Ten31 Timestamp 776,359
The heavy hand of regulation came down particularly hard this week on the non-bitcoin “crypto” complex. Kraken, Signature Bank, Binance, and Paxos all felt the sting of what appears to be a rapidly expanding regulatory appetite for more aggressive treatment of centralized crypto products and platforms promising “yield” to retail investors. While it’s too soon to say for sure whether this week’s torrent of regulatory headlines is a flash in the pan or a signal of a sustained escalation in government hostility toward “crypto,” Ten31 believes the writing has long been on the wall for instruments that pass the Howey Test and the companies attempting to skirt securities regulations to promote them. The regulatory outlook for bitcoin remains comparatively much brighter, with recent statements from key regulators consistently reinforcing the long-established view of bitcoin as a commodity. In a truly adversarial regulatory scenario – which bitcoiners should always be planning for – such precedents and clear reasoning are likely to offer thin protection for bitcoin, but for the time being regulatory ire appears to be directed, predictably, toward the types of assets and enterprises Ten31 has been avoiding since its inception. In the final analysis, bitcoin alone can’t be banned, and its adoption worldwide – particularly in the Global South and forward-thinking jurisdictions – will continue to proliferate regardless of how or when behind-the-curve bureaucrats choose to launch counterproductive and self-defeating attacks. Meanwhile, our portfolio companies will continue to build tools and infrastructure to help make bitcoin use more robust, censorship-resistant, and approachable for the next billion people who need superior money more than they need illusory “yield.”
Selected Portfolio News
Coinkite unveiled the Q1, its latest and most richly featured hardware signing device. The Q1 is available for pre-order now:
Coinkite is also now offering a new discounted multisig bundle including a Coldcard Mk4 and two Tapsigners:
Unchained successfully completed its SOC 1 and 2 certifications, the latest validation of the company’s robust internal security and risk management procedures:
Unchained also added support for its trading desk to clients in Idaho:
As part of its ongoing process of moving to a full bitcoin standard, Start9 announced the launch of its own bitcoin-only online store powered by BTCPay Server:
Fedi announced the winners of its 30-day hackathon:
Zaprite added an IBEX integration allow for easy lightning payments directly from invoices:
Bitcoin Magazine released the second episode of Freedom Money with Matt Odell.
Matt also wrote a piece considering the possibility of using the Fedimint protocol to build alternative mining pools.
Unchained published an article looking at various ways to interact with bitcoin more privately.
Drew Armstrong, COO of Cathedra Bitcoin, released the second part of his overview of the interaction of debt capital markets and bitcoin mining.
Cathedra also put together a thread showing detailed data from their extensive testing of the S19J Pro’s efficiency.
Publicly traded Canadian miner Hut8 announced it would merge with US Bitcoin Corp, creating a pro forma entity with combined hashrate of 5.6 EH/s.
DCG continued to make various moves to respond to the fallout of subsidiary Genesis’s insolvency, including restructuring of its equity in Genesis Trading and discounted sales of investment vehicles under the Grayscale umbrella.
Stronghold announced the restructuring of its remaining $55 million of debt, including a postponement of amortization payments through June 2024.
Peer to peer bitcoin exchange LocalBitcoins announced it will cease operations by the end of this month, citing headwinds from the current bear market.
To kick off an extremely busy week of regulatory actions, the SEC issued an investor alert warning that crypto tokens held in IRAs may be classified as unregistered securities.
Shortly thereafter, a class action lawsuit was filed against Signature Bank regarding the bank’s allegedly “substantial” involvement in perpetuating FTX’s fraudulent practices.
News hit in the middle of the week that the SEC was probing some of Kraken’s offerings to US investors, which was shortly followed by the announcement of a $30 million settlement between the parties and Kraken’s shuttering of its staking business. The substance of the SEC’s complaint revolved around its view of Kraken’s “staking-as-a-service” business as effectively an unregistered securities offering.
In the wake of this news, Coinbase CEO Brian Armstrong publicly aired his fears that regulators may look to broadly crack down on retail staking in general.
Following this episode, SEC Chair Gary Gensler took to CNBC to voice resounding skepticism about crypto “yield” products and suggest that exchanges and other institutions should “take note” of this precedent.
Meanwhile, reports surfaced that the New York Department of Financial Services is investigating stablecoin issuer Paxos, though the scope of the investigation is unclear.
Binance announced it would suspend USD deposits and withdrawals, though cited no specific reason for the decision.
Eight Democratic lawmakers including Elizabeth Warren sent a letter to the Department of Energy and the EPA urging the agencies to compel bitcoin miners to disclose more data about their energy usage.
Kazakhstan implemented new legislation aimed at only allowing bitcoin miners to consume electricity from the country’s grid when a surplus is available. The law also limits which pools miners in the country can use.
The Bank of England released a framework for their “digital pound” CBDC. Notably, the framework includes restrictions on “hoarding” digital pounds to limit the potential for bank runs.
Some banks in the UK have reportedly started blocking clients’ access to cryptocurrencies, citing volatility and the potential for fraud.
The New York Fed released a lengthy paper dissecting bitcoin’s apparent lack of correlation to macro headlines, in contrast to other major asset classes.
The US trade deficit reached an all-time high of nearly $950 billion in 2022.
The ECB released a survey suggesting cash remains the dominant payment method among Europeans, though its use relative to digital payments has declined notably in recent years, which may have implications for the eventual rollout of CBDCs.
Meanwhile, Swiss activists have generated significant momentum to force a vote on a proposal to establish the use of cash as a constitutionally-protected right.
A UK court ruled that Craig Wright’s lawsuit against bitcoin developers – in which Wright is seeking to compel developers to make updates that would allow him to retrieve 111,000 bitcoin he ostensibly lost – can proceed to trial.
However, a separate UK court ruling established that Wright has no copyright claim on bitcoin.
The number of inscriptions on the bitcoin blockchain is approaching 50,000.