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Grayscale presents case against SEC, Kraken cracks on with Kraken Bank, crypto scams spike 67%

Grayscale presents case against SEC,  Kraken cracks on with Kraken Bank, crypto scams spike 67%
US OCC head Michael Hsu, left, has called for tougher regulation and Kraken CEO Jesse Powell, right, could soon see his own bank open.

Grayscale presents case against SEC

Asset manager Grayscale will present arguments against the Securities and Exchange Commission in a hearing today. Grayscale took the SEC to court for rejecting its proposal to transform its flagship fund, Grayscale Bitcoin Fund, into a spot bitcoin ETF.

GBTC is a controversial financial instrument: it has high admin fees – 2% annual fee while the ETF industry standard is around 0.5% – and trades at a discount to Bitcoin’s price, currently at 42%.

Alameda Research sues Grayscale in recovery effort

In other Grayscale news, FTX sister firm Alameda Research initiated a lawsuit against the asset manager on Monday, as part of an effort to recover funds for creditors and customers. FTX CEO and chief restructuring officer John J. Ray III, who has overseen bankruptcy proceedings for FTX and Alameda since both firms collapsed in November, said recovery efforts are “being suppressed by Grayscale’s self-dealing and improper redemption ban.”

Alameda has an estimated $290 million in trust with Grayscale, but the lawsuit alleges that Grayscale’s fees and redemption system place the actual number at more than $540 million. The Alameda lawsuit also named Grayscale CEO Michael Sonnenshein, struggling crypto conglomerate Digital Currency Group and its founder Barry Silbert.

Crypto needs ‘consolidated supervision:’ US Banking Watchdog

Michael Hsu, acting head of the US Office of the Comptroller of the Currency, insisted Monday that crypto firms will not be trusted until they are supervised at the federal level, calling for “consolidated supervision” of the industry.

Speaking at an Institute of International Bankers event in Washington, DC, Hsu compared the collapse of FTX to a 1991 bank implosion which resulted in regulatory consolidation. Hsu’s speech echoes statements made by a slew of international bankers in the past few weeks, with the IMF, FSB and other entities calling for coordinated crypto regulation among nations.

The OCC is not the only US banking regulator pushing for tougher crypto policing. The Federal Reserve and Federal Deposit Insurance Corporate have both, just like the OCC, recently launched a string of cautions and law enforcement actions that market watchers suggest means that they are slowly bringing crypto under their thumb.

NOW READ: Bank regulators won’t ban crypto, they’ll ‘starve’ it

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Hong Kong crypto scams spike 67% in 2022

Hong Kong police have released numbers indicating a surge of cryptocurrency scams in 2022, with over HK$1.7 billion (US$216.6 million) in losses reported. Authorities reported 2,336 crypto-related scams in the city, amounting to a 67% rise from 2021.

The uptick in crypto crimes is described by police as a way for scammers to avoid being caught in the act – and it appears to be working. Only HK$1.3 billion in funds were intercepted by police in 2022, compared to HK$2.3 billion in 2021.

Kraken set to launch bank despite Silvergate worries

Crypto exchange Kraken is moving forward with its plans to create a new bank despite recent regulatory rumblings.

While the company’s chief legal officer Marco Santor lamented “a pretty unfortunate situation” in the US with a barrage of enforcement actions pelting the industry in recent months, he said on The Block’s The Scoop podcast that the exchange is still very much moving ahead with plans to open a bank.

Kraken Bank is very much on track to launch, very soon

“Kraken Bank is very much on track to launch, very soon,” Santori said. “We’re going to have those pens with the little ball chains. We’re going to order thousands of them and attach them to the to the desks of Wall Street banks everywhere. With our logo.”

Kraken’s Kraken Bank news comes as short-sellers suggest that US crypto-friendly bank Silvergate Bank may soon meet its demise .

In February, Kraken paid the SEC $30 million in fines and closed its staking platform on the agency’s orders. The exchange has neither admitted nor denied any wrongdoing.

NOW READ: Hedge fund short seller says Silvergate crash may be a sign of the bottom

Tether’s USDT grabs highest market share since 2021

Stablecoin frontrunner Tether’s USDT coin captured the largest share of stablecoin market share seen since November 2021. The jump comes amidst turbulence in the wider stablecoin market. Monday data shows USDT scooping up 54% of the stablecoin market, as Binance-branded BUSD’s market cap has declined from $16 billion to $9 billion in under a month.

The decline comes following a February order for stablecoin issuer Paxos to cease minting BUSD, issued by the New York Department of Financial Services. Stablecoin chart, indicating USDT dominance

Tornado Cash fork Privacy Pools intends to address key privacy issue

Privacy Pools launched on the Optimism layer 2 ecosystem over the weekend with the stated goal of addressing a key issue in keeping transactions private.

Privacy Pools is a “fork” of the crypto mixer Tornado Cash, which currently faces US sanctions for its alleged role in North Korean money-laundering.

A crypto mixer users to pool their funds in a common wallet which conceals transaction data. This makes tracking the funds back to their original source harder.

Privacy Pools differs from Tornado Cash by using a burgeoning technology, called zero-knowledge proofs, to facilitate private transactions while ensuring they have no links to criminal activities.

Privacy Pools remains in experimental stages, and has not yet been audited.

Elsewhere, Tornado Cash developer Alexey Pertsev has been in a Netherlands jail, awaiting trial, for seven months. Dutch prosecutors have accused him of money laundering crimes for his role in the mixer.

NOW READ: They’re coming for the DeFi devs: ‘You can’t just decide that the law doesn’t apply to you’

US Trustee appeals FTX judge ruling to forgo independent examiner

The US government is appealing a judicial decision to forego investigation into FTX by an independent examiner.

US bankruptcy court judge John Dorsey made the decision after FTX’s new management made the case that the probe could cost taxpayers up to $100 million to execute. Despite the big bill, the Department of Justice’s US Trustee was joined by a group of US senators who called for the case to be investigated by a third party.

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