weekly recap: a roller coaster for bitcoin amid more regulatory efforts, fresh allegations on ex-FTX boss

News weekly recap: a roller coaster for bitcoin amid more regulatory efforts, fresh allegations on ex-FTX boss

The last week in the crypto scene was punctuated mainly by the continuation of existing trends. The rise in regulatory pressures and enforcement actions remained the same. Bitcoin (BTC) saw significant fluctuations triggered by the macro landscape, ending the week with a 1.3% gain after touching the much-coveted $24,000 zone for the first time since August 2022. Meanwhile, the FTX situation remained in the spotlight for another week, with new developments and insights coming to light.

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FTX updates and fresh allegations on Sam Bankman-Fried

Sam Bankman-Fried’s embattled empire has been in the news every week since early November of last year, with updates on its unique troubles emerging. Last week was no different, as it introduced more insight into the long-lasting saga. 

Reports from Jan. 30 suggested that Australian financial regulators had been investigating FTX six months before the implosion. The Australian Securities and Investment Commission (ASIC) began investigating the company following its entry into Bahamas. 

Though FTX claimed its operations complied with Australian regulatory standards, the investigations continued for months. However, they were only concluded following their implosion last November.

As FTX’s bankruptcy proceedings progressed, new revelations were brought to light last week. These included claims that Sam Bankman-Fried allegedly attempted to delay the bankruptcy proceedings with the U.S. Department of Justice (DoJ) to shift FTX assets to foreign regulators. 

The FTX founder was looking to plead for leniency with foreign regulators, hoping to regain control of the company and its assets. To this end, he had open withdrawals for FTX customers domiciled in the Bahamas. In contrast, withdrawals were locked for other customers at the outset of the company’s woes.

Barely 24 hours after these claims surfaced, further reports leveled fresh allegations on Sam Bankman-Fried, this time involving his family. His parents, Joseph Bankman and Barbara Fried, were alleged to have been unduly involved in the FTX case. Current FTX CEO John Ray III, who led the investigation into Sam Bankman-Fried’s family, claimed that there is a likelihood that his parents were paid.

Amid the ongoing bankruptcy proceedings, specific investigations have become necessary to pinpoint the whereabouts of lost assets. To this end, FTX debtors filed a motion last week to subpoena Sam Bankman-Fried and his inner circle requesting documents to help with the investigations. 

However, among the targeted parties, only Joseph Bankman and the legal representatives of FTX Trading’s Chief Operating Officer have responded to the inquiries. Sam is reportedly not complying, along with his mother, Barbara Fried.

Furthermore, last week, the head of product business operations at Coinbase, Conor Grogan, revealed some mysterious swaps made by FTX-affiliated wallets that allegedly led to a de-pegging event. In turn, this contributed to the eventual implosion of some crypto projects last year, including defunct hedge fund Three Arrow Capital (3AC) and bankrupt lender Celsius Network.

Blockchain security resource Peck Shield highlighted these withdrawals and swaps between May and June last year. The analytics platform noted that they were carried out by three wallets linked to FTX. Further claims suggest that Sam might have been involved in the swaps.

FTX debtors continue to scavenge for funds

The quest to settle creditors and customers spilled into last week as FTX debtors continued to salvage funds. Last Monday, FTX attorneys filed a motion on behalf of Alameda Research to recover $445m that had been sent to now-bankrupt lender Voyager in loan repayment. However, Voyager and the creditors’ committee replied, saying they won’t reimburse funds.

In another effort to recover as much money as possible, FTX extended the bid deadline for the auction of its European and Japanese subsidiaries to Mar. 8. The extension plea was granted by John Dorsey, the Delaware bankruptcy judge overseeing the firm’s proceedings. The auction is now expected to occur on Apr. 26 without new developments.

More recently, blockchain data revealed that the “Alameda Consolidation” address received over $13m from three different addresses in the space of two hours on Feb. 1. But what caught the attention of the crypto community was the fact that a BitFinex hot wallet was one of the three addresses, as the exchange was noticed to have sent $8.5m to Alameda, triggering questions.

Another round of regulatory efforts

Meanwhile, global regulatory efforts showed no signs of slowing down last week despite a massive concentration in the past few weeks. Enforcement actions further accompanied these international regulatory efforts.

On Jan. 31, Hong Kong’s central bank, the Hong Kong Monetary Authority (HKMA), revealed an update on its forthcoming regulatory scheme for stablecoins. The report highlighted the need for proper surveillance and suitable guidelines.

The apex bank also noted that it would enact a licensing scheme for stablecoin issuers looking to operate within the administrative region. This would encompass several regulatory requirements. 

In response, Binance CEO Changpeng “CZ” Zhao lauded the HKMA’s proposed regime, noting that it reflects some of the recommendations made by Binance. CZ pointed out the importance of ample regulation in the stablecoin market, saying stablecoins could benefit the global payments scene. Overall, he added, regulatory clarity could boost crypto adoption.

Australian authorities also announced last week that they would introduce improved legislation to combat crypto scams and protect consumers. The three-stage plan would ensure that crypto entities are subjected to proper risk-disclosure requirements.

The European regulatory landscape also saw some newly-proposed measures for digital assets. In an attempt to mitigate risks seen in 2022, the U.K.’s His Majesty’s (HM) Treasury disclosed plans to provide further regulatory clarity for the crypto scene in the country. This strategy involves regulating the digital currency industry with as much scrutiny as observed in traditional finance.

Another European nation Lithuania also revealed an approved plan to inspect several payment service providers this year for numerous identified issues, including AML/CTF, internal governance and operation management concerns, among others. Some of the entities to be inspected have close ties with Binance and

El Salvador, one of the foremost adopters of Bitcoin and cryptocurrencies, enacted a new law to improve its already-favorable approach to digital assets. The rule proposes the formation of a dedicated regulatory agency tasked with cryptocurrency surveillance. It also spells out new policies for transfers involving cryptocurrencies.

Notwithstanding its historical antagonism for bitcoin and the broader cryptocurrency industry, China might be looking to improve its attitude towards digital assets, Justin Sun, the co-founder of Tron, thinks. Sun, who is also the head of Seychelles-registered exchange Huobi, claimed on Jan. 30 that China’s recently-disclosed plans to tax cryptocurrencies constitute a significant step towards the country’s “increasing embrace of cryptocurrencies.”

In the same vein, the Tron Network’s official Twitter account also expressed excitement over the development on Feb. 1. They relayed their support of crypto taxation in the country.

While China appears to be transitioning towards a more lenient approach to crypto regulations, Berkshire Hathaway’s vice chairman Charlie Munger, who commended China for banning cryptocurrencies, recently suggested a similar approach for the United States. Munger believes an outright ban on cryptocurrencies would protect users in the United States. He maintains that digital assets are nothing but gambling contracts.

More enforcement actions

In addition to the regulatory efforts witnessed last week, the crypto scene saw several enforcement actions. In its fight against evasions of financial sanctions imposed on Russia, the U.S. Treasury Department, on Feb. 1, blocked 22 entities and individuals involved in facilitating funds with Russia. They include several bitcoin and ethereum addresses.

The Treasury further issued a warning to crypto exchanges and platforms against processing transactions involving sanctioned addresses, reiterating the risks associated with the blacklisted entities.

The enforcement action was announced two days after reports revealed that Russian nationals were resorting to drastic measures to circumvent financial restrictions from the West. These measures include purchasing KYC’ed crypto exchange accounts on the dark web.

Two days into February, the crypto scene received news of South Korean authorities’ arrest of Bithumb’s former chairman Kang Jong-hyun. The arrest was a week after the authorities issued a warrant for Kang based on numerous charges bordering market manipulation and fraudulent transactions.

Binance is looking to expand

The previous week also saw Binance in the spotlight for a few days. The crypto exchange made several moves to expand while concurrently demonstrating its commitment to combating scams. 

Last Monday, Binance revealed that it had partnered with MasterCard to launch its prepaid card in Brazil. The card is currently in its beta phase and will be unveiled in the coming weeks. The move will likely drive crypto adoption in the region due to Brazil’s position in the Latin American economy.

Binance also announced the release of the Whitepaper for its new decentralized data storage system BNB Greenfield. The innovative project aims to provide an improved data ownership and management approach. Upon the release of the Whitepaper, the team behind the project indicated a readiness to accept suggestions and feedback from the general public.

Binance is keen to re-enter the South Korean market through an acquisition deal as part of their expansionary moves. Last week, Binance purchased a substantial stake in South Korean exchange Gopax which halted principal and interest payments for its product GOFi last November due to exposure to bankrupt lender Genesis Global Capital. Binance was already showing interest in the exchange at the time.

Moreover, Binance has been supporting Kazakhstan in the development of its digital currency project. The project aims to develop a digital currency to be leveraged as a domestic medium of exchange in Kazakhstan. Reports from Feb. 3 revealed that the project had moved to the pilot phase with the support of Binance and the National Bank of Kazakhstan.

Meanwhile, updates on the public altercation between Binance and Zanmai Labs surfaced last week. Binance disclosed that it would stop providing wallet services to WazirX amid the long-standing argument about who owns the exchange between Binance and Zanmai Labs. 

The decision to terminate wallet services to WazirX follows Zanmai Labs’ reluctance to retract statements concerning Binance, which the exchange deems false. Binance had allowed Zanmai Labs to withdraw the statements or terminate their partnership.

In an attempt to support regulatory efforts, reports from last week suggested that Binance had begun blocking accounts on its platform that had interacted with Bitzlato, putting up withdrawal restrictions. The majority of blocked accounts belong to Russian nationals. It came shortly after U.S. authorities announced sanctions on Bitzlato, alleging that the exchange was being used for money laundering crimes.

Bitcoin clinches $24,000 after high volatility

Amid all the events witnessed within the space, the firstborn crypto bitcoin (BTC) was subjected to price fluctuations triggered by a mix of crypto-focused developments and the macroeconomic climate. Despite fierce resistance at the much-coveted $24,000 zone, BTC ended the week with a 1.3% increase.

On Jan. 31, Santiment disclosed that the previous day was bitcoin’s largest profit-taking day since Feb. 17, 2021. The development indicated that the asset would start seeing a pullback, and it was not far from the truth, as BTC dipped by 3.86% on Jan. 30, closing the day below the $23,000 mark. The dip was bitcoin’s largest intraday loss this year.

Despite the Jan. 30 drop, bitcoin was noted to have ended January with a 39% increase, making the previous month its most profitable January since 2013 and its best month since October 2021. Additionally, notwithstanding massive whale movements recorded last week, bitcoin’s percent supply last active in at least one year hit a 1-month high of 66.75% on Feb. 1.

While most industry players believe the previous year was not favorable for bitcoin and the crypto industry, a new study from last week revealed that interest in bitcoin increased by 82% in 2022 as more high-net-worth individuals considered the possibility of investing in the asset class last year. 

The story differed with institutional investors surveyed by American multinational financial services firm JPMorgan. Data from the JPMorgan survey showed that 72% of institutional investors are skeptical of cryptocurrencies in 2023, as they indicated no plans to invest in the nascent industry this year.

Nonetheless, the value appreciation witnessed with bitcoin and other crypto assets has pumped bullish sentiments into the space as investors find renewed hope. Ark Invest reiterated its bullish prediction for bitcoin last week, maintaining that the asset will reach $1 million by 2030 in a recent report. CEO of Morgan Creek Mark Yusko also claimed that the crypto summer bull run would begin in the second quarter of this year.

Veteran analyst Crypto Tony forecasted that, while bitcoin could get caught in a bearish trend in February, the asset is likely to stage a breakout that would lead to the reclamation of the $24,000 price point. Two days later, bitcoin recaptured the $24,000 zone for the first time since last August, soaring to $24,255 on Feb. 2 before facing resistance which saw it close the day at $23,488.

The U.S. macro climate and its effects on BTC

Amid these bullish forecasts and price movements, bitcoin’s entanglement with traditional finance contributed to the asset’s swings. The U.S. macro climate was hit with several updates last week. 

Following the previous CPI data report, the Federal Reserve increased benchmark interest rates by 0.25% in the last FOMC meeting. Shortly after the hike, which market watchers expected, BTC and other crypto assets staged some modest rallies. BTC appreciated by 3.37% in 24 hours to $23,828.

On Feb. 3, the U.S. jobs report came in, revealing the creation of 517,000 jobs last month, as opposed to the 185,000 estimates. In response, bitcoin plummeted to $23,370. Despite a modest comeback, the asset closed the day with its second consecutive loss. BTC ended Feb. 4 with its fourth successive loss but closed the week with a 1.3% gain, trading at $23,326.

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