Q1 2023: Five stories that shaped cryptocurrency

Quarterly retrospective covering January 1–March 31, 2023. Dated March 31, 2023. Stories selected for market impact, policy significance, and consequences for cryptocurrency infrastructure.

1. Silicon Valley Bank’s failure breaks USDC’s dollar peg

USDC temporarily lost its dollar peg in March after Circle disclosed that $3.3 billion of its reserves were held at failed Silicon Valley Bank. The uncertainty demonstrated that a stablecoin backed by conventional assets could still face disruption through its banking relationships. After U.S. authorities announced protection for the bank’s depositors, Circle said the reserve funds would be available and normal operations could resume. The episode connected traditional bank-run risk directly to cryptocurrency markets and made reserve composition, banking concentration, and redemption access central questions for stablecoin users. Source: Circle, March 12.

2. Genesis’s lending businesses seek bankruptcy protection

Genesis Global Holdco and two lending subsidiaries filed for Chapter 11 in January, extending the fallout from the previous year’s failures. The company said its separate trading and custody businesses were outside the filing and continued operating. The distinction mattered to customers trying to understand which entities held their claims. The bankruptcy showed that the consequences of the 2022 lending crisis were still unfolding, with recoveries depending on legal structures and restructuring negotiations rather than a return to normal withdrawals. Source: Associated Press, January 20.

3. Kraken settles U.S. staking-service charges

Kraken agreed in February to end its U.S. staking-as-a-service programme and pay $30 million to settle SEC charges. The agency alleged that the pooled service constituted an unregistered securities offering. The action focused industry attention on how centralised providers described staking returns, handled customer assets, and structured their programmes. It also sharpened the distinction between participating directly in a proof-of-stake network and buying an intermediary’s service. The settlement addressed the particular programme and entities involved rather than establishing a blanket prohibition on every form of staking. Source: SEC litigation release, February 13.

4. Paxos is directed to stop issuing new BUSD

Paxos announced in February that it would cease minting new Binance USD tokens following a direction from the New York Department of Financial Services. The change affected the future supply of a major dollar stablecoin and the relationship between a regulated issuer and a large cryptocurrency exchange. Existing-token redemption and the issuance of new tokens were separate matters, making the operational details important for holders. The episode illustrated how regulatory decisions about an issuer could reshape liquidity and product choices across trading platforms that depended on its stablecoin. Source: Blockworks, February 13.

5. Ordinals brings a new inscription market to Bitcoin

The launch of Ordinals early in the year introduced a convention for tracking individual satoshis and associating them with inscribed content. Bitcoin Magazine described the accompanying software as a wallet and explorer for creating, viewing, and transferring inscriptions. The development opened a new market for Bitcoin-based digital collectibles and renewed debate about the use of block space. For infrastructure operators, its importance extended beyond collectible prices: new transaction patterns and demand for inscription data created additional considerations for fees, indexing, and the services built around Bitcoin transactions. Source: Bitcoin Magazine, January 31.