Author: Michelle Lazo

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Robinhood Markets Inc. (NASDAQ:HOOD) disclosed in a regulatory filing on Monday that it has received a formal warning from regulators regarding potential enforcement action related to its cryptocurrency operations.

The warning, known as a Wells notice from the US Securities and Exchange Commission, specifically pertains to Robinhood Crypto and various aspects of its cryptocurrency business, including listings, custody procedures, and platform operations.

According to the filing, the SEC’s staff informed Robinhood that they have made a “preliminary determination” to recommend that the SEC pursue enforcement action against the company.

Potential outcomes of this action could include an injunction, a cease-and-desist order, disgorgement of profits, and other penalties or restrictions on business activities.

Robinhood stated that it had previously received a subpoena related to the investigation and has cooperated with the SEC throughout the process.

It’s important to note that a Wells Notice provides the company with an opportunity to respond to the SEC’s allegations, and the issuance of such a notice does not necessarily guarantee that enforcement action will ultimately be taken.

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Cryptocurrency exchange Coinbase (NASDAQ:COIN) exceeded expectations in its first-quarter earnings report, outperforming both revenue and earnings projections. The company reported revenue of $1.64 billion, surpassing estimates of $1.32 billion, with adjusted earnings per share (EPS) reaching $4.40, exceeding the projected $1.07.

To analyze Coinbase’s performance, Steve Jang, Founder and Managing Partner of Kindred Ventures, joins Market Domination Overtime. Jang highlights the approval of bitcoin ETFs as a positive factor for Coinbase, particularly benefiting its consumer trading segment. He emphasizes Coinbase’s transition into its “second chapter” post-IPO, positioning itself as a key service provider for major financial institutions globally.

Drawing parallels to tech giants like Facebook (NASDAQ:FB) and Amazon Web Services (NASDAQ:AMZN) in their early stages, Jang commends Coinbase’s forward-looking strategy, particularly in creating a platform for developers. He predicts that this approach will drive Coinbase’s long-term growth, stating, “Coinbase is, was, and continues to be the best company to build the pillars that create the gateway for crypto and traditional finance.”

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Led by CEO Jack Dorsey, payments firm Block (NYSE:SQ) has commenced a dollar cost averaging initiative to expand its substantial bitcoin reserves. Starting in April, the company allocated 10% of its monthly bitcoin-related gross profit to purchase additional bitcoin, intending to continue this practice throughout 2024.

During the first quarter, Block reported $80 million in bitcoin gross profit. If this level persists for the remainder of the year, the company will accumulate approximately $24 million worth of bitcoin under this program, further bolstering its balance sheet.

Block already holds a significant amount of bitcoin, having acquired 4,709 bitcoins in October 2020 and an additional 3,318 tokens in early 2021. With bitcoin’s current price hovering around $59,000, these holdings are valued at approximately $4.7 billion.

In addition to this initiative, Block has released its Bitcoin Blueprint For Corporate Balance Sheets. This blueprint outlines the methodology behind its large-scale crypto acquisitions, detailing how the company acquires significant amounts of cryptocurrency without causing significant market fluctuations. It also elucidates Block’s processes for custody, insurance, and accounting of these holdings.

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Vodafone (NASDAQ:VOD)is gearing up to address the anticipated surge in cryptocurrency demand on mobile phones by leveraging SIM card technology. David Palmer, the telecom giant’s blockchain lead, discussed with Yahoo Finance Future Focus how Vodafone is spearheading blockchain utilization on mobile devices to streamline crypto transactions.

Palmer emphasized the integration of mobile phone SIM cards with digital wallets, identity management, and blockchains, utilizing the cryptography embedded in SIM cards for seamless blockchain integration.

Anticipating a significant increase in blockchain-based digital wallets, Palmer projected that by 2030, there could be as many as 5.6 billion such wallets worldwide. He underscored their pivotal role as gateways to financial services.

Palmer highlighted the adoption of public blockchains like ethereum, noting their enhanced speed and security. However, he acknowledged regulatory challenges, particularly in mainstream financial services due to sanctions.

Vodafone’s innovation in this realm includes the PairPoint Digital Asset Broker platform. This platform facilitates transactions between public and private blockchains, enabling seamless integration through smart contracts.

The PairPoint platform builds on Vodafone’s earlier experiments with peer-to-peer micro-payment transactions and the integration of SIM card technology with blockchain, introducing interoperable ‘digital identity passports’. These passports, anchored on the blockchain, securely store private keys to digital wallets within the SIM card’s hardware module.

This evolution led to the development of Vodafone’s Pairpoint platform, empowering internet of things devices with decentralized digital identities, enabling them to transcend organizational and system boundaries.

Palmer illustrated potential scenarios where devices equipped with hardware wallets could autonomously authenticate and execute transactions, such as electric autonomous vehicles paying for charging at a station.

Despite the promise of these advancements, Palmer cautioned about the imperative of securing these wallets against cyber threats, recognizing them as prime targets for hackers.

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LayerZero has taken a snapshot as it gears up for its anticipated airdrop, scheduled for the first half of 2024. A snapshot typically precedes outflows as investors participating in airdrops often redistribute liquidity to other projects.

Developers of the cross-chain interoperability protocol hinted at additional airdrops in the pipeline, signaling ongoing developments within the ecosystem. The recent snapshot, labeled as “snapshot #1,” marks the first step in a series of planned airdrops.

LayerZero stands out as a protocol facilitating blockchain connectivity without relying on intermediaries. Currently utilized by platforms like Stargate and Radiant Capital, both experienced modest token gains following the confirmation of the snapshot.

In April, LayerZero secured $120 million in a Series B funding round, valuing the company at $3 billion. Notable investors in the round included Andreessen Horowitz and Sequoia Capital, indicating strong support for LayerZero’s vision.

As snapshots pave the way for potential outflows, investors utilizing protocols for airdrop allocations can strategically allocate liquidity to maximize their participation in various projects. Recent data from DefiLlama indicates a net outflow of $5 million from the Stargate bridge in the last 24 hours, with $43 million deposited and $48 million withdrawn.

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Robert Mitchnick, BlackRock’s(NYSE:BLK) head of digital assets, revealed that financial institutions are engaging in diligence and research discussions, with BlackRock providing educational support. BlackRock has been actively discussing bitcoin with these institutions for several years.

Despite the recent break in inflows into spot bitcoin exchange-traded funds, BlackRock anticipates a resurgence driven by a new wave of investors, including sovereign wealth funds, pension funds, and endowments. Mitchnick highlighted the renewed interest in bitcoin and the ongoing discussions surrounding portfolio allocation strategies.

Mitchnick emphasized that various institutions, including pensions, endowments, sovereign wealth funds, insurers, asset managers, and family offices, are conducting continuous due diligence and research. BlackRock’s role is to facilitate education in navigating the complexities of bitcoin investment.

While attention has been drawn to the assets under management  race between BlackRock’s IBIT ETF and Grayscale’s GBTC, Mitchnick stressed that BlackRock’s focus lies on client education rather than size competition. Despite IBIT’s impressive AUM of $17.2 billion compared to GBTC’s $24.3 billion, BlackRock prioritizes client understanding and adoption.

BlackRock’s interest extends beyond bitcoin, as evidenced by its filing for an ether ETF. Mitchnick highlighted the potential benefits of digital assets across cryptoassets, stablecoins, and tokenization. While acknowledging the complexity of the Ethereum blockchain ecosystem, BlackRock remains committed to educating clients on the broader implications and opportunities within the digital asset space.

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Switzerland-based Backed has successfully closed a $9.5 million fundraising round, with Gnosis leading the investment charge.

According to one asset management company’s forecast, the tokenized real-world asset market could reach a staggering $10 trillion by the decade’s end.

Backed, a tokenized asset issuer, announced on Tuesday that it secured $9.5 million in funding, with Gnosis at the helm of the investment. Other participants in the fundraising round included Exor Seeds, Cyber Fund, Mindset Ventures, Stake Capital Ventures, Blockchain Founders Fund, Blue Bay Capital, and Nonce Classic.

The company plans to utilize the investment to accelerate its private tokenization offering and onboard asset managers onto blockchain platforms, as stated in the press release.

The fundraising round comes at a time when the tokenization of real-world assets  is emerging as a prominent trend in the digital asset industry. Crypto firms and global banking and asset management giants are actively vying to tokenize traditional financial instruments like bonds, funds, or credit on blockchains.

Tokenization offers several advantages over traditional financial systems, including enhanced trade settlement efficiency, broader investor access, and reduced administrative burdens. According to a report by asset manager 21.co, the market for RWAs could potentially reach $10 trillion by the end of the decade.

Backed, headquartered and regulated in Switzerland, specializes in tokenization services and has already issued over $50 million worth of tokenized RWAs. These include ERC-20 compatible token versions of exchange-traded funds and individual stocks such as Coinbase (NASDAQ:COIN) and Tesla (NASDAQ:TSLA), as listed on its website.

“Youbin Kang, CEO of Nonce Classic, one of the investors in the round, commented, “Global financial markets are fragmented, hindering accessibility and efficiency. Backed aims to solve these issues by bringing RWAs on-chain.”

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In response to mounting regulatory pressure, Wasabi Wallet and Phoenix have ceased operations for customers in the United States. The companies behind these wallets, zkSNACKs and ACINQ respectively, announced the suspensions following recent actions taken by U.S. authorities against similar cryptocurrency services.

zkSNACKs has taken proactive measures to block access to its services from U.S. IP addresses, including Wasabi Wallet. Meanwhile, ACINQ intends to remove Phoenix Wallet from U.S. application stores by May 3.

These decisions underscore the companies’ efforts to comply with potential regulations that could classify self-custody wallets as money services businesses, subjecting them to stringent regulatory oversight.

The regulatory crackdown on cryptocurrency services intensified following the arrest of two individuals associated with Samourai Wallet on charges of money laundering, including funds derived from illicit sources such as the Silk Road marketplace.

The U.S. government’s enforcement actions against Samourai Wallet led to the seizure of its web servers and domain, along with the removal of its app from the Google Play Store in the U.S.

Keonne Rodriguez, co-founder of Samourai Wallet, was granted release on a US$1 million bond after pleading not guilty to charges of money laundering and operating an unlicensed money-transmitting business at the U.S. District Court for the Southern District of New York.

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Michael Saylor’s bold move to embrace Bitcoin in 2020 has yielded substantial gains for the co-founder and executive chairman of MicroStrategy Inc (NASDAQ:MSTR). Saylor has reportedly earned around $400 million from pre-planned daily sales of approximately 5,000 shares of MicroStrategy since January, fueled by the stock’s remarkable surge.

The stock, which has doubled this year to approximately $1,280, has outpaced the gains of Bitcoin, the cryptocurrency Saylor embraced. MicroStrategy’s stock performance appears to allay investor concerns regarding Saylor’s selling activity, given his controlling stake in the company.

Despite questions about MicroStrategy’s premium over Bitcoin, particularly after the introduction of US exchange-traded funds for the cryptocurrency, investor sentiment remains positive. However, some skeptics, like Kerrisdale Capital Management LLC, have taken short positions, citing the stock’s outpacing of Bitcoin’s price surge.

The anticipation now shifts to MicroStrategy’s first-quarter results, expected after regular trading hours on Monday. Analysts project flat revenue of around $122 million, with a forecasted net loss of 61 cents per share. MicroStrategy’s Bitcoin holdings, currently valued at approximately $14 billion, have been a key factor driving its investment strategy.

Investor focus also centers on MicroStrategy’s adoption of an accounting rule to value Bitcoin at market prices, with a deadline set for 2025. Despite past impairment charges, MicroStrategy continues to expand its Bitcoin holdings, having already spent over $1 billion on the cryptocurrency in the first quarter of 2024.

“Saylor has a simple strategy for MSTR: sell equity/debt and buy BTC with proceeds,” noted Jeff Dorman, chief investment officer at Arca, highlighting MicroStrategy’s ongoing commitment to its Bitcoin-centric investment approach.

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This week witnessed a notable shift in the momentum of two of the most successful exchange-traded fund launches in history. BlackRock’s (NYSE:BLK)spot Bitcoin ETF, IBIT, renowned for its remarkable performance, experienced zero inflows on Wednesday and Thursday, marking the end of its 71-day streak of fresh investments totaling approximately $17.24 billion in assets under management since its trading approval on January 11. Additionally, Fidelity’s FBTC, the current runner-up in the ETF race, reported losses of $22.6 million on Thursday, marking its first reported outflow and reducing its assets under management to around $9.9 billion, according to CoinGlass data.

The waning interest in the leading Bitcoin ETFs, excluding Grayscale’s GBTC, serves as a significant indicator of the cryptocurrency market’s recent cooling and suggests that the initial ETF frenzy, which propelled Bitcoin to new heights, has subsided. With Bitcoin currently trading around $63,500, down approximately 12% from its all-time high of $73,000 in March, only one of the 10 trading spot Bitcoin ETFs, Franklin Templeton’s EZBC, reported inflows on Thursday.

Disappointing inflation data has tempered hopes for Federal Reserve interest rate cuts, and the prospect of higher borrowing costs typically diminishes the market’s appetite for riskier, more volatile investments like crypto. Meanwhile, Bitcoin has remained relatively stagnant since early March, partly reflecting ETF stagnation and the anticipation surrounding the network’s recent “halving” event on April 19, as investors adhered to the “buy the rumor, sell the news” strategy, liquidating their holdings.

Nate Geraci, president of the ETF Store, noted that ETF flows often mirror the performance of the underlying asset, suggesting that a pause in Bitcoin’s price may lead to a temporary hiatus in inflows. However, Geraci emphasized that these products are still in the early stages of adoption, with many large institutions yet to permit their brokers to solicit purchases of spot Bitcoin ETFs, and registered investment advisors cautiously entering the category.

Despite the recent slowdown, these funds are widely regarded as a resounding success, accumulating over $54 billion in assets in just over three months of trading, thereby integrating Bitcoin-tracked assets into the portfolios of millions of mainstream investors.

Highlighting their success, Hong Kong’s Securities and Futures Commission recently granted approvals for three spot Bitcoin and Ether ETFs, set to commence trading on Tuesday, with additional countries expected to follow suit. Issuer Harvest is waiving a management fee for its funds, sparking expectations of a fee war akin to the heated competition in the U.S., where Grayscale introduced a Bitcoin Mini Trust with ultra-low fees of 0.15% in an effort to capture some of the outflows from GBTC, which charges 1.5%.

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