Cryptocurrency roundup: Twitter founder’s “DeFi” platform
In crypto this week: regulators are getting worried; Jack Dorsey’s bitcoin DeFi platform; and dogecoin’s co-founder lambasts cryptocurrencies. Salon Sardana reports on the top crypto stories of the week.
It has been a mixed week for crypto with a combination of regulators getting worried about crypto; Jack Dorsey announcing he will launch a decentralised finance (DeFi) platform built around bitcoin; and dogecoin’s co-founder Jack Palmer lambasting cryptocurrencies.
Despite some bullish news for the industry, most cryptocurrencies remained in a sea of red compared to the previous week.
Here are the top stories that caught our eye.
Jack Dorsey says Square will launch a bitcoin “DeFi” platform
Jack Dorsey, the billionaire chief executive of Twitter said on Thursday his mobile payments company Square is due to launch a decentralised finance (DeFi) project using bitcoin.
“Square is creating a new business (joining Seller, Cash App, & Tidal) focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralised financial services,” Dorsey said on Twitter.
The news is theoretically a win for bitcoin. Decentralised finance – the blockchain-based form of finance that eliminates intermediaries – has so far mostly been associated with cryptocurrency ether.
But it remains unclear what the business’ exact offering would be and how the project may be monetised. Among other finer details which have yet to be confirmed, the project has also not been named.
The UK will spend £11m to warn younger investors on risks of crypto
The Financial Conduct Authority – the UK’s regulator that oversees financial services – announced on Thursday it would spend £11m in a campaign to educate young investors about the risks and huge losses they can face if they invest in cryptocurrencies.
Research from Interactive published earlier this month shows 45% of young investors’ first investment was made in cryptocurrencies.
“This is a category of consumer that we are not used to engaging with – 18 to 30-year-olds more likely to be drawn in by social media. That’s why we are creating an £11m digital marketing campaign to warn them of the risks,” Nikhil Rathio, chief executive of the FCA said on Thursday in the FCA’s Our Role and Business Plan webinar.
The announcement comes as central banks across the globe are getting increasingly worried about the rise in cryptocurrencies. Many central banks are rushing to build central bank digital currencies (CBDCs) so they are unlikely to want competition.
China particularly has taken a tough stance on cryptocurrencies and earlier this banned cryptocurrency mining in the country and the country’s financial institutions from participating in the crypto space.
Conversely, the Bank of England’s deputy governor, Jon Cunliffe, told CNBC earlier this week that cryptocurrencies haven’t grown big enough to pose a systematic risk to financial stability. “There are issues of investor protection here. These are highly speculative assets,” Cunliffe says. “But they’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system.”
Dogecoin creator Jackson Palmer lambasts cryptocurrencies
Cryptocurrencies came under fire this week, by none other than the co-founder of one of the most successful cryptocurrencies.
Jackson Palmer, who created the meme cryptocurrency dogecoin in 2013, said on Twitter on Wednesday: “After years of studying it, I believe that cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificially enforced scarcity.”
He also made a number of other scathing remarks, including that cryptocurrencies result in the rich getting richer while vulnerable investors pay the brunt for becoming involved.
Palmer also said he has no plans to return to crypto.
While dogecoin started as a joke, the project is worth many other projects which are considered to be “more serious”. Dogecoin is up more than 5,000% in the last year, far outpacing the growth in the world’s two largest cryptocurrencies – bitcoin and ether – by market cap.
Crypto exchange FTX says it could acquire many prestigious companies
Sam Bankman-Fried, chief executive of cryptocurrency exchange FTX, says his company could acquire many blue-chip companies.
Bankman-Fried told the Financial Times that his company could buy institutions such as Wall Street giant Goldman Sachs or CME Group. Such acquisitions could be possible once the company overtakes rival exchanges such as Binance and Coinbase, he said.
“If we are the biggest exchange, [buying Goldman Sachs and CME] is not out of the question at all,” he told the FT.
Bankman-Fried also said this may become a wider trend across the industry where crypto exchanges look to snap up established firms. The claim highlights how greater regulatory scrutiny has failed to deter crypto exchanges’ expansion plans.
Hong Kong Authorities arrest four in suspected $155m money laundering scheme
Authorities in Hong Kong arrested four people on Thursday for allegedly being involved in a cryptocurrency money laundering scheme worth $155m, the South China Morning Post reported on Thursday.
An investigation showed that more than 60% of the funds had passed through bank accounts in Singapore over the last 15 months.
The syndicate allegedly operated between February 2020 and May 2021 through launching shell companies using e-wallets.
It also used a local platform to trade “privacy coins” issued by tether, Coindesk says.
Those convicted of money laundering in Hong Kong face a maximum penalty of 14 years in jail and a fine of up to $643,000.
Crypto markets update
Here’s what happened in the crypto market over the last seven days:
- Bitcoin fell 5% to $31,237
- Ether fell 11% to $1865
- Dogecoin fell 14% to $0.18
- Cardano fell 12% down to $1.17
- Binance Coin fell 3% to $3.02
What investors need to watch out for next week
Crypto prices may move sideways throughout July, ahead of the 28 July deadline by which the Senate Banking Committee’s subcommittee on economic policy has to respond to US Senator Elizabeth Warren’s concerns.
The Democratic senator, who also chairs the Senate Banking Committees’ subcommittee on economic policy, warned of the risks of investing in “highly opaque and volatile” cryptocurrency market in a letter earlier this month addressed to Gary Wensler, chair of the Securities and Exchange Commission, the US financial regulator.
Warren set a deadline of 28 July for Gensler to reply to her concerns.