Welcome to The Node. This is Daniel Kuhn and Prachi Vashisht, here to take you through the latest in crypto news and why it matters. In today’s newsletter:
The Biden administration took aim at cryptocurrencies in its annual “Economic Report of the President” aimed at explaining his policy priorities. The report included an entire chapter on “digital assets,” arguing the crypto industry creates issues for consumers, the financial system and the environment. “The amount of attention given to digital assets is substantial, especially when viewed in comparison to other areas of financial services that have arguably been far more detrimental over the past few weeks. The assessment is striking in its definitive tone and broad brush strokes,” former financial regulator Matt Homer said. Meanwhile, Tether, the controversial stablecoin issuer, has seen at least $5 billion of inflows since the global banking crisis began earlier this month. The largest stablecoin’s market capitalization stood at over $77 billion as of Wednesday. “Tether has no exposure to [Silicon Valley Bank] as its popularity lies more in the Asian region, meaning USDT doesn’t rely on dollars being held in American banks,” François Cluzeau, head of trading at Flowdesk, said. Speaking of Telegram users can now transfer USDT on the app.
Winners and Losers
In the past 24 hours, XRP surged over 20% amid rumors the token’s issuer Ripple may soon settle – or emerge victorious – in its ongoing case against the U.S. Securities and Exchange (SEC). The surge comes after Ripple defenders submitted a filing in the separate Voyager Digital Holdings bankruptcy case, which noted a U.S. bankruptcy judge recently rejected key SEC arguments for litigating crypto and seemed to endorse Ripple’ legal gambit. Meanwhile, as of March 16, crypto exchange OKCoin has suspended trading of two so-called citycoins built on the Bitcoin-adjacent Stacks blockchain. MiamiCoin and NYCCoin were both at one time supported by the cities’ mayors, but now have limited liquidity, leaving room for price manipulation and fraudulent activities, OKCoin said.
Tough Times?
Crypto custody provider Copper will cut 15% of its staff due to tough market conditions that impact the crypto industry. The company, which employs 300 people, can not put an exact number on the job losses. This comes after Copper’s decision to shelve its enterprise software business last week, including cutting ties with global custody bank State Street. Meanwhile, Ethereum software developer ConsenSys launched a new staking marketplace where firms can choose among various service providers including the just-launched ConsenSys Staking as well as Allnodes, Blockdaemon and Kiln. The announcement comes just weeks before Ethereum’s much-anticipated Shanghai hard fork, an upgrade that will finally enable users to withdraw their staked ETH.
Sound Bites
“If that money belongs to the holding company … then it all belongs to the creditors of the holding company.”
– Kleinberg Kaplan partner Dov Kleiner, discussing Silicon Valley Financial Group’s bankruptcy case, on CoinDesk TV’s “First Mover”
Of the other participants that were actively involved in the conference, no other made an impact quiet like Near Protocol. Until recently, Near was a super-charged, proof-of-stake platform designed for speed, security, and scalability. Building on such a strong platform, people too often view Near as a competitor to Ethereum. However, Near’s presence at ETHDenver showed that the blockchain is not out to compete against Ethereum, but instead compliment the blockchain and support Ethereum for its shortfalls. Continue reading.
*This is sponsored content from Near Protocol.
The Takeaway: Choke Point 2.0
The Biden administration and federal regulators appear to be using whatever means necessary to cut the cryptocurrency industry off from banking services. Critical observers have dubbed this alleged effort “Choke Point 2.0” after a similar effort by the Obama administration to cut undesirable but legal industries off from the financial system.
Figures including Brian Brooks, former head of the Office of the Comptroller of the Currency (OCC), allege this has led to banks being targeted for shutdown, in part, because they served cryptocurrency customers. That would have no grounding in existing law or regulations, and may have caused collateral damage by fomenting instability in the banking sector.
A new report, authored by the White House Council of Economic Advisers, devotes a lot of space to crypto, and certainly confirms the negative sentiment in the U.S. executive branch. One former financial regulator described this report to CoinDesk as “a damning indictment of the space that makes [the Biden administration’s] policy position crystal clear.”
This follows a wave of bank shutdowns that some have alleged were triggered not just by financial stability concerns, but by the broader push to extralegally strangle cryptocurrency businesses. Former U.S. Rep. Barney Frank has explicitly claimed the shutdown of Signature Bank was intended “to send a message to get people away from [banking] crypto.” Frank is a member of Signature’s board, so he is motivated to claim crypto, rather than mismanagement, was to blame for the bank’s failure.
There is other support for the idea of an undisclosed crypto-strangling agenda. Reuters reported late last week the Federal Deposit Insurance Corporation (FDIC) required Signature’s acquirers to give up Signature’s crypto customers in the sale. The FDIC initially denied that report but, as with other recent events, its actions would seem to confirm it. Signature assets will now become part of Flagstar Bank, but the deal, announced on March 20, did not include roughly $4 billion in deposits belonging to crypto firms, according to a Flagstar statement.
As no less than the Wall Street Journal editorial board argued earlier this week, this seems to confirm the FDIC is not just actively pursuing an anti-crypto agenda, but is lying to the public about it. Nic Carter of Castle Island Ventures was the first to term this alleged initiative “Choke Point 2.0.” That refers to Operation Choke Point, an initiative of the Obama Justice Department to lean on banks that served gun manufacturers, payday lenders and other legal but undesirable industries.
Though executed under the cover of anti-money laundering efforts, multiple critics, including former regulators and the House Financial Services Committee, ultimately condemned Operation Choke Point as an abuse of power. Ultimately, new restrictions were placed on the power of the FDIC in the wake of Choke Point, in part to settle lawsuits brought by victims of the crackdown. It seems highly plausible that similar targeted bias is at play in the FDIC’s recent actions.
That may mean the agency faces another wave of official and legal backlash for its unauthorized initiative. But the damage – both intended and accidental – has already been done.
EVE Online Creator Is Making a Triple-A Web3 Game (Blockworks)
‘We’re not sharks’: Haun Ventures’ Sam Rosenblum on haggling hard in crypto investing (The Block)
Who Is Balaji Srinivasan And Why Should We Care About His $1 Million Bitcoin Prediction? (Forbes – paywalled)
Indie Card-Battler Shardbound Revived as Web3 Game on Immutable zkEVM (Decrypt)
We know that the recent events with the U.S. banking system have put many in the crypto and Web3 community in a challenging situation. That’s why we have decided to extend our current prices for Consensus 2023. This means that you have a few more days to take advantage of these savings on your registration for the most important event in crypto and Web3.
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