Grayscale CEO Michael Sonnenshein steps down, replaced by Goldman exec: CNBC Crypto World

Grayscale CEO Michael Sonnenshein steps down, replaced by Goldman exec: CNBC Crypto World

today Michael sunen shine steps down as CEO of grayscale the New York attorney general settles with bankrupt crypto lender Genesis and we take a look at a growing list of actions by the SEC to regulate Defi and what they mean for the second largest cryptocurrency ethereum welcome to cnbc’s crypto world I’m Mackenzie sigalos Bitcoin has hovered around the $67,000 mark all weekend and is jumping above that level again this morning by noon Eastern that cryptocurrency Rose about 3/4 of 1% ether meanwhile is up nearly 1.4% this morning to the $3,100 level and Unis swaps token inched 4/10 of a percent higher to 773 okay let’s talk about the top stories Michael sonen shine has stepped down as CEO of grayscale after a decade on the job the company announced that Peter minsberg the global head of strategy for Goldman sachs’s asset and wealth manag agement division will take over mburg previously worked at Black Rock Oppenheimer funds and Invesco of course under son and shine’s Leadership grayscale played a pivotal role in the launch of spot Bitcoin ETFs the company sued the SEC for its denial to convert the grayscale Bitcoin trust into an ETF the court then sided with grayscale saying that the regulator was wrong to deny the application gbtc was the largest Bitcoin ETF to come to Market back in January but has has a steady stream of outflows this year $17 billion according to fact set at the same time gbtc management fee is significantly higher than competing ETFs on the market in a statement sonin said the crypto asset class is at an important inflection point and this is the right moment for smooth transition I wish the grayscale team every success in its next chapter next New York’s attorney general Leticia James is settling with bankrupt crypto lender Genesis for $2 billion now back in October James sued Genesis its parent company digital currency group and partner company Gemini trust alleging that they misled investors about the Gemini earn lending product the deal does bar Genesis from operating in the state of New York and creates a victims fund for nearly 30,000 New York residents who gave more than1 billion dollar to Genesis through the Gemini ear product notably the settlement does not include partner company Gemini the the bankery court has also approved a separate settlement that ends an SEC lawsuit against Genesis that restructuring includes a repayment plan for customers who have had their tokens Frozen on the platform since withdrawals were halted in November of 2022 after the collapse of FTX all right for our main story as the SEC continues its fate of enforcement actions against centralized crypto players the regulator has also set its sights on decentralized finance and ethereum D5 players like Unis Swap and consensus have disclosed closed Wells notices from the agency and the SEC has even reportedly begun investigating the ethereum foundation itself crypto World took a look at what the growing list of regulatory action by the SEC means for Defi and ethereum just ahead of an expected decision on ether ETFs this week the SEC is just days away from approving or denying spot ether ETFs but the agency stance on ether is very much uncertain and its Crackdown on the crypto industry is only getting more intense so far this year the agency has sent Wells notices filed lawsuits or reached settlements with a whole host of crypto firms and the agency’s legal challenges are increasingly focused on ethereum and decentralized Finance in particular four defi firms including shapeshift trade station Unis Swap and consensus have received Wells notices or settled with the SEC in 2024 and that comes just as the agency is reportedly investigating the ethereum foundation this is the harder case the decentralized exchanges it’s less clear um whether they are like an alternative trading system or a market maker or whether they really are just a technology that like say an unhost wallet that allows you to do things with crypto that does not make you a broker dealer the industry argues if the second largest cryptocurrency gets classified as a security it could throw the future of the ethereum network and many adjacent crypto firms into question exchanges both centralized and decentralized would be forced to choose registered with the SEC or delist ether all together if the SEC in fact does take the position that ethereum is a security uh pretty much everyone in in this business that is using or uh providing services on the ethereum blockchain they’re going to be on notice that they might need to be registered and so whatever protections they thought they had before are no longer going to be there and we’re going to see really a a shift in the industry consensus tried to preempt the sec’s action with its own lawsuit claiming regulatory overreach consensus says this followed three subpoenas issued last year and it was noticed from the SEC that claimed menam mask swaps consensuses business that lets users swap crypto tokens as well as this metamask staking product violated Federal Securities laws what’s been alarming for us is they’ve been really targeting our developers they asked for a list of the names of any consensus developers who contributed any coding to the merge they asked for the identities of public and private consensus software developer code repositories and those are very strange requests from a financial regulator you know I can speak to that because I used to be um in the cftc’s enforcement Division and investigated cases myself the company’s CEO Joe Luben who’s also a co-founder of ethereum told wired mag magazine it’s plausible the SEC could be taking a heightened interest in ethereum because the regulator thinks its native token looks more like a security after the merge that’s when ethereum switched from a proof of work to a proof of stake protocol the network required volunteered users to hold its native token to validate transactions and generate new ether first we’re asking the Court to declare both that ether is not a security and that the SEC lacks jurisdiction to investigate ethereum we’re also looking for the Court to declare that our metamask wallet and specifically the features metamask swaps and metamask staking are not unregistered Securities Brokers and they’re not Distributing Securities the SEC is going to have to respond to this complaint the way they do that is they file an answer uh so they’re going to be hardpressed not to state in their answer whether they think ethereum is a security or not I suspect that because of the proof of State concept that Chang in 2022 with ethereum they are going to take the position that it is a security another major player to receive a Wells notice this year Unis swap hasn’t taken legal action against the SEC but a blog post titled fighting for defi did say its legal team would be taking on the fight both consensus and Unis swap suggest the sec’s broad approach the classifying Securities may be outdated every step in technology requires us to sit and rethink how should this work and does it does the framework we have now already work and I’m I’m think we’re getting to the point where the framework we have now might not already work for a lot of these different decentralized applications in the same way that when you’re browsing you know the internet on Google Chrome Google Chrome is not the offer of the websites and services you’re you’re accessing through it and I think that’s really the best analogy for what metamask is doing in its blog post uniswap points to a Court decision in the SEC vers Ripple case that it says quote makes clear that secondary Market transactions in digital assets generally do not constitute investment contracts thus alleging that the SEC has no jurisdiction over Unis swap we reached out to Unis swap about how it plans to respond to its Wells notice from the SEC but the platform declined to comment one thing the SEC has been clear on is its classification of Bitcoin as a commodity with ether the regulator has had more of a rocky history when we look at Bitcoin or if we look at ether and the highly decentralized nature of the networks we don’t see a third- party promoter where applying the disclosure regime would make a lot of sense so we’re we’re comfortable uh in some uh sort of viewing these as uh items that don’t have to be regulated as Securities is ether a commodity or a security without speaking to anyone I know you repeatedly said you’re not going to speak to one except you’ve spoken to one Bitcoin so I’m asking you to speak to a second one the LGE second largest market cap here and speaking to the tokens there’s 10 to 12,000 the SEC believes that much of the industry belongs under its jurisdiction already and its lawsuits are simply bringing the industry under compliance crypto firms argue that the recent legal battles haven’t given the regulatory Clarity the industry has been asking for meanwhile centralized players are still facing scrutiny too in May investment platform Robin Hood announced it received a Wells notice for the company’s crypto operations so if we’ve got company that are you know wasting resources trying to figure out you know uh am I a broker dealer you know are these asset Securities um we’re already having a hard enough time trying to get them to be compliant with with other you know important laws uh you know anti-money laundering laws you know anti- bribing corruption laws um you know all all the different state laws in the US around fraud we asked the SEC about its recent Wells notices sent to crypto firms and an agency spokesperson declined to comment at the same time all eyes are on the agency’s upcoming decision on spot ether ETFs to see if the agency gives any more insight as to whether it believes ether is a security and could face more oversight in the near future okay that’s all for crypto world today but we’ll be back again tomorrow and we’ll see you then

CNBC Crypto World features the latest news and daily trading updates from the digital currency markets and provides viewers with a look at what’s ahead with high-profile interviews, explainers, and unique stories from the ever-changing crypto industry. On today’s show, Crypto World takes a look at the SEC’s recent actions against decentralized finance platforms and Ethereum as it prepares to issue a decision on spot ether ETF proposals.

Chapters:
00:00 – CNBC Crypto World, May 20, 2024
0:27 – Bitcoin crosses $67k
0:47 – The headlines
3:18 – SEC’s DeFi action

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Grayscale CEO Michael Sonnenshein steps down, replaced by Goldman exec: CNBC Crypto World