Insider trading in NFTs, Turkey’s war on bitcoin and Tether goes on the defensive

Plus, Coinbase scraps planned crypto lending service after SEC threatens to sue

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NFT platform hit with insider trading allegation

OpenSea, the largest NFT marketplace, admitted last week to one of its employees having taken part in an insider trading scheme. The company did not name the employee, but requested and accepted his resignation.

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Online sleuths, however, quickly zeroed in on the company’s head of product, alleging that blockchain records indicated he had bought NFTs just before they were featured on the site.

“We do not take this behaviour lightly. Upon learning of this conduct, we immediately commissioned a third party to conduct a thorough review of the incident and make recommendations on how we can strengthen our existing controls. That review is ongoing but we are committed to quickly implementing its recommendations,” OpenSea said in a statement.

Since the incident OpenSea has tightened its regulations around its own employees, including banning OpenSea team members from buying or selling from collections or creators while they are being featured or promoted by the company, as well as barring staff from “using confidential information to purchase or sell any NFTs, whether available on the OpenSea platform or not.”

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According to DappRadar, in the last 30 days OpenSea has recorded US$4.08 billion in trading volume, with 452,570 unique traders.

Turkey declares ‘war’ on bitcoin

In April, authoritarian Turkish president Recep Erdogan banned the use of cryptocurrencies for payments on goods and services. On Monday, he took the crackdown to another level, declaring, “We are in a war against bitcoin.”

Erdogan made the comments at a meeting of youth leaders from Turkey’s 81 provinces. Crypto has became increasingly popular in the country following a 2018 debt crisis — by 2020, about 20 per cent of Turks were either investing in crypto or using it for transactions.

Recep Tayyip Erdogan, Turkey's president, speaks during the United Nations General Assembly via live stream in New York, U.S., on Tuesday, Sept. 21, 2021.
Recep Tayyip Erdogan, Turkey’s president, speaks during the United Nations General Assembly via live stream in New York, U.S., on Tuesday, Sept. 21, 2021. Photo by Michael Nagle/Bloomberg files

Erdogan’s “war” comes as the government attempts to assert itself in the crypto space by fully implementing a digital Lira by 2023 under central bank control.

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At the meeting, one of the youths asked if the planned central bank Lire meant the government was planning to “open up to cryptocurrencies,” to which Erdogan replied: “We will not give them such a premium… Because we will continue on the road with our money, which is our fundamental identity in this matter.”

In October, the Turkish government will submit a bill aiming to regulate crypto, including taxation for cryptocurrency holdings above a given threshold.

Crypto is booming in Africa

Africa has become the third fastest growing crypto economy, despite only capturing two per cent of all the cryptocurrencies received and sent, according to a new study from crypto analytics firm Chainalysis.

Between July 2020 and June 2021 the study found the continent received US$105.6-billion worth of crypto assets.

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In terms of peer-to-peer crypto trading, Kenya leads the rest of the world by a large margin, according to Chainalysis’s Global Crypto Adoption Index, which puts Togo in second, Tanzania in fourth and Ghana in tenth. As well, Nigeria and South Africa are ranked 18th and 64th, respectively. It’s not just the number of transactions, but their size as well. The global average for retail-sized transactions is 5.5 per cent, whereas Africa’s stands at 7 per cent.

The continent’s biggest crypto channel is to East Asia, which Chainalysis says is largely due to the high number of Chinese nationals working there.

Part of the rise can be attributed to the extremely high remittance costs in the continent.

Coinbase scraps lending service amid battle with SEC

Coinbase has scrapped plans to launch a crypto lending service after the Securities and Exchange Commission (SEC) threatened to sue if they went ahead. The announcement came without fanfare in an update to a Friday blog post.

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The Lend program would have let users earn four per cent by lending their crypto tokens. According to Coinbase CEO Brian Armstrong, the SEC called this a security threat.

A monitor displays Coinbase signage during the company's initial public offering (IPO) at the Nasdaq MarketSite in New York.
A monitor displays Coinbase signage during the company’s initial public offering (IPO) at the Nasdaq MarketSite in New York. Photo by Michael Nagle/Bloomberg files

“As we continue our work to seek regulatory clarity for the crypto industry as a whole, we’ve made the difficult decision not to launch,” the firm said in its Sept. 17 post. “We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest. We will not stop looking for ways to bring innovative, trusted programs and products to our customers.”

The statement was vastly different in tone to Armstrong’s 21-tweet thread on Sept. 7 detailing his issues with the SEC. He wrote at the time, “Shutting these down would arguably be harming consumers more than protecting them, and by preventing Coinbase from launching the same thing that other companies already have live, they’re creating an unfair market.”

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Coinbase may have more cause to clash with the SEC in the future: unnamed sources told CoinDesk on Tuesday that the exchange is planning to pitch a regulatory framework for crypto to the regulatory body, including definition of what is and isn’t considered a security.

Tether denies Evergrande exposure

The debt crisis of Chinese real estate developer Evergrande spilled over into the cryptocurrency realm this week, prompting heavy selloffs in Bitcoin, Ethereum and Solana.

But attention also zeroed in on Tether, the world’s largest stablecoin, which has acknowledged that it holds a significant portion of the coin’s reserves in commercial paper.

Was Tether sitting on big wad of Evergrande’s US$300 billion in debt, market watchers wondered?

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Once speculation began circulating, Tether quickly issued a statement denying that it held any commercial paper or securities issued by Evergrande.

“The vast majority of the commercial paper held by Tether is in A-2 and above rated issuers,” the statement said.

The level of transparency around stablecoin reserves has become a hot topic in recent months, amid concerns that they could be sitting in risky assets or concentrated in illiquid markets where a run of redemptions could create instability.

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According to Tether, half of its $62.8 billion assets at the end of June 2021 were backed by commercial paper and certificates of deposit.

In an interview with the Washington Post, SEC chief Gary Gensler took shots at stablecoins, comparing them to the poker chip in the Wild West casino that is crypto. He also said that the SEC is putting together a report on stablecoins and pushing for Congress to give them expanded authority to regulate the coins.

Tether’s price dipped just below US$1 in response to the speculation, but was back at par by Wednesday afternoon.

Financial Post

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