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Turmoil in the cryptocurrency markets shows action is needed and the Commodity Futures Trading Commission is “well-positioned” to fill a regulatory gap in cryptocurrency markets if Congress chooses, the agency’s chair said. 

The agency is also “working towards another strong year of precedent setting cases,” following the spectacular fall of crypto exchange FTX and other companies’ failures over the past few months, CFTC Chair Rostin Behnam said.

“The bankruptcies, failures, and runs only validate that action is needed,” Behnam said at an American Bar Association meeting. “The ecosystem is vast, will not vanish, and needs comprehensive legislation.”  

Lawmakers introduced bills last year to regulate crypto including the Digital Commodities Consumer Protection Act, or DCCPA. That bill had support from former FTX CEO Sam Bankman-Fried and would give the commodities agency the authority to regulate digital assets. The bill would need to be reintroduced this year.  

Behnam said the CFTC will continue to work with new stakeholders. 

Enforcement train roaring through 

To date the agency has brought 69 enforcement actions involving digital assets, which Behnam said shows the “outstanding capacity” of its staff.  

Some of the prominent cases included a first for the agency, such as a complaint filed against Ooki DAO in September alleging that it has been illegally running a futures exchange.  

Along with the Securities and Exchange Commission, the agency also brought civil charges in December against FTX, Bankman-Fried and Alameda Research for misappropriating customer funds. The Justice Department is separately pursuing a criminal case against Bankman-Fried. 

Behnam said the agency’s Division of Market Oversight is considering whether designated contract markets that list crypto-based derivatives contracts, or are affiliated with crypto spot markets, should adopt policies to restrict trading by certain employees. Designated contract markets, or DCMs, are companies that allow the trading of derivatives.  

Cyber is an “increasingly urgent problem”  

Cyber risk will get its own rulemaking, Behnam said.  

“The growth of cybersecurity threats to financial institutions is well-documented and widely recognized as an important and increasingly urgent problem,” Behnam said.  

The agency too has brought cases against firms for not following certain cybersecurity policies. In 2019, a firm settled charges with the CFTC after the agency said the firm allowed cyber criminals to breach email systems and did not disclose the breach to customers in a timely manner.  

Behnam’s remarks come after the derivatives trading arm of financial company Ion Markets was hit by a hack earlier this week, affecting its activity.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Microstrategy founder and bitcoin enthusiast Michael Saylor said Silvergate was “responsible” amid the collapse of other crypto institutions including the FTX exchange and said he’d keep doing business with the crypto-friendly bank.

The executive’s comments come as the Justice Department’s fraud unit has reportedly begun probing Silvergate’s handling of accounts for former FTX CEO Sam Bankman-Fried’s firms. The fraud probe is focused on potential criminal wrongdoing in allowing FTX’s deposits – including user funds – into accounts belonging to sister trading firm Alameda Research, Bloomberg News reported on Thursday, citing sources.

“We will continue to do business with Silvergate,” Saylor said on CNBC. “The institutions that were improperly constructed collapsed — the Alamedas, the FTXes, the Voyagers, the BlockFis of the world — but in fact, Silvergate was a responsible bank.”

Last year, Silvergate issued a $205 million term loan to MacroStrategy LLC, a subsidiary of MicroStrategy. 

Saylor also defended cryptocurrencies following comments this week by Charlie Munger, vice chairman of Berkshire Hathaway, who called for a ban on cryptocurrencies in a Wall Street Journal op-ed.

“If he was a business leader in South America or Africa or Asia, and he spent 100 hours studying the problem, he would be more bullish on bitcoin than I am,” Saylor said. “The Western elite, they haven’t had the time to study it.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

WisdomTree, the New York-based asset manager that operates blockchain-enabled funds, reported that the value of its cryptocurrency holdings fell to $136 million at the end of the fourth quarter from $357 million at the end of the same quarter last year.

The company saw a net loss of $28.3 million in the period, compared to a profit of $11.2 million in the same period last year. Operating revenue declined to $73.3 million from $79.2 million in the previous fourth quarter.

Shares of the company were down 2% as of 10:47 am ET.

WisdomTree’s digital asset strategy is centered around both bringing crypto into the mainstream and traditional assets into the digital ecosystem through tokens and funds, it said in the results presentation. It highlighted its new digital wallet WisdomTree Prime, which will allow users to spend, transfer and invest digital assets. There is currently a waitlist to try the product. 

WisdomTree saw net inflows of $5.3 billion “primarily driven by inflows into fixed income, U.S. equity and commodity products.” Net flows specifically from crypto totaled $4 million.

“Driven by over $12 billion of net inflows in 2022, WisdomTree exited the year with record assets under management.,” COO and President Jarett Lilien said. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Activision Blizzard agreed to pay a $35 million fine from the Securities and Exchange Commission for its failure to maintain disclosure controls and whistleblower violations stemming from allegations of workplace misconduct.

The SEC said the video game publisher knew employee retention issues were “a particularly important risk in its business,” but did not have adequate controls in place to assess and address workplace misconduct complaints between 2018 and 2021. 

The regulator also said Activision Blizzard violated whistleblower laws by requiring former employees to tell the company if the SEC ever reached out for information. 

In paying the fine, Activision Blizzard neither admitted nor denied the commission’s findings. 

Activision Blizzard’s former chief operating officer, Daniel Alegre, is set to take over Bored Ape Yacht Club creator Yuga Labs. He had served as the COO since April 2020. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

MakerDAO, which builds the platform that issues the DAI stablecoin, saw a marked decline in 2022 revenue, as the DeFi protocol launched a significant pivot from crypto-native lending to the real-world asset market, according to a financial report issued by Steakhouse Financial.

Total revenue decreased 42% to 65 million DAI ($65 million) in 2022 from 112 million DAI in 2021, the report said. This led to an 80% drop in the protocol’s net operating earnings to 19 million DAI last year from 90 million DAI in 2021. Operating expenses rose to 46 million DAI in 2022, more than double the figure reported the previous year.

MakerDAO’s decreased earnings followed the general crypto downturn of 2022 in which the market experienced a massive deleveraging cycle triggered by collapses of the Terra ecosystem and the FTX exchange — events that occurred amid a significant slowdown in the global financial markets and impacted both centralized and decentralized participants in crypto lending.

Maker’s total balance shrunk to 5 billion DAI at the end of 2022, a 43% decline from the 9 billion at the end of the previous year, according to Steakhouse.

Maker’s growing real-world asset exposure

MakerDAO engineered a significant shift in DAI economics last year that saw a pivot to real-world asset backing. The Maker protocol issues the DAI stablecoin, which users mint in exchange for approved collateral assets that are supplied in excess of the amount of DAI being minted.

The volume of Maker’s real-world asset vault balance grew to 640 million DAI at the end of 2022. This figure marks a 37-fold increase from the end of 2021, with a large portion of the growth occurring in the last half of 2022 including a 500 million DAI vault for Monetalis Clydesdale and a 100 million DAI vault allocation for Huntingdon Valley Bank.

The impact of Maker’s real-world asset push can also be seen in its revenue-generation matrix, with the vaults accounting for 70% of MakerDAO’s gross revenue in December, according to the report. That’s despite the fact that the vaults only accounted for a tenth of the DAI minted over the period.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Cryptocurrencies and traditional markets slid as the U.S. jobs report numbers more than doubled estimates. 

Bitcoin and ether were down more than 2% over the previous 24 hours at about 9:40 a.m. EST, with the former trading at $23,393 and the latter around $1,641. 

BTCUSD chart by TradingView

Nonfarm payrolls in January grew by 517,000, more than twice the 185,000 estimate, signaling that the Federal Reserve is likely to continue hiking interest rates as it attempts to stave off inflation.

Crypto-related companies fell across the board, with Coinbase down 5% and Silvergate lower by 8.8%.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Job adverts posted on LinkedIn hint that eBay’s NFT platform, KnownOrigin, is set for an expansion push. 

The e-commerce giant, which started allowing the buying and selling of NFTs in 2021, acquired NFT marketplace KnownOrigin back in June. 

Jobs posted in the past week include a head of community, a content designer and a tech lead. EBay is also hiring for a crypto counsel to advise on regulation, tax, finance, privacy, information security, IP, web3, NFTs and crypto-assets.

The hiring push comes amid gloom elsewhere in the market, as crypto native businesses slash jobs and halt recruitment. Last week, Digital Currency Group-owned crypto exchange Luno cut 35% of its workforce, citing the “incredibly tough year.” Crypto exchange Gemini also shed 10% of its staff in a third round of layoffs since June.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Stronghold Digital Mining filed a prospectus to sell up to 10 million Class A shares as part of its efforts to preserve cash.

The offering consists of 2.27 million shares of Class A common stock that have been issued to the selling stockholder, 2.73 million shares of Class A common stock that are issuable upon the exercise of pre-funded warrants acquired by the selling stockholder and 5 million shares of Class A common stock that are issuable upon the exercise of warrants acquired by the selling stockholder.

The company will use any proceeds for general corporate purposes.

On Jan. 3, Stronghold reached an agreement with noteholders to convert $17.9 million of debt into equity as the miner has been trying to improve cash flow. It also ended a hosting deal with Northern Data and eliminated $67.4 million in debt with NYDIG.

“This is necessary to preserve cash, reduce our financial obligations and better position the company to survive a potentially prolonged crypto market downturn,” Greg Beard, co-chairman and chief executive officer said at the time.  

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Coinbase is off to a “strong start” in 2023 with a rebound in trading volume, Cowen analysts said.

Total trading volume in January of $55 billion is a 58% increase over the previous month and average daily volume of $1.8 billion is the highest since August, which had daily volume of $1.9 billion, analysts Stephen Glagola and George Kuhle wrote in a Feb. 2 note. 

Shares in Coinbase jumped 24% yesterday to the highest in nearly three months after a lawsuit alleging it sold unregistered securities was dismissed.

The daily average crypto market cap in January was $949 billion, a 14% increase from December.

Should the cadence of trading remain, revenue for the first quarter should come in around $652 million, compared to Cowen’s current estimate of $518 million and the average consensus of $604 million.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.