US authorities to intensify scrutiny of crypto industry in 2023
United States authorities to increase scrutiny of cryptocurrency industry in 2023.

Fourteen years after Bitcoin’s genesis block launched a profound disruption in financial services and other industries through the rise of blockchain technology, United States authorities are finally becoming more interested in cryptocurrencies’ future and economic impact.

On Dec. 14, the Financial Accounting Standards Board discussed new accounting and disclosure requirements for entities holding crypto assets in financial statements, following an agenda consultation with investors — the first in five years. The proposed rules are expected to be issued in the first half of 2023.

A few days earlier, the Securities and Exchange Commission delivered a sample letter regarding the recent developments in the crypto markets, asking companies to consider in their disclosures “the need to address crypto asset market developments in their filings generally, including in their business descriptions, risk factors, and management’s discussion and analysis.”

The changes are set to be felt by many players in the crypto and financial services industries, according to legal specialists. “It should have a multi-pronged and ultimately profound macro and micro impact on financial markets generally and the crypto industry specifically,” said Mark Kornfeld, securities and financial fraud shareholder at the law firm Buchanan Ingersol and Rooney. He told Cointelegraph:

“First, the Commission, much like it did after the Madoff Ponzi scheme was disclosed to the world at large, will be aggressively monitoring and doing full-blown regulatory examinations of in time thousands (if not more) conducting business in and around this space. All in the market should reasonably anticipate and fully expect a sizable uptick in regulatory enforcement proceedings by the Commission, and, continued legal challenges to, the Commission’s jurisdictional authority.”

Cryptocurrency is also reportedly becoming a focus of the Internal Revenue Service (IRS), with its Criminal Investigation division hiring hundreds of new agents to work on digital assets and cybercrime. Along with its own data scientists, the IRS is hoping to cooperate with crypto firms, aiming to create a “symbiotic relationship” to fight financial crime.

Legislators in the United States are also under pressure to set a new regulatory framework for cryptocurrencies after last November's dramatic collapse of crypto exchange FTX, ​​setting the stage for upcoming scrutiny in the crypto market in 2023.

There are, however, some who believe the outcomes will be positive in the long term. “The net result should prove to be a more regulated and transparent climate, increased market stability, and much-improved investor and consumer protection in a space that has until recently operated in an environment fairly characterized as relatively secretive and opaque,” said Kornfeld.

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1.5M houses could be powered by the energy Texas miners returned
During the winter storm in Texas in December 2022, Bitcoin-mining operators returned up to 1,500 megawatts of energy to the distressed local grid.

During the winter storm in Texas in December 2022, Bitcoin mining operators returned up to 1,500 megawatts of energy to the distressed local grid. It became possible due to the flexibility of mining operations and the ancillary services, provided by the state authorities.

In his commentary to Satoshi Action Fund, Texas Blockchain Council president Lee Bratcher stated that miners returned up to 1,500 megawatts to the Texas grid. This amount of energy would be enough to heat “over 1.5 million small homes or keep 300 large hospitals fully operational,” according to the calculations from the Bitcoin advocacy group.

While there’s no specification regarding the exact time period in which miners have accumulated such an amount of power, the global Bitcoin mining hashrate dropped by 30% on Dec. 24-25, 2022. Miners appeared to be the model participants of ancillary services in the state, which stimulate customers to reduce their consumption during peak demand in order to stabilize the grid.

The winter storm in North America was so severe that it shut down Binance's cloud mining products from Dec. 24-26. During the days leading up to Christmas, a "bomb cyclone" unleashed extreme temperatures across the United States, leaving millions without electricity and claiming dozens of lives.

Back in March 2022, the Electric Reliability Council of Texas (ERCOT) established an interim process to ensure that new large loads, such as Bitcoin miners, can be connected to the ERCOT grid. Software providers have also begun working with miners to ensure they have the tools needed to properly enable grid balancing.

With its 14% share in Bitcoin hashrate, Texas is among the top states for Bitcoin mining in the United States, along with New York (19.9%), Kentucky (18.7%) and Georgia (17.3%).

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Wash trading will cause crypto’s next implosion: Mark Cuban
Mark Cuban has spoken about the danger of exchange wash trading becoming the next thing to hinder the crypto industry.

Crypto token wash trading on centralized exchanges will be the cause of the next crypto “implosion,” according to billionaire Dallas Mavericks owner and crypto investor Mark Cuban.

In an interview with The Street on Jan. 5, the billionaire investor opined that 2023 will not be short of crypto scandals following the numerous fiascos that rocked 2022.

Cuban, who has backed several crypto and Web3 startups, said he believes the next biggest thing to impact the industry will be "the discovery and removal of wash trades on central exchanges.”

“There are supposedly tens of millions of dollars in trades and liquidity for tokens that have very little utilization,” he said before adding, “I don't see how they can be that liquid.”

Wash trading, which is illegal under U.S. law, is a process whereby a trader or bot buys and sells the same crypto asset to feed misleading information to the market.

The goal is to artificially inflate volumes so that retail traders jump on the bandwagon and push prices up. In essence, it is a pump-and-dump scheme.

Cuban said he was just making a prediction, adding “I don't have any specifics to offer to support my guess.”

As much as 70% of the volume on unregulated exchanges is wash trading, according to a December report by the National Bureau of Economic Research (NBER).

Researchers used statistical and behavioral patterns to determine which transactions were legitimate and which ones were spurious.

Furthermore, a 2022 study by Forbes on 157 centralized exchanges found that more than half the Bitcoin trade volumes were fake.

Wash trading isn’t just limited to centralized exchanges, however. On Jan. 5, Quantum Economics CEO and former eToro senior market analyst Mati Greenspan said that 42% of all NFT volume is wash traded.

He added that wash trading is also used to harvest tax losses, making it appear (to the taxman) that there has been a greater loss than in reality.

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This Daily Dose was brought to you by Cointelegraph.

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