The past week was marked by considerable activity on the cryptocurrency scene, characterized by a group of significant events, including the underpinning of regulatory crackdowns and a market rally. The US SEC’s quest for greater control over the crypto space was of particular interest, prompting the agency to set its sights on Paxos and Do Kwon. Despite these challenges, cryptocurrency markets rallied, promising investors and enthusiasts a glimmer of hope.
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The US SEC seeks to bring cryptocurrencies under its control
After facing widespread criticism from the crypto industry at large for its enforcement actions against Kraken two weeks ago, the US Securities and Exchange Commission (SEC) continued its regulatory crackdown last week, targeting Paxos and Do Kwon.
Last Monday, the regulatory watchdog announced its intention to take legal action against Paxos, the blockchain-based financial firm responsible for issuing Binance USD (BUSD). The SEC cited violations of investor protection provisions related to the distribution of securities. He gave a notice from Wells to Paxos about the matter.
Paxos launched a statement in response, strongly challenging the SEC’s assertion that BUSD is a security that falls under the purview of federal regulations. The New York-based company clarified that no other complaints had been filed against it. They plan to continue engaging with the regulator on the issue. Furthermore, Paxos expressed its willingness to take the matter to court if necessary.
However, in a similar regulatory effort, last Monday, the New York Department of Financial Services (NYDFS), the agency responsible for overseeing Paxos, tidy the blockchain firm will suspend minting new BUSD by February 21, an order that Paxos had to comply with.
As events related to Paxos and the SEC unfolded, concerns were expressed by the broader cryptocurrency community about the regulatory climate in the US cryptocurrency industry. This was mainly due to the recent enforcement actions of the SEC, in addition to its notice from Wells to Paxos. While there were reports suggesting Circle’s involvement in the matter, the P2P technology company has refuted these claims.
After issuing a notice from Wells to Paxos, the SEC turned its attention to Do Kwon and Terraform Labs, ultimately indicting the South Korean developer and his failed company. In a Feb. 17 press release, the SEC accused Do Kwon of misleading investors in cryptocurrency schemes involving an algorithmic stablecoin and other assets that qualify as securities.
The SEC also accused Do Kwon and Terraform Labs of using a “masked” trading company located in the US in an attempt to re-fix the value of the crashed TerraUSD (UST) stablecoin when it first encountered problems in May 2021. The company in the question was eventually revealed to be Jump Trading. While the SEC has yet to file charges against the company, its involvement in the Terra incident remains a hot topic.
Despite the SEC’s ultimate focus on Do Kwon and Terraform Labs, members of the cryptocurrency community feel that the US regulator’s involvement came too late. South Korean authorities were the first to launch an investigation into Do Kwon and the collapse of Terra and, as part of their probe, last week requested an arrest warrant for the former chief executive of Tmon, an e-commerce company. Authorities say he accepted bribes from Daniel Shin, a co-founder of Terra, to promote UST.
In addition to Do Kwon and Paxos, the US SEC also turned its attention to former NBA player Paul Pierce last week. The agency filed charges against Pierce for his involvement in promoting the failed EthereumMax (EMAX) project that led to losses for investors. The SEC alleged that Pierce was paid more than $244,000 in EMAX, but did not disclose his compensation for promoting the asset. Pierce agreed to pay $1.4 million to settle the charges.
Other regulatory efforts
US SEC Chairman Gary Gensler further highlighted the importance of proper regulation for crypto custodial activities as the regulatory agency continued to police the US crypto scene. Gensler revealed that the SEC is examining possible ways to include crypto custody within the current regulatory framework or even create a new one to ensure proper supervision of the sector.
The recent surge in regulatory efforts has been triggered in part by the collapse of FTX, which exposed the need for proper oversight of the crypto industry. Following earlier reports suggesting that FTX founder Sam Bankman-Fried used company funds to make campaign donations to politicians, a bill emerged last week from the Kansas legislature that seeks to cap $100 to crypto donations for political campaigns.
Increasing regulatory efforts in the cryptocurrency industry subsequently led major banks to break ties with cryptocurrency-related companies to avoid getting caught up in regulatory scrutiny. This approach may push cryptocurrency companies to consider moving their operations to more crypto-friendly jurisdictions, a pattern that seems to have picked up of late.
Meanwhile, the regulatory landscape in Asia became even stricter last week, with the formation of a new partnership between South Korea and Hong Kong aimed at curbing the illegal use of cryptocurrencies in cross-border transactions. This association was established in response to reports that more than 60% of the illicit cryptocurrency-related transactions identified in South Korea were destined for Hong Kong.
Under the partnership, both regions plan to collaborate closely by sharing relevant information to combat illegal transnational transactions involving cryptocurrencies. Their goal is to exchange intelligence and work together to crack down on these illegal activities.
This collaboration came amid reports of Hong Kong’s intentions to finally legalize cryptocurrency trading for all of its citizens, as it seeks to establish a crypto hub in the heart of Asia. The administrative region plans to allow all its citizens to buy, trade, and sell cryptocurrency by June 1.
Bitcoin Leads Crypto Recovery
Dominant regulatory scrutiny last week did little to hamper bitcoin (BTC) growth, as the asset rode a series of rallies to hit a 6-month high. The broader crypto market also took advantage of this campaign, leading to massive gains for various altcoins.
Last Tuesday, bitcoin surged 2.9% in 24 hours, retaking $22,000 price territory when it reached a value of $22,230. The surge came on the heels of reports that long-term asset holders they are unfazed by market turbulence. The data revealed that the percentage of BTC that last moved in at least two years had reached a new ATH of 49.86%.
Soon after, an analysis by CryptoQuant suggested that this year is the best time to accumulate bitcoins, as the asset seems to be preparing for a breakout. CryptoQuant author Dan Lim and points analyzed the BTC MVRV ratio, indicating that further declines for bitcoin are unlikely.
One day after CryptoQuant’s analysis appeared, BTC rallied to a 6-month high of $24,900. The asset’s massive rally supported altcoins, which also posted impressive gains at the time. The data further revealed that bitcoin and ethereum (ETH) were experiencing renewed optimism in the derivatives scene.
Despite facing fierce resistance in the $24,900 territory on Feb. 16, bitcoin’s drive persisted, leading to a recovery of the $25,000 zone on the same day for the first time since last August. As the asset’s rise spread to the rest of the market, the global cryptocurrency market rose by an estimated $100 billion in 24 hours.
Consequently, several altcoins hit new all-time highs in the wake of the uptrend across the market. These altcoins include OKB, GMX, VELA, and OAS, among others. Amid the rally, the global crypto market capitalization rose to $1.12 trillion. Meanwhile, bitcoin ended the week with a value of $24,631, which is an increase of 12.6% from the price of $21,862 with which it began the week.
