SEC Chair claps back at Coinbase 🔥, Crypto community reacts to Ledger 🤯, Distributed ledger tech 🌟

Daily Crypto, Blockchain & Web3 Update 2023-05-17

CRYPTOCURRENCY

SEC Chair Gensler claps back at Coinbase, says crypto rules already exist (3 min read)

The chair of the United States Securities and Exchange Commission, Gary Gensler, has hit back at Coinbase’s petition compelling the agency to provide a clear stance on crypto regulation, arguing that there are already adequate laws in place.

In a May 15 keynote speech at the Financial Markets Conference, Gensler was asked about the dispute with Coinbase, the rules on crypto and why “the SEC doesn’t publish rules for that market.”

Bancor DAO hit with class-action suit over impermanent loss protection promises (3 min read)

A group of investors has filed a class-action suit against the Bancor decentralized autonomous organization (DAO); its operator, BProtocol Foundation; and its founders in the United States District Court for the Western District of Texas. The plaintiffs claim, among other things, that Bancor deceived investors about its impermanent loss protection (ILP) mechanism for liquidity providers and was an unregistered security. 

According to the suit, Bancor’s v2.1 investment product, introduced in October 2020 and the second to feature ILP, operated at a deficit that the defendants were aware of and tried to cover by launching a new product, v3, which promised “some of the most competitive returns anywhere […] without asking users to take on any risk.”

Bitcoin Lightning company River raises $35M amid ‘new wave of institutional adoption’ (2 min read)

“We’re seeing another wave of Bitcoin interest, largely driven by business and institutional adoption,” says Alex Leishman, River CEO. “It’s not fueled by hype.”

The tide might have gone out on Bitcoin ordinals, but there’s a strong undercurrent of investments in Bitcoin-only companies. River, a United States-based Bitcoin technology and financial services company, is the latest to make a splash. 

River announced a $35 million Series B equity funding round despite the bear market. Kingsway Capital led the round, with notable contributions from PayPal co-founder Peter Thiel, Cygni, Goldcrest and Valor Equity Partners.

Updated European tax directive requires reporting on all crypto asset transfers (3 min read)

DAC8 extends tax reporting procedures to crypto transfers in line with the OECD crypto reporting framework and EU AML rules.

The European Council has approved updated rules that extend tax reporting requirements to include transfers of crypto assets. This is the eighth version of the Directive on Administrative Cooperation (DAC), which is a set of procedures for automatic information sharing between European governments for tax purposes. 

DAC8 was proposed in December and approved on May 16 after the passage of Markets in Crypto-Assets (MiCA) since it depends on definitions established in that legislation.

BLOCKCHAIN

Crypto community reacts to Ledger wallet’s secret recovery phrase service (5 min read)

Several crypto community members, including Ledger wallet owners, have taken to social media to express their discontent following the release of Ledger’s latest feature. The newly introduced retrieval solution for its hardware crypto wallets, known as Ledger Recover, aims to offer a safeguard in case users misplace their seed phrase.

Ledger Recover is a subscription service that allows users to utilize an additional layer of protection for their private keys. This service employs a technique where the user’s seed phrase is divided into three encrypted fragments, each sent to different external entities. Once these fragments are combined and decrypted, they can be used to reconstruct the original seed phrase. 

‘Trusted’ marketplace sold fake Trezor wallets stealing crypto: Kaspersky (3 min read)

Amid the rising popularity of hardware cryptocurrency wallets, the Russian cybersecurity firm Kaspersky has reminded users about the importance of using authentic crypto devices.

The victim reportedly purchased a tampered hardware wallet that posed as Trezor’s advanced crypto wallet Trezor Model T. The fake wallet appeared to be exactly the same as a genuine Trezor Model T wallet, providing a standard set of wallet functions.

Libra-related Sui blockchain fixes critical bug that put ‘billions’ at risk (4 min read)

The Sui blockchain network quietly fixed a bug that could have put “billions of dollars” at risk, according to a May 16 announcement from Zellic, the security firm hired to audit the network’s security.

The bug was in a dependency of the bytecode verifier, which ensures that the human-readable Move language used to write smart contracts on Sui is correctly transcribed into machine code during deployment. Had the bug not been fixed, it could have “allowed attackers to bypass multiple security properties, leading to potentially significant financial damages,” the announcement said.

Optimism’s major ‘Bedrock’ upgrade set for June 6 (4 min read)

Layer 2 scaling solution Optimism is set to undergo its highly anticipated Bedrock upgrade on June 6. The move is expected to result in significantly reduced transaction fees, provide greater network security and enhanced compatibility with Ethereum.

The Optimism team stated via a May 15 Twitter thread that the network would be down for two to four hours on June 6 as the upgrade goes through.

BUSINESS

Distributed ledger tech could save TradFi $100B a year: Lobby group (2 min read)

Around $100 billion a year or more could be saved if distributed ledger technology (DLT) was used in traditional markets, claims a new report from the Global Financial Markets Association (GFMA).

In a May 16 report, the traditional finance sector lobby group, along with international consulting firm Boston Consulting Group (BCG) and others, asked both regulators and traditional financial institutions to take a more serious look at the upsides of the technology.

A distributed ledger is an umbrella term for a system that records transactions and digital information. A blockchain is a specific type of distributed ledger.

Breaking: Court victory for Ripple as judge denies SEC motion to seal Hinman docs (1 min read)

A motion from the United States securities regulator to seal records of its internal deliberations following a speech by former director William Hinman has been denied — a move that has been seen as a win for the Ripple and crypto community. 

In the June 2018 speech, the former Securities and Exchange Commission corporation finance division director stated that Ether, the native token of the Ethereum blockchain, is not a security. 

Crypto bank runs in 2022 catalyzed by institutional withdrawals: Research (3 min read)

The 2022 crypto bank runs — caused by the failure of multiple ecosystem giants — have had a lasting impact on the crypto industry. A new research report from the Federal Reserve Bank of Chicago (FRBC) has identified several key factors and catalysts that accelerated last year’s crypto crisis.

The report identified that withdrawals by crypto whales and large account holders on centralized exchanges, including some key institutional accounts, created a liquidity crisis that eventually led to the bank run.

Signature Bank failed to understand risks associated with crypto: FDIC chair (2 min read)

Investigations into the collapse of Signature Bank point toward illiquidity circumstances and poor management. However, the Federal Deposit Insurance Corporation (FDIC) chairman, Martin Gruenberg, believes the bank’s failure to understand the risks associated with cryptocurrencies expedited its fall.

Speaking at a recent United States House of Representatives Financial Services Committee hearing on Oversight of Prudential Regulators, Gruenberg highlighted the recent failures of Silicon Valley Bank (SVB) and Silvergate Bank, which eventually manifested in large declines in stock prices and subsequent deposit outflows at other banks.