In this recap of the crypto world, we will explore the events and news that had the most significant impact in the past week of March 6. Our focus will be on the following developments:
- Amazon prepares to enter the NFT market in Spring
- Yuga Labs Twelvefold Mint Concluded
- Silvergate Bank liquidating
- Biden wants a 30% tax on all electricity used to mine cryptocurrencies
- Senator Gillibrand: The crypto bill draft will be released in April
World’s largest Retailer’s NFT Initiative Coming Soon
Amazon getting into digital assets is undoubtedly huge for the space, but there are mixed feelings, as usual. On one side, you have a lot more exposure and a smoother transition to mass adoption, but on the other, will amazon do to existing crypto projects similar to what they did to real-world mom-and-pop shops?
A source close to the project said that Amazon “coming into the space is a big one for crypto for many different reasons. We knew it was possible, but now it seems like it’s happening. That will affect the existing players in the space — if they execute and do this right and are smart about it.”
It remains uncertain what Amazon’s ultimate plans and ambitions are regarding Web3. While it’s unclear if the company aims to challenge existing Web3 marketplaces such as OpenSea and Rarible directly, two sources claim that these platforms would perceive Amazon’s successful entry into the market as a significant threat.
Something else to consider is Amazon Web Services (AWS) recently partnered up with Ava Labs, the company behind the Avalanche blockchain. Although Avalanche does have experience in the NFT realm, with marketplaces like JoePegs and Campfire, has the blockchain ever been tested against such an influx of users? It was only about a year ago when an article came out stating that Avalanche was ‘crippled by a bug that was triggered by unusually high volume”. It will be interesting to see how it pans out in Spring.
Yuga Labs Ordinals Mint Completed.
Yuga Labs has wrapped up its first-ever auction of Bitcoin NFTs, known as TwelveFold, after a 24-hour bidding frenzy. A spokesperson for Yuga reported that the auction garnered 3,246 bids, with 288 bidders winning pieces from the limited series collection. These successful bidders spent a combined $16.49 million worth of Bitcoin, with the highest bid amounting to 7.1159 BTC or approximately $159,500 and the lowest successful bid being 2.2501 BTC or just over $50,000. The top 288 bidders can expect to receive their inscriptions within the week, while the remaining 12 pieces will be distributed as part of Yuga’s philanthropic programs.
Although the auction went without a hitch, it did have its share of critics. Yuga faced criticism over how it had structured the bidding process. As per the process, bidders had to deposit the total amount of their bids directly with Yuga to participate in the auction. Yuga promised to return the rejected proposals within 24 hours of the auction’s end.
Casey Rodarmor, the creator of Bitcoin Ordinals, expressed his disapproval of the bidding process, stating that it legitimized a practice that dubious project creators could easily manipulate to steal funds from bidders.
It’s only fair to acknowledge that activities involving Ordinals are still a novel experience. Given the amount of money involved in Yuga’s auction, their deposit-based approach was a necessary precaution. However, the good news is that everything went smoothly, and all losing bidders received their refunds. It’ll certainly be interesting to watch the TwelveFold collection as it develops.
Silvergate Bank Saga Continues
US-based Silvergate Bank, which focuses on cryptocurrency, is shutting down its operations due to customer withdrawals following the collapse of the FTX cryptocurrency exchange. The bank reported a $1bn loss in Q4 2022 after depositors withdrew over $8bn, leading to losses incurred from selling assets to cover the withdrawals. Coinbase and Galaxy Digital, among others, cut ties with Silvergate, which the US Department of Justice is investigating. The bank is now set to undergo a voluntary liquidation with the full repayment of deposits.
As a result of the recent events, shares of Silvergate Capital fell 41%. The bank’s crypto-friendly peer, Signature Bank, also saw a decline in its shares. The shutdown of Silvergate raises questions about the relationship between traditional banks and the cryptocurrency world, according to one observer. But, as Analyst Conor Ryder with Kaiko states, “there is still glaring evidence of the need for a crypto-friendly bank. The next best contender will likely be a smaller bank raising their hand to take on the risk of crypto in search of a wave of new deposits,”. There isn’t anyone in the crypto space that can argue with that.
Biden Wants a 30% Crypto Mining Tax.
President Joe Biden’s budget proposal aims to reduce mining activity and includes a proposal to subject United States crypto miners to a 30% tax on electricity costs.
According to a Department of the Treasury supplementary proposal released on March 9, “any firm using resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30% percent of the costs of electricity used in digital asset mining”.
The tax would be phased in over three years, starting after December 31, at a rate of 10% per year and reaching the maximum tax rate of 30% by the third year. Crypto miners will have reporting requirements on the amount and type of electricity used and the value of that electricity.
Even if crypto miners acquire their electricity needs off-grid, they will still be subject to the tax. They must estimate the electricity costs of any “electricity generating plant.” The Treasury reasoned that the energy consumption of crypto mining operations has adverse environmental effects, increases prices for those sharing a grid with the processes, and creates uncertainty and risks to local utilities and communities.
Senator Gillibrand and Lummis Work on Crypto Bill Draft.
After working on the Responsible Financial Innovation act, the senators are moving forward with the next installment that is expected to offer regulatory clarity for many crypto projects and determine whether they fall under the responsibility of the US Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC).
Senator Kirsten Gillibrand announced that a new draft of the bipartisan crypto bill, co-authored by Senator Cynthia Lummis, will be released to the new Congress after being deferred in 2022. During a Senate Agriculture Committee hearing on the Commodity Futures Trading Commission’s oversight on March 8, Gillibrand inquired about CFTC chair Rostin Behnam’s opinion on the crypto bill that she and Lummis had previously drafted. The proposed legislation aims to create a regulatory framework for the crypto industry. Gillibrand shared that the next version of the bill will be available in mid-April.
Gillibrand explained that the bill intends to initiate a national discussion on a comprehensive approach to digital assets. This includes regulating digital assets with securities-like characteristics under the SEC, regulating investments with commodity-like elements under the CFTC, providing oversight for stablecoins by the OCC, and implementing tax provisions for the entire industry.