united states

Crypto ‘cannot be partisan,’ says US lawmaker who scored negative on bipartisanship index: Report

“This is literally about looking at America and opportunities for Americans,” according to Minnesota Representative Tom Emmer.

United States House of Representatives member Tom Emmer has reportedly suggested that regulating and encouraging innovation in the crypto space should not be a political win for either Democrats or Republicans.

According to an interview released Tuesday by Axios reporter Brady Dale, Emmer said many of his colleagues in Congress were treating cryptocurrencies as a risk that merited warnings, rather than an investment opportunity for the United States. The U.S. lawmaker added that encouraging figures like FTX CEO Sam Bankman-Fried to stay in the country will open more doors for residents rather than driving them away with regulatory uncertainty.

Emmer, who has often pushed back against the “regulation by enforcement” approach some government agencies — including the Securities and Exchange Commission — have taken, reportedly questioned the partisan divide among crypto-related legislation and policies. A Republican, Emmer reportedly challenged claims made by Democratic Senator Elizabeth Warren, who has been one of the most outspoken critics of crypto in Congress, proposing legislation that would shut down bank-provided crypto services, calling decentralized finance “the most dangerous part of the crypto world,” and equating crypto investments to scams with no consumer protection.

“I feel that [crypto] cannot be partisan,” said Emmer. “This is literally about looking at America and opportunities for Americans […] If you try to take all risk out of this stuff, well, you’re going to take away a lot of the opportunity […] It can either happen here in this country or it will happen somewhere else.”

While the Minnesota representative said he may not want crypto regulation to be partisan, thecollaboration between Democrats and Republicans dropped in 2021 following the mob attack on the U.S. Capitol on Jan. 6, according to data from the Lugar Center and the McCourt School of Public Policy at Georgetown University. Emmer ranked as the 156th most bipartisan lawmaker out of 435 House members, with a negative score of -0.26955. In the Senate rankings, Warren scored even lower, at -0.79962.

“A negative score indicates that a member falls below the average of their group for the 20-year baseline period,” said the researchers. “A very negative score on the Bipartisan Index indicates that a member is giving little thought to working with the other party when he or she introduces bills and makes co-sponsorship decisions.”

Related: Lines in the sand: US Congress is bringing partisan politics to crypto

Emmer didn’t stand alone — roughly 60% of senators from both sides of the aisle and 75% of all U.S. House members scored negative in 2021, according to the index. New Hampshire Senator Maggie Hassan, a Democrat, was ranked with the highest bipartisanship track record, and she hapreviously raised concerns about the use of cryptocurrency in ransomware attacks.

Celsius bankruptcy proceedings show complexities amid declining hope of recovery

Celsius Network’s bankruptcy proceedings have highlighted that the firm has misrepresented many of its assets with deep complexities in its operations.

Celsius Network is one of the many crypto lending firms that have been swept up in the wake of the so-called “crypto contagion.” 

Rumors of Celsius’ insolvency began circulating in June after the crypto lender was forced to halt withdrawals due to “extreme market conditions” on June 13. It eventually filed for Chapter 11 bankruptcy a month later on July 13.

The crypto lending firm showed a balance gap of $1.2 billion in its bankruptcy filing, with most liabilities owed to its users. User deposits made up the majority of liabilities at $4.72 billion, while Celsius’ assets include CEL tokens valued at $600 million, mining assets worth $720 million and $1.75 billion in other crypto assets. The value of the CEL has drawn suspicion from some in the crypto community, however, as the entire market cap for CEL is only $494 million, according to CoinGecko data.

Iakov Levin, CEO of centralized and decentralized finance platform Midas, told Cointelegraph that the issue of CEL’ value issue could adversely affect its holders. He explained:

“Celsius calculated the CEL token denominated in $1 per token, requiring someone willing to pay this price for the bankrupt token. The situation is dark not only for Celsius users but also for CEL tokenholders. CEL has become a sad example of how some events can cause a domino effect, and the broader digital asset market can suffer as a result.”

At the time of its bankruptcy filing, the firm said it aims to use $167 million in cash on hand to continue certain operations during the restructuring process and that it intends to eventually “restore activity across the platform” and “return value to customers.”

A new report filed nearly a month after its Chapter 11 filing shows that the actual debt of the crypto lender stands at more than double what the firm revealed in July. The report shows that the company has net liabilities worth $6.6 billion and total assets under management of $3.8 billion. In its bankruptcy filing, the firm claimed around $4.3 billion in assets against $5.5 billion in liabilities, representing a $1.2 billion difference.

Pablo Bonjour, managing director of Macco Restructuring Group — which has worked with several crypto firms going through the bankruptcy process — explained why Celsius’ balance gap increased and what lies ahead for the troubled crypto lender. He told Cointelegraph:

“Celsius is really no different than most Chapter 11 bankruptcies in that the debt or shortfall ‘hole,’ if you will, sometimes turns out to be greater than initially expected, especially with regard to cryptocurrency and valuations depending on who and what they owe.” 

“It’s too early to tell how things will shape up, and Celsius still has a way to before they can sort things out, but I’m sure all of the professionals on all sides are working hard for a better outcome. I anticipate an interesting road ahead and if the examiner is approved, I look forward to reading the examiner’s report. Of course, that may not be ready before the end of 2022. We’ll just have to wait and see,” he added.

Recent: How blockchain technology is changing the way people invest

With its current debt and cash flow at hand, Celsius is estimated to run out of money by October. A court filing shows Celsius’ three-month cash flow forecast, which estimates steep declining liquidity, indicates the company will experience an approximate 80% drop in liquidity funds from August to September.

Brian Pasfield, chief technology officer of decentralized finance protocol Fringe Finance, explained the critical issue that led to the crypto contagion in the first place. He told Cointelegraph:

“In order for centralized platforms to compete with fully decentralized alternatives, they need to solve their overhead. However, since decentralized competitors are empowered by lack of overhead, this makes it impossible for players such as Celsius to sustain themselves without incurring fragility strategies, which is what led to this mess in the first place.”

Celsius’ bankruptcy proceedings get messier

The bankruptcy court proceedings for the troubled crypto lender are getting messier by the day. First, Celsius’ lawyers made it clear that the chances of users getting their crypto back are legally impossible because they gave up their rights by signing the terms and conditions.

At the first bankruptcy hearing for Celsius, lawyers from the Kirkland law firm, led by Pat Nash, detailed how retail users with Earn and Borrow accounts transferred the title of their coins to the firm as per its terms of service. As a result, Celsius is free to “use, sell, pledge, and rehypothecate those coins” as it wishes.

Terms of Service for Celsius accounts. Source: Celsius Presentation

Through “first day” motions, Celsius said it intends to pay employees and continue their benefits. The company said it would also continue to service existing loans with maturity dates, margin calls and interest payments to continue as they have in the past. Celsius has also appointed new members to its board to guide it through the restructuring process, including David Barse, a so-called “pioneer” in distressed investing who is the founder and CEO of index company XOUT Capital.

The case took another turn when the representative of the United States trustee overseeing the case claimed there was “no real understanding” of the nature or value of Celsius’ crypto holdings — or where it keeps them. The trustee asked for an examiner to look into allegations of “incompetence or gross mismanagement” as well as “significant transparency issues” surrounding Celsius’ operations in the context of the bankruptcy case.

Anna Becker, CEO and co-founder of EndoTech, explained to Cointelegraph what eventually led to Celsuis’ downfall, tellin Cointelegraph:

“Celsius has built more than a lending machine. It has built a strong community of incentivized believers. This is an example of a company that was very aggressive and successful in its acquisitions efforts, but half-hazard in its risk management. Its ‘tribe’ of believers is bullish but will need to face the harsh realities of its risk management and bankruptcy. So, while there is lots of excitement in the community, the value crater is real and continues to deepen.”

On Aug. 17, Chief Bankruptcy Judge Martin Glenn of the Southern District of New York approved Celsuis’ request for running BTC mining and selling operations as a means to reinstate financial stability, against the objections of the U.S. trustee. This means they may have an opportunity to continue as an entity and survive the bankruptcy, of course on a reorganized and restructured basis instead of a liquidation.

The Celsius community’s efforts might not be fruitful

The Celsius community remained strong in the aftermath of funds freezing and throughout the bankruptcy proceedings. 

There’s also an unofficial community-led recovery plan that appears to be gaining traction on Twitter under the hashtag #CELShortSqueeze. The movement is attempting to force short-sellers of CEL to cover their short positions by purposefully driving up its price through the mass purchase and withdrawals of the token from various exchanges.

CEL’s price rose from $0.67 on June 19 to $1.59 on June 21, a 180% spike. In the same period, the overall crypto market rose 12.37%. However, experts believe that the impact of the short squeeze won’t be long-lived. 

Jackson Zeng, CEO of crypto brokerage firm Caleb & Brown, told Cointelegraph, “Celsius holds the majority of CEL — 90%, based on Etherscan — but can’t sell or move the token amid its bankruptcy proceedings. However, traders still have to pay 0.5%–2.5% per day to short the token, so many have been forced to close their short positions over the last two months,” adding:

“A company undergoing a bankruptcy is unlikely to have a positive road ahead. Once the supply is unlocked, the shorts can be covered, therefore having a negative impact on the price and removing the effect of the short squeeze.”

Recent: Bitcoin and the banking system: Slammed doors and legacy flaws

Celsius CEO Alex Mashinsky reportedly “took control” of trading strategy at the crypto lending firm amid January rumors the United States Federal Reserve planned to hike interest rates.

According to a report from the Financial Times, Mashinsky personally directed individual trades and overruled financial experts in an effort to protect Celsius from anticipated declines in the crypto market. The Celsius CEO reportedly ordered the sale of “hundreds of millions of dollars” worth of Bitcoin (BTC) in one instance, rebuying the coins less than 24 hours later at a loss.

As the bankruptcy proceedings reveal more complexities with the crypto lender, Celsius might face a similar fate as many of its peers, including Voyager, BlockFi and Hodlnaut.

Still waiting: SEC delays VanEck’s third Bitcoin spot ETF application

The wait for a first Bitcoin spot exchange-traded fund continues as the U.S. SEC buys more time to make a decision on VanEck’s proposed BTC ETF.

The United States Securities and Exchange Commission (SEC) has pushed back a decision on the latest application for a Bitcoin (BTC) spot exchange-traded fund (ETF) by global investment firm VanEck.

The company has long been trying to get the green light for what will be the first BTC ETF in America, with its first application lodged with the SEC dating back to 2017, which was eventually denied.

VanEck saw a second application ruled out in November 2021 by the SEC, reasoning that the firm had not met thestandards to protect investors as well as prevent fraudulent and manipulative acts and practices.

VanEck persevered with a third application for a BTC ETF offering in June 2022 filed with the SEC, highlighting a number of reasons why the SEC should reconsider its previous decisions.

Related: Bitcoin ETFs: A beginner’s guide to exchange-traded funds

VanEck’s primary argument was that American funds were gaining exposure to Bitcoin through BTC spot exchange-traded products offered in Canada. America’s northern neighbor approved a spot Bitcoin ETF in February 2021, becoming one of the first countries around the world to do so.

The deadline for approval of the latest filing with the SEC was set to expire on Aug. 27, leading the regulator to postpone its decision on the matter by almost two months.

The SEC has given itself until Oct. 11 to make a ruling and noted that it had not received any comments on the proposed rule change after calling for public consultation in July 2022:

“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein.”

The push for an American spot Bitcoin ETF has been a talking point since 2017, which would essentially allow institutional investors to buy shares representing Bitcoin that would be held by VanEck. This gives investors exposure to Bitcoin without having to physically own and store the cryptocurrency. VanEck intends to list its BTC ETF product on the Cboe BZX Exchange.

Crypto ATM firm Bitcoin Depot aims to go public in 2023 via $885M SPAC deal

One of the largest crypto ATM providers in North America, Bitcoin Depot, plans to list its stock on Nasdaq in the first quarter of 2023.

Bitcoin Depot, a major cryptocurrency ATM provider in the United States, is planning to go public through a merger with a special-purpose acquisition company (SPAC).

Atlanta-based Bitcoin Depot has reached a definitive agreement to merge with the SPAC GSR II Meteora (GSRM) in an $885 million deal to go public, the firm officially announced on Thursday.

The business combination would result in Bitcoin Depot becoming a publicly listed company as the combined company — to be dubbed Bitcoin Depot Inc. — will trade on the Nasdaq under the new ticker symbol BTM.

The merger has been unanimously approved by the leadership team of Bitcoin Depot and the board of directors of GSRM and is expected to close by the first quarter of 2023. The business combination is subject to regulatory and stakeholder approvals, and other customary closing conditions.

The GSR II Meteora SPAC reportedly has about $320 million that Bitcoin Depot could use to grow, though SPAC investors are able to withdraw their money before the merger is done. Bitcoin Depot could proceed with a funding round that would close at the same time as the merger deal.

Gus Garcia, GSRM co-CEO and a former SPAC banker at Bank of America, said he is confident in Bitcoin Depot’s financing options because of the company’s steady growth. 

“With its significant BTM footprint, key strategic relationships, and feature-rich mobile app, we believe Bitcoin Depot is well positioned to take advantage of the highly fragmented BTM market both domestically and overseas,” he noted.

Related: Galaxy Digital terminates BitGo acquisition, citing breach of contract

Founded in 2016, Bitcoin Depot is one of the largest crypto ATM providers in North America, operating over 7,000 kiosk locations. According to CEO Brandon Mintz, the company has continued growing despite the ongoing cryptocurrency bear market, which highlights a growing number of use cases for crypto-like payments and transferring money globally.

“We’re actually doing fantastic right now regardless of the market,” he said. Mintz also noted Bitcoin Depot plans to pursue acquisitions after going public.

Crypto mining can benefit Texas energy industry: Comptroller’s office

Given the unique positioning of the crypto mining market, Texas officials believe miners can participate in demand response programs — which involve turning off miners’ power during peak demand.

The United States filled in the wide gap in Bitcoin (BTC) mining that was left open by China by the end of June 2021. Despite looming rumors of high power consumption, officials in Texas, one of the fastest growing crypto mining hubs in the U.S., now believe that mining operations can, in fact, garner a symbiotic relationship with the energy industry. 

A newsletter from the Texas Comptroller’s office revealed the state’s pro-crypto stance with the intent to host long-term miners and operators. Clarifying the general misconception about Bitcoin’s energy usage, the fiscal note highlighted that unlike “manufacturing facilities or industrial chemical plants, which can be expected to be around for decades,” cryptocurrency mining facilities do not place big electrical demands on the grid.

With greater crypto miners moving into Texas, concerns around power demand remain as the sudden surge threatens to disturb the balance between supply and demand. While other power-hungry industries often continue production amid market fluctuations, one of the concerns raised in the newsletter by Texas-based research associate Joshua Rhodes was:

“The difference is that Bitcoin mines (mining facilities) can come in so fast and may be gone so fast depending on the price of Bitcoin.”

Given the unique positioning of the crypto mining market, Texas officials believe miners can participate in demand response programs — which involve turning off miners’ power during peak demand. This process is widely adopted by energy-intensive industries such as petrochemical plants.

Moreover, the study envisioned that increased mining operations could spur additional energy infrastructure, especially in remote areas of West Texas.

Related: Bitcoin mining to cost less than 0.5% of global energy if BTC hits $2M: Arcane

A prolonged bear market brought down mining revenue to record lows in June 2022. However, data from blockchain.com showed that BTC mining revenue jumped nearly 69% in one month — from $13.928 million on July 13 to $23.488 million on Aug. 12.

In addition, lower mining equipment (GPU) prices have now allowed BTC miners to upgrade and expand their mining rigs as they pursue mining the last 2 million BTC.

Certain regulatory clarity could be ‘hugely detrimental’ for crypto, says former CFPB director

Some players in the industry could find U.S. regulators making a “big overreach” if agencies like the SEC listed specific criteria for cryptocurrencies as securities.

Kathy Kraninger, former director of the United States Consumer Financial Protection Bureau, or CFPB, said while many in crypto have complained about the lack of regulatory clarity in the country, the legal gray area has afforded the industry opportunities.

Speaking to Cointelegraph, Kraninger said Congressional action on dividing the roles of different regulatory agencies — including the Securities and Exchange Commission, or SEC, and Commodity Futures Trading Commission, or CFTC — would be the “best outcome” in her view. However, she added it was unlikely any single department would have total control over the variety of investment products related to the digital asset space.

“It’s not going to be in the SEC’s interest or its nature — or certainly its chairman’s current posture — to come out and say ‘oh yeah, let me give you all the criteria for what a security is that is going to answer everybody’s questions,’” said the former CFPB director. “That’s just not going to happen and I can see why in some respects why the industry says it wants that, but if it got that, it also could be hugely detrimental. It could be a big overreach, it could extend beyond.”

The SEC, CFTC, CFPB, Financial Crimes Enforcement Network and Federal Trade Commission handle different aspects of digital asset regulation and enforcement in the United States, resulting in a patchwork approach companies must navigate to legally operate. Some U.S. lawmakers have proposed certain agencies collaborate to establish regulatory clarity, while others have introduced legislation aimed at giving one department more authority than others.

Another option for regulatory clarity, according to Kraninger, could lie in case law from enforcement actions. In July, the SEC labeled nine cryptocurrencies as securities in an insider trading case against former Coinbase product manager Ishan Wahi, his brother and an associate. Lawyers representing a former OpenSea product head accused of insider trading claimed in a Friday filing that authorities were using the case in an attempt to set a legal precedent that nonfungible tokens were securities.

Kraninger added that applications in the decentralized finance space could be the next big proving ground among regulators:

“DeFi just takes it to a whole different echelon in terms of the agencies that could be implicated, the use cases, the lack of intermediaries, if you truly are centralized […] Just that whole decentralized ecosystem and the use cases therein — that’s something that regulators across the globe are really going to struggle with.”

Related: US Senator Hagerty to CFPB Director: Don’t stifle crypto innovation

Kraninger has worked as the vice president of regulatory affairs at market surveillance firm Solidus Labs since July 2021 following her departure from the CFPB. On Aug. 16, former CFTC commissioner Dawn Stump announced that she would also be joining the company as a strategic advisor.

Tornado Cash saga highlights legal issues affecting the crypto market

As support for Tornado Cash developer Alexey Pertsev mounts, questions regarding the legality of his arrest and the future of DeFi innovation continue to come to the forefront.

Things have not been looking too good for the crypto market in recent months, with the market seemingly being gripped by one piece of bad news after another. To this point, on Aug. 8, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued legal sanctions against digital currency mixer Tornado Cash.

As per the regulatory body, since the platform’s inception in 2019, it has been used for a host of illicit money laundering activities estimated to be worth $7 billion. Of this sum, it is estimated that $455 million was controlled by the notorious Lazarus Group, a North Korean state-sponsored hacking group. Additionally, Tornado Cash was also used to launder over $96 million of ill-gotten funds derived from June’s Harmony Bridge hack and $7.8 million from this month’s Nomad heist.

Before proceeding any further, however, it would be best to understand what exactly a cryptocurrency mixer is. Simply put, it is an offering that helps obfuscate potentially identifiable or tainted cryptocurrency funds with others to erase any trails linked with the assets, thus making it impossible for anyone to trace the tokens back to their original source.

Creator arrest leads to public outcry

On Aug. 12, Alexey Pertsev, the creator of Tornado Cash, was arrested by Dutch authorities. According to a press release issued by the financial crime authority of the Netherlands — the Fiscal Information and Investigation Service — the arrest was made based on Pertsev being involved in the “concealment of criminal financial flows and facilitating money laundering.”

While Tornado Cash can potentially be used by bad actors to hide criminal proceeds, it can and is also be used to facilitate a wide array of legitimate activities. The Dutch police have yet to make it clear as to which exact rules Pertsev broke, even though different media outlets have speculated and offered varying explanations as to why he was arrested. The Tornado creator has yet to be charged with any wrongdoing.

Following Pertsev’s detainment, a mass of protesters gathered in Amsterdam’s Dam Square on August 20 to voice their displeasure with the handling of the matter. And, while the demonstrators did not directly comment on the legal issues surrounding the arrest, they did claim that Pertsev’s arrest signaled a dark future for the fast-growing Web3 ecosystem. Not only that, but they also believe that it could have a chilling effect on the Netherlands’ existing blockchain ecosystem.

Mark Smargon, CEO of decentralized payment network Fuse, told Cointelegraph that while he is very disappointed to see a developer being arrested for simply having written a piece of code, to avoid such scenarios in the future, crypto finance entities — especially those who see mainstream adoption on the horizon — should be willing to meet regulators halfway to mitigate existing security issues while ensuring people’s rights to individual privacy.

However, Abraham Piha, CEO and co-founder of Web3-focused firm Tomi, told Cointelegraph that government sanctions like these are scary if one starts looking at them objectively:

“Tornado existed only because most blockchains were not private enough. If successive updates of Ethereum or Bitcoin include protocol integrations like Mimblewimble, will the next step be to block them as well? This act is yet another reason to push for Web3, a free web, controlled by users and not by some big brother governments.”

A spokesperson for crypto policy think tank Coin Centre noted that the nonprofit is considering taking the matter to court since it believes that the core argument prohibiting the platform from operating is unjustified. Not only that, but the independent body also believes that the Treasury’s actions may have exceeded its statutory authority.

Was Tornado’s forced shutdown unconstitutional?

In a recent interview with Bloomberg, Jesse Powell, CEO of digital-asset exchange Kraken, argued that the Treasury Department’s actions to shut the Tornado Cash could be “unconstitutional,” stating that people have a right to privacy and thus, it will be interesting to see if the regulatory body’s assertions can hold any sort of ground in a court of law. He further stated that the subsequent removal of Tornado’s native code repositories was a “totally unnecessary step.” 

Recent: Ethereum Merge prompts miners and mining pools to make a choice

Following the sanctions, USD Coin (USDC) stablecoin issuer Circle decided to block all Tornado Cash addresses, to which Powell reacted: “Having a digital currency that’s so controlled and able to be controlled by maybe unconstitutional government action is a little bit scary.”

Kenny Li, co-founder and core developer for Manta Network — a privacy-preservation protocol — told Cointelegraph that the Treasury’s decision to sanction Tornado Cash is far-fetched and extreme even though in the past, certain individual crypto wallet addresses have been subject to the same treatment. But, in most cases, he said, there was a clear case of fraud, hacks or a Ponzi scheme:

“In this case, smart contract addresses are being blacklisted. Smart contracts aren’t people. Not only that, but people forget that Tornado Cash is a protocol, not a person or an entity, which means it will continue to run regardless of the sanctions. It is time that we realize privacy and anonymity aren’t the same, and Web3 is all about privacy.”

On the subject of people moving their USDC to other stablecoins following Circle’s decision to block Tornado Cash wallet addresses, Li noted that, unfortunately, there has been an increase in the number of platforms blacklisting wallet addresses maintained via Tornado Cash. 

He pointed out that the move was due to Circle’s status as a regulated platform, thus obliging it to comply with any sanctions issued by a government body whose jurisdiction it operates under.

Lastly, he believes that Circle’s actions of blocking the movement of millions of dollars worth of USDC can potentially inhibit innovation within this space. Li concluded:

“No one wants their funds to be blocked, especially for activities they aren’t involved in. That said, there’s no certainty that tomorrow Tether won’t block addresses that have touched Tornado Cash. Ultimately, this action from the Treasury will likely instigate a domino effect, most of which is yet to be felt.”

Human rights violations brewing?

One aspect of Pertsev’s detention that has drawn public attention is that since his arrest, he has reportedly been denied visits of any sort, including those from his wife, Ksenia Malik. 

In recent correspondence with Cointelegraph, Malik said, “He’s kept in prison as if he were a dangerous criminal,” despite simply “writing open source code.”

With Dutch authorities continuing to bar any contact with the outside — not even “one short call” — several rallies are being organized to support him. Decentralized finance aggregator 1inch tweeted that the arrest stands to establish a dangerous precedent, one that could potentially “kill the entire open-source software segment” if developers are continued to be held accountable for any misuse that emanates as a result of the software they create.

Decentralized finance aggregator 1inch tweeted that the arrest stands to establish a dangerous precedent, one that could potentially “kill the entire open-source software segment” if developers are continued to be held accountable for any misuse that emanates as a result of the software they create.

Despite the heartfelt sentiments of the open-source development community, it is pertinent to highlight a recent report from blockchain security platform SlowMist, which found that approximately 74% of all funds stolen from the Ethereum network over Q1 and Q2 of this year made their way to Tornado Cash, with researchers noting:

“The platform accounts for most of the initial funding for these security incidents. There have also been reports of withdrawals from exchanges, trading platforms, and personal wallets to fund these security incidents.”

Lastly, it should be noted that despite the outpouring of public support for Pertsev, his arrest hasn’t been entirely disapproved of by members of the global finance arena. For example, in a recent interview, venture capitalist Kevin O’Leary stated that platforms like Tornado Cash — which are advertised as “privacy tools” — have created a culture where it is fine to tinker around with federal regulations. 

Recent: Ethereum advances with standards for smart contract security audits

In his view, Pertsev’s arrest was necessary and that it’s fine to have “sacrificed him” because it will, in his view, help introduce a high degree of stability within the market in the long run.

Therefore, moving forward, it will be interesting to see how legal issues such as these continue to be dealt with by regulatory agencies across the globe.

FTX US among 5 companies to receive cease and desist letters from FDIC

The government agency had previously stated that deposits at non-bank entities, including crypto firms, are not covered by FDIC insurance.

The Federal Deposit Insurance Corporation (FDIC) has issued cease and desist letters to five companies for allegedly making false representations about deposit insurance related to cryptocurrencies.

FDIC issued a Friday press release disclosing cease and desist letters for cryptocurrency exchange FTX US and websites SmartAssets, FDICCrypto, Cryptonews and Cryptosec. In the letters, which were issued on Thursday, the government agency alleges that these organizations misled the public about certain cryptocurrency-related products being insured by FDIC.

“These representations are false or misleading,” the FDIC said in regard to “certain crypto-related products” being FDIC-insured or that “stocks held in brokerage accounts are FDIC-insured.” The regulator said these companies must “take immediate corrective action to address these false or misleading statements” on their websites and social media accounts.

Excerpts of the FDIC’s cease and desist letter to FTX US. Source: FDIC.

The FDIC has been vocal about the lack of insurance protection for non-bank entities, which includes crypto-focused firms. In July, the regulator issued a notice advising banks in the United States that they need to assess and manage risks when forming third-party relationships with crypto service providers. The FDIC reiterated that, while deposits at insured banks were protected against default for up to $250,000, no such coverage exists for crypto firms.

Related: Fed demands Voyager remove ‘false’ claims deposits are FDIC insured

It has been alleged that the FDIC has taken an overly harsh approach to digital assets, going as far as discouraging banks from dealing with crypto service providers. As Cointelegraph reported, Pennsylvania Senator Pat Toomey, who also serves on the Senate Banking Committee, sent a letter to FDIC director and acting chairman Martin Gruenberg informing him of allegations made by a whistleblower. In the letter, Toomey said he suspects that FDIC “may be improperly taking action to deter banks from doing business with lawful cryptocurrency-related (crypto-related) companies.”

US lawmakers appeal directly to 4 mining firms, requesting info on energy consumption

Four members of the U.S. House Committee on Energy and Commerce said they were “deeply concerned” that proof-of-work mining could increase demand for fossil fuels.

Four members of the United States House of Representatives from the Energy and Commerce Committee have demanded answers from four major crypto mining firms in regard to the potential effects of their energy consumption on the environment.

In letters dated Wednesday to Core Scientific, Marathon Digital Holdings, Riot Blockchain and Stronghold Digital Mining, U.S. lawmakers Frank Pallone, Bobby Rush, Diana DeGette and Paul Tonko requested the companies provide information from 2021, including the energy consumption of their mining facilities, the source of that energy, what percentage came from renewable energy sources and how often the firms curtailed operations. The four members of the House committee also inquired as to the average cost per megawatt hour the companies spent mining crypto at each of their respective facilities.

“Blockchain technology holds immense promise that may make our personal information more secure and economy more efficient,” said the lawmakers in a letter to Riot CEO Jason Les. “However, the energy consumption and hardware required to support PoW-based cryptocurrencies may, in some instances, produce severe externalities in the form of harmful emissions and excess electronic waste.”

The request followed U.S. President Joe Biden signing the Inflation Reduction Act into law on Tuesday, a bill considered by many experts to be the biggest legislation in the fight against climate change. The bill included incentives to support and grow green energy projects, including clean transportation and “climate-smart” manufacturing:

“Given the existential threat posed by the climate crisis, we are deeply concerned about efforts like [proof-of-work mining] that increase demand for fossil fuels, with the potential to put new strain on our energy grid.”

Related: Green and gold: The crypto projects saving the planet

Whether in discussion over its environmental or economic impact, cryptocurrency remains in the spotlight among many in government, both in the United States and abroad. In April, 23 U.S. lawmakers sent a letter to the Environmental Protection Agency, urging administrator Michael Regan to assess crypto mining firms potentially violating environmental statutes.

Troubled miner returns 26,000 rigs to eliminate debt

The mining operator entered into a deal with NYDIG to sell rigs to alleviate $64.7 million in outstanding debt.

The United States-based Bitcoin mining company, Stronghold Digital Mining (SDIG), announced on Tuesday new moves to elevate outstanding debt and restructure its financial operations.

In an agreement with lender New York Digital Investment Group (NYDIG), the company plans to release 26,000 of its mining rigs, 18,700 of which are currently running. The sell-off will create more liquidity and clear $67.4 million in debt held by Stronghold. Before the agreement, the company had $47 million in liquidity as of Frida.

After Stronghold returns 26,000 rigs, with a total hash rate of 2.5 EH/s, their operational fleet will be approximately 16,000 miners. Overall, the hash rate capacity will be over 1.4 EH/s and a total power draw of 50–55 megawatts.

The crypto market crash has played a significant role in the current difficulties for miners. In July, Bitcoin (BTC) mining revenue dropped to a one-year low at nearly $15 million. Around this time, other mining operations, such as Compass Mining, were also forced to sell rigs while facing bankruptcy.

For the past three months, Bitcoin miners hodl-ed 27% less due to the need for major sell offs.

Industry insiders refer to the bear market as a moment in crypto that will weed out operations that lack long-term sustainability while allowing others to restructure.

Related: The best bear market plan? ‘Relentless optimism for the future,’ says fintech CEO

Stronghold’s restructuring and expansion also come with an agreement with WhiteHawk, which adds an additional $20 million available for borrowing. According to the official statement, the company will “opportunistically” deploy the capital to purchase new miners.

Greg Beard, co-chairman and CEO of Stronghold, said the restructuring will provide, “significantly improved liquidity and flexibility to deploy capital opportunistically in a way that creates equity value through cycles in the Bitcoin and power market.”

Despite the sell-offs, restructuring could be a move in the right direction as experts say there is still long-term profitability in crypto mining. After reaching its low in July, mining revenue reversed its trajectory with a 68.6% increase in August. 

Recently, a New York judge approved a request from the Celsius Network to include BTC mining in its refinancing efforts post-bankruptcy.