Cryptocurrency assets have been filed with the US Securities and Exchange Commission list of priorities for 2023. However, we have not yet tasted the “regulatory certainty” that many have called for. Instead, the regulator threw the book at Kraken for allegedly failing to register its betting program. Coinbase appears next on the chopping block, but its lawyers are ready to fight.
This week’s Crypto Biz newsletter dives into Coinbase’s defense of its staking program and its not-so-palatable quarterly financial results. We also look at the latest company fall victim to Sam Bankman-Fried’s FTX.
Coinbase Beats Q4 Earnings Estimates Amid Falling Transaction Volume
The fourth quarter was a rough quarter for the cryptocurrency market, and nowhere was it more evident than in the year Latest Coinbase Earnings Report. On February 21, the crypto exchange reported a 12% drop in transaction volume during the quarter as revenue fell 57% year over year. Although the revenue figures were higher than expected, I wouldn’t put much stock in Wall Street’s projections. (If you set the bar low enough, anyone can “exceed expectations.”) Still, there was a silver lining: Coinbase’s subscription and services revenue increased 34% during the quarter. However, investors should be aware that Coinbase is under investigation by the United States Securities and Exchange Commission (SEC) regarding its betting products. The switchboard tries to put out the fire before it even starts (more on that below).
Coinbase is “fundamentally different” from Kraken’s general counsel
With the SEC cracking down on Kraken over its betting products, other exchanges are scrambling to get ahead of the curve to avoid similar repercussions. Coinbase Chief Legal Officer Paul Grewal told shareholders this week exchange betting products “are fundamentally different from the revenue products described in the enforcement action against Kraken.” According to Grewal, Coinbase users always retain ownership of their digital assets. Second, users have a “right of return,” meaning that Coinbase cannot unilaterally decide not to pay out any stake rewards. The SEC filed a complaint about the Kraken claims that exchange users will lose control of their tokens when participating in a staking program. Kraken settled with the SEC for $30 million.
If I grow the oranges myself and harvest them myself, the oranges are not securities. If I grow my own oranges and harvest them with a supplier who charges me a fee, the oranges are still not securities.
— paulgrewal.eth (@iampaulgrewal) February 13, 2023
Hedge fund closes operations after losing funds on FTX exchange: Report
The crypto market felt the lasting legacy of FTX again this week after the hedge fund Galois Capital has reportedly closed its doors. Galois had significant exposure to FTX when the exchange went bust in November 2022. According to the Financial Times, Galois co-founder Kevin Zhou has already written a letter to investors apologizing for his firm’s involvement in FTX. Zhou also told investors that he would receive 90% of Galois’ remaining assets, with the remaining 10% temporarily held by the firm. Like FTX’s other creditors, Galois is waiting for bankruptcy proceedings to begin – that is, the process it can take up to ten years to fully develop.
For the record, yes, we had significant funds stuck on FTX. No, we have not used any Bahamian method to move funds.
— Galois Capital (@Galois_Capital) November 11, 2022
Mastercard enables crypto payments on Web3 via USDC settlement
Mastercard’s foray into the digital asset market continued this week after the payments giant they revealed the partnership with the Web3 Immersive payment protocol. This means that Mastercard users who want to make a direct crypto payment will no longer have to rely on third parties – as long as they have a Web3 wallet. Real-time payments for digital and physical goods will be settled in USD coins (USDC), a US dollar-backed stablecoin issued by Circle. Will this partnership be an important milestone in driving the mainstream adoption of Web3 wallets, or will it get lost in the noise? Only time will tell. Meanwhile, much more work is needed to educate people The real meaning of Web3.
Before you go: Watch out for Bing AI chat and ChatGPT pump-and-dump tokens
ChatGPT has taken the world by storm in recent months. Now, fraudsters want to take advantage of this growing trend launching a series of fakes pump-and-dump tokens. Investors, beware! In this week’s Market Report, Marcel Pechman and I discuss the recent explosion of pump-and-dump tokens and share some words of wisdom on how to stay safe. We also provide you with the latest information on the cryptocurrency market and whether Bitcoin is bullish or bearish. You can watch the full replay below.
Crypto Biz is your weekly pulse of the blockchain and cryptocurrency business, delivered straight to your inbox every Thursday.