16 November

The collapse of FTX and Alameda Research impacts the centralized finance (CeFi) part of the crypto industry the most, Bernstein said in a research report Monday. Part of the crypto ecosystem is exposed to this event, but it is not the entire industry, the report added. The decentralized finance (DeFi) ecosystem and blockchain-based applications, ‘gain from this fragility, subject to some regulatory boundaries and negotiations.’

Bernstein says there needs to be a distinction made between the centralized custodial players in crypto, namely the exchanges, custodians, and crypto banks, as this is where regulation is coming. This will involve rules around maintaining reserves and uniform accounting for custodial firms, the broker said. Governments and regulators may also increase their scrutiny of offshore exchanges, where regulations are lighter, it added.

Echoing comments made by Wall Street rival Citi in a report last week, Bernstein says that decentralized exchanges (DEXs) continue to see traction, especially after the failure of FTX.”

See Also: DeFi Protocols Are Winning Users as Centralized Crypto Exchanges Suffer Ether Outflows

The Securities Commission of the Bahamas, where FTX is headquartered, has approved the liquidation of FTX’s assets. Kevin Cambridge and Peter Greaves of Big Four accounting firm PricewaterhouseCoopers (PwC) have now been approved by the court as joint provisional liquidators.

A provisional liquidator does not distribute assets to creditors but instead is put in place to preserve the firm’s assets prior to a court hearing into a firm’s bankruptcy filing. The Commission will be liaising with “other supervisory authorities” to get to the bottom of the FTX’s historic collapse.”

See Also: FTX’s New Leadership Is in Touch With Regulators, May Have Over 1M Creditors, New Filings Say
See Also: Thousands petition for congressional investigation of alleged Gensler–SBF links

Crypto lender BlockFi is preparing a potential bankruptcy filing because of its “significant exposure” to bankrupt crypto exchange FTX, the Wall Street Journal reported on Tuesday.

The lender denied rumors that a majority of its assets were held at FTX, but did acknowledge on Monday that in addition to having deposits on the platform, it had an undrawn line of credit from FTX and obligations that FTX owed it.”

See Also: Liquid Global Halts Withdrawals as FTX Contagion Continues

At their peak last November, decentralized finance (DeFi) applications stored more than $10 billion on the Solana network, its popularity being led by high-flying proponents including Sam Bankman-Fried, Multicoin Capital, Sino Global Capital and other venture funds. A year later, the total value locked (TVL) has dropped to just over $300 million with FTX filing Chapter 11 bankruptcy proceedings and facing prosecution, Multicoin and Sino Global reporting multimillion-dollar losses and the Solana Foundation itself losing “tens of millions.”

Lending and borrowing platform Solend took the biggest hit both in percentage and value terms. It held over $280 million on Nov. 2 and now holds under $30 million. Data show a vast amount of stablecoins, wrapped bitcoin tokens and Solana-based tokens have left the protocol.

Solana has undoubtedly taken a massive blow. Restless and unpredictable as it may be, it will eventually reveal the true worth of projects and token.”

The small recovery comes as U.S. stocks were buoyed by fresh data from the Labor Department’s Producer Price Index report on Tuesday showing a decline in the cost of goods excluding food and energy. This, experts say, could mean inflation is finally being brought under control.

Quantum Economics CEO Mati Greenspan told Decrypt that ‘inflation data does seem to be turning, which is really positive for asset prices.'”

A group of major banks and the Federal Reserve Bank of New York have started to test the use of digital tokens representing digital dollars to improve how central bank money is settled between institutions. Citigroup (C), HSBC (HSBC), BNY Mellon (BK) and Wells Fargo (WFC) are among the banks taking part, along with payments giant Mastercard (MA).

The 12-week proof-of-concept pilot program will explore the use of a platform known as the regulated liability network, or RLN, whereby banks issue tokens that represent customers’ deposits that are settled on a central bank reserve on a shared distributed ledger.”

See Also: USDC Stablecoin Issuer Circle Says Businesses Can Accept Apple Pay

The European Union could ban banks and crypto providers from dealing in privacy-enhancing coins such as zcash, monero and dash under a leaked draft of a money laundering bill obtained by CoinDesk.

Credit institutions, financial institutions and crypto-asset service providers shall be prohibited from keeping …anonymity-enhancing coins.

Under the Czech plans, crypto asset providers would be obliged to verify customers’ identity even for occasional transactions of under 1,000 euros ($1,040), and to probe the nature and purpose of the business for larger payments. That would make rules more onerous than for other kinds of firms such as banks, where due diligence rules only kick in for larger payments, apparently due to fears that crypto payments can easily be broken up into smaller chunks.

The bill would represent the latest in a regulatory onslaught against online anonymity – which has legitimate purposes, but which regulators also worry can be used to process criminal funds, bust sanctions, or raise money for terrorists and other pariahs.”

See Also: The ‘SBF Bill’: What’s in the Crypto Legislation Backed by FTX’s Founder

All 19 of the congressional candidates backed by the crypto industry’s most widely supported political action committee, GMI PAC Inc., won their races last week, sending 16 new members to the House and Senate.

The millions in campaign spending from this group is at least partially responsible for a large number of relatively young and crypto-friendly additions to Congress. But that positive performance is also at least somewhat eclipsed by the FTX meltdown. Former FTX CEO Sam Bankman-Fried was a top contributor to GMI.

Bankman-Fried contributed $2 million in January, and GMI’s relationship with him was limited to his interest in GMI’s mission at the time of his contribution. As with all contributors, Bankman-Fried had no involvement in decision making about the PAC’s activities or which candidates the PAC supported.

The implosion of his crypto empire and the devastation wrought on other companies and the real-people users of FTX will likely shape how Congress views digital assets in the coming session. Whether crypto goodwill will remain for those GMI and its affiliated PACs helped into office will immediately be tested. Congressional hearings will likely question what happened with FTX, and the new lawmakers will have to consider appropriate legislation in what could be the most important year yet for the industry on Capitol Hill.”

See Also: Meaning of FTX Fall Depends on One’s Politics, US Senate Hearing Shows

Aftermath Of The FTX Collapse In The Markets