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Law Decoded: Green lights of the SEC, black flags of Binance, Nov. 13–20

Libel laws and new faces at the U.S. securities regulator lead the week’s news….

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Amid a political news cycle that has been stuck in a nauseating loop, covering crypto is often refreshing. Partisan forces have yet to dig out the trenches. A lot of the current task is just getting working definitions in play.

Meanwhile, the technology advances at a mind-boggling rate, and there are still enough outrageous scams, absurd tomfoolery and indeed general skulduggery to keep everything from getting dull.

Speaking of skulduggery, I will begin this week with a comment on a challenge to journalism in the crypto industry that has wide-spanning implications. Not many people think about the relationship between the law and journalism. At its best, journalism is egalitarian in whose toes it steps on — whether they’re bigwigs in government or private industry, with obvious bonus points for size. Just so long as you’re exposing what those people want to keep hidden.

The concept of the strategic lawsuit against public participation, or SLAPP suit, is that you don’t need to win to shut someone up — whether that’s a public whistleblower or, often, a journalist. It’s a nasty legal invention that depends on an entity having more resources to burn on a lawsuit than the defendant has to defend him or herself. With that bit of prologue, we’re starting with a defamation lawsuit from one of the biggest names in crypto.

Binance Holdings, the parent company of the global exchange but, they claim, not of Binance.US, is suing journalists Michael del Castillo and Jason Brett and publication Forbes for libel.

The pair wrote a piece accusing Binance of using a scheme of concealed corporate ownership to get funds from operations in the U.S. back to the mothership. Binance’s plight in this case would likely be more sympathetic if the firm didn’t have a record of concealing its ownership and registration location. It’s a lack of transparency that means nobody is quite sure where the largest crypto exchange in the world is based and whose laws it answers to. In a positive light, it’s sort of like pirate radio back in the ’60s UK, going offshore to broadcast the Who to unsuspecting Britons. In a negative light, it’s more like regular old pirates, coming to shore only when they want to do some pillaging.

The case, filed in New Jersey’s district court, seems unlikely to turn out in Binance’s favor, but that’s hardly the point. CEO Changpeng Zhao has a longstanding contentious relationship with reporting on the company. In the past year, he has used Twitter to threaten to hit TheBlock with a similar libel suit, and once casually referred to Cointelegraph’s staff as “evil journalists.”

Trying to intimidate journalists, as mentioned above, is nothing new. SLAPP lawsuits have become part of the game, and with companies operating across such a wide range of jurisdictions, many do a fair bit of jurisdiction shopping. Fortunately for del Castillo, Brett and Forbes, New Jersey is fairly protective of its journalists. Such suits, however, have a chilling effect on efforts to shine light on opaque businesses like Binance.

The U.S. Securities and Exchange Commission sent out only its third no-action letter to a token issuer, allowing social media platform IMVU to sell and buy its VCOIN to and from users.

The SEC has long been a major stumbling block for firms looking to issue crypto tokens. Many in the industry chafe at the lack of solid guidance as to what the SEC does not consider a security. As firms like Telegram and Facebook found out, such definitions are important.

The two earlier no-action letters from the SEC were for projects that were extremely limited in scope. The SEC was providing pretty flimsy support for tokens on tiny platforms with single uses that, critically, did not allow users to turn those tokens back into fiat currency.

Per this week’s no-action letter, VCOIN will not be available to trade on any outside platform and will stay at a fixed price that IMVU has committed to buy and sell at, providing an unlimited supply. The idea here is to avoid the “expectation of profit” prong of the Howey Test, which the SEC uses to determine investment contracts. Which is all par for the course.

IMVU’s wide user base AND the ability of those users to transact VCOIN among themselves before selling them back to platform in exchange for fiat currency is a huge leap forward for the SEC’s comfort with crypto. Maybe, as the guard is changing, the people in charge are trying to open the gate. Speaking of which…

This week, the SEC also announced that Jay Clayton, who has been chairman of the commission since 2017, will step down by the end of the year. Coming just a week after Bill Hinman, director of the Division of Corporate Finance, made a similar announcement, the SEC’s leadership is poised for a major turnover.

Such a turnover is not a complete surprise. Clayton has been known to be looking to leave the SEC for some time. He in fact fell into a somewhat scandalous situation when President Trump and Attorney General Barr tried to jam through his nomination to serve as prosecutor in the Southern District of New York after an apparently chummy golf outing between Trump and Clayton.

Moreover, regulatory staffs often track alongside shifts in presidential administrations. Trump and Senate Republicans have been charging through a roster of nominations in what may be the clearest indicator that they don’t actually believe Trump won this month’s election. Clayton’s timed departure, however, should put nomination of the SEC’s new leadership firmly in the hands of a Biden administration. Given that the Senate will be deadlocked or with a slight Republican majority, it’s likely going to be a fairly moderate candidate, but certainly one not as laissez-faire as Clayton.

The Electronic Frontier Foundation has put out a new project to educate the public on browser fingerprinting and tracking.

Legal analysts for Bloomberg Law analyze the charges against BitMEX and the exchange’s leadership in the context of AML requirements for crypto.

Lawyers for Pilsbury write on the developing role of blockchain and tokenization in fractional real estate ownership and trading.

Source: https://cointelegraph.com/news/law-decoded-green-lights-of-the-sec-black-flags-of-binance-nov-13-20

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Cointelegraph

Binance Coin reaches 37% of Ethereum’s market cap: 3 reasons why BNB is soaring

Binance Coin (BNB), the native cryptocurrency of Binance Smart Chain, has been rallying after seeing an uptick in transaction volume.

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Binance Coin, the native cryptocurrency of Binance Smart Chain, has been surging with a massive uptick in transaction volume.

Binance Coin reaches 37% of Ethereum’s market cap: 3 reasons why BNB is soaring

Binance Coin (BNB), the native cryptocurrency of Binance Smart Chain and top digital asset exchange Binance, is starting to close in on Ethereum (ETH) in market capitalization.

As of April 12, BNB is valued at $87 billion at the price of just under $600. The valuation of Ethereum is hovering at around $246 billion, which is 2.8 fold larger than that of Binance Coin.

— Joe Grech (@JoeBGrech) April 12, 2021

The technical momentum of BNB has been so strong that it briefly surpassed the volume of the BTC/USDT pair on Binance.

This trend is significant because USDT is the biggest stablecoin in the global market and the BTC/USDT pair is one of the most liquid trading pairs in crypto.

Why is Binance Coin surging so hard?

Binance Coin has been rising due to the three key reasons: an overall uptick in the popularity of Binance Smart Chain, strong technical momentum, and the gap between BSC and Ethereum projects.

Binance Smart Chain transaction volume. Source: BSCScan.io

In recent weeks, the transaction volume on Binance Smart Chain has tripled the volume of the Ethereum blockchain.

Particularly in Southeast Asia, the usage of Binance Smart Chain has been rising, according to Coin98, the biggest venture capital firm in Vietnam that is building a DeFi ecosystem targeted at Asia.

Considering that the price of BNB was much lower than Ethereum until late March, this discrepancy between BNB and ETH likely made BNB a compelling trade.

There is also a big gap in valuations between the Ethereum DeFi ecosystem and Binance Smart Chain, which has been fueling a large portion of the demand for BSC projects.

This has caused the value of BNB to rapidly rise over the past two weeks while ETH has been relatively stable at just over $2,000.

A journalist who covers crypto in China known as “Wu Blockchain” explained:

“BNB broke through an astonishing $600, but Ethereum’s Fees fell to its lowest point in a month. Although the transaction volume of BSC is 3x that of Ethereum, the two are not in a competitive relationship. The top 10 addresses of BNB hold more than 88%, and Eth is 20%. The future of Ethereum depends on the upgrade of EIP-1559 and 2.0. The only two things Binance needs to worry about are the government suppression and hackers.”

Traders foresee BNB to undergo a more explosive rally in the foreseeable future if it breaks out against Bitcoin.

Kaleo, a pseudonymous cryptocurrency trader, said:

“$BNB breaking above this level on the $BTC pair could lead to the type of explosive momentum needed to actually close in on $1,000.”BSC/BTC 1-day price chart (Binance). Source: TradingView.com, KaleoWill the capital rotate back into Ethereum?

However, Kelvin Koh, the managing partner at Spartan Group, one of the largest DeFi-focused funds in Asia, said that for now, he expects the capital to rotate back into Ethereum as BSC projects near the valuation of ETH equivalents.

He emphasized that there is a huge valuation gap between BSC and ETH projects. This gap could be making BSC projects compelling to the market. He said:

“BSC is having its own DeFi summer….so much alpha to be discovered in BSC ($XVS, $CAKE). If you are wondering why Ethereum DeFi coins are lacklustre, its because of the huge valuation gap that still exists between the BSC coins and ETH equivalents. Until this gap closes, money isn’t rotating back to ETH DeFi coins.”

Source: https://cointelegraph.com/news/binance-coin-reaches-37-of-ethereum-s-market-cap-3-reasons-why-bnb-is-soaring

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Our Man in Shanghai: Scandal as $45M of stolen government funds lost using 100X leverage

A blockchain security company’s future is in doubt after its CMO allegedly lost $45M betting on Bitcoin; Chinese netizens turn the other cheek to Peter Thiel’s warnings, and more

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The Chief Marketing Officer a blockchain security company has been charged with embezzlement; Peter Thiel calls Bitcoin a ‘weapon’ of China (but no one cares), and CZ’s net worth rises to $1.9 billion.

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Our Man in Shanghai: Scandal as $45M of stolen government funds lost using 100X leverage

Blockchain security company Beosin has been the focus of a major scandal after its Chief Marketing Officer Gao Ziyang was taken into custody and charged with embezzlement of state-owned assets. He is alleged to have been using government funds to unsuccessfully short BTC, resulting in a massive liquidation of over 300 million renminbi, or $45 million dollars.

Beosin, also known as Lianan Tech, had a working relationship with Chinese authorities and was helping them investigate fraudulent fundraising schemes. After the seizure of funds back in 2020, Beosin was tasked with storing and selling the assets, to be later returned to the state treasury. Instead of selling the assets, CMO Gao Ziyang allegedly opened a short position in late August, hoping to increase the size of the positions for personal gain. At the time, BTC was trading around $12,000.

Authorities say that records obtained from OKEx show the position began using 10x leverage, before increasing to 100x, and eventually ended up in liquidation. They began to ask about the whereabouts of the funds, before finally realizing that the assets were no longer in the wallet. Online, people have marveled at the age of Gao Ziyang, who was described as in his twenties. The future of Beosin, which was once regarded as a credible blockchain security company in China, is now in serious doubt.

Peter Thiel’s Bitcoin claims ignored

On Wednesday, PayPal co-founder and venture capitalist, Peter Thiel warned that the Chinese government may be using Bitcoin as a “financial weapon” to undermine the stability of the U.S. Dollar. The reaction was quite muted, as only 30 comments responded to the story on Sina Finance, a social media account with over 23 million followers. One of the top comments simply pointed out that “Bitcoin wasn’t invented by China” while another comment simply stated “Impossible”.

Binance billionaire

On Thursday, Binance founder Zhao Changpeng, better known as CZ, appeared as #1664 on Forbes’s annual billionaire list. His net worth is now listed at $1.9 billion, an increase of $700 million from the last list in 2020.

Nanjing Ribensi bought by US company

US Company Future FinTech announced earlier this week that they had agreed to a deal to acquire China-based mining company Nanjing Ribensi Electronic Technology Co. Nanjing Ribensi operates a mining farm that can handle up to 30,000 Bitcoin mining machines. The deal was worth approximately $9.1 million dollars and stipulates that the mining company must generate no less than approximately $2.3 million dollars in 2021.

Blockchain standards accelerated

China’s National Development and Reform Commission called for the accelerated implementation of blockchain standards in a new plan released on April 1. The plan was jointly issued by 28 government departments and also included technologies such as cloud computing, IoT, and big data.

This weekly roundup of news from Mainland China, Taiwan, and Hong Kong attempts to curate the industry’s most important news, including influential projects, changes in the regulatory landscape, and enterprise blockchain integrations.

Source: https://cointelegraph.com/news/our-man-in-shanghai-scandal-as-45m-of-stolen-government-funds-lost-using-100x-leverage

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CoinMarketCap removes South Korea crypto exchanges from Bitcoin price tracker

The crypto analytics provider also removed South Korean exchanges from the price calculations of cryptocurrencies in 2018 “due to the extreme divergence in prices.”

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“If the prices on South Korean exchanges stabilize, then we will add the data back in, but that hasn’t happened yet,” said a CoinMarketCap spokesperson.

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CoinMarketCap removes South Korea crypto exchanges from Bitcoin price tracker

Crypto price trackin website CoinMarketCap has removed many South Korean exchanges from its calculations for the price of Bitcoin as the coin dipped under $58,000 again.

As of today, CoinMarketCap’s Bitcoin price tracker shows no data from major South Korean crypto exchanges including Upbit, Bithumb, Coinone, and Korbit. The website uses data from many exchanges to estimate the average price for cryptocurrencies. At the time of publication, the price of Bitcoin (BTC) is $57,721, having fallen more than 2% this morning.

Speaking to Cointelegraph, CoinMarketCap content manager Molly Jane Zuckerman said the removal was due to the premium observed on crypto exchanges based in South Korea. The crypto analytics provider estimates the BTC price to be roughly 6% higher than that on other exchanges.

“If the prices on South Korean exchanges stabilize, then we will add the data back in, but that hasn’t happened yet,” said Zuckerman.

The last time the price tracking website took similar action was in 2018, when CoinMarketCap announced it had “excluded some South Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity.”

During roughly the same time three years ago, the price of XRP was falling significantly after reaching an all-time high of $2.96 on Jan. 2. However, the token is looking bullish today, having briefly surpassed $1.00 for the first time since 2018 after it rose more than 20% in the last 24 hours. The price has since fallen to $0.9694 at the time of publication.

CoinMarketCap said only its Bitcoin price index was affected today, given the large volume of the crypto asset on South Korean exchanges. Last month, the volume of transactions in the South Korean digital currency market — driven in part by the price of BTC reaching an all-time — briefly exceeded the daily average transaction amount of the country’s stock market.

Source: https://cointelegraph.com/news/coinmarketcap-removes-south-korea-crypto-exchanges-from-bitcoin-price-tracker

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