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 sent shock waves through crypto markets.
Nevertheless, the prices of Bitcoin and Ethereum experienced some turbulence shortly after the story broke on Monday, but quickly recovered. Bitcoin (BTC) has since increased 3% over the past week to $28,410 as of Saturday morning, and Ethereum (ETH) has jumped 4.2% to $1,825.
Most of the top thirty cryptocurrencies have been relatively stable over the last seven days, but two names posted hefty rallies: Stellar (XLM) leaped 22% and currently trades at almost $0.11, while XRP skyrocketed 20% to $0.53 owing to “investor hope” among the XRP army that Ripple’s ongoing case with the SEC might turn out in their favor.
The CFTC is the United States’ premier derivatives regulator. According to the lawsuit filed with a Chicago federal court, the federal agency accuses Binance of unauthorized derivatives trading by offering futures, swaps, and options on several leading cryptocurrencies.
The suit claims the exchange is providing these services to U.S. customers despite not having registered with the regulator. It added: “Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to ‘block’ or ‘restrict’ customers located in the United States from accessing its platform.”
Other allegations in the suit accuse the exchange of having insufficient anti-money laundering (AML) and know-your-customer (KYC) controls, knowingly evading or helping U.S. customers evade regulators, and, rather damningly, trading against its own clients.
For its part, Binance told Decrypt on Monday that the lawsuit was: “unexpected and unsatisfactory as we have been working collaboratively with the CFTC for more than two years.”
On Wednesday the state of Texas presented Senate Bill 1751, a bill that seeks to protect the state’s grid during peak electricity loads, but the proposal could mean that local mining operations may soon be lacking the incentives that have made the state an attractive location for miners.
The bill restricts Bitcoin miners from participating in a state-run demand response program that rewards miners for giving power back to the grid at peak times.
It also prevents “virtual currency mining from tax abatements given that the large scale of growth in virtual currency mining is already projected to occur in the state,” according to the bill’s sponsor Senator Lois Kolkhorst during Tuesday’s testimony, who argued there’s no need to subsidize the growth.
That same day U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testified at the House Appropriations Subcommittee on Financial Services and General Government and said that rules for making crypto compliant already exist—in response to frequent calls by the industry for clearer guidelines—but that the industry is still “rife with noncompliance.”
During the hearing, Gensler stayed firm in reiterating his opinion that most cryptocurrencies are unlicensed securities: “Frankly, of the ten or twelve thousand tokens, there are very few that don’t have a group of entrepreneurs in the middle that the public is counting on. Those are securities under the securities law.”
Finally, across the pond, the Bank of England’s Central Bank Digital Currency (CBDC) lead Katie Fortune said that CBDC’s can be a “bridging asset” between TradFi and crypto.
CBDC’s are an envisioned form of centrally-issued cryptocurrency pegged and backed by the state currency, in this case, a digital sterling.
In a talk at the Citi Digital Money Symposium, she said: “What you have today is, I have a Santander account, I can go to a cash machine and take out the same cash my friend with a Barclays account takes out. I think that could be really powerful in a world of stablecoins and other digital forms of money to have a central bank digital currency that can be a bridging asset between all these different forms of money.”