Silvergate Bank, the banking institution linked to troubles with now-defunct cryptocurrency platform FTX, announced on Wednesday it would “wind down operations.”
The Bank’s parent company, Silvergate Capital Corporation, said in a press release it would close operations due to “recent industry and regulatory developments.”
It also plans a “full repayment of all deposits,” according to its liquidation plan.
The news comes after numerous cryptocurrency platforms, including Paxos, Coinbase, Gemini, Galaxy Digital, and BitStamp said they would sever ties to the bank.
Their announcement comes after the firm faced lawsuits for facilitating FTX and Alameda Research payments despite the latter two filing for bankruptcy shortly after.
Silvergate Capital said it would close its exchange network on 3 March due to a “risk-based decision.”
The embattled bank also sparked the ire of banking and cryptocurrency firms after it stated it would delay filing its annual 10-K report, raising suspicion about its financial situation.
KuCoin faces a lawsuit after New York State Attorney General, Letitia James, filed the measure on Thursday.
In a press release, she accused the cryptocurrency firm of violating securities laws, citing unregistered tokens as securities.
The regulator is the first to accuse Ether of becoming a security, despite the Commodity Futures Trading Commission (CFTC) consistently designating Bitcoin and Ether as commodities.
The regulator claims that the Martin Act allows regulators to designate Ether tokens as securities, allowing them to file criminal charges against violators.
The NYAG said in a statement, “KuCoin claimed to be an exchange, but is not registered with the Securities and Exchange Commission as a national securities exchange or appropriately designated by the [CFTC] as is required under New York Law.
“KuCoin also failed to comply with a subpoena issued by OAG to provide more information about its digital asset trading activities in the state. KuCoin has already been found to be operating without proper licensure in multiple jurisdictions including the Seychelles, Canada, and the Netherlands.”
Shortly after the NYAG publicised the lawsuit, ETH dropped 8 percent, with other cryptocurrencies following suit.
The statement also argues that KuCoin Earn, the platform’s staking and cryptocurrency lending offering, allowed NYAG to create a KuCoin account with a New York IP address. The exchange allegedly charged a fee for buying and selling tokens, as well as depositing tokens on the KuCoin Earn scheme.
James hopes to receive a court order to block KuCoin from holding exchange status and block the firm from trading in New York. The office also plans to geo-block KuCoin and block access to its apps and services.
The news comes after the NYAG launched further measures against Nexo, Celcius, CoinEx for allegedly offering unregistered securities to customers.
Ethereum founder Vitalik Buterin announced on Thursday that he had dumped a large number of altcoin holdings this week, stating they had “no cultural or moral value.”
The cryptocurrency expert sold off 9.9 billion CULTDAO native tokens (CULT) for roughly 58 Ether (ETH), along with MOPS and BITE holdings.
PeckShield revealed the news, adding that the sale totalled up to 220 Ether, or $331,705 USD at the time of writing.
In a statement on Reddit, Buterin said: “$BITE and most other coins being discussed on this forum are shitcoins, have no redeeming cultural or moral value, and will probably lose you most of the money you put into them. I anti-endorse these projects to the greatest extent.”
The news comes after Buterin burned Shibu Inu (SHIB) holdings valued at $6 billion USD after receiving half of the total supply in circulation.
In November last year, Buterin added Scourge to Ethereum’s roadmap to tackle censorship and boost network decentralisation. This aimed to expand the number of transactions per second to roughly 100,000 by using rollups as an upscaling technique.
He added the update aimed to boost the network’s proof-of-stake capabilities, providing “reliable and credibly neutral transaction inclusion” and avoiding protocol risks. This would block exploitative mining transactions on the network as well as investors leveraging tools to create censorship.
Bitcoin has stumbled under $20,000 after several backtracks in the crypto market, just after a massive surge in prices across 2023.
Thursday saw Bitcoin’s market capitalisation fall 7.7 percent compared to the previous day, data from Trading View showed.
Similar trends took place in November 2021, when Bitcoin plummeted from $69,000 USD to $16,600 up to early 2023. External influences included the collapse of FTX, Voyager Digital, Genesis, and Terra/Luna.
Despite this, Bitcoin and numerous cryptocurrencies surged in February this year, with the former topping $25,000. However, later in the month, the United States Federal Reserve revealed high levels of inflation that would require greater-than-anticipated efforts.
Fed Reserve chair Jerome Powell aimed to reduce inflation to 2 percent to stabilise the economy.
Recently Silvergate Bank also collapsed due to its ties to disgraced cryptocurrency exchange FTX and its subsidy, Alameda Research. The former facilitated the latter’s payments despite filing for Chapter 11 bankruptcy on 11 November, just days after receiving assistance from Silvergate Bank.
Numerous cryptocurrency exchanges such as Coinbase, Gemini, and others have severed ties with the troubled bank. The Biden administration said that it was aware of the situation and would continue monitoring the Silvergate collapse closely.
British officials at the Financial Conduct Authority (FCA) discussed their agency’s work on crypto regulation with the House of Commons Treasury Committee on Wednesday.
At the meeting, organisational chair Ashley Alder said the FCA was halfway “through a quite ambitious reset” amid the nation’s Financial Services and Markets Bill.
The legislation is currently under review in Parliament.
Both Alder and chief executive of the company, Nikhil Rathi, addressed inquiries on numerous financial topics at the Committee hearing.
In a letter to the Committee, former FCA chair Charles Randell wrote: “speculative crypto is gambling pure and simple and it should be regulated and taxed as such.”
Alder responded that “this is not going to be looked at from a regulatory perspective other than by financial regulators,” adding financial regulation “needs to be appropriately tough.”
The news comes as the Bill moves through Westminster, allowing the FCA to regulate the cryptocurrency industry without eliminating crypto risks.
Rathi added: “We are not going to be able to put in place a framework that protects consumers from losses,” adding that UK cryptocurrency holders only owned no more than “several hundred pounds.”
The news comes as the United Kingdom drafted a framework to explore using Web3 technologies, including cryptocurrencies, decentralised finance (DeFi), and others.
United States Federal Reserve chairman Jerome Powell offered his thoughts on the cryptocurrency industry at a Tuesday Senate Banking Committee meeting.
He hoped the Web3 technology could feature “productive innovation that makes lives better” and that the Fed did not want to “stifle innovation.”
In his statement, he said,
“We have to be open to the idea that – somewhere in there – there is technology that can be featured in productive innovation that makes people’s lives better […] We don’t want to stifle innovation.”
Powell and the Crypto Space
The news comes after Powell discussed concerns over the cryptocurrency industry in his two-day testimony, which is set to continue up to Wednesday.
He added that the Fed had seen a “remarkable set of events in the crypto space” and “quite a lot of turmoil” over the last year due to multiple fraud and bankruptcy cases.
He added: “We see in crypto activity lots of things that suggest that regulated financial institutions should be quite cautious in doing things in the crypto space.”
The news comes as banking regulators in the US have cracked down on cryptocurrency firms such as now-defunct crypto exchange FTX, Voyager Digital, Genesis, and Terra/Luna, among others.
Additionally, Silvergate Bank proved risky to the crypto and banking industries after regulators found it had facilitated transactions for FTX days before the latter collapsed into bankruptcy.
A Workable Framework?
Speaking further, Powell called for a “workable legal framework” for US digital assets, adding,
“People are going to assume when they deal with something that looks like a money market fund that that has the same regulation as a money market fund or a bank deposit. So stablecoins need some attention in that respect.”
Concluding, he said that stablecoins could continue in the financial sector with “appropriate regulation.” Ha added that there were “real concerns about permissionless public blockchain” which were “so susceptible to fraud, to money laundering and all of those things.”
The Biden administration has been monitoring the ongoing Silvergate Bank crisis, White House press sec Karine Jean-Pierre told the media on Monday.
She added that she could not comment on Silvergate specifically, but stated that United States president Joe Biden had urged Congress to act on the situation.
She also said that numerous crypto firms had “experience[d] significant issues” over the last few weeks, citing statements from banking regulators that cautioned of cryptocurrencies’ potential risks to banks and global financial institutions.
Jean-Pierre said in a statement,
“In recent weeks banking regulators have released guidelines on how banks should protect themselves from risks associated with crypto. As you know, this is a president that has repeatedly called on Congress to take action to protect everyday Americans from the risk posted by digital assets and he will continue to do so.”
She added: “[I] won’t speak to this particular company as we have not on other cryptocurrency companies, but we’re going to continue monitoring reports, and currently we’re aware of the situation.”
Silvergate Ties to FTX
The news comes after Silvergate announced on Friday last week it would cease operations of its Silvergate Exchange Network. The platform allowed customers to settle transactions outside normal banking operations or hours.
Silvergate also said in a recent press release that it would delay its annual report filings, adding it would become “less than well capitalized” after selling its debt securities.
This forced multiple exchanges such as Coinbase Global, Gemini, Galaxy Digital, and Bitstamp to sever ties to Silvergate after the bank allegedly facilitated illegal banking transactions for FTX.
Silvergate’s involvement with the now-defunct crypto exchange and its research subsidiary, Alameda Research, took place just days before the latter two firms filed for bankruptcy in November.
The bank’s stock plummeted as a result, falling 58% in a single day before largely stabilizing. A number of the bank’s most prominent crypto clients have announced they would suspend their business with Silvergate,
“[I] won’t speak to this particular company as we have not on other cryptocurrency companies, but we’re going to continue monitoring reports, and currently we’re aware of the situation,” Jean-Pierre said Monday.
The United States’ first nuclear Bitcoin mining plant, the Nautilus Cryptomine, is now home to TeraWulf (WULF) cryptocurrency mining operations.
It currently has 8,000 functioning mining rigs operating at 1.0 exahashes per second (EH/s), it said in a press release on Monday.
TeraWulf hopes to have a further 8,000 machines over the next few weeks to boost capacity to 1.9 EH/s, it added.
The company added it had energised around half of its 50-megawatt stake in the Cryptomine facility in a joint venture with Cumulus Coin LLC.
The Nautilus Cryptomine is set to slash TeraWulf energy costs. According to the statement, the latter secured a 2 cents per kilowatt hour (kWh) deal with the facility for five years.
This aims to cut energy consumption costs to around 4 cents per kWh at its two locations. TeraWulf typically pays 5 cents per kWh at its New York site.
Nuclear-Backed Bitcoin?
The news comes as the mining enterprise faced several issues in recent months such as plummeting crypto prices and higher energy costs.
TeraWulf chairman and chief executive Paul Prager said that roughly 16,000 company miners representing 1.9 EH/s of self-mining capacity were “onsite and being brought online daily.
He concluded,
“The Nautilus nuclear-powered mining facility benefits from what is arguably the lowest cost power in the sector, just $0.02/kWh for a term of five years […] We look forward to continuing to work alongside Cumulus Coin as the Nautilus facility increases operational hash rate in the coming weeks.”
Alameda Research, FTX’s sister enterprise, filed a lawsuit against crypto asset firm Grayscale Investments, it said in a press release on Monday.
In the suit filed in the Court of Chancery in Delaware, the company said it was seeking injunctive relief for alleged $250 million USD in assets it owes to FTX Debtors creditors and customers.
The document also states that Grayscale chief executive Michael Sonnenshein and Digital Currency Gorup (DCG) chief executive Barry Silbert had taken massive fees to manage Grayscale Ethereum and Bitcoin trusts. Shares linked to the trusts traded around 50 percent lower than net asset values.
According to the complaint, FTX debtors shares would have stood at $550 million, or 90 percent higher than current values, if the firm had reduced its fees and permitted redemptions.
John J Ray III, current chief executive and chief restructuring officer for FTX Debtors, said,
“We will continue to use every tool we can to maximize recoveries for FTX customers and creditors. Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban”
The news comes after DCG and Genesis Global Trading, an affiliate division, faced paybacks amid the collapse of crypto lending firm Genesis. The company owes creditors roughly $2.8 billion USD.
However, DCG must pay back $575 million to Genesis Global Capital by May this year, Silbert said in a letter in November last year.
French luxury firm Hermès International has asked Federal courts to prohibit Web3 artists Mason Rothschild from promoting non-fungible tokens featuring his “MetaBirkin” designs.
The news comes after Reuters reported on Monday jurors had decided that the artist had breached trademark rights on Hermès branded Birkin bags.
Hermès court filings revealed on Friday that the Web3 artist had continued to back his MetaBirkin NFTs, despite jurors finding him guilty of trademark infringement, dilution, and “cybersquatting,” Reuters said.
Due to the violations, courts forced Rothschild to pay Hermès $133,000 in damages and penalties. The French fashion boutique also ordered him to cease the “Birkin” trademark, MetaBirkin production, ownership, and earning funds.
Despite this, Hermès found that Rothschild still earned 7.5 percent in royalties for his MetaBirkin NFT sales whilst promoting the digital assets on his website and social media.
The company urged courts to launch a permanent injunction to block his actions, stating he “cannot be trusted [and made] repeated false statements.”
The filing added: “In light of the Jury Verdict on Hermès’s dilution and trademark infringement claims, the court may presume irreparable harm.”
It added that such presumptions were “warranted” as jurors found that Rothschild’s Birkin trademark violation was “likely to confuse potential consumers.” It also “intentionally designed to mislead consumers into believing” Hermès had associated with Rothschild’s MetaBirkins project, the filing said.