Weekly Roundup

Retail Investor Participation:  It was estimated that individual investors contributed roughly a fifth of US stock-trading volume, despite recent volatility over the past year.   Blackrock published an open letter to investorsregarding investing in an era of climbing interest rates and higher inflation figures.

Private Fund Regulation: The SEC announced updated regulations targeting  transparency practices within the private fund industry. Originally proposed in February 2022, the changes will require hedge funds and private equity firms to disclose all fees and expenses on a quarterly basis, prohibit firms from charging for unperformed services or advisor examinations, and make it easier for investors to sue fund managers.

Tornado Cash Sanctions: A federal judge ruled that the U.S. Treasury Department’s sanctions against the Russian decentralized cryptocurrency platform Tornado Cash will remain in place. Specifically, the judge dismissed a civil lawsuit filed by six individuals associated with the digital currency mixer against Treasury Department leadership in which they asserted that the sanctions exceeded the department’s authority and violated their First Amendment rights. Tornado Cash, which is primarily known for enabling anonymous cryptocurrency exchanges, was initially sanctioned by the agency for alleged money laundering activities, including potential involvement in a North Korean-led hacking scheme.

Atomic Wallet Lawsuit: This week, cryptocurrency investors who claim that Atomic Wallet failed to share information regarding a major cybersecurity breach that resulted in over $100 million in losses this past June filed a class-action lawsuit against the company. The suit was launched by 50 clients who collectively lost $12 million due to the breach suffered by the noncustodial digital currency platform. Atomic Wallet has estimated that the hacking campaign affected approximately 5,500 accounts.

Coinbase Futures: Coinbase Global has become the first digital currency-focused firm to gain approval for offering crypto futures to U.S. retail customers. This move has caught the attention of sector observers due to its potential to reinvigorate the currently shrinking $2 trillion cryptocurrency derivatives market that is currently confronting economic uncertainty, regulatory challenges, and low volatility.

Gemini vs. SEC: Gemini, a cryptocurrency exchange, is seeking dismissal of a lawsuit brought by the SECaccusing its service, Gemini Earn, of violating securities regulations by offering unregistered securities. In its latest court filing, Gemini argues that the SEC’s claims have not clearly defined the alleged security in question and have shifted over time, causing confusion amongst Gemini investors and a lack of coherence in the agency’s position.

In the Mix: This Week’s Top FinTech Thought Leader

  • Gary Gensler, Chair of the SEC, released a statement this week after the agency approved new regulations that will limit the exemptions American broker-dealer firms have to confront before registering with a national securities association. Gensler said that these rules, which have not been updated since before the “cell phone era,” will reverse the trend of brokers being unregistered, therefore providing greater transparency for consumers. “National securities association membership will help enhance robust and consistent oversight, particularly with regard to cross-market and off-exchange oversight,” Gensler said.

  • Dan Morehead, Founder of Pantera Capital, told attendees of a Bloomberg Invest panel this week that Ripple’s legal victory over the SEC in federal court could be a positive “black swan” event that drives various digital currency prices higher during the next fiscal quarter. Morehead believes that the decision, despite increasing regulatory uncertainty, and a reduction in crypto mining could be the main factors driving growth in the sector over the next 12 months. “Everybody ignores black swans until one happens. Then all everybody wants to talk about is ‘the next shoe to drop’. I would say the biggest surprise is that we already had all these massive shoes drop last year—and it’ll be nothing crazy happening,” Morehead said.