Crypto update: LOL who cares, crime is legal

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im sorry but every time i see a stupid comment on here the person has crypto or bitcoin in their bio

— Derek Guy

Amy preparing for a full and frank discussion in the marketplace of ideas

Amy Castor has declared herself retired from writing. I can confirm that Amy is definitely not leading a guerilla resistance group high in the mountains of Massachusetts with occasional terrorist sorties to blow up Tesla Superchargers.

For the minutiae of crypto news, we heartily recommend signing up for Molly White’s newsletter. [Citation Needed]

Pivot to AI is still going strong, and it has a YouTube channel now. Hear me rant about AI bubble nonsense for a few minutes every day! [YouTube]

Crypto trading is still fake

Hello, crypto fans! I haven’t forgotten you! I’ve just spent the past nine months or so writing the same article about bitcoin repeatedly:

• Trading is thin;
• The price is set on unregulated offshore casinos;
• Bitcoin is pumped with stablecoins printed out of thin air as loans;
• This isn’t a bubble, it’s a balloon being inflated with hot air.

A retail bubble doesn’t really seem to have restarted? Volumes are up on mid-2024, but are still nothing like November 2021. The actual dollars remain scarce.

For the barrage of headlines about the price of bitcoin, the public still don’t seem to be falling for it again as yet. I’m slightly surprised.

A new preprint, “Tracing the Masterminds Behind Cryptocurrency Pump-and-Dump Schemes,” says that just 438 people are the “masterminds” behind “$3.24 trillion” of crypto market pumping. I put that in quotes because we’re talking about memecoins and garbage, and not anything that touches an actual dollar. [arXiv, PDF]

These 438 traders are defi bottom feeders. Our good friend Bitfinex’ed puts the number of those netting the dollars from the single unified crypto casino at less than 20. For all its headline footprint, crypto is small.

Anti-money-laundering just hampers innovation

The Trump administration is not enforcing the anti-money-laundering law that requires businesses to declare their actual beneficial owners. It just … doesn’t matter! [Reuters]

(“The extensive use of intermediaries to conceal control interests is because they know they’re doing nothing wrong.” — Chris Slaughter on the Ethereum Foundation)

Tornado Cash has been removed from the US sanctions list. This has long been on the crypto industry wish list, so of course it’s fine. The Justice Department will continue to pursue cybercrime for sanctions-busting by North Korea, just not in ways that might do much. [DoJ]

The AML regime is stupid and broken in many ways. But it also does useful things. So the useful things are the first ones they break.

Fifty more Silvergates!

Of the four US bank collapses in 2023, Silvergate and Signature were directly because they got into crypto, and Heartland was the CEO falling for a crypto pig-butchering scam.

But nobody cares, so the Office of the Comptroller of the Currency has told banks to go as crypto as they like, and provide the world with more worked examples of why regulation exists. [Reuters]

It’s a good thing bankers have historically shown appropriate restraint when regulators tell them “ALL THE FREE MONEY IN THE WORLD, DIVE IN BOYS.”

Nanostrategy

Michael Saylor has gone full corporate Ponzi with his bitcoin sales. MicroStrategy has changed its name to Strategy B — the “B” is for bitcoin! It’s a large pile of bitcoins with a stock exchange ticker.

The plan is to kite cheques as far as possible and borrow actual dollars against a pile of bitcoins that could never be sold for a thousandth of its book value, while insiders sell company stock as long as number is up.

Saylor is setting up various new stock offerings and a second stock market ticker, STRK, as well as the existing MSTR. The details are deliberately confusing — they’re in the linked FT articles if you care — but the main trick is that Saylor promises dividends funded by … just diluting the stock and issuing more to sell! He’s taking a page out of Northern Data’s book. [FT, archive; FT, archive]

I told Decrypt about how this looks very like the scam bitcoin miners ran in the last crypto bubble — say a lot of bitcoin words while the cash flows to insiders. The exit is the company going Chapter 11. [Decrypt]

Pivot to Quantum

Quantum computing company D-Wave is so far down the quantum grift rabbit hole they had to prop up the quantum talk with blockchains. [press release, archive; arXiv, PDF]

This preprint claims you could make a proof of work blockchain that uses quantum computing! Probably. If — unlike anyone else in crypto — you still gave a hoot about new proof of work mechanisms.

They’ll be introducing a token soon, betcha.

D-Wave sells actual quantum computers! They do quantum annealing rather than the vastly-hyped quantum computation that venture capitalists desperately hope will be a new tech bubble.

But venture capital will hype anything with whatever this month’s magical jargon word is — because the particular technology involved doesn’t matter to the bubble economics. Look at our e/acc friends at Extropic. I fully expect D-Wave to pivot to “quantum electronic,” selling ordinary computers on the basis that transistors are quantum.

Return of the Kraken

I wrote in December 2019 about how a whistleblower at the Kraken crypto exchange, Nathan Runyon, sued the exchange for unfair dismissal. The complaint included allegations of fake addresses for company officers, and sloppy compliance and sanctions enforcement. [Case docket]

I’m pretty sure the complaint caused Kraken a ton of trouble in obtaining their Wyoming bank charter application — a charter that Kraken still doesn’t have — and problems regarding possible sanctions sloppiness. [New York Times, 2022, archive]

Anyway, it looks like Runyon got his desired settlement. Kraken brought a countersuit accusing Runyon of misappropriating trade secrets — specifically, that he revealed Kraken’s address. Kraken didn’t claim any actual losses from this, so the claim was dismissed in September 2020 for failure to state a claim. [Reuters, 2020; Justia, PDF, 2020]

An amended complaint by Kraken was partially dismissed in January 2021. After much back and forth, Runyon and Kraken finally seem to have come to a settlement on his original complaint in October 2021.

Kaiser Ng, Runyon’s boss at Kraken at the time he was fired, was next spotted in Singapore working for Binance. [Irish Times, 2023]

Kraken remains one of less than ten companies worldwide to have a warning on its GlassDoor page that it’s taken legal action over employee reviews of the company.

Yelling into the void

Here’s a new Foreign Policy piece on Trump’s bitcoin reserve plan! It’s not by me, but it quotes me extensively. “This is just naked kleptocracy. This is corruption. It’s what it looks like.” [Foreign Policy]