They’re a shady crypto exchange (is there any other kind?) that’s been banned in a tonne of countries around the world for flaunting financial regulations. If there’s a major run on Binance, I’d be shocked if depositors get their deposits back.
Yes. Kraken.
> regular Proof of Reserves audits make it easy for clients to verify the balances they hold are backed by real assets, all with just a few easy clicks in their account.
Kraken knows this.
> Kraken voluntarily conducted the industry’s first Proof of Reserves audit and set a legitimate standard by accounting for not only our crypto balances, but also our client liabilities under the supervision of an independent auditor.
https://blog.kraken.com/post/16592/proof-of-reserves-or-proo...
The big 4 accounting firms have all stated they won't take on more crypto audits. So have like the next 20 :)
That is true whether you're trying to do it right or not (IE It is independent of whether you are in the 0.1% of this stuff that is not a scam).
It's not reasonable to ask them to do something impossible, and then point out that they can't do it as proof of fraud. That's true even if it's impossible because of worries about fraud :)
It's instead reasonable to ask them to do what they can.
IE "Prove you aren't fraudulent by getting the big 4 to audit your liabilities" - "The big 4 won't take on more crypto audits due to worry about fraudulent companies and their own reputation" - "See, you are fraudulent!"
Does not work as an argument.
I mean, audits should trigger a collapse... I assume once people inside realize the audit passed, they'll be more blatant and likely to blow up their scheme.
So they haven’t sworn off crypto as an entire industry, they just won’t audit shady firms. And specifically binance has not been able to convince a major firm to audit them.
Also, it’s not that these crypto companies aren’t hiring big4, it’s that big4 won’t attest to reserves and other accounting standards. So it’s quite likely that crypto companies are attempting to hire, big4 do due diligence, detect shenanigans and refuse.
[0] https://blockworks.co/news/crypto-auditors-call-it-quits
It seems a lot more likely to me they were threatened by regulators or scared of what they would do, and created blanket policies about new clients or what they would attest to as a result than “we are doing diligence on tons of crypto firms that want us as clients and just saying no after we discover they are shady”
It’s much more likely that the big4, who have been doing the same thing for 100+ years, just applies their normal system when evaluating new clients- what is their ability to perform the work, what is their risk to the firm.
The fact is that they haven’t been audited. Financial regulation is set up so you don’t have to speculate or assume why this doesn’t occur. If it doesn’t occur, that’s bad from a risk mitigation standpoint.
Since crypto firms are logical entities that know the benefits of auditing and they have lots of funding and can afford it, it seems more likely that they don’t audit because they have bad books.
The threat to accounting firms by regulators is that if they audit incorrectly and attest to incorrect things then they will be shut down.
is different from “won’t take on more clients”.
There is no such thing as reputable audit firm. They will do whatever audited firm wants because they want to get paid for more audits.
Clearly, because they won't attest to liabilities (IE, how much money do they owe in total), but "client liabilities" (IE, how much money do they owe to their customers).
If they took out a loan for 100M, with their client's assets as collateral, that won't be covered by "client liabilities", but it sure as hell will be a problem when that loan gets called in.
If crypto is regulated, your crypto can be seized, frozen, held, and so on.. Why regulate it?
(lightning or ethereum would also solve this problem, but binance has more users despite being a company instead of a protocol)
I've never advised my dad to take his crypto off of Coinbase, and he's been keeping it there safely for about six years at this point. It's the best place for him to keep it, for better or worse. I'm not there to transfer everything to a ledger as he trades, and I also don't really want to take responsibility for all of his funds anyway. If he started trading on Binance US (not gonna happen) then I would probably just tell him to send it to Coinbase. I don't keep my crypto on exchanges, but for a lot of people, it really is better than the alternatives.
Kraken as well. They don’t play the game other exchanges such as Binance play and are happy to function just an ordinary simple exchange. However it’s difficult to know since they are not a public company and proof of reserves means nothing without knowing how much debt the exchange has.
I don’t want to defend Binance. They are shady and they deserve to go down, but there is no week that goes buy that the USA does not sue anybody or closes a crypto friendly bank such as Signature. Off ramps are all crippled. The European Parliament wants to limit the amount you can deposit to a private wallet. It’s non stop to the point I personally laugh every time.
All this feels to me like a coordinated non stop attack and it already has a code name, operation chokepoint 2.0
In all fairness I wish HN was a bit more friendly to crypto specially to Ethereum which has switched to a more ecologically friendly model, that is innovating in regard to zk proofs… Specially in a month that Shanghai upgrade launches, and the probability that the SEC fills a lawsuit against the Ethereum Foundation will exponentially grow.
"Why are you so upset now that you found out I'm stealing grandma's savings? Don't you know I stopped beating my wife already. Also I'm doing much less meth these days. A man don't get no respect around here." -- crypto, the deadbeat cousin of actual tech.
A Ponzi scheme has a specific definition. Despite what HN seems to think, it is not shorthand for "crypto thing I don't like/understand".
Here's the common definition of a Ponzi scheme. While people can debate whether any specific coin or nft built on etherium is a Ponzi scheme, it'd be hard to argue that there aren't plenty of examples.
Etherium makes it easy to spin up a new "coin" or token, the article is a prime example.
> Many Ponzi schemes share common characteristics. Look for these warning signs:
> High returns with little or no risk.
Some new shit coins and many NFT projects absolutely make these bullshit claims, but it's well, well known that there's risk by speculating in crypto at this point. We've all seen multiple 80% drops in bitcoin's price (or you can with a simple look at the 5-10 year chart). It's no secret. People speculate in it anyway for other reasons.
> Overly consistent returns. Investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.
Except for maybe stablecoins (which we found out this past year aren't exactly stable), no crypto coin can claim to have consistent returns.
> Unregistered investments. Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators.
This part is true for many crypto coins, and the SEC is going after them now. Bitcoin itself seems to be immune to this by having no centralized component to it, which is unlike most other coins.
> Unlicensed sellers. Federal and state securities laws require investment professionals and firms to be licensed or registered.
Most exchanges are either licensed and registered if they operate in the US, hence their KYC measures.
> Secretive, complex strategies.
Yeah, some algorithmic stablecoins are like this (at least the complex part), and you've seen most of them collapse at this point. The rest are pretty simple coins for the most part, and many of them have completely open source code, so there's nothing secretive about it at all.
> Issues with paperwork. Account statement errors may be a sign that funds are not being invested as promised.
You can't really have an account statement error on the blockchain outside of a 51% attack (which is arguably not an error, just creating a new consensus), although some of the companies that have sprung up around it add obfuscation that can lead to possible account errors. Banks can have account errors as well, though.
> Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out.
This one can happen at exchanges, but the blockchains themselves still work and you can transfer with others directly, assuming you have taken your crypto off of exchanges ("Not your keys, not your crypto" as the saying goes).
[1]: https://www.investor.gov/protect-your-investments/fraud/type...
Unfortunately cryptocurrency and NFTs fit exactly the definition of a Ponzi scheme and it's quite easy to see why:
> Pon·zi scheme
> noun
> a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
Literally the entire basis of deflationary speculative "currency" is a Ponzi scheme. It has no value if new people don't buy in.
What is the enterprise? Cryptocurrencies themselves have no governance or accountability. They don't have any responsibility to continue to exist beyond the efforts of the participants that are propping them up. This is evidenced by the massive number of rug-pulls that constantly happen in crypto.
> is a statement that evaluates to true for any currency ever minted.
Except not really. Let's talk about USD. If there were no new participants introduced to United States currency at this point it doesn't become valueless because it is not a deflationary speculative currency. It exists as an agreed upon representation of value, it doesn't need to continue to consume new participants to justify its valuation, or continue to exist.
Let me ask you, is there a good or common reason to buy etherium today besides hoping that it increases in value? How would it increase in value if no new people were introduced to the system? How does crypto justify its existence in any way beyond convincing the next biggest sucker to buy in? Bonus points if you don't mention stocks.
A classic use case is engaging in commerce (whether it's with ETH, DAI, USDC, etc), without needing to trust a middleman like PayPal to not freeze or steal your funds. For this one needs ETH to pay gas.
Common: The middleman is still there in the most common case since most wallets are custodial. There are a ton of recent examples of exchanges freezing accounts, including the very article that we're commenting under, so I don't really get what you're talking about.
Good: It doesn't make sense to use a wildly volatile deflationary token as currency. Deflation discourages spending which is why there is no real currency that restricts the supply of money to a fixed amount, because it encourages hoarding.
I wouldn't argue that everyone should self-custody. If many users have access to convenient custodians who they can trust not to steal their funds, that's great; it's just that not everyone does.
I don't really have a stance on Eth's monetary policy, I was just trying to address your point about a use case.
Surely that wouldn't destroy the value of famous originals? Because their value is based on provenance, not the physical difficulty of (re)creation. NFTs are the same - replicating a JPEG is trivial, but the replica won't have the same provenance.
You can just say you don't understand the appeal, that is a perfectly valid opinion.
What? Source.
How do they plan on enforcing this?
Tyranny. People make technology to get around their idiotic laws and control. Suddenly they must become more tyrannical than they were before just to maintain the same control they previously enjoyed. We'll either end up with anarchy enabled by subversive technology or totalitarian governments that regulate everything their citizens do online.
Who's going to show up at some untrustworthy place with fat stacks of cash in order to trade crypto?
> as it is initially meant to be used
It was meant to replace the USD for everything including everyday transactions.
Lots of people, actually. Its more common than you would think!
The hardest part is matchmaking and (optionally) escrow.
LocalBitcoin originally did this for IRL but then stopped as they were slapped by a regulator. They were taking a cut from the escrow and acting as a custodial wallet, which made it easy to spank them.
They are now kaput.
There are other, less stupid, platforms that replace them.
There are ways to transact P2P without meeting in person. Bisq is decentralized example.
> It was meant to replace the USD for everything including everyday transactions.
I did not read this chapter of the Bitcoin whitepaper
- traders would be forbidden from making or accepting anonymous crypto transfers over 1,000 euros unless the identity of the other party can be verified
- Businesses would be forbidden from accepting over 7000 Euros in cash
- transfers between private individuals would be allowed even if they are large
- They are seeking to ban anonymous accounts
- Mixers, tumblers and privacy coins should be taken into account as risk factors when assessing money-laundering risk
Again, I suspect this comes down to incompetency and isn't even intentional. They want to regulate the space but they don't understand what smart contracts are and how dApps work.
I'm not sure that's that bad. I've got some crypto wallets but the stuff has got there by me transfering fiat to Kraken, with KYC, passport scan etc and then the USDT or whatever to the wallet so it's easy enough to trace it to me.
If you allow fully anonymous stuff to interact with the regular financial system it does kind of leave it open to all sorts of tax evasion / illegal activities.
Do you want to make cash illegal and the government to trace every single financial transaction you do? Even worse, web3 is mostly not about money in the first place. Do you want them to track everything you do online, every app you interact with, every file you uploaded?
What is required to proof reserves is a full audit instead, which no shady speculator will do which is in fact what all these 'exchanges' are which also means your crypto is at full loss category if you are using them.
"Coinbase, Kraken Under Investigation by US Regulators" - https://bitcoinmagazine.com/legal/coinbase-kraken-face-us-in...
"Kraken Pauses Deposits, Withdrawals As Investigation On Fidor Bank Funding Continues" - https://thedeepdive.ca/kraken-pauses-deposits-withdrawals-as...
Hasn't coinbase repeatedly asked the SEC which tokens were securities and have yet to get answer... I don't think SEC strong arming is any indication of shadiness.
Meanwhile SEC says Ethereum is a security. Specially after the move to PoS.
It doesn’t seem they can even agree with each other.
This logic seems like wishful thinking that people can't get rekt by both the SEC and CFTC, they can.
The legality of all this isn’t confusing to anyone it’s just that they don’t like that answer.
"Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges" - https://www.sec.gov/news/press-release/2023-25
The unfortunate reality, though, is that Coinbase depositors ARE unsecured creditors of Coinbase and may lose their deposits in the event of a bankruptcy. This is all spelled out in their quarterly filings.
Not your keys, not your crypto as they say.
These are not the actions of a company following best practices for protecting depositors.
> A decent rule of thumb is that all cryptocurrency exchanges are doing crimes, and if you’re lucky your exchange is doing only process crimes.
https://www.bloomberg.com/opinion/articles/2023-03-27/the-cf...
What's the fundamental value of Crypto?
It's utility? If so, I'm sure there's a calculation you could make that compares the number of "useful" legal transactions (economic activity) vs. the market cap. I'm assuming the numbers are probably ridiculous, however; the equivalent of 1,000s of dollars of "value" per real transaction.
My assumption is that the bulk of Crypto's actual value is its ability to hide flows of money from regulators (tax avoidance, drug money, silk road transactions, etc). KYC rules probably have helped in this regard, although I'd be interested in someone in the know having an opinion.
Do we have estimates for what % of crypto transactions are not provably legit?
Yes. Bitstamp.
No guarantee of future performance, of course...
Except for all the times they have "halted withdrawals" while Tether printed out a couple billion fun bucks. Don't trust me, look for yourself: https://www.google.com/search?q=binance+halts+withdrawals
This is due to the security balance between difficult-to-access cold wallets containing the majority of funds, and easy-to-access hot wallets containing the minimum required for expected daily operations.
No idea on the coincidence with Tether minting, other than Tether mints often whether directly or indirectly as a result of market conditions, which of course may also be influencing exchange withdrawal dynamics.
SVB implodes and investors (but not depositors) lose everything and it's ok.
You're nuts if you think there's no insider trading or pump and dumps on the stock market.
Seems like a double standard.
This all has more to do with maintaining a monopoly on the financial system and certain classes of participant in the US wanting to maintain the power to collect rents. And there really is no counterbalance to their unchecked authority.
Now, some stocks have a real value + speculative value on top. Netflix and many other tech companies are in this state, and the speculative value can go down way more than the real value. But the floor for Netflix stock is waaaaaaay above 0. The floor for BTC and similar is 0, by contrast.
As for pump-and-dumps and insider trading etc - sure, they happen, just as thefts and muggings happen. But they happen a lot less then in crypto-land where they are fully legal, and where, even if they weren't legal, no one would be checking for them.
"Bitcoin to zero" is a matter of faith at this point, I don't see it happening and I haven't heard anyone explain a good model for how it happens. US is certainly trying its best to outlaw it. Still won't go to zero.
I think my larger point is if the government wants to go after something, go after fraud--in crypto or "Fintech" or banks or stocks or whatever. And mostly they are! But then they're also leaning on banks to cut off the ability to convert crypto to fiat and that's a bunch of bullshit.
There are even corporations that announce buyback and then don't do it. For stock it's enough to jump up and then random shareholders that accidentally sell their shares in specific window that allows them to profit from such fake buyback get very rich while people waiting for buyback are left with the bucket. It's completely not pump and dump.
Let me tell you about the 90s...
"Expressing optimism or pessimism" also doesn't sound very scientific or rational.
Just for example the amount of wash trading in crypto is substantial, and if done on stocks would be found and prosecuted.
The entire cryptocurrency universe can go away and people can blow their disposable income betting on the horses or eating out instead. There will be no good or service missing in the market.
A lot of services would go missing, actually!
Ransomeware gangs would no longer be able to easily receive their ill-gotten gains. The North Korean regime would lose a major source of funding. Darknet drug marketplaces would have a much more difficult time facilitating illegal activities. Etc.
It should also be telling that just betting on the best performing stocks consistently is a more successful strategy than using intricate metrics and trendlines to try to predict future successes, just as counting cards is a better strategy than whatever astrology habitual gamblers come up with. Of course nothing tops the success rate of "insider trading" (i.e. cheating), which is why it's illegal.
What happened with GameStop and other meme stocks is exactly the definition of a pump-and-dump.
... and I say this as someone with enough faith in the stock market to invest heavily in it.
So is gambling.
Of course, "Illegal stocks" (or their equivalent) and illegal gambling aren't.
There are a lot of people who have got rich in crypto who are not 'the bank"
Sure if everything went to zero you could turn around and say there was nothing there but so far bitcoin goes up and up if with dips, while fiat currencies trend to zero if you adjust for inflation.