Whatever else one might think about stablecoins or the GENIUS Act, its insolvency provisions are an absolute mess, both conceptually and in drafting. If the GENIUS Act becomes the law, we're in for a FUBAR situation when a stablecoin issuer ends up insolvent. Even more concerning, if a bank custodian for a stablecoin issuer's reserves ends up insolvent, the claims of the stablecoin investors will come ahead of the bank depositors. That's right. Crypto comes ahead of ma-and-pa. The effect: stablecoins are being subsidized by bank deposits. Now that's GENIUS.
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A Coinbase data breach filing with the Maine Attorney General finally gives us some more detail than Coinbase’s vague “less than 1% of monthly transacting users”. 69,461 people were affected, and Coinbase says the data breach occurred on December 26, 2024.
It took them almost five months between the incident and the incident disclosure, although the company has since admitted it knew customer support agents were suspiciously accessing customer data as far back as January.
Security researchers who have spent months trying to call Coinbase’s attention to serious issues at the company are disputing Coinbase’s claims about the timing of the breach. “Threat actors had ongoing access via multiple insiders over a prolonged period of time.”
The SEC requires material cybersecurity incidents be disclosed within four business days; state laws often have a 30-day disclosure deadline. It’s not clear if customers outside the US were affected; if so, other disclosure laws may apply.
The SEC has just filed a lawsuit against Unicoin, its CEO, and promoters, accusing them of “a massive securities offering fraud” amounting to more than $100 million. The SEC had reportedly previously tried to negotiate a settlement, but Unicoin refused it.
The SEC warned Unicoin of impending civil charges in December 2024, after the company decided after Trump’s election that they would breach a standstill agreement they’d entered with the agency.
(Note: Unicoin is not to be confused with the Uniswap decentralized exchange.)
Adam Levitin on the GENIUS Act:
[I]n regard to cash deposits, the stablecoin investors will have priority over the claims of ma-and-pa for their bank deposits (and thus over the FDIC's subrogation claim when it pays ma-and-pa).
Yes, you read that correctly: Congress is about to put the claims of stablecoin investors ahead of ma and pa's bank deposits. That's just stunning. Now ma-and-pa's deposits are FDIC insured, so they'll be alright, but it means the FDIC's Deposit Insurance Fund is footing the bill. In other words, the GENIUS Act is subsidizing stablecoin issuance on the back of bank deposits. By subordinating the FDIC's subrogation claim in a bank insolvency to the claims of stablecoin investors, the GENIUS Act is effectively letting FDIC insurance leak out to cover uninsured stablecoins, without any insurance premiums paid.
In April, Coinbase announced changes to its user agreement that added two clauses further limiting class action lawsuits and requiring lawsuits to be filed in New York. The changes apply to disputes initiated after May 15.
On May 14, Coinbase disclosed a data breach.
Five lawsuits have been filed against Coinbase in response to the breach since then: all class action, none before May 15, two outside of New York.
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Coinbase announces it's joining the S&P 500 and then announces a serious data breach two days later.
oof.
The only data Coinbase has disclosed about the scale of the breach is that it affects "less than 1% of Coinbase monthly transacting users", which seems super cagey.
“Don’t hurt anyone. Never bully people weaker than yourself. Help out those in need. Some would say that these rules are obvious. But the truth is, the obvious is no longer obvious in today’s world. What’s worse is that some people even ask why. They don't understand why they shouldn't hurt other people. It's not a simple thing to explain. It’s not logical. But if they read books they will understand. It’s far more important than using logic to explain something. Human beings don’t live alone, and a book is a way to show them that.”– Sōsuke Natsukawa, The Cat Who Saved Books
Rintaro did his best to explain to the invisible listener.
“I think the power of books is that—that they teach us to care about others. It’s a power that gives people courage and also supports them in turn.”
Rintaro broke off for a moment, biting his lip.
“Because you seem to have forgotten,” he resumed with all the strength he could muster, “I’m going to say it as loud as I can. Empathy—that's the power of books.”