Crypto Roundup: Crypto And Terrorism? A Fake News Rally, And Grayscale Court Drama

We’re taking a break from the Sam Bankman-Fried trial this week.

It’s not because the trial isn’t thrilling theater (it is). It’s just that there is more pertinent stuff going on in the crypto space right now that I want to make sure we cover. After all, SBF isn’t going anywhere, amirite? 🤣

Alright, that’s my last joke for at least 500 words. Because I want to talk about something serious to kick off today’s Crypto Roundup.

You’ve probably heard the concerns that have been raised before about the use of cryptocurrencies like Bitcoin for funding terrorism. And sure, during the early stages, it was a bit like the Wild West.

But like most frontiers, they eventually get settled. One of the ways you do that is by introducing the rule of law. In case you haven’t noticed with our coverage here lately, that’s where we’re at with crypto right now.

Why do I bring this up? Well, there was a big story in the Wall Street Journal this week that we need to discuss.

Let’s get to it…

Is Crypto Funding Terrorism? A Deeper Look… 🔍

According to the WSJ report I mentioned above, the terrorist group Palestinian Islamic Jihad received $93 million between August 2021 and June 2023. Hamas, the bastards who staged the attacks in Israel, received about $41 million in the same timeframe.

There’s just one problem. As CoinDesk reports, Hamas announced in April that it was suspending crypto fundraising. Why?

“Given blockchain technology’s inherent transparency and the often public nature of terrorism financing campaigns, cryptocurrency is not an effective solution to finance terrorism at scale.”

That quote comes from Chanalysis, a forensic blockchain firm that disputes the work of the firms the WSJ used in its reporting. They also argue that the fears surrounding crypto’s role in terrorism financing may be overstated.

They argue that the WSJ’s reporting included all money flows to certain service providers that received some funds associated with terrorism financing. See the problem there? They may have received some terrorism financing, but that doesn’t mean all of those funds financed terrorism. That context matters.

You can read their entire findings here. They’re worth a look if you really want to geek out.

But if you don’t want to get into the weeds, just remember this basic fact… All transactions on a blockchain are publicly recorded and can be viewed by anyone. It’s not as difficult for law enforcement agencies to track and freeze assets linked to terrorist activities as you might think.

The problem is we don’t actually know if they are hip to this stuff and how good of a job they’re actually doing. Some even suggest that the U.S. and Israel’s recent sanctions, while well-intentioned, are a day late and a dollar short. For example:

The Bigger Picture

In the meantime, U.S. lawmakers like Senator Elizabeth Warren, who previously led a fundraising drive by declaring “war” on crypto, are using this as a fresh excuse to renew the fight. But she’s not alone. A group of 100 lawmakers recently sent a letter to the Biden administration demanding answers on crypto activities and terrorism.

But consider this. Iran is by far the largest funding source of terrorism, to the tune of $100 million a year, according to the U.S. government estimates. So, maybe start there?

I dunno, call me crazy, but maybe those guys shouldn’t be allowed to have a nuclear program. And maybe we shouldn’t be unfreezing billions of dollars to give to them. Take care of that stuff, and then we can worry about the crypto angle later.

So, while the political theater escalates around this issue reaches a fever pitch, remember that most people agree that sensible regulation for the crypto industry can be a good thing. But go too far, and you risk driving the crypto industry offshore. That makes it even harder to regulate, potentially opening up more avenues for terrorists to exploit.

Fake News Takes Bitcoin On A Wild Ride… 🎢

On Monday, Bitcoin’s price went on a little rollercoaster ride, initially skyrocketing by over 10%.

The culprit? A post by Cointelegraph claimed the SEC had given a thumbs up to BlackRock’s iShares spot bitcoin ETF. Spoiler: They hadn’t.

Cointelegraph quickly pulled the post and went into damage control, apologizing for the mix-up and launching an internal investigation. Meanwhile, BlackRock confirmed their ETF is still in the SEC’s waiting room.

The digital currency’s price briefly touched a high of $29,900 before retracing most of its gains, though it still managed to close the day up by over 4%.

Why All The Fuss?

If you’ve been following along for the past few weeks, you know that the crypto community has been on pins and needles, eagerly awaiting for the Securities and Exchange Commission (SEC) to approve a spot bitcoin ETF. And rightly so…

For those unfamiliar, a spot bitcoin ETF would allow investors to directly invest in actual bitcoin rather than derivatives. The SEC has multiple applications for such ETFs under review, and its approval is seen as a significant milestone for mainstream crypto adoption. The anticipation is palpable, as an approved spot ETF would provide a more direct way for institutional and retail investors to gain exposure to Bitcoin, potentially ushering in a new era of crypto investment.

Grayscale’s Courtroom Chronicles 👩‍⚖️⚖️

The legal tango between Grayscale Investments and the SEC is nearing its finale. A federal court is poised to cement Grayscale’s triumph over the SEC regarding a spot Bitcoin exchange-traded fund (ETF) application.

This saga began when the SEC played hardball by rejecting Grayscale’s ETF application to convert its landmark Grayscale Bitcoin Trust ETF into a spot-price ETF two years ago. But Grayscale, not one to back down, took the fight to court and emerged victorious. As the court preps to formalize this win, the crypto community is on tenterhooks, keenly eyeing what the SEC’s next move will be. The regulatory body could either accept its defeat gracefully or decide to reject the application again, albeit for different reasons.

The buzz around this case isn’t just a fleeting headline. It has some real meat to it, as the outcome could potentially alter the crypto (and ETF) landscape. If the court’s gavel bangs in favor, Grayscale will convert its Bitcoin Trust (GBTC) into an exchange-traded product, making it a new entrant on NYSE Arca and providing investors a fresh avenue. While Grayscale’s all set and ready to make the move, the SEC’s next steps are anybody’s guess​​. But after a series of L’s in court, sooner or later, it’s going to have to play ball.

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