This Week in Coins: Bitcoin and Ethereum Survive the CFTC’s Binance Crackdown
This week in coins. Illustration by Mitchell Preffer for Decrypt.
The news earlier this week that the Commodity Futures Trading Commission (CFTC) is suing the largest crypto exchange in the world, Binance, and its CEO Changpeng “CZ” Zhao, could have shaken the crypto markets.
Instead, tthe prices of Bitcoin and Ethereum wobbled briefly after the news broke on Monday, then recovered. Bitcoin (BTC) is up 3% in the past week to $28,410 as of Saturday morning, and Ethereum (ETH) is up 4.2% to $1,825.
Most of the top thirty cryptocurrencies are in the same boat, with no significant change in either direction over the past seven days, but two names posted hefty rallies: Stellar (XLM) jumped 22% and is currently trading at nearly $0.11 , while XRP exploded 20% to $0.53 thanks to “investor hopes” among the XRP army that Ripple’s endless case with the SEC might go Ripple’s way.
The CFTC is the US’s leading derivatives regulator. According to the lawsuit filed in a federal court in Chicago, the federal agency accuses Binance of unauthorized derivatives trading by offering futures, swaps and options on many leading cryptocurrencies.
The suit alleges that the exchange offers these services to US clients despite not having registered with the regulator. It added: “Binance has taken a calculated, phased approach to growing its presence in the US despite publicly stating its alleged intention to ‘block’ or ‘restrict’ customers in the US from accessing its platform.”
Other allegations in the lawsuit accuse the exchange of having inadequate anti-money laundering (AML) and know-your-customer (KYC) controls, knowingly evading or helping US customers evade regulators, and, quite damningly, trading against its own customers.
For its part, Binance told Decrypt on Monday that the lawsuit is: “unexpected and disappointing as we have been cooperating with the CFTC for more than two years.”
Monetary policy
On Wednesday, the state of Texas introduced Senate Bill 1751a bill that seeks to protect the state’s grid during high electricity loads, but the proposal could mean local mining could soon lack the incentives that have made the state an attractive place for miners.
The bill restricts Bitcoin miners from participating in a government-run demand response program that rewards miners for feeding power back into the grid during peak periods.
It also blocks “virtual currency mining from tax cuts given that the large growth in virtual currency mining is already projected to occur in the state,” according to the bill’s sponsor Sen. Lois Kolkhorst during Tuesday’s testimonywho argued that there is no need to subsidize growth.
The same day, US Securities and Exchange Commission (SEC) Chairman Gary Gensler testified before the House Appropriations Subcommittee on Financial Services and General Government, saying that rules to make crypto compatible already exist – in response to repeated calls from the industry for clearer guidelines – but that the industry is still “riddled with non-compliance.”
During the hearing, Gensler held firm by reiterating his belief that most cryptocurrencies are unlicensed securities: “Frankly, out of the ten or twelve thousand tokens, there are very few that don’t have a group of founders in the middle that the public expects. These are securities under the Securities Act.”
Finally, across the pond, Bank of England’s Central Bank Digital Currency (CBDC) head Katie Fortune said CBDCs could be a “bridging resource” between TradFi and crypto.
CBDCs are a notional form of centrally issued cryptocurrency linked to and backed by the government’s currency, in this case a digital sterling.
Speaking at the Citi Digital Money Symposium, she said: “What you have today is I have a Santander account, I can go to an ATM and withdraw the same cash that my friend with a Barclays account withdraws. I think it can be very powerful in a world of stable coins and other digital forms of money to have a digital central bank currency that can be a bridge between all these different forms of money.”
