Three momentous crypto stories from the past week

Quick Take

  • This past week, the Ethereum blockchain successfully activated The Merge as it shifted to proof-of-stake from proof-of-work. 
  • The Biden administration released its much-anticipated digital asset reports, formulating a possible U.S. framework for crypto. 
  • A South Korean court put out an arrest warrant for Terraform Labs CEO Do Kwon, four months after his Terra blockchain temporarily collapsed as its native stablecoin depegged. 

It's safe to say that the past week will go down in crypto history. Not only did Ethereum activate The Merge as it shifted to proof-of-stake, but the Biden administration also dropped its much-anticipated digital asset reports. Additionally, South Korean courts put out a warrant for the arrest of Terraform Labs CEO Do Kwon — that's quite a week!

Here are the three biggest stories: 

Ethereum successfully activates The Merge

On Sept. 15 at 6:44 am UTC, Ethereum's Merge upgrade was finally activated, a development that had been in the works since 2020. This was the final step in the blockchain's transition to proof-of-stake, meaning that the use of computing power to validate the network (or mining) is no longer needed to validate transactions. 

"And we finalized! Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today," said Ethereum co-founder Vitalik Buterin on Twitter.

The move was particularly momentous as it reduces Ethereum's energy consumption by more than 99%, meaning that it's now Environmental, Social, and Governance (ESG) compliant. 

In the lead-up to The Merge, many traders were hedging their bets, expecting market volatility if the transition didn’t go to plan, but the reaction was muted with the Ether native token hovering around the $1,500 mark. 

Developers are now focused on growing Ethereum via rollups or layer 2 networks so that it can achieve greater scalability to process faster and cheaper transactions. 

Biden administration releases crypto reports

On Friday, the Biden administration released a set of reports that aimed to outline a possible framework for U.S. digital asset policy. 
The reports were a crucial step in the government's efforts to lay out a framework for its policy toward cryptocurrencies and included calls from the Treasury Department to "double down" on regulation, further support for research on central bank digital currencies (CBDC) and plans of action against digital asset usage by bad actors.
Still, some cryptocurrency industry groups and Republican lawmakers slammed the documents. Crypto Council for Innovation CEO Sheila Warren described the reports as “outdated and unbalanced” and criticized a lack of clear policy recommendations. Republican Patrick McHenry of the House Financial Services Committee also panned the reports for not providing more specific actions. 
They were received well by some figures in the industry, however, with general counsel at crypto infrastructure firm Paxos saying they were pleased with the efforts. Binance CEO Changpeng Zhao also praised the reports. 

Legal troubles for Do Kwon

On Wednesday, a South Korean court issued an arrest warrant for Do Kwon, CEO of Terraform Labs, charging him and his co-former head of research, Nicholas Platias, with violating the Capital Markets Act. 

The warrant came four months after Kwon's Terra blockchain halted as its algorithmic stablecoin TerraUSD de-pegged from its intended $1 mark.

In an attempt to restore the peg, billions of dollars in bitcoin were sold by related entity Luna Foundation Guard, while unprecedented volumes of Terra’s native currency luna were issued. TerraUSD was once the third-largest stablecoin by issuance and its de-pegging resulted in heavy losses for investors. Kwon has since tried to rebuild the ecosystem with a new native currency. 

Claiming in an August interview that South Korean investigators looking into the crash had not contacted him, Kwon's last known whereabouts were in Singapore. Following the warrant, prosecutors asked the South Korean Foreign Ministry to invalidate his passport so that he would be unable to travel.

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