Bitcoin soars on Fed Chairman’s remarks, crypto group warns of privacy concerns, Kraken refuses to dismiss SEC case, etc.

Happy Friday! Today we take a look at Bitcoin’s surge following comments from the Federal Reserve Chairman, two crypto entities raising privacy concerns about the SEC’s integrated audit trail, and how Kraken’s motion to dismiss the US SEC case was denied.

Let’s get started.

Bitcoin Soars as Fed Announces ‘Time for Policy Adjustment’

Bitcoin broke above $61,000 after Federal Reserve Chairman Jerome Powell expressed confidence that U.S. inflation would return to 2% and hinted at a possible interest rate cut.

• Powell told the Jackson Hole symposium that the timing and pace of rate cuts will depend on incoming data and changing economic outlook.
• Following Powell’s speech, the global cryptocurrency market cap increased to $2.28 trillion, up 0.6% over the past 24 hours.
• Stocks rose on Friday as well, with the Dow Jones Industrial Average up 417 points, the S&P 500 up 1.2% and the Nasdaq Composite up 1.8%.
• The CME FedWatch tool currently shows a 67.5% chance of a 25 basis point cut at the next Federal Open Market Committee (FOMC) meeting in September, and a 32.5% chance of a 50 basis point cut.
• Bitfinex’s head of derivatives said Powell’s speech is a key indicator of the upcoming FOMC meeting, and investors are closely watching Powell’s interpretation of recent economic data.

Blockchain Association, DeFi Education Fund Warns of Privacy Concerns

The Blockchain Association and DeFi Education Fund have raised concerns that the SEC’s Unified Audit Trail (CAT) database could compromise the privacy of millions of people, including those involved in digital assets.

• The SEC adopted Rule 613 following the 2012 financial crisis, requiring national securities exchanges and financial industry regulators to maintain CATs.
• The groups argue that CAT could de-anonymize blockchain transactions, turn blockchains into government-searchable repositories, and potentially expose users’ entire transaction histories without a warrant.
• They added that the CAT database, which collects personally identifiable information, poses serious privacy risks and could be vulnerable to data breaches.

Kraken, US SEC Case Dismissed

A U.S. federal district judge ruled that the SEC’s claim that Kraken brokered investment contracts that were deemed securities was valid, allowing the lawsuit against Kraken to move forward.

• Judge Orrick noted that Kraken earned $43 million in trading fees from 2020 to 2021, and that Kraken had several restrictions on trading assets.
• The SEC filed suit against Kraken in November 2023, accusing the exchange of operating as an unregistered securities exchange and broker-dealer and of mishandling customer assets and information.
• Kraken argued that the SEC had overstepped its authority, but Judge Orrick noted that similar motions to dismiss were denied in the SEC’s lawsuits against Binance and Coinbase.

China, Thailand to extradite $14 billion cryptocurrency pyramid scheme mastermind

China has extradited a suspect named Zhang from Thailand, the first time a financial crime suspect has been extradited since the China-Thailand extradition treaty came into effect in 1999.

• Zhang is accused of leading a $14 billion pyramid scheme called “MBI Group,” which lured more than 10 million investors into paying membership fees by issuing cryptocurrencies.
• Chinese and Thai authorities formed a special task force called “Hunting Fox”, and Zhang was arrested in Thailand and extradited to China after a court ruling in May 2023.
• There is an ongoing crackdown on illicit cryptocurrency activity in China, with the country’s top law body recently including cryptocurrency-related fund transfers as a means of money laundering in a judicial interpretation.

Spot Bitcoin ETF records $65 million in net inflows

On Thursday, US spot Bitcoin ETFs recorded net inflows of $64.91 million, continuing a six-day streak of positive flows.

• BlackRock’s IBIT led the way with $75.49 million inflows, followed by Fidelity’s FBTC with $9.23 million and Ark and 21Shares’ ARKB with $7.83 million.
• Grayscale’s GBTC also saw outflows of $28.36 million, making it the second-largest spot Bitcoin ETF, alongside Bitwise’s BITB, which saw net outflows of $11.5 million.

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