“The FTX’s exchange token, FTT, went into freefall Tuesday even after the company got a lifeline from larger rival Binance – as fears mounted over the crypto trading firm Alameda Research’s financial woes, fueling what appeared to be contagion driving down prices broadly across digital asset markets.
Both Alameda and FTX are part of the billionaire Sam Bankman-Fried’s now-fast-dwindling crypto empire. FTT fell to $4, down more than 80% over the past 24 hours. SOL, the native token of the Solana blockchain, fell to $21 from $30.
Broader crypto markets, which mounted a short-lived recovery after the bailout announcement, quickly lost steam and turned sharply lower. The CoinDesk Market Index (CMI), which tracks 162 cryptocurrencies, fell 8% in the last 24 hours. Bitcoin (BTC), the largest cryptocurrency by market capitalization, tumbled to $17,114 on the Bitstamp exchange, a 23-month low. The BTC price recovered somewhat to $18,400 but was still down 12% on the day.
CoinDesk reported last week that Alameda Research’s balance sheet is loaded with highly illiquid FTT tokens, and is also a big holder of SOL tokens. Investors fear that the giant Binance exchange’s bailout of FTX might not extend to Alameda, which is a significant market maker and lender in the crypto space, and that Alameda might face margin calls and be forced to fire-sell assets from its balance sheet to raise liquidity.
Alameda’s rout could spell trouble for the broader crypto industry, including lenders exposed to the trading firm and to crypto ecosystems which Alameda and FTX have been heavily invested.
Assuming Alameda doesn’t survive, there could be a good deal of pain, particularly for the Solana ecosystem — in which they were deeply involved — and any institutions that had lent to Alameda.”
“The venture capital arm of cryptocurrency exchange FTX has been a prominent investor in some of the biggest names in the crypto ecosystem. With Binance’s possible acquisition of its rival FTX, questions swirl around what will happen to these investments.
Among the biggest names in which FTX Ventures invested were Bored Ape Yacht Club creator Yuga Labs, USDC stablecoin issuer Circle, layer 1 blockchains Near Protocol and Sui, crypto lender BlockFi and two different funding rounds for the Aptos blockchain.
FTX has been linked closely with the embattled BlockFi. The U.S. arm of FTX gave the strained lender a $400 million credit line. In September, FTX Ventures agreed to buy 30% of SkyBridge Capital for an undisclosed amount after the investment firm was dinged by the bear market.
The FTX turmoil could also cause more headaches for investors in the cryptocurrency exchange, particularly the already weakened Tiger Global Management and SoftBank Vision Fund. Chase Coleman’s Tiger Global hedge fund participated in a $420 million round for FTX in October 2021.”
“Crypto exchange FTX has halted all non-fiat customer withdrawals. The halt highlights the deteriorating condition of the exchange. Reuters reported FTX saw withdrawals totaling $6 billion in the past several days.
Any transfers besides fiat are halted.
It appears customers can still withdraw their assets to fiat, although opting for the fiat option could see the funds take up to five business days for settlement.”
“Regulators across the world have the power to block major mergers if they fear they would limit market choice, and also have strict laws against anti-competitive behavior. Binance is the world’s largest crypto exchange by volume, while FTX is within the top five.
In the U.S., antitrust laws such as the Sherman Act outlaw direct competitors from acting to protect each other. CZ said that he had stepped in to protect users after FTX, faced with a “significant liquidity crunch” had asked for help. That suggests an illegal agreement, Schrepel says.
This [deal is] a textbook horizontal merger of the sort that the antitrust laws in the U.S. and internationally are meant to address. I think that the apparent hope they have that excluding the U.S. exchanges from the deal is going to save their deal from antitrust scrutiny is very short sighted. These are global markets.
While the Twitter announcements from Binance and FTX on Tuesday made the deal look all but done, Kressin said it’s likely just the start of a months-long legal process that could potentially result in federal regulators attempting to block the acquisition. Kressin added that Binance’s Chinese origins (though the exchange has long pushed back against being labeled as a “Chinese company”) could result in an extra layer of scrutiny for the deal.
They’re likely going to have to file [premerger notifications] with the merger enforcement authorities in a lot of different jurisdictions. I think it’s likely that this would go to the DOJ, and the DOJ would be looking at the deal and deciding whether they want to sue under the U.S. antitrust laws to block a transaction.”
“Binance CEO Changpeng Zhao said on Tuesday that his exchange would soon introduce “Merkle-tree proof of reserves,” in the interest of “full transparency.”
Banks run on fractional reserves. Crypto exchanges should not.
Jeremy Nau, Director of Digital Assets at Armanino, has already offered to implement a proof of reserves system on Binance’s behalf, using Merkle-tree proofs. The firm already provides a similar service for Kraken, which it says possesses assets exceeding 100% of its liabilities.”
“The U.S. Treasury Department is “redesignating” Tornado Cash as a sanctioned entity, overtly alleging that North Korea has used the crypto mixing service to support its weapons of mass destruction (WMD) program.
OFAC also published a new frequently-asked-question to address longstanding questions about who, exactly, was being added to its Specially-Designated Nationals (SDN) list. Much of the crypto industry has argued that Tornado Cash and its wallet addresses are software, not a person or entity, and so OFAC should not be able to designate the mixer as a sanctioned entity. In its new FAQ, Treasury pushed back against this argument, saying an entity could be “a partnership, association … or other organization.”
Tornado Cash is an entity under the definition created by the executive orders overseeing sanctions, OFAC said. The organizational structure includes both Tornado Cash’s founders and developers, as well as the decentralized autonomous organization (DAO) that votes on new features.
Tornado Cash uses computer code known as ‘smart contracts’ to implement its governance structure, provide mixing services, offer financial incentives for users, increase its user base, and facilitate the financial gain of its users and developers.
The watchdog noted that Tornado Cash’s founders, DAO members and users were not sanctioned ‘at this time.’“
“NTT Docomo, Japan’s largest mobile-phone network, pledged to invest up to 600 billion yen ($4 billion) into Web3 infrastructure.
The company will collaborate with Astar Foundation, the developer of the public blockchain Astar Network, and Accenture to speed up Web3 adoption. They will set up a consortium that allows individuals and corporations to utilize tokens for governance.
Japan’s Web3 policy has been given by a jumpstart this year by politicians keen to do away with red tape and a customarily slow decision-making process. A Web3 policy office now exists under the Ministry of Economy, Trade and Industry (METI). Last week, the country’s digital ministry announced it would create a decentralized autonomous organization (DAO) to explore Web3 technology.”