Cryptocurrency prices were down Friday, falling over a very busy week that included an interest rate hike and regulation efforts. The White House announced its regulatory framework for cryptocurrencies, the SEC claimed jurisdiction over Ethereum, and the IRS is going after crypto tax evaders. Meanwhile, JPMorgan says increased interest rates should benefit Coinbase, which denied reports of market manipulation on Friday.
From Warren Buffett's indirect crypto investments to the latest $160 million DeFi hack, here are this week's top cryptocurrency news stories.
Be sure to also check this week's coverage of cryptocurrency ETFs like BITQ, BLOK and BITS.
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Cryptocurrency Price Action
Bitcoin tumbled to around $18,800 by market close Friday after recovering above $19,400 Thursday evening. And Ethereum fell under $1,300, now down about 12% in the last seven days. Ethereum's price has slipped after merging to a proof-of-stake network that should make the system faster and vastly more energy efficient. Cryptocurrency prices tumbled during the week on the latest inflation data.
Cryptocurrency Prices Heat Map:
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The IRS Comes After Crypto Tax Evaders
An attorney for the Southern District of New York has authorized the Internal Revenue Service to issue a "John Doe Summons" to collect unpaid cryptocurrency taxes. The summons requires M.Y. Safra Bank to produce information about U.S. taxpayers that may have failed to report or pay taxes on crypto transactions. Specifically, the IRS seeks information about users of crypto broker SFOX, who utilized services offered by M.Y. Safra Bank to customers engaged in cryptocurrency transactions. "The government is committed to using all of the tools at its disposal, including John Doe summonses, to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share," said Damian Williams, attorney for the Southern District of New York.
Coinbase Denies Proprietary Trading
Coinbase denied reports from the Wall Street Journal saying the crypto exchange participates in proprietary trading to act as a market maker. The WSJ report claimed the crypto exchange hired Wall Street veterans to trade and "stake," or lock up, cryptocurrencies using the company's cash to generate profit. Earlier this year, the team completed a $100 million transaction to test the effort. Coinbase says from time-to-time it purchases cryptocurrency as principal, for treasury and operational purposes. But it doesn't consider those proprietary trades because the purpose isn't short-term gains.
China's Blockchain Patent Applications
China makes up 84% of blockchain applications worldwide, according to state officials from the Ministry of Industry and Information Technology. However, despite the most patent applications, only 19% of those filed are approved, the South China Morning Post reports. While China is interested in blockchain technology and NFTs, it banned cryptocurrency mining and trading earlier this year.
Jamie Dimon Calls Cryptocurrencies Ponzi Schemes
JPMorgan CEO Jamie Dimon called crypto tokens "decentralized Ponzi schemes" in testimony to the House Financial Services Committee on Wednesday. Dimon, who has been critical of Bitcoin in the past, called cryptocurrencies dangerous, pointing to money laundering issues and billions lost in hacks and fraud. However, "properly regulated" stablecoins wouldn't be problematic, Dimon said. JPMorgan launched an in-house stablecoin in 2020, as well as opening a virtual lounge in Decentraland earlier this year.
House Drafts Crypto Regulations
The U.S. House of Representatives has drafted a bill to regulate stablecoins, according to Bloomberg. The legislation would place a two-year ban on algorithmic stablecoins that are backed by another digital asset from the same creator, which is how TerraUSD collapsed earlier this year. The bill states it would be illegal to issue or create new "endogenously collateralized stablecoins," and mandates multiple agencies collaborate on a study of Terra-esque tokens.
CEO Of Kraken Exchange Steps Down
Jesse Powell, CEO of the crypto exchange Kraken, is stepping down from his position. Chief Operating Officer Dave Ripley will take the reins of the fourth-largest cryptocurrency exchange, based on spot-trading volume, according to CoinMarketCap data. Powell, the company's largest shareholder, will stay on as board chairman.
The SEC Claims Jurisdiction Over Ethereum
The Securities and Exchange Commission claimed jurisdiction over Ethereum transactions, arguing they take place in America because Ethereum nodes are "clustered more densely in the United States than any other country." The claim was made in a lawsuit against Ian Balina, cryptocurrency promoter and CEO of crypto investment research platform Token Metrics. Balina is accused of conducting an illegal sale of Sparkster tokens for its unregistered Initial Coin Offering in 2018, raising $30 million from 4,000 investors. Because the sale occurred using the Ethereum blockchain and transactions were validated by Ethereum nodes, it happened in the U.S., the SEC says.
Bitcoin's Electricity Consumption
Bitcoin accounts for up to 77% of electricity consumed on cryptocurrencies, recent data from BanklessTimes shows. As of mid-August 2022, the U.S. share of global Bitcoin electricity usage is estimated between 33 billion and 55 billion kWH per year, which is comparable to the entire annual consumption of countries such as Portugal, Switzerland, Algeria and Peru. Estimates say the American crypto industry currently emits between 25 and 50 million metric tons of CO2 annually.
Warren Buffett Indirectly Invests In Crypto
Warren Buffett has been critical of cryptocurrencies, contending that they have no intrinsic value. That criticism has kept Berkshire Hathaway away from digital banking, crypto firms and NFTs. But Buffett's recent SEC filings show he may be opening up to some of these more speculative assets — at least indirectly.
Nasdaq Launches Digital Asset Business
Nasdaq is establishing a new business to drive institutional adoption of digital assets. The new Nasdaq Digital Assets firm will provide custody solutions, liquidity and execution services for financial institutions. Nasdaq also plans to expand its anti-financial crime technology capabilities to cover the space. "The technology that underpins the digital asset ecosystem has the potential to transform markets over the long-term," Nasdaq CEO Adena Friedman said. "To deliver on that opportunity, our focus will be to provide institutional-grade solutions that bring greater liquidity, integrity and transparency to support the evolution."
Latest $160 Million DeFi Hack
United Kingdom-based crypto market maker Wintermute had $160 million stolen from its decentralized finance operations on Tuesday. CEO Evgeny Gaevoy says things will get back to normal after services disruptions today and over the next few days. Wintermute provides liquidity to more than 50 exchanges and trading platforms including FTX, Coinbase, Binance, Kraken and Uniswap.
Where Does Bitcoin Stand After Ethereum's Merge?
More than $20 billion of ETH is effectively collateralized to run the Ethereum network following its merge to proof-of-stake. Where does that leave proof-of-work Bitcoin as the crypto winter drags on?
Coinbase Could Benefit From Higher Rates, JPMorgan says
Coinbase could see $1.2 billion in interest income revenue in 2023, JPMorgan estimates. JPMorgan analyst Kenneth Worthington said Coinbase could have a "substantial revenue opportunity" from higher interest rates and the one-month Treasury yield hitting 3.75% by the end of the year. He expects $700 million of that revenue to come from the Centre Consortium, Coinbase's 50/50 joint venture with Circle, which oversees the USDC stablecoin. Worthington raised his price target for COIN stock to $78 from $64 but keeps a Neutral rating.
FTX Has $1 Billion To Spend On Acquisitions
Crypto exchange FTX has more than $1 billion to spend on acquisitions and bailouts, CEO Sam Bankman-Fried told CNBC's Squawk Box. Bankman-Fried said it depends how much they're comfortable deploying, but there's another "ballpark billion that is completely unencumbered." FTX has stepped up as a last-resort lender and bailed out multiple crypto firms over the past year — or at least publicly offered to — as cryptocurrency prices nose-dived.
Binance Launches NFT Gift Cards
Binance is launching the first NFT gift cards. The crypto exchange is releasing gift cards and digital gift cards that exchange non-fungible tokens instead of fiat money. Binance intends for various crypto projects to use them as a way to spread brand awareness, engage with their communities and provide a user-friendly point of entry to the NFT space.
