By Darren Parkin
Data from CryptoCompare shows that the price of Bitcoin dropped from around $22,500 to around $22,100over the last seven days after recovering from a weekly low below the $20,000 mark, with the cryptocurrency crashing over a bank run in the traditional finance space.
Ethereum’s Ether, the second-largest cryptocurrency by market cap, moved similarly to BTC, dropping from around $1,550 to a $1,350 low before it started recovering and climbed back up to $1,580.
This past week was initially dominated by a number of headlines surrounding Silvergate Bank, Bank was one of the few mainstream financial institutions that catered to the cryptocurrency space, shutting down.
These headlines were accompanied by BinanceUSD (BUSD) the stablecoin issued by Paxos for the leading cryptocurrency exchange, seeing its market capitalization plunge as investors moved away from it.
Investors moved away from BUSD after Paxos Trust, the operator of the Binance-branded stablecoin, announced that it would stop minting BUSD due to the SEC’s intention to sue Paxos for violating investor protection laws.
Headlines were, however, later on, captured by the impact of the bank run on Silicon Valley Bank, in which investors and depositors tried to pull $42 billion from their accounts n a single day. SVB soon ran out of cash and ways to get it, forcing the Federal Deposit Insurance Corp. to step in.
The bank affected the cryptocurrency space as several firms in the sector had funds placed on it. These firms included the reserves of the second-largest stablecoin in the space, USDC, which had $3.3 billion in the bank.
Circle revealed that $3.3 billion of USDC’s reserves were on SVB at about the same time Coinbase, a leading cryptocurrency exchange and a part of the CENTRE Consortium, the entity behind USDC, revealed it as pausing conversion between USDC and USD on weekends.
As a result, the stablecoin lost its peg amid a flurry of trading activity that saw decentralized exchanges Uniswap and Curve record lifetime high trading volumes. USDC has since recovered and is now close to the $1 mark again, after US regulators stepped in to make SVB depositors whole.
New York regulator labels Ether a security in KuCoin lawsuit
New York Attorney General Letitia James has filed a lawsuit against KuCoin, a cryptocurrency trading platform based in Seychelles, alleging that the exchange violated securities laws. The lawsuit specifies tokens, which it says meet the definition of a securyti. These tokens include Ethereum’s ether.
This is the first time that a regulator has claimed in court that Ether is a security, despite hints from Securities and Exchange Commission Chairman Gary Gensler that the agency might consider it as such.
While the Commodity Futures Trading Commission previously maintained that Bitcoin and Ether are commodity assets, James argues that Ether falls under the Martin Act, which is a 102-year-old anti-fraud law that gives her office the power to investigate securities fraud and take legal action against violators.
Meanwhile, Bankrupt cryptocurrency lender Voyager Digital has secured court approval to sell its assets and transfer its users to Binance.US, in a deal valued at $1.3 billion, though the firm still has to clear additional hurdles before the deal is finalized.
Headlines coming from the United States have also revealed that the Federal Reserve is forming a team of experts to monitor developments in the cryptocurrency industry, particularly in relation to unregulated stablecoins. The move is part of the central bank’s effort to maintain oversight of the sector and establish necessary regulations.
Biden admin budget proposes 30% tax on crypto mining energy
Under President Joe Biden’s latest budget proposal, US crypto miners may face a 30% tax on their electricity costs in an effort to reduce mining activity. The tax would apply to any firm using resources, regardless of whether they own or rent them.
The tax would be phased in over three years, starting after December 31, 2021, at a rate of 10% per year, before reaching the full 30% rate in the third year. The Treasury argues that the energy consumption of crypto mining operations has negative environmental effects and creates uncertainty and risks for local utilities and communities.
To comply with the proposal, cryptocurrency miners would need to report the amount and type of electricity used and the value of that electricity. The move would also apply to those who acquire their energy off-grid.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.
Featured image via Unsplash.
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