Axios Crypto

A multicolored cube.

September 20, 2022

It's crypto winter on the blockchain, but it's still very much summer in New York City and Brady is sick of the heat.

  • 📮 Email us if you watched that crypto couple show on ABC we wrote about yesterday, or for any other reason: [email protected]

Today's newsletter is 1263 words, a 5-minute read.

🔬 1 big thing: Six SEC-registered crypto firms

Illustration of a cursor holding a magnifying glass

Illustration: Sarah Grillo/Axios

On Thursday, SEC chair Gary Gensler said something at the Senate Banking Committee hearing that has everyone Axios has checked in with perplexed, Brady writes.

  • "There's six companies that are actually registered under the disclosure regimes," he said, in response to a question from Sen. Mike Rounds (R-S.D.).
  • The SEC has not responded to multiple requests for comment from Axios asking to name which six companies are registered (and what kind of registration the chair is referring to).

Why it matters: Outside of crypto, entrepreneurs are criticized for resisting regulation. Inside crypto, entrepreneurs fear that approaching regulators only invites trouble.

State of play: While we don't know what Gensler meant exactly about the six firms that have met the SEC's disclosure requirements, we can name a few examples of firms that have gone through some kind of SEC process.

For example, Reg A+ is a way of raising money that was created under the JOBS Act of 2012 that allows a firm to raise up to $50 million from investors of all sizes. We know of two digital asset projects that have done this:

  • Blockstack raised $23 million selling its stacks (STX) token in 2019. That company has since evolved into an alphabet soup of companies and organizations, and its stacks blockchain, a smart contract platform that uses Bitcoin for its security, carries on.
  • YouNow filed a Reg A+, not to raise money, but to distribute its PROPS token to users. PROPS was meant to undergird something like a crypto-powered TikTok. That project shut down in 2021.
  • Of note: Both PROPS and STX were launched with the intent to graduate from security to commodity status.
  • INX, a crypto exchange, sought the security designation for a $85 million token sale it completed in 2021.
  • Arca released Arcoin in 2020, a tokenized fund that primarily invests in U.S. Treasury securities.

By the numbers: Blockstack cofounder Muneeb Ali didn't deny it in 2019 when an interviewer said it was rumored to cost between $1.5 and $2 million to complete its Reg A+ filing — roughly the size of many startups' seed rounds.

In addition, projects have gotten letters from regulators saying that the agency had no plans to take action against them, such as:

  • TurnKey Jet, a private jet rental company, from 2019.
  • Pocketful of Quarters, a video game platform, also in 2019.

Neither of these are exactly the talk of Web3, it should be noted.

💭 Our thought bubble: That gets us to six, but it's a stretch.

  • It is wild to think that there are thousands of crypto projects out there and tons of excitement about this new industry, but only six projects have been able to get an OK from D.C.

🦧 2. Charted: Apecoin's staking rumors

Data: CoinGecko; Chart: Axios Visuals
Data: CoinGecko; Chart: Axios Visuals

Apecoin is outpacing ether recently, with its price appreciating significantly just as most of the crypto market sees red, Brady writes.

By the numbers: Apecoin is the 34th largest cryptocurrency by market cap, according to CoinMarketCap. It's both a governance token and a utility token for the owners of the Bored Apes Yacht Club NFTs, the most valuable overall NFT collection.

Zoom out: Yuga Labs, the company behind the apes and apecoin, recently announced a partner, Horizen Labs, to build its apecoin staking program.

Context: In apecoin's case, staking is largely a way to limit liquid supply and therefore increase the price of tokens on the market. Stakers will be rewarded for locking up apecoin with fresh emissions of the token.

Be smart: Staking started as an insurance program for decentralized workers. Their stake was a way of guaranteeing they worked in good faith — but it's become a way to simply boost price.

👯‍♀️ 3. Following Binance's lead

Illustration of the Binance logo on a compass.

Illustration: Aïda Amer/Axios

India's largest crypto exchange is following Binance out of some dollar-pegged stablecoins, further tilting the tables toward the BUSD token, Crystal writes.

Driving the news: The exchange, WazirX, on Monday said it already stopped taking new deposits denominated in USDC, USDP, and TUSD — the dollar-pegged stablecoins from Circle, Paxos, and True.

  • Any existing deposits would soon be auto-converted to BUSD.

Context: The move follows on the heels of Binance's own decision to institute a BUSD auto-convert feature and echoes its justification for delisting competing stablecoins: to "enhance liquidity and capital efficiency" for the good of its customers.

The intrigue: Some people think WazirX is actually a Binance-owned company, per an acquisition announcement made roughly two years ago.

  • In August, however, Binance CEO Changpeng Zhao, or CZ, denied that the transaction closed. The Indian exchange at the time was mired in a regulatory investigation that resulted in law enforcement freezing assets on the platform. (The exchange has since been reinstated.)
  • "Binance does not control or operate WazirX," according to Binance spokesperson Lily Lee. WazirX did not respond to requests for comment.

Details: USDC, USDP, and TUSD spot market pairs will be delisted on WazirX on Sept. 26, according to the company's blog post.

  • Withdrawals in that denomination before BUSD auto-conversion will be supported until Sept. 23.
  • Customers will eventually be able to withdraw their stablecoins off of WazirX in those three stablecoin denominations.

The big picture: Binance is the world's largest crypto exchange, and while its BUSD is now the third-largest dollar-pegged stablecoin behind Tether's USDT and Circle's USDC, it appears poised to close in.

  • Yes, but: Size also indicates great regulatory responsibility (read: scrutiny).

Between the lines: The public spat about who owns WazirX erupted on the heels of India's Directorate of Enforcement's investigation of the exchange's parent company, Zanmai Labs, for allegedly allowing money laundering to occur on the platform.

  • India's regulators alleged that Zanmai Labs "created a web of agreements with — Crowdfire Inc. USA, Binance (Cayman Islands), Zettai Pte Ltd Singapore — to obscure the ownership of the crypto exchange," following a search conducted on one of Zanmai's directors.

Catch up quick: CEO CZ last month denied the acquisition via tweet: "This transaction was never completed. Binance has never — at any point— owned any shares of Zanmai Labs, the entity operating WazirX."

  • That prompted WazirX founder Nischal Shetty to push back on CZ's claim.
  • CZ then conceded that Binance provides wallet services for WazirX, and control of WazirX's domain was transferred under its control. He further countered: "We could shutdown WazirX. But we can't, because... it hurts users."

Days following the spat and the updated acquisition announcement, Binance removed the ability for users to make off-chain transfers between its exchange and WazirX.

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🦦 4. Catch up quick

👹 Crypto market maker Wintermute's decentralized finance operation was hacked for roughly $160 million, CEO Evgeny Gaevoy tweeted. (TechCrunch)

📢 The Treasury posted 23 questions in an effort to crowdsource crypto regulation. (Decrypt)

🇺🇸 The SEC seems to claim that all of Ethereum is under its jurisdiction due to the location of validators, in a court case stemming from a 2018 incident. (Decrypt)

🤑 MicroStrategy bought more bitcoin, and now has 130,000 coins in its stash. (MicroStrategy)

Top coins

Data: CoinGecko; Table: Axios Visuals

🍜 5. Culture hash: Solitaire-y

Tweet described Club Bitcoin, a play-to-earn mobile game version of the popular card game Solitaire

@BobbyPerew

How does a Bitcoin enthusiast pass the time with the price per coin hovering around $19,000? Play-to-earn Solitaire, maybe, Crystal writes.

What's happening: Bitcoin game maker THNDER Games just launched Club Bitcoin — the popular Solitaire game with a crypto twist. (Pro tip: There are many old-school games that dangle coin rewards.)

How it works: THNDER makes money via in-app purchases and ads, then breaks off a piece via a daily prize raffle for players.

  • Players play and collect tickets that go toward those prize draws.
  • Storing and cashing out winnings means connecting a Lightning-enabled third-party wallet.

Flashback: Gambling and bitcoin go way, way back.

This newsletter was edited by Pete Gannon and copy edited by Nick Aspinwall.

If ya encounter engaging, unique play-to-earn games, share 'em. —C & B.