The Daily: Bitcoin spikes following Fed Chair comments, crypto groups warn of privacy concerns, Kraken denied SEC case dismissal and more

Happy Friday! Today, we look at Bitcoin spiking following the Fed Chair's comments, two crypto organizations pointing out privacy concerns regarding the SEC's consolidated audit trail, how Kraken’s motion to dismiss U.S. SEC case was denied more.

Let's get started.

Bitcoin spikes as Fed says 'time for policy adjustment'

Bitcoin surged past $61,000 after Fed Chair Jerome Powell expressed confidence that U.S. inflation is on track to return to 2% and suggested potential interest rate cuts.

• Powell indicated at the Jackson Hole symposium that the timing and pace of rate cuts will depend on incoming data and the evolving economic outlook.
• Following Powell's speech, the global cryptocurrency market capitalization rose to $2.28 trillion, marking a 0.6% increase in the last 24 hours.
• Stocks also rose on Friday, with the Dow Jones Industrial Average climbing 417 points, the S&P 500 gaining 1.2% and the Nasdaq Composite advancing 1.8%. 
• The CME FedWatch tool now shows a 67.5% probability of a 25 basis point cut and a 32.5% chance of a 50 basis point cut at the next Federal Open Market Committee meeting in September.
• The Bitfinex Head of Derivatives stated that Powell's speech is a significant indicator for the upcoming FOMC meeting, with investors closely monitoring his interpretation of recent economic data.

Blockchain Association, DeFi Education Fund warn of privacy concerns

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

• The SEC adopted Rule 613 following the 2012 financial crisis, requiring national securities exchanges and the Financial Industry Regulatory Authority to maintain a CAT.
• The groups argue that the CAT could deanonymize blockchain transactions, turning blockchains into a searchable repository for the government and potentially exposing a user's entire transaction history without a warrant.
• They add that the CAT database, which collects personally identifiable information, poses significant privacy risks and could be vulnerable to data breaches.

Kraken’s motion to dismiss US SEC case gets denied

A U.S. District Judge ruled that the SEC has plausibly alleged Kraken facilitated investment contracts that qualify as securities, allowing the case against Kraken to proceed.

• Judge Orrick highlighted Kraken's $43 million in revenue from trading fees between 2020 and 2021, emphasizing the few restrictions Kraken placed on asset trading.
• The SEC's lawsuit against Kraken, filed in November 2023, accuses the exchange of operating as an unregistered securities exchange and broker-dealer, as well as mishandling customer assets and information.
• Kraken argued that the SEC was overstepping its authority, but Judge Orrick pointed out that similar motions to dismiss were unsuccessful in the SEC's lawsuits against Binance and Coinbase.

China extradites $14 billion crypto pyramid scheme mastermind from Thailand

China has extradited a suspect named Zhang from Thailand, marking the first financial criminal suspect to be extradited under the China-Thailand extradition treaty since its implementation in 1999.

• Zhang allegedly led a $14 billion pyramid scheme known as "MBI Group," which involved luring over 10 million investors into paying membership fees through the issuance of cryptocurrency.
• Chinese and Thai authorities formed a special working group called "Hunting Fox," and Zhang was extradited to China after his arrest in Thailand and a court ruling in May 2023.
• China's crackdown on illegal crypto activities continues, with the country's top legal authorities recently including crypto-related money transfers as a method of money laundering in their judicial interpretations.

Spot bitcoin ETFs see $65 million in net inflows

U.S. spot bitcoin ETFs reported $64.91 million in net inflows on Thursday, marking six consecutive days of positive flows.

• BlackRock’s IBIT led the way with $75.49 million in inflows, with Fidelity’s FBTC recording $9.23 million in inflows and Ark and 21Shares’ ARKB saw $7.83 million.
• Grayscale’s GBTC also saw $28.36 million in outflows, making it the second-largest spot bitcoin ETF to experience negative flows, alongside Bitwise’s BITB, which logged $11.5 million in net outflows.

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