An unexpected and major selloff in crypto markets caused some $1 billion in cascading liquidations. Bitcoin plunged Thursday as low as $25,000, with crypto’s market cap shedding 6.7% overall in one of the biggest drops in recent history. Among the theorized market movers: Elon Musk’s SpaceX, a private company, reportedly wrote down its bitcoin holdings in 2021 and 2022 leading to speculation it sold off its stockpile while others pointed to macroeconomic tailwinds caused by China-based real estate firm Evergrande filing for bankruptcy in the U.S. Though a more likely explanation is simply crypto’s market structure and relative illiquidity, which means selloffs easily accelerate. A single unknown trader, caught up in all this, lost at least $55 million worth of ETH (representing 30% of all liquidated futures on Binance).
SEC Contests
The U.S. Securities and Exchange Commission (SEC) is one step closer to appealing a partial decision in its lawsuit against Ripple Labs related to the legality of selling XRP to exchanges for retail trading. Federal Judge Analisa Torres initially found that Ripple only violated securities laws by selling XRP to institutional buyers, a point the SEC said it would contest, and has now opened a path for the SEC to do so. However the agency must still gain final approval from Torres and then the Second Circuit Court of Appeals. Elsewhere, bankrupt crypto lender Celsius will vote on a plan to sell remaining assets to a consortium of crypto investors called Fahrenheit. The judge that approved that process suggested Celsius creditors may recover 67%-85% of their losses.
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Off Base?
Crypto exchange Coinbase (COIN) will suspend USDT, DAI and RAI stablecoins in Canada in the coming weeks, after the country rolled out tighter regulations governing exchanges this year. Several firms including rival Binance have recently left Canada, while Crypto.com delisted USDT in January. Coinbase just days ago launched a new trading platform in Canada, integrating local banking rails and announcing plans to work with regulators. In other news, despite recent regulatory wins, a Coinbase-backed lawsuit challenging the legality of the U.S. Treasury Department’s sanction of Tornado Cash has been dismissed. The judge found the government did not overstep its bounds by halting access to the crypto mixing service, and interestingly that a “DAO is an entity unto itself…not unlike that of stockholders of a corporation” and subject to U.S. law.
The Takeaway: Feeling FIT
(Darren Halstead/Unsplash, modified by CoinDesk)
Kristin Smith is CEO of the Blockchain Association, a Washington D.C.-based trade association representing more than 100 of the industry’s leading companies.
While not yet perfect, the FIT Act is the most comprehensive piece of legislation for the digital assets industry voted on by our elected officials, and marks the first time crypto-focused regulatory bills have been voted out of any committee in the House or Senate.
Even more encouraging, the FIT Act garnered vital bipartisan support, making it a symbol of cooperation and recognition that this sector is too important for the status quo regulatory regime to stand.
Last month’s message from policymakers was clear: Crypto is here for good and Congress, not regulators, will determine an appropriate regulatory framework for the industry. The cryptocurrency industry is too significant to be subjected to the whims of partisan politics, and last week’s vote signaled a shift by lawmakers to come together to develop smart regulations that promote innovation and ensure consumer protection.
These votes highlighted the need for – and growing momentum driving – bipartisan collaboration to address the complexities and potential of cryptocurrencies effectively. Over and over again, committee members rightly lamented the ineffectiveness of the current regulatory regime, and by association, the hyperactive enforcement campaign by the U.S. Securities and Exchange Commission (SEC).
We must keep this traction going as emerging technologies such as blockchain and AI continue to advance.
These important votes also come at an important moment for the crypto industry. From the collapse of Do Kwon’s algorithmic stablecoin to Sam Bankman-Fried’s spectacular fall from grace after the implosion of FTX, the crypto ecosystem has suffered in the eyes of the public, among investors and in Washington D.C. circles.
However, as of late, the reaction from many in Congress has been one of increasing awareness and acknowledgment that the digital asset industry cannot simply be wished away. As cryptocurrencies and blockchain technology continue to gain traction and pose a practical and philosophical challenge to traditional financial systems, it becomes even more essential for regulators to craft intelligent, forward-thinking rules that foster innovation while ensuring consumer protection and financial stability.
Maintaining and growing bipartisan support in Washington requires the industry to continue proving the world-changing use cases of the technology. Indeed, beyond the speculative aspects often associated with it, digital assets and crypto networks offer myriad societal benefits.
The FIT Act represents a significant step forward in acknowledging the importance of the digital assets industry, yet there is still work to be done. The forthcoming congressional session after the August recess will prove critical both in terms of refining the bill and embarking on the next phase of policymaking for the industry.
Industry stakeholders, regulators and lawmakers must collaborate to address potential loopholes, uncertainties and regulatory gaps. The goal is to create a comprehensive framework that fosters innovation, maintains market integrity — and most importantly — protects consumers and investors.
As this process unfolds, organizations such as Blockchain Association remain ready to serve as valuable resources. Collaboration between the industry and policymakers is crucial to strike the right balance between innovation and regulation.
With the collective expertise and insights from both sides, future legislation will be thoughtfully crafted to accommodate the ever-changing dynamics of the digital asset space, cementing the United States as the world-leader in innovation.
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