Gary Gensler: Crypto staking falls under the SEC
Good morning, and welcome to Protocol Fintech. This Tuesday: Gensler vs. Ether, AmEx hiring, and Opendoor’s stumble.
Off the chain
Bankruptcy experts may soon also need to be blockchain analytics experts. The judge in the Celsius case recently approved the appointment of an independent examiner. One case the person might want to look into involves CEO Alex Mashinsky’s holdings of CEL, the token Celsius issued as a reward to depositors. One critic claims to have traced suspicious transactions to wallets apparently controlled by Mashinsky and his wife. The case may also raise new questions about how separate a company and a token are. Watch this space (and those wallet addresses).
– Owen Thomas (e-mail | twitter)
Could Gensler put ether to sleep?
Gary Gensler gave Ethereum an early Halloween scare. The SEC chief alarmed crypto’s second largest ecosystem by suggesting that the merger may have transformed the ether token into a value.
Gensler did not mention Ethereum or ether by name. But his recent comments about how staking has features that match the definition of a security come on the heels of Ethereum’s major shift from proof-of-work to proof-of-stake. And they quickly sparked speculation that the regulator — which has long argued that most cryptocurrencies should be regulated as securities — lumped ether in with the rest.
Stakeholders expect returns. Staking, a mainstay of DeFi, certainly looks like a system where “the investing public expects profits based on the efforts of others,” making the product offered a security, Gensler told reporters after testifying before the Senate Banking Committee last week.
- Gensler confirmed during the hearing his view that bitcoin is not a security, unlike “a large majority” of other cryptocurrencies. The largest cryptocurrency, he argued, had “no group of individuals at the center. So the investing public is not betting on someone in the middle.”
- Gensler’s views on ether, the most traded crypto token after bitcoin, have not been as clear. In his 2018 MIT lectures, he had said that compared to bitcoin, “Ethereum is a little more centralized and has more leadership,” with co-founder Vitalik Buterin playing a key role with a “kind of founding following.”
- His predecessor at the SEC, Jay Clayton, made it clear that he did not consider ether a security as far back as 2019. And many speculated that Gensler would follow that stance. So his comments about stakes last week surprised the Ethereum community. Ether’s price fell around 11% after Gensler’s comments spread.
What exactly is Gensler saying? Ether’s price retreated as investors and the Ethereum community realized that the SEC chairman’s comments were not so clear. But that in itself can be a problem.
- Cathy Yoon, legal director at MPCH, argued that “calling ether a security after all this time, even after a change in the consensus mechanism, is a reach.”
- Crypto entrepreneur Alex Dunmow suggested that the SEC chairman “didn’t talk about [ether] be a security”, but instead addressed “stake derivatives”, focusing on crypto marketplaces such as Coinbase, in a tweet. “Let’s not panic yet,” said Dunmow.
- The confusion speaks to a larger problem, Yoon pointed out. The SEC under Gensler “has consistently said that no guidance or clarity from the commission is needed because the law is settled,” but crypto companies and investors are struggling with a lot of uncertainty, she told Protocol.
Figuring out the SEC’s thinking on crypto has long been challenging. The regulator makes “big, big statements,” Yoon said. But beyond pursuing “enforcement actions based on very specific facts and circumstances,” Team Gensler “has done nothing to delve into their thought process and how they apply existing laws and regulations,” she said. There is little clarity, and a lot at stake.
—Benjamin Pimentel (e-mail | twitter)
A MESSAGE FROM VERSAPAY
When your AR automation only focuses on making your team more efficient, you’re leaving out one important factor: customer experience. Find out why CFOs are taking a more collaborative approach to AR in our exclusive survey of 1,000 C-suite executives.
Learn more
On the money
Nasdaq enters the crypto custody business. A new group within the exchange dedicated to digital assets will start by offering custody services for bitcoin and ether to institutional investors.
A long-awaited bill targeting Visa and Mastercard swipe fees has been introduced to the House. The legislation’s backers hope to increase competition and reduce costs by allowing merchants to route more credit card payments over networks not operated by the two payment giants.
Meanwhile, American Express is looking for tech talent. AmEx is seeking software engineers, coders and developers as part of a 1,500-person hiring spree.
About protocol: Treasury wants to hear your comments about crypto.
New data shows that Opendoor has been hit hard by the housing downturn. iBuyer lost money on 42% of its transactions in August.
Ripple is pushing the court for a ruling on the SEC’s lawsuit against it. In separate motions, both Ripple and the SEC asked a federal judge to either rule that the XRP cryptocurrency violated federal securities laws or dismiss the lawsuit.
Crypto market maker Wintermute was hacked for 160 million dollars. The DeFi company’s CEO, Evgeny Gaevoy, so the company remained “solvent” and its centralized stock exchange was not affected.
Overheard
Crypto payments are no longer hot, at least among customers of JPMorgan Chase. “We saw great demand from our customers, let’s say until six months ago,” Takis Georgakopoulosthe bank’s global head of payments, told Bloomberg Television. – We see very little right now.
Private valuations in fintech have not fallen enough to trigger a real M&A boom. “Unfortunately, we have not seen the value adjustments that have occurred in the public market make it through to the private market,” AvidXchange CEO Michael Praeger told Axios Pro.
Agreement flow
San Francisco crypto data infrastructure provider Goldsky raised $20 million in a seed round. Felicis and Dragonfly Capital co-led the round.
New York rent-to-own fintech Kafene raised $18 million in a Series B funding round. The round was led by Third Prime, along with previous investors who participated in Kafene’s $30 million Series A.
Majority, a mobile banking app for migrants to the US, raised $30 million in equity in a Series B funding round along with $7.5 million in debt financing. Valar Ventures led the equity financing, with participation from existing investors.
Yellow Card Financial, a Nigerian cryptocurrency exchange, raised $40 million in Series B funding. Polychain Capital led the round, coming almost exactly one year after the company’s $15 million Series A.
Ethic, an investment startup that helps users customize investments based on their values, raised $50 million in a Series C funding round. Jordan Park led the round with participation from Nyca Partners, Sound Ventures, Kapor Capital and others. The Duke and Duchess of Sussex entered into a corporate partnership with Ethic last year.
A MESSAGE FROM VERSAPAY
When your AR automation only focuses on making your team more efficient, you’re leaving out one important factor: customer experience. Find out why CFOs are taking a more collaborative approach to AR in our exclusive survey of 1,000 C-suite executives.
Learn more
Thanks for reading – see you tomorrow!
