Crypto News Highlights (12th February to 16th February 2024)

• Gensler Holds Back on Ethereum ETFs Due to Bitcoin ETF Approval Rationale from Court Loss
• Assets of 3AC Founders Worth Over $1 Billion Frozen by Court Order
• Justin Sun of Tron Unveils Strategy for Bitcoin Layer 2 Solution
• Genesis Granted Permission by Court to Distribute $1.3 Billion in GBTC Shares to Reimburse Clients
• Sam Altman Affirms Dedication to Worldcoin Initiative

Gensler Holds Back on Ethereum ETFs Due to Bitcoin ETF Approval Rationale from Court Loss

Gensler remains cautious on the prospect of Ethereum exchange-traded funds (ETFs), citing recent court decisions and Bitcoin ETF approvals as influential factors.

SEC Chair Gary Gensler refrained from divulging specific details or a potential timeline when pressed about the possibility of approving Ethereum ETFs, emphasizing that the process mirrors that of Bitcoin ETFs.

The SEC's recent postponement of a decision on the Invesco Galaxy Ethereum ETF, along with delays in December, underscores the agency's deliberative approach. Applications from industry heavyweights like Grayscale, Fidelity, and BlackRock also face deferment.

Noteworthy contenders such as VanEck and Hashdex are vying for Ethereum ETF approval, with Franklin Templeton joining the fray as the latest asset manager to file.

In discussing Bitcoin ETF approvals, Gensler reiterated that the SEC's decision doesn't signify a shift in its risk assessment but rather a response to a court ruling in the Grayscale v. SEC case. The court's critique of the SEC's rationale for approving Bitcoin futures over spot ETFs prompted a reconsideration.

Gensler highlighted concerns about Bitcoin's association with illicit activities and the oversight challenges posed by many crypto exchanges. He underscored the prevalence of fraud and manipulation in the crypto industry, juxtaposing it with government-issued currencies' role in supporting established economies.

Despite these concerns, Gensler stressed the SEC's commitment to impartiality and adherence to legal compliance, affirming that the agency remains "merit neutral" in its evaluations.

Assets of 3AC Founders Worth Over $1 Billion Frozen by Court Order

A court in the British Virgin Islands has ordered the freezing of assets exceeding $1 billion belonging to 3AC co-founders Su Zhu and Kyle Davies, as well as Davies’ wife, Kelly Chen. This judicial action follows the fund's collapse in 2022 amid a broader downturn in the crypto market, resulting in considerable losses for creditors.

The court's ruling aligns with the concerns voiced by Teneo, the liquidator overseeing the 3AC case, which estimates creditors are owed a staggering sum of approximately $3.3 billion.

The asset freeze by the British Virgin Islands court is emblematic of 3AC's unraveling amidst financial strain. According to the liquidator's report, the company's assets, valued at around $1.16 billion, primarily consist of illiquid tokens, exacerbating the challenge of recovery for creditors.

This development follows Zhu's arrest in Singapore after attempting to leave the country, resulting in authorities in Singapore banning Zhu and Davies from engaging in regulated activities within its jurisdiction.

Despite the tumultuous situation, the liquidators offer a glimmer of hope for creditors, with an estimated recovery rate of 45.74% of their claims and initial distributions slated for the upcoming year. H

However, the bulk of 3AC's assets are tied up in illiquid tokens, subject to vesting periods extending until the end of 2026, emphasizing the challenges in unwinding positions of a once-prominent crypto hedge fund.

Efforts by liquidators to convert liquid tokens and NFTs into fiat currency have yielded approximately $66 million thus far.

Nevertheless, the substantial claims totaling $3.4 billion paint a somber picture of the fund's financial standing. Ongoing legal proceedings, including litigation with DeFiance Capital and investigations into 3AC's associations with entities like Tai Ping Shan, further compound the uncertainty surrounding the fund's future.

Justin Sun of Tron Unveils Strategy for Bitcoin Layer 2 Solution

Tron Founder Justin Sun has unveiled an ambitious roadmap for the protocol's Bitcoin Layer 2 initiative, aiming to enhance the Bitcoin network's capabilities while bolstering scalability, speed, and security.

Among the key objectives, TRON plans to integrate tokens from its network with the Bitcoin blockchain, fostering seamless interoperability between TRON and Bitcoin.

Sun, in a tweet on Thursday, Feb. 15, outlined three phases for TRON's Bitcoin Layer 2 project, emphasizing the platform's commitment to advancing blockchain technologies and setting new industry standards.

The initial phase focuses on integrating various tokens from the TRON network with the Bitcoin blockchain through cross-chain technology, enabling smooth interactions. Tokens slated for integration include TRX, SUN, JST, BTT, WIN, NFT, along with leading stablecoins like USDT and USDC.

In the subsequent phase, TRON intends to establish strategic partnerships with different Bitcoin Layer 2 protocols to foster ecosystem growth and enable TRON users to participate in staking programs on Bitcoin Layer 2 networks.

The final phase aims to develop a comprehensive Bitcoin Layer 2 solution merging TRON, BTTC, and BTC, creating a Bitcoin-compatible protocol that combines low fees and fast transactions akin to Proof-of-Stake systems, alongside the security features of Proof-of-Work and unspent transaction output models.

Furthermore, the TRON DAO has initiated projects focusing on Ordinals and Bitcoin Layer 2 solutions, investing in the development of compatible wallets and tools for BRC-20 tokens.

The resurgence of Ordinals, which introduced decentralized finance (DeFi) and non-fungible tokens (NFTs) to Bitcoin, has garnered both acclaim and criticism. While Ordinal inscriptions brought increased traffic to the Bitcoin network, resulting in elevated transaction fees and network congestion, some within the Bitcoin community have raised concerns, labeling Ordinal inscriptions as fraudulent due to the associated high fees and transaction delays.

Genesis Granted Permission by Court to Distribute $1.3 Billion in GBTC Shares to Reimburse Clients

Genesis Global has secured approval from a bankruptcy court to proceed with the sale of its shares in the Grayscale Bitcoin Trust (GBTC), marking a significant step in its efforts to repay creditors.

The bankrupt crypto lender is now authorized to sell its 35 million GBTC shares, valued at over $1.3 billion, as part of its strategy to reimburse customers. During a Zoom hearing on Feb. 14, Judge Sean Lane granted permission for the debtors to execute the sale, although no specific timeline was outlined.

With Judge Lane's endorsement, Genesis has the flexibility to convert the shares into either bitcoin or cash, and the autonomy to determine the manner of sale, including the option to collaborate with a broker for the process.

In a filing on Feb. 2, Genesis had signaled its intention to also sell shares from the Grayscale Ethereum Trust and Grayscale Ethereum Classic Trust, alongside the GBTC shares, amounting to $1.6 billion.

Initially, Genesis had pledged the GBTC shares as collateral for the Gemini Earn program, a move seen as significant, particularly after GBTC received approval as an exchange-traded product (ETP) on Jan. 10.

However, Genesis encountered resistance in its plans. Digital Currency Group (DCG), the lender's parent company, and Grayscale opposed the liquidation of these assets, arguing that Genesis' rationale lacked merit.

DCG's lawyers contended that given the uncertainty surrounding Genesis' Amended Plan and the timing of creditor distributions, there was no immediate necessity for the relief sought by the debtors.

Genesis' lawyer, Sean O’Neal, countered that DCG and Grayscale stood to benefit from delaying the sale or redemption of the Trust Assets due to their above-market management fees. O'Neal asserted that these fees were causing the debtors' interests in the underlying assets of the trusts to depreciate in value.

Sam Altman Affirms Dedication to Worldcoin Initiative

Sam Altman, CEO of OpenAI, has reiterated his support for the ambitious cryptocurrency venture, Worldcoin, as it pursues $50 million in funding. Spearheaded by Tools For Humanity, Worldcoin endeavours to establish a novel global identity and financial network, leveraging iris scanning technology to enrol over 2.6 million individuals and provide them with digital IDs and complimentary cryptocurrency.

At the core of Worldcoin lies Altman’s vision of a future where AI's pervasive influence underscores the importance of human identity verification. Speaking at a virtual Q&A session with fintech-focused investment bank FT Partners, Altman emphasized the necessity of distinguishing individuals in an AI-driven landscape, echoing the project's fundamental philosophy of creating a secure and universal identity system through advanced technology.

Worldcoin's innovative approach involves deploying "orb" devices globally to scan users' irises and generate digital IDs, transcending mere cryptocurrency distribution to reimagine digital identity verification.

By incentivizing users with complimentary cryptocurrency, Worldcoin has rapidly expanded its user base, achieving significant milestones in its ambitious journey.

A recent report revealing Tools For Humanity's endeavour to raise $50 million by offering Worldcoin's crypto tokens at a discounted rate underscores the project's aggressive growth strategy. This funding initiative aims to bolster Worldcoin's development and cement its position in the global cryptocurrency landscape.

Despite encountering regulatory scrutiny in countries such as the United Kingdom and Germany, Worldcoin persists in its innovative approach to digital identity and financial inclusion, garnering increasing recognition.

Disclaimer:  The information provided in this crypto news round-up is for informational purposes only and should not be considered financial or investment advice. Obiex will not be held liable for your investment decisions.