<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107337316-1700585872532-gettyimages-1239957235-FRANCE_BLOCKCHAIN-820x547.jpeg" alt="" class="wp-image-429211" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107337316-1700585872532-gettyimages-1239957235-FRANCE_BLOCKCHAIN-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107337316-1700585872532-gettyimages-1239957235-FRANCE_BLOCKCHAIN-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107337316-1700585872532-gettyimages-1239957235-FRANCE_BLOCKCHAIN-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107337316-1700585872532-gettyimages-1239957235-FRANCE_BLOCKCHAIN-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107337316-1700585872532-gettyimages-1239957235-FRANCE_BLOCKCHAIN-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107337316-1700585872532-gettyimages-1239957235-FRANCE_BLOCKCHAIN-scaled.jpeg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Zhao Changpeng, founder and chief executive officer of Binance, speaks at the Blockchain Week Summit in Paris, France, on Wednesday, April 13, 2022.  Benjamin Girette | Bloomberg | Getty Images</figcaption></figure>



Binance chief Changpeng Zhao pleaded guilty Tuesday to criminal charges and stepped down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice, according to court documents. The plea arrangement with the government resolves a multiyear investigation into the world’s largest cryptocurrency exchange.



Zhao appeared before Judge Brian Tsuchida in a Seattle courtroom to enter his plea. Zhao and others were charged with violating the Bank Secrecy Act by failing to implement an effective anti-money-laundering program and for willfully violating U.S. economic sanctions “in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law,” according to the Justice Department.



Zhao said Tuesday in a post on X, formerly Twitter, that he had “made mistakes” and “must take responsibility.” He said Richard Teng, the company’s former global head of regional markets, has been named the new CEO of Binance.



The action against Binance and its founder was a joint effort by the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department. The Securities and Exchange Commission was notably absent.



Treasury Secretary Janet Yellen said in a release Tuesday that the exchange allowed illicit actors to make more than 100,000 transactions that supported activities such as terrorism and illegal narcotics and that it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions.



It also allowed transactions associated with terrorist groups such as Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, al-Qaida and ISIS, Yellen said in the release, noting Binance “never filed a single suspicious activity report.”



U.S. Attorney General Merrick Garland said in a press conference Tuesday that the fine is “one of the largest penalties we have ever obtained.”



“Using new technology to break the law does not make you a disruptor. It makes you a criminal,” Garland said.



“Binance prioritized its profits over the safety of the American people,” he said.



According to a 92-page consent order between Binance and Treasury’s Financial Crimes Enforcement Network, or FinCen, the crypto exchange “even developed a process to notify VIP users if they became the subject of a law enforcement inquiry.”



Zhao personally pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act, according to the plea agreement. The DOJ is also recommending that the court impose a $50 million fine on Zhao.



Zhao has been released on a $175 million personal recognizance bond secured by $15 million in cash and has a sentencing hearing scheduled for Feb. 23.



Binance will continue to operate but with new ground rules. The company will be required to maintain and enhance its compliance program to ensure its business is in line with U.S. anti-money-laundering standards. The company is required to appoint an independent compliance monitor.



The case against Binance, which was unsealed Tuesday, shows that three criminal charges were brought against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy.



Binance has agreed to forfeit $2.5 billion to the government, as well as to pay a fine of $1.8 billion.



The Justice Department said in its filing Tuesday that Binance “knowingly and willfully” caused the supply of services to Iran, in breach of U.S. sanctions. It follows a report that Binance processed billions of dollars worth of Iranian transactions.



“Let me be clear: We are also sending a message to the virtual currency industry more broadly, today and for the future,” Yellen wrote in a press brief.



The settlement comes after FTX founder Sam Bankman-Fried was found guilty of several criminal counts of fraud and conspiracy on Nov. 2 following just three hours of deliberation by the jury. Experts told CNBC that, for a high-profile monthlong trial that involved nearly 20 witnesses and hundreds of exhibits, they’d never seen such a speedy decision.



CNBC reached out to Zhao for comment but did not immediately hear back. Binance did not respond to several CNBC requests for comment.



The charges follow civil suits brought earlier this year by both the Securities and Exchange Commission and the Commodity Futures Trading Commission.



Binance has been the center of intense regulatory scrutiny over how it operates, with officials in multiple jurisdictions flagging concerns about the company’s approach toward launching in certain markets even when it lacks the authority to do so, and allegations of involvement in illicit dealings such as money laundering and securities fraud.



The SEC targeted the company with an expansive lawsuit in June, alleging that Binance was running an illegal securities exchange and mishandling customer funds.



The SEC hit rival exchange Coinbase with a similar lawsuit shortly after, alleging it is operating as an unauthorized securities exchange, broker and clearing agency.



And on Monday the SEC sued Kraken, alleging that the exchange commingled $33 billion in customer crypto assets with its own company assets, creating the potential for a significant risk of loss to its users.



In the 13 charges brought against Binance by the SEC, the agency accused Binance of commingling billions of dollars in customer money with Binance’s own funds, similar to allegations made against the now-bankrupt crypto exchange FTX. SEC Chair Gary Gensler added, “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”



Started by the Chinese-born entrepreneur in 2017, Binance went from being a relatively obscure name to being a major force in crypto in a matter of weeks. Binance remains the world’s largest crypto exchange globally, processing billions of dollars in trading volume every year.



While its holding company is based in the Cayman Islands, Binance doesn’t have a global headquarters and Zhao frequently resisted calls to create one, saying he wanted the platform to run on a “decentralized” operating model.



In 2021, the U.K.’s Financial Conduct Authority barred Binance’s U.K. unit from operating in the country, saying it wasn’t authorized to carry out regulated activities. More recently, Binance scrapped plans to pursue a full U.K. license after the regulator said its know-your-customer and anti-money-laundering controls didn’t meet its requirements.



In the CFTC’s complaint, the regulator alleged that Binance, Zhao, and the company’s ex-chief compliance officer, Samuel Lim, operated an “illegal” exchange, ran a “sham” compliance program, and violated the Commodity Exchange Act, including laws “designed to prevent and detect money laundering and terrorism financing.”



Binance and Zhao filed a motion in July to dismiss the CFTC’s suit. The U.S. arm of the exchange is also pushing back on the SEC’s lawsuit, filing a protective order against what they call the SEC’s “fishing expedition.”



Of particular concern for the crypto industry are the implications of the agency’s crackdown on crypto for myriad tokens and blockchains — not just the exchanges. The SEC maintains that several of the tokens Binance and Coinbase offer on their platforms — such as Solana’s sol, Cardano’s ada, and Polygon’s matic — are securities that should have been registered with the agency.



— CNBC’s Kevin Breuninger contributed to this report.

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Binance CEO Changpeng Zhao pleads guilty to federal charges, steps down

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/10/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-1-820x462.jpeg" alt="" class="wp-image-428455" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/10/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-1-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/10/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/10/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-1-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/10/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-1-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/10/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-1.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Bitcoin. Filip Radwanski | Sopa Images | Lightrocket | Getty Images</figcaption></figure>



The price of bitcoin breached the $34,000 level to hit its highest since May last year, bolstered by positive sentiment about a bitcoin exchange-traded fund.



The world’s largest cryptocurrency was trading 4.97% higher at $34,596.40 on Tuesday, according to data from Coin Metrics.



Ether, the second-biggest digital coin, surged to its highest since August, according to Coin Metrics data.



“The real catalyst that created the ‘god candle’ earlier today and pushed bitcoin above $34,000 was the $167 million in short liquidations, mainly on offshore exchanges,” said Ryan Rasmussen, analyst at Bitwise Asset Management.



“I don’t think anyone expected the level of price action we’re seeing, and those investors who were shorting bitcoin in the $33,000 plus range are certainly feeling the pain of that surprise today,” said Rasmussen.



Anticipation of a bitcoin ETF grew after the court ruled in favor of crypto-focused asset manager Grayscale over the U.S. Securities and Exchange Commission in its bid to turn its huge Grayscale Bitcoin Trust (GBTC) bitcoin fund into an ETF.



Last week, the SEC declined to appeal that ruling by a key deadline, sparking hopes a bitcoin-related ETF may be approved in the next few months.



A bitcoin ETF would give&nbsp;investors a way to gain exposure to bitcoin’s price movements without owning the cryptocurrency&nbsp;directly.



Bitcoin is considered a highly volatile asset, and its price fluctuations are unpredictable.



Major financial institutions such as BlackRock, Invesco, Fidelity and Grayscale have been pushing for bitcoin ETFs and submitted applications to sell such assets, portraying them as safer investment options compared to direct crypto investments known for their speculative nature and price volatility.



Coinbase told CNBC it is confident that a U.S. bitcoin exchange-traded fund will be approved by the U.S. SEC.



<h2 class="wp-block-heading" id="h-investors-watching-closely"><a></a>Investors watching closely</h2>



The crypto industry is closely watching such developments that could point to a comeback.



Over the past year, the sector has been embroiled in scandals and high drama such as FTX’s bankruptcy and Terraform and its CEO Do Kwon being charged in February for defrauding investors.



Bitcoin price reached an all-time high in November 2021, with values exceeding over $65,000 at that time. However, a year later, the value plummeted to around $16,000 in November last year. That was when Sam Bankman-Fried’s crypto exchange FTX collapsed and filed for bankruptcy.



The SEC has been cracking down on crypto firms, with companies such as Coinbase and Ripple embroiled in lawsuits with the SEC, which has accused them of violations in securities laws.



Both Coinbase and Ripple, as well as other crypto firms, have slammed the U.S. for a lack of clarity around crypto regulations and threatened to leave the country in response to the SEC’s crackdown.



— CNBC’s Tanaya Macheel and Ryan Browne&nbsp;contributed to this story.

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Bitcoin crosses $34,000 to the highest since May 2022 on ETF hopes

The District of Columbia Court of Appeals has paved the way for bitcoin exchange-traded funds.



On Tuesday, the court sided with Grayscale in a lawsuit against the Securities and Exchange Commission which had denied the company’s application to convert the&nbsp;<a href="https://www.cnbc.com/quotes/GBTC/">Grayscale Bitcoin Trust</a>&nbsp;to an ETF. The decision could impact other companies that want to create bitcoin ETFs, like&nbsp;<a href="https://www.cnbc.com/quotes/BLK/">BlackRock</a>&nbsp;and Fidelity.



A spot bitcoin ETF would be traded through a traditional stock exchange, although the bitcoin would be held by a brokerage, and would allow investors to gain exposure to the world’s biggest cryptocurrency&nbsp;without having to own the coin themselves. Many crypto bulls believe that approval of a spot bitcoin ETF will lead to more mainstream institutional adoption.



<a href="https://www.cnbc.com/quotes/BTC.CB=/">Bitcoin</a>,&nbsp;<a href="https://www.cnbc.com/quotes/ETH.CM=/">ether</a>, and other major cap crypto coins surged on the news, and&nbsp;<a href="https://www.cnbc.com/quotes/COIN/">Coinbase</a>, which is listed as the custodian partner in multiple spot bitcoin ETF applications, was up more than 14% on Tuesday.



“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said, referring to exchange-traded products. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”



Grayscale Investments, which manages the world’s biggest crypto fund,&nbsp;<a href="https://www.cnbc.com/2022/06/30/grayscale-sues-sec-after-rejected-bid-to-turn-bitcoin-fund-into-etf.html">initiated its lawsuit against the SEC in June</a>&nbsp;2022 after the agency rejected its application to turn its flagship bitcoin fund, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC&nbsp;<a href="https://www.cnbc.com/2021/10/18/first-bitcoin-futures-etf-to-make-its-debut-on-the-nyse-tuesday-proshares-says.html">approved ProShares’ futures-based bitcoin ETF in October 2021</a>.



The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about market manipulation and investor protections.



“We are reviewing the court’s decision to determine next steps,” the SEC said in a statement.



A spokeswoman for Grayscale called Tuesday’s ruling “a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”



U.S. court rules in favor of Grayscale over SEC, opening door for first spot Bitcoin ETF



“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” continued the written statement.



GBTC, which has $16 billion in assets under management as of Tuesday, was the first crypto product investors could trade in their brokerage accounts to get exposure to bitcoin. It was launched in 2013, well before the approval of bitcoin ETFs in Canada or bitcoin futures ETFs in the U.S. Grayscale charges a 2% annual fee to investors, making it a cash cow for parent company Digital Currency Group, led by Barry Silbert.



“It virtually guarantees they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to refile, but they will almost certainly be approved as well.”



Firms have been applying for spot bitcoin ETFs for more than two years, but so far, the SEC has denied more than 30 proposals since 2021 — a 100% rejection rate. But investor sentiment was buoyed in June when BlackRock, the world’s largest asset manager with some $9 trillion in assets under management, put in an application. The firm has had all but one of its previous 575 ETF applications accepted.&nbsp;



—&nbsp;CNBC’s Jordan Smith contributed to this report.

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First bitcoin ETF could be coming soon as court rules in favor of Grayscale over SEC

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107261385-1687508402375-gettyimages-1080265094-octane_1_big0168-820x462.jpeg" alt="" class="wp-image-426848" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107261385-1687508402375-gettyimages-1080265094-octane_1_big0168-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107261385-1687508402375-gettyimages-1080265094-octane_1_big0168-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107261385-1687508402375-gettyimages-1080265094-octane_1_big0168-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107261385-1687508402375-gettyimages-1080265094-octane_1_big0168-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/08/107261385-1687508402375-gettyimages-1080265094-octane_1_big0168.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Andriy Onufriyenko | Moment | Getty Images</figcaption></figure>



Bitcoin slipped sharply on Thursday evening, tumbling by as much as 9% to just over $26,000.



The cryptocurrency last traded at $26,593.68, reflecting a decline of more than 8%, according to Coin Metrics data.



The fall in bitcoin followed several hours after The Wall Street Journal reported that SpaceX, which is helmed by Elon Musk, wrote down the value of its bitcoin holdings by a total of $373 million in 2022 and 2021, and that the space travel company had sold the virtual currency.



“This is one of the most brutal minute-by-minute selloffs we’ve seen in the history of bitcoin,” Ryan Rasmussen, a researcher at&nbsp;Bitwise&nbsp;Asset Management, told CNBC. “The current speculation is it’s an Elon Musk/SpaceX-driven selloff.” He noted that this latest dramatic decline is “short-sighted and largely retail-driven.”



In 2022, Tesla, which Musk also leads as CEO, announced that it sold about 75% of its bitcoin holdings after investing $1.5 billion in the flagship cryptocurrency.



The billionaire executive has historically been a vocal supporter of crypto.



A recent study found that Musk’s mentions of certain altcoins on X, the social media site formerly known as Twitter, has boosted the prices of those cryptocurrencies. Back in 2021, speaking at “The B-Word” conference, Musk had also said “If the price of bitcoin goes down, I lose money. I might pump, but I don’t dump.”



Bitcoin had been under pressure earlier, starting after the Federal Reserve issued the minutes from its July policy meeting. In Thursday’s session, the cryptocurrency slumped to its lowest level in almost two months.



—CNBC’s Tanaya Macheel and Sarah Min contributed to this story.

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Bitcoin abruptly tumbles as much as 9% to just over $26,000 late Thursday

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="553" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/06/107152567-1668602820538-GettyImages-1244424369-820x553.jpg" alt="" class="wp-image-425276" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/06/107152567-1668602820538-GettyImages-1244424369-820x553.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/107152567-1668602820538-GettyImages-1244424369-300x202.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/107152567-1668602820538-GettyImages-1244424369-133x90.jpg 133w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/107152567-1668602820538-GettyImages-1244424369-768x518.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/107152567-1668602820538-GettyImages-1244424369-1536x1036.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/107152567-1668602820538-GettyImages-1244424369-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The CEO of the largest online exchange for trading cryptocurrency, Binance, said he is establishing a recovery fund to help people in the industry, while saying the sector “will be fine.” Ben McShane / Contributor / Getty Images</figcaption></figure>



The Securities and Exchange Commission filed 13 charges against Binance, the world’s largest crypto exchange, and its founder, Changpeng Zhao, alleging both comingled billions of dollars worth of user funds and sent them to a European company controlled by Zhao.



The U.S. regulator alleged on Monday that Zhao and his exchange worked to subvert “their own controls” to allow high net worth U.S. investors and customers to continue trading on Binance’s unregulated international exchange.



One senior executive allegedly told a compliance officer that the company was operating as a ”[f&#8212;ing] unlicensed securities exchange in the USA bro.”



The complaint alleges Binance created Binance.US as a shield for the main company and Zhao, to “reveal, retard, and resolve” law enforcement targets and insulate Binance.



Two successive Binance.US CEOs expressed deep concern over Zhao’s level of control, according to the SEC. Both testified before federal regulators: Neither were named, but its first and second chief executives were Catherine Coley and Brian Brooks.



“I’m not actually the one running this company, and the mission that I believe I signed up for isn’t the mission. And as soon as I realized that, I left,” a former Binance.US CEO identified as “BAM CEO B” testified to the SEC.



Binance earned $11.6 billion in revenue, most of which came from transaction fees, from June 2018 through July 2021, the complaint said. Since its inception, the exchange has “at first overtly and later furtively” worked to entice U.S. customers, at the direction and control of its founder Zhao, the SEC alleged.



Binance knew that tens of thousands of customers were in the U.S. but chose not to act, the SEC alleged, despite federal law barring the unregistered offer and sale of securities. Binance’s ultimate compliance, in 2019, was largely a public show, the SEC complaint continues.



The SEC alleges Zhao ordered the creation of an evasion plan for high net worth customers, using a VPN service to hide their U.S. location and submitting compliance documents to obscure their country of origin.



CNBC previously reported on how Binance employees encouraged users to evade the exchange’s “know your customer” systems through VPNs.



“We do need to let users know that they can change their KYC on&nbsp;Binance.com&nbsp;and continue to use it. But the message, the message needs to be finessed very carefully because whatever we send will be public. We cannot be held accountable for it,” Zhao allegedly told his top team in 2019.



The SEC also alleged that Binance and Zhao used market-making companies that they controlled to inflate trading prices and profit off their customers.



Merit Peak and Sigma Chain allegedly acted as “market makers” for Binance’s two platforms, meaning they were always available to fill a customer order to buy or sell a crypto asset. But the SEC complaint highlighted multiple issues with the two companies’ roles: They were both beneficially owned by Zhao and collected “tens of billions of dollars” of customer money. The firms also mixed customer funds with Binance’s money, similar to allegations against bankrupt crypto exchange FTX.



Most damaging to investors, they allegedly engaged in “wash trading,” trading with themselves to artificially prop up the price of crypto assets.



Sigma Chain collected $190 million for its beneficial owner Zhao, the SEC alleged. The “proprietary trading firm” then spent $11 million to purchase a “yacht,” the complaint said.



Zhao dismissed the charges on Twitter by saying “4,” a popular refrain in Binance’s community urging users to ignore fear, uncertainty and doubt, or “FUD.”



The complaint comes after the Commodity Futures Trading Commission filed similar charges against the crypto exchange, alleging it failed to prevent U.S. customers from accessing it.



“We will issue a response once we see the complaint,” Zhao said on Twitter. “Media gets the info before we do.”



In a blog post that followed, Binance wrote, “We are disappointed that the U.S. Securities and Exchange Commission chose to file a complaint today against Binance seeking, among other remedies, purported emergency relief.” The company added that it has “actively cooperated with the SEC’s investigations” and “engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations.”



The defendants showed a “blatant disregard” for federal law, the SEC alleged. The complaint included a “high-level” breakdown of Binance’s ownership structure, with Zhao and his holding vehicles allegedly controlling 100% of Binance and Binance.US’ various entities.

107152567-1668602820538-GettyImages-1244424369

SEC sues Binance and CEO Changpeng Zhao for U.S. securities violations

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="555" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-820x555.jpg" alt="" class="wp-image-420644" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-820x555.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-300x203.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-133x90.jpg 133w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-768x519.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-1536x1039.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: Representations of cryptocurrencies are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration</figcaption></figure>



Cryptocurrency companies are playing a game of poker with the Securities and Exchange Commission, making bold threats to leave the U.S. as the regulator steps up pressure on the industry to toe the line.



Major players are hoping that the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.



Executives at firms including crypto exchange Coinbase and blockchain services company Ripple have piled on with comments laying into the SEC and signaling plans to shift business overseas, in a bid to rally support and send a message to U.S. politicians concerned that the country may miss out on a key technological innovation.



Coinbase CEO Brian Armstrong said last week that the SEC was on a “lone crusade” with its tough actions against certain crypto companies. He added that Chair Gary Gensler had taken an “anti-crypto view,” despite earlier being a supporter of the industry during his time as an economics professor at the MIT Sloan School of Management.



“The SEC is a bit of an outlier here,” Armstrong told CNBC’s Dan Murphy in an interview in Dubai. “I don’t think [Gensler is] necessarily trying to regulate the industry as much as maybe curtail it. But he’s created some lawsuits, and I think it’s quite unhelpful for the industry in the U.S. writ large.”



Brad Garlinghouse, CEO of Ripple, also tore into the SEC this week. When asked for his message to Gensler as the company announced an expansion into Dubai, he quipped, “Who?” before later saying Ripple will have spent $200 million defending itself against a lawsuit initiated by the regulator by the time it is over.



“I find it as a company that started in the United States and as somebody who is a U.S. citizen, it’s sad. I have sadness about this. The U.S. is getting passed not just by a little bit but by a lot,” Garlinghouse said.



“The tough thing about this is you have a country that I think has put politics ahead of policy and that’s not a good decision if you’re trying to invest in the economy.”



Dubai and Europe have proven to be much more favorable markets with their virtual asset regulatory frameworks, Garlinghouse said, adding: “The United States is definitely stuck.”



Garlinghouse, Armstrong and other crypto bosses have made threats to leave the U.S., highlighting concern from the industry that the SEC’s crackdown is becoming too harsh. The regulator has taken strong enforcement actions against companies including Ripple, Coinbase, Kraken and Paxos, accusing each of flouting securities laws.



The SEC’s contention is that most tokens in the market may qualify as securities, which would subject them to much stricter requirements around registration and disclosure. Crypto firms, naturally, have denied assets they issue or list on their platforms should be treated as securities.



Will they stay or will they go?



 The question is: could they actually leave? It looks pretty unlikely.



“The U.S. is one of the largest markets for crypto, and hence it is highly unlikely that they will leave,” Larisa Yarovaya, associate professor of finance at Southampton University, told CNBC via email.



“The biggest fear of crypto companies is that regulation will cause panic among crypto investors and prices will go down. To look confident (even arrogant) is a common tactic of crypto company CEOs. They think this will translate into investors’ confidence, overconfidence in some cases, and will encourage further irrational behaviour among investors, e.g. HODL [hold on for dear life] even when markets are falling.”



Ripple’s Garlinghouse has been threatening to move his company’s headquarters overseas since 2020. In October that year, he said the U.K., Switzerland, Singapore, Japan and the United Arab Emirates were under consideration for Ripple’s potential move abroad.



That hasn’t happened yet.



Coinbase’s chief, meanwhile, suggested at a London fintech conference in April that the firm would consider options of investing more abroad, including relocating from the U.S. to elsewhere, if the exchange doesn’t get regulatory clarity in the U.S.



A month later, Armstrong said Coinbase “is not going to relocate overseas.”



“We’re always going to have a U.S. presence … But the U.S. is a little bit behind right now,” he told CNBC.



The U.S. is a huge market for the industry, with over 50 million Americans saying they own some crypto, according to a survey conducted by Morning Consult for Coinbase.



“There’s a much greater focus on the international markets for those firms. But at the top end of the market, personally I just can’t see that ever happening that you leave the United States market completely,” Jonathan Levin, co-founder of Chainalysis, told CNBC in an interview in London.



“It’s more about how much do you invest in new international expansion where maybe that wasn’t as high up on the agenda, but now it’s let’s look at France, let’s look at the U.K.”



On top of this, the practicalities of moving these already large companies out of the U.S. would be tough.



“Although these industries are virtual by their nature, they still need people, and people have families, mortgages, and preferences on where they live. Replacing them with local talent in the new place may be easier said than done,” George Weston, a partner at global offshore law firm Harneys, told CNBC via email.



Regulatory certainty outside the U.S.



 Crypto bosses are playing up to some officials’ concerns that the U.S. has become shrouded in regulatory uncertainty while other jurisdictions, like the European Union and U.K., have charged forward with proposed regulatory frameworks for digital assets.



Hester Peirce, a commissioner at the SEC, said at a Financial Times conference last week that the U.S. was “shooting ourselves in the foot by not having a regulatory regime in the U.S.”



She praised the EU on its progress with waving through laws for the crypto industry.



The EU is expected to bring in the first comprehensive set of regulations for digital assets, known as Markets in Crypto Assets (MiCA), sometime in 2024.



“It’s really commendable that Europe was able to get that done so quickly,” Peirce said, according to Reuters. “If we built a good regulatory regime, people would come. I think you will see that with MiCA.”



Diego Ballo Ossio, a partner at law firm Clifford Chance, said other jurisdictions including the U.K. and EU are changing their legislative frameworks to create clear regulatory regimes for exchanges.



“This means that other countries are effectively providing US based exchanges an option – a place to move to. It is not unthinkable that a U.S. exchange decided to create operational hubs in non-U.S. jurisdictions where the product can be safely innovated and enhanced,” he told CNBC.



Binance, the world’s largest crypto exchange, recently said it has become more difficult for the company to operate into the U.S. and that it was minded to establish a regulated operation in the U.K.



Patrick Hillman, the company’s chief strategy officer, said the U.S. “has been very confusing over the past six months,” pointing to the SEC’s actions against Coinbase as a sign of how the country is in a “weird place.”



While the U.S. crypto industry might currently be throwing out empty threats right now, there could be a real issue if regulators in America don’t move forward with thoughtful regulation.



“My conclusion is that I think it is more sabre rattling than a genuine desire to up and leave the U.S., but if the SEC continues down the path it is on, many firms will have no choice but to try another way of doing business. It is existential,” Daniel Csefalvay, a partner at BCLP law firm, told CNBC via email.

Illustration shows representations of cryptocurrencies

Crypto companies are playing poker with the SEC as agency cracks down on the industry

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="458" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u-820x458.jpeg" alt="" class="wp-image-424278" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u-820x458.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u-300x168.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u-768x429.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u-1536x858.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u-scaled.jpeg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Standard Chartered predicts that bitcoin could fall to $5,000 in 2023 as part of their research on potential market surprises next year. Nurphoto | Getty Images</figcaption></figure>



Cryptocurrencies fell on Monday as investors put excitement from Ethereum’s “Shapella” upgrade behind them and refocused on upcoming bank earnings and recession concerns.



Bitcoin fell 3% to $29,515.35, according to Coin Metrics, falling below the key $30,000 it hit last week for the first time since June. Meanwhile, ether was lower by 2.8% but maintained the $2,000 it broke through last week.



Crypto is coming off a winning week in which prices were boosted by optimism around Ethereum’s latest tech upgrade, dubbed “Shapella” (also known as “Shanghai”). The update is meant to bring greater liquidity to the network by allowing “locked up” ether to be withdrawn and ultimately draw in more institutional interest in the long term. Bitcoin and ether advanced 8% and 12%, respectively, for the week.



This week, it wouldn’t be surprising to see a small correction in prices, according to Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank, and there could be some selling pressure as some investors may want to take profits from the previous week.



While crypto was rallying, “Friday’s U.S. stock market showed unstable movements as stronger-than-expected consumer sentiment and Fed’s Waller’s speech strengthened the possibility of another rate hike in May,” Hasegawa said. “Nevertheless, the Fed Funds futures market has already priced in more than 80% chance of a 25bp hike in May, so pressures from macro factors on the price of bitcoin is expected to be limited.”



Crypto investors are watching bank earnings this week for more insight about the health of the sector and possibility of a coming recession. Several Fed officials are scheduled to speak this week too.



“We haven’t seen crypto perform in a high-rate, slowing growth environment until now,” said Callie Cox, analyst at investing company eToro. “It’s anyone’s guess how crypto acts during a recession.”



For this week, any downside potential “should not be severe” or keep bitcoin from continuing on its uptrend, Hasegawa said.

107074597-1655103399286-gettyimages-1241039329-porzycki-bitcoinp220601_npP5u

Bitcoin dips below $30,000 to start the week as crypto investors refocus on economic concerns

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061-820x547.jpeg" alt="" class="wp-image-424188" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061-768x513.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061-1536x1025.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061-scaled.jpeg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The bitcoin halving is an event that happens roughly every four years where rewards to miners are cut in halve, effectively limiting supply of the token. S3studio | Getty Images</figcaption></figure>



Bitcoin is nearly a year away from a key technical event — which might be the catalyst for a prolonged climb in the cryptocurrency’s value.



In April or May 2024, bitcoin is expected to undergo its next so-called “halving,” though the exact date is not yet known.



Bitcoin has been rising in the past few weeks in anticipation of the halving, as a potential U.S. Federal Reserve interest rate cut contends with the prospect of sluggish growth and tightening credit conditions resulting from woes in the banking sector.



One bitcoin was worth roughly $30,000 as of Wednesday morning, according to data from CoinGecko. The world’s largest cryptocurrency is up by more than 80% since the start of the year.



Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said that the bitcoin jump above $30,000 at a time of bank failures and economic uncertainty suggests the cyclical “bottom” for bitcoin is forming.



“This tends to happen a year or so prior to the Bitcoin’s halving event, which is slated next for around April 2024,” Ayyar told CNBC via email.



<h2 class="wp-block-heading" id="h-what-is-the-bitcoin-halving"><a></a>What is the bitcoin halving?</h2>



Bitcoin halvings take place roughly every four years, or every time another 210,000 “blocks” are added to the blockchain. The event cuts the rewards to bitcoin miners — volunteers running specialized equipment to validate transactions on the network and mint new tokens — by 50%. The aim is to reduce the number of new bitcoin unit released into the market.



Currently, bitcoin miners receive 6.25 bitcoin for each block they successfully mine. This means their computer had the right amount of computing power needed to solve the cryptographic puzzles that secure the bitcoin network and prevent it from being compromised by malicious actors.



Once the next bitcoin halving occurs, this reward will be reduced to 3.125 bitcoin.



Backers of the cryptocurrency say this can help push up the price by enhancing bitcoin scarcity.



The maximum number of bitcoins that will ever exist in circulation is capped at 21 million. This is ensured by the halving mechanism, whereby rewards for mining bitcoin will eventually be slashed to $0.



Before the last halving, which took place on May 11, 2020, the price of bitcoin increased by 19% in the preceding 12 months, from $7,191.36 to $8,568.88, according to figures from CCData.



During the halving before that — which occurred on Jul. 9, 2016 — bitcoin rallied 142% compared with the 12 months prior, moving from $269.14 to $651.83.



The first ever halving of Nov. 28, 2012 saw the price of bitcoin balloon by 384% to $12.35 from $2.55, CCData’s figures show.



“Analysing historical Bitcoin halving patterns, it appears that investors often accumulate Bitcoin in the run-up to the halving event, although the exact timing and extent of returns post-halving can differ,” Jamie Sly, analyst at CryptoCompare, told CNBC.



“The accumulation period from the market bottom after the breakout to the halving date has historically spanned at least 500 days.”



Sly added: “This would mean, if we were to assume that the market bottom for this cycle was in November last year (when Bitcoin hit a yearly low of $15,760), then we are only 142 days into the current cycle. This would correlate with the next expected Bitcoin halving date, which is another 378 days ahead.”



<h2 class="wp-block-heading"><a></a>Bitcoin’s post-halving gains</h2>



The bitcoin price tends to spike even higher, in the months that follow halving.



After the halving of May 11, 2020, the cryptocurrency rallied 688.31% in the following 546 days, reaching a then record high of $67,549.14 on Nov. 8, 2021, according to CCData.



The halving before that, which took place on Jul. 9, 2016, saw bitcoin skyrocket 2,824% to a then all-time high of $19,065.71 by mid-December 2017.



Bitcoin had a torrid 2022, defined by the collapses of major companies and projects, from stablecoin terraUSD to crypto exchange FTX.



Rising inflation led to higher interest rates in the U.S. and in other major economies, which in turn caused investors to flee bitcoin and other risky assets.



That has seen prices of several top digital currencies slump sharply from their all-time highs.



Despite its recent ascent to $30,000, bitcoin is still down more than 50% from the highs of November 2021.

107223050-1681209527842-gettyimages-911964384-set04375-29january2018kw0061

Bitcoin is one year away from a major technical event. History suggests the start of another bull run

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/105964618-1560376221bitcoin-1170x463-1-820x461.jpg" alt="" class="wp-image-424146" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/105964618-1560376221bitcoin-1170x463-1-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/105964618-1560376221bitcoin-1170x463-1-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/105964618-1560376221bitcoin-1170x463-1-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/105964618-1560376221bitcoin-1170x463-1-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/105964618-1560376221bitcoin-1170x463-1-1536x864.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/105964618-1560376221bitcoin-1170x463-1.jpg 1920w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> climbed on Monday evening, topping the key psychological level of $30,000 as investors awaited key inflation data later in the week that could steer crypto prices.



The largest cryptocurrency by market cap rose 7% to $30,193.25 for the first time since June, according to Coin Metrics. <a href="https://www.cnbcafrica.com/quotes/eth=x/">Ether</a> advanced more than 3.5% to $1,925.11 for the first time since August as investors awaited the Ethereum network’s latest tech upgrade, scheduled for Wednesday.



Now that bitcoin has touched $30,000, a move into the mid- to high-30s will be “likely” if it pushes through with conviction and would “force short speculators to cover and buy instead,” said James Lavish, managing partner at the Bitcoin Opportunity Fund. “Some investors are trying to get positioned ahead of that,” he said.



Traders are likely speculating that Wednesday’s consumer price index number “could come in at a level that gives the Fed reason to think about pausing raising rates in the next meeting, thereby giving a boost to assets like bitcoin,” Lavish added.



Investors are also watching the latest reading on the producer price index, due out Thursday.



Cryptocurrencies have been rallying this year. Monday night’s action brings bitcoin’s year-to-date gains to more than 80%, while ether has now added 60% for the year so far. Price moves for the two crypto assets have historically tracked relatively in line on a percentage basis, but the top two crypto assets “decoupled” in March, thanks to a “flight to quality” in bitcoin following bank closures.



Nevertheless, the two cryptocurrencies remain somewhat correlated for the time being and macro drivers continue to influence both assets. The upcoming inflation data will be key in determining if or when the Fed will pause or put an end to its rate hiking campaign.



Meanwhile, ether has been climbing ahead of its planned “Shanghai” tech upgrade, which is expected to bring a wave of negative sell pressure on the market as previously locked funds on Ethereum are released over the next few weeks.

105964618-1560376221bitcoin-1170×463-1

Bitcoin tops $30,000 for the first time since June ahead of key inflation data; ether nears $2,000

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-820x461.jpeg" alt="" class="wp-image-423927" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107208912-1678874096868-gettyimages-1236743873-FR_20211118_011.jpeg 1920w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Bitcoin is up 50% so far in 2023, beating major commodities and stock indexes. Industry insiders said the bank collapses have sent investors looking for alternatives to the traditional banking system and there is also anticipation of a slowdown in interest rate rises, which is helping bitcoin. Filip Radwanski | Sopa Images | Lightrocket | Getty Images</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> climbed sharply Wednesday as investors shrugged off initial fears surrounding U.S. regulators’ crackdowns on industry giants and became willing to take some risk.



The world’s largest cryptocurrency surged 5% in the past 24 hours to as high as $28,474, according to CoinGecko data. Bitcoin has retaken the $28,000 level after dipping below it on Monday following news of the U.S. Commodity Futures Trading Commission FTC’s lawsuit against Binance.



Ether, the second-biggest digital coin, rose nearly 6% to $1,816.10.



Bitcoin has been steadily rising this year after a brutal 2022 that saw collapses of major crypto exchanges and a sharp slump in prices. Investors have taken some comfort from the thought of a reversal in the U.S. Federal Reserve’s interest rate hiking moves, which put pressure on risk assets like stocks.



The reason for the jump Wednesday was not immediately clear. However, it comes amid a broad rise in U.S. stocks. Bitcoin has been known to follow movements in equity markets, with investors treating it like more of a traditional risk asset.



Nasdaq futures were up 100 points, or 0.9%, Wednesday morning.



U.S. regulators have sharpened their crackdown on crypto firms of late, with the CFTC suing Binance and its co-founder Changpeng Zhao for allegedly breaking trading rules by courting clients in the U.S. without authorization.



The Securities and Exchange Commission has also threatened to take legal action against Coinbase for alleged violations of securities rules.



“Broadly we are looking quite bullish here with Bitcoin reclaiming $28K and looking to target $30K next,” Vijay Ayyar, head of international at crypto exchange Luno, told CNBC via email Wednesday.



“In general, when price action starts to absorb negative news this quickly, it indicates that the market is bullish and trending upward. The CFTC case against Binance, while quite important, doesn’t seem to have affected the market that much.”



Bitcoin had earlier gotten a boost from woes in the global banking system. Swiss banking giant Credit Suisse was recently rescued by its peer UBS in a government-backed, cut-price deal.



U.S. tech-focused lender Silicon Valley Bank and crypto-oriented banks Silvergate and Signature have also failed.



The Federal Reserve has sought to cushion the blow of the banking crisis with a lending program known as the Bank Term Funding Program, or BTFP, which aims to help banks meet their obligations to depositors.



Proponents of bitcoin say it can serve as a store of value in times of economic distress and a form of money people can access without the need for a bank account.



However, it is incredibly volatile and has been known to swing up or down 10% in a matter of hours.



“The market seems to be placing greater importance on macroeconomic factors and that the Fed has already begun a form of QE, now known as BTFP, but also that the interest rate pivot might happen sooner than later,” Ayyar told CNBC.



“Against the bank failure backdrop over the past month or so and Bitcoin’s rise, this provides the perfect context for Bitcoin to continue remaining bullish and move higher.”

107208912-1678874096868-gettyimages-1236743873-FR_20211118_011

Bitcoin climbs 5% above $28,000 as investors shrug off regulatory crackdowns

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107215223-1679839185536-signal-2023-03-22-092958_006-820x461.jpeg" alt="" class="wp-image-423888" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107215223-1679839185536-signal-2023-03-22-092958_006-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107215223-1679839185536-signal-2023-03-22-092958_006-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107215223-1679839185536-signal-2023-03-22-092958_006-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107215223-1679839185536-signal-2023-03-22-092958_006-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107215223-1679839185536-signal-2023-03-22-092958_006-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107215223-1679839185536-signal-2023-03-22-092958_006.jpeg 1600w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Bitnob CEO Bernard Parah and Cash App’s crypto product lead, Miles Suter, at the Africa Bitcoin Conference in Accra, Ghana. Bernard Parah</figcaption></figure>



ACCRA, Ghana — Block CEO Jack Dorsey and his top brass descended on Accra for the inaugural Africa Bitcoin Conference in December to talk about one of the most potentially disruptive and transformative alternatives to the continent’s existing financial system: bitcoin.



Since its inception in 2008, this unfamiliar form of money has alternatively been disdained as an absurdly complex toy for libertarian techies, a legalized form of gambling, a speculative bet to get rich quick, and a vehicle for criminals and fraudsters to obscure the origins of their ill-begotten gains.&nbsp;



But this parallel financial system can also serve a tangible social good, offering an onramp to the financial system for people who would otherwise be left out. In countries where the vast majority of the population is unbanked, national currencies are no longer a safe store of value, remittances comprise a hefty portion of GDP, and international sanctions complicate connections to the global economy, a virtual currency that doesn’t require an intermediary to approve transactions can be a vital lifeline for survival.&nbsp;



As cryptocurrency continues to rise in prominence and becomes a growing flashpoint for regulators, Dorsey and his deputies are providing an essential counternarrative: Bitcoin brings financial power to people who would otherwise have none.&nbsp;



“It doesn’t matter to me if the price goes down or up, because I can still use bitcoin as a vehicle to move money around the world instantaneously,” said Mike Brock, the CEO of TBD at Block, a unit which focuses on cryptocurrency and decentralized finance.



“I can exchange dollars for bitcoin and then bitcoin for Brazilian rial. There is a market for bitcoin in every corner of the world today,” continued Brock.



<h2 class="wp-block-heading" id="h-a-broken-financial-system"><a></a>A broken financial system</h2>



Moving money in Africa is an expensive and complicated process.



Commercial bank branch access is limited, especially for people living in remote and rural areas. Digital banking options are also limited. Tack on rampant hyperinflation, widespread government corruption, and capital controls trapping domestic cash in banks, and money can stop making sense altogether.



“If someone wants to move money to the country next door, normally, you’d have to fill up a suitcase full of cash and move it over the border,” explains Ray Youssef, CEO of Paxful.



Part of the problem stems from the continent’s quasi-colonial payment framework, in which roughly 80% of cross-border payments originating from African banks are processed offshore, mostly in the U.S. or Europe. That translates to higher costs and processing times that are sometimes measured in weeks.



Then there’s mobile money, which has been around since the early 2000s. Think of it like an electronic wallet tied to a phone number that does not require a smartphone or data to operate. Users can pay bills and shop with their phone through SMS texting, instead of having to rely on traditional banking options.



Africa’s mobile money transactions rose 39% to more than $700 billion in 2021, according to data from the GSM Association, a non-profit representing mobile network operators worldwide. World Bank data shows that account ownership at a financial institution — or via a mobile money service provider — has more than doubled in the last decade, rising to 55% of adults in Sub-Saharan Africa.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="720" height="405" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107213101-1679490554162-gettyimages-166894459-AFRICA_M-PESA.jpeg" alt="" class="wp-image-423889" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107213101-1679490554162-gettyimages-166894459-AFRICA_M-PESA.jpeg 720w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107213101-1679490554162-gettyimages-166894459-AFRICA_M-PESA-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/107213101-1679490554162-gettyimages-166894459-AFRICA_M-PESA-160x90.jpeg 160w" sizes="(max-width: 720px) 100vw, 720px" /><figcaption class="wp-element-caption">An employee uses a Nokia 1200 mobile phone inside an M-Pesa store in Nairobi, Kenya, on Sunday, April 14, 2013. Trevor Snap | Bloomberg | Getty Images</figcaption></figure>



But even as adoption proliferates, mobile money users don’t get the perks of legacy banking, including earning interest on banked savings and building up a credit score based on a history of spending. Interoperability on the continent also remains a major issue with this alternative way of banking.



“The entire banking system in Africa is completely and utterly broken, even amongst the mobile money providers, the telcos,” said Youssef from Paxful, a peer-to-peer crypto marketplace where users can directly buy and sell tokens with one another.



“Two thousand payment networks and only 2% of them talk to each other. That number continues to grow. It’s not getting better, it’s actually getting worse,” continued Youssef.



Companies like Western Union and MoneyGram offer an expansive physical network of storefronts around the world designed to move money for those who are unbanked. That cash network was extraordinarily difficult and expensive to build, which is why there aren’t a lot of direct competitors. It is also why those cash transfers often incur substantial fees.



Bitcoin could eliminate all these intermediaries, allowing citizens to send digital payments directly to one another, without relying on credit and without incurring multiple settlement fees along the way.



“We’re going to move to a model where we can make payments without IOUs, or credit, or promises, or fiat,” said Alex Gladstein, chief strategy officer for the Human Rights Foundation, an organization that works with activists from authoritarian regimes around the world. “It’s literally like sending a piece of gold or a $20 bill instantly somewhere else.”



“If you can get access to the internet, you can settle bitcoin payments,” said Brock. “And the government can’t do anything about it.”



Dorsey points to the example of what happened in Nigeria during the protests against the brutality of the country’s Special Anti-Robbery Squad — a movement referred to as #EndSARS.



“The Nigerian government went to various bank corps to stop protesters from receiving money — which bitcoin made up for,” Dorsey said in Accra. “So our whole reason for being as a company is solving the same problem that bitcoin will ultimately solve for everyone in the world.”



Moving money on the bitcoin blockchain at its base layer has its own challenges. At times of peak demand, fees will often spike higher, and if a user is unwilling to pay a premium for the transaction, they may have to wait for more blocks of transactions to get confirmed before their transfer goes through.



Bitcoin’s Lightning Network helps alleviate both of those problems by slashing the cost of transactions to virtually zero and enabling nearly instantaneous cash payments around the planet – making bitcoin a more effective payment rail. This so-called “layer two” technology is built on top of bitcoin’s main chain, in part because bitcoiners are conservative about introducing changes to the base layer, for fear of opening it up to hacks or other mischief.



Yellow Card — Africa’s largest centralized cryptocurrency exchange run by CEO Chris Maurice — is also looking to embed this layer two technology into the platform, in order to drive down the price of transactions to virtually zero. Currently, the exchange doesn’t charge a commission for transactions, but network fees can be pretty steep when a lot of trades are happening at once.



“It’ll have a pretty big impact to our customers, because a lot of them are very price sensitive,” says Justin Poiroux, the co-founder and CTO of <a href="https://www.cnbc.com/2023/03/25/how-this-26-year-old-created-yellow-card-top-crypto-exchange-in-africa.html">Yellow </a>C<a href="https://www.cnbc.com/2023/03/25/how-this-26-year-old-created-yellow-card-top-crypto-exchange-in-africa.html">ard.</a>



Yellow Card’s plan is still in its infancy, but Poiroux tells CNBC that he thinks the Lightning Network could ultimately provide a lot of value for its retail customers.



Because Lightning offers a universal monetary language, money can travel around the world between any Lightning-enabled bitcoin wallet. Someone who uses a platform like Block’s Cash App — a regulated, American financial product with 51 million monthly transacting users which integrated with the Lightning Network in Feb. 2022 — can pay any Lightning invoice in the world instantly.



“It’s a new way of doing business. It’s a different paradigm entirely,” said Gladstein.



The crypto product lead at Cash App, Miles Suter, believes that a big part of bitcoin’s utility is how it gets around broken and convoluted payment systems that don’t talk to each other.



“At Cash App in particular, we’ve always been really interested in taking bitcoin beyond just being seen an investment and bringing day-to-day utility to it,” Suter told CNBC on the sidelines of the Africa Bitcoin Conference.



“In many ways, the people on the African continent are already doing that with the tools they have,” continued Suter.



<h2 class="wp-block-heading"><a></a>Sending cash with Lightning</h2>



Bernard Parah is a 30-year-old entrepreneur living in Jos, Nigeria, about a five hour drive from the capital city of Abuja. He’s the CEO of Bitnob, an app that lets users across Africa buy, save, and invest in bitcoin. Bitnob is SMS-based and piggybacks on the mobile money system, making it easier for people to send money directly into bank accounts and mobile money wallets in African countries.



Parah recently teamed up with Strike, a Lightning Network payments platform, to launch a feature called “Send Globally” that allows Americans to transfer money to people living in Nigeria, Ghana, and Kenya.



It uses local fiat cash on either side of the transaction, but bitcoin is used under the hood as the pipeline to jump money over the border. The end user never touches the cryptocurrency themselves.



“We’re able to settle into bank accounts or mobile money accounts, without the recipients having to interact with bitcoin themselves,” Parah tells CNBC.



“Over time, we’ve seen that there are still people who really don’t understand how to use bitcoin; who don’t care about bitcoin. What they do care about is their problems getting solved,” continued Parah.



It feels like a wire transfer or a Venmo payment, according to Strike CEO Jack Mallers.



“It’s instant. There’s no debt. There’s no credit. There’s no delays,” explains Mallers.



The model works because Parah and Mallers are willing to take on the liability associated with the transfer by holding cash in escrow on either end of the exchange.&nbsp;



Once the money is received in Nigeria, Bitnob — which is a regulated entity with connections to the local banks — will take that bitcoin and turn it into their local currency.



“It’s just two regulated entities communicating over the language of bitcoin and cutting out excess fees,” said Suter. “I think that’s revolutionary.”



Mallers says that they offer more competitive foreign exchange rates by using bitcoin as a price-setting intermediary, a sort of new world reserve currency.



“The rate that we got was actually 60% better than the traditional forex market rate,” said Mallers. “The way to actually think about how we’re achieving forex if we clear through bitcoin is, ‘I have dollars. How many bitcoin can I get for my dollars? And then how many naira can I get for my bitcoin?’” said Mallers.



“It’s acting as the most liquid, accessible, global instrument for us to clear and settle value amongst each other,” he said.



The arrangement also offers a few big ancillary benefits, including interoperability with payment apps around the world that have tens of millions of users.



Block’s Suter explained that Cash App could theoretically interoperate with Bitnob.



“We’re only live in the U.S. right now, but that doesn’t mean we can’t speak to Bitnob in Nigeria and transfer value instantly and for free across these borders,” Suter said of Cash App.



<h2 class="wp-block-heading">Meeting customers where they are</h2>



South African developer Kgothatso Ngako, who goes by KG, has integrated the Lightning Network into the GSM network, combining the best of a few worlds, in a larger effort to meet customers where they are.



“My focus is giving people without an internet connection the ability to send or receive bitcoin,” Ngako said.



KG calls his custodial Lightning wallet “Machankura” — South African slang for money. Whereas most Lightning transactions today require a smartphone and data, Ngako’s service integrates lightning via Unstructured Supplementary Service Data, or USSD, which is the protocol that mobile money runs on. (It is similar to HTTP, or HyperText Transport Protocol, the protocol on which the web was built.)



Ngako tells CNBC that he currently has around 3,000 users spread across eight countries, with a concentration in South Africa, Uganda, Kenya, and Nigeria. In his home market of South Africa, there are strict rules around currency exchange, which make his product even more appealing to some users looking to move their money abroad.



“The South African Reserve Bank regulates the cross-border flow of capital — including the exchange of currency — to and from South Africa. You need some form of approval to convert ZAR into foreign currency,” said Ernest Marais, partner at Johannesburg law firm, Tabacks.



KG’s Machankura is compatible with any Lightning wallet on the planet. In practice, this means that someone with the Cash App in San Francisco, for example, could instantly send bitcoin via Lightning to the phone number of someone with a data-less, basic phone living in a remote part of Uganda.



Ngako’s project does face some risks, including regulatory blowback.



Marais tells CNBC that because the South African Reserve Bank cannot regulate the cross-border flow of cryptocurrency, it is considered to be illegal and a criminal offense — though crypto regulation largely remains nebulous across most of the continent.



“All African central banks, except for Central African Republic, have made notices stating that they don’t issue bitcoin and hence they don’t regulate it,” counters Ngako, adding that a bitcoin transaction cannot be considered a cross-border exchange as bitcoin transactions aren’t regulated within the central bank’s institution.



But the rules are confusing for everyone involved.



“The actual location of crypto assets is an anomaly. At what point does it leave the country?” continued Marais.



Ultimately, Ngako believes that once Machankura begins to scale, it will be a major driver of bitcoin adoption across the continent. To that end, Ngako is raising money and building — a common refrain among the entrepreneurs on the ground in Accra.



As Dorsey said in Africa, “More and more mass adoption will, in my belief, take away all the oxygen” from governments attempting to control behavior through financial oppression.



“So what do we do? We build, we build, we build, we build, we build, they can’t stop us. And that’s what’s important.”

107215223-1679839185536-signal-2023-03-22-092958_006

Bitcoin is poised to blow up Africa’s $86 billion banking system

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/GettyImages-1241890923-820x547.jpg" alt="" class="wp-image-423624" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/GettyImages-1241890923-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/GettyImages-1241890923-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/GettyImages-1241890923-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/GettyImages-1241890923-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/GettyImages-1241890923-1536x1025.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/GettyImages-1241890923-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">NEW YORK, UNITED STATES &#8211; 2022/07/13: Attorney General Letitia James makes an announcement regarding the investigation of sexual harassment in Sweet and Vicious at the Attorney General&#8217;s Office. The owner of the restaurant agreed to a settlement of $500,000 to be paid for more than a dozen current and former employees. AG stated that the office of the Attorney General will continue to investigate the hospitality industry for unlawful practices. (Photo by Lev Radin/Pacific Press/LightRocket via Getty Images)</figcaption></figure>



NEW YORK, March 9 (Reuters)&nbsp;&#8211;&nbsp;New York&#8217;s attorney general on Thursday sued KuCoin for failing to register with the state before letting investors buy and sell cryptocurrencies on its platform, as part of her effort to rein in what she calls &#8220;shadowy&#8221; cryptocurrency companies.



Attorney General Letitia James said the fourth-largest cryptocurrency platform violated the Martin Act, a powerful state securities law, by transacting in cryptocurrencies, selling the product &#8220;KuCoin Earn&#8221; to generate income for itself and investors, and wrongfully calling itself an &#8220;exchange.&#8221;



In papers filed with a state court in Manhattan, James is seeking a permanent injunction to stop KuCoin from operating in New York until it complies with the law.



KuCoin did not immediately respond to requests for comment.



Launched in September 2017, KuCoin describes itself on its website as the &#8220;People&#8217;s Exchange,&#8221; with more than 27 million users across 207 countries and regions.



KuCoin trails Binance, Coinbase and Kraken in trading volume among cryptocurrency spot exchanges, according to the data company CoinMarketCap. It raised $150 million in a funding round&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL3N2X12RT&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">last May</a>, giving it a $10 billion valuation.



James said KuCoin has let investors trade popular virtual currencies such as ETH, LUNA and TerraUSD, and that her case is among the first by a regulator calling ETH a security.



&#8220;One by one my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk,&#8221; James said in a statement.



Last month, James&nbsp;<a href="https://www.yahoo.com/now/1-york-sues-coinex-says-223712347.html" target="_blank" rel="noreferrer noopener">sued</a>&nbsp;the CoinEx cryptocurrency platform for failing to register with the state.



In January, 10 states including New York secured&nbsp;<a href="https://ag.ny.gov/press-release/2023/attorney-general-james-and-multistate-coalition-secure-24-million-cryptocurrency" target="_blank" rel="noreferrer noopener">up to $24 million</a>&nbsp;from the cryptocurrency company Nexo Inc, which they also accused of operating illegally.



KuCoin is headquartered in the Seychelles. James said its owners are Mek Global Ltd, also based in the Seychelles, and PhoenixFin PTE Ltd, based in Singapore.



(Reporting by Jonathan Stempel in New York; Editing by Diane Craft and Daniel Wallis)

Attorney General Letitia James makes an announcement

New York sues KuCoin, expands cryptocurrency crackdown

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-820x547.jpg" alt="" class="wp-image-423316" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/F4TO3YKQWNK6NCNXZJUQ2UEGC4-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: A man walks past the International Monetary Fund (IMF) logo at its headquarters in Washington, U.S., May 10, 2018. REUTERS/Yuri Gripas/</figcaption></figure>



LONDON, Feb 23 (Reuters)&nbsp;&#8211;&nbsp;The International Monetary Fund has laid out a nine-point action plan for how countries should treat crypto assets, with point number one a plea not to give cryptocurrencies such as bitcoin legal tender status.



The global lender of last resort said its Executive Board had discussed a&nbsp;<a href="https://www.imf.org/en/News/Articles/2023/02/23/pr2351-imf-executive-board-discusses-elements-of-effective-policies-for-crypto-assets" target="_blank" rel="noreferrer noopener">paper</a>, &#8220;Elements of Effective Policies for Crypto Assets,&#8221; that provided &#8220;guidance to IMF member countries on key elements of an appropriate policy response to crypto assets.&#8221;



Such efforts have become a priority for authorities, the fund said, after the collapse of a number of crypto exchanges and assets over the last couple of years, adding that doing nothing was now &#8220;untenable&#8221;.



The top recommendation was to &#8220;safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.&#8221;



The IMF had hit out at El Salvador in late 2021 when the central American country became the first to&nbsp;<a href="https://www.reutersconnect.com/reuters.com/markets/us/imf-recommends-el-salvador-not-use-bitcoin-legal-tender-2021-11-22/" target="_blank" rel="noreferrer noopener">adopt</a>&nbsp;bitcoin as legal tender, a move that has since been&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL2N2WP253&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">copied</a>&nbsp;by Central African Republic.



Other advice on Thursday&#8217;s list, which comes as G20 decision makers meet in India, included guarding against excessive capital flows, adopting unambiguous tax rules and laws around crypto assets, and developing and enforcing oversight requirements for all crypto market actors.



Countries should also establish international arrangements to enhance supervision and enforce regulations, the IMF added, as well as set up ways to monitor crypto&#8217;s impact on the stability of the global monetary system.



Outlining its Executive Board&#8217;s assessment, the IMF said directors welcomed the proposals and agreed the widespread adoption of crypto assets &#8220;could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks.&#8221;



They &#8220;generally agreed,&#8221; too, that crypto assets should not be granted official currency or legal tender status, and though strict bans of assets are &#8220;not the first-best option,&#8221; a few directors thought they should not be ruled out.



(Reporting by Marc Jones; Editing by Leslie Adler)

FILE PHOTO: Man walks past the IMF logo at HQ in Washington

IMF lays out crypto action plan, recommends against legal tender status

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-820x547.jpeg" alt="" class="wp-image-423116" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-scaled.jpeg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Paxos has been ordered by New York regulators to stop issuing the Binance USD (BUSD) stablecoin. Jakub Porzycki | Nurphoto | Getty Images</figcaption></figure>



Digital currency markets are on edge after a flurry of aggressive regulatory actions from U.S. authorities over the past few days.



Bitcoin was slightly higher at $21,826.68 at around 05:31a.m. ET, according to CoinDesk data.



Investors are digesting a number of major regulatory actions in the U.S., as authorities look to rein in the once free-wheeling cryptocurrency industry.



On Monday, the New York State Department of Financial Services told Paxos to stop minting new Binance USD, or BUSD, stablecoins. A stablecoin is a type of digital currency that is pegged to a real-world asset. BUSD is pegged one-to-one with the U.S. dollar. Paxos issues BUSD, the third-largest dollar-pegged cryptocurrency.



Stablecoins are often backed by real-world reserve assets, such as bonds and cash. They are used to trade in and out of different cryptocurrencies, as a trader does not need to convert money back to fiat currencies.



BUSD remained relatively stable and close to its $1 peg after the New York regulator’s orders. Paxos said that BUSD will continue to be redeemable through at least Feb. 2024. People can redeem funds in U.S. dollars or convert BUSD to Paxos’ own stablecoin called Pax Dollar (USDP).



Paxos confirmed that the Securities and Exchange Commission has notified it that the agency could recommend an action that alleges BUSD is a security, and that Paxos should have registered the token offering under federal securities law.



The market is waiting to see what the exact SEC charges are toward Paxos, and whether that might have implications for other stablecoins such as USD Coin (USDC) and tether (USDT). There is no official SEC action against Paxos currently.



Last week, cryptocurrency exchange Kraken settled with the SEC over allegations that it sold unregistered securities.



U.S. regulatory action has picked up on parts of the cryptocurrency industry, following a year of turmoil that saw nearly $1.4 trillion wiped off the market, along with bankruptcies, failures of projects and companies topped off by the collapse of major exchange FTX.



Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said that there might not be a major collapse in coin prices after the huge sell-off last year.



“The market seems to be taking the news quite well and that sentiment remains cautiously optimistic given we might have seen most of the selling in the market occur over the last year,” Ayyar told CNBC on Tuesday.



Investors are waiting to see what happens next on the regulatory front.



“We’re seeing a lot of scrutiny across various sectors in crypto in the U.S., with the two most recent areas being staking and stablecoins. This is an obvious repercussion of the fallout from FTX, Luna, and the general contagion in crypto over the last year,” Ayyar said.



“The markets might take some time to consolidate here and wait and watch whether there are further events that play out in terms of regulatory crackdown, hence we could see a couple of weeks of sideways action.”



&#8211;&nbsp;CNBC’s Rohan Goswami contributed to this report.

107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ

Crypto markets on edge as U.S. regulatory crackdown on industry intensifies

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-820x462.jpeg" alt="" class="wp-image-420480" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>Ether has hugely outperformed bitcoin since both cryptocurrencies formed a bottom in June 2022. Ether’s superior gains have come as investors anticipate a major upgrade to the ethereum blockchain called “the merge.”
Yuriko Nakao | Getty Images</figcaption></figure>



2022 marked the start of a new “crypto winter,” with high-profile companies collapsing across the board and prices of digital currencies crashing spectacularly. The events of the year took many investors by surprise and made the task of predicting bitcoin’s price that much harder.



The crypto market was awash with pundits making feverish calls about where bitcoin was heading next. They were often positive, though a few correctly forecast the cryptocurrency sinking below $20,000 a coin.



But many market watchers were caught off guard in what has been a&nbsp;tumultuous year for crypto, with high-profile company and project failures sending shock waves across the industry.



It began in May with the collapse of terraUSD, or UST, an algorithmic stablecoin that was supposed to be pegged one-to-one with the&nbsp;U.S. dollar. Its failure brought down terraUSD’s sister token luna and hit companies with exposure to both cryptocurrencies.



Three Arrows Capital, a hedge fund with bullish views on crypto,&nbsp;plunged into liquidation&nbsp;and&nbsp;filed for bankruptcy&nbsp;because of its exposure to terraUSD.



Then came the&nbsp;November collapse of FTX, one of the world’s largest cryptocurrency exchanges which was run by Sam Bankman-Fried, an executive who was often in the spotlight. The fallout from FTX continues to ripple across the cryptocurrency industry.



On top of crypto-specific failures, investors have also had to contend with rising interest rates, which have put pressure on risk assets, including stocks and crypto.



Bitcoin has sunk around 75% since reaching its all-time high of nearly $69,000 in November 2021 and more than $2 trillion has been wiped off the value of the entire cryptocurrency market. On Friday, bitcoin was trading at just under $17,000.



CNBC reached out to the people behind some of the boldest price calls on bitcoin in 2022, asking them how they got it wrong and whether the year’s events have changed their outlook for the world’s largest digital currency.&nbsp;



<h2 class="wp-block-heading" id="h-tim-draper-250-000"><a></a>Tim Draper: $250,000&nbsp;</h2>



In 2018, at a tech conference in Amsterdam, Tim Draper predicted bitcoin reaching $250,000 a coin by the end of 2022. The famed Silicon Valley investor wore a purple tie with bitcoin logos, and even&nbsp;performed a rap&nbsp;about the digital currency onstage.&nbsp;



Four years later, it’s looking pretty unlikely Draper’s call will materialize. When asked about his $250,000 target earlier this month, the Draper Associates founder told CNBC $250,000 “is still my number” — but he’s extending his prediction by six months.



“I expect a flight to quality and decentralized crypto like bitcoin, and for some of the weaker coins to become relics,” he told CNBC via email.



Bitcoin would need to rally nearly 1,400% from its current price of just under $17,000 for Draper’s prediction to come true. His rationale is that despite the liquidation of notable players in the market like FTX, there’s still a huge untapped demographic for bitcoin: women.



“My assumption is that, since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.



<h2 class="wp-block-heading"><a></a>Nexo: $100,000&nbsp;</h2>



In April, Antoni Trenchev, the CEO of crypto lender Nexo, told CNBC he thought the world’s biggest cryptocurrency could&nbsp;surge above $100,000&nbsp;“within 12 months.” Though he still has four months to go, Trenchev acknowledges it is improbable that bitcoin will rally that high anytime soon.&nbsp;



Bitcoin “was on a very positive path” with institutional adoption growing, Trenchev says, but “a few major forces interfered,” including an accumulation of leverage, borrowing without collateral or against low-quality collateral, and fraudulent activity.&nbsp;



“I am pleasantly surprised by the stability of crypto prices, but I do not think we are out of the woods yet and that the second and third-order effects are still to play out, so I am somewhat skeptical as to a V-shape recovery,” Trenchev said.&nbsp;



The entrepreneur says he’s also done making bitcoin price predictions. “My advice to everyone, however, remains unchanged,” he added. “Get a single digit percentage point of your investable assets in bitcoin and do not look at it for 5-10 years. Thank me later.”&nbsp;



<h2 class="wp-block-heading"><a></a>Guido Buehler: $75,000&nbsp;</h2>



On Jan. 12, Guido Buehler, the former CEO of regulated Swiss bank Seba, which is focused on cryptocurrencies, said his company had an “internal valuation model” of between $50,000 and $75,000 for bitcoin in 2022.



Buehler’s reasoning was that institutional investors would help drive the price higher.



The executive, who now runs his own advisory and investment firm, said 2022 has been an “annus horribilis,” in response to CNBC questions about what went wrong with the call.



“The war in Ukraine in February triggered a shock to the paradigm of world order&nbsp;and the financial markets,” Buehler said, citing the consequences of raised market volatility and rising inflation in light of the disruption of commodities like oil.



Another major factor was “the&nbsp;realization that interest rates are still the driver of most asset classes,” including crypto, which “was hard blow for the crypto community,&nbsp;where&nbsp;there has been the belief that this asset class is not correlated to&nbsp;traditional assets.”



Buehler said lack of risk management in the crypto industry, missing regulation and fraud have also been major factors affecting prices.



The executive remains bullish on bitcoin, however, saying it will reach $75,000 “sometime in the future,” but that it is “all a matter of timing.”



“I believe that BTC has proven its robustness throughout all the crisis since&nbsp;2008 and will continue to do so.”



<h2 class="wp-block-heading"><a></a>Paolo Ardoino: $50,000&nbsp;</h2>



Paolo Ardoino, chief technology officer of Bitfinex and Tether, told CNBC in April that he expected bitcoin to fall sharply below $40,000 but end the year “well above” $50,000.



“I’m a bullish person on bitcoin … I see so much happening in this industry and so many countries interested in bitcoin adoption that I’m really positive,” he said at the time.



On the day of the interview, bitcoin was trading above $41,000. The first part of Ardoino’s call was correct — bitcoin did fall well below $40,000. But it never recovered.



In a follow-up email this month, Ardoino said he believes in bitcoin’s resilience and the blockchain technology underlying it.



“As mentioned, predictions are hard to make. No one could have predicted or foreseen the number of companies, well regarded by the global community, failing in such a spectacular fashion,” he told CNBC.



“Some legitimate concerns and questions remain around the future of crypto. It might be a volatile industry, but the technologies developed behind it are incredible.”



<h2 class="wp-block-heading"><a></a>Deutsche Bank: $28,000&nbsp;</h2>



A key theme in 2022 has been bitcoin’s correlation to U.S. stock indexes, especially the tech-heavy Nasdaq 100. In June, Deutsche Bank analysts published a note that said bitcoin could end the year with a price of approximately $27,000. At the time of the note, bitcoin was trading at just over $20,000.



It was based on the belief from Deutsche Bank’s equity analysts that the S&amp;P 500 would jump to $4,750 by year-end.



But that call is unlikely to materialize.



Marion Laboure, one of the authors of Deutsche Bank’s initial report on crypto in June, said the bank now expects bitcoin to end the year around $21,000.



“High inflation, monetary tightening, and slow economic growth have likely put additional downward pressure on the crypto ecosystem,” Laboure told CNBC, adding that more traditional assets such as bonds may begin to look more attractive to investors than bitcoin.



Laboure also said high-profile collapses continue to hit sentiment.



“Every time a major player in the crypto industry fails, the ecosystem suffers a confidence crisis,” she said.



“In addition to the lack of regulation, crypto’s biggest hurdles are transparency, conflicts of interest, liquidity, and the lack of reliable available data. The FTX collapse is a reminder that these problems continue to be unresolved.”



<h2 class="wp-block-heading"><a></a>JPMorgan: $13,000&nbsp;</h2>



In a Nov. 9 research note, JPMorgan analyst Nikolaos Panigirtzoglou and his team predicted the price of bitcoin would slump to $13,000 “in the coming weeks.” They had the benefit of hindsight after the FTX liquidity crisis, which they said would cause a “new phase of crypto deleveraging,” putting downside pressure on prices.



The cost it takes miners to produce new bitcoins historically acts as a “floor” for bitcoin’s price and is likely to revisit a $13,000 low as seen over the summer months, the analysts said. That’s not as far off bitcoin’s current price as some other predictions, but it’s still much lower than Friday’s price of just under $17,000.



A JPMorgan spokesperson said Panigirtzoglou “isn’t available to comment further” on his research team’s forecast.



<h2 class="wp-block-heading"><a></a>Absolute Strategy Research: $13,000&nbsp;</h2>



Ian Harnett, co-founder and chief investment officer at macro research firm Absolute Strategy Research,&nbsp;warned in June&nbsp;that the world’s top digital currency was likely to tank as low as $13,000.



Explaining his bearish call at the time, Harnett said that, in crypto rallies past, bitcoin had subsequently tended to fall roughly 80% from all-time highs. In 2018, for instance, the token plummeted close to $3,000 after hitting a peak of nearly $20,000 in late 2017.



Harnett’s target is closer than most, but bitcoin would need to fall another 22% for it to reach that level.



When asked about how he felt about the call today, Harnett said he is “very happy to suggest that we are still in the process of the bitcoin bubble deflating” and that a drop close to $13,000 is still on the cards.



“Bubbles usually see an 80% reversal,” he said in response to emailed questions.



With the U.S. Federal Reserve likely set to raise interest rates further next year, an extended drop below $13,000 to $12,000 or even $10,000 next can’t be ruled out, according to Harnett.



“Sadly, there is no intrinsic valuation model for this asset — indeed, there is no agreement whether it is a commodity or a currency — which means that there is every possibility that this could trade lower if we see tight liquidity conditions and/or a failure of other digital entities / exchanges,” he said.



<h2 class="wp-block-heading"><a></a>Mark Mobius: $20,000 then $10,000</h2>



Veteran investor Mark Mobius has probably been one of the more accurate predictors of bitcoin.



In May, when the price of bitcoin was above $28,000, he told Financial News that bitcoin would likely fall to $20,000, then bounce, but ultimately move down to $10,000.



Bitcoin did fall below $20,000 in June, and then bounce in August before falling again through the rest of the year.



However, the $10,000 mark was not reached.



Mobius told CNBC&nbsp;he forecasts bitcoin to hit $10,000 in 2023.



<h2 class="wp-block-heading"><a></a>Carol Alexander: $10,000&nbsp;&nbsp;</h2>



In December 2021, a month on from bitcoin’s all-time high, Carol Alexander, professor of finance at Sussex University, said she expected bitcoin to drop down to $10,000 “or even more” in 2022.



Bitcoin at the time had fallen about 30% from its near $69,000 record. Still, many crypto talking heads at the time were predicting further gains. Alexander was one of the rare voices going against the tide.



“If I were an investor now I would think about coming out of bitcoin soon because its price will probably crash next year,” she said at the time. Her bearish call rested on the idea that bitcoin has little intrinsic value and is mostly used for “speculation.”



Bitcoin didn’t quite slump as low as $10,000 — but Alexander is feeling good about her prediction. “Compared with others’ predictions, mine was by far the closest,” she said in emailed comments to CNBC.

107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1

From $250,000 to $10,000 price calls: How market watchers got it wrong with bitcoin in 2022

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Binance’s books are a black box, filings show, as crypto giant tries to rally confidence

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="485" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg" alt="" class="wp-image-419501" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg 728w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-135x90.jpg 135w" sizes="(max-width: 728px) 100vw, 728px" /><figcaption>A bitcoin representation is seen in a file photo, in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/File Photo</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> on Wednesday rose to a two-week high as investors continue to weigh up the fallout from the collapse of cryptocurrency exchange FTX.



But one analyst warned that the bounce is likely just a bear market rally and would not be sustained.



Bitcoin topped $17,000 trading at its highest level since Nov. 15 before paring gains. The world’s largest cryptocurrency was trading 2% higher at $16,879.50 at around 2:37 a.m. ET.



Other digital coins were also up, including <a href="https://www.cnbcafrica.com/quotes/eth=x/">ether</a>, which rose 5% to $1,271.72.



Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said the move higher was likely a result of “over leveraged shorts covering.”



Someone who shorts an asset borrows some of that asset, sells it at a higher price then buys it back at a lower price and banks the profit from that. A short covering is when a trader buys the asset back at the lower price. That can cause the price of that asset to move higher.



Ayyar said the price of bitcoin has “hit resistance” at $17,000 and is likely to go lower from there.



“This is just a bearish retest,” Ayyar said.



Investor confidence in cryptocurrencies has been hammered after Sam Bankman-Fried’s exchange FTX collapsed and filed for bankruptcy this month, sending shockwaves through the entire industry.



Contagion from the fallout is spreading. Crypto lender and exchange BlockFi filed for bankruptcy as a result of exposure to FTX.



More than $1.3 trillion of value has been wiped off the cryptocurrency market this year, sparked by the failure of the algorithmic stablecoin terraUSD in May and implosion of hedge fund Three Arrows Capital. The FTX collapse has worsened the situation.



Traders will also be closely watching the contents of a speech by U.S. Federal Reserve Chair Jay Powell at the Brookings Institution on Wednesday for clues about the central bank’s interest rate plans. If the market thinks the Fed will slow the pace of rate hikes, it could give a boost to risk assets such as stocks and bitcoin.

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Crypto

Binance CEO Changpeng Zhao pleads guilty to federal charges, steps down

Bitcoin crosses $34,000 to the highest since May 2022 on ETF hopes

First bitcoin ETF could be coming soon as court rules in favor of Grayscale over SEC

Bitcoin abruptly tumbles as much as 9% to just over $26,000 late Thursday

SEC sues Binance and CEO Changpeng Zhao for U.S. securities violations

Crypto companies are playing poker with the SEC as agency cracks down on the industry

Bitcoin dips below $30,000 to start the week as crypto investors refocus on economic concerns

Bitcoin is one year away from a major technical event. History suggests the start of another bull run

Bitcoin tops $30,000 for the first time since June ahead of key inflation data; ether nears $2,000

Bitcoin climbs 5% above $28,000 as investors shrug off regulatory crackdowns

Bitcoin is poised to blow up Africa’s $86 billion banking system

New York sues KuCoin, expands cryptocurrency crackdown

IMF lays out crypto action plan, recommends against legal tender status

Crypto markets on edge as U.S. regulatory crackdown on industry intensifies

From $250,000 to $10,000 price calls: How market watchers got it wrong with bitcoin in 2022

Binance’s books are a black box, filings show, as crypto giant tries to rally confidence

Bitcoin tops $17,000 for the first time in two weeks but analysts don’t expect the bounce to stick

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