Exchanges: Moody’s warns Coinbase faces serious consequences

Custodians: Crypto Custody Firm BitGo Reaches Preliminary Agreement to Buy Prime Trust: Sources

DEXs: Spot volumes on CEXs plunge to 2019 levels, but there is a silver lining

Miners: El Salvador’s Bitcoin miner Volcano Energy launches with $250M investment

Staking: Ethereum Staking Is Highly Centralized: How to Address the Risks?

Digital asset markets experienced an earthquake of regulatory activity over the past week, but the price action for many tokens would not suggest as much. Binance, the world’s largest cryptocurrency exchange, and Coinbase, the US’s largest domestic crypto exchange, were hit with back-to-back suits from the SEC, accusing both of dealing unregistered securities. The SEC named 19 of the assets they consider unregistered securities explicitly for the first time, including several top-20 cryptocurrencies like Cardano (ADA), Solana (SOL), Binance Coin (BNB), Polygon (MATIC), and Cosmos (ATOM). Many or all of the trading pairs for these assets have been delisted on Binance’s US arm, Binance.US, as well as other brokers like Robinhood. When added to other tokens separately targeted by the SEC, like Ripple Labs’s XRP token, Bloomberg notes that the agency has now categorized over $120 billion of coins and tokens specifically as unregistered securities.

The Commission also charges that Binance and its CEO Changpeng Zhao engaged in fraud and deception by commingling customer assets or diverting customer assets to third parties, as well as misleading US investors about non-existent trading controls over the Binance.US platform. Binance.US announced that it will be halting US dollar deposits and its banking partners are preparing to close US Dollar withdrawal channels as early as June 13, after regulators said they supported freezing Binance's assets. As they head toward litigation MRP will continue to examine the developing cases against top crypto exchanges, as well as certain cryptocurrency issuers. We utilize our Daily Intelligence Briefings to analyze SEC enforcement actions, as well as their potential implications for the broader crypto industry.

The market capitalization of all cryptocurrencies tracked by CoinMarketCap fell by roughly $36 billion throughout the past seven days, equivalent to a -3.2% decline, but managed to hang onto the $1.1 trillion threshold by the time Friday morning rolled around. The relatively muted reaction was likely due to long-standing expectations that SEC enforcement action against cryptocurrency exchanges was inevitable – especially after the SEC took action against Binance’s in-house stablecoin (BUSD) earlier this year, and subsequently delivered a Wells Notice to Coinbase.

The reaction was even less climactic for Bitcoin (BTC), the world's largest cryptocurrency, which only fell by -1.5% throughout the past week, now trading near $26,600. As SEC Chairman Gary Gensler himself has said in the past, Bitcoin is a commodity and, therefore, outside of the Commission’s purview. Gensler has been more ambiguous about other large cryptocurrencies like Ethereum (ETH), the second largest cryptocurrency by market cap, but the SEC’s choice to avoid naming it as part of these ongoing suits – as well as past comments made by SEC officials, referring to Ethereum as a commodity – suggests ETH may be more sufficiently decentralized than similar protocols. Several large Bitcoin forks, including Dogecoin (DOGE) and Litecoin (LTC), also avoided scrutiny in the suits, which was not unexpected.

Per Cryptoquant’s Crypto SECurities and Commodities Index, which compares the performance of assets the SEC has deemed securities against Bitcoin and Ethereum, shows the Crypto SECurities index falling -14.4% since the SEC announced their suit against Binance on June 6. Meanwhile, the Crypto Commodities index has declined by just -1.1%.

On-chain metrics show that, for the most part, Bitcoin holdings are staying where they are. Per Glassnode data, the percentage of BTC’s circulating supply that has not been transacted in a year or more just hit a new all-time high at 68.41%. The portion of Bitcoin’s supply that is on the move has largely flowed out of exchanges altogether, as the balance of BTC held on 21 exchanges tracked by Glassnode just hit its lowest level since mid-March. Moving funds off exchange into a privately-held wallet device or other form of self-custody solution typically indicates the owner of the assets does not intend to sell them in the near-term, which is why this process is also commonly known as sending to “cold storage”.

May 22, 2023: Tether Expands Profits, Dominance, and Bitcoin Holdings as T-Bills and Reverse Repo Become Reserve Standards →

February 22, 2023: Ethereum May Face Contagion from SEC Crackdown on Crypto Exchanges’ Staking Services →

February 14, 2023: Staking Services and Stablecoins in SEC Crosshairs as Crypto Industry Preps for Court Battles →

January 24, 2023: Bitcoin Mining is Back to Profitability, Hash Ribbon Shows Peak Capitulation May Have Finally Passed →

October 18, 2022: Fallout From Ethereum “Merge” Bolsters Bitcoin’s Hash Rate as Some Criticisms Still Linger →

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