Crypto Roundup: Exchange Errors, Updates and Lawsuits

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The cryptosphere has been buzzing lately and it’s hard to keep up with all the newsworthy happenings. That’s why we created this crypto roundup to make sure you stay up to date on all things crypto. This summary covers lawsuits, upcoming blockchain updates, and exchange errors so you can learn more about what’s happening in the cryptocurrency world. Let’s dive in.

Closure of crypto exchanges

Our recap starts with an overview of the recent crypto exchange drama. Many stock exchanges have recently closed, especially bankruptcies. One of the most notable is Three Arrows Capital (3AC), the first domino to fall. 3AC was a crypto hedge fund that focused on crypto lending and investing.

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A series of bad investment choices drove them out of business, and loan swaps with 3AC followed; The founders of 3AC disappeared shortly after the bankruptcy. Celsius and Voyager Digital also participated in crypto lending before filing for bankruptcy. This is just speculation, but part of the problem may be that crypto exchanges are trying to act like banks.

At its core, crypto is a decentralized asset. The crypto has been around for over a decade and has never shown long-term price stability. The crypto lending frenzy started after the 2021 highs but crashed below the price correction. Presumably, these lending operations attempted to treat crypto as fiat currency, which has more or less consistent value.

As crypto evolves under the inevitable incoming regulation, we will likely continue to see loan transactions. This first wave of failures should be a warning that investors should now bear in mind. Meanwhile, correlation does not mean causation; it is not known exactly what causes all these exchanges to fail. As far as we know, it’s likely a combination of factors, including mismanagement, hacks, and government regulation.

Next, in the crypto overview, there is a backup suggestion. It hasn’t been discussed that much in the popular media, but you can use exchanges without keeping your crypto in their wallets. If you buy a cold wallet, or a hardware wallet, you can store your crypto there. Exchanges can make crypto trading easier as they provide a simple platform for it.

Decentralized financial (DeFi) exchanges like pancakeswap can intimidate new entrants to the crypto space. Centralized exchanges like Binance or Coinbase offer a user-friendly interface and can also store your crypto. But after the collapse of 3AC, Voyager Digital and Celsius, it may be time to take it a step further.

When you sign up for a crypto exchange, you agree to give them partial control over your money. This should be a purely logistical move to facilitate the exchange to open your wallet and transact. However, as we saw after the Voyager and Celsius bankruptcies, the exchange was able to keep your money.

So while you can still use centralized exchanges to easily trade crypto, leaving it in your exchange wallet can have serious consequences. Sending crypto from your exchange wallet to your hardware wallet ensures that you remain the owner. This way you get the best of both worlds.

Upcoming Blockchain Updates

A few updates are coming for popular blockchain projects. For Ethereum, there is the merger with Ethereum, which the developers have postponed due to security concerns. The merger will see Ethereum move from Proof of Work (PoW) to a Proof of Stake (PoS) consensus model.

Changing consensus models is a long-term action that should reduce the energy needs of the grid. Ethereum fans looking to continue mining after the merger can check out Ethereum Classic. Ethereum Classic is the result of a previous hard fork on the blockchain and works on the original Ethereum model.

Cardano’s Vasil upgrade has also been tested and is expected in the coming months. Despite being a PoS pioneer, Cardano (ADA) has struggled since its 2021 highs, like many other altcoins. Anyway, the developers keep on upgrading Vasil. Vasil will upgrade Cardano’s smart contract protocols, scalability and interoperability. Simply put, this makes the blockchain faster, more efficient and able to handle larger transaction volumes.

Although the developers have not specified a release date, it is probably better. Investors would like to see the update roll out and maybe even hope it will increase ADA’s value. In the end, the update should succeed. The negative impact of deploying an incomplete update is much worse than waiting to get it right. This logic applies to any crypto update or technical update.

The altcoin Shiba Inu (SHIB) is also waiting for an exciting update that the developers call Shibarium. Shibarium will bring Layer 2 functionality, essentially creating a SHIB blockchain on top of the underlying Ethereum network. Additionally, the update is expected to expand SHIB’s reach as part of an ambitious project that includes metaverse real estate and SHIB games. Shibarium doesn’t have a specific release date, but the developers have hinted that it will be released later this year.

Ongoing and Future Lawsuits

And now an overview of notable crypto pursuits. The SEC lawsuit against Ripple Labs Inc. still running. The result will shake the cryptosphere and will likely shape the near future of crypto regulation. At the heart of the lawsuit is the SEC’s claim that Ripple Labs was selling XRP as “illegal unregistered security”. Ripple recently took a big win. Emails from former SEC Corporation chief financial officer Bill Hinman were admitted in court as evidence.

Ripple’s lawyers say Hinman’s emails demonstrate a conflict of interest, with Hinman willing to classify Ethereum as a “legally unrecorded asset.” Current SEC chairman Gary Gensler has publicly advocated classifying cryptocurrencies as securities (excluding Bitcoin). The outcome of the SEC lawsuit against Ripple Labs Inc. will likely determine whether Gensler succeeds in bringing the crypto under SEC regulation in the near term.

Meanwhile, the popular crypto exchange Coinbase is waging its own legal battle. Following the collapse of stablecoin Terra, customers and investors are suing Coinbase for negligence. One of the benefits that centralized exchanges should provide is that they do not list unstable or fraudulent cryptocurrencies. Coinbase is facing two lawsuits related to stablecoins, USDTerra Classic (USTC) and GYEN (GYEN), which were not properly pegged to a dollar value. The lawsuits allege that Coinbase failed to exercise due diligence and inform investors about the nature of these crypto assets.

Finally, we end this crypto overview with a change in the dynamics of the lawsuit: a crypto exchange suing someone else. As customers are suing Binance for offering the now-defunct altcoins Terra and Luna, the exchange is also going on the offensive. Binance is suing Hong Kong-based Modern Media, which licenses Bloomberg content, for defamation. The lawsuit comes after Modern Media published a headline mentioning Binance as a Ponzi scheme by founder Changpeng Zhao.

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