Coinbase, Kraken Under Investigation | Meta Loses Billions On Its Metaverse Bet

NEW HEADWINDS FOR CRYPTO EXCHANGES

The cryptocurrency world is bracing for fallout from the U.S. Securities and Exchange Commission’s allegations in a civil lawsuit that nine crypto assets involved in an insider trading case are securities. The designation comes as the regulator is reported to be investigating whether the largest American crypto exchange, San Francisco-based Coinbase, offered unregistered securities. Hundreds of other exchanges around the world are trading the nine assets named in the insider-trading case, forcing a tough decision: ignore the allegations and wait for an official ruling or preemptively appease the SEC and stop listing the cryptocurrencies now to avoid a Coinbase-style suit.

With more than 100 exchanges globally trading at least one of the nine tokens named in the SEC complaint, according to CoinMarketCap.com data, the ramifications could be widespread. Among the exchanges are centralized giants like Coinbase, Binance in the Cayman Islands and Seychelles-based KuCoin. Decentralized platforms like Uniswap, which also list some of the tokens, are much easier for investors and developers building their own trading services to access and could prove more difficult to regulate…Read more here. 

KRAKEN SUSPECTED OF SANCTIONS VIOLATION  

The Treasury Department’s Office of Foreign Assets Control is investigating whether the second-largest crypto exchange in the U.S. allowed users in Iran to buy and sell digital tokens, according to the New York Times. Citing anonymous sources affiliated with the company, the report alleges that the officials have been investigating the company since 2019 and are expected to fine the exchange. Kraken would be the largest crypto firm in the U.S. to face enforcement action from O.F.A.C. Sanctions against Iran were imposed in 1979 to prohibit the export of goods or services to people or entities in the country. In September, the U.S. Commodity Futures Trading Commission (CFTC) hit Kraken with $1.25 million of fines for facilitating margined retail commodity transactions in digital assets, including bitcoin, to ineligible customers between June 2020 and July 2021.

Source: Forbes Digital Assets, powered by Nomics.  Prices as of 4:00 p.m. on July 28, 2022.

META’S MOST EXPENSIVE BET

Facebook’s parent company lost $2.81 billion on $452 million in revenue from its virtual-reality division, Reality Labs, in the second quarter, according to an earnings report published Wednesday. That puts the division’s year-to-date losses at a whopping $5.7 billion. “This is obviously a very expensive undertaking over the next several years,” said Meta CEO Mark Zuckerberg, “But as the metaverse becomes more important in every part of how we live… I’m confident that we’re going to be glad we played an important role in building this.” Notably, that same day the Federal Trade Commission (FTC) filed suit to block Meta from buying the maker of a virtual reality fitness app called Within, alleging the firm is trying to monopolize the industry.

Overall, Meta reported quarterly revenue of $28.8 billion and earnings of $2.46 per share, compared with the $28.9 billion and $2.59 expected by analysts. The company’s stock slid more than 3% immediately following the announcement.

BLOCKCHAIN 50 SPOTLIGHT

Société Générale: Last year, France’s third-largest bank released Cast Framework through its Forge subsidiary. The software lets mainstream financial firms and crypto startups create regulatory-compliant digital securities on a blockchain. A recent application was helping Banque du France refinance $45 million in securities backed by some of the central bank’s home-mortgage portfolio, tracked on a blockchain. Using the blockchain reduced transaction time and saved on auditing costs. SocGen is also developing a so-called smart-contract library of reusable code specific to financial services and has applied for a French regulatory license that will allow it to manage digital assets for clients.  

ELSEWHERE

Tether Says There Is No Chinese Commercial Paper Among Its Reserves [Bloomberg]

Cathie Wood’s Ark Invest Offloads Over 1.4M Coinbase Shares As COIN Price Falls [CoinDesk]

The Merge Draws Ever Closer As Ethereum Passes Another Critical Test [The Defiant] 

Michael del Castillo
Senior Editor 
Forbes Digital Assets

Nina Bambysheva
Reporter
Forbes Money & Markets

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