🔴 Banks Shock Crypto | This Week in Crypto – Mar 13, 2023

The crypto market goes haywire following a bank collapse, causing USDC to depeg from the dollar and raising concerns over the whole sector’s future. Will crypto survive the domino effect? These stories and more this week in crypto.

Bitcoin Drops Below $20,000, Billions Wiped Out

Bitcoin’s price fell below $20,000, marking a two-month low, as $70 billion was wiped off the broader crypto market in a matter of 24 hours. The sell-off came with the wider downward movement of US tech stocks after crypto-linked Silicon Valley Bank was shut down by regulators, causing a ripple effect throughout the markets.

Major Fallout for USDC Following Bank Collapse

Circle’s normally reliable USDC stablecoin dropped below its $1peg, as the firm revealed it has over $3 billion in USD Coin reserves at the collapsed Silicon Valley Bank. Other stablecoin prices also de-pegged from the dollar, and Ethereum gas fees soared as investors hurried to quickly reallocate their funds in a bank run, after regulators shut down the failed bank.

Ether is Labeled as a Security

Ether also fell to its lowest price in two months, after the New York attorney general labeled it ‘a security’ in the state’s lawsuit against crypto exchange KuCoin, fueling fears of a wider regulatory crackdown. KuCoin is facing charges for failing to register with the state before facilitating transactions on its platform.

Kraken is Ready to Launch a New Bank

San Francisco-based cryptocurrency exchange Kraken is reportedly closer to launching its own bank in the United States. Kraken already has approval from a state regulator in Wyoming that permits Kraken to operate an independent bank, which would reduce reliance on third-party financial institutions. Kraken’s chief legal officer confirmed that they can launch their own bank “very, very soon.”

Coinbase Continues its Staking Services

US crypto exchange Coinbase has renewed its position that its staking services will continue. Despite the SEC looking to crack down on supposed unregistered securities offerings via staking programs, Coinbase has reiterated that its staking services are here to stay. Under the fresh terms however, Coinbase explicitly explains that users earn rewards from the decentralized protocols, not directly from Coinbase.

Bybit Suspends USD Bank Transfers

Bybit, one of the world’s leading crypto exchanges, has announced the suspension of USD deposits via bank transfers until further notice, due to “service outages from the end-point processing partner”. The processing partner wasn’t named but the halt came shortly after crypto bank Silvergate revealed plans to discontinue its crypto payment network.

US Proposes 30% Tax on Crypto Miners’ Electricity

A budget proposal put forth by President Biden seeks to lower mining activity in the United States by imposing tax on energy used by crypto miners. The Department of Treasury explained that any company utilizing electrical resources would be subject to a tax of 30% of the costs of electricity used in digital asset mining.

BitMex Cofounder Proposes Bitcoin Based Stablecoin

Arthur Hayes, co-founder of crypto trading platform BitMEX, has proposed a new type of stablecoin, called NakaDollar (NUSD), which would be backed by bitcoin and perpetual swap derivatives. Hayes notes in a blog post explaining the idea that, unlike a majority of already existing stablecoins, like Tether or USDC, NakaDollar would be created without the traditional banking system, making it exempt from fiat regulations.

That’s what’s happened this week in crypto, see you next week.