#79 The Context: Are Binance Execs Jumping Ship? đ˘
Binance CEO calls a recent report on resignations âFUDâ đą
gm, and welcome back to The Context. We had a nice little three-week break from news about Binance, the embattled global crypto exchange thatâs being poked and prodded by European, Australian and American regulators. The holiday is officially overâalthough some of the companyâs executives may soon have extra time on their hands.
The usual disclaimer:Â This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/Web3/NFT land and tries to provide unbiased context. It's aimed at anyone who wants to keep an eye on the space. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
[tl;dr]
Several Binance executives have recently left the company đś
Circle and Tether have frozen assets linked to the Multichain exploit đĽś
SEC says Coinbase knew it may have been listing securities đŁď¸
[Binance Ex(ecs)odus đŞ]
Binance general counsel Hon Ng, chief strategy officer Patrick Hillmann and senior vice president for compliance Steven Christie resigned this week, per a report from Fortuneâs Jeff John Roberts. (Senior director of investigations Matthew Price also recently left the company.) The report, which cites a âperson at Binance familiar with the situation,â says the execs resigned over CEO Changpeng Zhaoâs handling of a US Department of Justice investigation into the exchange.
What Binance Said: âMore FUD about some departures. Yes, there is turnover (at every company),â tweeted CEO CZ. âBut the reasons dreamed up by the ânewsâ are completely wrong.â
Christie and Hillmann backed up their former boss. Christie tweeted that âthe reasons for my departure are very different than what was reportedâ while Hillmann wrote that he was leaving the exchange âon good terms.â
What Journalists Said: Regardless of the reason, this is a big deal, reasoned Roberts, ârepresent[ing] a management and strategic crisis for Binance at a time when it is navigating immense regulatory pressure. The situation is also likely to increase that pressure given that the departures are from legal and compliance units that deal most directly with regulators.â
Olga Kharif and Muyao Shen of Bloomberg led their story with CZâs rebuttals but pointed out that heâs ârepeatedly had to counter what he terms âFUDâ â or fear, uncertainty and doubt â amid a decline in Binanceâs share of spot crypto trading volumes as officials turn up the heat.â
FUD or not, the list of resignations is growing. Kharif and Shen also reported that chief business officer Yibo Ling has left, while CoinDeskâs Elizabeth Napolitano revealed that Steve Milton, global VP of marketing and communications, departed in June.
Why It Matters: This week, Australian securities regulators began a probe of the exchange. In the past few months, Binance has been subject to a French investigation, forced to exit the Netherlands, and fielded an SEC lawsuit in the US. The onslaught from all sides is putting a lot of wear and tear on the company, and now many of the companyâs drivers are getting out of the vehicle.
[Multichain Reaction âď¸]
USDC-issuer Circle and USDT-issuer Tether froze $65 million in assets after an exploit moved $120 million in stablecoins, wrapped Bitcoin, and other coins from cross-chain protocol Multichain to outside wallets.
What Multichain Said: The assets were âmoved to an unknown address abnormally,â tweeted Multichain on July 6, before pausing its service. It has yet to communicate any followup regarding an investigation or resumption of service.
What Journalists Said đ§âđť: Whatâs not being said is speaking pretty loudly. In breaking down the still âunexplainedâ exploit, Cointelegraphâs Ana Paula Pereira explained that Multichain, which âallows users to transfer tokens between different networksâ such as Ethereum, Dogecoin, and Fantom, âhas been facing technical and operational challenges since its leadership vanished a few weeks ago.â
Mononymous CEO and co-founder Zhaojun has been missing since May, added Maria Gracia Santillana Linares for Forbes. Rumors are swirling online that heâs been arrested in China. Meanwhile, she wrote, this has happened to Multichain beforeâback in 2021, when it was known as Anyswap, it got taken for $8 million.
This all looks awfully suspicious, as Mat Di Salvo of Decrypt details. In fact, âBlockchain analysts are now saying it might have been an inside job.â
Why It Matters: Multichainâs woes represent a significant blow to the cross-chain bridge ecosystem. A rug pull would signal the end for Multichain, which has been a critical tool for DeFi users.
[He Said, SEC Said đŁď¸]
After the U.S. Securities and Exchange Commission sued Coinbase in June over listing securities tokens, the exchange filed a motion to dismiss, claiming the SEC doesnât have jurisdiction because the cryptocurrencies named in the lawsuit arenât securities. In response, the SEC says Coinbase itself admitted that some of its listings might be deemed securitiesâŚwhen it registered with the SEC.
What the SEC Said â˛:âSince becoming a public company, Coinbase has repeatedly informed its shareholders of the risk that the crypto assets traded on its platform could be deemed securities,â the regulator wrote in a July 7 filing.
What Coinbase Said: This filing is âmore of the same,â argued Coinbase chief legal officer Paul Grewal.
What Journalists Said đ: This is all part of a long legal tennis match between the two sides, wrote Blockworksâ Katherine Ross. The SEC âwill oppose any motion brought forth by Coinbase seeking to dismiss the regulatory agencyâs lawsuit.â
But the SEC filing gave us a preview of its case when it said two of the exchangeâs arguments were flawed, noted CoinDeskâs Nikhilesh De. The first is Coinbaseâs assertion that âan investment contract must include a formal contract,â and the second is that âinvestment contracts are only asset sales if they're being traded on secondary markets.â According to the SEC, âthe Howey Test does not need a formal contract.â Moreover, âtransactions on secondary markets may still violate securities laws.â
Why It Matters: Warning customers that your asset might be securities â even when flagging that warning to the SEC so it can approve an IPO â clearly isnât enough to ward off enforcement action from the agency.
[Tweet of the week]
[Tidbits]
âBlockchain data firm Arkham Intelligence launched a bounty marketplace that will let blockchain users buy and sell on-chain data.â Some in crypto are calling it âdox to earn.â Story by Samyuktha Sriram (Unchained)
âBitcoin's (BTC) hash rate hit a new all-time high over the weekend, meaning that it becomes increasingly difficult for any individual or group to control more than 50% of the networkâs total computational power.â Story by Andrew Asmakov (Decrypt)
K33 Research has shared its findings that nearly 200k people work in cryptocurrency-related jobs. This proportion is significantly pronounced in the US which employs around 29% of this market. Despite Chinaâs long-standing hostility towards crypto, it still employs around 15% of this market. Story by Shalini Nagarajan (Blockworks)
Mantle, an Ethereum layer-2 network developed by BitDAO has secured a capital pool of over $200m which is set to be deployed across the Mantle ecosystem over the next 3 years. Story by Ana Paula Pereira (Cointelegraph)
[Events]
NFT Show Europe | 14th - 15th July | Valencia, Spain
Mallorca Blockchain Days IV | 13th - 16th July | Mallorca, Spain
DAOCON Paris 2023 | 16th July | Paris, France
Contextualised Paris 2023 | 16th July | Paris, France
EthCC[6] | 17th - 20th July | Paris, France
AIBC ASIA | 19th - 22 July | Manila, Philippines
[EthCC â Looking Ahead To Next Week đŤđˇđĽ]
EthCC, the largest annual European Ethereum conference created by and for the community, will return for EthCC[6] from 17-20 July 2023 in Paris, France. The conference will bring together the top minds in Ethereum to share their vision for the future of the ecosystem.
Looking beyond the conference itself, Paris will be jam-packed with side events, parties, and social gatherings. For more info on fun events to attend next week, check out our side events page and be sure to come over to our booth and say hi!
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: âTetherâ by Heather (Jenn Fir)
Tether, commonly denoted as $USDT, is a unique player in the world of cryptocurrency. Itâs a âstablecoin,â meaning its value is pegged to the US dollar, with each Tether theoretically equal to $1. This design seeks to offer the stability of traditional fiat currencies, like the US dollar, while retaining the technological advantages of cryptocurrencies, such as fast, secure, and borderless transactions. However, it's important to note that even though it's designed to maintain a 1:1 value with the US dollar, Tether's price can still fluctuate slightly due to the forces of supply and demand.
Why is a stablecoin that lacks the wild price swings characteristic of cryptocurrencies like Bitcoin or Ethereum important? The answer lies in the volatility of the crypto market itself. Tether offers a safe haven for traders, allowing them to âstableâ their funds in USDT during periods of high market uncertainty. In such scenarios, if traders rush to convert their cryptocurrencies into Tether, its value can creep above $1; conversely, an oversupply of Tether can push its value below $1. But these fluctuations are usually minor â the most notable dips and peaks, even during significant market events, have only resulted in changes of around half a cent.
Despite its stability, Tether is not without its controversies and questions. One major point of concern is whether the currencies and financial instruments backing each USDT in circulation are sufficient. However, despite these uncertainties, Tether remains a crucial part of the cryptocurrency ecosystem, typically acting as a steadying force in the often tumultuous sea of crypto trading.
The team: founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Andrew Wickerson, Damian Alvarez, Becky Corbel and Delon Chan. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and Web3 brands through impactful storytelling. Find out more about us here.