David Canellis

In the film Die Hard, East German criminal mastermind Hans Gruber took over Nakatomi Plaza in a plot to steal over half a billion dollars in bearer bonds — worth $1.7 billion in today’s money.



Now, three and a half decades later, Germany is back, holding all of our attention hostage while it liquidates billions in bitcoin.



The bitcoin was seized earlier this year from the operator of Movie2k, the defunct piracy portal that shut down in 2013. Nearly 50,000 BTC was assumed by Germany, a $2.86 billion haul at current prices, $2.15 billion when reports first broke and <a href="https://www.tomshardware.com/tech-industry/cryptocurrency/german-police-claim-largest-bitcoin-seizure-ever-more-than-dollar2-billion-recovered-in-ongoing-video-piracy-investigation">reportedly</a> around $25 million when Movie2k was at its height.



Overall, <a href="https://blockworks.co/tag/germany">Germany</a> has sent over $2 billion in bitcoin to trading platforms since June 16, per Arkham Intelligence data, including unidentified addresses assumed to be OTC desks.



Earlier this morning, addresses linked to the Bundesregierung altogether transferred 6,306 BTC ($361.3 million) to Kraken’s exchange, market maker Cumberland DRW and two other entities that appear to be connected to over-the-counter trading desks or other similar platforms.



Meanwhile, on Monday, the same addresses directed an eye-watering 16,038 BTC ($920 million) to Kraken, Cumberland DRW and other trading venues including Bitstamp, Flow Traders and Coinbase.&nbsp;



The simplest explanation for those transfers is that the government is selling the seized bitcoin, as the US government <a href="https://blockworks.co/news/us-government-dumps-bitcoin-silk-road">does from time to time</a>.&nbsp;



But Germany’s wallets have also received bitcoin back from the trading platforms, totaling $508.6 million, valued at each time of transfer.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/18671590/embed#?secret=PcVfJbJ3QG" data-secret="PcVfJbJ3QG" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Purple plus signs are exchange deposits, green diamonds are inflows back to Germany’s wallets</figcaption></figure>



Take yesterday: Of the $920 million in bitcoin sent to trading platforms, about 15% of it was directed to Bitstamp, equal to around $134 million.&nbsp;



Earlier this morning — two hours before Germany’s latest round of exchange transfers — government wallets received 1,692 BTC ($97 million) back from Bitstamp. Chunks of bitcoin have also been returned from Kraken, Coinbase and miscellaneous apparent OTC desks.



It’s unclear why Germany’s wallets follow these patterns, but perhaps most importantly, the outflows far outweigh the inflows to date.



If we surmise that any bitcoin that hasn’t made it back to German wallets has more than likely been sold for fiat, then Germany is so far more than halfway through liquidating Movie2k’s bitcoin.



A broad estimation suggests Germany may have generated up to $1.54 billion from 27,014 BTC, with an implied price of $56,800 per coin — 1% below its current trade price. US authorities sent a separate $241.2 million to Coinbase at the end of June.



Read more: <a href="https://blockworks.co/news/us-german-governments-selling-bitcoin">US, German governments have sent $738M in bitcoin to exchanges over the last 2 weeks</a>



Germany is still holding 22,846 BTC ($1.31 billion), which is definitely a lot of money. (For scale, CoinGecko reports about $32 billion in global daily bitcoin volume right now).



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/18671813/embed#?secret=LKWy7uBjv0" data-secret="LKWy7uBjv0" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Mt Gox and the US government still have a long way to go</figcaption></figure>



As with big spectacle liquidations like these, it’s difficult to say which has the bigger market impact: the actual sales or the chatter surrounding them.&nbsp;



Bitcoin’s price has slipped as much as 15% since Germany started transferring to exchanges, but it’s hard to say whether Germany’s sales were directly responsible, especially so considering BTC is in the midst of a retracement following an <a href="https://blockworks.co/news/bitcoin-all-time-high">all-time high in March</a>.



The answer doesn’t really matter. The outcome is the same. What does matter is that Germany could turn out to be the least threatening bitcoin villain over the short-term.



Mt Gox still has over five times more bitcoin to distribute to creditors <a href="https://blockworks.co/news/mt-gox-bitcoin-final-boss">over the next few months</a>, and directly to crypto exchanges, no less.&nbsp;



The US government, meanwhile, is sitting on even more seized bitcoin — over 50% more than Mt Gox’s remaining stash — equal to $12.67 billion.



And a new threat could always emerge in the UK government, which itself has 61,245 BTC ($3.5 billion).



Yippee ki‐yay, bitcoin stacker.



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Germany still holds $1.5B in bitcoin after surge of exchange transfers

Katherine Ross

Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">Backup to Nakamoto Plaza!</h2>



In Die Hard, East German criminal mastermind Hans Gruber took over Nakatomi Plaza in a plot to steal over half a billion dollars in bearer bonds — worth $1.7 billion in today’s money.



Now, three and a half decades later, Germany is back, holding all of our attention hostage while it liquidates billions in bitcoin.



The bitcoin — nearly 50,000 BTC ($2.86 billion) — was seized earlier this year from the operator of Movie2k, the defunct piracy portal that shut down in 2013.&nbsp;



Earlier this morning, addresses linked to the Bundesregierung altogether transferred 6,306 BTC ($361.3 million) to Kraken’s exchange, market maker Cumberland DRW and two other entities that appear to be connected to over-the-counter trading desks or other similar platforms.



Meanwhile, on Monday, the same addresses directed an eye-watering 16,038 BTC ($920 million) to Kraken, Cumberland DRW, and other trading platforms including Bitstamp, Flow Traders and Coinbase.&nbsp;



Overall, Germany has sent over $2 billion in bitcoin to trading platforms since June 16, per Arkham Intelligence data, including unidentified addresses assumed to be OTC desks,



The simplest explanation for those transfers is that the government is selling the seized bitcoin, as the US government does from <a href="https://blockworks.co/news/us-government-dumps-bitcoin-silk-road">time to time</a>.&nbsp;



But Germany’s wallets have also received bitcoin back from the trading platforms, totaling $508.6 million, valued at each time of transfer.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXdDQoKoyg-hWMRO6NcQSbuS46KTp_25sFe1YrEUU7yF0R1RdfXC-Gm9WI8Vr5ivyK-5HFmtueoziMnqBTxRnSMFspV2cvSKfSJr_IwoeQRJqI94Hzf_tBnXjcxfUWQ1dFeegB4zNCv9zL-5yu4Kh1KJJkBn?key=41qEQCwGUDAIflaILZWd0g" alt=""/><figcaption class="wp-element-caption">Purple plus signs are exchange deposits, green diamonds are inflows back to Germany’s wallets</figcaption></figure>



Take yesterday: Of the $920 million in bitcoin sent to trading platforms, about 15% of it was directed to Bitstamp, equal to around $134 million.&nbsp;



Earlier this morning — two hours before Germany’s latest round of exchange transfers — government wallets received 1,692 BTC ($97 million) back from Bitstamp. Chunks of bitcoin have also been returned from Kraken, Coinbase and miscellaneous apparent OTC desks.



It’s unclear why Germany’s wallets follow these patterns, but perhaps most importantly, the outflows far outweigh the inflows to date.



If we surmise that any bitcoin that hasn’t made it back to German wallets has more than likely been sold for fiat, then Germany is so far more than halfway through liquidating Movie2k’s bitcoin.



A broad estimation suggests Germany may have generated up to $1.54 billion from 27,014 BTC, with an implied price of $56,800 per coin — 1% below its current trade price. US authorities sent a separate $241.2 million to Coinbase at the end of June.



Germany is still holding 22,846 BTC ($1.31 billion), which is definitely a lot of money. (For scale, CoinGecko reports about $32 billion in global daily bitcoin volume right now).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXfx9tScwghiTn2mANqafF09NJ__h8bACjPJA7cf0HI9-g62GfChW3xN6MypFcjTvmX1CTWJ6ZM3p780QDdgWoAdUfH08sBkSDKmhPlzOlPseOb4j7eBpTiL7Fg1k-JIb_hetEBJhU1BGaWqWTlfpGdCeJ30?key=41qEQCwGUDAIflaILZWd0g" alt=""/><figcaption class="wp-element-caption">Mt. Gox and the US government still have a long way to go</figcaption></figure>



As with big spectacle liquidations like these, it’s difficult to say which has the bigger market impact: the actual sales or the chatter surrounding them.&nbsp;



The answer doesn’t really matter. The outcome is the same. What does matter is that Germany could turn out to be the least threatening bitcoin villain over the short term.



Mt. Gox still has over five times more bitcoin to distribute to creditors over the next few months, and directly to crypto exchanges, no less.&nbsp;



The US government, meanwhile, is sitting on even more seized bitcoin — over 50% more than Mt. Gox’s remaining stash — equal to $12.67 billion.&nbsp;



Yippee ki‐yay, bitcoin stacker.



— David Canellis



<h2 class="wp-block-heading">Data Center</h2>



<ul>
<li>The UK government also has its own seized bitcoin <a href="https://platform.arkhamintelligence.com/explorer/entity/uk">stash</a>: 61,245 BTC ($3.52 billion). It hasn’t yet transferred any of it.</li>



<li>BTC open interest is down <a href="https://www.coinglass.com/BitcoinOpenInterest">almost</a> 25% over the past month, now at $27.63 billion.</li>



<li>Weekly DEX volumes are up 45% to $44.4 billion, led by Solana’s Raydium with 13.5% of the total, per DeFiLlama.</li>



<li>Restaking protocol Karak’s <a href="https://defillama.com/protocol/karak-protocol?denomination=USD">TVL</a> is looking to reclaim the $1 billion mark, after falling under $800 million earlier this month. </li>



<li>Rival EigenLayer has shed over $5 billion <a href="https://defillama.com/protocol/eigenlayer">TVL</a> over the past month. ETH’s falling price is only partly to blame, with stakers overall pulling 6% of ETH locked in the protocol.</li>
</ul>



<h2 class="wp-block-heading">Must keep swimming</h2>



I’m losing at 2024 bingo, if we’re being honest.



So far this year, there have been a few things that I didn’t think to include in my expectations, such as crypto becoming an election topic (and part of the Republican <a href="https://cdn.nucleusfiles.com/be/beb1a388-1d88-4389-a67d-c1e2d7f8bedf/2024-gop-platform-july-7-final.pdf?utm_medium=email&amp;utm_source=ncl_amplify&amp;utm_campaign=240708-2024_gop_platform_make_america_great_again&amp;utm_content=ncl-4NsN8UE5x2&amp;_nlid=4NsN8UE5x2&amp;_nhids=wmn7SnnE">party platform</a>, ICYMI) and, well, the German government suddenly deciding to offload its bitcoin stash.



Let’s focus on the latter since we’ve seen a whole lot of transfers in the last couple of days, and some investors seem spooked.&nbsp;



I called up Ledn’s John Glover to check in on the two levels he gave us a few weeks ago ($55,000 to $56,000 and $49,000, respectively) in light of the German government&#8217;s lack of diamond hands.



“I mean, that was a significant amount of bitcoin that they supposedly sold in the last 24 to 48 hours. Interesting to me that they&#8217;re doing it. But you know, when you look at every government being cash-strapped, it&#8217;s not really surprising,” he said. 



In total, he estimates that $25 billion worth of bitcoin has been repossessed by authorities, which is just another overhang to keep in mind because governments will seek to monetize those holdings.&nbsp;



With roughly $2 billion dollars offloaded so far, Glover’s not too worried though. Given that the market is trading roughly $30 to $40 billion a day in bitcoin alone, that kind of selling can be absorbed, he added.&nbsp;



In fact, when you’re looking at the chart, you can kind of track where the selling pressure is coming from…. and when the dip’s being bought. For example, the pressure on Sunday night came during the Asia/Europe hours but had bounced back by the time the US was coming online.&nbsp;



“And that&#8217;s what we&#8217;ve seen the last couple sell-offs. It&#8217;s been a late European, early Asian sell-off, and then the US comes in and starts buying it back,” Glover said.



“So I think there&#8217;s the overhang from Mt. Gox in Asia, and then there&#8217;s the desire for traditional finance players to add to their portfolios on dips. That kind of makes sense for what&#8217;s happening here. It&#8217;s just [that figuring out] who&#8217;s going to win this battle between the bears and the bulls is a little bit tough.”



Let’s be clear though: The German government&#8217;s selling may be a negative catalyst right now, but that’s not impacting Glover’s longer-term thinking. He still thinks we hit $80,000, with the potential to go higher, by the end of the year.&nbsp;



I’m now hoping nothing too crazy happens to further throw off my bingo card.&nbsp;



— Katherine Ross



<h2 class="wp-block-heading">The Works</h2>



<ul>
<li>Cboe filed on behalf of the SOL ETF contenders — <a href="https://cdn.cboe.com/resources/regulation/rule_filings/pending/2024/SR-CboeBZX-2024-066.pdf">21Shares</a> and <a href="https://cdn.cboe.com/resources/regulation/rule_filings/pending/2024/SR-CboeBZX-2024-067.pdf">VanEck</a> — late Monday, adding that it hopes to address “increasing investor interest in Solana.” </li>



<li>DigitalX Limited received the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02826170-6A1215032?utm_medium=email&amp;_hsenc=p2ANqtz--7xJ-s12Q6_HrVX1hzX43VhoFCht663rOrfizw5pnTA_UHyB5Bi7QCnN7P_UPEoMCALMUo7iw3dys00x92WoKMr8zeYA&amp;_hsmi=314902829&amp;utm_content=314902829&amp;utm_source=hs_email">green light</a> from Australia to launch a spot bitcoin ETF.</li>



<li>While bitcoin remains dominant, Australian investors are increasingly interested in some memecoins, <a href="https://www.theblock.co/post/304152/aussie-investors-still-favor-bitcoin-while-newer-memecoins-gain-popularity-kraken">according</a> to Kraken.</li>



<li>Ex-Valkyrie CEO Leah Wald will be <a href="https://www.coindesk.com/business/2024/07/09/ex-valkyrie-ceo-leah-wald-to-take-reins-of-crypto-investment-firm-cypherpunk/">taking over</a> as CEO of investment company Cypherpunk. </li>



<li>Hut8 <a href="https://www.globenewswire.com/news-release/2024/07/09/2910169/0/en/Hut-8-Executes-Definitive-Agreements-for-Site-in-West-Texas-with-205-MW-of-Immediately-Available-Power-Capacity.html">announced</a> it entered into a power-purchase agreement for a West Texas site. </li>
</ul>



<h2 class="wp-block-heading">The Riff</h2>



Q: What can crypto be optimistic about right now?



The easy answer is the ETH ETFs (which could come very soon, according to our very own Ben Strack!)



But I’m actually going to say the election. Putting aside the politics of it all, there’s no doubt that a party acknowledging crypto shows how far it has come. And not only could we see bitcoin top new all-time highs, it validates the industry to boot.



Again, I can’t stress enough that I’m not endorsing or signing off on either political party. But I’d be remiss not to see the potential growth for the industry based on the combination of new ETFs and more attention on a national scale.&nbsp;



— Katherine Ross



That we may be finally ready to put the worst dramas in crypto history to bed, for good.



Mt. Gox repayments should be wrapped up over the next 90 days max. Think of those like a Band-Aid — the sooner the better. The same goes for Germany’s liquidations and whatever else the US wants to sell.



Not to discount the anguish still felt by victims of Terra, Three Arrows, Celsius and FTX.



Anyone financially, spiritually, mentally or emotionally hurt in the fallout surrounding any of those collapses (and the many others around the same time) will still have to deal with that day-to-day. And that sucks.



But if Solana can shed its connection to Sam Bankman-Fried and Alameda Research in the public zeitgeist — to the point that funds are filing for SOL ETFs — then we too can drop even our heaviest baggage.



— David Canellis



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Empire Newsletter: Germany may now be over half-way done selling bitcoin

Germany and the US are seemingly competing for who can spook bitcoin markets more.



Addresses linked to German and US governments have recently sent $737.6 million in bitcoin to exchanges including Coinbase, Bitstamp and Kraken, as well as some to OTC desk operator-slash-market maker Flow Traders.



Germany makes up about three-quarters of that total, with its deposits spread across 30 different transactions — usually in the morning around 9 am local time.&nbsp;



While it’s unclear whether all the bitcoin was actually sold (a portion has since been returned to the original addresses), Germany’s transfers to exchanges are believed to be the first ever, at least going by Arkham Intelligence data.&nbsp;



Local authorities had previously seized bitcoin via various criminal cases, including <a href="https://blockworks.co/news/german-police-bitcoin-seizure">pirate portal Movie2k</a>.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1512" height="1130" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png" alt="" class="wp-image-88862" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=1512 1512w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=344 344w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=349 349w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=293 293w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-8.png?w=80 80w" sizes="(max-width: 1512px) 100vw, 1512px" /><figcaption class="wp-element-caption">Bitcoin transfers to exchanges from governments have ramped up significantly.</figcaption></figure>



Over the past two weeks, Germany has sent 7,828 BTC in transfers that appear to be part of liquidation efforts.&nbsp;



That bitcoin was altogether valued at $496.4 million at the respective transaction times, implying an average price of $63,400. Bitcoin currently trades for $60,200, although a direct causal link between Germany’s transfers and falling prices is tough to draw.



As for the US, the Feds used to sell bitcoin at auction. Now, it <a href="https://blockworks.co/news/doj-bitcoin-silk-road-mempool">sells on Coinbase</a>.&nbsp;



The US sent a single 3,940 BTC deposit to Coinbase Prime at 11 am ET on June 26. The bitcoin, which once <a href="https://www.justice.gov/opa/pr/dark-web-vendor-sentenced-distributing-narcotics-and-ordered-forfeit-150m">belonged</a> to drug dealer Banmeet Singh, was worth $241.22 million at the time, while the same haul would fetch $237.35 million right now.&nbsp;



Aside from the bitcoin sold at <a href="https://jlopp.github.io/us-marshals-bitcoin-auctions/">auction</a> in years prior, putting an exact value on how much the US government has offloaded over the years is difficult.&nbsp;



Some transactions are obvious, like the Coinbase deposits. Others only end up on exchanges after being sent through multiple single-use addresses. (For the sake of this analysis, crypto that was first sent to an in-between address before being forwarded to an exchange also counted towards the totals.)



After combing through the chain for exchange deposits, and other transfers that have all the hallmarks of sales, it looks like the US government may have now either liquidated or moved to liquidate almost $590 million in bitcoin since November 2020 (valued at the time of transfer). Which is about 20% more than Germany’s recent moves.



<figure class="wp-block-image is-resized"><img loading="lazy" decoding="async" width="1520" height="1134" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png" alt="" class="wp-image-88863" style="width:642px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=1520 1520w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=344 344w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=350 350w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=294 294w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-9.png?w=80 80w" sizes="(max-width: 1520px) 100vw, 1520px" /><figcaption class="wp-element-caption">It’s hard to say whether these transfers have moved markets. Although, bitcoin definitely hasn’t gone up.</figcaption></figure>



The data suggests that:



<ul>
<li>The US sold 15,903 BTC for approximately $37,000 on average since 2020.</li>



<li>Had the US held all that bitcoin until now, it could’ve netted $958.7 million.&nbsp;</li>



<li>The US missed out on an estimated $370 million by selling too soon, and that’s not counting the billions missed by selling at auction over the last decade.</li>
</ul>



World governments moving around their bitcoin tend to make a lot of noise. But the onchain data indicates that the US has been selling seized ETH for as long as BTC.&nbsp;



Split between Coinbase and Kraken, addresses tagged as the US government have sent $49.1 million in ETH to trading platforms since September 2020. An additional $2.6 million in DAI and a small amount of USDC was also sent to an address that forwarded it onto Kraken.



All up, using the same analysis as the bitcoin exercise above, the US government appears to have liquidated 108,673 ETH for an average price of $452 (current price: $3,300). Had it held all that and sold today, it would’ve scored over $358 million — missing out on nearly $310 million.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1513" height="1132" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png" alt="" class="wp-image-88864" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=1513 1513w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=343 343w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=349 349w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=293 293w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/image-10.png?w=80 80w" sizes="(max-width: 1513px) 100vw, 1513px" /><figcaption class="wp-element-caption">The plus symbols represent ETH deposits to exchanges and other apparent sales, while the diamond is for DAI and USDC.</figcaption></figure>



The ETH came from wallets designated to seizures from cases involving defunct crypto debit card ploy Centra Tech and Gary Harmon, who, ironically, <a href="https://www.justice.gov/opa/pr/man-sentenced-stealing-over-712-bitcoin-subject-forfeiture">stole</a> bitcoin seized by the US government, among others.



Combining it altogether shows the US and Germany have directed close to $1.14 billion in seized bitcoin, ether and stablecoins to exchanges and other trading platforms over the past four years.



The US is still sitting on about $13.3 billion in crypto, mostly bitcoin, as well as a combined $300 million in ether and tether. Germany otherwise continues to hold 43,549 BTC ($2.6 billion).



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US, German governments have sent $738M in bitcoin to exchanges over the last 2 weeks

The United States Marshals Service picked Coinbase Prime to custody and provide trading services for certain crypto seized by the arm of the Department of Justice.&nbsp;



According to a blog post, Coinbase Prime will hold large-cap digital assets for the USMS.&nbsp;



“The USMS conducted a competitive due diligence process that evaluated a range of solutions, ultimately choosing Coinbase due to our strong track record and ability to securely provide institutional-grade crypto services at scale,” the post said.



Per an awards <a href="https://sam.gov/opp/9ea963fb74f140b48f69b9b926fb51c7/view">notice</a> from the DOJ on the government’s website for awards management, Coinbase Prime will receive $32.5 million for it.&nbsp;



The USMS first <a href="https://sam.gov/opp/c7ce250733cf4d5c9ccd072adde93acb/view">posted</a> the contract earlier this year. The goal, the site said, was to find a partner that could “streamline” handling crypto for the USMS.&nbsp;



“The US Marshals Service (USMS) department of Justice (DOJ), on behalf of the Asset Forfeiture Division (AFD) has a requirement for managing and disposing of large quantities of popular cryptocurrency assets, known as Class 1 cryptocurrencies,” the listing said.&nbsp;



The US government has a history of <a href="https://blockworks.co/news/doj-moves-silk-road-bitcoin">using Coinbase to sell crypto</a>. Coinbase created a law enforcement program back in 2014, the company said, which points to its “longstanding history” of working with the government.&nbsp;



“Growing the crypto economy means promoting safe and efficient markets, and these partnerships are critical to our mission,” the blog post continued.



However, the exchange has also been targeted by an arm of the government. The Securities and Exchange Commission filed a suit against Coinbase last summer alleging that it acted as an unregistered broker and exchange while <a href="https://blockworks.co/news/sec-sues-coinbase">offering and selling unregistered securities</a>.&nbsp;



The regulator and the publicly traded company have been locked in a legal battle since last spring after the latter <a href="https://blockworks.co/news/sec-serves-coinbase-in-latest-alleged-crypto-securities-violation">received a Wells notice</a> about the lawsuit (which was then filed in late June.)



Despite the suit, the US government has continued to use <a href="https://blockworks.co/tag/coinbase">Coinbase</a> to offload crypto, including bitcoin, per <a href="https://platform.arkhamintelligence.com/explorer/tx/0f3f9a7c01d85c5747a3ae6cc9621cc30360390c4b681c1f95573e6bbcffed4f">data</a> from Arkham Intelligence.



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USMS awards Coinbase Prime a multi-million dollar contract

Molly Jane Zuckerman

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="256" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024&amp;h=1024" alt="" class="wp-image-60166" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



Earlier this week, the US State Department <a href="https://blockworks.co/news/state-department-bounty-for-onecoin-crypto-queen">upped the reward money</a> from $250,000 to $5 million for information about missing OneCoin promoter Ruja Ignatova.



Better known as the Crypto Queen, Ignatova has either been on the run since 2017, when she took a plane to Greece and was never seen in public again — or was murdered by the Bulgarian mafia sometime after, probably on a yacht in the Mediterranean.



But regardless of where Ignatova may be in this world or the next, her multi-billion dollar OneCoin crypto scam is definitely over. Two other higher-ups in the OneCoin family — co-founder Karl Sebastien Greeword and former legal chief Irina Dilkinska — are serving twenty years and four years respectively, with each also paying $300 million and $111 million in fines.



Justice might not be fully served, but it has definitely had a very nice start. So why would the US up her reward by a magnitude of 20? Especially after <a href="https://www.bbc.com/news/articles/c2llvlx2ez9o">last year’s BBC special</a> that found pretty convincing evidence that Ignatova fell victim to the selfsame Bulgarian mafioso hired to protect her.



Read more from our opinion section: <a href="https://blockworks.co/news/eminem-cryptocom-advertisement-silly">Eminem’s new crypto ad fails to capture the moment, lets it slip</a>



There’s no doubt that the US loves to prosecute crypto criminals, and that’s not necessarily a bad thing. Despite the countless op-eds that we have run about the Securities and Exchange Commission’s overreach into the crypto sector, it’s generally considered good when people who break the law are punished for breaking the law. Just look at <a href="https://x.com/therealZNO/status/1804587631780520097">some</a> of the <a href="https://x.com/JustinBrannan/status/1804739087892463627">reactions</a> to sassy headlines about the cop who arrested Justin Timberlake for drunk driving.



However, something about the latest price jump for information about Ignatova (a previous increase brought the original reward from $100,000 to the next quarter of a million number) feels just a little bit off.&nbsp;



Yes, finding the people behind the massive crypto scams that hurt the livelihood of thousands of people all over the world is definitely a righteous cause. But the crypto industry and the scams that grow out of it right now are so wildly different from the large scale Ponzi schemes of 2017, so much smaller and more insidious, that this latest OneCoin news bump feels a bit like the prosecutors are falling behind the times.&nbsp;



Catching one of the people behind a multi-billion dollar crypto scam from 2017 would be a great way to ensure that justice has been brought to that scam’s victims, but I can’t help thinking about all of the ways that several million dollars could help US law enforcement prevent the types of crypto scams that are active at this moment.&nbsp;



Ransomware attacks, SIM swapping, complex DeFi rug pulls, a seemingly <a href="https://www.coindesk.com/policy/2024/03/21/north-korean-crypto-hackers-have-stolen-3b-since-2017-says-un-security-council-report/">never-ending stream</a> of North Korean crypto cyber hacks — I can’t claim that I know for sure that the US is dropping the ball in its prosecution of these more difficult-to-solve crypto crimes, but I do know that they have definitely fumbled before. Remember its highly teased press announcement of the huge crypto scam prosecution that ended up being over an <a href="https://blockworks.co/news/doj-busts-crypto-exchange">exchange that nobody had ever heard of</a>?



If the US does catch the Crypto Queen from this new, higher bounty, more power to it. And if some other crypto scam emerges that is actively hurting people right now, I hope the US also puts the equivalent of $5 million of effort into stopping it before it gets to the multi-billion dollars worth of fraud — not after.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



I don’t care much about tech, I don’t care a whole lot about finance, either. I care about writing stories and watching weird things unfold. And that’s why I’ve ended up in crypto. But because I’m missing that passion for what crypto and blockchain are all about — finance, tech, privacy, yadda yadda — I’m going to write instead about what I am actually interested in. Everything about crypto that has very little to do with crypto. That’s what this column will be about. All the tangential stories that come out of the blockchain and crypto space, what I think about them, and how I navigate it all as a skeptical former Russian literature major. It’s precisely my perch as an outsider that lets me do what I do: Opine on all sides of any crypto issue, no strings attached, no skin in the game. If you want to talk crypto with me, let’s go off topic.



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OneCoin’s Crypto Queen should be old news

Felix Jauvin

Ben Strack

Casey Wagner

Today, enjoy the On the Margin newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



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Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Casey Wagner and Felix Jauvin. Here’s what you’ll find in today’s edition:



<ul>
<li>Why a look at the housing market offers incredible insight into where the economy is headed.</li>



<li>A US solana ETF proposal is on the table, though getting SEC approval is another story.</li>



<li>Coinbase probably had enough litigation on its hands. But why not add a couple more suits?</li>
</ul>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">The slowdown finally hits housing</h2>



They say that housing is the business cycle. And it makes sense! Think about all the components that fall into the process of building and selling a home:



<ul>
<li>Labor: Many people are needed to build a house. Carpenters, electricians, architects, etc.</li>



<li>Commodities: A lot of resources are needed to build a house. Lumber, metals, energy, etc.</li>



<li>Mortgage rates: A mortgage is often the largest expense on an individual’s balance sheet every month. Moreover, that expense is extremely sensitive to changes in interest rates. That is, unless you’re American and were smart enough to lock in a 30-year fixed mortgage at generational lows a couple years ago.</li>



<li>Land value: It is one of the few things we cannot make more of. People need to live somewhere and sleep under a roof every night.</li>
</ul>



Simply put, analyzing the housing market provides an excellent mirror into the health of land, labor and capital — the three tenets of an economy. By understanding the linkages between the three, you can get a pretty good idea of where the economy is headed:



<ol>
<li>As mortgage rates rise, the interest payments on new mortgages, refinanced mortgages and variable mortgages rise. As this occurs, consumers who were previously able to afford their mortgage on the margin now may be squeezed, forcing them to downsize and list their house. Further, no one wants to buy houses during this time given that rates are rising.</li>



<li>The supply of available housing to purchase therefore increases, making it a “buyer’s market.” Additionally, fewer new homes are being constructed, which leads to a downcycle in homebuilders (in both resource use and labor requirements).</li>



<li>Eventually, as the supply of available housing grows — much like an NFT project where everyone is listing at the floor hoping to get liquidity — all it takes is a few owners to undercut the floor price to trigger a downward spiral in prices. </li>



<li>As this downward spiral in house prices occurs, the equity that many people anchor their wealth to these days (often directly through something like a home equity line of credit) gets impaired, leading to a lower consumption, especially on discretionary items. This leads to a ratcheting down of economic growth until a recession occurs. </li>
</ol>



See? It’s a mirror of a classic business cycle.



Looking at the housing market in the US today, it feels like we’re seeing a regime shift.



Due to the fact that so many Americans have been sitting on their sub-3% 30-year fixed rate mortgage, it took longer than most expected to go from step 1 to step 2. But we are getting there now.&nbsp;



New home sales came in at -11.3% this week — versus an expected -0.2%. A huge miss! 



With that, we are seeing inventory pile up as sales crater.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXf8NPmqYqD5jj5WTrfh16w-eqkFr_oCEpGMXTokaovIVrZLgFwfR3ebQQTGzc4eSyp2DQ63qTRxGs1c3x2Sf79PeNifT_O8sjmuQNZ06Abgv1uPunun5xfyNtoZL_qghiCkJJx3b_Q7yDmiiCorHMsAn0f7?key=Xd5Iv-QH--DuVZmhB0wrug" alt=""/></figure>



From there, we look to see when step 3 will arise. Looking at the National Home Price Index, not a whole lot is happening quite yet.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXd0v9-KE0Xewbqt9ZplUbOrjKE_Irn0A9wKlrou4h9fP5xGSK4a7ZzsiRBL2CMdT2Y4t6Z1NFkYvf275DjfJz0IQ_qQxBll-JLzneN7IFh0sMkfXyRTv_p_tuzb2-JElg4psaoGx5YnJZi253WdqDDB-kZQ?key=Xd5Iv-QH--DuVZmhB0wrug" alt=""/></figure>



Aside from its impact on housing prices, this miss in new home sales also has implications for home building labor and therefore the unemployment channel.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXdOHu-b9Oo7rp180FXsSvH7-SJbWqCv7q7eMkJ5Tdx6BLhSJjxz70YWfjWSYyHgCCOswvwrF8EhEPinFwybyBbb0s7-_ygBJtI-vwGZaKhhHLHJsbWANAAWf1odsKiprVXGqHljQdNQeQzSnJ34ktXGndc?key=Xd5Iv-QH--DuVZmhB0wrug" alt=""/></figure>



If new home sales continue to slow down, layoffs in the sector will bump up the unemployment rate, which (as <a href="https://blockworks.co/news/on-the-margin-newsletter-fed-policy-unemployment">previously explained</a> through the Sahm rule) is key to understanding the Fed reaction function.



— Felix Jauvin 



<h2 class="wp-block-heading">$155 million</h2>



The value of bitcoin miner CleanSpark’s pending all-stock deal to acquire GRIID Infrastructure.&nbsp;



Still subject to GRIID shareholder approval, the <a href="https://blockworks.co/news/cleanspark-btc-miner-acquires-griid-infrastructure">pending transaction</a> sets up the chance for CleanSpark to build its presence in Tennessee. The company ultimately seeks to have more than 400 megawatts (MW) of infrastructure in the state, matching the type of expansion it has executed in Georgia. The merger would mark one of the first significant <a href="https://blockworks.co/news/post-bitcoin-halving-miner-mergers-acquisitions">M&amp;A deals</a> between public companies in the sector after April’s Bitcoin <a href="https://blockworks.co/news/bitcoin-halving-2024-occurs">halving</a>.



Unlike Riot Platforms’ apparent <a href="https://blockworks.co/news/riot-nominates-bitfarms-board-directors-takeover">ongoing attempt</a> to acquire rival miner Bitfarms, the CleanSpark-GRIID agreement is not of the so-called hostile takeover variety.



<h2 class="wp-block-heading">VanEck aims high with new SOL ETF filing</h2>



With US spot ether ETF launches imminent, fund group VanEck is now also <a href="https://blockworks.co/news/vaneck-files-for-solana-etf">eyeing</a> a solana product.&nbsp;



The investment firm’s Thursday <a href="https://www.sec.gov/Archives/edgar/data/2028541/000162828024030249/vanecksolanatrusts-1.htm">filing</a> for a spot SOL ETF comes a week after Canada-based 3iQ revealed plans to bring North America’s first solana ETP (if permitted by the Ontario Securities Commission) to the Toronto Stock Exchange.&nbsp;



To be clear, the proposed products are different.



3iQ’s planned fund is closed-ended, meaning it would offer a fixed number of shares. It also seeks to stake its solana holdings. While VanEck’s fund would not stake the SOL it holds, its authorized participants would continuously create and redeem shares based on market demand.



Put another way, the VanEck fund would be akin to the types of ETPs many American investors are used to (like the spot BTC funds and <a href="https://blockworks.co/news/ether-etf-issuers-await-sec-final-approval">imminent</a> ETH ETFs). The 3iQ product would only be a step in that direction.



Chris Matta, president of 3iQ Digital Assets, said last week he did not expect regulators to allow an open-ended solana ETF yet given there is no regulated solana futures market (like CME offers with BTC and ETH).



“Frankly, I think that’s why there haven’t been filings in the US for solana ETFs,” he noted.



Other industry watchers agree, <a href="https://blockworks.co/news/us-spot-crypto-etf-approvals-outlook">telling Blockworks</a> last month they didn’t expect the current precedent (the SEC needing to see regulated futures markets before approving spot products for that asset) to change in the near-term.



A Trump win in November and possible subsequent <a href="https://blockworks.co/news/on-the-margin-newsletter-trump-sec-and-solana-etp">SEC shake-up</a> could change that down the line.



Also, while SEC Chair Gary Gensler has acknowledged bitcoin as a commodity (rather than a security), the agency left the status of ETH pretty unclear until last month’s spot ether ETF 19b-4 proposal <a href="https://blockworks.co/news/sec-approves-ether-etf-proposals">approvals</a>. But you might remember the SEC labeling SOL <a href="https://blockworks.co/news/the-sec-says-these-crypto-assets-are-securities-their-reasoning-is-wrong">as a security</a> in lawsuits against Coinbase and Binance last year.



Matthew Sigel, VanEck’s head of digital assets research, argued in an X <a href="https://x.com/matthew_sigel/status/1806313241431138434">post</a> that “SOL’s decentralized nature, high utility, and economic feasibility align with the characteristics of other established digital commodities.”



We have our eyes peeled to see if other US issuers follow VanEck’s lead with similar filings. If not, that likely signals they believe the regulatory uphill battle is currently too great. 



 — Ben Strack



<h2 class="wp-block-heading">Coinbase racks up its legal bills </h2>



As if it didn’t have enough litigation on its hands, Coinbase is initiating legal action against the SEC and the Federal Deposit Insurance Corporation.&nbsp;



The lawsuits, filed in Washington DC Thursday, come after Coinbase and its consultancy firm, History Associates Incorporated, were denied a series of Freedom of Information Act (FOIA) requests in 2023. History Associates is the plaintiff in both lawsuits and Coinbase is listed as an interested party.&nbsp;



The SEC and FDIC unlawfully withheld the requested information, according to Coinbase. Now, the exchange is asking the court to force the federal agencies to produce the documents. Neither the SEC nor the FDIC returned Blockworks’ request for comment.&nbsp;



The FOIA requests — filed by History Associates on behalf of Coinbase last year — were for documents pertaining to the SEC’s views on Ethereum. That includes copies of the so-called “pause letters” the FDIC sent to supervised financial institutions asking them to stop engaging in digital asset-related activities.&nbsp;



The SEC and FDIC in their denials of the FOIA requests cited federal exemptions intended to protect information that could threaten national security or would harm an ongoing investigation. Coinbase and History Associates say both agencies improperly cited exemptions as a reason to keep information private.&nbsp;



As a journalist, I get it. It’s pretty rare to have a FOIA request granted, especially from the SEC. It’s an interesting case with some potentially big implications; we might see the SEC and FDIC release these documents, or see a new precedent set around FOIA policies.&nbsp;



This is now Coinbase’s third legal entanglement with the SEC. The crypto exchange <a href="https://blockworks.co/news/coinbase-appeals-sec-rulemaking-petition">sued</a> the securities regulator after the SEC denied Coinbase’s formal petition for rulemaking in 2022. That case is now in the US Court of Appeals for the Third Circuit.



The SEC sued Coinbase in June 2023 for alleged securities violations. Coinbase <a href="https://blockworks.co/news/judge-rules-against-coinbase-sec-dismissal">mostly lost</a> its petition to toss the lawsuit in March, and the case has proceeded to the discovery phase.



I think the true sign of a bull market is a trifecta of lawsuits. Coinbase’s legal bills must be through the roof. 



— Casey Wagner



<h2 class="wp-block-heading">Bulletin Board</h2>



<ul>
<li>State Street Global Advisors and Galaxy Digital said Wednesday they are linking up to launch “the next generation of digital asset-based strategies.” An initial <a href="https://www.sec.gov/Archives/edgar/data/1516212/000119312524169018/d849788d485apos.htm">proposed</a> Digital Asset Ecosystem ETF would invest in crypto equities and futures contracts, as well as in ETFs that hold spot crypto or futures.</li>



<li>The Supreme Court on Thursday <a href="https://www.supremecourt.gov/opinions/23pdf/22-859_1924.pdf">ruled</a> 6-3 to allow defendants sued by the SEC to have a jury trial in federal court, as opposed to in-house adjudication. It’s the latest decision from the conservative-majority court that challenges the powers of federal agencies. </li>



<li>More than $570 million was lost to hacks and fraud across the Web3 ecosystem during the second quarter of 2024, according to a new <a href="https://immunefi.com/research/">report</a> from security services platform Immunefi. The figure is a 112% increase from the second quarter of 2023, researchers said.</li>
</ul>



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On the Margin Newsletter: Where’s the economy headed? The housing market will tell you

The State Department announced on Wednesday that it was offering a $5 million reward for Ruja Ignatova, the so-called crypto queen who ran OneCoin once upon a time.&nbsp;



Ignatova is accused of defrauding investors by promoting OneCoin as an investment — which would outshine bitcoin — when it was nothing more than a scam. She, and others running OneCoin, allegedly stole over $4 billion from victims.&nbsp;



The “Crypto Queen” was indicted back in 2017, but became a fugitive shortly after. She’s reportedly been on the run ever since, though <a href="https://www.bbc.com/news/articles/c2llvlx2ez9o">reports</a> have emerged suggesting she may have been murdered.&nbsp;



“Ignatova was indicted in the US District Court for the Southern District of New York and charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering,” the State Department’s press release announcing the bounty said.


<div class="wp-block-image">
<figure class="alignright size-large is-resized"><img loading="lazy" decoding="async" width="2072" height="1381" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=1024&amp;h=1024" alt="" class="wp-image-88469" style="width:415px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=2072 2072w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/20568654991_5e809c0a26_o-1.jpg?w=80 80w" sizes="(max-width: 2072px) 100vw, 2072px" /><figcaption class="wp-element-caption">Source: <a href="https://www.flickr.com/photos/134729469@N04/20568654991">OneCoin Official/&#8221;Dr. Ruja Ignatova&#8221;</a> (<a href="https://creativecommons.org/licenses/by-sa/2.0/">CC license</a>)</figcaption></figure></div>


“Two weeks after the indictment Ignatova traveled from Sofia, Bulgaria, to Athens, Greece, to evade arrest and has been a fugitive since that time. In February 2018, a superseding indictment was issued charging Ignatova with the additional crimes of conspiracy to commit securities fraud and securities fraud,” it added.



The reward — which would be granted for information leading to either the arrest or conviction of Ignatova — is being offered under the Transnational Organized Crime Rewards Program.



Ignatova is on the FBI’s Most Wanted list after being added back in 2022.&nbsp;



Other conspirators in OneCoin, such as co-founder Karl Sebastien Greenwood and former legal chief Irina Dilkinska, have been sentenced by US courts and ordered to pay monetary penalties. 



Greenwood was <a href="https://blockworks.co/news/onecoin-cofounder-sentenced">sentenced to 20 years last year</a> and was ordered to pay a $300 million fine for his involvement. Dilkinska, according to a DOJ press release, was sentenced to four years and ordered to forfeit roughly $111 million.



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State Department announces $5M bounty for OneCoin ‘Crypto Queen’

Eli Zeger

If there’s one thing the crypto industry hates more than government oversight, it’s the prospect of a free and open internet.&nbsp;



This might sound contradictory to the entire ethos of the crypto space, but I believe that the most powerful players actually desire centralized authority, deregulation and boosting their portfolios at the expense of the collective wellbeing of online users.



In other words, they want to become the next Big Tech. It’s the complete opposite of what most people in this space believe in.



A bill highly lauded by the crypto industry, known as FIT21, recently <a href="https://blockworks.co/news/house-passes-act-fit21-with-bipartisan-support">won a bipartisan majority</a> in the House. While this bill has seized the discourse, it isn&#8217;t all that advocates think it is. Worrisome aspects of FIT21 have not gotten enough attention.



Should it reach Biden’s desk, the legislation would relax securities regulation so that cryptocurrencies have more leeway to be treated as commodities rather than investment contracts — despite the persistent market volatility of most currencies. To achieve this, the act would take away the authority of one government agency (the Securities and Exchange Commission) and give it to another (the Commodity Futures Trading Commission).



There’s a significant reason for what might appear to be a trivial bureaucratic maneuver. FIT21 is largely a retaliation against SEC Chair Gary Gensler, the government official responsible for determining whether individual cryptocurrencies count as securities or not.



Gensler has mostly remained steadfast in the affirmative. (Earlier this year, he did capitulate to the industry to avoid a drawn-out court case, making an exception for bitcoin by deeming it a <a href="https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023">“non-security commodity”</a>.) In response, crypto elites have thrown their hands in the air in feigned confusion: The government is persecuting them and won’t explain why! Bureaucrats like Gensler must hate innovation; worse yet, they want to <a href="https://fortune.com/crypto/2023/04/18/anti-crypto-regulators-are-blocking-the-pathway-to-a-digital-american-dream/">thwart the American Dream</a>.



Crypto whales have lobbied Congress to back the legislation because they want to continue to earn a profit on their investments tax free. But when you parse through it, the bill reveals something else. The whales don’t actually care about the most fundamental tenet of Web3: decentralization.



It is this particular detail, rather than the one about treating crypto as a commodity, that reveals the industry’s predilections toward replicating Big Tech.



<h2 class="wp-block-heading">Why not cooperate?</h2>



What’s boggling is that FIT21 is likely unnecessary. The crypto industry has a credible path to avoid securities regulation that it chooses not to pursue.



Last year, <a href="https://media.orrick.com/Media%20Library/public/files/insights/2023/cooperatives-path-to-compliance-for-web3.pdf">a group of legal experts</a> co-authored a white paper outlining how founders and investors could convert their enterprises into cooperatives. They state outright in the paper’s introduction that “the SEC has consistently declined to classify cooperative memberships as securities.” The HBAR Foundation, which stewards the Hedera network, <a href="https://x.com/HBAR_foundation/status/1618351674049048576">tweeted support</a> for the paper, while Variant Fund included it in <a href="https://variant.fund/articles/whole-crypto-catalog-progressive-decentralization/">a link dump</a>. However, it didn’t receive coverage in crypto-focused media.



So, why is crypto not taking the paper’s advice?



There are technical solutions to make one-person-one-vote — the typical approach to how members of cooperatives legislate decisions together — <a href="https://www.coindesk.com/learn/what-are-soulbound-tokens-the-non-transferrable-nft-explained/">possible in the blockchain space</a>. Token-weighted voting doesn’t need to be the only option for governance. But leveling the playing field would instantly kill the value of existing tokens, and protecting those prices matters far more than fighting for a decentralized net.



Instead, founders and investors have opted for theatrics over substance, insisting that Web3 is “sufficiently decentralized.” That’s a deliberate choice of phrase. In 2018, an SEC director <a href="https://www.sec.gov/news/speech/speech-hinman-061418">gave a speech</a> suggesting that so long as cryptocurrencies were distributed in a “sufficiently decentralized” manner, they could avoid the Howey test, the legal standard which the commission follows to determine investment contracts.



According to the Howey test, an individual invests in a product in part because they know that a person or a fixed group of people is behind it. As a workaround, dapps and other crypto enterprises sought to diffuse themselves, minting their own governance tokens and dispersing this equity through airdrops to early users so as to compensate freelancers and fund regular grants/bounties programs.



Because the SEC never elucidated the parameters of decentralization, the crypto industry opted to spin it <a href="https://news.bloomberglaw.com/securities-law/insight-crypto-the-pursuit-of-sufficient-decentralization">as a marketing strategy</a>. The carefree dispersal of tokenized equity manufactured the appearance of countless users inheriting governance power. Altogether, it was an attempt to sidestep Howey’s provision that an investor understands that a defined person or team of people oversees the product. And yet, users weren’t ultimately inheriting <a href="https://strangematters.coop/how-venture-capital-ruined-blockchain-socialism/">all that much power</a>.



The hope was that staging a spectacle of decentralization would satisfy the SEC, while at the same time entrance crypto enthusiasts and turn their collective gaze away from the growing presence of Silicon Valley firms investing millions in new projects.



<h2 class="wp-block-heading">The point of FIT21</h2>



These efforts have proved insufficient in the eyes of Gensler, which is why the crypto lobby has chosen to defy the SEC and render Howey irrelevant.



<a href="https://www.congress.gov/bill/118th-congress/house-bill/4763/text">FIT21</a> proposes that in order for a crypto enterprise to be decentralized, neither the founder nor any “affiliated person” can own more than 20% of the token supply. By this logic, four individuals can each hold 19%. And even if they are members or affiliates of the founding team, they wouldn’t need to worry about facing securities regulation because this legal definition of decentralization would help them get around Howey.



But the parameters might not even matter. It’s unclear how FIT21 accounts for users with multiple crypto wallet addresses who could anonymously commit backdoor centralization by dividing up their token holdings between wallets. The legislation gives enterprises the ability to self-certify their decentralization, but it <a href="https://www.sec.gov/news/statement/gensler-21st-century-act-05222024">doesn’t provide additional resources</a> to the SEC to keep pace with what would be an inevitable flood of certifications.



Read more from our opinion section: <a href="https://blockworks.co/news/crypto-regulators-us-global-legislation">Hey regulators, here’s how to get crypto right</a>



FIT21’s chances of getting a vote in the Senate are minuscule given the higher density of anti-crypto Dems than in the House. Its chances are even dimmer following Biden’s recent veto of <a href="https://www.axios.com/2024/06/01/biden-veto-crypto-bill-sec">a separate crypto bill</a>.



The crypto industry would rather celebrate a dead on arrival bill and continue to sink who knows how many thousands of dollars into SEC court battles, than consider the viability of funding democratic user ownership — which, unlike their previous ploys, would actually be faithful to the vision of Web3 — and thus appease Gensler on the grounds of securities law.



Behind the ridiculousness of it all, there is a long-term strategy. Silicon Valley players are making a bet that, should Big Tech start to crumble, Web3 could emerge in its wake, and they want to ensure that the laws regulating the technology are gamed in their favor. In the years to come, <a href="https://www.citationneeded.news/2024-cryptocurrency-election-spending/">the crypto lobby will continue</a> to push for legislation like FIT21 with its anti-user definition of decentralization.



The vision behind Web3 — a universally owned and governed internet powered by blockchains and cryptocurrencies that are financially rewarding and transparent to everyone — is admirable, and doesn’t get the credit it deserves in mainstream media.



Can you blame the haters, though?



FIT21 might seem like a populist achievement, but for those of us who care about the free and open web, let’s be honest with ourselves: Will this bill (and future bills like it) get us closer to an authentic Web3, or Big Tech 2.0?



Unfortunately, all signs point to the latter.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Eli Zeger writes about democracy and its relationship with technology. His work has been published in the Boston Review, Noema Magazine, Strange Matters, Zora Zine, among numerous other publications.</div>


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FIT21 isn’t the crypto win you think it is

Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) that once belonged to the Silk Road is on the move — about four months after the US Department of Justice (DOJ) sold millions of dollars worth of it on Coinbase.



A string of transactions involving Silk Road bitcoin was waiting to be confirmed Wednesday morning. Altogether, 9,825 BTC ($302.2 million) queued for sending by addresses tied to the DOJ.



The addresses are directing the bitcoin to unused addresses. The DOJ has shuffled its Silk Road stash before, so it’s too soon to say it intends to be sold immediately.&nbsp;



Still, authorities offloaded 9,800 BTC in March directly to US-based platform Coinbase for $21,800 per token, generating $215 million.



At the time, officials said they intended to sell an additional 41,500 BTC ($1.27 billion) <a href="https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34">seized</a> from Silk Road hacker James Zhong across four batches.



Bitcoin is today worth $31,600 after shedding a few hundred dollars after word of the transfers first broke.



Silk Road, one of the first marketplaces powered by bitcoin payments, went dark in October 2013 as US authorities arrested founder <a href="https://blockworks.co/news/imprisoned-silk-road-founder-sold-his-first-nft-to-a-dao-trying-to-free-him">Ross Ulbricht</a>. He was charged the following year and eventually sentenced to consecutive life sentences plus 40 years without parole.



The DOJ&#8217;s <a href="https://www.blockchain.com/explorer/transactions/btc/31f1ad8cec13978f1b93403641eb0c08144a450d7266eaf1fbaa4fd859b093d0">pending</a> Silk Road <a href="https://www.blockchain.com/explorer/transactions/btc/7dcbeff9e6da0f4ec5133d2f8b6fbe8bb73e05c5ddc8f5e410d408f8150e02ca">transactions</a> are currently facing a confirmation delay, potentially caused by inadequate transaction <a href="https://www.blockchain.com/explorer/transactions/btc/3c4e8e98890fa5c633d2a4f853751513e0a6558baa2318914eec73c727ef8316">fees</a>.&nbsp;(The transactions were later confirmed.)



One had been waiting 20 minutes at time of writing, another for more than 40 minutes, with <a href="https://www.blockchain.com/explorer/transactions/btc/7dcbeff9e6da0f4ec5133d2f8b6fbe8bb73e05c5ddc8f5e410d408f8150e02ca">both</a> blocks unconfirmed. The DOJ appears to have only allocated a meager sum, only $8 in fees, for these transactions. Bitcoin blocks are processed on average once every 10 minutes.



The last time the <a href="https://blockworks.co/news/us-government-dumps-bitcoin-silk-road">department sold coins</a> connected to the Silk Road, the US government paid more than $215,000 in transaction fees, officials said in court filings.



A <a href="https://jlopp.github.io/us-marshals-bitcoin-auctions/">portal</a> tracking bitcoin seized by the US government shows the Feds have missed out on $5.6 billion by selling BTC rather than holding it.



Updated Jul. 12, 2023 at 11:09 am ET: Two transactions were confirmed after around an hour. A third transaction is still pending after almost two hours. Code is law.



Updated Jul. 12, 2023 at 11:31 am ET: The third transaction was finalized after around two hours and five minutes.



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DOJ gets Silk Road coins worth $305M stuck in Bitcoin mempool

The Chamber of Digital Commerce has issued a Congressional call to action to prioritize moving a legal framework for crypto forward.&nbsp;



The advocacy group is requesting Congress to establish a “Digital Asset and Blockchain Technology Solarium Commission” to create a comprehensive policy package. The Commission proposal draws on President Dwight D. Eisenhower-era policy when “Project Solarium” was launched to address national security concerns during the Cold War.&nbsp;



More recently, Congress mandated the bipartisan “Cyberspace Solarium Commission” in 2019 to improve cyber defense strategies.&nbsp;



“Our allies&#8217; and adversaries&#8217; advances in blockchain and digital assets threaten U.S. leadership and dominance across next-generation finance, trade, business, and other verticals while the U.S. sits idle&#8211;effectively pushing the industry overseas,” the Chamber wrote in a statement Thursday.&nbsp;&nbsp;



A consensus among a number of bipartisan lawmakers has emerged: crypto-oriented businesses are leaving the US, but <a href="https://blockworks.co/news/anti-crypto-memo-democrats" target="_blank" rel="noreferrer noopener">political parties have different thoughts as to why</a>.&nbsp;



Rep. Stephen Lynch, D-Mass., said crypto companies, <a href="https://blockworks.co/news/waters-floats-stablecoin-bill" target="_blank" rel="noreferrer noopener">particularly stablecoin issuers</a>, are trying to go to the area of least regulation.&nbsp;



“A race to the bottom is the custom of this industry,” Lynch said Thursday morning during the House Financial Service Committee Digital Asset Subcommittee on Digital Asset stablecoin <a href="https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408790">hearing</a>.&nbsp;



Their goal is to “escape regulation,” he said.&nbsp;



Other lawmakers, namely Warren Davidson, R-Ohio, <a href="https://blockworks.co/news/crypto-industry-takes-stock" target="_blank" rel="noreferrer noopener">have countered, challenging that crypto companies are really going offshore</a> in the pursuit of more regulatory clarity, lacking precision in terms of US industry oversight.&nbsp;



In its call to action, the Chamber of Digital Commerce highlighted work other countries are doing to advance crypto policy. South Korea has invested close to $45 billion to advance its “Digital New Deal” while Japan is miles ahead of the US on stablecoin legislation, the Chamber said.&nbsp;



“A Commission will render collaboration and leadership from government, industry, and academia for the future of the industry&#8217;s development,” the Chamber added. “We believe an effort of this magnitude is imperative in today&#8217;s divided Congress and we call all members of the 118th Congress to support it.”



The Chamber of Digital Commerce has already drafted legislation, to be released soon, and has sponsors “lined up,” Cody Carbone, vice president of policy at the Chamber, told Blockworks.&nbsp;



The Commission is &#8220;a unique approach to counter the stalled/political efforts we see right now,” Carbone added.&nbsp;



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Blockchain Advocacy Group Calls on Congress to Get it Together 

Sebastian Sinclair

<div id="highlights-block_634fa8b0f6de7" class="highlights">
 <ul>
 <li>The concept will include the digitization of a series of government debt to be issued to select participants</li>
 <li>The private permissioned blockchain is compatible with the Ethereum virtual machine</li>
 </ul>
 
</div>



The Israeli government is planning to test blockchain-based digital bonds as it seeks to modernize financial market processes and reduce associated costs.



In a joint effort, the Office of the Accountant General in the Ministry of Finance and the Tel Aviv Stock Exchange (TASE) — the country’s only public equities bourse — will issue bonds via a permissioned private distributed ledger technology platform being readied for live testing.



The proof-of-concept will include the digitalization of a “new series” of government debt to be issued to select local and foreign primary dealers, marking the first time Israel has embarked on such a venture.



Digital assets infrastructure and custody solutions provider Fireblocks and US-based cloud computing tech firm VMWare will assist in the technical execution of the platform, while TASE has been tasked with leading the project.



Tokenized bonds will be sent to participants&#8217; digital wallets while the issuance consideration, in digital currency, will be transferred from the participants to the state of Israel’s own wallet, according to a statement.



The pilot project will begin within the next few days and is expected to be completed by the end of the first quarter of 2023.



“Israel is almost the only market in the world where government bonds are traded on the main exchange, so it’s an opportunity to generate a pilot, with the involvement of the State of Israel and leading international banks,” TASE’s head of clearing Orly Grinfeld told Blockworks in an email.



Unlike some experiments to tokenized bonds, such as <a href="https://cms.blockworks.co/major-french-bank-wants-to-back-the-dai-stablecoin-with-40m-in-bonds/" target="_blank" rel="noreferrer noopener">Société Générale’s partnership with MakerDAO</a> in October 2021, which used the Ethereum public blockchain, this one will remain entirely centralized for now. However, a Fireblocks spokesperson told Blockworks that the permissioned blockchain is compatible with the Ethereum virtual machine (EVM), and therefore, “if the Ministry of Finance wanted to issue digital assets on a public chain in the future, there would be little difference.”



The platform, which will also be based on smart contracts and tokenization, will be designed for the clearing and trading of non-crypto digital assets, TASE said.



<h3 class="wp-block-heading">Blockchain bond issuance</h3>



Typically, government debt raising through the issuance of bonds often requires large-scale coordination between various systems. Blockchain tech is often praised for its ability to expedite financial transactions while cutting out intermediaries.&nbsp;



In this instance, TASE is hoping its test will demonstrate the tech’s use in reducing bond issuance costs, speeding up settlement times, improving transparency and streamlining processes.



Following the first <a href="https://www.icmagroup.org/market-practice-and-regulatory-policy/fintech-and-market-electronification/distributed-ledger-technology-dlt/frequently-asked-questions-on-dlt-and-blockchain-in-bond-markets/5-what-are-dlt-bonds/" target="_blank" rel="noreferrer noopener">DLT bond</a> issued in 2018 by the <a href="https://www.worldbank.org/en/news/press-release/2018/08/23/world-bank-prices-first-global-blockchain-bond-raising-a110-million" target="_blank" rel="noreferrer noopener">World Bank</a>, TASE and the ministry said they had been following developments in the financial markets, including tokenizing various assets. 



Both said they were eyeing central bank digital currency test runs of financial institutions, which have begun to pick up in speed.



Several countries have begun leveraging DLT-based bonds to raise money for infrastructure from the debt instrument, including the Philippines, which earlier this year raised 11 billion Philippine pesos ($186 million) after investors rallied behind its debut.



TASE and the government also said they could read the writing on the wall when it came to a shift in the digitization of financial instruments.



“The financial markets are undergoing drastic transformations in recent years,” TASE CEO Ittai Ben-Zeev said in the statement. “We hope to see Israel spearhead financial technology while being the first to implement cutting-edge technologies and upgrade the capital market.”



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Israel To Test Blockchain-based Bonds

Jacquelyn Melinek

<div id="highlights-block_6202a9e31b921" class="highlights">
 <ul>
 <li>Both crimes carry a total maximum sentence of 25 years in prison</li>
 <li>It’s the department’s largest financial seizure ever, Deputy Attorney General Lisa Monaco said in a statement</li>
 </ul>
 
</div>



The US government has recovered the majority of the cryptocurrency stolen during the 2016 Bitfinex hack and arrested a married couple allegedly linked to it.



In 2016, hackers stole 119,755 bitcoin, worth approximately $5.3 billion at the current price, from the cryptocurrency exchange. The <a href="https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency" target="_blank" rel="noreferrer noopener">Department of Justice said</a> Tuesday that law enforcement had recouped more than $3.6 billion so far. 



This is the department’s largest financial seizure ever, Deputy Attorney General Lisa Monaco said in a statement. “[Today’s arrests] show that cryptocurrency is not a safe haven for criminals,” Monaco said.



New York residents Ilya Lichtenstein, 34, and Heather Morgan, 31, were arrested for conspiracy to launder cryptocurrency and money that was stolen during the hack six years ago. They were also charged with conspiracy to defraud the US.



Both crimes can carry a total maximum sentence of 25 years in prison. They are scheduled to make their first appearances in a Manhattan federal court Tuesday afternoon.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions,” Monaco said. “Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.”</blockquote>



Lichtenstein and Morgan allegedly conspired to launder 119,754 bitcoins that were stolen from the platform after a hacker breached the systems and made over 2,000 unauthorized transactions.&nbsp;



“Those unauthorized transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control,” according to court documents. “Over the last five years, approximately 25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan.”



The remainder of the stolen funds, about 94,000 bitcoins, remain in the wallet used in the hack.



At the time of the theft, bitcoin was trading at $612, valuing the heist at $73.39 million — less than one 70th of its current worth.



Bitfinex <a href="http://12:37https://support.bitfinex.com/hc/en-us/articles/4417401349657-2016-Security-Breach-Bitcoin-Recovery-Frequently-Asked-Questions-FAQ-" target="_blank" rel="noreferrer noopener">said</a> it hoped to work with the U.S. Department of Justice to retrieve the stolen bitcoin. &#8220;We will provide further updates on our efforts to obtain a return of the stolen bitcoin as and when those updates are available,&#8221; the company said.



Prior to this, global law enforcement and other private sectors helped Bitfinex recover about 27.66 and 6.5 bitcoin in February 2019 and December 2021, respectively.



The complaint alleges the couple used a handful of laundering techniques, including using fictitious identities to set up online accounts and utilizing computer programs to automate transactions.



“Financial crime strikes at the core of our national and economic security,” Acting Executive Associate Director Steve Francis of Homeland Security Investigations said in a statement. “With a hack of this magnitude, public and private sector collaboration is crucial to ensure continued consumer confidence in our financial system.”



Crypto platforms in general have been struck by a number of exploits, including several that took place this year.&nbsp;



Earlier this month, hackers stole <a href="https://cms.blockworks.co/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether/" target="_blank" rel="noreferrer noopener">120 ether, or $320 million</a>, from the Wormhole protocol in the <a href="https://defiyield.app/rekt-database" target="_blank" rel="noreferrer noopener">second-largest</a> DeFi hack to date.&nbsp;



At the end of January, DeFi (decentralized finance) protocol Qubit Finance lost millions of dollars to a hack after 206,809 Binance Coin, roughly <a href="https://cms.blockworks.co/defi-protocol-qubit-finance-loses-80m-in-hack/" target="_blank" rel="noreferrer noopener">$80 million</a>, were stolen.



The DOJ was not available for comment on Tuesday.



This story was updated on Feb. 9, 2022, at 12:50pm ET, with additional details on the stolen funds and Bitfinex&#8217;s efforts to recover them.



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