are generally accepted as the natural ebb and flow of the business world, and while there may be a momentary blip, more often than not, things are back on track fairly soon afterward.

Transactions between cryptocurrency platforms in the days following the announcement. Source: Blockanalia/X

Even in this instance, from the chart, it is apparent that there were still sizeable inflows to Binance during the period. The two incidents may be completely unrelated. With so many factors involved, no one can say for sure.

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Jim Graham, a cryptocurrency analyst at think tank PsyBold, told Cointelegraph: “While we can’t attribute the shift in funds wholly to last week’s announcement, we most certainly can’t reject it, either. There have been several key managerial changes in the past few months, and virtually all of them have been accompanied by a dip in holdings on the platform. Trust remains a massive obstacle for crypto platforms, and it’s an obstacle they are failing to overcome.”

Money is a valuable commodity, and even the hint that it may be in jeopardy is reason enough to react quickly and decisively.

As the saying goes, trust is earned, not given away, and the recent negative events involving crypto platforms have done little to raise that level of trust. Graham added:

“Crypto platforms need to be on par with banks regarding trust. Investors need to know that entrusting their money to them is a good, safe idea, not a risky one. Unfortunately, they are nowhere near that, and until we reach that level, these spikes are inevitable.”

So, how do the platforms get to that level of trust? Most people would simply say, stop doing bad things. Once crypto platforms act more like banks, people may trust them more.

But this is much easier said than done. For one, most banks have been around for years, some even hundreds of years. Trust has an element of longevity to it, which people like. The general feeling is if something or someone has acted responsibly and transparently for a long time, there is more of a chance that they will continue to do so.

Crypto platforms don’t have that luxury, of course. Most can only look back on a few years of existence; the only pledge they can give is their word.

On top of that, there is the age-old discussion of regulation. Licensed banks are regulated. That means an authority monitors what they do and is there to step in if things go wrong.

The last thing such an authority or the bank wants is a bank run, as this represents a complete breakdown in trust for all concerned, with the consequences that go with that. Once that has happened, it is tough to win that trust back, as witnessed during the economic crisis of 2008.

In the unregulated world of crypto exchanges, there is currently a stalemate. Some investors are in the middle, clamoring for regulation, fearing for their investments. In contrast, others are vehemently opposed, stating regulation is the very thing cryptocurrency was created to avoid.

And on either side are the exchanges and the authorities, each accusing the other of this and that in what seems like an endless spiral, with neither ready to back down.Sandra McAllister, an attorney specializing in tech litigation with Clifford Chance, told Cointelegraph:

“The need to clarify the legalities around trading cryptocurrencies, particularly in the U.S., is vitally important for the future of the industry, but the protracted processes and tactics being employed are damaging, for both sides, and that, in turn, is turning investors away.”

“The power of social media is also a pressure on the market. The bounce in the Ripple price we saw in July following the court ruling on XRP underlines that perfectly. The decision was anything but conclusive and, in reality, nothing more than a step along the path, but it was blown up on social media as a huge victory that drove up prices. We only have to see where the Ripple price is today to see how much of a victory it actually was,” she said.

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Moving assets around between different exchanges or different assets is nothing new or unusual, of course. In times of economic downturn, funds tend to flow toward the “safer” havens, such as bonds and gold, before reverting to more profitable areas when things pick up.

Graham commented, “While diversifying holdings and being ready to react to ensure you are not unduly affected by negative pressures is sound financial advice, the problem facing crypto holders right now is which platform is safer than another. The FTX demise showed us that ‘too big to fail’ does not apply, so what remains?”

Wyoming stablecoin: Are state digital currencies even possible?

September 14, 2023 Coin Telegraph

CBDC

The Stable Token Commission continues researching the potential implementation of stable tokens in Wyoming.

In July, the American state of Wyoming shared an open job position for the head of its Stable Token Commission.

The executive will work alongside Wyoming’s governor, state auditor, state treasurer and four expert appointees to bring the state’s very own stablecoin to life.

While Wyoming was the first to pass a law on a state stablecoin, it isn’t the only state considering launching its own digital currency.

In April, a similar initiative was proposed in Texas, where lawmakers introduced bills for creating a state-based digital currency backed by gold.

However, the idea of state stablecoins raises many questions: How would they affect the monetary stability of fiat money and the power of the Federal Reserve? Could they be compatible with a central bank digital currency? Do people really want to return to a system with state banks printing their own monetary notes?

The Wyoming experiment

The Wyoming Stable Token Act was originally introduced in February 2022, in the midst of the crypto market crisis. The bill defines the Wyoming stable token as a virtual currency representative of and redeemable for one U.S. dollar held in trust by the state of Wyoming. Basically, the state would tokenize the federal currency on a 1:1 ratio with deposits.

NEWS--bipartisan group of top #Wyoming legislators proposed a bill for State of Wyoming to issue a #stablecoin, 100% backed by USTreasuries, where the State keeps the float. I see pros & cons (didn't know it was coming) but❤️that Wyoming continues to explore cool #crypto ideas! https://t.co/BXbELukUQE
— Caitlin Long ⚡️ (@CaitlinLong_) February 17, 2022

Explaining why state lawmakers took such an interest in the digital token project, Chris Rothfuss, the minority leader in the Wyoming State Senate, told Cointelegraph:

“Wyoming needs to be able to transact in a digital currency — to accept payments, to make payments, and to do so without risk. The Wyoming stable token is the solution to that challenge.”

A notable reservation in Section 2 of the Stable Token Act makes the state’s attorney general responsible for monitoring the startup phase of the token’s issuance. Should the attorney general believe it contradicts federal or state law, the project would be frozen.

The bill also sets a deadline for the project: The commission’s director shall provide their report on the doability of the stable token no later than Nov. 1, 2023.

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Other than that, the document doesn’t specify much; instead, it establishes the Stable Token Commission with the authority to craft further details.

The legislation’s path wasn’t easy. In March 2022, Governor Mark Gordon vetoed the bill, saying he was “unconvinced” that the state’s Treasury was ready to implement the project safely.

Gordon criticized the lack of information and the cost of accounting services, blockchain development and other necessary expenses, and he was skeptical of the project’s purported benefits.

A year later, the governor applauded the effort made by legislators to enhance the document, but voiced new reservations:

“First and foremost, there was no overall plan (a ‘business plan’ for lack of a better term) or, if a plan exists, it did not appear to have been used to guide the legislators in crafting the legislation.”

On March 22, 2023, the Stable Token Act was passed into law without Governor Gordon’s signature. Gordon recognized the state stable token’s potential to “nurture Wyoming’s reputation as a leader in the digital asset world” and deemed the improvements made by the bill’s authors enough to allow it to become law.

The era of multiple stablecoins?

Neither the U.S. Federal Reserve nor any crypto-focused legislators have reacted publicly to the Wyoming project, but it is hard to imagine any kind of affirmative response, given that the American dollar was established precisely to provide a countrywide monetary standard and bring the currency under the purview of the federal government.

So, in principle, any state token project could contradict the logic of central bank currency to a similar degree as private cryptocurrencies.

At the same time, the potential value of Wyoming’s stable token is rigorously tied to the same old American dollar, which makes it less of a separate currency and more of a state-issued financial asset, similar to the state-issued notes for specie of the 19th century.

A $40 note issued by the State Bank of Georgia in 1855. Source: Southern Style Currency

Rothfuss clarified, “We are not issuing a new currency. The Wyoming stable token is a digital representation of a U.S. dollar held in trust by the state of Wyoming on behalf of the tokenholder. We are not competing with the Federal Reserve — we are enabling a technology.”

Some observers still see a potential conflict between the states and the Fed. “Certainly, there will be a tussle between states and the federal government over the former attempting to issue their own stablecoins,” Brent Xu, CEO of Web3 bond-market platform Umee, told Cointelegraph.

But there could be a compromise in which the Federal Reserve allows states to issue stablecoins under a particular framework, he believes, noting the discussions concerning a national framework for stablecoins.

Zachary Townsend, CEO of Bitcoin-based life insurance provider Meanwhile, doesn’t see any potential problems with state stablecoins, as he believes that the very concept of a stablecoin is open to almost any entity, political or corporate, as the recent example with PayPal’s initiative has shown.

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He told Cointelegraph, “There are going to be tons of private stablecoins. If I just looked at my life and all the companies I have ‘accounts’ or ‘wallets’ or ‘balances’ with, those are going to transform to become stablecoins within a few years.”

This is something Peter Herzog, state policy lead at the Crypto Council for Innovation, can agree with. “There are a variety of models for stablecoins that involve different decisions around underlying collateral, governance and more,” he explained to Cointelegraph. For Herzog, it comes as no surprise that individual states with an active interest in crypto are continuing their experiments with new initiatives:

“Until we see a federal regulatory framework, it is likely that states continue to step in to create rules of the road to promote innovation and protect consumers.”

Adobe, IBM, Nvidia join US President Biden’s efforts to prevent AI misuse

September 13, 2023 Coin Telegraph

Coin Telegraph

Adobe, IBM, Nvidia and five other companies have joined the initiative, unveiled in July, aimed at preventing the misuse of AI's capabilities for harmful purposes.

Adobe, IBM, Nvidia and five other companies have endorsed U.S. President Joe Biden's voluntary artificial intelligence (AI) commitments, including watermarking AI-generated content.

This announcement was made by the White House on Tuesday, Sept 12. The White House Chief of Staff, Jeff Zients, emphasized the urgency of leveraging AI's advantages, mitigating its risks and rapid action, stating, "We're collaborating with the private sector and utilizing every available resource to achieve this goal." Additionally, Palantir, Stability, Salesforce, Scale AI, and Cohere have also joined the commitments.

*Screenshot of the statement release Source: The White House.*

The initial commitments, unveiled in July, aimed to prevent the misuse of AI's capabilities for harmful purposes. Google, OpenAI, and Microsoft, a partner of OpenAI, endorsed these commitments during the same month.

The private commitments endorsed by the Biden administration are viewed as a temporary measure, as discussions within Congress regarding potential AI legislation have been ongoing but with little concrete progress in terms of introduced bills or substantial legal changes. Concurrently, the White House is actively developing an executive order related to AI.

In June 2023, a bipartisan group of U.S. lawmakers introduced a bill aiming to establish an AI commission to tackle issues in the swiftly expanding sector. The Biden Administration has stated its commitment to working alongside international allies such as Australia, Canada, France, Germany, India, Israel, Italy, Japan, Nigeria, the Philippines, and the United Kingdom in the formation of a global framework for AI.

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Crypto adoption crosses party lines amid Washington’s political deadlock

August 14, 2023 Coin Telegraph

Coin Telegraph

Support for crypto among United States politicians and voters appears to be crossing party lines with bipartisanship agreements.

Crypto’s legitimacy and adoption have increased in recent years, and along with the uptick in use, the tech has become a topic of political divisiveness, resulting in a perception of partisanship — especially in the United States.

Speaking to Cointelegraph, Jonathan Jachym, the Global Head of Policy at U.S.-based crypto exchange Kraken, said he doesn’t think crypto is partisan and that the situation is far more nuanced.

He says crypto tech is fundamentally about financial empowerment, the ownership of assets and the decentralization of power structures.

“These are non-partisan issues which legislators across the globe face daily as their constituents navigate the challenges of the existing financial system,” Jachym said.

“Technology can be used to build a fairer, trustless, apolitical financial system, which is more efficient, transparent and secure for everyone. Now is the time to embrace crypto,” he added.

Nearly even split of crypto support among politicians and voters

According to Coinbase’s Legislative Portal, which tracks U.S. politicians who have made positive statements about crypto, there is a healthy number of crypto supporters in Congress on both sides of the political aisle, with 26 Republicans and 22 Democrats in the House of Representatives voicing support.

In the Senate, it’s slightly skewed toward the right, with 24 Republicans and only 11 Democrats making positive statements about crypto. Support for crypto among voters also appears to be a close split between the left, right and independents.

According to a Feb. 27 national survey conducted by business intelligence company Morning Consult, 22% of Democrats, 18% of Republicans and 22% of Independents said they own crypto.

Jachym believes bad actors have sown division in the space, but overall he says crypto itself remains an inclusive, transformative technology with the potential to improve lives.

“This is why, regardless of the political consensus of their populous, many developed economies are advancing bespoke regulatory regimes for crypto assets,” he said, adding, “For example, at the state level within the United States, both ‘red’ and ‘blue’ states have made meaningful progress toward workable frameworks for crypto.”

Bipartisan support for crypto already happening

There have already been some examples of bipartisanship among politicians with forming the Congressional Blockchain Caucus on Sept. 26, 2016, through cooperation by Democrats and Republicans.

The blockchain caucus was created to study blockchain tech and the role Congress can play in its development, and according to its website, the current four co-chairs are two Republicans and two Democrats.

Both parties also appear to be happy accepting monetary donations from the crypto industry.

In the wake of FTX’s collapse in 2022, it came to light that the exchange’s CEO Sam Bankman-Fried had made political donations to Democrats, but he also implied in a later interview that Republicans had received roughly the same amount in “dark” donations.

1) I was a significant donor in both D and R primaries.

Supporting constructive candidates across the aisle to prevent pandemics and bring a bipartisan climate to DC.

And working with them to support permissionless finance.
— SBF (@SBF_FTX) November 5, 2022

Bradley Allgood, the co-founder and CEO of U.S.-based blockchain development and fintech company Fluent Finance, told Cointelegraph that he doesn’t consider crypto a partisan issue but does believe the tech has been drawn into political discussions and power plays.

“A fundamental aspect of crypto — its inherent political neutrality and its role in fostering innovation — has found resonance in certain political factions, notably among those who favor deregulation and open markets,” he said.

“Contrarily, some elements of the current administration and regulators have adopted an adversarial stance toward crypto, purportedly to protect traditional institutions and maintain control over monetary mechanisms,” Allgood added,

However, Allgood says he firmly believes that the tech and the ideals it represents, such as decentralization, transparency and individual freedom, are far removed from the political squabbles of our time. He said:

“I must emphasize: each individual cryptocurrency is in and of itself the product of human intention and does carry inherent political bias.”

“The policies and parameters which govern individual cryptocurrencies — for example, how consensus is achieved on-chain, how validators are rewarded for their services, and inflation schedules — attract certain types of users and repel others,” he added.

Critics of crypto are united as well

Critics of the crypto industry also come from both sides of politics. Democrats such as California Representative Brad Sherman and Massachusetts Senator Elizabeth Warren are two of the loudest voices criticizing the industry.

When you’ve made enemies with the bankers and Elizabeth Warren, you know you’re doing the right thing. https://t.co/w2WflrkJOu
— Tyler Winklevoss (@tyler) July 28, 2023

They are not alone, though, with Republicans such as Kansas Senator Roger Marshall co-sponsoring Warren’s bill demanding more transparency in digital asset transactions and South Carolina Senator Lindsey Graham throwing his support behind reintroducing the bill.

Speaking to Cointelegraph, Aharon Miller, co-founder and chief operating officer of peer-to-peer trading platform Oobit, said crypto challenges the traditional financial system, so it’s natural for people with different political beliefs to have differing opinions on it.

He says crypto isn’t just for one political camp; it’s a technology that goes beyond political boundaries and has the potential to impact everyone, bringing perks such as financial inclusion, lower transaction costs and more transparency to the table.

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Miller characterizes crypto as a “game-changer that can revolutionize finance,” which is why he says regulators, policymakers, and the industry must work together to find the right balance between protecting consumers and fostering innovation.

“We need an environment that encourages responsible innovation so we can unlock crypto’s full potential,” he said.

“The more we understand the real-world advancements facilitated by cryptocurrency, the better equipped we are to address practical and accessibility concerns, thus promoting broader adoption.”

Biden administration launches AI cybersecurity challenge to ‘protect Americans’

August 10, 2023 Coin Telegraph

Coin Telegraph

With an allocation of nearly $20 million in rewards, the AI Cyber Challenge brings together prominent AI enterprises such as Anthropic, Google, Microsoft, and OpenAI.

The Biden administration revealed an opportunity on August 9, for hackers to vie for substantial monetary rewards through the application of artificial intelligence (AI) in safeguarding vital United States infrastructure from cybersecurity vulnerabilities.

In spring, a preliminary phase will select up to 20 high-performing teams for DEF CON 2024's semifinals. Of these, a maximum of five teams will earn $2 million each and move on to DEF CON 2025's finals. The top three teams will vie for extra prizes, including a $4 million award for the best safeguarding of vital software, as stated in an official press release.

With an allocation of nearly $20 million in rewards, the AI Cyber Challenge brings together prominent AI enterprises such as Anthropic, Google, Microsoft, and OpenAI. These industry leaders will contribute their technology to the competition, which was unveiled during the Black Hat U.S.A. hacking conference held in Las Vegas.

*Screenshot of the AI Cyber Challenge press release. Source: The White House*

Participants will be requested to publicly share the inner workings of their systems, enabling broader utilization of their solutions. Additionally, guidance for the challenge is provided by the Open Source Security Foundation, a division of the Linux Foundation.

The organizing body of the competition, the Defense Advanced Research Projects Agency (DARPA), has committed to offering financial support of up to $1 million to seven small enterprises aiming to join the competition, thus ensuring a diverse range of participants.

The use of hacking competitions to foster innovation is not a new approach for the government. Back in 2014, DARPA initiated the Cyber Grand Challenge, aimed at creating an open-source automated defense system capable of safeguarding computers against cyber threats. The present two-year challenge follows a comparable framework to this prior initiative.

The contest shows that there are official efforts to deal with a new threat that experts are working to fully understand. In the past year, several U.S. companies have created different AI tools, like ChatGPT, that let users make realistic videos, images, texts and code.

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What criminal charges for Celsius ex-CEO mean for crypto industry

July 24, 2023 Coin Telegraph

Coin Telegraph

The former CEO of the troubled crypto lender faces multiple charges of fraud and market manipulation as U.S. regulators eye crypto market overhaul.

Celsius was one of the top lenders in the crypto ecosystem during the bull market in 2021. At its peak, it served 1.7 million customers and managed $25 billion in assets.

All that came crashing down in June 2022 amid major flaws in the company’s working structure.

The bear market in 2022, especially the Terra ecosystem implosion in May, exposed Celsius’ fragile business model, which was highly dependent on its native CEL (CEL) token and the high staking rewards it offered.

The price of CEL fell dramatically in June after the crypto lenders’ relationship with Terra became public, followed by Celsius sending huge amounts of funds off the platform and pausing user withdrawals.

Just a month later, on July 14, the troubled firm filed for Chapter 11 bankruptcy. At the time of the filing, it had roughly $2.7 billion in debt.

On June 16, 2022, securities regulators from five U.S. states opened an investigation into Celsius. The company’s former CEO, Alex Mashinsky, ultimately stepped down from his position on Sept. 27 amid rumors he was attempting to flee the United States.

By the end of 2022, the U.S. Justice Department, Commodity Futures Trading Commission (CFTC), Federal Trade Commission (FTC), and Securities and Exchange Commission had all begun investigating Celsius’ collapse and Mashinsky’s role in it.

Mashinsky faces criminal charges

The first significant blow for the troubled crypto lender came on July 5, 2023, when the CFTC concluded its investigation and alleged Celsius and Mashinsky had violated several U.S. regulations and misled investors.

On July 13, the SEC filed a complaint against Celsius and Mashinsky, accusing them of violating securities laws by raising billions of dollars through unregistered and fraudulent offers. The FTC also fined Celsius $4.7 billion and ceased its trading operations.

On the same day, the Justice Department charged the former CEO with “securities fraud, commodities fraud, and wire fraud for defrauding customers and misleading them about core aspects of the company he founded.”

Celsius’ former chief revenue officer, Roni Cohen-Pavon, and Mashinsky are “further charged with conspiracy, securities fraud, market manipulation, and wire fraud for illicitly manipulating the price of CEL, Celsius’s proprietary crypto token, all while secretly selling their own CEL tokens at artificially inflated prices.”

Damian Williams, the United States attorney for the Southern District of New York, said that his office is not seeking charges against Celsius, specifically, adding that it reached a non-prosecution agreement with the firm, as it “agreed to accept responsibility for its role in the fraudulent schemes” and is helping customers recover funds.

Mashinsky was arrested and released on a $40 million bond later the same day.

Ex-Celsius CEO Alex Mashinsky was arrested following a probe into the company’s collapse. The SEC sued both Mashinsky and the bankrupt crypto lender in New York court https://t.co/KgIYS487Zo
— Bloomberg Crypto (@crypto) July 14, 2023

With these charges and enforcement actions, Celsius and its former executives have joined the growing list of crypto firms to fall under the microscope of U.S. regulators in 2023.

A lawsuit against Binance accuses the exchange of offering unregistered securities and being mismanaged internally. Another against Coinbase alleges the exchange offered broker services for unregistered securities without a license.

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This slew of so-called “regulation through enforcement” has led many market pundits to argue that regulators need to be more clear in their approach to the crypto industry.

Mriganka Pattnaik, CEO of crypto compliance service provider Merkle Science, told Cointelegraph:

“The U.S. regulatory response remains uncertain, but the prosecution may have far-reaching implications for the cryptocurrency industry. The allegations of wire fraud, securities fraud and price manipulation raise concerns about similar activities in other crypto firms, potentially influencing regulators to heighten their oversight and enforcement efforts.

“Moving forward, the Celsius case will likely lead to more severe legal and financial consequences for noncompliant cryptocurrency firms,” she said.

Prosecution of bad actors is a boon for the crypto industry

Many crypto proponents believe the prosecution of Celsius’ former CEO could be good for the crypto industry. Punishing bad actors sends a clear message that fraud will not be tolerated, even if committed under the guise of a relatively unregulated industry.

Yamina Sara Chekroun, head of U.S. legal at Web3 payment infrastructure firm Ramp, told Cointelegraph, “Consumer-oriented actions by regulators should be applauded in light of the devastating losses users have suffered over the past two months as a result of mismanagement and the general lack of standardized requirements for risk disclosures. That being said, we should continue to honour due process, whether on Wall Street or in crypto.”

Kadan Stadelmann, chief technology officer of open-source blockchain tech provider Komodo, believes regulators will likely want to set an example with Celsius and other firms that allegedly broke the law, especially for those operating in the United States. However:

“The recent slew of crypto-related prosecutions will ultimately help the industry evolve to a point where users don’t have to worry about the safety of their crypto assets from potential human misuse or theft.”

Adam Ettinger, partner at the law firm FisherBroyles, told Cointelegraph that crypto lenders and fintech firms that defraud investors, lie about their financial products or manipulate markets should expect enforcement actions.

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“If the misconduct is egregious enough, executives may face criminal charges and arrest. My hope is that fewer crypto companies will ‘face the heat’ because the bad actors have already either departed or perished, and those that might have considered fraud will take notice of the enforcement activity and fly right,” he added.

Most of the litigation against accused bad actors has come after ecosystem implosions and losses, which have proven disastrous for many consumers and cast a shadow of doubt on the entire ecosystem. Thus, regulators’ actions against such bad actors often become the last hope for investors and consumers to get some of their funds back.

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AI companies commit to safe and transparent AI, White House reports

July 22, 2023 Coin Telegraph

The Biden Administration emphasized the responsibility of these companies in ensuring the safety of their products.

The White House announced on July 21, that prominent artificial intelligence (AI) companies, such as OpenAI, Google and Microsoft, have made commitments to create AI technology that is safe, secure and transparent. Additionally, the White House acknowledged other companies like Amazon, Anthropic, Meta and Inflection for also committing to AI safety.

The Biden Administration emphasized the responsibility of these companies in ensuring the safety of their products. The goal is to harness AI's potential while promoting the highest standards in its development.

Kent Walker, Google's President of Global Affairs, acknowledged that achieving success in AI requires collaboration. He expressed satisfaction in joining other leading AI companies to support these commitments and assured that they will continue to work together by sharing information and best practices.

*Screenshot of the White house statement release. Source: White House*

Among the commitments are pre-release security testing for AI systems, sharing best practices in AI safety, investing in cybersecurity and insider threat safeguards and enabling third-party reporting of vulnerabilities in AI systems. Anna Makanju, OpenAI's VP of Global Affairs, stated that policymakers worldwide are contemplating new regulations for advanced AI systems.

In June, bipartisan U.S. lawmakers introduced a bill to create an AI commission, addressing concerns in the rapidly growing industry. The Biden Administration says it is collaborating with global partners like Australia, Canada, France, Germany, India, Israel, Italy, Japan, Nigeria, the Philippines and the UK to establish an international framework for AI.

According to Microsoft President Brad Smith, the company is endorsing all of President Biden's voluntary commitments and independently committing to additional practices that align with these crucial objectives. By doing so, Microsoft aims to expand its safe and responsible AI practices and collaborate with other industry leaders.

Global leaders, including the United Nations Secretary-General, have expressed concerns about the potential misuse of generative AI and deepfake technology in conflict zones. In May, the Biden administration met with AI leaders to establish the groundwork for ethical AI development and announced a significant $140 million investment in AI research and development by the National Science Foundation.

The administration emphasized that these immediate commitments by the companies highlight the essential principles of safety, security and trust, signifying a crucial step towards the responsible development of AI.

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