USDC faces SEC amid Crackdown on Crypto

Hi there! It’s CoinBasics is here to sweep you off your feet, no matter if you're single or in a relationship. We'll be your Valentine for the day ❤️, bringing you all the latest news, insights, and analysis from the world of cryptocurrencies.

Here’s what we got for today :

• ⛔️How USDC faces SEC enforcement.

• 🛑Paypal Halts stablecoin launch.

• ✊Long Live Tether.

• 🧐Bitcoin Ordinals pump and dump. (Don’t miss this, best for last!)

So grab some chocolates and sit back, and let's look into the your love : world of crypto!

⛔️ SEC CRACKDOWN NOW ON USDC?

According to rumors, the Securities and Exchange Commission (SEC) is set to issue an enforcement notice to Circle, the company behind USDC, over its stablecoin.

This move follows its enforcement letter to Paxos, which demanded the exchange to stop minting Binance stablecoin BUSD, as it may be considered a security.

SEC Chair Gary Gensler has stated that stablecoins could be defined as securities due to their features similar to, and potential competition with, money market funds, other securities, and bank deposits.

According to the SEC’s own definition, money market funds are funds that give an interest rate payment slightly higher than bank accounts and currently hold about $3 trillion in assets.

The SEC argues that it is important to have appropriate safety and soundness protections, investor protections, and safeguards against illicit activity.

Circle's USDC may face enforcement from the SEC as the reserves backing USDC are managed in a money market fund called Circle Reserve Fund, which is managed by BlackRock and specializes in money, cash, and treasuries that mature in no longer than 397 days. 

Circle has admitted that its operations are directly impacted by changes in interest rates and other macroeconomic conditions.

🛑 Paypal Halts Stable Coin Launch amid Paxos Lawsuit.

PayPal has halted the launch of its stablecoin, due to heightened regulatory scrutiny in the crypto industry and news of a probe by the New York State Department of Financial Services (NYSDF) into its key partner, Paxos.

Paxos was working closely with PayPal to launch a ‘PayPal Coin’ that was intended to be backed by the US dollar.

However, the launch has been put on hold for now, with a spokesperson for PayPal stating that they are exploring a stablecoin and that they will work closely with relevant regulators if and when they move forward with it.

Paxos made headlines after the SEC threatened legal action against the firm for minting Binance stablecoin BUSD, which the SEC alleges to be an unregistered security.

Following the threat, Paxos has announced that it will no longer issue new BUSD tokens from February 21 onwards. Binance, which partnered with Paxos in 2019 to launch BUSD, has also been caught up in a scandal involving suspicions of money laundering and other financial crimes.

Given the recent regulatory developments in the crypto industry, it remains to be seen if PayPal will risk the regulatory scrutiny and launch its stablecoin in 2023.

✊ LONG LIVE TETHER !

Tether, the largest stablecoin in the market, is banned from operating in New York following its previous settlement with the New York Attorney General.

This settlement came after a request to the SEC for documents on Tether was returned with an exemption, citing that the documents were compiled for law enforcement efforts.

Despite the ban, Tether continues to be one of the largest and most popular stablecoins in the market, with a market cap of over $40 billion.

With all the regulatory scrutiny surrounding stablecoins, it's clear that the crypto world is entering a new era of heightened regulation.

But it will be interesting to see how regulatory landscape is navigated the complex and ever-changing world of DeFi, & NFT’s. One Major Example is

Bitcoin Ordinals NFT Pump & Dump Using Copyright Images

As the hype around the "NFTs on Bitcoin" movement continues to grow.

Ordinals, a new project by Bitcoin developer Casey Rodarmor, makes it possible to inscribe up to 3.9 MB of data into each Bitcoin block.

These inscriptions give normally fungible satoshis, the smallest denomination of Bitcoin, added numismatic value, which has resulted in some inscriptions selling for high prices.

However, many inscriptions use stolen images and copyrighted media, leading to concerns around the validity of these offerings.

🧐How the Ordinals Pump and Dump Began ?

The potential for profit in the world of ordinals has not gone unnoticed, and pump and dump groups are now taking advantage of the situation.

These groups, often found on Telegram or Discord, use pseudonyms and other tactics to appear credible, but are simply looking to profit from the hype.

With one group claiming to be able to "front-run whales" and ensure profit for its members.

In the short time since the Ordinals project was launched, there are already tens of thousands of inscriptions, many of which have been created by NFT project administrators.

Examples of ordinals inscription projects

Some of these inscriptions have simply copied images from Ethereum-based NFTs, while others are using trademarked and copyrighted content, like CryptoPunks, Pudgy Penguins, EtherRocks, and others have already been inscribed from Ethereum onto Bitcoin numerous times — without their owners’ permission.BitcoinShrooms, which is using a Linux mascot, Wall-E character, and Pac-Man ghost, despite the fact that its sale has not yet been opened.

The focus for many of these administrators is purely profit, with price predictions and attempts to add value to their NFT-based enterprises being common themes.

However, some people are skeptical of the value of these offerings, given their close association with the NFT fad of 2021, which saw volumes decline by 99%.

Which ordinals offerings are securities offerings?

In the US, pump and dump schemes are considered a form of fraud by the Justice Department and are regularly targeted with charges.

The Securities and Exchange Commission (SEC) also warns against such schemes, as they typically involve the misrepresentation of an asset's value.

Promoters of NFTs and inscriptions often claim that they are not securities, and therefore exempt from information disclosure regulations.

However, almost anything can be sold as a security if it is sold as an investment contract. This occurs when a promoter sells anything, even a non-security, with the expectation of profit derived from the efforts of others.

Many promoters of inscriptions are selling their offerings in a way that qualifies as a securities offering, making them subject to information disclosure regulations.

One administrator's claim that they would ensure a profit for their holders, regardless of the market, is dangerously close to the SEC's Howey Test, which determines whether an offering is a security.

Main takeaway

The popularity of Bitcoin ordinals and NFTs on the Bitcoin blockchain has led to a rise in the number of pump and dump groups, using stolen images and copyrighted content to profit from the hype.

It is important to be cautious when considering investments in NFTs or inscriptions, as many of these offerings may qualify as securities offerings and be subject to information disclosure regulations.

So, there you have it, folks!

A trifecta of crypto news that's sure to get your love this V-Day in your Love & Hate Relationship With Crypto ❤️.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.