Your Weekly Crypto Updates #16 ??

?? Circle Stablecoin (USDC) Falls To $0.87

US Dollar Coin (USDC), the second-largest stablecoin by market cap, has fallen below its peg of $1 and is currently trading at 91 cents, with a low of 87 cents overnight.

This happened after Circle, the issuer of USDC, disclosed that $3.3 billion worth of cash reserves that back USDC remain held at Silicon Valley Bank, which was shut down by California financial regulators this week after a bank run.

This news led to panic among customers, with major crypto exchanges Binance and Coinbase temporarily suspending USDC conversions. Other dollar-pegged stablecoins have also depegged, including DAI, USDD, and USDP.

?? Silvergate Capital To Shut Down Operations

Silvergate Capital, a bank that specializes in providing services to the cryptocurrency industry, is shutting down and liquidating its operations after suffering a series of setbacks.

These include its exposure to the FTX scandal of 2022, layoffs, a downgrade by JP Morgan, and being cut off by major cryptocurrency exchanges Coinbase and Crypto.com.

Silvergate stated that an orderly wind-down of operations and voluntary liquidation is the best path forward, and all customer deposits will be fully repaid according to a liquidation plan.

?? President Biden Calls to Double Capital Gains Tax From 20% to 40%

The upcoming fiscal 2024 budget proposal from U.S. President Joe Biden includes changes to crypto tax treatment with the aim of raising around $24 billion, including a proposed crackdown on crypto wash sales and the doubling of capital gains tax rates for investors making at least $1 million.

The proposed changes are aimed at reducing the deficit by almost $3 trillion over the next decade. The proposal to end the tax-loss harvesting strategy for crypto traders is similar to current wash sale rules for stocks and bonds.

The timing of the proposal is significant for many crypto holders who entered the crypto space on the back of 2021 market peaks and are suffering heavy losses.

?? Apple Holds Back Uniswap’s Mobile App

Uniswap Labs is planning to launch a mobile crypto wallet for iPhone users, but Apple has yet to approve its launch.

The delay may add to Apple’s perception as a hardline gatekeeper in regulating the crypto world’s access to iOS, as it has refused to adapt its commerce policies to accommodate some crypto companies and bans crypto trading apps that don’t use an “approved exchange”.

Uniswap plans to have a swap feature that routes trades through its permissionless decentralized exchange. Uniswap Labs said it plans to release its app to 10,000 users via the TestFlight beta platform while waiting for Apple’s approval.

?? Biden Administration Proposes 30% Tax on Bitcoin and Cryptocurrency Mining Electricity Usage

President Joe Biden's annual budget proposal includes a call for a 30% tax on all electricity used for cryptocurrency mining, phased in over three years at a rate of 10% in the first year, 20% in the second, and 30% thereafter.

The initiative aims to reduce mining activity and associated environmental impacts. Firms engaged in mining would be required to report the amount and type of electricity used and its value.

The current law does not provide tax rules specifically addressing digital assets, but certain exceptions exist related to broker reporting and cash transactions.

?? Silicon Valley Bank is Having a Detrimental Crisis

Shares of Silicon Valley Bank (SVB) continued to tumble for a second day before the bank was shut down by regulators due to concerns that more banks could incur heavy losses on their bond portfolios.

SVB's CEO, Greg Becker, held a call with clients to calm their fears after a 60% drop in the stock price. Regulators shut down the bank midday on Friday, and the FDIC will protect insured deposits.

SVB's surprise announcement that it needed to raise $2.25 billion in stock after selling all its available-for-sale bonds at a $1.8 billion loss caused concern among founders and venture capital investors.

?? Circle Implements New Strategy to Restore USDC's $1 peg

Circle, the issuer of the USDC stablecoin, announced that it would support its stablecoin using company resources if its bank failed to return the necessary cash holdings.

This announcement came after USDC's price dropped below its $1 peg, and it was revealed that $3.3 billion of USDC reserves was held at Silicon Valley Bank, which was shut down by the California Department of Financial Protection.

Circle stated that it had made an effort to relocate its assets before the bank's closure and that the transaction might be finalized on Monday.

?? WSJ: Tether Used Fake Documents

Tether, the world's largest stablecoin, is facing more trouble as the company is accused of using fake documents and shell companies to enter the banking system, according to a WSJ report.

The report claims that Tether's parent company, Tether Holdings Ltd., used problematic third parties with connections to a designated terrorist organization. The U.S. Justice Department is currently investigating Tether.

The company refutes the allegations and states that it adheres to applicable legal requirements. USDT is the most-traded digital asset, with a market cap of $71 billion, and is popular in markets where dollars are restricted or unavailable, as well as in DeFi. Tether has yet to provide documentation to prove that its stablecoin is backed by U.S. dollars, and the company is not independently audited.

?? Coinbase Report: 20% of Americans Own Crypto

Coinbase commissioned a survey of over 2,000 American adults conducted by Morning Consult to understand how they view the current financial system and crypto's role in it.

The survey found that 80% of respondents believe the current financial system is unfair and in need of major changes or a complete overhaul. Additionally, 20% of Americans own cryptocurrency, with ownership higher among people of colour and younger Americans and consistent across political affiliations.

Coinbase plans to launch an integrated public education campaign to educate Americans about the role crypto can play in supporting a broader effort to make the financial system more open, fair, and faster for everyone.

Silicon Valley Bank - The Bank Crisis ??

?? FDIC Came to Rescue?

The FDIC announced on Friday that insured depositors with SVB will have access to their deposits by Monday. Those with accounts over $250,000 are advised to contact the FDIC directly.

For uninsured deposits, an advance dividend will be paid within a week, and a receivership certificate will be issued for the remaining amount. Future dividend payments may be made to uninsured depositors as the FDIC sells SVB's assets.

The FDIC and the Federal Reserve are weighing creating a fund that would allow the regulators to backstop more deposits at banks that run into trouble following Silicon Valley Bank’s collapse.

?? Joseph Gentile: Ex-CFO of Lehman Brothers

Regulators in California ordered the closure of Silicon Valley Bank due to concerns about the bank's struggle to acquire capital and its potential sale.

Joseph Gentile, the bank's chief administrative officer, was previously a part of Lehman Brothers, which collapsed in 2008 and triggered a global financial crisis.

The closure of Silicon Valley Bank is one of the latest problems in the banking industry following the closure of Silvergate Bank.

?? European Banking Industry Faces Crisis as Silicon Valley Bank Jitters Spread

European banking stocks experienced a sharp sell-off on Friday, triggered by jitters surrounding U.S. bank SVB Financial's 60% plunge on Thursday. Silicon Valley Bank is heavily focused on startup firms, particularly venture-backed tech and life sciences companies in the U.S., and was forced into a fire sale of its securities to offset bond sale losses.

SVB sold $21 billion worth of holdings at a $1.8 billion loss and aims to raise $2.25 billion through common equity and convertible preferred shares. The U.S. Federal Reserve's aggressive interest rate hikes over the past year caused long-dated bond values to fall, and SVB plans to reinvest proceeds from its sales into shorter-term assets.

Billionaire investor Bill Ackman warned that if SVB fails, it could "destroy an important long-term driver of the economy." The situation raises concerns over vulnerabilities in the wider banking system, with many institutions sitting on large unrealized losses on their fixed-income holdings.

European banks did not invest their deposit inflows out of the curve, which could help them remain stable despite the rising interest rates.

That's all for this week's Your Weekly Crypto Updates ??

As always, please Do Your Own Research (DYOR), and follow me for more crypto news and updates. I will see you again next week!

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Crypto 101 with Tian Beng ??

?? What's a Hot Wallet?

A crypto hot wallet is a software application or service that allows users to store their cryptocurrency assets online and is accessible through the internet. It is called "hot" because it is connected to the internet and, therefore, more vulnerable to hacking and theft compared to a "cold" wallet that is stored offline. Hot wallets are often used for everyday transactions and trading, while cold wallets are used for the long-term storage of cryptocurrency assets.

?? What's a Cold Wallet?

A crypto cold wallet is a device or software that stores cryptocurrency offline and is not connected to the internet. This makes it less vulnerable to hacking or cyber-attacks. Cold wallets are often used for long-term storage of cryptocurrencies, as they provide a higher level of security compared to hot wallets, which are connected to the internet and are more vulnerable to security breaches. Examples of cold wallets include hardware wallets like Ledger or Trezor and paper wallets, essentially a printout of the public and private keys used to access and transfer the cryptocurrency.

?? What Wallet Should You Use?

A hot wallet is generally more convenient for day-to-day use and if you are an active trader on the crypto exchange(s), but it is important to ensure that the wallet and the device it is on are secure.

For long-term storage, a cold wallet is the best option as it offers more security against hacking and cyber-attacks. Please keep your seed phrases safe and never share them with anyone;)

In general, it's recommended to keep only a small amount of cryptocurrency in a hot wallet for day-to-day use and to store the majority of your funds in a cold wallet for long-term storage.

It's also important to research and choose a reputable wallet provider and to always use strong passwords and two-factor authentication to protect your assets.

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