Stablecoins may not be stable, but they could be criminal

What if – and listen to us here – not everything in the world of cryptocurrency is what it seems? What if it’s a place where a joke can get dead serious, where coins and tokens and the rest can live in a Heisenbergian-Schrödegerrian state of uncertainty and paradox, both currency and security and both at the same time? Where words take on different and seemingly opposing meanings? Where instead of constancy and transparency does a stablecoin actually bring instability and opacity?

These are the questions Janet Yellen, Jay Powell & Co. are trying to answer. Merrick Garland has a simpler question: what if the most important stablecoin out there, the most widely used that underpins more than half of all Bitcoin trades, isn’t just at its core just a really practical way to manipulate crypto markets? but a gigantic bank fraud?

The Justice Department’s investigation focuses on behaviors that emerged years ago, when Tether was still in its infancy. Specifically, the federal prosecutors are checking whether Tether has concealed from banks that transactions were associated with crypto…. Federal prosecutors have been circling Tether since at least 2018. In the past few months, they have been sending letters to individuals advising them that they are the subject of an investigation, one of the people said.

Fast! Better get out of the biggest stablecoin and move things to, oh, we don’t know, maybe the third biggest?

Several hedge funds have withdrawn from trading and other activities on Binance in response to accelerating regulatory action against the crypto exchange, adding to the burden on a group that is already cut off from a number of banks and payment companies … Several major UK high street banks such as Barclays, NatWest and Santander recently blocked retail clients from sending money to the stock market. At least two of Binance’s payment partners – regulated groups that provide a gateway between the conventional and crypto financial systems – have also cut ties.

Yes, it’s almost as if this is a particularly unsavory corner of the financial universe and those who run it are starting to get the message.

In the past few days, Texas, New Jersey, and Alabama have [BlockFi] Accounts amounted to an unregistered offer of securities. New Jersey ordered the company to stop selling the product on July 29, and the other states threatened to take similar action unless BlockFi could dissuade them.

The first move came from the FTX exchange, which said it would reduce the amount of bets investors can make by lowering the leverage it offers from 101 times to 20 times. About 14 hours later, Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, reiterated FTX’s move, announcing that his company has already started capping leverage for new users by 20x and that limit is coming soon Will expand to other existing customers.

Well not everyone.

“We did a lot of work behind the scenes to give our crypto customers the functionality they wanted.” [Robinhood co-founder Vlad Tenev] called. “We know you want wallets …” Tenev’s testimony came during Robinhood’s public roadshow on Saturday, where the company’s top executives asked the public about Thursday’s IPO.

Tether executives are expected to face criminal investigations into bank fraud [Bloomberg]
Hedge funds are pulling out of Binance after a regulatory attack [FT]
Regulators in three US states are joining BlockFi’s cryptocurrency accounts [FT]
Leading companies in the cryptocurrency industry are trying to contain the most risky businesses [NYT]
Robinhood CEO says the company is all-in on crypto and that users can expect new crypto features “at some point” [BI]

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