An explosive week (already)

Binance bombshell and Gucci teasers

April 04, 2023

Welcome back. The next time you need to defend NFTs at a family reunion, just drop this example of an IRL use case: Ticketmaster debuted NFT-gated ticket sales with popular metal band Avenged Sevenfold. But if mosh pits aren’t your thing, don’t worry—token-gating is bound to redefine the live music industry one way or another.

Today: Binance drama, the two sides of web3 investing, and good news for BTC miners. Let’s go.

—Angelina

Big Binance Mess

The SEC must be grateful for the break. Last week, the U.S. Commodity Futures Trading Commission (CFTC) filed a bombshell lawsuit against Binance—and it hit hard.

In a nutshell: The CFTC’s allegations against Binance and its CEO Changpeng Zhao (CZ) are hefty. The Commission claims that Binance illegally sold crypto derivatives to U.S. customers, actively avoided regulation, and facilitated terrorist financing. It also alleges that Binance “instructed its employees and customers to circumvent compliance controls in order to maximize corporate profits” by using VPNs.

Coverage of the Binance lawsuit was widespread…but three interesting points you might have missed:

  1. The suit refers to ETH as a commodity, which is a significant move. Whether certain tokens are classified as commodities or securities has long been a point of contention between the CFTC and the SEC—that classification determines which regulator oversees crypto assets.

  2. The CFTC accessed CZ’s phone (or so it seems). The allegations draw upon damning internal texts, group chats, and emails that only CZ could have had access to.

  3. The suit alleges that VIP Binance customers were given special perks, including “prompt notification of any law enforcement inquiry concerning their account.”

Binance’s response? CZ dismissed the suit as an “incomplete recitation of facts,” defaulting to his usual strategy of deferring rather than rebutting allegations against him and his exchange.

Looking ahead: Unlike the SEC’s recent threats against Coinbase, the CFTC’s suit makes a pretty strong case that Binance really did skirt U.S. law. So what’s next? Binance could end up paying a hefty fine and might be prevented from serving any U.S. customers—which would be a significant hit to the exchange’s derivatives product business, to which U.S. customers contribute 16% of revenue.

Gucci Bling, Disney Fling

This week has shown us that there are two sides to the “corporate web3 project” and the perceived success (or failure) of the countless companies trying to plant their metaverse flags in the ground.

Disney is sunsetting its metaverse endeavors in an effort to “streamline” its business. The company announced a big round of layoffs last week, slashing its entire metaverse division. Disney first shared its metaverse strategy in mid-2022 and appeared to be ramping up its web3 ambitions in September with DeFi- and NFT-focused job listings.

Meanwhile, Gucci is diving deeper into web3. The luxury brand revealed a partnership with Yuga Labs last Monday, teasing at a feature in Yuga’s Bored Ape-themed metaverse game “Otherside.” Gucci has dabbled with metaverse ventures before, such as buying virtual land plots in early 2022.

Zoom out: Web3 is still young, which means brands are just starting to figure out how to harness this emerging tech (and whether they should in the first place). As the economy slows down, we’ll get more insights into which brands FOMO'd into the metaverse hype and which ones are here for the long haul.

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Miners Make a Comeback

The Bitcoin network’s hashrate (which measures the computing power used to mine new blocks on the blockchain) spiked to an all-time high of 414 exahashes per second (EH/s) last week, up from just 120 EH/s six months ago.

Some context: Miners went through a bit of a rough patch in 2022—many were forced to shut down their rigs entirely due to Bitcoin’s low price and exorbitant energy bills. But BTC’s recent price surge, paired with an increasing availability of cheap renewable energy, makes mining profitable again.

Why is this good news? A higher hashrate increases Bitcoin’s security and suggests that miners are again growing bullish on BTC in the long run.

In other news:

  • USDT reached its highest market share since 2021 as investors flee from stablecoin competitor USDC.

  • BRICS countries—Brazil, Russia, India, China, and South Africa—are reportedly developing their own (digital) currency to break free from the U.S. dollar.

  • The IRS proposed new tax guidelines for NFTs.

  • The U.S. government has good chances at quashing the $1 billion Voyager-Biannce deal.

  • Here’s what AI thinks Satoshi Nakamoto looks like.

Crypto Job Board

And that's what you need on your radar today in crypto. Any other metalheads out there delighted to see Avenged Sevenfold’s embrace of NFTs? If that’s you, shoot me a reply. If not, catch you back here next Tuesday for a metal-free newsletter (I promise).