Crypto Classification, Coinbase Crime, & Crescive Capitol

In crypto-related news, the majority of the leading cryptocurrencies were up during sunrise trading on Friday, with Bitcoin Cash BCHUSD, seeing the largest change, growing 3.89% to $127.50. Ethereum was trading at USD 1,566.22, +1.61%; Solana USD was at 41.24, falling 4.02%; and Dogecoin was at USD 0.0682, down -1.3590%. According to Matt Hougan, chief investment officer at Bitwise Asset Management, the cryptocurrency market may stay erratic for the rest of the year. “We’re still working through the last of the deleveraging process,” Hougan said. “We’re also dealing with some short term regulatory headwinds, including what is expected to be sort of a tumultuous fall in 2022 for crypto from a regulatory perspective.” Nevertheless, he anticipates a crypto bull market to begin in 2023, in spite of a looming recession. “As we get into the next technological cycle in crypto, I think sort of the secular trends powering cryptos growth will overwhelm the macro trends,” Hougan said.  

The overall market capitalization for crypto assets surpassed $1 trillion on Monday for the first time in the previous five weeks. The statistical milestone occurs as three significant cryptocurrency bankruptcy cases begin, and investor anticipation for Ethereum's merger continues to rise. A disastrous second quarter for crypto has led to its drive to reclaim the trillion dollar market cap. According to Hougan, the greatest crypto story for the second half of 2022 may depend on Ethereum's successful switch to proof-of-stake, amidst increased hope for its anticipated software upgrade. With Ethereum values up, “Ethereum will be the institutional asset of choice in the second half of the year and it’s on sale," Hougan asserted.

After stablecoin, TerraUSD, collapsed in late May, a lot of crypto companies still have solvency difficulties. The likelihood that American investors will be able to put their money in crypto businesses in the near future will be greatly influenced by each lender's capacity to repay consumers. Investors will be keenly monitoring developments around Three Arrows Capital, Voyager Digital, and Celsius Network, three significant cryptocurrency bankruptcies. While Flexa, the issuer of one of the affected coins, claimed it hasn't been contacted by the U.S. Securities and Exchange Commission (SEC), Coinbase disputed the SEC's assertions that seven cryptocurrencies traded on the crypto exchange were securities. The SEC described why nine out of the 25 crypto assets in question would pass the Howey test—the standard used by the U.S. Supreme Court to assess what constitutes a "investment contract,” in a different civil lawsuit claim. Along with Flexa's AMP, the nine coins also include RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM.

A major topic of discussion in relation to the regulation of digital assets is whether or not cryptocurrencies count as securities. Paul Grewal, the cryptocurrency exchange's senior legal officer, stated on Thursday that Coinbase does not list any securities. "Seven of the nine assets offered on Coinbase's platform are subject to the SEC's accusations. These assets are not securities," according to Grewal. Jake Chervinsky, director of policy at the Blockchain Association, a trade association for the sector, agreed. According to Chervinsky's tweet, the SEC would probably "act like they've set precedent & move on to the next target." Grewal stated, “The SEC itself has evaluated the rigorous process Coinbase uses to analyze and review each digital asset before making it available on our exchange. In addition to analyzing whether the asset might be regarded as a security, this procedure also takes regulatory compliance and information security into account.”

Following the accusation of insider trading against a former Coinbase employee, the price of Bitcoin began to slide downward. Ishan Wahi, a former product manager for the business, is charged with taking part in a scheme to engage in insider trading using cryptocurrencies listed on the platform. He is charged with leaking information regarding secret plans to offer certain digital tokens to his brother and a friend. A Justice Department press release claims that the three made at least $1.5 million in earnings. According to FBI Assistant Director Michael Driscoll, "the charges in this case relate to transactions done in a crypto exchange — rather than a more traditional financial market — but they nonetheless constitute insider trading." This is thought to be the first cryptocurrency-related insider trading scam.

According to a press release, Sameer Ramani, a former Coinbase employee, had been charged but had not been apprehended, while Ishan Wahi and his brother Nikhil Wahi had both been taken into custody. While Nikhil Wahi and Sameer Ramani were each charged with one count of wire fraud conspiracy and one count of wire fraud, Ishan Wahi was charged with two counts of wire fraud conspiracy and two counts of wire fraud. Although the DOJ's charges do not include any counts of securities fraud, it is interesting to note that in separate charges filed by the SEC, a number of the assets traded by the group are identified as being crypto asset securities, a designation that, if upheld, will undoubtedly have significant ramifications for the cryptocurrency market

In the SEC’s 62-page filing, they targeted the aforementioned businesses and coins, stating "Nikhil and Ramani traded in securities subject to the federal securities laws because these crypto assets were investment contracts; they were offered and sold to investors who made an investment of money in a common enterprise, with a reasonable expectation of profits to be derived from the efforts of others." According to the press announcement, the group had purchased cryptocurrencies using accounts belonging to others and transferred money "via many anonymous Ethereum blockchain wallets." Ishan Wahi apparently tried to flee the country but was prevented by authorities before boarding a flight.

The SEC's expansion of its classification of crypto assets as securities poses a significant risk to the cryptocurrency market, which has gained steam as a result of lenient regulatory standards for commodities, which many insiders have claimed cryptocurrencies should be categorized as. Coinbase declared that they had submitted a petition to create new standards for crypto regulatory frameworks in response to the SEC's lawsuit. The arrests come after a narrative that primarily took place on Twitter, during which Cobie, a well-known cryptocurrency figure, uncovered a wallet that had been used to purchase a variety of cryptocurrencies before Coinbase announced that it would list those assets on its exchange. This arrest comes after OpenSea executive Nate Chastain's arrest in June, who was also accused of insider trading linked to NFTs.

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