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Montenegro to Extradite Do Kwon to South Korea, Rejecting U.S. Request

Kwon has been in custody in the Balkan country since March 2023, when he was arrested for using a fake passport en route to Dubai.

Terraform Labs co-founder and fraudster Do Kwon is once again set to be extradited from Montenegro to his native South Korea, after a ruling from the Balkan nation’s court of appeals Thursday.

The Appellate Court of Montenegro issued a ruling confirming an earlier decision from a lower court, the High Court of Podgorica, to send Kwon to South Korea instead of the U.S., which is also seeking his extradition.

Both countries want to try Kwon for criminal charges tied to the $40 billion implosion of the Terra/LUNA ecosystem in May 2022. Terra was the first proverbial domino to fall in a sequence of high-profile crypto company collapses that year including FTX, the second-biggest crypto exchange in the world.

Kwon went on the lam shortly after Terra’s collapse. In September 2022, Interpol put out a red notice for Kwon. Six months later, in March 2023, he was arrested and subsequently jailed in Montenegro for attempting to use a fake Costa Rican passport to fly to Dubai. Kwon was initially given a four-month sentence for using falsified documents, but remained in prison until March of this yeart, when he was released on bail without his real passport, which was confiscated to prevent him from leaving the country.

Thursday’s decision is expected to put an end to months of back-and-forth over whether Kwon should be extradited to South Korea, which submitted its extradition request first, or the U.S. Kwon successfully fought against earlier rulings to extradite him to the U.S. but, when the High Court of Podgorica ruled to send him to South Korea, the country’s Supreme Court stepped in to postpone it after the country’s top prosecutor issued a statement arguing that the court’s decision overstepped the limits of its power. There have been numerous court rulings overturning previous decisions to send him to one or another of the two countries.

A truly final decision on where Kwon will be extradited can only be made by Montenegro’s minister of justice, according to the Office of the Supreme State Prosecutor. Montenegro’s Prime Minister, Milojko Spajic, is a personal investor in Terraform Labs, Bloomberg reported earlier this year.

No date for Kwon’s extradition has yet been set.

Crypto Exec Pushing for Industry Support of Kamala Harris for President

J.P. Thieriot, a board member and ex-CEO of Uphold, backs the vice president in her U.S. presidency bid and says he’s hoping to build a digital assets advocacy for the Democrat.

The former CEO of crypto platform Uphold, J.P. Thieriot, is trying to drum up crypto support for Vice President Kamala Harris as she pursues the Democratic nomination in the presidential election, arguing that former President Donald Trump is offering empty promises to the industry and Harris is signaling a new openness.

Trump, the Republican nominee in the 2024 race, has quickly become the crypto favorite, garnering big-money support from industry leaders as he adopts enthusiastic cheering for the digital assets sector (which he’d looked on with open skepticism until recently). But Thieriot said there seems to be “a real opportunity to help shape the Harris campaign’s position on crypto.”

“Of course, she’s going to have to do some stuff to gain trust, but she has signaled she’d like a chance,” said Thieriot, who said he still retains a stake in Uphold and is building a new crypto trading operation, in an interview. “It would be crazy to not engage on that.”

He said he wrote a strategy paper with a wider group, which included crypto lawyers who he declined to name. They shared that document with Harris’ campaign this week and are awaiting a response.

“We would argue that crypto is this electoral cycle’s foremost interstate swing issue,” said the strategy paper, which was reviewed by CoinDesk. “Trump has already moved to try to capture this space, and raised significant capital, essentially offering vague platitudes and no meaningful policy commitments.”

The paper suggested an opening crypto fundraiser in San Francisco and predicted that Harris could garner endorsements from prominents crypto figures and potentially earn tens of millions in campaign donations from the industry. Thieriot said he’s setting up a website, and the effort can be contacted at info@crypto4kamala.co.

Industry support has most loudly gravitated toward Trump, who spoke at the recent Bitcoin 2024 conference in Nashville, Tenn., and who says he’ll put a stop to the government resistance to cryptocurrency typified by the actions of Securities and Exchange Commission Chair Gary Gensler and the opposition of Sen. Elizabeth Warren (D-Mass.).

Despite President Joe Biden’s appointment of Gensler and ongoing support of his oversight of the cryptocurrency sector, “Kamala has, I think, an opportunity at a clean slate,” Thieriot said. The strategy he and the other supporters have in mind: She makes it clear her administration will work with the industry and support clear rules for it, and she shows openness for a friendlier chief at the SEC.

Thieriot isn’t alone among crypto insiders now favoring Harris. Tonya Evans, a prominent crypto law professor and board member of the Digital Currency Group, argued that Harris offers a chance for a new course that differs from the Gensler/Warren views that have dominated this administration. Evans is involved in a group of decentralized finance leaders favoring the vice president, which has scheduled a Thursday organizational meeting.

Some of the most recent national polling shows Harris with a slight lead over Trump, though the candidates remain nearly even.

EU Regulator Details How It Classifies Unlawful Overseas Businesses Under MiCA

The European Securities and Markets Authority released an opinion to aid firms that may do business with overseas firms in order to prevent them breaching the rules on Wednesday.

The European Securities and Markets Authority published some clarity on Wednesday for crypto companies dealing with overseas firms to prevent them breaking the Markets in Crypto Assets rules (MiCA).

Companies that are not authorized to operate in the trading bloc of 27 nations cannot provide any services to European Union clients unless those clients reach out first. With Thursday’s guidance, ESMA wants to prevent unauthorized companies from finding loopholes to proactively reach out to EU clients.

The opinion by ESMA, an independent EU body tasked with investor protections, detailed actions it believed could be unlawful solicitation of clients. The regulator said it would be illegal for an EU-authorized broker to systematically route orders it receives to a group’s execution venue if that group is located outside the EU and the broker hasn’t explored any alternative options.

ESMA also deemed it unlawful for legal brokers to rely on the brand of an overseas exchange when advertising to attract business from EU citizens to the point that it makes it difficult to distinguish its services.

Included in the mix of illicit activity would be if the authorized broker has limited revenue from EU clients “or has revenue flows that significantly diverge from what would be expected where an independent broker and independent execution venue interact,” the paper said.

MiCA does allow EU-authorized brokers to offer exchange services such as exchanging crypto-assets for funds or other crypto-assets to EU clients, and to enter into agreements with non-EU entities to both manage liquidity and hedge their risk, ESMA said.

However, companies “should pay close attention to situations where an established hedging scheme has the main purpose or effect to channel EU order flows systematically and automatically to a unique non-EU execution venue and, in particular, where this non-EU execution venue is part of the same group,” the report said.

DeFi Protocol Convergence Hacked, CVG Token Plunges 99% on Curve

The exploiter created 58 million of the protocol’s CVG token and then swapped for roughly $200,000 worth of wrapped ETH and crvFRAX and forwarded to Tornado Cash.

Decentralized finance protocol Convergence, a Curve-based yield-enhancing protocol, a was exploited Thursday, sending its token’s price to near-zero.

The attacker created (minted) 58 million of the protocol’s CVG token using a vulnerability in the protocol’s codebase, and swapped the tokens for 60 wrapped ether (wETH) and 15,900 crvFRAX stablecoin using liquidity pools on Curve, web3 security auditing firm QuillAudits said.

Blockchain data on Etherscan shows that the attacker’s address converted the funds to ether (ETH) and sent the tokens to Tornado Cash.

The attack caused about $210,000 loss, QuillAudits added.

CVG holders, however, suffered additional damage as the token’s $17 million fully diluted value (FDV) before the attack evaporated. CVG’s price declined 99% in the Curve liquidity pools, nosediving to $0,0004 from trading around $0.12 earlier today.

Convergence asked users not to interact with the protocol.

MicroStrategy Reports Q2 Loss; Bitcoin Holdings Rise to 226,500

Still not switching over to mark-to-market, the company booked an impairment charge of $180.1 million in the second quarter.

MicroStrategy (MSTR) reported a second quarter net loss of $102.6 million or $5.74 per share versus income of $22.2 million or $1.52 per share one year earlier.

The loss came as the company took an impairment charge on its bitcoin holdings of $180.1 million versus $24.1 million in the second quarter a year ago.

Led by Executive Chairman Michael Saylor, the company disclosed July 31 bitcoin holdings of 226,500 tokens, up a handful of coins since the latest purchase announcement in mid-June. Those 226,500 bitcoins were acquired for $8.3 billion or a cost of $36,821 per token. At the current price of $63,500, those assets are worth about $14.4 billion.

“On the adoption front, we are extremely optimistic with the improved understanding of bitcoin and the increasing support for the ecosystem from bipartisan politicians and institutions on display at the Bitcoin 2024 Conference in Nashville,” said CEO Phong Le in the earnings release.

The impairment charge reflects the loss or gain of the company’s bitcoin holdings compared to the price that it was purchased at. While new accounting guidelines allow for companies to mark to market their digital asset holdings, firms are not yet required to do so.

Checking operations, the company posted $111.4 million in revenue versus analyst estimates of $122 million, according to FactSet.

Shares fell 6.5% in the regular trading session prior to earnings on Thursday alongside a steep fall in both stock and crypto markets. MSTR has more than tripled over the past year as the price of bitcoin more than doubled over the same period.

The Nasdaq-listed software firm in July announced a 10-for-1 stock split to make its stock more accessible to investors and employees. That split became effective at the close of business today.

Coinbase Shares Rise After Q2 Revenue Beats Wall Street Estimates Amid Falling Trading Volume

The crypto exchange posted better-than-expected revenue mostly due to its sales diversification strategy.

Coinbase (COIN) second-quarter revenuebeat the Wall Street analysts’ estimates slightly as the industry continues to recover from the crypto winter, sending the crypto exchange’s shares higher.

The crypto exchange said its second quarter total revenue was $1.45 billion versus average estimate of about $1.4 billion, according to FactSet. However, the second quarter adjusted Ebitda of $596 million came in lower than the consensus of $607.7 million.

Coinbase’s biggest source of income comes from transaction fees, which slipped 27%from the previous quarter as trading volume fell 28%. One of the bright spots for the exchange in the second quarter was the subscription and services revenue which grew 17% from previous quarter.

“On a Q/Q basis, subscription and services revenue benefited from higher average USDC on-platform balances and USDC market capitalization, as well as higher average crypto asset prices – notably SOL and ETH,” the firm said in a shareholders letter.

The exchange has been trying to diversify its revenue streams by becoming a crucial part of the spot bitcoin and ether (ETH) exchange-traded funds (ETFs) business, listing some of them and also acting as custodian.

Most recently, CoinDesk reported that the exchange is tapping into real-world assets (RWA) by planning on creating a tokenized money-market fund, a corner of finance that has become popular for asset managers.

Asset management giants BlackRock and Franklin Templeton have both tokenized one of their funds earlier this year. BlackRock’s BUIDL token surpassed $500 million in market value in less than four months of existence.

The stock rallied about 2% in the minutes following the report. It has gained 48% since the beginning of the year and has traded little changed over the past month.

Bitcoin Miner Marathon’s Shares Tumble After Revenue Unexpectedly Misses Wall Street’s Estimates

The miner said its adjusted EBITDA swung to loss, compared to previous year’s profit.

The shares of bitcoin miner Marathon Digital (MARA) fell as much as 8% on Thursday post-market trading after the company’s second quarter revenue missed Wall Street’s expectations. The shares have recouped some of their losses since then.

Marathon reported revenue of $145.1 million versus an estimate of $157.9 million, according to FactSet data. The company’s sales took a hit in the second quarter due to several operational challenges which hindered its ability to mine bitcoin as well as recent halving weighing on the mining sector, Marathon said in its earnings release.

“During the second quarter of 2024, our BTC production was impacted by unexpected equipment failures and transmission line maintenance at the Ellendale site operated by Applied Digital, increased global hash rate, and the April halving event,” said Fred Thiel, the firm’s CEO, in a statement.

However, Marathon said that the issues have since been remedied and the company reached an all-time high mining power of 31.5 exahash per second (EH/s) in the second quarter.

The miner also said that its second quarter adjusted EBITDA swung to a loss of $85.1 million from a gain of $35.8 million in the previous year, mainly due to unfavorable fair value adjustments of its digital assets and lower BTC being mined in the quarter.

Despite the challenges, the miner continues to see reaching hashrate of 50 EH/s by the year-end and plans to growth it further next year.

Marathon sold 51% of the bitcoin it mined in the second quarter to fund its operating costs. However, it recently announced that it bought $100 million worth of bitcoin in the open market and re-adopted strategy to fully hold all BTC in its balance sheet. The miner now holds more than 20,000 BTC in its balance sheet.

“During the quarter, we organized the internal structure of the business to better align with our growth opportunities, sharpen our strategic focus, bolster accountability, and accelerate our speed and agility as we scale,” said Thiel.

Bitcoin as a Strategic Reserve

Both former President Donald Trump and Sen. Cynthia Lummis proposed the U.S. hold its bitcoin.

Over the weekend, former U.S. President and current Republican nominee Donald Trump and a number of lawmakers spoke at the Bitcoin Nashville conference. The biggest piece of news everyone has been talking about was Trump and Sen. Cynthia Lummis’ proposals to create a strategic reserve for Bitcoin, but the event also served as Sen. Tim Scott’s entry into actual crypto discussion.

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BTC conference

The narrative

Lawmakers – and Donald Trump, who of course is hoping to regain the presidency this November – took the stage through the Bitcoin Nashville conference last week to try and appeal to BTC holders for votes or funds.

Why it matters

This is the first major U.S. election where crypto is getting attention from lawmakers and candidates. While it’s still not totally clear whether there truly is a significant mass of single-issue crypto voters, what is clear is lawmakers are going to continue to appeal to this crowd over the next few months.

Breaking it down

First up: Former President Donald Trump spoke, saying if he’s elected he’ll work to appoint friendlier regulators, but his biggest promise may be his suggestion that the U.S. would create a strategic bitcoin stockpile, a promise echoed by Sen. Cynthia Lummis (R-Wyo.) who introduced a bill this week that would support that goal.

“And so as the final part of my plan today, I am announcing that if I am elected, it will be the policy of my administration, United States of America, to keep 100% of all the bitcoin the U.S. government currently holds or acquires into the future, we’ll keep 100%,” Trump said. “I hope you do well, please. This will serve, in effect, as the core of the strategic national bitcoin stockpile.”

The former president also acknowledged that “most of the bitcoin currently held by the United States government was obtained through law enforcement action.”

“You know that they took it from you. Let’s take that guy’s life. Let’s take his family, his house, his bitcoin. We’ll turn it into bitcoin. It’s been taken away from you, because that’s where we’re going now. That’s where this country is going to – fascist regime. And so as I take steps to transform that vast wealth into a permanent national asset to benefit all Americans,” he said.

The proposals – both from Trump and Lummis – still leave some questions unanswered at the moment, but in a broader sense, they’re more just messages to the bitcoin community at the moment, that if Trump becomes president again (and/or if Republicans become the majority party in the Senate), he’ll be friendlier toward the industry than in his first term.

Trump also shouted out Vivek Ramaswamy, who briefly also vied for the Republican ticket.

“I’ve heard from Vivek 175 million people in some form, are involved with this world of crypto and Bitcoin and all of the others, 175 million,” he said. “So when they heard that, they said, ‘Let’s be nice to them, at least until after the election.'”

You can read a partial transcript of Trump’s remarks here.

As my colleague Jesse Hamilton reported, this event also served as Sen. Tim Scott’s (R-S.C.) first substantial introduction to the crypto community. The Senate Banking Committee’s top Republican, Scott – another former contender for the presidency – will become the committee’s chair if the GOP retakes the Senate, putting him in charge of legislation that could affect the Securities and Exchange Commission and crypto regulation more broadly. He did not introduce any specific policy ideas during his remarks on stage.

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If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

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See ya’ll next week!

Indian Survey Reveals Impact of Crypto Taxes and Anti-Money Laundering Rules on Investors

The study was conducted to assess how savvy investors are engaging with traditional finance, crypto and stablecoins in their investment portfolios.

India should consider revising its taxes on crypto and not depend on its anti-money laundering rules to reverse the impact of those high taxes, the latest survey of savvy Indian investors by a New Delhi-based technology policy think tank revealed.

The study by the Esya Centre also found that Indian investors are considerably aware of regulations relating to the taxation of cryptocurrencies (58%) and money laundering (52%), and prefer collateralized stablecoins (93%) over algorithmic ones.

The survey was conducted in March and April in five urban cities: Ahmedabad, Bengaluru, Delhi, Jaipur, and Lucknow and focused on 1,342 highly educated respondents.

Critically, the study found that India’s “anti-money laundering law has led to a shift in favor of equity investments compared to crypto investments (by 8 percent).”

Since last year, India has required crypto businesses to register with the Financial Intelligence Unit (FIU), the country’s anti-money laundering unit, to comply with processes under the Prevention of Money Laundering Act (PMLA).

Despite evidence-backed studies by Esya and others calling for reduction, India has kept high crypto taxes unchanged since introducing them in 2022.

Esya’s latest survey found that knowledge of the “tax regulations not only increases investment in crypto assets (by 10 percent), but also investment via foreign crypto platforms (by 15 percent).”

That trend was reversed to some extent evvel India blocked as many as nine off shore exchanges, some of which have now been registered in India.

The survey found that some Indian investors were circumventing offshore exchanges’ URL blocking, suggesting that the anti-money laundering laws were not “sufficient to reverse or neutralize the impact of tax regulations.”

Thus, the think tank reiterated its suggestion that the government should “consider revising the tax rules for crypto assets to prevent offshoring” and that “future attempts by the government to nudge consumers to engage responsibly in the crypto asset market should be in consultation with crypto exchanges.”

All the respondents considered crypto assets to be very attractive as an “additional investment opportunity and for cross-border transactions,” while NFTs and stablecoins were “not perceived as similarly lucrative.”

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