Crypto Icons Who Fell in 2023 🤾
A year of crypto crash course in legal woes. $10.7B total crypto VC funding in 2023, down from $33.3 billion in 2022. SEC's Dec 29 Top DeFi protocols of 2023. SEC sets Dec 29 deadline for Bitcoin ETF.
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The year 2023 has been a rocky ride for the cryptocurrency industry, with several major figures facing legal troubles.
From fraud convictions to money laundering charges, these legal woes have cast a shadow over the entire industry.
Sam Bankman-Fried: From FTX Founder to Convicted Fraudster
Sam Bankman-Fried, the founder of the once-booming FTX exchange, was convicted of fraud in November 2023. He is facing a lengthy prison sentence and has been ordered to pay billions of dollars in restitution. Bankman-Fried's downfall was swift and dramatic, as FTX filed for bankruptcy just weeks after his conviction.
Changpeng Zhao: Binance Founder Pleads Guilty to Banking Violations
Changpeng Zhao, the founder of the world's largest cryptocurrency exchange, Binance, pleaded guilty to violating US banking laws in October 2023. Zhao has agreed to pay a hefty fine and cooperate with US authorities. The charges against Zhao stem from Binance's alleged failure to comply with anti-money laundering regulations.
Read: What’s next for CZ?🔮
Do Kwon: Terra Founder Faces Extradition After Company's Collapse
Do Kwon, the founder of the Terra blockchain project, is facing extradition proceedings in South Korea after his company's dramatic collapse in May 2023. Terra's algorithmic stablecoin, TerraUSD, lost its peg to the US dollar, triggering a cascade of liquidations and causing billions of dollars in losses for investors.
Other Notable Cases
Alexey Pertsev: The Tornado Cash developer, a mixing service allegedly used to launder money, Pertsev was detained in the Netherlands and is awaiting trial for money laundering.
Avraham Eisenberg: A DeFi hacker accused of manipulating cryptocurrency markets, Eisenberg was arrested and is currently in jail awaiting trial.
Alex Mashinsky: The co-founder of Celsius Network, Mashinsky is facing charges of fraud and market manipulation related to Celsius's lending and borrowing platform. He is currently out on bail awaiting trial.
Heather Morgan and Ilya Lichtenstein: A married couple who allegedly laundered billions of dollars in cryptocurrency through a variety of schemes, Morgan and Lichtenstein pleaded guilty to money laundering conspiracy charges. Morgan is under house arrest, while Lichtenstein is detained.
Total crypto VC funding in 2023. Down from $33.3 billion in 2022.
Abhishek Saxena, principal lead at Polygon Ventures, told The Block.
"The significant drop in crypto funding in 2023 was largely expected given the macroeconomic environment, regulatory uncertainty, and the scars left by recent major crypto failures. However, most investors and founders were still surprised by the sheer intensity of the funding pullback. This funding winter served as a healthy and necessary correction, enabling the industry to take stock and refocus on critical priorities."
Read: VC eyes on Crypto 2024 👀
TTD DeFi 📶
Traditionally, total value locked (TVL) has been the go-to metric for measuring a DeFi protocol's success.
As DeFi went through a bear market in 2023, some argued that TVL can be misleading.
Critics say that TVL can be inflated by a few large investors, and that it doesn't take into account a protocol's actual revenue.
Total value locked (TVL) is no longer the best measure of a DeFi protocol's success. What metric can we use instead?
One possibility is revenue.
This would be the fees that a protocol collects minus the rewards it pays out to liquidity providers.
The Top 5 DeFi Protocols by Revenue in 2023
MakerDAO: $95.91 million
Protocol that lets users create the stablecoin DAI. MakerDAO has been able to generate revenue by purchasing US Treasury bonds and earning interest on them.
Lido: $55.79 million
Staking platform that lets users earn rewards for staking their Ethereum. Lido's revenue comes from the fees it charges on staked Ethereum.
PancakeSwap: $52.31 million
Decentralised exchange (DEX) that lets users trade cryptocurrencies. PancakeSwap's revenue comes from the fees it charges on trades.
Convex Finance: $42.23 million
Asset management protocol that lets users earn yield on their Curve tokens. Convex's revenue comes from the fees it charges on its services.
GMX: $37.52 million GMX
Perpetual swap exchange that lets users trade cryptocurrencies with leverage. GMX's revenue comes from the fees it charges on trades.
The SEC has set a deadline for spot Bitcoin ETF applicants to file final S-1 amendments by Dec 29, Reuters reported, citing public memos and two people familiar with the discussions👇🏻
TTD Inflows 💹
After $16 million in outflows the previous week, crypto fund offerings bounced back with $103 million in inflows in the week ending Dec 22, according to CoinShares.
Despite the concerns, the inflows of the past few weeks suggest that there is still significant institutional interest in Bitcoin and other cryptocurrencies.
The approval of a spot Bitcoin ETF could further boost inflows and lead to a continuation of the bull market.
Bitcoin Leads the Charge with $87.6 Million Influx
Bitcoin (BTC) funds saw the largest inflows of any cryptocurrency, with over $87.6 million, representing 85% of the total.
Ether (ETH) was a distant second, posting $7.9 million in inflows.
Litecoin and Avalanche Buck the Trend
Litecoin (LTC) and Avalanche (AVAX) ETPs bucked the overall trend, posting net outflows of $400,000 and $2.6 million, respectively.
Germany and Canada Lead the Way in Regional Inflows
When viewed by region, Germany saw the largest inflows of any country at just over 40% of the total. Canada saw the second-largest, representing 25% of the total.
Bull Market Began in September
The current bull market for crypto fund products appears to have begun in the week of Sept 29.
Before that, crypto funds had seen outflows for eight of the previous nine weeks.
Spot Bitcoin ETF Approval Hopes Boost Sentiment
In previous reports, CoinShares speculated that the recent string of inflows may be the result of traders' optimism that spot Bitcoin exchange-traded funds (ETFs) will soon be approved in the United States.
The SEC has set a deadline of Dec. 29 for spot Bitcoin ETF updates, and some market participants believe that a first wave of approvals could come in early January.
Concerns Remain About Potential Impact of Spot Bitcoin ETFs
Some, like former BitMEX CEO Arthur Hayes, have expressed concerns that spot Bitcoin ETFs could "completely destroy" Bitcoin if they are too successful.
Hayes argues that spot Bitcoin ETFs could vacuum up too much supply and drive down the price of Bitcoin.
Stablecoin Regulation Around the World
Stablecoin regulation is rapidly gaining traction worldwide, with diverse levels of progress across different jurisdictions.
The PwC Global Crypto Regulation Report 2023 published on Dec 19.
25 Countries Have Enacted Stablecoin Regulations
Austria, Denmark, and France are among the countries that have enacted regulations.
The United States and the United Kingdom are still working on their stablecoin regulations.
What are the Regulations?
The vast majority of countries that enacted stablecoin laws have also secured or enforced other regulations, such as:
A crypto regulatory framework
Licensing or registration
The Financial Action Task Force's Travel Rule
Some countries, like the United States, the United Kingdom, and Canada, have not yet finalised legislation for stablecoins or a regulatory framework for cryptocurrencies.
Where is Stablecoin Regulation in Progress?
23% of the reviewed jurisdictions, including Australia, Hong Kong, and Singapore, have the stablecoin regulation process initiated and are actively engaged in adopting stablecoin laws.
Which Countries Have Not Started Stablecoin Regulation?
18% of analysed countries, or just 8 jurisdictions, have not initiated any stablecoin regulations at all. These include Bahrain, Brazil, India, Taiwan, and Turkey.
TTD Surfer 🏄
Apple is in talks with news and publishing outlets to secure licenses for their content for its AI systems, offering multiyear agreements valued at a minimum of $50 million.
The Indian government is testing artificial intelligence (AI) in creating climate models to forecast severe weather conditions, according to a top local weather official.
South Korean game publisher Wemade has launched a $100 million Web3 fund with Singapore-based investment firm Whampoa Digital.
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