Binance is working with regulators and preparing to pay fines to “make amends” for past regulatory violations, Chief Strategy Officer Patrick Hillmann told the WSJ on Wednesday, without denoting the size of the fines or particular investigations. Hillmann further explained that what is now the world’s largest exchange by trading volume quickly – not always aware of myriad regional money laundering, sanctions and corruption laws and regulations. The U.S. Department of Justice reportedly subpoenaed at least two trading firms for information about past dealings with Binance US. Meanwhile, the U.S. Securities and Exchange Commission (SEC) is officially working on new rules that would require registered investment advisers to put all of their clients’ assets, including crypto assets, into a narrow list of approved “qualified custodians.” Although this regulatory proposal may bar many crypto trading platforms from holding keys, there’s some indication established firms like Coinbase’s and BitGo’s state-chartered trust structures could qualify.
Up and Down
Tether’s USDT, the largest stablecoin, has gained some $1 billion in market capitalization as crypto investors exit Binance USD (BUSD), which came under regulatory scrutiny earlier this week. USDT’s market cap has grown to $69.5 billion from $68.5 billion since Monday, according to CoinGecko, the highest since June’s crypto market turmoil. Paxos has burned more than $1.8 billion worth of BUSD since Monday morning, according to Nansen. Elsewhere, Binance Research has found the majority of ETH staked on Ethereum is out of profit ahead of the network’s Shanghai upgrade, scheduled for mid-March, which will finally let users withdraw funds. More than 16.5 million ETH (~$27.7 billion) has been locked since December 2020, when the proof-of-stake backbone called the Beacon Chain went live.
China, Climate and Change
Tencent Cloud, a unit of the Chinese tech conglomerate, has tapped MultiversX (previously known as Elrond) to build out Web3 services – a notable event in a country that has taken a less-than-consistent approach to limiting crypto. The “strategic partnership” could involve “payments, Web3 hubs, infrastructure, staking services and metaverse” projects, MultiversX CEO Beniamin Mincu said. Meanwhile, the reportedly regulatory-compliant public blockchain Conflux Network said Wednesday it will build SIM cards for China Telecom, the second-largest wireless carrier in the country. The so-called BSIM pilot will start in Hong Kong, and offer encrypted storage and key retrieval. That comes as Hong Kong’s government issued its first tokenized product under its Green Bond Program. The ~$100 million bond, issued on a private blockchain in collaboration with Bank of China (Hong Kong), Crédit Agricole CIB, Goldman Sachs and HSBC, will fund eco-friendly development. Finally, in other climate news, the Sustainable Bitcoin Protocol completed its first transaction – leading to the creation of a tradable carbon credit-like token on the Bitcoin network.
Sound Bites: A Joke
“The original bond is a joke. [Sam Bankman-Fried’s] parents agreed to pay $250 million if Sam takes off. That’s a joke. They don’t have assets nearly in that amount as far as we know.”
– Securities lawyer James Murphy, on CoinDesk TV’s “First Mover”
The Takeaway: Tech to Crypto Pipeline
In his immediate response to media queries, former dean of Stanford’s law school Larry Kramer gave a very personal explanation for why he’d pledge $500,000 to get Sam Bankman-Fried out on bail. Kramer, along with Stanford computer scientist Andreas Paepcke, were both identified yesterday as bail guarantors after Bankman-Fried’s lawyers missed a window to appeal the decision.
For his part, Kramer and SBF’s parents Joe Bankman and Barbara Fried have been “close friends since the mid-1990s.” They were very supportive during a cancer scare in Kramer’s family. “In turn, we have sought to support them as they face their own crisis,” Kramer said, adding he was acting solely in a personal capacity and does not have financial exposure to the mess that is FTX.
No one could fault a lawyer for giving a canned response, especially considering the many legal uncertainties surrounding Bankman-Fried’s criminal trial and FTX’s bankruptcy process. Kramer must have had his statement prepared, at least since District Judge Lewis signaled the public’s right to know who co-signed SBF’s bond outweighed potential risks to their safety.
All four of Sam’s backers have ties to Stanford University, an Ivy League school that acts as a pipeline to the tech industry. Whatever damage happens to their individual reputations pales in comparison to the latest impact FTX will have on the tech and crypto industries – including the longstanding ties between prestigious research industries and the startups founded by alumni.
Pulling back, the tech industry is already going through a period of forced reinvention, amid a shrinking economy, dwindling financial prospects and the “techlash” against companies once positively called disruptive. Public perception of tech firms, once seen as building a better, “flatter” future, has shifted – as their unaccountable power and ties to The Establishment grow.
Tech skeptics have been proven right in recent months as Facebook, Google and other tech giants have laid off well-paid employees, even as total U.S. unemployment shrinks, about the unsustainability of the contemporary tech industry. The unofficial feeder system between top-rated computer science schools and the largest tech companies is clogged.
Crypto, which has a presence in both Silicon Valley and Wall Street, has certainly benefited from this system. But it might benefit more from the tarnishing of Big Tech’s prestige. Companies like Google and Facebook used to sop up talent by offering generous benefits, uber-competitive salaries and, perhaps most importantly but hardest to quantify, prestige.
Other crypto firms, too, have cut back. CoinDesk found the industry shed nearly 30,000 jobs since April. But at its best, crypto also provides a way for young innovators to build the things they think will benefit everyone. Energy and time once spent coding the-next-hated-Gmail update, could be put towards the next open source innovation.
Sure, this is an optimistic appraisal. Crypto is no longer very sexy. But as more and more Theranoses and FTXes come out of the traditional tech carnival, reputations will be built elsewhere. People will be forced to think about who they’re working for. And, if nothing else, the only thing better than working for yourself is working for the world.
Mysten Labs CEO Evan Cheng is seeking to raise over $100 million for a web3 fund (The Block)
Why does a16z want to strengthen its grip on Uniswap? (Protos)
Meet the Four Artists Behind GQ’s First-Ever Digital Art Drop (GQ)
Banks Are Breaking Up With Crypto During Regulatory Crackdown (WSJ)
Charlie Munger calls crypto ‘sh-t’: ‘I’m not proud of my country for allowing this crap’ (MarketWatch)
Norwegian Authorities Recoup $5.9M From Axie Infinity Ronin Hack (Decrypt)
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