US Senators Want Fidelity To Stop Offering Bitcoin

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US Senators Urge Fidelity To Reconsider Its Bitcoin Offerings After FTX Blow-Up

In a letter addressed to Fidelity Investments CEO Abigail Johnson, three U.S. Senators – Elizabeth Warren, Tina Smith, and Richard Durbin, have asked $4.5 trillion asset management firm Fidelity Investments to reconsider its Bitcoin offering to retirement savers. 

The letter specifically pointed to the recent FTX collapse as enough reason for doing so. 

The letter stated, 

“Fidelity Investments has opted to expand beyond traditional finance and delve into the highly unstable and increasingly risky digital asset market. The recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear the digital asset industry has serious problems. The industry is full of charismatic wunderkinds, opportunistic fraudsters,  and self-proclaimed investment advisers promoting financial products with little to know transparency.”

The senators also added that these “wunderkinds” and “fraudsters” have played a huge role in manipulating the price of Bitcoin, which in turn has impacted 401(k) retirement savings holders who have invested in Fidelity’s Bitcoin product: 

“Since July, when we last raised concerns with you about the deeply concerning prospect of exposing workplace retirement plans to Bitcoin, its value has plummeted.” 

“While the full extent of the damage caused by FTX continues to unfold, the contagion is being felt across the broader digital asset market. Bitcoin is no exception,” the senators commented. 

The senators’ letter to the Fidelity CEO was the second in recent months, with the first letter on July 26 demanding an explanation of why Fidelity decided to expose its customers to a Bitcoin 401(k) product to begin with. 

Durbin, Smith, and Warren also noted that some 32 million Americans and 22,000 US employers use Fidelity as a workplace retirement account and employer-sponsored plan. 

The senators added that with a retirement security crisis already playing out in the country, Fidelity shouldn’t be exposing its customers’ retirement savings to an “unnecessary risk.” 

What many people who are more familiar with cryptocurrency know that the senators in question appear to be ignoring – is that Bitcoin is not the same as FTX. 

In fact, it’s quite the opposite: 

Bitcoin is trustless and decentralized. FTX was completely centralized, and required full trust in the FTX team to manage your funds. 

It appears that Fidelity knows this – they have written about it in multiple reports since their digital asset division began:

It’s also a bit telling that the senators in question did not ask Fidelity to stop offering stocks after META fell over 25% this year. They also did not ask banks to stop offering the US dollar after out-of-control inflation has tanked its value – or after the Bear Stearns collapse in 2008, for that matter. 

But not all U.S. lawmakers appear to have sided with the three crypto-skeptic senators. 

In May 2022, Republican Senator Tommy Tuberville introduced the Financial Freedom Act into the U.S. Congress, which serves to allow U.S. residents to add cryptocurrency to their 401(k) retirement savings plan without being subject to regulatory influence. 

Fidelity has continued to increase its investment in the digital asset space, with plans to expand its digital asset division by 25% with 100 new employees by the end of Q1 2023.

Crypto Broker Genesis Warns Of Possible Bankruptcy Without Funding

According to a Bloomberg report, Digital Currency Group-owned crypto brokerage firm ‘Genesis’ is struggling to raise funding for its lending unit, and has reportedly sent a warning to potential investors that it may need to file for bankruptcy if its efforts fail. 

Genesis has also reportedly reduced its fundraising target from $1 billion to $500 million, due to fundraising difficulties. 

A representative for Genesis responded to Bloomberg via an emailed statement, saying: 

“We have no plans to file for bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.” 

As you may have guessed, the rush for funding was precipitated by the FTX collapse. Genesis halted redemptions shortly after revealing on November 10 that it had $175 million locked in an FTX trading account. 

Genesis has reached out to Apollo Global Management in a bid to secure an investment, but Apollo is unlikely to commit to a deal, according to a person familiar with the matter. One option proposed by Genesis was for Apollo to buy parts of its loan book, this person said. 

Other platforms are facing their own struggles as redemption requests roll in after FTX’s bankruptcy filing turned the crypto sector on its head and left investors on edge about the risk of contagion. 

Genesis is a counterparty to many in the digital asset space and is closely watched by some as a gauge of the industry’s strength. It’s among the crypto lenders that are feeling acute strain after a prolonged massacre in crypto prices amid multiple high-profile blowups. 

The difficulties at Genesis have also buffeted the billionaire Winklevoss twins Tyler and Cameron, owners of the Gemini crypto exchange. 

In response to Genesis suspending withdrawals, Gemini halted redemptions from its Earn product. That left in limbo a program that has $700 million dollars of customer funds tied up in it.

Cardano-Based Decentralized Stablecoin Djed Will Hit Mainnet In January

According to an announcement made by developers at the Cardano Summit event in Lausanne, Switzerland, Cardano’s first decentralized stablecoin ‘Djed’ will launch on the Cardano Mainnet in January 2023. 

However, this will be contingent upon the stablecoin completing a successful audit and a series of rigorous stress testing. 

Djed will be an over-collateralized algorithmic stablecoin soft-pegged to the U.S. dollar that will exist on Cardano’s Layer 1 blockchain. The excess collateral will be in the form of cryptocurrency stored in a reserve. 

The stablecoin has been in development for well more than a year. Once launched, Cardano users will be able to take ADA – the native cryptocurrency of the Cardano network – and use it as collateral to mint the stablecoin. 

Djed’s overcollateralized design means that it is backed by excess collateral in reserve. This is a similar design used by Dai, the most popular decentralized stablecoin in the Ethereum ecosystem. 

Each Djed will require more than 400% in collateral value to be minted. 

“Djed takes what’s great with crypto as collateral, meaning no fiat in the system, but also takes over-collateralization very seriously,” Coti CEO Shahaf Bar-Geffen said. 

At its launch, Djed will be integrated into 40 apps in the Cardano ecosystem. The launch will also come with the introduction of DjedPay, a service that will let merchants and other crypto players accept Djed payments.

Luke Baldwin