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SPIRIT Blockchain – Weekly Wrap-up 7/22/2022

Here’s what happened in blockchain and crypto this week.

The skirmish between crypto companies and the U.S. Securities and Exchange Commission (SEC) continued this week. While the SEC asked the U.S. Congress for more resources to address current issues in the crypto ecosystem, its approach was criticized by both industry heavyweights and other regulators. The SEC also classified nine cryptoassets as securities as part of charges against a former Coinbase employee for alleged insider trading. 
 

It was a busy week in crypto vs. SEC headlines, with the agency reiterating that it needs more resources to tackle cryptoasset issues. The head of the SEC’s enforcement unit, Gurbir Grewal, asked Congress for additional personnel – in the form of 125 more people – to shore up the agency’s crypto regulation efforts. On Tuesday, SEC chair Gary Gensler said on Bloomberg that he continues to see plenty of “noncompliance” across the industry. 

The SEC’s stance was met with resistance by Coinbase which filed a a petition to the SEC criticizing the current state of cryptocurrency regulation in the U.S. It also  issued a blog post on Thursday, criticizing the agency for ineffective crypto framework. The company’s Chief Policy Officer, Faryar Shirzad, explained the reasons behind the move in a blog post, saying that the existing rules for securities “just do not work for digital assets”, further calling for “a workable regulatory framework”. To the surprise of many crypto market participants, CFTC Commissioner Caroline Pham also chimed in, taking issue with the SEC’s regulation via enforcement and encouraging the agency to cooperate with the CFTC on a digital assets framework. 

Former SEC Chairman Jay Clayton originally said that bitcoin was not a security. Later, former SEC director of corporation finance William Hinman said that ether (ETH) did not exhibit properties of a security. The latter view was questioned by current SEC Chairman Gary Gensler who said bitcoin was the only token that he felt comfortable calling a commodity. Although the SEC approved futures-based bitcoin ETFs, it has rejected all spot bitcoin ETF applications so far, citing a lack of surveillance sharing agreements with exchanges, among other things. Grayscale, which manages the world’s largest bitcoin fund, announced last month that it would sue the SEC after it turned down its bid to convert the investment vehicle into an ETF.

Meanwhile, the SEC has listed nine cryptocurrencies that it claims are securities. This statement was contained within a complaint arresting and charging a former Coinbase employee and two others with wire fraud. The assets in question were: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, KROM. They were each mentioned in connection with alleged insider trading. Previously, the SEC has also sued Ripple for allegedly selling unregistered securities, referring to the the company’s token XRP. 

 

Market Overview

The global cryptoasset market capitalization currently amounts to $1.09 trillion –  up from $975 billion since Friday last week, with bitcoin accounting for 40.4%. Among the Top 30 cryptoassets by market cap, Ethereum Classic (ETC) outperformed, gaining roughly 73% over the week. During the same period, the price of bitcoin (BTC) rose by 12.5% to $23,154 while the price of ether (ETH) shot up by 32.5% to $1,576. The total value locked (TVL) in DeFi sits at $86.6 billion – up from $76.5 billion last week – with Ethereum accounting for about 63% of TVL.

This Week’s Headlines

 

Notable Deals and Fundraising

  • Crypto exchange FTX is in talks to raise more funding, Bloomberg reports

  • Bitcoin Miner Core Scientific raises $100 million in equity financing

  • Blockchain security firm Halborn raises $90 million in Series A funding

  • DeFi trading platform Hashflow raises $25 million in a Series A round

  • NFT authentication company Opticraises $11 million in a seed funding round

  • Crypto infrastructure firm Blockdaemonacquires wallet security firm Sepior

  • Valkyrie announces venture capital fund focused on early stage “web 2.5” firms

  • New hedge fund Modular Capital raises $20 million from Multicoin Capital and others

 

Manuel Trojovsky, Head of Crypto Investments & Research

 

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