Weekly Crypto Roundup: new rules, severe report cards, and yet more hacks

Mainstream companies and regulators are feeling the ripples coming from the crypto industry

Mainstream companies and regulators are feeling the ripples coming from the crypto industry

As several crypto firms reported falling revenues in the second quarter of 2022, a growing number of traders are facing the ripple effect of the meltdown spreading from the crypto industry to mainstream companies, triggering regulators around the world to act.

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Rising regulations

This week U.S. Senators Debbie Stabenow and John Boozman proposed the Stabenow-Boozman bill, which aims to give the Commodities Futures Trading Commission (CFTC) the main responsibility of regulating Bitcoin and Ether. At present, the crypto industry is struggling to navigate the regulatory overlaps of the CFTC – which is thought to be more tolerant of crypto innovation – and the Securities and Exchange Commission (SEC), which is known for taking legal action against a number of crypto companies.

The SEC has thousands of full-time employees and a budget nearing $2 billion, while the CFTC has fewer than 1,000 full-time employees and its budget is well below $500 million.

The proposal comes as Bitcoin’s value more than halved this year to touch prices below $19,000, and a number of crypto lending/trading platforms fought to maintain operations – or simply suspended user transfers and withdrawals.

On the other side of the Atlantic, the Indian government is closely watching the crypto sector.

In a written reply to the Rajya Sabha on Tuesday, the Minister of State for Finance, Pankaj Chaudhary reported that the Directorate of Enforcement is probing the Indian crypto exchange WazirX. The platform was alleged to have laundered around Rs 2,790 crore.

“In one of the cases, investigation done so far has revealed that one Indian Crypto-exchange platform, Wazirx, operated by Zanmai Labs Private Limited in India was using the walled infrastructure of Cayman Island based exchange BINANCE. Further it has been found that all crypto transactions between these two exchanges were not even being recorded on the blockchains and were thus cloaked in mystery,” he said, according to PTI.

The Enforcement Directorate also froze ₹64.67 crore in WazirX’s bank deposits. WazirX issued a statement today saying that regardless of the regulator’s actions, its deposits and withdrawals were taking place as usual. The exchange is also assessing its options.

Saylor no longer CEO

The American company MicroStrategy is known for its business intelligence services, but those in the crypto world would more likely call it a “whale,” referring to high-profile cryptocurrency buyers whose movements can greatly influence the market. At the last count, MicroStrategy owned about 129,699 BTC.

This week, however, MicroStrategy’s co-founder and billionaire Michael Saylor announced he was stepping down from the role of CEO and taking up an executive chairman position instead, so he could focus on acquiring more cryptocurrency. Mr. Saylor has been the CEO of the company for over 30 years.

MicroStrategy’s stock rose by 14.56% in the last five days, its highest since early May.

Yet, this didn’t change the company’s Q2 results, which showed that Bitcoin’s losses had also hit the balance sheet hard. Total revenues for the quarter fell to $122.1 million and net loss came to over $1 billion.

“Net loss for the second quarter of 2022 was $1.062 billion, or $94.01 per share on a diluted basis, as compared to $299.3 million, or $30.71 per share on a diluted basis, for the second quarter of 2021,” stated the company’s official release on Tuesday.

In other news, Jack Dorsey’s Block, which pushed for the mass adoption of crypto, is also taking steps to address the current state of the crypto economy. The company is slowing down on hiring, and also plans to cut its investment target by $250 million.

Block’s shares are up by 22.49% in the past five days.

Two strikes in one week

This week was a painful one for many crypto traders investing in Solana, the ninth biggest blockchain by market cap. Tuesday and Wednesday saw around 8,000 wallets hacked and their crypto funds quickly drained. A number of ecosystem members jumped into action to investigate the cause of the hack, and evidence pointed to the vulnerability possibly originating from Solana’s digital wallet Slope.

“We feel the community’s pain, and we were not immune. Many of our own staff and founders’ wallets were drained,” stated the Slope wallet’s official statement published on Thursday.

It added that the team was working with developers, security experts, and protocols in the ecosystem in order to “identify and rectify.” The Slope wallet team confirmed that while it had some hypotheses regarding the exploit, it had no “firm” answers yet.

This latest incident goes to show how traders and new users often pay the heaviest price when it comes to decentralised blockchain projects, whose founders are not accountable to investors during such crises.

Solana traders were not the only ones out of luck. The crypto bridge Nomad, which helps move crypto assets between blockchains, was also exploited this week. Hackers took over $190 million on Tuesday, but later returned about $9 million.

Crypto bridges are a common target for hackers, with the Ronin bridge hack leading to the theft of around $600 million earlier this year. This is one of the largest crypto hacks on record.

While ‘white hat hackers’ flag security breaches or try taking funds in order to draw attention to vulnerabilities in a project, analytics platforms have also revealed that North Korean state hackers resort to crypto exploits in order to evade sanctions.

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