Previous SOMA.finance Weekly Wrap-up
Issue #112
Market Overview
Last week’s bullish energy was snuffed out by a rise in global tensions as the escalating conflict between Israel and Iran led to a spike in volatility across markets, with risk assets struggling while gold traded near its all-time high.
Issue #112
Market Overview
Last week’s bullish energy was snuffed out by a rise in global tensions as the escalating conflict between Israel and Iran led to a spike in volatility across markets, with risk assets struggling while gold traded near its all-time high.
Any major developments in the cryptocurrency industry have taken a back seat to matters of greater importance on a broader scale, be it the rising specter of war, major economic stimulus payments, interest rate cuts, catastrophic hurricanes, or port worker strikes that threaten supply chain instability.
While most analysts remain bullish on Bitcoin and cryptos headed into year-end, it's hard to deny that the ‘digital gold’ and ‘store of value’ themes took a hit this week as Bitcoin fell nearly 10% since last Friday while altcoins were a sea of red. BTC is highly likely to reach that status at some point in the future, but for now, gold is outshining all assets as it continues to trade within 1% of its all-time high.
After hitting a high of $66,574 last Friday, BTC started showing the effects of rising fears around the conflict in the Middle East over the weekend. After Iran launched its missiles, King Crypto plunged through support after support until finally bouncing off support at $60,000 on Wednesday. Thursday was dominated by consolidation, and Bitcoin closed the daily candle at $60,763.
At the time of writing, Bitcoin trades at $61,140, and the total cryptocurrency market cap stands at $2.12 trillion, a decrease of 2.3% over the past week. The DeFi market cap currently stands at $80.6 billion, with a 24-hour trading volume of $4.57 billion, which is 5.6% of the total crypto market volume.
Crypto News
Crypto Voters – A nationwide and battleground state poll conducted by HarrisX and Consensys shows that 49% of those polled described a candidate’s support of pro-crypto policies as being “extremely” or “somewhat” important to them, further highlighting the growing stature of cryptocurrencies concerning U.S. politics. 56% said they support Donald Trump’s pro-crypto stance, with a third saying they are more likely to vote for him because of it. 54% acknowledged that it’s important for Kamala Harris to take a clear position on crypto, showing that neither party has a monopoly on the issue. Overall, voters were split between trusting Republicans (35%) and Democrats (32%) on setting crypto policies. 92% of crypto owners plan to vote, underscoring their significant impact on the upcoming election.
Tokenization Rising – Blockchain solutions provider Digital Asset announced the completion of another large pilot project demonstrating the tokenization power of its Canton Network, this time working with clearing and settlement service Euroclear, the World Gold Council, and global law firm Clifford Chance to tokenize gold, Eurobonds, and gilts. A total of 27 unnamed market participants participated in the project, including 11 observers, who tokenized assets and used them as collateral in over 500 real-time atomic transactions, divided into six categories. In the project, simulated transaction flows ending in a prime broker default were carried out in a three-day period, representing a simplified workflow and considerable savings of time. The project report estimated that tokenization could save 35%–65% across the settlement value chain, including $4.1 billion from settlement failures.
Real World Use Case – A study from Chainalysis found that stablecoins now account for approximately 43% of the total transaction volume in Sub-Saharan Africa, largely due to currency devaluation. While the region accounted for just 2.7% of global cryptocurrency transactions between July 2023 and June 2024, the smallest of any region, the use cases are “compelling,” with Africans leveraging crypto for business payments, as a hedge against inflation, and for more frequent, smaller (i.e. retail-sized) transfers. “Notably, Sub-Saharan Africa leads the world in DeFi adoption, likely driven in part by a growing need for accessible financial services in a region where only 49% of adults had a bank account as of 2021,” Chainalysis said, adding, “Sub-Saharan Africa is emerging as a global model for how crypto can drive real-world impact, especially in areas underserved by traditional financial systems.”
And in the World of Surprise Developments…
XRP ETF – Cryptocurrency asset manager Bitwise officially filed for the Bitwise XRP ETF, the first spot XRP ETF filing with the U.S. SEC, which, if approved, will provide exposure to the value of XRP held by the trust “less the expenses of the trust’s operations and other liabilities,” the filing reads. In the filing, Bitwise noted that the trust’s XRP holdings will be stored with the Coinbase Custody Trust Company, similar to its other crypto ETFs, and said the trust creates and redeems shares using the cash-create method or in exchange for cash. The ETF filing followed shortly after Bitwise filed for an XRP ETF Trust in Delaware on Oct. 2, signaling that a formal filing with the SEC would follow. The launch of the Bitwise XRP ETP is pending effectiveness of the Form S-1 as well as approval of a Form 19b-4 filing.
Now Taking Bets – A U.S. federal appeals court has greenlighted Kalshi, a derivatives exchange, to list event contracts tied to US election outcomes. This paves the way for election prediction markets—possibly including Web3 platforms such as Polymarket—to operate in the US. The US Court of Appeals for the District of Columbia Circuit ruled against a bid by the CFTC to stop Kalshi from listing derivatives tied to political outcomes on the eve of the US presidential election. “The Commission cannot obtain a stay at this time because it has not demonstrated that it or the public will be irreparably harmed while its appeal is heard,” the judge on the case ruled. As of Wednesday, Polymarket shows that nearly $1 billion has been bet on the outcome of the November US presidential election, showing that, similar to sports, there is a healthy demand for placing bets on the outcome of government elections.
Privacy No More – The Telegram messaging app made waves among the crypto community after announcing a significant update to its privacy policy, informing users that it will start sharing user data with relevant authorities in response to valid legal requests, raising privacy concerns. The development follows the arrest of Telegram CEO Pavel Durov in France, with authorities saying the arrest relates to Durov helping to facilitate illegal activities through Telegram since he resisted sharing user details with law enforcement. In response to the update, Durov noted that “since 2018, Telegram has been able to disclose IP addresses/phone numbers of criminals to authorities, according to our Privacy Policy in most countries.” Moving forward, he said the messaging app will share the IP addresses and phone numbers of users who violate the app’s rules.
Related News
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Issue #104
Market Overview
The past week was basically an extended pump and dump for the cryptocurrency market as resistance at $68,000 proved to be too strong for Bitcoin bulls to overcome for the second week in a row, resulting in its price retreating to support at $62,500 and the broader altcoin market following suit.
Talk about the U.S. government's adoption of BTC as a strategic reserve currency provided a boost in momentum, with high-profile figures the likes of Presidential candidates Donald Trump and Robert F. Kennedy Jr. both saying they would make the idea part of their agendas if elected, while Senator Cynthia Lummis (R-WY) sponsored a bill to achieve the goal through Congress.
The fact the U.S. national debt surpassed $35 trillion for the first time in history this week only strengthened the argument as the chart showing the debt has reached the exponential ‘hockey stick’ phase, with no signs of slowing down on the horizon. The Fed held interest rates steady this week, which only exacerbates the matter as the high rate on historically high debt means the U.S. now spends more on interest payments than it does on defense.
Bitcoin spiked to $70,000 on Monday amid the surge in sentiment but reversed course and headed lower as the week progressed. While most markets responded positively to the Fed’s announcement and a signal that an interest rate cut could come in September, Bitcoin continued to slide lower and experienced a sharp sell-off on Thursday, hitting a low of $62,240 before recovering and closing the daily candle at $65,274.
At the time of writing, Bitcoin trades at $64,802, and the total cryptocurrency market cap stands at $2.32 trillion, an increase of 2.52% over the past week. The DeFi market cap currently stands at $92.9 billion with a 24-hour trading volume of $4.7 billion, which is 5.36% of the total crypto market volume.
Crypto News
Strategic Reserve – The crypto rumor mill proved to be correct as Presidential candidate Donald Trump announced plans to make Bitcoin a strategic reserve asset at the Bitcoin 2024 Conference on Saturday, saying that if re-elected, it will be his administration's policy “to KEEP 100% of all the Bitcoin the U.S. government currently holds or acquires in the future,” which would serve “as the core of a strategic national Bitcoin reserve.” Trump also said he would stop the “war on crypto,” fire SEC Chair Gary Gensler “on day one,” and appoint a Bitcoin and crypto presidential advisory council. Following Trump’s speech, Senator Cynthia Lummis (R-WY) announced that she would be introducing the Bitcoin Act of 2024, which, if passed, would establish a strategic Bitcoin reserve that would include a “Bitcoin Purchase Program” of up to 200k BTC per year for five years, for a total of 1 million BTC.
Car Titles Meet Blockchain – The California DMV announced that it is launching its own chain on the Avalanche network and has tokenized 42 million car titles to help modernize the vehicle title transfer experience for the state’s 39 million-plus residents. The DMV partnered with Oxhead Alpha and Avalanche to complete the process, and vehicle owners will be able to claim their digital titles through the DMV’s secure mobile wallet app in minutes using a verifiable credential. Along with providing a more efficient and streamlined experience, the system can also provide an early warning system for lien fraud by creating a transparent and unalterable record of property ownership, making it difficult for fraudulent activity to go undetected. California residents will be able to access their digital car titles starting early next year as the DMV builds out the app and infrastructure for consumer access.
Stable Profits – USDT issuer Tether reported record-breaking profits of $5.2 billion in the first half of 2024 and now holds its largest stockpile of U.S. government bonds to date, with the company’s portfolio worth approximately $97.6 billion. The figures are based on an attestation by BDO, an independent accounting firm. Tether also reported a net equity – which is the total value of all company assets minus liabilities – of $11.9 billion, while the value of the assets composing the company’s Reserves “exceeds the value of the liabilities of the Companies issuing Tether tokens by US$ 5,334,337,355.” In recent months, Tether has worked to expand its portfolio and has made investments into sustainable energy, Bitcoin mining, data, AI infrastructure, P2P telecommunications technology, neurotech, education, and other long-term proprietary investments, which are not considered to be part of its reserves backing USDT.
And in the World of Crypto Laws and Legislation…
Backpedal – A new filing by the U.S. SEC shows the regulator is looking to amend its complaint regarding the “Third Party Crypto Asset Securities” defined in its opposition to Binance’s motion to dismiss – meaning that they are no longer asking the courts to decide on whether the tokens named in a lawsuit against Binance are deemed securities. The tokens in question, which the SEC labeled as securities in its original filing, include BNB, Binance USD (BUSD), Solana (SOL), Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Infinity (AXS), and Coti (COTI). It’s unclear why the SEC has sought to amend the filings, but the move comes as political pressure on the regulator regarding cryptocurrencies is rising amid a pro-crypto pivot by Republican presidential candidate Donald Trump and Independent candidate Robert F. Kennedy Jr.
New Tech, Same Old Fraud – The SEC and the US Attorney’s Office for the Southern District of New York charged BitClout founder Nader Al-Naji with fraud, alleging that he sold $257 million in unregistered securities through the project’s native token, BTCLT, and defrauded investors by siphoning a portion of those funds for personal use. According to the complaint, Al-Naji allegedly spent $7 million in customer funds on luxury items and monetary gifts to family members, including a $1 million gift payment to his wife, despite promising investors that funds would not be used as compensation for any BitClout team members. The SEC also named Decentralized Social (DeSo), a newer project from Al-Naji, in the complaint, along with Al-Naji’s wife, mother, and related business entities, who were identified as relief defendants because they were alleged recipients of investor funds from the BitClout founder.
Cross-Border Crypto – Russian lawmakers in the State Duma, the lower hose of parliament, passed a bill on Tuesday that will legalize the use of cryptocurrencies for international trade as part of the country’s efforts to maintain business activities amid heavy sanctions imposed by Western nations following the country’s invasion of Ukraine. The new law is expected to go into effect in September, and the first crypto transactions will take place before the end of the year. They also passed a separate piece of legislation dealing with the regulation of crypto mining. With the Russian economy struggling under the weight of sanctions, it’s anticipated that the draft laws will see quick approval from senators in the Federation Council before being signed into law by President Vladimir Putin, allowing them to come into force on September 1.
Related News
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US debt surpasses $35 trillion as calls to back the USD with Bitcoin and gold intensify
Lummis Introduces Bitcoin Reserve Bill Aiming to Bolster US's Global Financial Standing
Fed Holds Policy Steady, Expresses More Caution Than Expected on September Rate Cut
Issue #76
Market Overview
The cryptocurrency market entered into consolidation over the past week following months of volatility with an upward trend in the lead-up to last week’s historic launch of the first spot Bitcoin ETFs on the U.S. markets.
Data provided by CoinShares shows that digital asset investment products recorded $1.18 billion worth of inflows last week (subject to T+2 settlement), while ETP trading volumes hit a new record high of $17.5 billion, significantly higher than the 2023 average of $2 billion per week.
While much of the debate leading up to the ETF launches centered around whether it would be a “buy the rumor, sell the news” event, or a “buy the rumor, buy the news” event, so far, both sides appear to have been wrong as it’s turned into a “buy the rumor and then trade sideways” development. Many analysts are still predicting a pullback into the mid to upper $30,000 range for Bitcoin, but it remains to be seen how the price action will unfold.
Representatives from both the Fed and ECB made comments this week suggesting that investors were too optimistic about a rate cut coming in March, which put pressure on financial assets from stocks to crypto. After losing support at $46,000 last Friday, Bitcoin spent the week trading sideways in a range between $40,630 and $43,575, with the majority of the price action occurring near support at $42,700. BTC took a turn for the worse late on Thursday and closed the daily candle at $41,288.
At the time of writing, the total cryptocurrency market cap stands at $1.63 trillion, a decrease of 7.9% over the past week. The DeFi market cap currently stands at $81.6 billion with a 24-hour trading volume of $4.87 billion, which is 7.67% of the total crypto market volume.
Crypto News
Cold Snap – Concerns around Bitcoin mining centralization are on the rise after the network’s hashrate declined by approximately 25% earlier this week due to requests by energy grid regulators in Texas to shut down mining equipment amid plunging temperatures. Global hashrate estimates fell from around 600 EH/s on Friday to 450 EH/s by Tuesday, which coincided with a weather warning for Jan. 14 to 17 issued by the Electric Reliability Council of Texas, which operates as the grid regulator for most of the state. ERCOT’s warning was followed by official conservation appeals on Sunday, Monday, and Tuesday, which forced mining farms in the affected area to turn off their machines. The drop in hashrate indicates that more than four gigawatts of power capacity were curtailed during the shutdown, with the Foundry USA Pool accounting for half of the decline.
Sionara NFTs – NFTs continue to have a rough go as gaming retailer GameStop announced that it will be phasing out its NFT marketplace in February due to regulatory uncertainty. The company notified users that they have roughly two weeks left to access the platform, but assured NFT holders that the decision to shutter the marketplace will not negatively impact their NFTs. Starting on Feb. 2, the ability to buy, sell, or create NFTs on the platform will be removed, which means that NFT holders will need to utilize other platforms to sell their tokens. GameStop cited a lack of regulation as the cause for reducing its crypto services. The firm’s CEO said that while the company remains optimistic about crypto, they did not want to put investor funds at risk.
Reporting Delay – The Internal Revenue Service (IRS) and Treasury Department announced a delay in the implementation of the requirement that businesses in the U.S. report any digital asset transaction over $10,000 in value until the regulators release a clear regulatory framework that lays out the requirements. The new reporting rule, which originally took effect on Jan. 1, was created within the Infrastructure Investment and Jobs Act and established that digital assets are deemed equivalent to cash when it comes to taxpayers who receive payment in crypto through the course of their trade or business. Businesses have been instructed to hold off on reporting such transactions for the time being as the regulators still need to clarify the exact requirements before the rule goes into effect.
And in the World of Cryptocurrency ETFs…
Futures Recall – Asset manager VanEck has announced that it will be shutting down its futures-based Bitcoin ETF less than two years after the product was launched, citing low performance, liquidity, assets under management, and investor interest amid the launch of multiple spot Bitcoin ETFs, including the VanEck Bitcoin Trust (HODL). Shareholders of the Fund have until the market close on January 30 to sell their shares on the Fund’s listing exchange. Those who continue to hold shares to the liquidation date, which is expected to be on or about February 6, 2024, will receive a liquidating distribution of cash in the cash portion of their brokerage accounts equal to the amount of the net asset value of their shares.
ETF Bonanza – U.S.-based ETF issuer ProShares announced that it is working to launch multiple leveraged and inverse Bitcoin ETFs that offer indirect BTC exposure following the launch of the first spot BTC ETFs on local stock exchanges. The new offerings include the ProShares Plus Bitcoin ETF and ProShares Ultra Bitcoin ETF, which seek daily investment results corresponding to a 1.5x and 2x increase from the daily performance of the Bloomberg Galaxy Crypto Index (BGCI). The other three products include the ProShares UltraShort Bitcoin ETF, Proshares Short Bitcoin ETF, and ProShares ShortPlus Bitcoin ETF, which seek daily investment results based on the inverse of the daily performance of the BGCI of -2x, -1x and -1.5x, respectively.
Heavy Flows – The combined volume of the listed spot Bitcoin ETFs surpassed $11 billion during their first four days of trading, a sum that has ETF analysts declaring the products a huge success when compared to the fact that 500 ETFs that were launched in 2023 had a combined volume of $450 million on Tuesday. BalckRock’s IBIT ETF alone process more volume than that, according to Bloomberg Intelligence senior ETF analyst Eric Balchunas. The products offered by Grayscale, BlackRock, and Fidelity account for the majority of the volume, with Grayscale representing more than $5.1 billion of the total as the fund is also grappling with outflows as investors rotate their holdings into ETFs with a better fee structure. At the close of business on Tuesday, the net inflows into all the newly listed ETFs was $894 million, roughly equivalent to 21,000 BTC at a price of $42,600.
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Spot Ether ETFs more significant than BTC ETFs for the broader cryptos industry – Analysts
Issue #75
Market Overview
It was a volatile week for the crypto market as the new year saw Bitcoin spike within reaching distance of $46,000, only to reverse course on the 15th anniversary of its ‘genesis’ day and dump back into the trading range that it has been oscillating in since early December.
The anticipated approval of the first spot BTC ETF remains the key driver of market activity, both to the upside and downside, as the competing narratives of multiple approvals versus multiple rejections excited traders and sparked the latest round of FUD – ultimately causing little change in the price of BTC from a higher time frame perspective.
From a macro perspective, the crypto market continues to hold its own amid escalating global conflicts, deteriorating economic conditions, and surging debt levels. The U.S. national debt climbed above $34 trillion for the first time in history and is growing at near exponential levels, further reducing the purchasing power of the U.S. dollar and making the case for reliable stores of value, including gold and Bitcoin.
Late on Monday, Bitcoin’s price started to rally higher, peaking out at $45,930 near midday on Tuesday, its highest price since April 2022. But a report suggesting the SEC would deny the BTC ETF applications hit the market hard on Wednesday, dropping the top crypto to a low of $40,635 before dip buyers arrived to halt the sell-off. BTC recovered back above $43,000 shortly after and closed the Thursday daily candle at $44,200.
At the time of writing, the total cryptocurrency market cap stands at $1.65 trillion, unchanged over the past week. The DeFi market cap currently stands at $88.2 billion with a 24-hour trading volume of $6.9 billion, which is 8.9% of the total crypto market volume.
Crypto News
Cashing Out - Former US President Donald Trump is taking advantage of the recent rise in crypto prices as the wallet affiliated with his NFT sales has transferred 1,075 Ether, worth $2.4 million, to Coinbase over the past month, with most withdrawals coming in batches of 100, 125, and 200 ETH. The Ether was earned through the launch of several NFT collections, including the most recent which featured his infamous mugshot taken when he surrendered himself to authorities in Georgia in August. The balance in the wallet has steadily increased since October and hit a peak of $4 million before the selling commenced.
Tax Crackdown - The Internal Revenue Service (IRS) is set to start enforcing certain aspects of President Joe Biden’s 2021 Infrastructure Investment and Jobs Act, including the requirement that brokers report all digital asset transactions received from crypto exchanges and custody providers that meet or exceed the $10,000 threshold to the tax collector. The new reporting requirement, which was initially scheduled to take effect in January 2023, only applies to businesses handling crypto assets and does not impact individuals. Included in the mandate is the requirement for crypto brokers to collect relevant information, including the sender’s name, address, and social security number, and report the details to the IRS within 15 days from the time of the transaction. Failure to do so could result in a felony charge.
PermaBull – MicroStrategy founder Michael Saylor continues to be one of the biggest Bitcoin bulls as he has begun a four-month process of selling $216 million worth of his shares in MicroStrategy, saying part of the proceeds will be used to buy more BTC. A Jan. 2 filing with the SEC indicates that Saylor has already started selling his 315,000 stock options awards, which were first granted to him in April 2014 and expire on April 30, 2024. “Exercising this option will allow me to address personal obligations as well as acquire additional Bitcoin to my personal account,” Saylor said on MicroStrategy’s earnings call on Nov. 2. A Q-10 filing with the SEC shows that Saylor can sell a maximum of 400,000 shares of his vested options between Jan. 2 and April 26.
And in the World of Bitcoin ETF News...
Dialing up the FUD - Singapore-based crypto platform Matrixport caused a stir in the community after a report from the platform's research arm circulated suggesting that the SEC could reject all the spot Bitcoin ETF applications that have been submitted. The report was widely cited as the reason for the Bitcoin sell-off on Wednesday, but more astute observers said that the move was really just a leverage flush, and the $600 million in liquidations were nothing unusual and part of standard Bitcoin bull market behavior. Matrixport owner Jihan Wu said the widespread dissemination of the report was not planned by the firm and was beyond their control, and stated that he thinks the approval of a spot ETF by the SEC, “which will attract fresh investment into Bitcoin, is inevitable.”
Final Preparations - Attorneys with the SEC met with representatives from the NYSE, Nasdaq, and Cboe exchanges to ask them to revise and finalize their 19b-4 filings, which were submitted by the exchanges on behalf of spot BTC ETF applicants. The meetings were seen as a positive sign that the regulator is nearing approval of some or all of the applications filed as the 19b-4 filings must receive SEC clearance before the ETF can be sold to the public. While no official announcement has been made, sources close to the proceedings say the SEC could begin notifying issuers of approval on Friday with trading beginning as early as next week.
Seeding for the Future - BlackRock, the firm that kicked off the ETF frenzy when it filed its spot BTC ETF application in June, was reportedly expected to purchase $10 million worth of Bitcoin on January 3 as it looked to seed its ETF before launch. It remains unclear whether or not BlackRock made the purchase, and some have speculated that they chose that date as a “tease” since it was the 15th anniversary of the genesis block for Bitcoin. Other reports indicated that the date to purchase was pushed back to Jan. 5, but all reports on the matter are speculative. The SEC’s decision on the ETFs is widely expected to be announced by Jan. 10.
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Issue #74
Market Overview
The return of bull market energy means the return of volatility to the crypto market as the overall picture was mixed over the past week, with Bitcoin (BTC) oscillating between a low of $40,520 and a high of $44,320.
The consolidation by Bitcoin meant traders focused on the altcoin market, with recent gainers correcting lower amid profit-taking and rotation into tokens that had yet to begin their rally. Mini “altcoin seasons” are common during sideways BTC interludes of bull markets, and FOMO reigns supreme as 100x pumpers excite the crypto degens, who hop from coin to coin, oftentimes with little to show for all their activity once all is said and done.
Ongoing discussions and meetings between the Securities and Exchange Commission and various asset managers have analysts growing increasingly confident that a spot BTC ETF will be approved in less than a month. This has put a firm level of support under the market as the majority of Bitcoin holders have no intention of selling anytime soon, which translates to lower liquidity on crypto exchanges, decreasing the likelihood of a rapid, steep sell-off.
After bulls successfully defended an attempt to smash BTC below $40,000 on Monday, they reversed course and pushed its price higher over the next two days, topping out at $44,325 on Wednesday, the same resistance level that had halted the previous two rallies higher. On Thursday, Bitcoin continued to consolidate below $44,000 and closed the daily candle at $43,338.
At the time of writing, the total cryptocurrency market cap stands at $1.66 trillion, an increase of 2.4% over the past week. The DeFi market cap currently stands at $86.9 billion with a 24-hour trading volume of $8.2 billion, which is 12.2% of the total crypto market volume.
Crypto News
Bankruptcy Settlement – The debtors for FTX have reached a settlement with the bankrupt crypto exchange’s liquidators that will see all users who don't have claims pending with the court be reimbursed in U.S. dollars for losses in cash or digital assets that they experienced when the exchange shuttered. Payments will be made based on asset prices at the time that the petitions were filed, “with no differential payments based on post-petition fluctuations in asset prices. NFTs have been exempted from these terms, and eligible claimants will be able to vote on the reimbursement plan in Q2 2024, as long as the agreement receives the approval of the U.S. Bankruptcy Court for the District of Delaware and the Supreme Court of the Bahamas.
CBDCs for Gold – China’s central bank digital currency (CBDC), the digital yuan, has now been used to complete the first-ever cross-border settlement for precious metals using a CBDC in a transaction conducted on Tuesday by the Bank of China's (BoC) Shanghai branch, in cooperation with the Shanghai Gold Exchange. The transaction involved the transfer of 100 million digital yuan ($14 million) in exchange for gold. The BoC Shanghai has been one of the leading supporters of digital yuan pilot testing and previously facilitated the import of iron ore to China via the e-CNY. The bank also partnered with BNP Paribas to launch a digital renminbi project and provides a support system for foreign financial institutions to meet business needs such as digital RMB payment for enterprises.
Cash Redemptions – Multiple asset managers – including BlackRock, ARK Invest, WisdomTree, Invesco, and Galaxy – have filed amendments to their spot Bitcoin ETF applications to allow for the implementation of a cash creation and redemption model, enabling them to accept a cash redemption system rather than in-kind redemptions. These amendments are seen as the latest effort by the investment managers to increase the likelihood that the SEC will approve the first spot BTC ETF by January at the latest as the regulator is purported to cash-only transactions for Bitcoin ETFs. Multiple analysts have said that the applications now have a 99% chance of approval in January following the amendments.
And in the World of Legal Justice...
Extradition Denied – The Appellate Court of Montenegro has canceled the extradition approval of Terraform Labs co-founder Do Kwon to either the United States or South Korea after Kwon’s defense team successfully appealed the previous decision by the High Court of Podgorica that approved the extradition. The court has ruled that the case should now return to the Podgorica Basic Court for retrial, saying the previous decision was affected by a “significant violation of the provisions” of Montenegro’s Criminal Procedure Code. Specifically, the statement from the court said, “[...] Violation is reasonably indicated by the appeal of the defendant's defense attorneys, because the decision does not have reasons for decisive facts, and the reasons given are unclear, which is the reason for its cancellation.”
It’s Official – The U.S. District Court for the Northern District of Illinois has officially entered the order against Binance and its former CEO, Changpeng “CZ” Zhao, that will see Binance pay $2.7 billion and CZ pay $150 million to the Commodity Futures Trading Commission (CFTC). The court approved the previously announced settlement and entered a consent order of permanent injunction, civil monetary penalty, and equitable relief against CZ and his companies Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited. As part of the order, CZ and Binance are obligated to make certifications as to the existence, application, and efficacy of Binance’s improved compliance controls, and they are permanently enjoining from further violations as charged.
Commence Sentencing – Judge Lewis Kaplan, the judge overseeing the trial of former FTX CEO Sam Bankman-Fried, denied SBF’s Dec. 20 request for a four- to six-week adjournment of his sentencing hearing. The request would have also delayed his sentencing hearing currently scheduled for March 28, 2024. In their letter to the judge, SBF’s attorneys said the defense needed more time to prepare for the pre-sentencing interview, but Judge Kaplan turned down any attempt to alter Bankman-Fried’s hearing schedule, telling the defense that it did not object to the sentencing date when it was initially set, and Bankman-Fried has already received one extension for filing sentencing submissions.
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ISSUE #72
Market Overview
The cryptocurrency market corrected lower over the past week after Bitcoin (BTC) steadily climbed from a price of $27,000 in the middle of October to a yearly high of $45,000 on Dec. 6, an increase of more than 67% in less than two months.
After holding near a price of $44,000 last weekend, Monday opened with a steep sell-off in BTC that saw the top crypto plunge 8.3% to a low of $40,130 before dip buyers put a halt to the slide and bulls gathered reinforcements.
While a rapid 8% sell-off would spell doom and signal greater problems on the horizon for most assets, volatility is a common feature in Bitcoin bull markets, and many analysts took it as a good sign as its price was getting overheated and in need of a correction. On Wednesday, Federal Reserve Chair Jerome Powell emboldened risk-takers by holding interest rates steady and signaling plans for three rate cuts in 2024 as the central bank now expects inflation to fall to 2.4% next year and to drop further to 2.2% by 2025.
Bitcoin responded positively to the interest rate news, climbing from $40,600 to a high of $43,475 late on Wednesday, where bulls looked to establish a firm level of support and continue their push higher. Bears had a different idea, and smacked BTC to a low of $41,440 on Thursday, but bulls fought back and lifted Bitcoin to a daily close above $43,000.
At the time of writing, the total cryptocurrency market cap stands at $1.62 trillion, an increase of 0.6% over the past week. The DeFi market cap currently stands at $80.6 billion with a 24-hour trading volume of $8.25 billion, which is 12.3% of the total crypto market volume.
Crypto News
Threat Alert – The National Vulnerability Database, a repository of cybersecurity risks managed by the U.S. government, has given Bitcoin inscriptions a 5.3 medium base severity score after adding them to the U.S. vulnerability database as part of the Common Vulnerabilities and Exposures (CVE) Assignment list. The agency claimed it was a security flaw that enabled the development of the Ordinals protocol in 2022. A medium score refers to a vulnerability where exploitation provides “very limited” access to a network or denial of service attacks that are quite difficult to execute. This development adds to the ongoing debate within the crypto community about Ordinals, BRC-20s, and the increase in network congestion and transaction cost that has arisen since they launched on the network.
Application Tweaks – In their ongoing quest to launch the first spot BTC ETF, BlackRock revised its application to make it easier for Wall Street banks such as JPMorgan or Goldman Sachs to act as authorized participants (APs) for the fund, letting them circumvent restrictions that prevent them from holding Bitcoin or crypto directly on their balance sheets. The new in-kind redemption “prepay” model will allow them to participate by creating new shares in the fund with cash rather than just cryptocurrencies. Under the revised model, APs would transfer cash to a broker-dealer, which converts it into Bitcoin, before storing it with the ETF’s custody provider. This also helps to shift risk away from APs and place it more in the hands of market makers.
Mug Shot NFTs – Former US President Donald Trump announced the launch of a third nonfungible token (NFT) drop – dubbed “MugShot” – which is centered around the theme of his ongoing criminal indictments. Each NFT is priced at $99 and can be purchased via a credit card or Wrapped Ether (WETH), and they are not transferable until Dec. 31, 2024. Users will be required to complete a KYC check to purchase the NFTs, and anyone who purchases 47 or more digital trading cards can receive “a piece of the president’s ACTUAL suit from his famous mugshot & dinner at Mar-a-Lago with the President.”
And in the World of International Developments
On-chain ID Verification – The Chinese Ministry of Public Security announced plans to roll out a new blockchain-based platform called RealDID to verify the real-name identities of its citizens. The platform has multiple use cases, including personal real name confirmation, personal data encrypted protection and certification, private logins, business identities, personal identification certificate services, and information vouchers on personal identity. The Chinese Government planned the project and will allow citizens to register and log into online portals anonymously using DID addresses, ensuring that transactions and data remain private between individuals and businesses. No official rollout date has been provided, but the agency said the platform holds “huge potential” in guaranteeing personal privacy.
Volcano Bonds Approved – El Salvador’s Volcano Bonds, the country’s highly-anticipated Bitcoin bonds, have reportedly received regulatory approval from the Digital Assets Commission and are scheduled to launch in early 2024, according to The National Bitcoin Office (ONBTC). Discussions about the launch of Volcano Bonds first arose in November 2021, and El Salvador passed the landmark legislation providing the legal framework for the Bitcoin-backed bond on Jan. 11 of this year. The bond is intended to pay down sovereign debt and fund the construction of the country’s proposed “Bitcoin City.” The ONBTC said the bond will be issued on the Bitfinex Securities Platform, a trading site for blockchain-based equities and bonds registered in El Salvador, and will last 10 years and pay 6.5% in annual return to holders.
International Expansion – Coinbase continues to expand its operations to users outside the U.S. as the exchange announced that institutional investors on its international exchange can now access spot crypto trading services for Bitcoin and Ether against USDC. The exchange said the services would launch on Dec. 14 with the goal of building liquidity, and will later expand to include retail investors, additional tokens, and “features that enable new trading strategies and enhance capital efficiency.” The move comes as Coinbase is looking to increase its international presence amid a lawsuit filed by the SEC in June which accuses the firm of allegedly operating as an unregistered securities exchange, broker, and clearing agency.
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ISSUE #70
Market Overview
There was little change in the macro picture for the cryptocurrency market over the past week as Bitcoin continued to struggle with resistance at $38,200, which prompted traders to rotate into altcoins, sparking a mini alt season, the first of this bull market cycle.
The Securities and Exchange Commission (SEC) delayed another spot Bitcoin ETF decision, pushing the application from Franklin Templeton into January – but that did little to stop the speculation that we are mere weeks away from the first such product being approved.
Evidence that institutions are wading deeper into cryptocurrencies was found in the latest digital asset fund flows, which showed that the total assets under management (AuM) of all listed crypto products increased by $346 million during the week ending Nov. 24. Last week marked the ninth consecutive week of inflows and the largest weekly increase since the bull market in late 2021, and brought the total AuM for listed products to $45.3 billion, the highest level in over one and a half years.
Conflicting messages from Fed governors led to a spike in volatility for Bitcoin as traders continued to digest last week's plea deal by former Binance CEO Changpeng Zhao, who has been ordered to remain in the U.S. until his sentencing hearing on Feb. 23, 2024. After hitting a low of $36,720 on Monday, Bitcoin reversed course and hit a weekly high of $38,485 on Wednesday in a failed attempt to break above resistance at $38,200. BTC slid lower from there and closed the Thursday daily candle at $37,733.
At the time of writing, the total cryptocurrency market cap stands at $1.43 trillion, an increase of 0.7% over the past week. The DeFi market cap currently stands at $66.2 billion with a 24-hour trading volume of $5.18 billion, which is 11.8% of the total crypto market volume.
Crypto News
Moon Mission – Dogecoin (DOGE) experienced a bout of bullish momentum after the CEO of Geometric Energy announced that the DOGE-1 satellite mission, a CubeSat mission that has been entirely funded through DOGE donations from members of the Dogecoin community, received approval for the DOGE-1 X-Band from the National Telecommunications and Information Administration (NTIA), advancing the mission one step closer to launch. Once fully approved, the satellite will be launched as part of the payload on a SpaceX Falcon 9 rocket and will be used to collect lunar-spatial intelligence using onboard sensors and a camera. Once in lunar orbit, the satellite will explore the Moon and display images and digital art on a small screen on the lunar orbiter that will be broadcast back to Earth.
Uranium Goes DeFi – Uranium3o8 ($U), the world’s first digital token backed by physical uranium, now has a liquidity pool on the Uniswap decentralized exchange, creating the first-ever spot market for buying and selling exposure to uranium. This will enable qualified entities to purchase and take delivery of the valuable commodity utilizing DeFi for the first time. The uranium backing the token is being sourced by Madison Metals, a publicly traded mining firm with operations in Namibia and Canada. Each $U token represents one pound of physical uranium. In order to take physical delivery of the uranium, token holders will need to meet strict regulatory requirements, hold a minimum of 20,000 $U tokens (representing 20,000 pounds of uranium), and be able to prove to Madison Metals that they are qualified under local laws and regulations to receive it.
Digital Yuan Rising – Multiple large multinational banks, including Standard Chartered, HSBC, Hang Seng Bank, and Taiwanese bank Fubon Bank, have announced that they will begin participating in trials for the digital yuan, China’s central bank digital currency (CBDC). Customers at the banks will now be able to conduct transactions using the e-CNY, either through the bank's mobile applications or by connecting their debit cards to the official e-CNY app to redeem digital renminbi. Clients at all four banks will now be able to transfer and withdraw digital yuan. The banks will also be participating in a pilot testing program to explore the use of the digital yuan in cross-border merchant payments, trade financing, and supply chain financing.
And in the World of Legal Developments
Disgruntled Fans – Pro-soccer star Cristiano Ronaldo has been named in a class-action lawsuit by plaintiffs who claim they suffered losses from his promotion of the crypto exchange Binance. According to the filing, Ronaldo “promoted, assisted in, and/or actively participated in the offer and sale of unregistered securities in coordination with Binance” after he signed a multi-year partnership deal with the exchange in mid-2022 to promote a series of his own nonfungible tokens (NFTs). The complaint alleges that Ronaldo was a key part of Binance’s growing popularity due to his influence and reach, and claimed users who signed up for Ronaldo’s NFTs were more likely to use Binance for other purposes, such as investing in what they claim are unregistered securities, including Binance’s BNB token and crypto yield programs. The plaintiffs are seeking damages of “a sum exceeding” $1 billion.
Crypto Taxes – His Majesty’s Revenue and Customs (HMRC), the tax authority in the U.K., has instructed crypto users in the country to declare and pay their taxes on digital assets within a strict timeframe or face the consequences. The guidance, which was published on Wednesday, provided UK citizens with a clear warning: “If you do not contact us to declare your unpaid tax, you could be liable to additional interest and penalties.” HMRC said the amount of time users have to pay outstanding taxes will depend on why they didn’t pay earlier, and gave taxpayers three options to choose from: confess that they didn't take enough care in paying taxes, evaded paying deliberately, or intended to pay but somehow failed. The latter group will have to pay for the four previous years, while less careful crypto traders have to pay for the last six years, and deliberate tax evaders are liable for taxes on all crypto stored for up to the previous 20 years.
Repayment Deal – Bankrupt crypto lender Genesis has struck a deal with its parent company, Digital Currency Group (DCG), that will see DCG pay its outstanding $324.5 million in loans by April 2024 in an effort to end an ongoing lawsuit aimed at clawing back $620 million in repayments from DCG. The deal would see DCG pay $275 million to Genesis in three installments, partially in U.S. dollars and bitcoin, due by April. The filing includes a stipulation that Genesis will be allowed to follow up on any unpaid amounts. Genesis said the repayment deal will provide it with “immediate significant and near-term benefits” and avoid the “risk, expense, and diversion of resources that would be required by litigation.” The deal will serve as part of Genesis’ plans to pay back creditors, who will vote on the plan before it is sent to Judge Sean Lean for a decision, who will take the wishes of creditors into consideration.
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ISSUE #69
Market Overview
Cryptocurrency bull markets are known for their volatility, and the current cycle is living up to that reputation as Bitcoin’s price chopped between $35,600 and $38,000 over the past week, albeit with an upward trend.
The source of the volatility was a series of positive and (perceived) negative developments, including the election of a pro-Bitcoin President in Argentina, and a plea deal by Changpeng Zhao (CZ), the now former CEO of Binance, that included a $4.3 million dollar fine for the world’s largest cryptocurrency exchange.
Financial markets, including the crypto market, have also benefited from a fresh round of data that shows inflation continues to moderate. This prompted traders to re-enter the markets as they now think the Federal Reserve is done raising interest rates. despite the minutes from October’s FOMC meeting showing that the Fed board members remain open to additional rate hikes. The CME FedWatch tool now gives a 26.5% chance that the Fed will announce the first rate cut in March 2024.
After trading near $36,500 over the weekend, Bitcoin started to climb higher on Sunday evening after Javier Melie became the president-elect of Argentina. It was rejected at $38,000, and then tumbled lower on Tuesday after the plea deal by CZ was announced, hitting a low of $35,640 in the early hours of Wednesday. From there, bulls made another charge at $38,000 resistance, but that fizzled out, and BTC closed the Thursday daily candle at $37,310.
At the time of writing, the total cryptocurrency market cap stands at $1.42 trillion, an increase of 1.4% over the past week. The DeFi market cap currently stands at $64.7 billion with a 24-hour trading volume of $4.44 billion, which is 11.4% of the total crypto market volume.
Crypto News
Bitcoin-Friendly – Javier Milei, Argentina’s Bitcoin-friendly presidential candidate, won the country’s run-off election on Sunday after securing more than 55% of the votes cast over his opponent Sergio Massa, and will officially take office on Dec. 10. Milei’s victory is notable in that he is an outspoken critic of the central banking system – calling it a scam and a “mechanism by which politicians cheat the good people with inflationary tax,” – and holds a positive view of Bitcoin as a way to return monetary power to the people. While the libertarian economist is the anti-establishment choice and holds a decidedly positive view of BTC, he has not signaled any intention to make Bitcoin legal tender in the country. Instead, he has indicated a desire to ditch his nation’s peso and adopt the U.S. dollar as the national currency.
Ironing Out the Details – A memo dated Nov. 20 indicates that representatives from BlackRock and Nasdaq met with the SEC to discuss the proposed rule allowing the listing of a spot Bitcoin. The memo shows that BlackRock provided a presentation detailing how the firm could use an in-kind or in-cash redemption model for its iShares Bitcoin Trust. It’s unclear how SEC officials responded to the two proposed models or if they intend to approve a spot BTC ETF after numerous delays and rejections. BlackRock first applied for a spot BTC ETF in June and is now one of many firms with similar applications in the SEC pipeline awaiting a response, including Fidelity, WisdomTree, Invesco Galaxy, Valkyrie, VanEck and Bitwise.
Class-Action Pushback – A class action lawsuit has been filed against Apple, with the plaintiffs claiming the tech giant has conspired to limit peer-to-peer (P2P) payment options on its devices and block crypto technology from iOS payments apps. The complaint was filed on Nov. 17 in a California District Court, and alleges that Apple entered into anti-competitive agreements with PayPal’s Venmo and Block’s Cash App to restrict the use of decentralized cryptocurrency technology in payment apps, which caused users to pay “rapidly inflating prices.” They said Apple uses restraints to “exercise unfettered control over every app installed and run on iPhones and iPads,” and said Apple forces new-to-market iOS P2P payment apps to bar crypto “as a condition for entry.” They seek to recover for excessive fees and overcharging and injunctive relief barring the firm from continuing the practice.
And in the World of Cryptocurrency Exchanges
End of an Era – Changpeng Zhao (CZ), the CEO of Binance, the world’s largest cryptocurrency exchange, has agreed to a plead deal with the U.S. Department of Justice that will see him plead guilty to a criminal charge, step down as CEO, and pay fines totaling $4.3 billion. An unsealed indictment from the DOJ shows that CZ and Binance faced charges of operating an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and the failure to maintain an effective anti-money laundering program. Binance has also been ordered to make a "complete exit" from the U.S. market. Binance has named its head of regional markets outside of the United States, Richard Teng, as its new CEO.
In Full Force – The U.S. SEC filed a lawsuit against the Kraken cryptocurrency exchange, alleging it commingled customer funds and failed to register with the regulator as a securities exchange, broker, dealer, and clearing agency. In the filing, the SEC alleged Kraken’s business practices and “deficient” internal controls led to the commingling of up to $33 billion worth of customer assets with its own, which resulted in a “significant risk of loss” for its clients. The complaint claimed Kraken paid for operational expenses directly from accounts containing customer assets, citing the exchange’s independent auditor. As part of the filing, the SEC listed 16 cryptocurrencies it considered securities, including Cardano’s ADA, Algorand, Polygon, and Solana.
The Seven-Year Saga – Creditors of the long-defunct Mt. Gox Bitcoin exchange received an update on the status of their claim repayments from the 2014 hack that saw 850,000 BTC stolen from the exchange. Nobuaki Kobayashi, the trustee overseeing the Mt. Gox estate, began sending out emails to rehabilitation creditors regarding the commencement of repayments on Wednesday, saying that he expects to start the first repayments to creditors in cash in 2023 and will continue the repayments in 2024. According to data from the Mt. Gox balance bot on X (formerly Twitter), the Mt. Gox trustee holds 135,890 BTC ($5 billion) on all known addresses, and an additional 3,795 BTC ($130 million) are held on unknown addresses.
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ISSUE #68
Market Overview
It was a volatile yet positive week for the cryptocurrency market as Bitcoin (BTC) climbed back above $37,000 on multiple occasions, with bulls now looking to flip resistance at $38,000 into support as the next stage in their journey towards a new all-time high.
Developments related to a spot Bitcoin ETF continue to be the primary driving force behind the momentum, with many speculating that all the ETF applications before the SEC would be approved this week. The SEC can only approve an application outside of public comment periods, and there was a brief window open until Nov. 17 where all the spot BTC ETF applications were in between comment periods, giving the SEC the opportunity to approve them in one fell swoop so as to not give any application first mover advantage.
Macro factors also had an effect on crypto prices, with the latest Consumer Price Index and Producer Price Index reports showing that inflation continues to moderate. Investors took the lower inflation reads as a sign that the Federal Reserve would continue to hold off on additional interest rate hikes, and the consensus is now that the central bank will actually be forced to lower rates as soon as May in an effort to help support the economy.
After briefly spiking near $38,000 last week, Bitcoin trended lower as traders booked profits, and plunged to a low of $34,780 on Tuesday amid chatter that a retest of $31,000 was inevitable. The outlook changed on Wednesday when a midday rally pushed Bitcoin to a high of $37,965, where bulls ran into a strong bear wall of resistance. On Thursday, BTC corrected lower again, bottoming out at $35,517, and closing the daily candle at $36,165.
At the time of writing, the total cryptocurrency market cap stands at $1.4 trillion, a decrease of 0.7% over the past week. The DeFi market cap currently stands at $64.5 billion with a 24-hour trading volume of $7.23 billion, which is 10.7% of the total crypto market volume.
Crypto News
Institutional Blockchain Rising – JPMorgan said their JPM Coin could be handling as much as $10 billion in daily transactions in the next year or two as blockchain adoption continues to roll out around the globe. A representative from the bank said they are expecting at least a 5 to 10-fold increase in transactions in the years ahead, greatly expanding their current count of $1 billion in transactions daily. JPM Coin enables wholesale clients to make dollar and euro-denominated payments through a private blockchain network, and is one of the few examples of a live blockchain application by a large bank, but remains a small fraction of the $10 trillion in US dollar transactions moved by JPMorgan on a daily basis.
ETF Fakeout – Someone filed a fake listing with the State of Delaware’s Division of Corporations on Monday that made it look as though BlackRock had registered an “iShares XRP Trust,” which helped provide a boost to the market and caused a brief 12% pike in the price of XRP. BlackRock was quick to deny making such a filing, and many analysts were skeptical from the start, so the rally quickly faded, and XRP price has drifted lower ever since. On Tuesday, the Delaware Department of State said the matter would be referred to the state authorities to investigate, and those responsible could be held liable for fraud since they used BlackRock managing director Daniel Schwieger’s name to register the fake trust.
Decentralizing DeFi – Microsoft, Tencent, and 16 other Web2 giants have partnered with Consensys in an effort to increase decentralization on the Infura network, which is the key point of access to Ethereum for much of the decentralized finance (DeFi) sector. The Infura network serves a vital role in that it helps prevent outages of the Web3 services that leverage it, including the wallet service MetaMask. DIN is currently scheduled to launch in Q4 and will offer a solution to the centralization for Infura, which is currently controlled by Consensys, meaning there remains a single point of failure. One of the first major features to be offered in the DIN is “failover support” for the Ethereum and Polygon networks, which means that the traffic on those networks can be re-routed to one or multiple DIN partners during an outage, guaranteeing higher uptime rates in the long run.
And in the World of Launches and Filings…
Ether Joins the Party – BlackRock, the world’s largest asset manager, filed an application for a spot Ether ETF, which sent the price of the second-ranked cryptocurrency by market cap back above $2,100 for the first time since April. The filing added to the building ETF hype that kicked off when the firm filed its spot BTC ETF application in June, and the SEC now has nearly 20 crypto-related ETF applications that it needs to make a determination on. Along with BlackRock, ARK 21Shares, VanEck, Hasdex, and Invesco have also filed spot ETH ETF applications with the SEC, and Grayscale Investments has moved to convert its Ethereum Trust into a spot Ether fund. There have also been multiple spot Ether ETF applications filed, with some already approved and trading on the markets.
Can’t Beat Them? Join Them – Economist Nouriel Roubini, a well-known crypto skeptic, appears to have joined the “blockchain, not Bitcoin club” as his asset management firm, Atlas Capital, has announced that it will be launching its own crypto token, the Atlas Climate Token (ACT). ACT is designed to be a blockchain-based stablecoin that will be pegged to a portfolio of liquid real-world assets, including climate-resilient REITs, strategic commodities, inflation-hedged sovereign bonds, and gold. To determine the price of each ACT, the Atlas Index will utilize advanced artificial intelligence, machine learning, and data processing tools to “track and measure the price performance and volatility of liquid, stable, and negatively correlated legacy assets that have formed the foundation of the US Dollar (Gold, Real Estate/REITs, US Treasuries).” The weighting of the token will be 55% U.S. Treasuries and Treasury Inflation-Protected Securities (TIPS), 20% gold, and 25% North American REITs.
NFTs Enter the Big Time – Disney announced a new partnership with blockchain and metaverse firm Dapper Labs to launch an NFT platform named Disney Pinnacle, which will tokenize Disney's classic cartoon characters going back a century, along with well-known characters from Pixar and the Star Wars universe. Disney plans to present the tokens as collectible and tradable digital pins on the NFT marketplace, allowing fans from around the world to collect the pins on their phones and securely trade them with others worldwide. Dapper Labs’ layer-1 blockchain Flow (FLOW) will host the marketplace, which Disney plans to launch later this year on the Apple App Store for iOS, the Google Play Store for Android, and on the web.
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ISSUE #65
Market Overview
Bull market momentum continued to pick up steam over the past week as a surge in open interest for Bitcoin led to a short squeeze that pushed the top crypto to a fresh 2023 high near $38,000, with bulls now strategizing how they can flip resistance at $40,000 into support.
Bitcoin’s struggles to overcome the solid wall of resistance in this zone prompted traders to rotate into altcoins, leading many on social media to declare the first “altcoin season” in the new bull market cycle.
Some of the biggest gainers in recent weeks include blue chip cryptocurrencies like Solana (SOL) and ChainLink (LINK), while multiple low-cap tokens in the gaming sector have seen double-digit increases as traders moved to position themselves ahead of a potentially year-long (albeit volatile) uptrend.
After hitting a low near $34,100 late last Friday, Bitcoin clawed its way back up to hit a high of $38,000 on Thursday, before profit-taking led to a pullback, resulting in a Thursday close of the daily candle at $36,725.
At the time of writing, the total cryptocurrency market cap stands at $1.41 trillion, an increase of 8.5% over the past week. The DeFi market cap currently stands at $58.1 billion with a 24-hour trading volume of $8.67 billion, which is 9.1% of the total crypto market volume.
Crypto News
Guilty – The five-week criminal trial of former FTX CEO Sam Bankman-Fried (SBF) came to an end last Thursday as the jury found him guilty on all seven counts in question, setting SBF up for a maximum sentence of 115 years in prison. Up next comes the sentencing hearing, where Judge Lewis Kaplan will decide on the appropriate sentence for SBF. The hearing has been tentatively scheduled for March 28.
Speedy Judgment – Dual court filings by the Securities and Exchange Commission (SEC) and the defense team for Terraform Labs founder Do Kwon show that both parties involved in the lawsuit have requested that the judge presiding over the case make a summary judgment on the claims without a full trial. Both motions for summary judgment are now in the hands of the presiding judge and will be ruled on in the near future.
Adoption Rising – HSBC announced plans to launch an institutional custody platform for tokenized securities via a partnership with Ripple-owned tech firm Metaco. The bank expects to roll out the service in 2024 as a complement to its digital asset issuance platform – HSBC Orion. HSBC emphasized that the new digital asset custody platform will only cover security tokens and will not support cryptocurrencies like Bitcoin or stablecoins like USDT.
And in the World of…
Going Pubic – Circle Internet Financial, the company behind the USDC stablecoin, is reportedly considering launching an initial public offering (IPO) in early 2024, according to anonymous sources familiar with the matter. They said the firm is currently in talks with their advisers about the potential of going public, but there has been no official announcement as deliberations are ongoing.
Expanding Access – Hong Kong is currently assessing whether to allow retail investors to access crypto-related ETFs, according to Julia Leung, CEO of the Hong Kong Securities and Futures Commission (SFC). She said the city is weighing retail-investor access to such spot ETFs “as long as new risks are addressed and regulatory concerns are met.” The SFC also recently updated its regulatory guidelines to clear the way for retail investors to access tokenized products.
CBDC Success – Mastercard announced the successful completion of a digital Hong Kong Dollar (e-HKD) pilot program that demonstrated the efficacy of the company’s Multi-Token Network (MTN) solution to settle Web3 transactions involving dApps and digital assets, such as NFTs. The pilot also showcased the potential for seamless funding and settlement in and out of Web3 marketplaces via a retail CBDC, such as e-HKD.
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ISSUE #64
13 October 2023
Market Overview
The cryptocurrency market trended down over the past week as an uptick in geopolitical uncertainty brought on by Hamas’ attack on Israel added to the growing list of troubles already plaguing the global financial system.
Focusing on developments in the U.S., the latest wholesale inflation data came in hotter than expected at 2.2% versus the predicted 2%, while the minutes from the September Fed meeting showed that a majority of Fed representatives see another interest rate as “likely to be appropriate.” This has raised the odds in the eyes of investors that there will be at least one more hike in 2023, which exerted negative pressure on risk assets.
The trial for former FTX CEO Sam Bankman-Fried (SBF) got underway, with the testimony in the first week being dominated by SBF’s former friends and business associates, who detailed how the once lauded CEO designed a system where an unlimited amount of customer funds could be transferred to Alameda Research for the company to trade with as it wished. Caroline Ellison, SBF’s one-time romantic partner and CEO of Alameda Research, said she was relieved when FTX collapsed as she “didn’t have to lie anymore.”
Bitcoin’s price action began to trend down on Sunday following the surprise attack by Hamas on Israel and limped lower throughout the week. After the wholesale inflation data released on Wednesday, the top crypto briefly dropped to $26,525, its lowest level since Sept. 28. At the close of the daily candle on Thursday, BTC traded at $26,750.
At the time of writing, the total cryptocurrency market cap stands at $1.05 trillion, a decline of 2.78% over the past week. The DeFi market cap currently stands at $41.8 billion with a 24-hour trading volume of $1.8 billion, which is 7.8% of the total crypto market volume.
Crypto News
Solana Rising - Solana continues to gain favor with investors while Ethereum’s price limps lower as the latest digital asset fund flows report from CoinShares showed that SOL-based products saw the second largest inflows of all funds behind Bitcoin, with $23.9 million flowing into these exchange-traded products the week ending Oct. 6. It was the token’s largest week of inflows since March 2022. Analysts said the project continues “to assert itself as the altcoin of choice” despite the recent launch of multiple Ether futures products, which have thus far seen a muted level of activity. Last week was the second consecutive week of positive inflows for all digital asset investment products, with Bitcoin seeing inflows of $42.7 million.
Frozen Funds - Police in Israel moved quickly to freeze multiple cryptocurrency accounts on Binance determined to be associated with Hamas in response to the militant organization's surprise attack over the weekend. Hamas used the accounts to raise donations via social media networks, but with the assistance of Binance, the funds held in those accounts will now be redirected to Israel’s state treasury to be used towards rebuilding efforts. A review of Israeli government seizure orders and blockchain analytics reports shows that in the year leading up to the attack, wallets connected to Hamas received $41 million in crypto donations, while the Palestinian Islamic Jihad and its Lebanese ally Hezbollah received $93 million.
Currency Hedge - Jefferies released a note to investors calling Bitcoin a “critical hedge” against the potential for monetary policy that reduces the value of currency, putting the top crypto in the same bag as gold in providing effective protection against policies that eroded the purchasing power of the U.S. dollar and other fiat currencies over time. The firm said that while investors have “effectively given up” on the U.S. recession forecast, the data still indicates that a downturn is coming, and efforts to tighten monetary conditions will suffer a larger lag than usual this cycle due to an explosion of money supply growth dating back to 2020. Jefferies went on to recommend that U.S. dollar-based long-term global investors, including pension funds, allocate 10% of their funds to Bitcoin, saying investments in both BTC and gold should be regarded by investors as insurance rather than short-term trades.
And in the World of Product Launches and Adoption…
DeFi Debit Card - Wirex, a firm that specializes in digital payment solutions, announced the launch of W-Pay, a platform that connects decentralized applications (dApps), non-custodial wallets, and traditional payment infrastructures to allow firms to issue non-custodial crypto debit cards. Up to this point, debit cards that allow crypto holders to spend their tokens have required them to deposit their coins on centralized platforms, such as Coinbase, that exchange the underlying assets at the time of purchase and transfer the fiat money to the receiver. W-Pay allows cardholders to maintain control of their assets, a key part of the ethos of using cryptocurrencies and “being your own bank” through self-custody. The new platform uses ZK-powered technology to offer fast, secure payments, and offers EVM compatibility and account abstraction, helping to simplify the user experience.
Tokenized Collateral - JPMorgan announced the launch of its new Tokenized Collateral Network (TCN), a blockchain-based tokenization application that will allow investors to better utilize assets as collateral and transfer collateral ownership without needing to move assets in the underlying ledgers. The new platform has already been successfully trialed by BlackRock, which used it to tokenize shares of one of its money market funds and transfer them to Barclays as collateral for an over-the-counter derivatives trade between the two institutions. The system utilizes JPMorgan's in-house blockchain network Onyx to conduct instantaneous transactions, allowing clients to access intraday liquidity through a secured repo transaction using tokenized collateral instead of relying on expensive unsecured credit lines. The ultimate goal is for the application to allow clients to use other assets, including equities and fixed income, as collateral.
Pay with Gold - The Reserve Bank of Zimbabwe (RBZ) announced that its Zimbabwe Gold (ZiG) gold-backed digital token is now officially endorsed as a payment method in the country and can be used to complete domestic transactions. The value of ZiG is pegged to the value of the country’s physical Mosi-oa-Tunya gold coin and will be revalued in line with the international gold price. Banks in the country will maintain dedicated ZiG accounts and facilitate transactions in ZiG in the same manner as they do with transactions in local and foreign currencies. External auditors have been hired by the RBZ to validate that there is enough gold in the bank’s reserves to back all issued ZiG tokens. The intent behind releasing both the physical and digital gold tokens is to persuade local investors to put their money into a national asset as opposed to U.S. dollars amid triple-digit inflation.
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ISSUE #64
6 October 2023
Market Overview
The chop continued for another week in the crypto market, albeit with an upward drift, as asset prices across the board saw a spike in volatility amid deteriorating global financial conditions and a surging U.S. Dollar.
The week started off hot for both digital and traditional assets as news of a last-minute deal to avert a U.S. government shutdown spread, but the gains were short-lived for most as prices quickly reversed lower in the face of rising Treasury Yields and the DXY.
The U.S. 10-year Treasury yield hit 4.885 on Wednesday, its highest level since August 2007 – when the great financial crisis was really starting to put pressure on banks – while the DXY climbed to 107.351 on Tuesday, its highest level since Nov. 30, 2022. The move higher prompted many traders to exit the market and opt for “risk-free” yields, but dip buyers were waiting to scoop up oversold assets, helping prices to stabilize in trading on Wednesday.
Bitcoin's (BTC) price spiked as news of the debt deal first emerged on Sunday, hitting a weekly high of $28,615 near midday on Monday before profit-taking dropped it down to support at $27,500. Bears attempted to push its price a leg lower from there, but bulls successfully defended those efforts, and BTC closed the Thursday daily candle at $27,407.
At the time of writing, the total cryptocurrency market cap stands at $1.08 trillion, unchanged over the past week. The DeFi market cap currently stands at $43.5 billion with a 24-hour trading volume of $2.72 billion, which is 10.6% of the total crypto market volume.
Crypto News
Not Just Payments - PayPal continues to expand its blockchain profile as a recently published patent filing shows the company has created a system that enables the transfer and trading of non-fungible tokens (NFTs) within its network. The patent, which was originally filed on March 21, 2022, but only made public on September 21, details a system that enables “off-chain transaction via an NFT marketplace,” allows for various wallets to have access to the NFT, and allows users to transfer NFTs in their possession to other users within the PayPal ecosystem. All digital wallets in the system are connected via a service provider. The NFT marketplace corresponds to a decentralized blockchain associated with an entity that is different from the service provider.
VCC Fund Launch - UBS Asset Management, one of the world's largest fund houses, announced the launch of its first live pilot testing for a tokenized Variable Capital Company (VCC) fund which will utilize the firm’s in-house tokenization service, USB Tokenize, to test various fund activities on-chain, including subscriptions and redemptions. All transactions will be conducted directly on the Ethereum public blockchain, creating an immutable record that is available for anyone to view and confirm. The VCC structure of the fund is a new form of legal entity designed for all types of investment funds in Singapore. The pilot project is part of UBS Asset Management’s global distributed ledger technology strategy, which is focused on leveraging public and private blockchain networks for enhanced fund issuance and distribution.
ETF Bonanza - Bitwise, ProShares, and VanEck launched Ethereum futures ETFs, which for the first time gives investors exposure to Ether futures through a regulated ETF format. Bitwise launched its Bitwise Ethereum Strategy ETF (AETH) and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP), and VanEck launched their VanEck Ethereum Strategy ETF (EFUT). ProShares launched their ProShares Ether Strategy ETF (EETH) for direct exposure to Ether, as well as their ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE), which rebalances monthly to a 50/50 weighting between the two cryptocurrencies, and the ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH), which rebalances monthly based on the market cap of BTC and ETH. There are now a total of 12 spot Bitcoin-related ETF filings, four spot Ethereum ETF filings, and seven Ether futures-related ETFs on the SEC’s docket.
And in the World of Legal Developments…
Airport Arrest - Su Zhu, co-founder of the bankrupt crypto hedge fund Three Arrows Capital (3AC), was arrested at Shanghai Airport in Singapore while attempting to leave the country. 3AC collapsed in 2022 in the wake of the demise of Terra/Luna and its algorithmic stablecoin TerraUSD, and its founders, Zhu and Kyle Davies, have been hiding from the authorities ever since. Teneo, the joint liquidator overseeing the 3AC bankruptcy, was granted a committal order – which is used to send someone to prison for contempt of court – in a Singapore court on Sept. 25 after Zhu failed to comply with a court order. The committal order sentences Zhu to 4 months in jail. Davies’ whereabouts are currently unknown.
Ripple Ruling - The judge overseeing the SEC's case against Ripple rejected the regulator’s move to certify for interlocutory appeal in the recent judgments on the case that were in favor of Ripple. The SEC was looking to appeal part of the decision about the programmatic sales as well as “other distributions” that included offers and sales of XRP in exchange for goods and services, but District Judge Anilisa Torres said the agency did not demonstrate that the appeal would “materially advance the ultimate termination of the litigation.” The trial date for the lawsuit is now set for April 23, 2024, to address the remaining charges in the matter.
SBF on Trial - Jury selection in the trial for former FTX CEO Sam Bankman-Fried began on Tuesday, nearly a year after the former top 3 exchange declared bankruptcy in the wake of multiple other high-profile collapses. Lawyers for SBF argued that their client was “not guilty because FTX was not regulated in the United States, and he followed the rules concerning FTX US,” and they filed a request for clarification and reconsideration of charges related to the misappropriation of funds in FTX. The Department of Justice responded to these statements by filing a motion in court on Wednesday claiming the lack of crypto regulations in the U.S. is no bar to the criminal charges made against SBF, saying the lack of existing legislation does not affect whether the defendant’s victims committed money to him as there are laws that prohibit companies from stealing customer assets.
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Hong Kong Exchanges and Clearing launches DAML-based settlement platform
ISSUE #63
29 September 2023
Market Overview
Volatility continued to spike across the crypto market over the past week but did little to change the overall picture as Bitcoin trades near $27,000, where it has struggled to overcome solid resistance since it broke below $29,000 in the middle of August.
Financial headlines were dominated by the impending shutdown of the U.S. government as lawmakers remain unable to come to an agreement on a budget deal, with the weekend deadline fast approaching. The 10-year Treasury note hit a 16-year high on Wednesday, exerting additional pressure on stocks and other risk assets, which have been struggling in the face of growing economic uncertainty.
It looks increasingly likely that a spot Bitcoin ETF will be approved in 2023 as the SEC continues to extend its decision deadlines as each of the nine applications currently on its docket comes up for review. On a positive note, SEC Chair Gary Gensler reiterated his stance that Bitcoin is a commodity during testimony in front of the House Financial Services Committee on Wednesday, providing a little extra clarity on how investors should classify the top crypto.
Bitcoin broke below support at $26,600 on Sunday evening and hit a weekly low of $25,980 on Monday before bulls pushed it back above $26,200. A midday rally on Thursday pushed it to a weekly high of $27,320 before profit-taking dropped it to support near $27,000 at the close of the daily candle.
At the time of writing, the total cryptocurrency market cap stands at $1.08 trillion, an increase of 2.78% over the past week. The DeFi market cap currently stands at $43.76 billion with a 24-hour trading volume of $2.83 billion, which is 9.2% of the total crypto market volume.
Crypto News
See You In 2024 - The Securities and Exchange Commission (SEC) announced a delay in its ruling on the ARK 21Shares Bitcoin ETF application, pushing its decision to January 10, while also delaying its decision on the Global X application until November 21, at which point the regulator has the option to extend that deadline as well. While the decision was a signal to many that a spot BTC ETF application won’t be approved in 2023, especially since the SEC made the announcement well in advance of the Nov. 11 deadline, one positive takeaway is that Jan. 10 is 240 days after the initial ARK 21Shares application was filed, which means that the SEC will not be able to delay its decision beyond that date. Prior to the announcement of the delays, a group of four U.S. Representatives sent a letter to SEC Chair Gary Gensler calling for him to “immediately” approve a spot Bitcoin ETF, citing the recent decision in the Grayscale case.
Big Bank Ban - U.K.-based customers of Chase Bank, a subsidiary of financial services company JPMorgan Chase, have been informed that starting on October 16, they will no longer be able to make crypto transactions using their debit cards or through outgoing bank transfers. Chase sent a letter to customers on Tuesday, saying that if the bank thinks a customer is making a payment related to crypto assets, they will decline it. The bank said it made this decision “because fraudsters are increasingly using crypto assets to steal large sums of money from people. Declining these payments is one of the ways we’re helping keep you and your money safe.” Data from Action Fraud, Britain’s fraud reporting agency, shows that U.K. consumer losses to crypto fraud have spiked more than 40% year-over-year as of May.
U.S. Bound - European alternative asset manager CoinShares announced the launch of its hedge fund division, CoinShares Hedge Fund Solutions, which will make its digital asset offerings available to qualified U.S. investors for the first time. CoinShares is best known for its crypto ETPs, research, and venture arms. They currently offer a wide range of crypto products, including single-asset ETPs for Bitcoin, Ethereum, Litecoin, XRP, Polkadot, Tezos, and Solana. They also have multi-asset products, such as the CoinShares Physical Top 10 Crypto Market ETP and the CoinShares Physical Smart Contract Platform ETP, which track the performance of a basket of cryptocurrencies.
And in the World of Blockchain Adoption…
Unredacted Wallet - Leaked documents from the Federal Trade Commission’s lawsuit against Microsoft show that the tech giant plans to integrate a crypto wallet into the next version of its popular Xbox gaming console, which is set to be released in 2028. Also included in the documents was an Xbox roadmap from May 2022 that detailed plans for a new disc-less Xbox Series X, a gyro controller, and a next-gen hybrid Xbox. The leak has been called the “biggest in Xbox history” because unredacted emails like this don’t usually appear in the public domain. Xbox chief Phil Spencer emailed Microsoft employees about the leak, saying the plans “were unintentionally disclosed” as part of the FTC v. Microsoft case, and noted that “the documents are well over a year old and our plans have evolved.” In a subsequent post on Twitter, Spencers said Xbox “will share the real plans when we are ready.”
Blockchains in the Cloud - Google Cloud announced the addition of 11 new blockchain networks to its BigQuery public datasets, allowing users to make intricate on-chain queries, such as assessing the number of NFTs minted or contrasting transaction fees across these chains. The new chains include Avalanche, Arbitrum, Cronos, the Görli testnet on Ethereum, Fantom, Near, Optimism, Polkadot, Polygon mainnet, Polygon Mumbai, and Tron. Google has also made improvements to the Bitcoin BigQuery dataset by adding Satoshis/Ordinals to the open-source blockchain-ETL datasets for developers to query. The addition of some of the most popular networks helps to simplify the process of accessing data on blockchain networks and will help the Web3 community provide answers to certain questions without the need to operate nodes or maintain an indexer.
Stellar Wallet - Peer-to-peer payments and money transfer company MoneyGram announced plans to launch its own non-custodial digital wallet in Q1 2024, saying the wallet will “enable consumers around the world to leverage stablecoin technology to seamlessly move from fiat to digital currency, to fiat again – all with the same global brand they trust.” The wallet will leverage the Stellar network and MoneyGram's fiat on and off-ramp services integrated with the Stellar network. Once fully rolled out, users will be able to visit any participating MoneyGram location to cash out their digital assets and will also be able to send digital assets to other users via the wallet. The company will be responsible for doing a comprehensive global compliance screening for all wallet users. To help entice users to adopt the wallet, MoneyGram is offering zero-fee services until June 2024.
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Gensler takes heat from lawmakers over his approach to regulating crypto
‘Nonsensical’ but ‘not a big deal’: Execs weigh Chase UK’s anti-crypto move
ISSUE #62
22 September 2023
Market Overview
Choppy price action in the cryptocurrency market resulted in a slight price appreciation for Bitcoin over the past week as economic data continues to present a mixed view of the global economy, while signs continue to emerge that consumers are being stretched thin, posing a risk to stock prices which still trade near all-time highs.
A new report from the research firm RxR that used an enhanced version of Metcalfe’s law suggests that Ether is trading at a 27% discount to its fair value when accounting for activity on various layer-two (L2) scaling solutions. Most Ether valuations use the standard version of Metcalfe’s law that only accounts for its user count on the mainnet, which significantly reduces the actual number of users and total value locked on the Ethereum network.
When accounting for activity on the various L2 solutions, RxR said they “see a reasonable chance of 200% growth in daily active users in 2024, implying a $800B fair network value by 2025 (2.9x from current fair value and 3.9x from current FDV).”
All eyes were on the Fed this week, which announced on Wednesday that it would be holding interest rates in the range of 5.25%-5.5% for the time being but reiterated its projections that rates could close out 2023 in a range of 5.5%-5.75%, implying that there will be one more rate hike this year. Bitcoin initially pulled back after the announcement, but bulls managed to bid it back above $27,000 later in the day. At the close of the daily candle on Thursday, BTC traded at a price of $26,560.
At the time of writing, the total cryptocurrency market cap stands at $1.05 trillion, unchanged over the past week. The DeFi market cap currently stands at $42.1 billion with a 24-hour trading volume of $2.31 billion, which is 8.43% of the total crypto market volume.
Crypto News
No Relent - Following last week's charges against the NFT project “Stoner Cats,” David Hirsch, head of the SEC’s Crypto Assets and Cyber Unit, warned that more enforcement actions are coming related to ongoing investigations. Hirsch said the SEC is currently investigating cryptocurrency exchanges and decentralized finance (DeFi) platforms that have allegedly conducted similar breaches as Coinbase and Binance.US, and a response from the regulator will be forthcoming. “We're going to continue to be active as to intermediaries,” he said. “That can be brokers, dealers, exchanges, clearing agencies, or any others who are active in this space, are within our jurisdiction, and [are] not meeting their obligations, either through registration or failure to provide adequate or complete disclosures.”
Seeking Recompence - Debtors in the FTX bankruptcy case filed a lawsuit against Joseph Bankman and Barbara Fried, the parents of FTX founder and former CEO Sam Bankman-Fried (SBF), alleging that they exploited their access to SBF’s business to enrich themselves at the expense of the FTX bankruptcy estate. The debtors alleged that Bankman and Fried “siphoned millions of dollars out of the FTX Group for their own personal benefit and their chosen pet causes,” including a $10 million cash gift and a $16.4 million luxury property in the Bahamas. They asked that the court award them “compensatory damages in an amount to be determined at trial resulting from defendants’ conscious, willful, wanton, and malicious conduct, which exhibits a reckless disregard for the interests of plaintiffs and their creditors,” and the “Disgorgement of all of Defendant Bankman’s compensation paid by Plaintiffs.”
Institutional Crypto Yields - Standard Chartered’s crypto unit, Zodia Custody, announced the launch of “Zodia Custody Yield,” a platform that will allow the bank's institutional clients to earn a yield on their crypto holdings for the first time. Zodia Custody partnered with OpenEden, a platform focused on bridging real-world assets into DeFi via tokenization, to enable the yield service. The new integration will also give institutions exposure to staking services, enabling them to “access off-chain yield potential for their on-chain assets without compromising on the bank-grade security of Zodia Custody’s platform.” The firms said they decided to launch this collaboration in response to increasing demands for an “institutional-grade custody solution for digital asset products that [is] low-risk, liquid, and transparent with respect to how returns are generated for stablecoin holders.”
And in the World of Blockchain and Cryptocurrency Adoption…
Phygital Marketing - Walmart, the world’s largest retailer by revenue, is looking to “reinvent retail” via the metaverse and virtual commerce, a new type of commerce where customers can purchase virtual goods for their online avatars alongside real-world versions of the same item for use in their daily lives. In the first phase of the project, Walmart plans to add new décor items from Mainstays and Better Homes and Gardens into House Flip, a mobile game that lets players renovate and sell virtual homes. The move will allow users to browse items in the virtual world before purchasing the physical version. The retailer's ultimate goal with the platform is to develop new ways to meet and engage with its customers and power commerce in the metaverse. As the system evolves, Walmart plans to allow customers to make purchases via their Walmart account without the need to leave the virtual world, helping to simplify the checkout process.
Banks Going Blockchain - Citigroup’s Treasury and Trade Solutions (TTS) announced the creation and pilot testing of the Citi Token Services for cash management and trade finance, which utilizes blockchain and smart contract technologies to deliver digital asset solutions for institutional clients. The new service will integrate tokenized deposits and smart contracts into Citi’s global network to upgrade the firm’s core cash management and trade finance capabilities, allowing it to operate on a 24/7 basis with instant settlement. To create the new service, Citi worked with Maersk and a canal authority to digitize a solution that serves the same purpose as bank guarantees and letters of credit in the trade finance ecosystem. Citi Token Services has also been applied to a global cash management pilot, enabling clients to transfer liquidity between Citi branches on a 24/7 basis.
Digital Asset Funding - The Japanese government announced that they plan to allow startups looking to launch in the country to raise funds from venture capital firms through the issuance of digital assets, such as cryptocurrencies, providing more funding avenues for up-and-coming companies involved in blockchain technology. Venture capital firms typically use limited partnerships to pool capital with other companies for startup investment, which caps their exposure to the money they put in. Up to this point, Japanese financial laws have restricted limited partnerships to more conventional assets, such as shares, stock options, and security tokens. The new rule adds other tokens and crypto assets to this list and is expected to primarily benefit companies involved in next-generation Web3 technologies.
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Ethereum could see 200% growth in daily active users, $800B fair value by 2025 - RxR Analyst
ISSUE #61
15 September 2023
Market Overview
Volatility is on the rise in the crypto market, but the overall picture remains the same as Bitcoin continues to trade above $26,000, but has shown little evidence that it will climb above the trading range it’s been trapped in since the middle of August amid deteriorating conditions in the broader financial markets.
Institutional interest in digital assets continues to rise as multiple firms filed a variety of exchange-traded product applications over the past week, with many waiting to see what step the U.S. Securities and Exchange Commission will take with regards to the first spot crypto ETF.
SEC Chair Gary Gensler testified in front of the Senate Banking Committee, stating that in his 44 years of experience related to finance, he has “never seen a field that is so ripe with misconduct. It’s just daunting.” When asked directly about the ETF applications and the Grayscale ruling, Gensler said, “We are still reviewing that decision and reviewing multiple filings around Bitcoin exchange-traded products. I’m looking forward to staff’s recommendations on similar questions.”
The latest Consumer Price Index (CPI) report released on Wednesday shows that inflation has once again started to climb higher, coming in at 3.7% versus an expected 3.6%, largely driven by the rising cost of energy. Bitcoin briefly fell below $25,000 on Monday, but bulls managed to push it back above $26,100 by the time the CPI was released on Wednesday and continued to gain ground, with BTC closing the Thursday daily candle at $26,545.
At the time of writing, the total cryptocurrency market cap stands at $1.05 trillion, a decrease of 1% over the past week. The DeFi market cap currently stands at $41 billion with a 24-hour trading volume of $1.83 billion, which is 6.77% of the total crypto market volume.
Crypto News
Ant Goes Blockchain - Ant Group, the owner/operator of Alipay, the world’s largest mobile payment platform, announced the launch of a new sub-brand dubbed “ZAN” that will focus on blockchain development and services for both institutional and individual Web3 developers. The ZAN product family includes ZAN eKYC, ZAN KYT, ZAN Smart Contract Review, and ZAN Node Service, and Institutional customers will be able to utilize the platform to help them issue and manage real-world assets (RWAs) in compliance with local regulatory requirements. ZAN has already been successfully utilized in pilot testing, and HashKey Group, Morpheus Labs, and Everest Ventures Group participated in ZAN’s brand launch ceremony as the company’s first batch of partners.
Metaverse Machinations - China launched a three-year action plan to encourage the development of the country’s metaverse industry as companies look to integrate next-generation information technologies like artificial intelligence, blockchain, cloud computing, and virtual reality into the metaverse. The plan includes five main tasks for firms in the country: Developing advanced technological and industrial systems; Creating a 3D interactive industrial metaverse; Designing immersive and interactive digital life applications; Establishing comprehensive industrial support systems; and Implementing a secure and credible industrial governance framework. China is looking to integrate its metaverse development into various facets of the economy, including the home appliance, automotive, aerospace, and manufacturing industries.
Big Bank Adoption - JPMorgan is reportedly in the early stages of exploring the creation of a blockchain-based digital deposit token designed to speed up cross-border payments and settlement, raising optimism that more institutional adoption of blockchain technology is on the horizon. The bank has already developed most of the underlying infrastructure needed for the new payment vehicle to work but is waiting on final approval from U.S. regulators before they actually create the token. A deposit token is a transferable digital coin that represents a deposit claim against a commercial bank, effectively serving as a digital version of the deposits that customers hold in their accounts. A source familiar with the matter who asked not to be identified said that once the bank receives approval, it will likely launch the product for use by corporate clients within a year.
And in the World of Legal Developments…
Fair Value Reporting - The U.S. Financial Accounting Standards Board (FASB) unanimously approved a new rule that requires companies that hold or invest in cryptocurrency to report their holdings at fair value, a measurement that aims to capture the most up-to-date value of an asset. Based on the updated standards, fair value is the estimated price of an asset that takes into account current market value and other decisive elements. The new rule, which goes into effect in 2025, is expected to increase volatility in the earnings of companies with large crypto holdings, but will also allow them to record financial recoveries from increasing crypto prices to better reflect the state of their treasuries. Crypto-native companies like Coinbase will be most affected by the rule change, along with investment firms and companies like MicroStrategy and Tesla that hold large amounts of crypto on their books.
Regulating DeFi - The U.S. Commodity Futures Trading Commission (CFTC) announced new enforcement actions against the Opyn, ZeroEx, and Deridex DeFi protocols for allegedly failing to register various derivatives trading offerings. All three platforms were charged with illegally offering leveraged and margined retail commodity transactions in digital assets, while Deridex and Opyn faced additional charges related to a failure to register under the proper designation. Along with an order to cease and desist from violating the Commodity Exchange Act (CEA) and CFTC regulations as charged, civil monetary penalties were also handed down. Opyn has been ordered to pay $250,000, ZeroEx was fined $200,000, and Deridex was penalized $100,000.
Bankruptcy Profits - Digital Currency Group (DCG) and its crypto lending subsidiary Genesis Global proposed a new remuneration deal for the creditors of the now-bankrupt lending platform that could see unsecured creditors recover 70-90% of their claimed funds while Gemini Earn users could recover 95-110%. Gemini Earn users will be able to recoup more than their originally deposited amount if Gemini agrees to provide additional financial assistance as they had promised to do previously, and there are more than 230,000 retail creditors who used Gemini’s Earn program and are entitled to remuneration. Bankers for DCG said Earn customers’ claims are being calculated based on what will be returned from the Genesis bankruptcy estate, plus Gemini user collateral of more than 30 million shares of the Grayscale Bitcoin Trust (GBTC), worth approximately $607 million.
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ISSUE #60
8 September 2023
Market Overview
The cryptocurrency market continued to experience range-bound, sideways trading over the past week as concerns related to the health of the global economy continue to mount, putting pressure on asset prices across financial markets as consumers struggle under the weight of rising oil prices.
While the past few months have seen some moderation in inflation, signs are beginning to emerge that the cost of living is again climbing higher, prompting speculation that the Federal Reserve may need to hike interest rates higher than previously stated and dashing hopes that there could be a rate cut before the end of 2023.
Last week’s Grayscale bump had all but faded by Friday, and the announcement that the Securities and Exchange Commission was delaying its decision on the spot Bitcoin ETF applications from seven asset managers sent BTC careening to a low of $25,308. As it stands now, the earliest one of these products will be approved in October, but many analysts do not expect an approval until sometime in early 2024.
After spending the week drifting lower following a spike to $26,125 on Sunday, Bitcoin saw a late day surge on Thursday that resulted in a daily candle close of $26,280. While analysts agree that the long-term outlook is positive, in the short term, the trend remains negative, with many warning that BTC could see one final flush out that drops it near $20,000 before it begins to head higher in the next leg of a bull market.
At the time of writing, the total cryptocurrency market cap stands at $1.06 trillion, an increase of 1% over the past week. The DeFi market cap currently stands at $42.2 billion with a 24-hour trading volume of $2.2 billion, which is 8.92% of the total crypto market volume.
Crypto News
SOMA.finance Launch - SOMA.finance (that's us), a joint venture between MANTRA and Tritaurian Capital, is planning to offer the first legally issued and compliantly structured digital security to global and U.S. retail investors later this month, the company said in a statement Wednesday. “We have been working quietly but diligently to develop the necessary technology to launch a revolutionary decentralized marketplace for digital assets, compliant digital securities, and NFTs while liaising with regulators to provide a highly regulated decentralized financial platform,” said William B. Heyn, co-founder and co-CEO, SOMA.finance and CEO of Tritaurian Capital." The launch will take place end of September/early October - complete your onboarding to SOMA.finance to take part.
ETF Filing Bonanza - ARK Invest and 21Shares have filed paperwork to launch a spot Ether ETF, becoming the first to file for such a product in the U.S. after filing for an Ether futures ETF last month. The goal of the ARK 21Shares Ethereum ETF is to track the performance of Ether, as measured by the performance of the CME CF Ether-Dollar reference rate. To sell or redeem its shares, the Trust “will do so in ‘in-kind’ transactions in blocks of 5,000 Shares that are based on the quantity of Ether attributable to each Share of the Trust,” the filing said. Coinbase Custody Trust Company has been selected as the custodian for the Trust. After Bitcoin, Ether is the next most likely candidate for a spot ETF as the asset is the second largest crypto by market cap (~$196 billion), is widely distributed, and has ample liquidity on the largest cryptocurrency exchanges in the ecosystem.
Requesting a Sit-down - Grayscale sent a letter to the SEC requesting a sit-down with the regulator following last week’s ruling that the SEC must review the firm's application to convert the Grayscale Bitcoin Trust (GBTC) to a spot BTC ETF after previously rejecting the application. The firm told the SEC it has no legal reasoning left to block the conversion of GBTC to an ETF and is looking to move the process forward as quickly as possible. The letter noted that the Rule 19b-4 filing for the Trust has been “pending for nearly three times the length permitted for Commission action under Section 19(b) of the Exchange Act,” and highlighted that according to Section 19(b)(2)(D) of the Act, “a proposed rule change is deemed approved by the Commission if the agency does not issue an order one way or the other within the statutory timeframe.”
Unidentifiable Scammers - The U.S. District Court for the Southern District of New York has dismissed a class-action suit against a group of five firms, including Uniswap Labs and investment giant Andreessen Horowitz, for alleged securities violations on the Uniswap decentralized trading platform. The plaintiffs claimed they lost money due to “scam tokens” listed on the decentralized exchange between December 2020 and March 2022 and said Uniswap facilitated the “unlawful promotion, offer, and sale of unregistered securities.” The Judge on the case said the plaintiffs were suing the defendants for statements made on social media instead of suing the scammers for unlawful solicitation, said the proper audience for the plaintiffs' complaints is Congress, and dismissed the complaint in full, with prejudice, meaning the case cannot be retried.
And in the World of Adoption and Integrations…
DeFi Integration - Robinhood announced the launch of custody, send, and receive support for Bitcoin and Dogecoin for all users, and has enabled in-app swaps on the Ethereum network, allowing users to access the blockchain’s extensive DeFi ecosystem, which includes a list of 200+ tokens that the Robinhood users will be able to access in the coming weeks. Traders who utilize the service will be able to pay transaction fees using tokens they already hold, which means they will not be required to first purchase Ether in order to pay the gas for transactions. The multi-chain, self-custody, web3-enabled wallet now allows users to own, send, and receive crypto on the Arbitrum (ARB), Bitcoin, Ethereum, Dogecoin, Optimism (OP), and Polygon networks, swap tokens on Ethereum and Polygon, and connect to a wide range of dApps.
Blockchain Infrastructure - The London Stock Exchange Group (LSEG) announced it is developing a new digital markets business that will make it the first major exchange to utilize blockchain technology to offer extensive trading of traditional financial assets. The new service will not offer access to crypto assets but will focus on utilizing blockchain to improve the efficiency of buying, selling, and holding traditional assets. If everything goes according to plan, the LSEG would be the first large global stock exchange to offer investors an “end-to-end” blockchain-powered ecosystem, allowing the firm to focus on growing its presence in the field of digital assets and asset tokenization. LSEG hopes to have its first blockchain-powered market up and running within the next year, and the firm is already in talks with regulators in multiple jurisdictions, as well as the government and Treasury in the UK, to gain regulatory approval.
USDC Expansion - Visa is looking to expand its stablecoin settlement capabilities with the addition of USD Coin (USDC) support on the Solana blockchain in partnership with merchant acquirers Worldpay and Nuvei. The payment provider has completed a pilot program that utilized VisaNet to move millions of USDC between its partners over the Solana and Ethereum blockchain networks, providing a new way to settle fiat-denominated payments and modernize cross-border money movement. The goal of the new integration is to improve the speed of cross-border settlement and provide modern options for the company’s clients to send or receive funds from Visa’s treasury easily. The firm chose to add support for Solana due to a rising demand to leverage newer, high-performance blockchains that can send and receive stablecoins with higher speed and lower costs.
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ISSUE #59
1 September 2023
Market Overview
Volatility spiked across the cryptocurrency market this week as Jekyl and Hyde developments on the spot Bitcoin (BTC) ETF front saw Bitcoin and the broader altcoin market surge higher, only to come crashing back down a couple of days later.
The main source of the new-found momentum was a ruling in favor of Grayscale Investments by the U.S. Court of Appeals, which ruled that the SEC must review Grayscale’s application to convert the Grayscale Bitcoin Trust (GBTC) into an ETF, which the regulator previously rejected.
ETF analysts from Bloomberg Intelligence have now raised the chances of a spot BTC ETF being approved in 2023 to 75%, while the likelihood of an approval by the end of 2024 now stands at 95%. The approval of such a product is likely to prompt registered investment advisors to reevaluate their allocation models to include digital assets, unlocking a treasure trove of funds as the 14,800 RIAs in the U.S. manage over $5 trillion in assets.
Bitcoin responded to the Grayscale ruling by breaking free of the shackles that had it pinned below $26,000 and spiking to a high near $28,200 before profits taking resulted in its price pulling back to support at $27,200. The momentum soon faded, however, and a Thursday announcement that the SEC was delaying its decision on the spot ETF applications from BlackRock, Valkyrie, Invesco, and WisdomTree, pushing its ruling until at least October, resulted in Bitcoin falling back to support at $26,000.
At the time of writing, the total cryptocurrency market cap stands at $1.05 trillion, relatively unchanged over the past week. The DeFi market cap currently stands at $41.7 billion with a 24-hour trading volume of $2.46 billion, which is 6.5% of the total crypto market volume.
Crypto News
One Step Closer - The integration of cryptocurrencies with X, formerly known as Twitter, is one step closer to becoming a reality as the popular social media platform received a currency transmitter license in the state of Rhode Island on Monday, which allows the platform to provide virtual asset-related services on behalf of its users. The license means X can now store, transfer, and exchange digital assets for its growing user base, and it allows the platform to facilitate cryptocurrency trading activities within the state. X owner Elon Musk has long made it clear that he wants to transform the social media platform into an “everything app” similar to China’s WeChat platform, and securing money transmitter licenses is a vital piece in making that goal a reality.
ETF Barrage - Cathie Wood’s ARK Invest and 21Shares jointly applied for two futures ETF products involving Ether and Bitcoin, adding to the growing queue of cryptocurrency-related ETF applications that the SEC needs to make a decision on in the coming months. According to the application filed by investment advisor Empowered Funds, the firms are looking to introduce the ARK 21Shares Active Ethereum Futures ETF (ARKZ) and the ARK 21Shares Active Bitcoin Ethereum Strategy ETF (ARKY), which will focus on cash-settled futures contracts traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC), such as the Chicago Mercantile Exchange (CME). Both products will invest at least 25% of their funds in futures products, while the remaining assets will be allocated to cash and cash equivalents, U.S. Treasuries, market instruments, and repurchase agreements.
A Tokenization First - Central African Republic (CAR) launched an initiative that will see the country’s land and natural resources tokenized and sold on the blockchain, becoming the first country in the world to do so. CAR President Faustin-Archange Touadéra enacted Law No. 23.010, which governs the tokenization of natural resources and rights in the country, after the National Assembly unanimously approved the initiative. The government said it made the move with the goal of helping the country become a preferred business destination in Africa. The country is estimated to have iron deposits valued at $2.2 trillion, diamond deposits valued at $258 billion, gold deposits valued at $60 billion, graphite deposits valued at $7 billion, uranium deposits valued at $5 billion, and limestone deposits valued at $2 billion.
And in the World of Legal Decisions Affecting Crypto…
Bankruptcy Battle - The Digital Currency Group (DCG) reached a preliminary agreement on a Chapter 11 bankruptcy plan with creditors of its crypto lending subsidiary, Genesis Global Capital (GGC), which will see unsecured creditors recover their assets in a range between 70-90% in USD and 65-90% in terms of digital assets, depending on how the market performs. The deal is still subject to approval by GGC’s lenders, who have pushed back against the agreement, calling it “wholly insufficient.” DCG owes $630 million in unsecured loans due in May 2023 and $1.1 billion under an unsecured promissory note due in 2032. Under the new arrangement, the firm would pay $275 million over four installments to cover the May 2023 loan maturities and will pay two lien facilities $328.8 million and $830 million over the next two and seven years, respectively.
NFTs are Securities - The latest enforcement action from the SEC indicates they are pushing to have non-fungible tokens (NFTs) labeled as securities as the agency charged Impact Theory, LLC, a media and entertainment company headquartered in Los Angeles, with conducting an unregistered offering of crypto asset securities in the form of NFTs. The regulator determined that the NFTs offered and sold by Impact Theory to investors were investment contracts, “and therefore securities.” Impact Theory did not admit to or deny the SEC’s findings, but has agreed to abide by a cease-and-desist order finding that it violated registration provisions of the Securities Act of 1933. As part of the settlement, the company is required to pay more than $6.1 million in disgorgement, prejudgment interest, and civil penalties.
Broker Regulations - The U.S. Department of the Treasury and Internal Revenue Service (IRS) released their proposed regulations on the sales and exchanges of digital assets by brokers, providing more clarification to crypto companies and investors in regard to tax reporting obligations. Under the proposed regulations, digital asset brokers include “digital asset trading platforms, digital asset payment processors, and certain digital asset hosted wallets.” These entities are required to report “certain sales and exchanges,” and brokers who deal with digital assets are now subject to the same information reporting rules as brokers for securities and other financial instruments. Individuals who only engage in distributed ledger validation, including miners and stakers, are exempt from broker requirements, but certain decentralized finance platforms will not be.
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ISSUE #58
25 August 2023
Market Overview
The cryptocurrency market started on the slow path to recovery over the past week following last Thursday’s 12% drop in the price of Bitcoin, which also saw $81 billion evaporate from the total cryptocurrency market cap in a matter of hours.
While headlines pointed to SpaceX, which sold $400 million worth of BTC in 2021 and 2022, as a reason for the pullback, many analysts have questioned the timing of the report from the Wall Street Journal and accused the paper of including the paragraphs on Bitcoin at the end of the report simply to spark a fresh round of FUD in the market.
Digging deeper into the data, multiple analysts highlighted that trading volumes had been on the decline, while a decrease in volatility hinted at the possibility of a breakout move following weeks of sideways price action. Unfortunately for the crypto faithful, the breakout was to the downside, and it will now take additional effort and time for Bitcoin’s price to climb higher and recapture support at $29,000.
Bitcoin bulls showed their first signs of life on Wednesday and managed to lift the top crypto back above support at $26,600. But bears aren’t giving up their recent gains without a fight, and they remained locked in a heated battle with bulls at the close of the Thursday candle with Bitcoin trading above support at $26,000. The struggles of the crypto market coincided with a surge in the value of the U.S. dollar and the 10-year U.S. Treasury bond, and prices likewise started to climb higher after the USD and 10Y T-bill retreated from their highs on Wednesday.
At the time of writing, the total cryptocurrency market cap stands at $1.05 trillion, a decrease of 1.87% over the past week. The DeFi market cap currently stands at $41.9 billion with a 24-hour trading volume of $1.97 billion, which is 7.2% of the total crypto market volume.
Crypto News
Monitoring the Metaverse - Reports have emerged that China is looking to implement its social credit system in the metaverse as Chinese state-owned telecoms operator China Mobile has drafted a proposal for a “Digital Identity System” for all users of online virtual worlds, aka metaverses, that would include both natural and social characteristics to determine an individual's trust score. The proposal also includes a suggestion that this information be permanently stored and shared with law enforcement “to keep the order and safety of the virtual world.” China Mobile said that such a digital identity system would allow police or government officials to identify individuals who “spread rumors and make chaos in the metaverse” and punish them accordingly. An expert review of the proposal determined that it risks violating the principles of privacy and freedom to connect that have become mainstays of the internet in the Western world.
CBDC Down Under - The Reserve Bank of Australia (RBA) has concluded its pilot project exploring the use cases for a central bank digital currency (CBDC) and has determined that a digital Australian dollar would be useful in four main areas: enabling ‘smarter’ payments, supporting innovation in financial and other asset markets, promoting private digital money innovation, and enhancing resilience and inclusion in the digital economy. While the RBA sees great potential for an eAUD, the central bank acknowledged that there is still a significant amount of research to be done on the topic, and said, “It is likely that any serious policy consideration of issuing a CBDC in Australia is still some years away.”
CBDC Caucus - Credit card giant Mastercard announced the launch of a new partnership program intended to explore the benefits and limitations of CBDCs with seven prominent crypto and FinTech firms. Mastercard said it formed the partner program with leading blockchain technology and payment service providers “to foster collaboration with key players in the space so they can drive innovation and efficiencies.” Some of the topics the program will explore include the role of the private sector in CBDC issuance, security, privacy, and interoperability, and what specific challenges CBDCs solve. The seven initial partners include Ripple, Consensys, multi-CBDC and tokenized assets solution provider Fluency, digital identity technology provider Idemia, digital identity consultant Consult Hyperion, security technology group Giesecke+Devrient and digital asset operations platform Fireblocks.
And in the World of Cryptocurrency Exchanges and Prime Brokers…
Deepening Relationship - Coinbase announced a reconfiguration of its partnership with Circle, the issuer of the stablecoin USD Coin (USDC), which will see all governance and operations responsibilities for the stablecoin brought in-house and Coinbase take an equity stake in Circle as the exchange recognizes “the fundamental importance of stablecoins to the broader cryptoeconomy.” Up to this point, USDC governance was handled by the Centre Consortium, a self-governance consortium jointly founded and managed by Coinbase and Circle. Under the new operating agreement, the Centre will no longer function as the main governance arm, and the firms will handle those responsibilities internally. The firms also announced that USDC would be added to six additional blockchains between September and October, which means the token will now be available on 15 different networks.
No Sales Occurred - Gemini filed to dismiss the lawsuit brought against the exchange by the Securities and Exchange Commission (SEC), which alleges that the Gemini Earn program constitutes an offer and sale of securities under applicable law and should have been registered with the Commission. The filing noted that according to Section Five of the Securities Act, it is unlawful to sell (or offer to sell) an unregistered security, but two requirements must be met: “There must be a security; and The defendant must have sold, or offered to sell, ‘such security.’” Since the Earn Program did not involve any sales or an offer to sell, Gemini’s legal team argued that the SEC cannot substantiate these claims in court, and therefore, the case should be dismissed.
Crypto Pension - Reports have emerged that multiple large pension funds, including the retirement fund for U.S. defense contractor Lockheed Martin, are included in the list of backers for the crypto prime broker Hidden Road, which provides financing that has traditionally been provided by banks. This has prompted some to warn about the danger cryptocurrencies pose to the long-term health of retirement vehicles like pension funds as the asset class is known for its volatility and large price swings. When a hedge fund borrowing money from a prime broker experiences a loss on its investments, it's the prime broker and its investors that are left holding the bill. The perceived risks are high as Hidden Road has a balance sheet in the hundreds of millions, as opposed to the billions held by large prime brokers, and there are additional risks when relying on outside capital to fund investments.
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ISSUE #57
18 August 2023
Market Overview
A combination of macroeconomic uncertainty around potential devaluation of the Chinese Yuan, the Feds hawkish stance on rate hikes, and SpaceX selling off almost $400m USD worth of Bitcoin lead to BTC price dropping 10% overnight. Whilst the past few weeks of stability for Bitcoin was an indication that some volatility was just around the corner, it's important to remember that institutional interest in Bitcoin is still high, with Blackrock, Vanguard and Fidelity all having shown their hand with their applications for Bitcoin spot ETFs.
Numerous altcoins recorded double-digit losses as a lack of any notable developments saw trading activity dwindle and prompted many traders to derisk in the face of mounting economic challenges. The SEC’s decision to appeal parts of the XRP ruling further drained the momentum from the altcoin market as investors now need to seriously consider how certain tokens will be classified in the future.
The minutes from July’s FOMC meeting showed that most Fed officials see upside risks to inflation while a "couple" of officials didn't want to raise rates that month. The threat of higher inflation means that the central bank may need to continue raising interest rates at future meetings, but for the time being, the consensus among 90% of traders is that the Fed will hold rates steady next month.
Bitcoin broke below support at $29,000 on Wednesday in response to the mounting economic headwinds, with the sell-off hitting break-neck speeds on Thursday as the top crypto plunged to a low of $25,243 before dip buyers arrived to push it back above $26,600 by the close of the daily candle. From a macro perspective, many analysts still see a significant increase in price coming for the top crypto as it heads into its next halving in April 2024, but from the micro perspective, additional struggles in the near term is expected.
At the time of writing, the total cryptocurrency market cap stands at $1.07 trillion, a decrease of 8.55% over the past week. The DeFi market cap currently stands at $42.4 billion with a 24-hour trading volume of $3.5 billion, which is 5.44% of the total crypto market volume.
Crypto News
Expanded Offerings - Coinbase announced that it received regulatory approval from the National Futures Association (NFA), a CFTC-designated self-regulatory organization, to offer eligible US customers access to crypto futures on its platforms. The approval makes Coinbase the first crypto-native exchange in the U.S. to operate as a Futures Commission Merchant (FCM) and directly offer traditional spot crypto trading alongside regulated and leveraged crypto futures. The exchange originally filed the application to register as an FCM nearly two years ago as the crypto market was approaching all-time highs. Coinbase called the securing of FCM status “a watershed moment” for the crypto industry in the U.S., and will share more information on how verified customers can access their futures offerings in the coming months.
The HUB - Payments giant PayPal followed up the release of its own stablecoin with the introduction of its new ‘Cryptocurrencies Hub’ feature, which allows users to buy, hold, and sell crypto assets, use any proceeds to pay for purchases, convert between PayPal USD (PYUSD) and another crypto asset, send and receive crypto assets, and view market information and educational content. Paxos Trust Company partnered with PayPal to serve as a custody, trading, and transfer services partner for crypto assets, and users are required to verify their identity, have a personal PayPal account, and a ‘Balance Account’ in good standing in order to access the Cryptocurrencies Hub. Users are only permitted to deposit tokens supported by PayPal in their Hub accounts, and any unsupported assets sent to these addresses will be permanently lost.
Fiat-Paid Transactions - Global payments provider Visa is looking to simplify the process of paying for transactions on the Ethereum network and revealed their work on an experimental solution that enables payment of on-chain gas fees with a Visa card. The company noted that when compared to the complex nature of blockchain transactions, the simplicity of fiat-based payment transactions supported by the Visa network shows that blockchain transactions need improvement. The proposed solution utilizes Ethereum's ERC-4337 standard and a paymaster contract, which is a specialized type of smart contract account that can sponsor gas fees for user contract accounts, to allow Visa cardholders to directly pay their gas fees with fiat currency. The experiment also utilized a Verifying Paymaster, which is a smart contract that delegates all necessary checks and sourcing of information to an off-chain component.
And in the World of ETF’s...
EU First to the Finish Line - The EU jumped ahead of the U.S. in the race to launch its first spot Bitcoin ETF as Jacobi Asset Management, a London-based multi-asset investment platform, announced the listing of Europe’s first such product on Euronext Amsterdam. The new ETF trades under the ticker BCOIN, is regulated by the Guernsey Financial Services Commission (GFSC), and has Fidelity Digital Assets serving as the custodial provider. Jacobi was approved by the GFSC to launch its Bitcoin ETF in October 2021 and originally planned to launch the product on the Euronext Amsterdam exchange in July 2022, but was forced to delay those plans due to the collapse of the Terra/Luna ecosystem in May of that year, followed by the bankruptcy of FTX in November.
Delayed Decision - The SEC delayed its decision on the ARK 21Shares Bitcoin ETF application and instead opened a 21-day comment period to the public to get feedback on the amendment added by the Cboe exchange in July that named Coinbase as the surveillance sharing agreement partner for the ETF. The delay was widely expected by analysts as numerous spot BTC ETF applications are on the SECs docket for review, and numerous industry players, including ARK Invest CEO Cathie Wood, have called on the regulator to approve all the applications at the same time so that no individual product gets a first-mover advantage. ARK originally filed to list the ETF in May, which gives the SEC a maximum of 240 days, or until January 2024, to reach a final decision.
ETH to the Future - Asset management firm Valkyrie filed for an Ether futures ETF with the SEC on Aug. 16 to go along with the firm's previous petition to change its investment strategy for a Bitcoin futures ETF. The new fund will not directly invest in Ether but will seek to purchase a number of ETH futures contracts. The ETF will also invest any remaining assets directly in cash, cash-like instruments or high-quality securities, which include bills, notes, and bonds issued by the U.S. government, along with money market funds and corporate debt securities. The ETF investment in Ether futures contracts will be limited to 8,000 contracts per month, in compliance with position limits established by the Chicago Mercantile Exchange.
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ISSUE #56
11 August 2023
Market Overview
“Boring” is the word that best describes the price action in the cryptocurrency market over the past week as the vast majority of tokens continued to consolidate while concerns related to the broader financial markets dominated the headlines and preoccupied investors.
Anxieties about the health of the U.S. banking industry reemerged after Moody’s downgraded the credit ratings of 10 small- to medium-sized lenders and placed six banking giants, including Bank of New York Mellon, U.S. Bancorp, State Street, and Truist Financial, on review for potential downgrades.
These downgrades come a week after Fitch Ratings downgraded the U.S. debt rating to AA+, showing that the financial conditions continue to deteriorate and others are starting to take notice. The latest data out of China also put pressure on financial markets as the country’s consumer sector fell into deflation in July, a sign that Beijing is struggling to revive demand, which increased concerns of a prolonged slowdown that would have global implications.
The latest Consumer Price Index (CPI) report released on Thursday, showing that inflation has indeed started to climb higher again, which exerted further downward pressure on asset prices as investors moved to de-risk as put their money in more stable, conservative financial products. Bitcoin price continues to coil in a narrow range below $30,000, prompting analysts to assert that a breakout is imminent, but the direction is yet to be determined.
At the time of writing, the total cryptocurrency market cap stands at $1.17 trillion, an increase of 0.9% over the past week. The DeFi market cap currently stands at $48.2 billion with a 24-hour trading volume of $2.27 billion, which is 8.76% of the total crypto market volume.
Crypto News
Due Process - Coinbase filed a motion to dismiss the lawsuit filed by the U.S. SEC against the exchange in June, saying the regulator violated due process and failed to provide a clear regulatory framework for the crypto industry while also filing multiple enforcement actions despite lacking the statutory power to regulate crypto exchanges. Coinbase highlighted the fact that Congress advanced legislation to grant the SEC the authority it was seeking, but claimed the SEC “wanted to get the jump” by filing the lawsuit before it had been granted the power to do so. “In making that jump, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws,” Coinbase said. For those reasons, “The subject matter falls outside the agency’s delegated authority,” which “entitles Coinbase to judgment on the pleadings now.”
Initiating Launch - The Bank of Russia (BoR) has announced that it will begin testing operations for the country’s CBDC – the digital ruble – beginning on Aug. 15, and 13 banks have been selected to participate in the pilot tests along with a restricted group of their clients. The initial phase of the pilot program will focus on refining fundamental processes, including the establishment and funding of digital wallets, digital ruble transactions among individuals, uncomplicated automated payments, and the utilization of a QR code for transactions involving purchases and services. The BoR plans to have the digital ruble fully released for public use by 2025.
Federal Oversight - The Federal Reserve is looking to increase its oversight of the crypto industry in the U.S. with the creation of a “Novel Activities Supervision Program” designed to “enhance the supervision of novel activities conducted by banking organizations” under the central bank’s supervision. The new program will focus on “novel activities” related to crypto-assets, distributed ledger technology (DLT), and complex, technology-driven partnerships with nonbanks to deliver financial services to customers. The Fed said the program will focus on risk in the market and has been created to complement existing supervisory processes as a way to help ensure that the risks associated with innovation are appropriately addressed.
And in the World of Partnerships and Product Launches…
Expanding Services - The Tel Aviv Stock Exchange (TASE) signed a strategic agreement with Fireblocks, an enterprise platform for managing digital asset operations, to help the exchange build out its crypto offerings so that it can provide “a comprehensive range of innovative and secure digital asset products and services.” Through the new integration, TASE will be able to offer regulated entities institutional-grade digital asset solutions, including crypto custody services. The new collaboration comes on the heels of the successful completion of the Proof-of-Concept (PoC) phase for Project Eden, a blockchain-based digital bond system created as part of the Israeli government's efforts to modernize the country’s financial markets.
CryptoGPT - Microsoft formed a new partnership with Aptos Labs with the goal of accelerating global web3 adoption using Microsoft Azure OpenAI service and a new artificial intelligence chatbot, dubbed “Aptos Assistant.” The AI chatbot was created as a way to provide everyday users and organizations with “a responsible, user-friendly and secure assistant” that can help them navigate the transition from web2 to web3. The partnership will also explore other facets of the emerging digital asset economy that are predicted to further advance the adoption of web3 by financial services enterprises, including asset tokenization, payments, and CBDCs. Aptos will also run validator nodes on Azure as a way to enhance the reliability and security of the Aptos blockchain.
Mainstream Stablecoin - Digital payments provider PayPal announced the launch of a U.S.-dollar-denominated stablecoin – PayPal USD (PYUSD) – as the firm looks to deepen its involvement with blockchain technology and upgrade its payments infrastructure. The new stablecoin, which is an ERC-20 standard token issued by stablecoin provider Paxos Trust Company, is fully backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents. Access to PYUSD began rolling out to U.S. customers on Monday, and the stablecoin can be used to send person-to-person payments, fund purchases, convert any of PayPal’s supported cryptocurrencies to and from PYUSD, and users can transfer the stablecoin between PayPal and compatible external wallets.
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ISSUE #55
04 August 2023
Market Overview
Volatility spiked across the cryptocurrency market this week, but little changed in the macro picture as Bitcoin (BTC) continues to trade near support at $29,200 while the total market cap declined by 1.1%.
The big story for financial markets this week was a downgrade to the U.S. debt rating, with Fitch Ratings lowering the rating from AAA, the highest rating possible, to AA+, citing “a steady deterioration in standards of governance.” Traders responded to the news by de-risking their portfolios, which led to declines across the major market indices.
Prior to Wednesday’s spike in volatility brought on the rating downgrade, Bitcoin’s 5-day volatility reading was lower than that of the Nasdaq, S&P 500, and gold, which highlights the sideways nature of the market in recent weeks. Bitcoin’s 30-day volatility is also near five-year lows and currently sits at a level where it has only spent eight days since January 2019. Periods like this have historically been followed by periods of high volatility, analysts warned.
On Tuesday, Bitcoin bears made an attempt to break below support at $29,200, dropping the top crypto to a low of $28,690 before bulls reversed course and pumped it to a high of $30,125 by early Wednesday morning. Analysts warned that the price turnaround was nothing more than a short squeeze, and by the time the Fitch downgrade had been digested by the market, Bitcoin was once again trading near support at $29,200.
At the time of writing, the total cryptocurrency market cap stands at $1.16 trillion, a decrease of 1.7% over the past week. The DeFi market cap currently stands at $46.9 billion with a 24-hour trading volume of $2.4 billion, which is 8.17% of the total crypto market volume.
Crypto News
Fair Playing Field - Grayscale Investments submitted a letter to the SEC asking that the regulator approve all the recently filed spot Bitcoin ETF applications at the same time so that no product has an advantage over the others. Grayscale said approving proposals on an individual basis “would reflect a positive but sudden and significant change in the Commission’s application of the relevant statutory standard, and as such would improperly grant an unfairly discriminatory and prejudicial first-mover advantage to these proposals.” The firm said that since the SEC previously rejected the argument that an SSA with a spot BTC exchange would satisfy the regulator's requirements for approving a spot Bitcoin ETP, if they decide to approve one of the recently filed applications, they “must do so in a fair and orderly manner that prioritizes the interests of investors.”
Institutional Ether - Following the flurry of spot BTC ETF applications that sparked fresh momentum in the cryptocurrency market, institutions are now clamoring to launch Ether (ETH) futures ETFs for customers in the U.S. as six asset managers have filed Ether-related ETF applications in recent days. The various products include the Bitwise Ethereum Strategy ETF, Roundhill Ether Strategy ETF, VanEck Ethereum Strategy ETF, ProShares Ether Strategy ETF, the ProShares Short Ether Strategy ETF, and Grayscale Ethereum Futures ETF. Most of the funds will invest in cash-settled, front-month and back-month Ether futures, and will obtain the price of ETH from the Chicago Mercantile Exchange (CME), which is the only exchange registered with the CFTC.
Unreasonable Request - Coinbase CEO Brian Armstrong said the SEC asked the exchange to halt trading all cryptocurrencies other than Bitcoin prior to filing a lawsuit against the exchange on June 6 for allegedly operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. Coinbase denied to follow through with the recommendation, with Armstong saying that if they had agreed, it would have set a precedent that could result in the majority of American crypto businesses operating outside the law unless they registered with the regulator. And with more than 200 tokens listed, the move would have a material effect on Coinbase’s ability to generate a profit as a large portion of its revenue comes from trading fees.
Staking Rewards are Income - The Internal Revenue Service (IRS) has ruled that U.S. cryptocurrency investors must report staking rewards as part of their gross income in the year it was received. The fair market value of any proceeds is determined by the “date and time the taxpayer gains dominion and control over the validation rewards,” the ruling states. “Dominion” is defined as the time when the investor controls and has the ability to sell, exchange, or otherwise dispose of the cryptocurrency. Tokens that have yet to be claimed do not need to be included. The IRS noted that staking rewards need to be reported whether an individual is performing their own network validation, delegating their tokens to another validator, or staking their tokens through a cryptocurrency exchange.
And in the World of Laws, Regulations and the Courts…
Trying to Avoid Another Contagion - The U.S. Department of Justice (DOJ) is reportedly considering filing fraud charges against Binance, the largest cryptocurrency exchange in the world, but has concerns about the effect the move would have on customers. People familiar with the matter said the DOJ wants to indict Binance for fraud, but prosecutors are worried that doing so could cause a run on the exchange similar to what happened with FTX when it ran into financial difficulties that ultimately resulted in filing for bankruptcy. In lieu of fraud charges, prosecutors are also considering other options, such as fines and deferred or non-prosecution agreements. This would be a compromise that holds Binance responsible for its alleged criminal behavior while also mitigating any potential harm to consumers.
Dismissal Denied - The judge overseeing the SEC lawsuit against Terraform Labs ruled that the case will proceed after denying the firm's motion to dismiss on Monday. Judge Jed Rakoff said that “Because the defendants used false and materially misleading statements to entice U.S. investors to purchase and hold on to defendants’ products, and because those products were unregistered investment-contract securities that enabled investors to profit from the supposed investment activities of defendants and others, the motion to dismiss must be denied.” As part of his ruling, Judge Rakoff also rejected the July 13 ruling from U.S. District Judge Analisa Torres that Ripple did not violate securities laws by selling its XRP token on public exchanges. Many analysts have warned that the XRP decision faces a strong possibility of being overturned in the Court of Appeals.
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ISSUE #54
28 July 2023
Market Overview
The broader cryptocurrency market saw a slight pullback over the past week as Bitcoin lost support at $30,000 and bottomed out at $28,978 on Monday, its lowest price since June 21. The move down came in the absence of any major bullish developments while investors awaited the latest policy announcement from the Federal Reserve.
Despite the struggles that the cryptocurrency ecosystem has faced over the past year and a half, a survey conducted by Ripple found that 90% of global financial leaders believe that blockchain technology will significantly impact business and finance in the next three years. Respondents in Latin America (LATAM) were the most bullish on enterprise and institutional use of crypto for business, followed by the Middle East and North Africa (MENA), then North America (NA), Asia Pacific (APAC) and Europe, Middle East and Africa (EMEA).
On Wednesday, Federal Reserve Chair Jerome Powell announced a 25 basis point hike in interest rates, which aligned with analyst expectations and elevated the benchmark rate to a range of 5.25% to 5.50%, the highest level in 22 years.
Bitcoin’s (BTC) price initially whipsawed in response to the announcement, but after hitting a low of $29,305, bulls regained their footing and managed to push the top crypto back above support at $29,500. Several analysts warned that the strong showing from BTC following the FOMC announcement showed signs of a short squeeze, and by the close of the Thursday candle, Bitcoin slid back down to $29,310.
At the time of writing, the total cryptocurrency market cap stands at $1.18 trillion, a decrease of 1.67% over the past week. The DeFi market cap currently stands at $48.6 billion with a 24-hour trading volume of $2.62 billion, which is 10.1% of the total crypto market volume.
Crypto News
Digital Eye-D - Worldcoin (WLD), a project co-founded by OpenAi CEO Sam Altman, Alex Blania and Max Novendstern that scans the iris of individuals to create a unique digital identifier, officially launched for trading on Monday and experienced a 34% increase in its first few days on the market. Scans produce numbers that can be tied to a user’s identity, and no record of the scan is kept, which helps prevent theft and fraud. To entice people to go through the process, 25 WLD tokens were offered as a reward. Funding for the project was provided by a variety of VC firms, including Andreessen Horowitz, Coinbase Ventures, 1confirmation, Blockchange and Day One Ventures. At its launch in 2021, Worldcoin was valued at $1 billion
X - Twitter owner Elon Musk made good on his promise to rebrand the popular social media platform to “X” as part of his long-term goal of creating an “everything app.” The rebrand was announced on Sunday and included a change in the domain to x.com, the classic Twitter blue bird logo was replaced with an X, and the color scheme of the platform has been changed from blue to black. While Musk has not tweeted anything about cryptocurrencies since the rebrand took place, he did add the Dogecoin (DOGE) “Д logo to his X profile, which led to a spike in the price of DOGE. At the time of writing, DOGE is up 11.4% on the week and trading at $0.078.
No More Crypto Loans - Coinbase announced it will be winding down its “Borrow” lending service and gave users until November 20th, 2023 to repay outstanding loans or risk losing their collateral. As part of the process, Coinbase has stopped opening new lines of credit for users against their Bitcoin holdings and has sent correspondence to all Borrow users encouraging them to pay their loans off as soon as possible. Loans that are due before November 20 are unaffected as long as users continue to make payments until they have completed their loan repayment schedule. Interest rates will remain unchanged throughout the wind-down process. Users with open loans after Nov. 20 will have their accounts closed and Coinbase will sell the necessary amount of BTC to pay off any unpaid balance.
And in the World of Central Bank Digital Currencies…
Making it Official - Russian President Vladimir Putin officially signed the digital ruble bill into law on Monday, making way for the legislation governing the creation of a public central bank digital currency (CBDC) to take effect on Aug.1. The new law establishes the legal norms for the introduction of an e-ruble in Russia, making it the third form of the national currency available for use in the country’s financial system. The Bank of Russia (BoR) plans to issue the digital ruble in addition to the existing cash and non-cash funds. The CBDC is designed to serve as a payment and money transfer method and is not for investment purposes. The BoR said they will initiate the first digital ruble pilot with real customers in August.
Testing the Waters - The Bank of Japan (BOJ) launched a series of discussions with 60 companies to explore the development of a digital yen. The BOJ said the discussions will explore various themes including the business and technological features of retail settlements using a CBDC. No decision has been made on whether Japan will actually issue a digital yen, and the government and parliament will ultimately have the final say in its creation. Aside from megabanks and regional lenders, the group of participants includes numerous prominent Japanese companies such as Sony, the financial arm of Toyota, convenience store operator Lawson, and East Japan Railway.
Digital Integration - People’s Bank of China (PBoC) governor Yi Gang told the audience at a conference in Singapore that the digital yuan has been used to facilitate 1.8 trillion yuan ($249.33 billion) worth of transactions as of the end of June, showing that the CBDC is slowly establishing itself as a fixture in the Chinese economy and surrounding areas. This is a notable increase from last August when the cumulative amount of digital yuan transactions totalled just over 100 billion yuan. Yi said the amount of e-RMB in circulation reached 16.5 billion yuan ($2.3 billion) as of the end of June, while 950 million transactions have been conducted and 120 million digital wallets created. Recent announcements suggest that these transaction figures will only continue to increase as the PBoC is hard at work establishing new integrations and partnerships to expand the use of its CBDC.
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ISSUE #53
21 July 2023
Market Overview
Consolidation remains the name of the game in the cryptocurrency markets as Bitcoin continues to trade near support at $30,000 while the gains for certain altcoins were overshadowed by losses in others, resulting in an overall decline in the total crypto market cap.
This was the first week in a while where there were no major developments within the ecosystem to cause a significant price movement or spike in volatility, which gave trades time to review their holdings and rebalance their portfolios in preparation for a bull run in the market.
Analysts have begun to discuss the topic of the Bitcoin halving with greater frequency as the market has entered a period of time where BTC price has historically started to steadily climb higher in preparation for the network to undergo a reduction in the number of new tokens minted with each finalized block. The current consensus estimate is that the next halving will occur on April 26, 2024, and it will see the block reward decline from 6.25 BTC to 3.125 BTC.
The price of Bitcoin fell under pressure early in the week as the momentum generated by the recent spot BTC ETF filings and the judgment that XRP is not a security faded away, allowing the economic realities of high inflation and additional interest rates to creep back into the awareness of investors. BTC hit a low of $29,620 on Tuesday and closed the Thursday daily candle at $29,900.
At the time of writing, the total cryptocurrency market cap stands at $1.2 trillion, a decrease of 4.76% over the past week. The DeFi market cap currently stands at $49.9 billion with a 24-hour trading volume of $3.88 billion, which is 10.5% of the total crypto market volume.
Crypto News
Crypto, Nationalized - Indonesia’s Commodity Futures Trading Supervisory Agency (CFTRA), also known as Bappebti, announced it is moving forward with its plan to launch a national cryptocurrency exchange, and expects to debut the platform in the coming weeks. Didid Noordiatmoko, acting head of Bappebti, said that trading on the exchange would be offered through an integrated application, which the CFTRA has already tested, and the regulator plans to restrict all cryptocurrency transactions so that they can only take place using the national exchange. Indonesia trade minister Zulkifli Hasan has been informed of the decision, and if there are no objections or additional instructions, Bappebti will sign the permit, which will give licensed traders one month to join the exchange.
Reevaluating the Landscape - Stock exchange operator Nasdaq (NDAQ) announced that it is halting its plans to launch a crypto custody service due to the uncertain regulatory conditions in the United States. The firm originally planned to launch its custody service by the end of the second quarter, but Nasdaq CEO Adena Friedman said those plans have been put on hold for the time being while speaking during the company’s Q2 results call. She said the company remains committed to developing its digital asset business, they just want to ensure that they have the necessary licenses and approval from regulators to avoid any fines or enforcement actions. Nasdaq will continue to closely monitor the market for potential regulatory developments in the coming months.
Baby Steps - On Monday, the U.S. Securities and Exchange Commission (SEC) accepted the recently filed spot Bitcoin ETF applications and opened the public comment period to get feedback before conducting their official review. On Wednesday, the applications for BlackRock, Fidelity, Invesco Galaxy, VanEck, and WisdomTree were published in the U.S. Government’s Federal Register, moving them one step along in the lengthy review and approval process. Once an application is published in the official journal, the SEC has a window of up to 240 days to approve or deny it.
And in the World of Laws and Regulations…
Consistency is Important - The Financial Stability Board (FSB), an international organization that monitors the global financial system, released its finalized global regulatory framework for crypto-asset activities in an effort to “promote the comprehensiveness and international consistency of regulatory and supervisory approaches.” The guidelines are intended to be implemented by members of the G20 under the principle of “same activity, same risk, same regulation,” the FSB said. To help aid countries in establishing a regulatory framework for digital assets, the FSB provided a set of high-level recommendations for the regulation, supervision, and oversight of crypto in general, as well as revised high-level recommendations related to the regulation of “global stablecoin” arrangements.
Bipartisan Regulation - A bipartisan group of U.S. Senators introduced the Crypto Asset National Security Enhancement Act of 2023, which looks to require DeFi protocols to abide by the same rules as other US-regulated financial intermediaries. The text of the bill requires that anyone who “controls” a DeFi protocol must take measures to prevent money laundering by conducting know-your-customer (KYC) checks before granting a user access to the platform. The operators would also be mandated to report any suspicious activity and ensure that all parties subject to sanctions by the U.S. government are not able to utilize its services. For protocols without an identifiable controller, anyone who invests more than $25 million in developing the protocol would be held responsible for fulfilling these duties.
Ready to Call a Truce? - Magistrate Judge Sarah Netburn, the judge presiding over the Securities and Exchange Commission’s (SEC) lawsuit against Ripple Labs, has ordered both parties to determine three mutually convenient dates for a potential settlement conference “if they believe it to be productive at this time.” The call for a settlement conclave was recommended “In light of Judge Torres’s recent decisions on the parties’ cross-motions for summary judgment,” Netburn wrote. The order presents an opportunity for both parties to resolve the conflict without proceeding further in court, which can help save time and money. While a settlement conference can potentially lead to a mutually agreed-upon compromise, it is important to note that the judge’s suggestion does not guarantee an imminent resolution to the case. The parties must first decide if they believe a settlement conference would be productive at this stage.
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ISSUE #52
14 July 2023
Market Overview
Little changed for the cryptocurrency market price-wise over the past week as Bitcoin (BTC) continued to trade near support at $30,500, showing signs of price compression that have analysts predicting an imminent breakout – with most leaning toward a breakout to the upside.
The spot Bitcoin ETF landscape is beginning to look crowded as the Cboe officially refiled five of its applications to list Coinbase as the exchange for the surveillance-sharing agreement (SSA). Cathie Wood’s ARK 21Shares BTC ETF is the first application up for approval, with its review date with the SEC scheduled for August 13.
Financial markets were under pressure early in the week following last week’s hawkish comments from the Federal Reserve, which signaled multiple interest rates in the second half of 2023 in an effort to reign in inflation. But the outlook improved on Wednesday after the latest Consumer Price Index (CPI) came in below expectations at 3%, stoking hopes for many that the Fed would be able to take its foot off the gas pedal and put a halt to interest rate hikes after an expected 25 bps hike in July.
Bitcoin initially responded positively to the CPI news, climbing to a high of $31,122 on Wednesday before the latest FUD story involving the sale of the Silk Road BTC confiscated by the U.S. Department of Justice put a halt to the climb and dropped Bitcoin back to support near $30,500.
At the time of writing, the total cryptocurrency market cap stands at $1.18 trillion, an increase of 1.7% over the past week. The DeFi market cap currently stands at $46.4 billion with a 24-hour trading volume of $2.1 billion, which is 6.75% of the total crypto market volume.
Crypto News
Dark BTC - The U.S. Department of Justice moved to sell the second tranche of the Silk Road Bitcoin stash that the agency confiscated from the darknet marketplace after it was shut down in 2013. A wallet controlled by the DOJ transferred 9,000 Bitcoin to another wallet in order to sell the funds via Coinbase. The DoJ first began selling its Silk Road stash of 51,352 BTC in March, with government officials selling 9,861 BTC for more than $215 million, leaving roughly 41,491 BTC in the government’s possession. The total value of the Bitcoin transferred is roughly $274 million, and some have expressed concerns that the sale of such a large amount at once could lead to weakness in the BTC price in the near term.
Selling the Rally - Coinbase (COIN) stock received a bump in price thanks to the exchange being named as the SSA partner on multiple sport BTC ETF filings, reaching its highest price since August 2022 and adding to the proclamations that the next bull market for crypto has begun. In response to the increase in price, Cathie Wood’s ARK sold 135,000 COIN shares from one of its ARK Innovation ETF in an effort to capture profits and help the firm get back to its winning ways. SEC Chair Gary Gensler was asked about Coinbase’s role at the center of the filings, he declined to comment on the specifics but said that crypto exchanges, in general, operate “conflicting services” and have “limited risk monitoring” for wash trading.
Playing Hardball - Crypto trust firm Gemini filed a lawsuit against the Digital Currency Group (DCG) and its CEO Barry Silbert in relation to the failure of Genesis Global Capital – a DCG subsidiary – to pay back the funds owed to the Gemini Earn crypto lending platform. The lawsuit alleges fraud on the part of the DCG and Silbert, saying they “engaged in a fraudulent scheme to induce a variety of depositors, including Gemini users'' to lend “huge amounts of cryptocurrency and U.S. Dollars to DCG’s subsidiary Genesis Global Capital.” The exchange said it has attempted to work toward solutions to return assets to the Gemini Earn lenders, but it has yet to find common ground with DCG or Silbert “despite paying public lip service to that goal.”
And in the World of Central Bank Digital Currencies
CBDCs Unite - China’s President Xi Jinping made comments at the 2023 Shanghai Cooperation Organization (SCO) Summit that suggest he sees central bank digital currencies (CBDCs) – also known as sovereign digital currencies – as a key to expanding the country’s Belt and Road Initiative and increasing cooperation among the country’s global partners. A major point of focus for Xi was on “practical cooperation” and improvements to cross-border currency settlements between SCO member states that could help “expedite economic recovery.” To achieve this goal, Xi proposed that the SOC “scale up local currency settlement between member states, expand cooperation on sovereign digital currency, and promote the establishment of an SCO development bank.”
Digital Ruble Approaching - Russia’s lower parliamentary house, the State Duma, passed the digital ruble bill in its third reading on Tuesday, bringing the central bank digital currency (CBDC) one step closer to being introduced to the public. The new law establishes the legal norms for the introduction of a digital ruble in Russia, making it the third form of the national currency available for use in the country’s financial system in addition to the existing cash and non-cash funds. From here, the legislation will move to the assembly’s upper chamber, the Federation Council, and, if passed, to President Putin’s desk for signing. The current plan is for transfers and payments in digital rubles to be free for Russian citizens, while the tariffs for businesses accepting payments in digital rubles will be 0.3% of the payment.
A Plethora of CBDCs - The Bank for International Settlements (BIS) published the results of a survey on CBDCs that showed 93% of the world’s central banks are currently in some phase of the exploration and development of a CBDC and there could be as many as 24 available for use in the global market by 2030. This includes 15 retail CBDCs that would be accessible to the general public and 9 wholesale CBDCs that would be used for interbank settlements. The Bahamas, the Eastern Caribbean, Jamaica and Nigeria are currently the only countries that have issued a retail CBDC. 18% of central banks surveyed said that they are likely to issue a retail CBDC “in the near term.” The 86 banks that participated in the survey represent 82% of the world’s population and 94% of global economic output.
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ISSUE #51
07 July 2023
Market Overview
It was an overall positive week for the cryptocurrency market as the ongoing rush by financial firms to file spot Bitcoin (BTC) ETF applications continued to support the bullish narrative for Bitcoin and provided a strong signal that institutional interest in the asset class is on the rise.
Coinbase has emerged as a vital piece in the possible approval of a spot BTC ETF as BlackRock, Fidelity, ARK, Invesco/Galaxy, WisdomTree, VanEck and Valkyrie have all updated their applications to list the top U.S. crypto exchange as their partner for the surveillance-sharing arrangement (SSA).
Partnering on an SSA means the firm hosting a Bitcoin-related market must share information about market trading activity, clearing activity, and customer identity. Coinbase is consistently responsible for more than 50% of the market share of BTC/USD spot trading volume, which is the reason the exchange was selected as the SSA partner for the recent re-filings. Numerous analysts have suggested that the addition of SSA agreements to the filings is the key to gaining SEC approval for a spot BTC ETF. The surveillance can help significantly reduce fraud and market manipulation, which were the top reasons the SEC cited in their rejection of roughly 30 spot Bitcoin ETF applications to date.
On Wednesday, the Federal Reserve released the minutes from the June Federal Open Market Committee meeting, which showed that the central bank remains hawkish on future interest rates, with some officials recommending a hike in June when the Fed paused. This revelation put pressure on all markets and resulted in Bitcoin falling back to support at $30,000 by the close of the daily candle on Thursday.
At the time of writing, the total cryptocurrency market cap stands at $1.16 trillion, a decrease of 0.9% over the past week. The DeFi market cap currently stands at $46.7 billion with a 24-hour trading volume of $2.59 billion, which is 8.41% of the total crypto market volume.
Crypto News
Expanded Offerings - CME Group, the world’s leading derivatives marketplace, announced that it plans to launch Ether/Bitcoin Ratio futures beginning on July 31, pending regulatory approval. To determine the cash-settled price for the investment vehicle, the value of CME Group Ether futures final settlement price will be divided by the corresponding CME Group Bitcoin futures final settlement price. The new contract will follow the same listing cycle as CME Group Bitcoin futures and Ether futures contracts. The firm said that it was launching the new product to help investors gain exposure to both Ether and Bitcoin in a single trade without the need to take a directional view.
Interoperability in Focus - Mastercard announced the launch of the Mastercard Multi-Token Network (MTN), a solution designed to support interoperability within the blockchain ecosystem. The payment processor created MTN to help make transactions within the digital asset and blockchain ecosystems secure, scalable and interoperable, with the overall goal of enabling more efficient payment and commerce applications. A beta version of MTN will be released in the UK this summer to serve as a testbed for developing live pilot applications and use cases with financial institutions, fintechs and central banks. The first phase of testing will focus on tokenized bank deposits, and Mastercard plans to make the platform available to additional markets around the world over time.
System Upgrade - The Federal Reserve announced that 57 companies have completed the formal testing and certification process for FedNow, clearing them to begin using the new instant payment system once it launches later in July. FedNow was developed by the Federal Reserve Banks as a nationwide instant payment service that operates around the clock, every day of the year. A total of 41 financial institutions on the list are participating as senders, receivers and/or correspondents supporting settlements, including JPMorgan, BNY Mellon, Wells Fargo, US Bancorp, and Peoples Bank. 15 institutions that provide processing services on behalf of participants have also been selected, including Finastra, Open Payment Network, and FPS Gold.
And in the World of APAC Adoption and Developments
Web3 Task Force - The government of Hong Kong has announced the formation of a new task force designed to promote Web3 development, citing the potential benefits that blockchain technology offers many industries as the world moves towards a more decentralized internet. The role of the task force is to provide recommendations on the sustainable and responsible development of Web3 in Hong Kong. Paul Chan, the Financial Secretary of Hong Kong, has been selected to chair the new task force, which is comprised of 11 members from government agencies and 15 advisory members from business and industry sectors. The launch of the task force is part of Hong Kong's effort to become a global hub for digital asset trading and the broader Web3 industry.
Social Security on the Blockchain - China continues to expand the use cases for its central bank digital currency (CBDC) as the Ministry of Human Resources and Social Security recently issued a plan to add digital yuan payment functionality to social security cards. The move is being seen as the latest effort to help boost digital yuan adoption by rural and elderly populations, who are less likely to have access to smartphones, which is the primary way to access and transact with the CBDC. Chinese officials said they think the addition of digital yuan payment features to the cards will make the currency easier to use and will help simplify things for Chinese state organizations by integrating payments to the state, benefits payouts, and ID functionality into a single card. The ministry has a stated goal of digitalizing the nation's social security management by 2027.
Metaverse Collaboration - China Mobile announced the launch of a Metaverse Industry Alliance with 24 founding members, including Huawei, Unity China and Xiaomi. The new Alliance was created to help boost collaborations across metaverse content creation, extended reality (XR) terminals, computing networks, and technological research, and will focus on copyright investment, research and development funding, and increasing the capacity to provide special support. China Mobile boasts a userbase of nearly 1 billion subscribers and the promotion of metaverse-related platforms is expected to help boost the overall adoption of blockchain technology in China.
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ISSUE #50
30 June 2023
Market Overview
It was a week of consolidation for the cryptocurrency market, with Bitcoin (BTC) largely trading above the psychologically important $30,000 support/resistance level as the momentum from BlackRock’s spot Bitcoin ETF began to fade while the struggles facing the broader financial system reemerged.
Fidelity became the latest firm to file for a spot BTC ETF, joining the growing list of companies looking to jump on the bandwagon with the hopes that the U.S. Securities and Exchange Commission (SEC) will finally approve such a trading vehicle for investors in the States.
Cathie Wood’s ARK Investments and the Cboe BZX Exchange filed an amendment to their application for the ARK 21Shares Bitcoin ETF that was submitted back in April, adding a surveillance sharing agreement (SSA) with the Chicago Mercantile Exchange (CME) futures markets and a crypto exchange in hopes that the SEC will approve the application after previously rejecting it on two occasions. They now sit at the front of the line for review ahead of BlackRock, with their SEC decision date scheduled for August 13.
On Wednesday, Federal Reserve Chair Jerome Powell said that the central bank has not ruled out the possibility of back-to-back interest rate hikes as it continues to try and get a handle on high inflation. This prompted a bearish turn in financial markets, resulting in Bitcoin briefly dipping to a weekly low of $29,950 before bullish reinforcements arrived to bid it back above $30,000.
At the time of writing, the total cryptocurrency market cap stands at $1.17 trillion, an increase of 0.7% over the past week. The DeFi market cap currently stands at $45.9 billion with a 24-hour trading volume of $2.38 billion, which is 7.95% of the total crypto market volume.
Crypto News
Infrastructure Buildout - Tether announced that it signed a Memorandum of Understanding (MOU) with the Government of Georgia to help the country develop its Bitcoin and peer-to-peer blockchain technology infrastructure. The collaboration comes as Georgia is trying to establish itself as a central hub for peer-to-peer and blockchain technology in a bid to spark a revolution of innovation and economic growth. The collaboration will focus on highlighting Georgia’s favorable working conditions and high quality of life to attract international attention and investments and create a conducive environment for decentralized solutions, adoption, and peer-to-peer technology startups. To help attract developer talent, Tether will create a special fund for local startups to provide assistance with the development of blockchain technologies and position Georgia as a country with an attractive ecosystem for technological startups.
Digital Francs for Banks - The Swiss National Bank (SNB) announced that it is preparing to issue a wholesale central bank digital currency (wCBDC) on the country’s SIX digital exchange as part of an upcoming pilot project designed to test the feasibility of a wholesale digital Swiss franc. Wholesale CBDCs are used by financial institutions to settle interbank transfers and related wholesale transactions in central bank reserves. A retail CBDC (rCBDC) would be used by the general public to conduct daily transactions, but at this time, the SNB is only exploring the use of a wCBDC due to concerns related to the potential risks that an rCBDC poses to the country’s financial system. An exact date for the pilot was not provided, but an SNB representative said that it will start “soon” and will take place for “a limited time.”
Deal’s Off - Cryptocurrency custody provider BitGo announced the termination of the firm's planned acquisition of its cash-strapped rival Prime Trust just two weeks after the custodians announced that a preliminary deal had been reached. The planned acquisition, first announced on June 9, came amid rumors that Prime Trust, a Nevada-based firm that custodies crypto and helps digital-asset companies park cash at network banks, was struggling to service withdrawal requests from its customers at Binance.US, Abra, and Swan Bitcoin. The decision by BitGo came after Prime Trust was ordered by Nevada’s Financial Institution Division (FID) to halt all deposits of fiat and digital assets for custody. On Tuesday, the FID placed PrimeTrust into receivership, saying the firm owes its clients more than $85 million in fiat currency, with only $3 million available on hand.
And in the World of Institutional Adoption
JPM Coin Goes to Europe - J.P. Morgan introduced euro-denominated payments for corporate clients using its native, blockchain-powered digital currency, JPM Coin, with Germany’s Siemens AG conducting the first euro payment on the bank's Onyx platform. J.P. Morgan is one of the few large banking institutions that has found a way to put blockchain technology to use in a commercial setting, but it still remains a small part of their overall operations. Large multinational organizations can use the system to transfer dollars or euros to and from their various J.P. Morgan accounts around the world or make blockchain payments to other customers of the bank instead of using traditional payment rails. The major benefit of JPM Coin payments is that they operate 24/7 and are not limited to business hours like traditional transactions. This helps reduce processing time so that client transactions are executed more quickly.
Cloud Support - Fireblocks, an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets, announced that it has expanded its secure MPC-CMP wallet and key management technology to include support for the popular cloud service providers Amazon Web Services (AWS), Google Cloud Platform, Alibaba Cloud, Thales and Securosus. The company said the new support was added so that banks and financial institutions can utilize Fireblocks' technology stack “to quickly bring their digital asset initiatives into production while meeting their risk, compliance, and regulatory requirements.” Fireblocks has helped over 50 major financial institutions build out their digital asset offerings in recent years, including BNY Mellon, BNP Paribas, ANZ Bank, NAB, ABN AMRO, BTG Pactual, Tel Aviv Stock Exchange (TASE), and SIX Digital Exchange.
Commodities Enabled - The Shanghai Clearing House – a financial services clearing counterparty under China’s central bank that handles bonds, interest rates, foreign exchange, credit, and commodities – announced the start of digital yuan clearing and settlement services for trading in commodities, marking another significant step in the institutional adoption of China’s CBDC. The new service allows users to make cross-bank clearings and settlements on commodities with the digital yuan, with no fees charged for the services for the time being, according to a notice on its website. China is currently the world's largest buyer of a number of commodities, so the move is expected to help facilitate the internationalization of the Chinese currency and provide the world with a trusted clearing system.
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ISSUE #49
23 June 2023
Market Overview
Bull market energy returned to the cryptocurrency market this week after BlackRock, the world’s largest asset manager by AUM, filed paperwork with the U.S. Securities and Exchange Commission (SEC) for a spot Bitcoin (BTC) ETF.
The filing by BlackRock sparked a renewed interest in digital assets by institutional investors and initiated a wave of FOMO for retail investors who had been sitting on the sidelines expecting lower prices due to the ongoing crackdown on the industry by regulators.
On Wednesday, Federal Reserve Chair Jerome Powell testified in front of the U.S. House Financial Services Committee about various facets of the crypto ecosystem including stablecoins, which he said are viewed as a form of money by the central bank while reiterating his stance that “the ultimate source of credibility in money is the central bank.” Powell also noted in his testimony that the digital asset industry “appears to have some staying power,” which helped provide a further boost to token prices.
Following the comments from Powell and no less than four spot Bitcoin ETF filings, Bitcoin’s price surged to its highest level since April, topping out at $30,835 on Wednesday, just shy of its yearly high of $31,186 from April 14. Bulls are now looking to gather reinforcements to try and push through resistance at $31,000, which is the last major resistance level until $38,000.
At the time of writing, the total cryptocurrency market cap stands at $1.166 trillion, an increase of 11.4% over the past week. The DeFi market cap currently stands at $45.8 billion with a 24-hour trading volume of $2.96 billion, which is 6.7% of the total crypto market volume.
Crypto News
ETF Rush - BlackRock, WisdomTree, Invesco, Bitwise, and Valkyrie all filed for spot Bitcoin ETFs over the past week, reigniting institutional interest in the top digital asset and putting an end to the recent regulatory-inspired downturn in the market. Only the fling from BlackRock was new, as the other three financial institutions previously filed their applications with the SEC but were denied. Rumors have also emerged that Fidelity is looking to make a similar move, either through a buyout of Grayscale or an application for a Bitcoin spot ETF, prompting some to speculate that one day BlackRock and Fidelity could dominate the U.S. digital asset space.
Das Crypto Custody - German investment bank Deutsche Bank AG is also looking to get deeper involved with digital assets and has filed an application with BaFin, Germany’s financial regulator, seeking permission to operate as a custody service for digital assets. A license from BaFin allows crypto firms to legally advertise and offer their services in the German market. This move towards crypto custody is part of a broader strategy to increase fee income at Deutsche Bank’s corporate bank and aligns with efforts by DWS Group – Deutsche Bank’s investment arm – to increase the income generated by digital asset products. Deutsche Bank has shown interest in providing digital asset custody services since late 2020, despite releasing a research report earlier in the year that said Bitcoin is “too volatile” to be a “reliable” store of value.
Institutionally Backed - EDX Markets (EDX) – a digital asset marketplace backed by Charles Schwab, Citadel Securities, Fidelity Digital Assets, Paradigm, Sequoia Capital and Virtu Financial – announced the successful launch of its digital asset market and the completion of an investment round with new equity partners. The platform is looking to become “the crypto marketplace of choice for industry leaders,” and will also offer retail-only quotes which give retail-originated orders better pricing. The exchange currently offers access to Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH), and has plans to launch ‘EDX Clearing’ later in 2023 to settle trades matched on EDX Markets. The clearinghouse will facilitate trades against a central counterparty, allowing participants to benefit from enhanced price competition and reduced settlement risks, while increasing operational efficiencies.
And in the World of Regulatory Proposals…
Programmable Payments - The Monetary Authority of Singapore (MAS) published a new whitepaper that proposes a common protocol specifying the conditions for the use of various types of digital money, including central bank digital currencies (CBDCs), tokenized bank deposits and stablecoins. The whitepaper outlines the concept of Purpose Bound Money (PBM), which enables senders to specify the conditions of a crypto payment, including the validity period and the types of shops where such payments can be made when conducting transfers in digital money across different systems. The whitepaper was developed in collaboration with the International Monetary Fund (IMF), Banca d’Italia, Bank of Korea, Amazon, DBS Bank, Onyx by J.P. Morgan, and several other industry partners.
The Quest for Interoperability - The International Monetary Fund (IMF) said that it is “working hard” to develop a global infrastructure that will ensure the interoperability of settlements between national digital currencies as countries around the world advance in their creation of CBDCs. The U.N. financial organization is currently developing a “trusted ledger” platform with a shared infrastructure that would avoid the emergence of “settlement blocks,” which can lead to further economic fragmentation. The ultimate goal is to avoid the underutilization of CBDCs. The IMF’s platform is designed to settle money denominated in many different currencies, likely in the form of central bank reserves, and will create “unique and standardized digital representations of them” for use on the platform. A key feature of the trusted ledger is that it allows for a multicurrency system without imposing a single or new settlement asset.
Unified Ledger - The Bank for International Settlements (BIS) released a chapter from its annual report related to the future of monetary systems, calling for a unified ledger that can harness CBDCs and other tokenized assets into “a new type of financial market infrastructure.” The BIS said the success of tokenization “rests on the foundation of trust provided by central bank money and its capacity to knit together key elements of the financial system,” largely aligning with Wednesday’s comments from Powell and the “trusted ledger” proposal from the IMF. The major goal of a “unified ledger” is to overcome the “siloed” nature of current tokenization schemes to enable faster transactions and atomic settlement in a “partitioned data environment” where privacy and transparency are controlled.
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ISSUE #48
16 June 2023
Market Overview
The outlook for the cryptocurrency market deteriorated over the past week as the recent enforcement actions by the U.S. Securities and Exchange Commission (SEC) have had a material effect on trading, especially for altcoins, which now face the increased likelihood of being officially labeled as securities.
Binance.US and the SEC managed to come to a compromise that allows the exchange to continue operations, including payroll and other business needs, so long as Binance Global and its founder Changpeng Zhao (CZ) are restricted from accessing the U.S. funds. The compromise was reached after the presiding judge on the case demanded that the two find a workable solution that meets both their needs.
The SEC also responded to Coinbase’s petition for the regulator to propose and adopt a clear regulatory framework for the cryptocurrency industry in the U.S., saying that developing such a framework would take a considerable amount of time and that the agency didn’t want to rush the process. In the interim, the SEC said that its staff anticipates being able to make a recommendation to the Commission regarding Coinbase’s rulemaking petition within the next 120 days, and asked that the courts not make a ruling on the petition until that report has been filed.
On Wednesday, the Federal Reserve announced that it would pause its interest rate hikes in June, but signaled that there would need to be at least two more hikes in 2023, a move that financial markets interpreted as a hawkish outlook. Shortly after the Fed announcement, Bitcoin lost support at $26,000 – where it had been hovering for the past week – and fell to a low of $24,845, its lowest price since March 17. The Thursday daily candle for BTC closed at $25,665.
At the time of writing, the total cryptocurrency market cap stands at $1.033 trillion, a decrease of 6.35% over the past week. The DeFi market cap currently stands at $41.3 billion with a 24-hour trading volume of $2.72 billion, which is 7.32% of the total crypto market volume.
Crypto News
Expanding Access - Cryptocurrency investment platform Finblox announced a new partnership with OpenEden to launch tokenized U.S. Treasury Bills, giving investors in Southeast Asia a way to earn a yield on their stablecoin holdings via OpenEden’s TBILL token rights. The TBILL Vault is the world’s first smart-contract vault for U.S. Treasury Bills, but it has historically only been accessible by accredited or professional investors. Through its partnership with OpenEden, Finblox will serve as an intermediary, investing TBILL tokens and then passing on the yield generated to its users via its own “T-Bill Token.” Data on the OpenEden app shows that there is currently more than $12.5 million in value locked in the TBILL Vault, with deposits earning an estimated yield of 5.25%.
Custody Matters - Digital asset custodian BitGo reached a preliminary agreement to purchase its rival Prime Trust amid rumors that the latter’s ability to service withdrawals has been limited due to the fallout from the enforcement actions by the SEC. BitGo signed a non-binding term sheet to acquire 100% of the equity of Prime Core Technologies, Inc., the parent company of Prime Trust. As part of the deal, Prime Trust’s Nevada Trust Company would join BitGo’s existing global network of regulated trust companies in South Dakota, New York, Germany, and Switzerland, and BitGo will incorporate Prime Trusts’ network of banking partners and payment rails, crypto IRA, and additional wealth management offerings. At this point, the deal still requires regulatory approval.
Upgrading Bitcoin - The Ordinals Protocol, which enables the creation of NFTs on Bitcoin, introduced a new method called recursive inscriptions that enables Ordinals inscriptions to reference the content of another inscription, allowing that data to be stored on Bitcoin more efficiently and enabling larger NFT file sizes. The method was developed as a way to overcome Bitcoin’s 4 MB per block size limit by allowing inscriptions to use a special "/-/content/:inscription_id" syntax to request the content of other inscriptions, unlocking a host of new use cases. As the system builds out and developers create a large repository for other developers to build upon, the new method will eventually enable the creation of complex pieces of software, such as a 3D video game, fully on-chain on Bitcoin.
And in the World of Digital Asset Developments in Asia…
Pilot is a Go for Launch - The Bank of Thailand has announced the launch of its retail central bank digital currency (CBDC) pilot project as part of its efforts to improve the convenience and efficiency of financial transactions and lower overall costs. The central bank has partnered with the Bank of Ayudhya (Krungsri), Siam Commercial Bank (SCB), and Singapore-based payments service provider 2C2P to run the trial in a regulatory sandbox, and the trial will run from June to August. There are expected to be up to 10,000 users participating in the trial, largely made up of the staff and close relatives of the banks taking part in the trial. The new digital currency can be used to pay for goods and services at participating stores by scanning a QR code, and the system is expected to help ease the intensity of transactions made under the country’s PromptPay service during peak periods once it has been successfully trialed.
Fintech Aspirations - Taiwan Mobile Co., the second-largest telecommunications company in Taiwan, is reportedly in talks with local crypto platforms, including Taipei-based XREX Inc., to explore the possibility of collaborating to offer crypto trading to its users. Talks also include a potential investment in one of the businesses. At this point, the discussions are still in the early stages, and a deal may not materialize, according to sources familiar with the matter. This move by Taiwan Mobile comes as multiple Japanese telcos have been doing a similar process, as smartphones offer easy access to cryptocurrency apps, wallets and exchanges.
Tokenized Renminbi - BOCI, an investment bank owned by Bank of China, a state-owned bank that serves domestic and overseas clients, has announced the successful issuance of a CNH 20 million digital structured note on the Ethereum blockchain, becoming the first Chinese financial institution to issue a tokenized security in Hong Kong. The new product was originated by UBS through its UBS Tokenize platform and offered to BOCI clients as the first step in a long-term partnership between BOCI and UBS in the digital structured note space. The Ethereum-based note is the first regulated securities product of its kind issued under Hong Kong and Swiss law in the Asia Pacific region.
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ISSUE #47
09 June 2023
Market Overview
The crypto market was rocked over the past week after the U.S. Securities and Exchange Commission (SEC) filed a pair of lawsuits against Binance and Coinbase – the two largest cryptocurrency exchanges in the world – for various charges, including the unregistered sale of securities. In their latest response to the lawsuit, Binance.US announced on Thursday evening that they would be suspending USD deposits and pausing fiat (USD) withdrawal channels as early as June 13th, with the aim of ‘protecting customers’. They also stated that they are aiming for a productive compromise with the SEC ‘that enables a thriving digital asset marketplace in America’. There is much speculation as to how the situation will develop.
The past six months have seen an uptick in enforcement actions by the SEC against crypto firms following the bankruptcy of the FTX cryptocurrency exchange. Evidence of the increased focus on regulation can be found by comparing enforcement actions in the second half of 2022 with the numbers seen in the previous five years. The total number of lawsuits filed in the years 2018, 2019, 2020, and 2021 were 5, 3, 6, and 5, respectively, as compared to 12 enforcement actions in the second half of 2022 and 17 enforcement actions in the first half of 2023.
As part of the new lawsuits, the SEC has specifically identified 13 tokens that the regulator considers to be securities, including Solana, Cardano, Polygon, Filecoin, The Sandbox, Axie Infinity, Chiliz, Flow, Internet Computer, Near, Voyager Token, Dash and Nexo. The focus on labeling tokens as securities managed to increase the FUD factor, resulting in a market-wide pullback on Wednesday afternoon as traders opted to wait in the safety of stablecoins until the current downturn subsides.
Despite the uptick in fear, Bitcoin (BTC) continues to trade within the range it's been trapped in since the middle of March, albeit at the lower end of the range. The top crypto hit a low of $25,480 on Tuesday after the lawsuit against Coinbase was revealed, but managed to climb back above $26,500 on Thursday after dip buyers started opening new long positions ahead of a possible rally.
At the time of writing, the total cryptocurrency market cap stands at $1.103 trillion, a decrease of 2.13% over the past week. The DeFi market cap currently stands at $46.4 billion with a 24-hour trading volume of $1.99 billion, which is 7.68% of the total crypto market volume.
Crypto News
A Bridge to Web3 - SWIFT, the largest interbank messaging system in the world, announced a new collaboration with Chainlink to explore how institutions can use the messaging system and Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to seamlessly connect their systems with any blockchain network. More than a dozen major financial institutions – including Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX) and the Depository Trust & Clearing Corporation (DTCC) – will take part in the trial to test how these firms can leverage their existing infrastructure to “efficiently instruct the transfer of tokenized value over a range of public and private blockchain networks.” Chainlink will facilitate the process by providing connectivity across public and private blockchains for these experiments.
Margin Approved - Cboe Clear Digital, the first U.S.-regulated crypto native exchange and clearinghouse combination platform to offer leveraged derivatives products, has received approval from the CFTC to expand its product offering to include margined futures contracts. The first products to launch following this new approval will be physically and financially settled Bitcoin and Ether contracts, which Cboe plans to launch in the second half of 2023. Up to this point, Cboe Digital has offered trading and clearing of Bitcoin and Ether futures on a fully collateralized basis, which requires customers to outlay the full amount of a futures contract upfront. The new margin model will only require a percentage of the total posted as collateral, providing customers with a less capital-intensive way to trade cryptocurrency futures.
The Futures Are Here - Coinbase’s CFTC-regulated derivatives exchange – Coinbase Derivatives Exchange – announced the launch of institutional Bitcoin and Ether (ETH) contracts amid soaring demand for advanced derivatives products. The new BTI futures will be sized at 1 Bitcoin per contract, while ETI futures will hold 10 Ether per contract. Along with a greater degree of risk management and “enhanced precision,” Coinbase said the new contracts “offer significantly lower fees than traditional offerings,” which helps institutions maximize their capital efficiency. The exchange referred to the launch of institutional-sized contracts as the latest milestone in their “ongoing mission to provide accessible and cutting-edge financial instruments to market participants and underscores our dedication to solutions tailored to the needs of institutional clients.”
And in the World of Blockchain Adoption…
Successful Trial - The Tel Aviv Stock Exchange (TASE) and the Israeli Ministry of Finance (MOF) announced the successful completion of the Proof-of-Concept (PoC) phase for Project Eden, a blockchain-based digital bond system. The project was designed to showcase the potential for innovative technologies like blockchain, smart contracts and tokenization to reduce risk and improve efficiency and transparency in the financial markets. As part of the trial, TASE held a go-live event on May 31 that brought together prominent international and local banks – including Barclays, BNP Paribas, Deutsche Bank, Goldman Sachs, JP Morgan and Merrill Lynch – where the MOF issued and minted the first “dummy digital governmental bond” on a blockchain-based platform as an ERC-1155 security token.
Cross-Border Crypto - Russian megabank Rosbank announced the launch of a pilot program for cross-border payments using cryptocurrency, becoming the first systemically important Russian bank to launch such a service in the country. To offer the service, Rosbank utilizes the services of a Russian fintech intermediary named B-crypto, which buys cryptocurrency abroad at the expense of the importer and transfers it to a foreign supplier. In order for a Russian individual or company to use the new service to pay for imported goods with digital assets, they must first complete the KYC verification process with both Rosbank and B-crypto. A representative from Rosbank said that corporate and private clients have already begun to use the service to conduct pilot transactions.
GIFT City Settlements - JPMorgan has formed a new partnership with six major Indian banks to launch a pilot program designed to test a blockchain-based platform for the settlement of interbank dollar transactions. HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and IndusInd Bank will be joining forces with JPMorgan’s banking unit at Gujarat International Finance Tec-City, also known as GIFT City, to trial the new platform. The goal of the project is to expand the capacity of the existing settlement system and the platform will allow the banks to process instant transactions 24 hours a day, seven days a week. This development comes as New Delhi is attempting to position GIFT City as an international financial hub and alternative trading center to places like Singapore and Dubai.
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ISSUE #46
02 June 2023
Market Overview
The chop continued for another week in the crypto market, albeit with an upward tilt, as the debt ceiling debate in the U.S. continued to dominate the headlines ahead of the vote which took place on Wednesday evening.
Cryptocurrency influencers were the latest cohort to receive a warning from the Securities and Exchange Commission care of former SEC chief John Reed Stark, who posted a warning to those who promote scams and manipulate prices on his Twitter feed.
“Attention all crypto promoters who use social media to manipulate the price of crypto-securities: Fail not at your peril,” Stark wrote. “Not only will you eventually get caught, but your prosecution will also be like shooting fish in a barrel.” Stark went on to highlight the particularly “brazen and arrogant” way that many crypto promoters “grift their victims,” doing it in plain view on platforms like Twitter, Discord, Instagram and Reddit. “The fraud is always easy to find, easy to archive and easy to present to a judge or jury,” he said.
This warning comes as the SEC continues to ramp up its enforcement actions in an attempt to reign in the fraudulent and unregulated aspects of the crypto market as jurisdictions around the world move closer to integrating blockchain technology and central bank digital currencies (CBDCs) into their financial systems.
From last Thursday’s low of $29,950, Bitcoin (BTC) proceeded to climb higher over the weekend, topping out at $28,440 on Monday before entering into correction and pulling back to support at $27,700. On Wednesday, the top crypto experienced another leg down, bottoming out around $26,671 before bulls managed to bid it back above $26,800 on Thursday.
At the time of writing, the total cryptocurrency market cap stands at $1.127 trillion, an increase of 1.5% over the past week. The DeFi market cap currently stands at $48.3 billion with a 24-hour trading volume of $2.16 billion, which is 7.21% of the total crypto market volume.
Crypto News
Building Bridges - The Ordinals Protocol continues to shake up the NFT landscape as the layer-two solution enabling decentralized storage of digital art on the Bitcoin blockchain launched the BRC-721E standard, which allows users to migrate Ethereum ERC-721-based NFTs to the Bitcoin blockchain. To complete the process, ERC-721 NFT holders must first burn the token with an Ethereum call function. This is an irreversible process that acts as an on-chain inscription method. In order to claim the ETH burn on Bitcoin, valid BRC-721E data must be inscribed on a satoshi, after which the bridged NFT will appear on a custom Ordinals market collection page with complete metadata. Metadata is not stored on-chain as part of the service’s initial rollout, but users can store a lower-quality preview image and include a reference to the Ethereum burn in the raw image data
Metaverse Mania - Zhengzhou, the capital city of Henan province, announced a new set of policy proposals designed to support metaverse companies, which includes the establishment of a dedicated fund worth 10 billion yuan ($1.42 billion) to foster growth and development in the industry. The government is now seeking public comments on the proposal, which is intended to help accelerate the construction of Zhengzhou's metaverse industrial ecosystem as the region looks to become an industry player at the global level. The city’s government also plans to collaborate with other governmental agencies and investment firms to secure an additional 50 billion yuan ($7.08 billion) to support various metaverse-related development projects.
Going Private - Russia announced that it is abandoning its plans to create a national cryptocurrency exchange and will instead move to establish rules governing the use of private digital asset exchanges for cross-border transactions. The idea of creating a state-run exchange was first proposed in November but was met with a lack of support from authorities, including Russia’s Ministry of Finance. This has led to the idea of facilitating cross-border transactions using private cryptocurrency exchanges that are heavily regulated. As part of the pivot away from a national crypto exchange, the Ministry of Finance will also work to help new exchanges get established so they can provide a workaround to the sanctions Western nations have placed on Russia for its invasion of Ukraine.
And in the World of Central Banks and CBDCs…
Central Banks Unite - The central banks of Hong Kong (HKMA) and the United Arab Emirates (CBUAE) held a bilateral meeting on Monday to discuss enhancing collaboration between their respective financial services sectors. The central banks explored a variety of “collaborative initiatives,” and ultimately agreed to strengthen collaboration in the areas of financial infrastructure, financial market connectivity between the two jurisdictions, and virtual asset regulations and developments. To move the initiatives forward, a joint working group led by the CBUAE and HKMA, with support from the relevant stakeholders of the two jurisdictions’ banking sectors, will be formed.
Regulation Needed - Norges Bank, the central bank of Norway, released a new report recommending that the country consider adopting a national strategy on crypto regulation as the asset class gains wider adoption around the world. The report highlighted that despite the fact that there are no large institutional investors or financial institutions in Norway or internationally that have substantial exposures to crypto assets, the evolution of the industry and sectors such as decentralized finance necessitate the establishment of regulations to protect users and “address societal considerations.” This includes combating crime and promoting financial stability. Norges Bank called for the development of specific regulations that can be adapted to different risks associated with an activity, such as systemic risk, and can contribute to a more efficient allocation of responsibility for risks.
The Real World - The Central Bank of Brazil (BC) released the roster of participants for its upcoming CBDC pilot project – a list that includes the likes of Visa, Santander, the Bank of Brazil, and several other Brazilian banking institutions – highlighting the national and global firms that will explore the implementation of a digital real (RD). The BC received a total of 36 proposals of interest from companies looking to participate in the RD pilot, which included more than 100 institutions from various financial segments. The bank ultimately settled on 14 participants that represent “financial institutions from the prudential segments S1 to S4, payment institutions, cooperatives, public banks, developers of crypto asset services, operators of financial market infrastructures and institutors of payment arrangements.”
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ISSUE #44
19 May 2023
Market Overview
Financial markets, on the whole, remained in a holding pattern over the past week as concerns related to the global economy – from rising inflation and interest rates to the threat of a debt default in the U.S. – have investors sidelined and scrambling to find a safe haven for their wealth.
Matters improved slightly for markets on Wednesday after positive comments from both sides of the aisle in regard to debt talks emerged, but the situation remains tense as the countdown to the date when significant portions of the U.S. government may need to shut down due to a lack of funding draws near.
In response to Coinbase’s petition for mandamus, which asked the SEC to establish a clear regulatory framework for cryptocurrencies, the regulator argued that no applicable laws or regulations impose “an obligation to issue the broad new regulations regarding ‘digital assets’ Coinbase has requested,” nor are they required to do so on a specific timeline. The agency argued that even according to Coinbase’s own submissions, “considering the various paths it suggests is a necessarily complicated endeavor” and the process of formulating and approving a new regulatory regime could take years.
Little changed for the price of Bitcoin (BTC) over the past week as the top crypto continued to oscillate around the $27,000 support level after briefly falling to a low of $25,875 last Friday in a move that was highly anticipated by many technical analysts. The community now finds itself evenly split among those who think that price will steadily climb higher from here and those that think another tip into the $25,000 range – and possibly lower – is likely before the uptrend resumes.
At the time of writing, the total cryptocurrency market cap stands at $1.122 trillion, an increase of 0.35% over the past week. The DeFi market cap currently stands at $49.9 billion with a 24-hour trading volume of $2.11 billion, which is 6.6% of the total crypto market volume.
Crypto News
NFTV - A recent patent filed by LG Global indicates that the company is seeking patent protection for a television that is capable of connecting with a non-fungible token (NFT) market server to allow users to send, receive and display artwork and fulfill purchases via a cryptocurrency wallet that is connected to the TV set. The patent, filed with the World Intellectual Property Organization, suggests that LG sees ongoing consumer demand for NFTs in the future and sees a business case for making them more accessible. LG first delved into the integration of NFTs with its television sets last September when it released its “LG Art Lab” marketplace, which enabled users to trade digital collectibles via U.S. LG televisions running their WebOS 5.0 operating system. The marketplace is only accessible via LG televisions.
Focused on Innovation - China officially launched its National Blockchain Technology Innovation Center in the capital city of Beijing, promising to train more than 500,000 specialists in blockchain and distributed ledger technology (DLT) in the coming years. The center will collaborate with local universities, think tanks and blockchain businesses to advance the development of blockchain technology in China with a primary goal of connecting the siloed application chains developed in China in recent years. According to its operational plan, the center is looking to build a national blockchain computing power network composed of provincial and municipal backbone node networks and industry application node networks. This digital infrastructure will serve important industries and key areas of the national economy such as cross-border trade, supply chain finance, energy, production safety, and the food industry.
DEXtination Polkadot - The Uniswap decentralized exchange is looking to expand its domination of the DeFi DEX space by launching in the Polkadot ecosystem via Moonbeam (GLMR), a parachain in the Polkdadot ecosystem. The move comes after the Uniswap community gave near-unanimous approval to a proposal – put forward by the educational group Blockchain at Micigain – on the exchange’s governance platform. The smart contracts for the exchange have already been deployed to Moonbeam, and the only tasks left to fully launch it are “front-end integration updates and including Moonbeam to the auto router,” the proposal stated.
And in the World of Regulatory Actions…
No Entry for CBDCs - Florida Governor Ron DeSantis officially signed an anti-CBDC bill into law, banning the use of American or foreign central bank digital currency (CBDC) in the state. The bill was first announced on March 20, with DeSantis warning at the time that the creation of a digital dollar would grant “more power” to the government. During the Friday press conference following the signing, DeSantis accused President Biden's administration of wanting to “crowd out and eliminate other types of digital assets, like cryptocurrency.”
Regulation on the Horizon - The European Union’s Markets in Crypto-Assets (MiCA) bill, a landmark piece of legislation designed to establish a regulatory framework for the EU, reached another milestone as the bill was approved by the finance ministers of all 27 member states. The unanimous vote by the EU’s Economic and Financial Affairs Council means MiCA remains on track to become law by the third quarter of 2024. The next step is for the bill to be published in the Official Journal of the European Union. The European Parliament previously approved MiCA on April 20, with 517 members of parliament voting in favor and 38 voting against it. If the bill stays on track for enactment, provisions related to stablecoins could come into force as soon as July 2024, while many of the other provisions won’t take effect until January 2025 at the earliest.
DeFi Under the Microscope - Eun Young Choi, the U.S. Department of Justice’s top crypto enforcer, has indicated that the Justice Department is planning to start cracking down on cryptocurrency exchanges, mixers, and other sources of crypto crime that help hide the trail of transactions from regulators. Both companies that commit crimes as well as those that enable crimes such as money laundering to be perpetrated will be targeted in the enforcement. Choi said she believed focusing on platforms will “send a deterrent message” to other digital assets businesses that are circumventing AML and KYC rules or do not have robust compliance and risk mitigation measures. The DoJ’s crypto unit will also focus on investment scams, which caused $2.5 billion in losses in 2022, according to the FBI.
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ISSUE #43
12 May 2023
Market Overview
From a micro perspective, the crypto market struggled over the past week as persistent inflation and the threat of a U.S. default on its debt weighed heavily on asset prices across all financial markets and will likely continue to do so for the foreseeable future.
Looking at things from a more macro point of view, little has changed for cryptocurrencies in nearly two months – ever since Bitcoin first surpassed the $27,000 mark – as the broader market has largely been in a sideways consolidation pattern since that time.
The big story making headlines this week has been the surge in transaction costs on both the Bitcoin and Ethereum networks. This has delighted miners and validators who have made a killing in fees at the expense of everyday users, who now have to pay an arm and a leg just to conduct a token transfer. For Bitcoin, the culprit behind the network congestion is the surging popularity of BRC-20s, which are essentially NFTs on the Bitcoin blockchain. For Ethereum, a spike in activity related to meme coins like PEPE and $SPONGE have been clogging up the network, increasing transaction costs and extending confirmation times.
The Bitcoin network’s inability to catch up with unconfirmed transactions resulted in Binance having to halt BTC withdrawals on multiple occasions on Monday, which took a toll on Bitcoin’s price as many grew disenchanted with transacting on the network. Around the time that Binance halted withdrawals, Bitcoin lost support at $29,00 and didn’t stop sliding until it bottomed out near $27,400, where it was then bid back above $27,700. On Wednesday, BTC price whipsawed following the latest CPI data report which showed inflation remains persistently high at 4.9% year-over-year. Following the volatile price movements, BTC now trades near support at $27,000.
At the time of writing, the total cryptocurrency market cap stands at $1.118 trillion, a decrease of 6.83% over the past week. The DeFi market cap currently stands at $48.1 billion with a 24-hour trading volume of $2.62 billion, which is 6.9% of the total crypto market volume.
Crypto News
A Different Approach - Grayscale Investments has decided to take a different approach in its efforts to launch a spot Bitcoin ETF in the U.S. and formed the Grayscale Funds Trust, a Delaware statutory trust structure that will allow the firm to independently manage its 1940 Act products as it continues to build out its ETF franchise. According to the registration statement, the fund will not invest in digital assets directly but “may offer indirect exposure to digital assets by virtue of its investments in companies and exchange-traded vehicles that use one or more digital assets as part of their business activities or that hold digital assets as investments.” The products Grayscale is looking to form Fund Trusts for include the Grayscale Ethereum Futures ETF, Grayscale Global Bitcoin Composite ETF, and the Grayscale Privacy ETF.
The French Connection - In a sign that the digital yuan continues to gain wider traction, BNP Paribas has partnered with the Bank of China (BOC) to enable their corporate customers to seamlessly transact in China’s central bank digital currency (CBDC), the digital yuan. The new partnership involves BNP Paribas China connecting with BOC to launch a digital yuan management system for its corporate clients. The system will link clients’ e-CNY wallets to their BNP Paribas bank accounts to facilitate “efficient, real-time and convenient” digital yuan usage. BNP Paribas is the first foreign-owned bank to be included in the country’s digital yuan rollout. The French bank will also explore the opportunities for expanding the use of China’s CBDC to smart contracts, utility payments, supply chain finance, and cross-border payments.
Now Accepting - The country of Liechtenstein announced that it is planning to add Bitcoin as a payment option for government services according to Prime Minster Daniel Risch. Risch, who also serves as the country's minister of finance, did not offer a timeline for adding the payment option, but said that any Bitcoin the government receives as payment would most like be immediately exchanged for Swiss francs – the country’s national currency – in an effort to avoid any exchange rate risks. Risch said that Bitcoin remains too volatile for Liechtenstein to consider holding a portion of the country's multi-billion-dollar annual savings in the digital asset.
And in the World of New Platform Launches…
Cloud Launching - Alibaba Group announced that it has partnered with the Avalanche network to release Cloudverse, a launchpad for metaverse projects on the layer-one Avalanche network. Alibaba Cloud, the digital technology and intelligence division of Alibaba Group, and Avalanche will collaborate on the platform which will give Alibaba’s clients access to a launchpad that is designed to help businesses customize, launch and maintain their own metaverse space. Alibaba and Avalanche are hoping that the ability to launch metaverses quickly and easily will lead to increased engagement from enterprises that don’t have the time or resources to develop these platforms themselves but are interested in the sector. The companies said that it would take about a month for a metaverse space to be up and running after the initial outreach by an interested firm.
Facilitating Connections - Binance is looking to woo the institutional crowd as they slowly enter the digital asset space with the launch of Capital Connect, a free platform for VIP-level users of the exchange that facilitates connections between investors and investment managers. All eligible Binance VIP clients that live in approved regions are eligible to apply as investors on Capital Connect, and investment managers who complete Binance’s know-your-business (KYB) verification process can also access the service. As part of its due diligence practices and to give investors insight into a fund's past performance, Binance has put requirements in place for listed investment managers to provide records of monthly returns that are verified by reputable fund administrators.
Blockchain for Institutions - Digital Asset, a fintech company that helps businesses create interconnected ecosystems, has joined with multiple firms to launch the Canton Network, a privacy-enabled interoperable blockchain network designed for institutional assets. The Canton Network is designed to provide a decentralized infrastructure that connects independent applications built with Daml, Digital Asset’s smart-contract language. Included in the list of Canton Network participants are BNP Paribas, Cboe Global Markets, Cumberland, Deloitte, Deutsche Börse Group, The Digital Dollar Project, EquiLend, Goldman Sachs, Microsoft, Moody’s, Paxos, S&P Global, and SBI Digital Asset Holdings, among others. The goal of the Canton Network is to help create opportunities for financial institutions to offer new innovative products to their clients while enhancing their efficiency and risk management.
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ISSUE #42
4 May 2023
Market Overview
It was more sideways price action for the cryptocurrency market this week as the broader financial markets fell under pressure amid the ongoing banking crisis which saw First Republic Bank’s assets purchased for cents on the dollar in an echo of events that transpired in 2008.
While regulators in the U.S. continue to take a hard-nosed stance against Bitcoin and cryptocurrencies, they – along with global regulators – continue to prepare the public for a future of CBDCs.
On Wednesday, Federal Reserve Chair Jerome Powell announced that the central bank would be raising interest rates another 25 basis points, bringing the benchmark rate above 5% for the first time since 2007, and left the door open for additional rate hikes in the future.
Bitcoin (BTC) responded to the rate hike announcement by briefly pulling back to $28,230 before surging to a daily high of $29,350. The top crypto has since traded near support at $29,000.
At the time of writing, the total cryptocurrency market cap stands at $1.19 trillion, a decrease of 1.7% over the past week. The DeFi market cap currently stands at $53.6 billion with a 24-hour trading volume of $2.19 billion, which is 6.77% of the total crypto market volume.
Crypto News
Energy Tax - The Biden Administration’s Council of Economic Advisers (CEA) is looking to institute a 30% Digital Asset Mining Energy (DAME) tax on cryptocurrency mining operations as part of the White House’s effort to minimize the digital asset mining industry’s impact on climate change. The administration is looking to address the issue from the federal level as state or local regulations could result in the industry just moving to more welcoming jurisdictions. The current plan is to have the 30% tax phased in over three years, starting with 10% and increasing by 10% each year for two additional years.
COIN Expanding - Coinbase announced that they have launched a new derivatives exchange in Bermuda dubbed ‘Coinbase International Exchange.’ The new exchange, which is operational and trading, offers BTC and ETH perpetual futures settled in USDC with up to 5x leverage to institutional clients in eligible jurisdictions outside of the U.S. The company previously announced that it had obtained a license from the Bermuda Monetary Authority as part of its ‘Go Broad, Go Deep’ international expansion drive. Coinbase International Exchange will offer real-time 24/7/365 risk management with all liquidity provided by external market makers, meaning no proprietary trading.
Memecoin Mania - The frogs have overtaken the dogs in popularity for the time being as Pepe (PEPE) – a meme coin created as an homage to the popular internet ‘Pepe the Frog’ meme by Matt Furie – has stormed up the charts and excited the crypto Twitter faithful with a gain of 2,000% in just two weeks. “The Inu’s have had their day,” the website for Pepe states. “It’s time for the most recognizable meme in the world to take his reign as king of the memes. Pepe is here to make memecoins great again.” Some are hoping that the flash of energy in meme token land will harken back to early 2021 – when DOGE and SHIB helped kick off the bull market that year – and kick off the bull market of 2023 that extends on past the Bitcoin halving in April 2024.
And in the World of NFTs and ‘Killer Whales’…
NFT Utility - Sports Illustrated has announced the launch of “Box Office,” a self-service event management and the primary ticketing solution developed and released by SI Tickets, a fan-first ticketing site that offers a secure, NFT-based ticketing marketplace. The new service was developed in partnership with ConsenSys and operates on the Polygon network. With the new platform, event owners, organizers and hosts will be able to create, manage and promote a fully scalable, paid or free ticketed live sporting event, performance or function on the trusted Sports Illustrated Tickets platform. At launch, SI Tickets will offer access to a wide variety of venues from youth football, basketball, hockey, cheer and dance competitions to fashion shows and live music bars. The platform has future plans to partner with a range of organizers and vendors across sports, health and fitness, concerts, comedy and nightlife, industry functions, and philanthropy.
Cornering the Market - Art auction house Sotheby’s has expanded on its Sotheby’s Metaverse with the launch of its own secondary marketplace for fine art NFTs. The integrated sales system for the secondary marketplace will be fully on-chain via the Ethereum and Polygon networks, and users can pay using the native ETH or MATIC token. Work from artists selected by Sotheby’s digital art specialists will be featured on a rotating basis on the new marketplace. The Art auction house said it intends to utilize smart contracts in order to pay out artist royalties and will do so in accordance with each artist’s stated on-chain royalty rate. The company is also planning to launch a new digital art gallery through the Web3 art gallery platform Oncyber in June that will feature select works from the secondary market.
Sink or Swim - The cryptocurrency ecosystem is set to get its own version of the popular reality TV show Shark Tank as crypto aggregator CoinMarketCap has revealed its intention to launch ‘Killer Whales,’ “the world’s first globally broadcasted Web3 television show.” The new reality show is set to begin filming in June and is designed to serve as a way to entertain and educate the global public “on the intricacies and evolving tech of the Web3 world.” Similar to Shark Tank, contestants on Killer Whales will pitch their crypto and NFT projects to a panel of industry expert judges – referred to as “Whales.” Quality pitches can receive ‘Swim’ votes from the judges while those that lack the ability to survive long term in the judge's eyes will receive ‘Sink’ votes. The goal is to obtain the most ‘Swim’ votes and the fewest ‘Sink’ votes for a chance to rank at the top of the series leaderboard and be crowned the series winner.
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ISSUE #41
28 April 2023
Market Overview
It was a week of recovery for the crypto market after Bitcoin broke below support at $28,000 last Friday, plunging the top crypto to a low of $27,030 late on Monday as bears attempted to break the back of the last remaining support level before a plummet to $26,000.
The big news on the regulatory front was the passage of the Markets in Crypto-Assets (MiCA) bill by the European Parliament, setting the stage for a final vote by the European Council on July 1 that will make the law official if approved. Even if the law is approved on that date, it will still take 18 months for it to go into effect, allowing companies affected by the rule change time to prepare for its implementation.
In an effort to speed up the process of onboarding companies under the new legal regime, France announced that it was exploring the possibility of providing companies with a “fast track” option which would allow them to come into compliance with MiCA regulations as soon as possible.
The outlook for Bitcoin began to improve late on Tuesday when the top crypto managed to surge back above $28,000, hitting a high of $30,040 on Wednesday before once again returning to support at $28,400. The move higher for the top crypto helped to relieve the pressure that altcoins were experiencing and put the broader market back on an uptrend.
At the time of writing, the total cryptocurrency market cap stands at $1.18 trillion, a decrease of 1.33% over the past week. The DeFi market cap currently stands at $53.9 billion with a 24-hour trading volume of $4.88 billion, which is 7.6% of the total crypto market volume.
Crypto News
Hurry Up and Regulate! - Coinbase filed a lawsuit against the SEC seeking to compel it to provide a “yes or no” response to a petition that the firm originally submitted last July seeking clarity on cryptocurrency regulation. The petition in question sought to have the SEC propose and adopt a clear regulatory framework for the cryptocurrency industry in the U.S. and establish guidelines for companies like Coinbase to work from as they build out their businesses. While SEC Chair Gary Gensler has repeatedly stated that in his view, all cryptocurrencies aside from Bitcoin meet the definition of a security and should be regulated as such, the agency has yet to release formal guidelines outlining its stance.
Hiring for the Future - Visa revealed that it is looking to fill multiple new positions to help it execute its crypto product roadmap focused on driving mainstream adoption of public blockchain networks and stablecoin payments. The firm is particularly interested in software engineers with experience using Github Copilot and other AI-assisted engineering tools to write and debug smart contracts. Specialized qualifications include having a good understanding of Layer 1 and Layer 2 solutions, experience writing smart contracts using Solidity, a good understanding of public and permissioned DLT networks, security protocols and private key custody, and familiarity with Ethereum enhancements such as ERC-4337, which enabled the creation of smart accounts.
Stellar Use Case - The Stellar (XLM) network has become the first public blockchain to host a U.S.-registered fund following the integration of the Franklin OnChain U.S. Government Money Fund (FOBXX), which can be accessed via the Benji Investments app. The fund’s transfer agent maintains the official record of share ownership using a proprietary blockchain-integrated system that currently utilizes the Stellar blockchain network for transaction activity, making it the first U.S.-registered fund to do so. The fund currently offers a 7-day yield of 4.53%, paid monthly, and has a total AUM of $272.92 million as of March 31. The Fund is a regulated 1940 Act fund that invests at least 99.5% of its total assets in government securities, cash and repurchase agreements collateralized fully by government securities or cash.
And in the World of Adoption and Expansion…
Credit Ratings Go DeFi - TransUnion, one of the top consumer credit reporting agencies in the U.S., has revealed that it will start delivering credit scores to decentralized finance (DeFi) lenders thanks to a partnership with Spring Labs and Quadrata. With this integration, decentralized applications (DApps) will be able to utilize the new service to access off-chain credit data using Spring Labs technology and Quadrata, a digital passport network that was spun out from Spring Labs. The process developed by Spring Labs will enable the delivery of credit scoring data while maintaining the privacy of the consumer’s identity. This development comes at a crucial time for the crypto industry as the ongoing Operation Chokepoint 2.0 has significantly limited the number of baking partners willing to work with cryptocurrency platforms.
Stablecoin Rising - SG-FORGE, the crypto division of French banking and financial services firm Societe Generale, announced the launch of EUR CoinVertible (EURCV), a Euro-pegged stablecoin hosted on the Ethereum (ETH) blockchain. The new token officially launched on April 19 and is designed to bridge the gap between traditional capital markets and the digital assets ecosystem. EURCV is currently available for institutional clients of the bank and is part of Societe Generale group’s strategy of developing initiatives in the field of digital assets in a secure and transparent framework for institutional investors that abide by banking, legal and regulatory standards. The collateral assets that back the stablecoin will remain completely segregated from the issuer, and token-holders will have direct access to the collateral assets anytime they wish to convert.
The Coinbase Triangle - Following comments from Coinbase CEO Brian Armstrong that the exchange may consider relocating if the regulatory environment in the U.S. doesn’t improve, Coinbase announced that it has obtained a license to offer its services in Bermuda. The new operational jurisdiction comes as part of an 8-week international expansion drive – dubbed “Go Broad, Go Deep” – which was launched on March 8 with the goal of rolling out a number of new initiatives in countries across six continents: South America, Europe, Africa/Middle East, Asia, Australia, and North America. Coinbase has obtained a Class F license in Bermuda, which enables it to conduct a range of activities, including the issuance, sale, and redemption of digital assets. It also allows the platform to operate as both a digital asset exchange and a digital asset derivatives exchange provider.
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ISSUE #40
21 April 2023
Market Overview
The major correction that many had forecast finally came to fruition this week as the crypto market saw red across the board on Wednesday as Bitcoin bears tore through support at $30,000 and pounded the top crypto below $29,000.
There was no specific inciting event that sparked the market turndown, but rather a conglomeration of factors including the ongoing uptick in regulator scrutiny of the industry, Operation Chokepoint 2.0 and the diminishing number of banking partners, the threat of additional interest rate hikes due to stubbornly high inflation, and a hot start to the year which has seen BTC nearly double in price in four months.
In the latest move from the U.S. Securities and Exchange Commission’s crackdown on the crypto industry, the comments period was opened for a proposal to alter the definition of “exchange” to include decentralized finance (DeFi) platforms. Making sure to emphasize the focus on DeFi, SEC Chair Gary Gensler said, “Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws.”
The move lower didn’t exactly come as a surprise to technical analysts and many of the more experienced cryptocurrency holders as the extended stay at $30,000 and a failed attempt to breakout above $31,00 on Tuesday meant a retest of lower support levels was a possibility. BTC originally fell below $30k on Monday, but bulls managed to bid it back above the psychologically important support level on Tuesday. Bears redoubled their efforts on Wednesday evening and not only broke through support at $30,000, but managed to continue the mauling through Thursday, pounding BTC to a low of $28,037.
At the time of writing, the total cryptocurrency market cap stands at $1.20 trillion, a decrease of 5.56% over the past week. The DeFi market cap currently stands at $56.6 billion with a 24-hour trading volume of $4 billion, which is 7.66% of the total crypto market volume.
Crypto News
Just NFT It – Nike became the latest highly recognizable brand to enter the realm of non-fungible tokens (NFTs) as the company announced it will soon launch its first NFT sneaker collection on .SWOOSH, the company’s platform for virtual creations. Dubbed “Our Force 1 (OF1),” the collection is co-curated by the .SWOOSH community and is “a tribute to the first 50 years of Nike and an homage to the creativity and versatility of the Air Force 1.” Nike is offering users a choice between two digital “boxes,” the Classic Remix box and the New Wave box. Each box contains an OF1 – which is a digital representation of an Air Force 1 – and can be purchased for $19.82. General access to the NFT sale will begin on May 10.
Sun Summoner – Justin Sun, the founder of the Tron network and part owner of the Huobi cryptocurrency exchange, has been issued a summons by a U.S. district court has 21 days from April 12 to respond regarding a lawsuit filed by the Securities and Exchange Commission (SEC). On March 22, the SEC filed a lawsuit against Sun, alleging that he illegally sold crypto securities and conspired to artificially inflate the trading volume of crypto assets. Failure to reply in the allotted time will result in a summary judgment. Soulja Boy and Austin Mahone were also named in the summons as they were the only two out of the eight celebrities charged by the SEC alongside Sun who did not settle their charges with the regulator.
Seeking acceptance - Brian Armstrong, the CEO of Coinbase, suggested that the company may eventually consider relocating to a more welcoming jurisdiction if the regulatory landscape in the U.S. continues to deteriorate or no clear framework is established. This statement follows the issuance of a Wells Notice to the exchange by the SEC, which is often the final step before formal charges are issued. Armstrong said that despite meeting with the agency over 30 times in the last years, they “never got a single piece of feedback from them about what we can be doing better or differently, and then this Wells Notice arrived.” During a speech Armstrong gave at the conference he was attending, he said, “I think if a number of years go by where we don’t see regulatory clarity around us... we may have to consider investing more elsewhere in the world. Anything including, you know, relocating.”
And in the World of Institutional Crypto.…
Daily expires - CME Group, the operator of the world’s largest derivatives exchange, announced that it plans to expand its suite of cryptocurrency options across its standard- and micro-sized Bitcoin and Ether contracts, pending regulatory approval. The new contracts are set to go live on May 22 and will offer options on Bitcoin and Ether futures with Monday, Tuesday, Wednesday, Thursday, and Friday expirations. The new offerings were created to complement the existing monthly and quarterly expiries currently available across all Bitcoin and Ether options on futures contracts.
London calling - LCH SA, the European-based arm of the London Clearing House (LCH) – which is majority owned by the London Stock Exchange Group (LSEG) – announced that it will begin offering the clearing of Bitcoin index futures and options contracts traded on GFO-X. GFO-X is a UK digital asset derivatives trading platform that has received approval from the Financial Conduct Authority to operate as a multilateral trading facility. The new service will be made available through LCH DigitalAssetClear, a new segregated clearing service developed by GFO-X. Bitcoin index futures and options contracts on LCH SA will be cash-settled through LCH DigitalAssetClear and will be based on the GFO-X/Coin Metrics Bitcoin Reference Rate (GCBRR), a benchmark regulation-compliant reference rate of the U.S. dollar price of Bitcoin.
X - Twitter users can now purchase cryptocurrencies and stocks directly through the social media platform thanks to a new partnership with eToro, an Israel-based social trading and investment company. The new feature has already gone live on the Twitter app and allows users to view market charts on a variety of different financial instruments directly from the social media platform. It also allows them to buy and sell cryptocurrency and other assets from eToro through the integration. A new button saying “view on eToro” has been added to the UI that redirects Twitter users to the eToro website where they can buy and sell assets. This development aligns with the longstanding rumors that Elon Musk is looking to create an ‘everything app’ – dubbed ‘X’ – which would include messaging and video chatting, the ability to facilitate payments and trade assets, play video games, share photos, hail rideshare and delivery services, shop, and more.
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ISSUE #39
14 April 2023
Market Overview
Cryptocurrency proponents were in high spirits this week as Bitcoin once again saw its price climb above $30,000 while Ethereum climbed above $2,000, further signaling to many that the crypto winter is over, spring has arrived, and the market is on course to hit new all-time highs.
Aside from the surge in BTC price late on Monday into Tuesday, it was a relatively quiet week for the ecosystem, all things considered, as there were no notable exchange collapses, banking failures, or high-profile enforcement actions to cause a spike in volatility. Many were actually seen using the term “boring” to describe the market prior to Monday’s surge, suggesting we’ve all become a little too accustomed to shakeups in the market. Things livened up after the Ethereum network successfully integrated its Shapella hard fork late on Wednesday, enabling the withdrawal of staked Ether for the first time.
What is clear is that the global movement of de-dollarization continues to ramp up, with numerous countries announcing new trade agreements that utilize local currencies in lieu of the U.S. dollar. Some have speculated that the dump-the-dollar movement has also been providing tailwinds for the digital asset market as global investors have started to turn to cryptocurrencies as a viable alternative to fiat currencies that have a better chance of holding their value.
As mentioned above, the Bitcoin market was largely a snoozefest until late on Monday when the king crypto awoke from its slumber at the $28,000 support level to steadily climb throughout the week to close the Thursday candle at a price of $30,536. Technical analysts have long had their eye on resistance at $31,000 as the level to overcome to officially signal the start of a new bull market, and optimism is now starting to rise as the top crypto is within striking distance of that bear vs. bull showdown.
At the time of writing, the total cryptocurrency market cap stands at $1.28 trillion, an increase of 7.5% over the past week. The DeFi market cap currently stands at $59.2 billion with a 24-hour trading volume of $3.9 billion, which is 7.82% of the total crypto market volume.
Crypto News
Unstakable - The Shapella upgrade to the Ethereum network has been successfully implemented, enabling the withdrawal of staked Ether and any rewards generated for the first time since the Beacon Chain launched in December 2020. While many were concerned that the ability to withdraw staked tokens would lead to a dump in the price of Ethereum, no such sell-off occurred as multiple measures were put in place to ensure the security of the network by preventing a mass validator exodus. While the ability to unstake ETH was a welcomed development for many crypto holders, future upgrades that increase scalability and decrease transaction costs are what will really take Ethereum to the next level in terms of adoption.
Taping the private sector - The Central Bank of Montenegro (CBGC) announced that it signed an agreement with Ripple, the enterprise crypto and blockchain solutions provider, to develop a strategy and pilot program for the launch of the country’s first central bank digital currency (CBDC) or stablecoin. The pilot program will analyze the advantages and risks that a CBDC or national stablecoin poses in regard to electronic means of payment availability, security, efficiency, compliance with regulations and the protection of end users’ rights and privacy. There will be several stages to the project, including one that explores the practical applications of a CBDC or national stablecoin, and another that tests different designs to simulate its circulation and use under controlled conditions.
2022 crypto blues - The horrendous 2022 for the cryptocurrency market took its toll on cryptocurrency proponents, as a study conducted by Pew Research found that 75% of Americans who are at least somewhat familiar with cryptocurrencies are not confident in their reliability and safety. That translates to roughly two-thirds of U.S. adults holding an unfavorable opinion of the crypto industry in its current state. There was a noticeable split in terms of age, with adults aged 50 and older more likely to say they are not confident in its reliability and safety (85%) as compared to their younger counterparts (66%). And women showed more skepticism when it comes to investing in, trading or using cryptocurrencies, with 80% saying they are not confident as compared to 71% of men.
And in the World of Cryptocurrency in the U.S.…
Mining in focus - Cryptocurrency mining operations have come under the microscope following the crackdown on crypto-related banking services, as several states, including Arkansas, Montana, Texas, and Mississippi, have introduced legislation related to crypto mining, with some adopting an open stance, while others are looking to put limitations on the industry. At the federal level, crypto miners could soon be subject to a 30% tax on electricity costs based on the text of the budget proposal introduced by President Joe Biden on March 9 aimed at “reducing mining activity.” With issues related to power consumption remaining at the forefront of concerns for many states, it's likely that there will be many more legislative acts at both the state and federal levels related to cryptocurrency mining in the future.
Texas gold - Lawmakers in Texas have introduced bills in the State Senate and House that are looking to require the state comptroller to establish a digital currency that is fully backed by gold and fully redeemable in cash or gold. If passed, the bill would also require the creation of a mechanism that would allow the new gold-backed digital currency to be used by citizens for their daily transactions. All gold reserves backing the digital currency would be held in a trust with the Texas Bullion Depository that is controlled by the comptroller or another entity appointed by the comptroller. There will be no limit on the amount of gold-backed digital currency that Texans can purchase, and they will be able to redeem the digital currency for gold or cash at any time.
Coalition of the willing - More than 40 states have joined together to launch the United States Blockchain Coalition (USBC), an organization intended to foster multistate collaboration and maintain American leadership in the fields of digital assets, Bitcoin, and distributed ledger technologies (DLT). The coalition will be led by representatives from Texas, Washington, California, Florida, Wyoming, and Pennsylvania. Notably, the Washington Technology Industry Association – the largest technology industry association in the U.S. – is one of the coalition’s founding members. Each USBC member will be responsible for cataloging use cases for blockchain employed in their region, providing education to policymakers, building relationships with regulatory bodies, and “proactively seeking out new partnerships with industry, government, academia, and investors” to help facilitate the growth of the industry across the U.S.
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Crypto regulation by enforcement is 'really, really bad,' says Binance CEO
Blockchain Association Doubles Down on Backing Tornado Cash in Lawsuit
SEC committee encourages 'aggressive enforcement' against crypto firms
ISSUE #38
7 April 2023
Market Overview
Altcoins were the main attraction over the past week as Bitcoin (BTC) continued to consolidate near support at $28,000 while countries around the world slowly start to de-dollarize. Many crypto proponents were encouraged by the revelation that the top crypto has actually been able to strengthen its position since March 14, when the U.S. government made the first sale of the BTC stash it acquired from the takedown of the Silk Road dark market.
Massachusetts Senator Elizabeth Warren launched her re-election campaign on a platform with the stated goal of creating an “anti-crypto army.” The move received a tremendous amount of blowback from the crypto community, who highlighted that the banking system poses a far greater risk to the financial health of citizens. On the opposite side of the spectrum, the indictment of former president Donald Trump led to a surge in the trading volume and floor price of his NFT collection.
Ethereum climbed to its highest price since last August on Wednesday, hitting a high of $1,940 as interest in the token has started to ramp up ahead of the Shanghai hard fork scheduled for April 12. Once the hard fork is integrated, Ether withdrawals from the Beacon Chain will be enabled for the first time since the proof-of-stake chain launched in December 2020. Liquid staking protocols, including Lido Dao and Rocket Pool, have also seen a boost in token prices as a result of the pending upgrade.
Bitcoin largely traded flat on the week following the end of the first quarter of 2023 which saw the king crypto increase by 74% to end the quarter at $28,400. Despite the ongoing crackdown on crypto banking services in the U.S., digital assets continue to gain favor in the eyes of investors who are slowly losing faith in the various fiat currencies of the world. The fact that MicroStrategy has once again started making Bitcoin purchases – bringing its total holdings to 140,000 BTC – has only served to further embolden crypto proponents to declare that the next bull market has begun.
At the time of writing, the total cryptocurrency market cap stands at $1.185 trillion, an increase of 0.8% over the past week. The DeFi market cap currently stands at $57.2 billion with a 24-hour trading volume of $3.98 billion, which is 11.1% of the total crypto market volume.
Crypto News
A tragic loss - The crypto community was in mourning on Wednesday after news broke that Bob Lee, the chief product officer for MobileCoin, former chief technology officer for Square and the creator of the popular mobile payment service Cash App, died after being stabbed in San Francisco on Tuesday. Despite the efforts of first responders who found Lee in the early AM hours on Tuesday and the medical personnel at the local hospital, Lee succumbed to his injuries. No arrests have been made at this time and the police have said the incident is under active investigation as a homicide. They have called for any witnesses to come forward to assist with their investigation.
DOGE days of Spring - Dogecoin (DOGE) price surged 36.5% on Monday to hit a high of $0.105 after the logo for the top meme coin replaced the Twitter blue bird logo for many users in what has been called a belated April Fool’s Day prank by Elon Musk. The tribute to the DOGE community came two days after Musk asked a U.S. judge to dismiss a $258 billion lawsuit filed by investors that alleged the Twitter owner was operating a pyramid scheme in his promotion of Dogecoin. The appearance of the DOGE logo drew mixed reactions from the crypto community, with some appreciating the move which falls in line with Musk’s sense of humor, while others saw it as a way for Musk to distract from the ongoing Twitter Blue controversy.
Paxempty - The rough year for peer-to-peer Bitcoin marketplaces continues as Paxful announced on Tuesday that it would be suspending its operations due to a variety of reasons, including regulatory challenges and a loss of key personnel. Paxful CEO Ray Youssef announced the suspension and said that the team is “not sure if it will come back.” In a bid to diminish any concerns about insolvency, Youssef reassured Paxful users that customer funds are all accounted for and that the Paxful Wallet will remain up for customers to retrieve their funds for an extended period of time.
And in the world of crypto adoption by banks…
Operation Facilitate - PostFinance, a retail bank fully owned by the Swiss government and one of Switzerland's largest retail banks, has announced a new partnership with Sygnum, the world’s first digital asset bank, to offer its customers access to a range of regulated digital asset banking services via Sygnum's B2B banking platform. Through the partnership, PostFinance will be able to offer bank-grade digital asset products and services to its customers, meaning they will be able to buy, store and sell several top-ranking cryptocurrencies, including Bitcoin (BTC) and Ethereum (ETH). Along with providing access to a range of cryptocurrencies, the partnership also offers bank users access to revenue-generating services such as staking on an ongoing basis.
Stable-Dol - BTG Pactual, the largest investment bank in Latin America, has announced the launch of its first stablecoin, BTG Dol, which is designed to maintain a 1:1 parity with the U.S. dollar and facilitate interactions between the traditional financial system and the growing digital economy. The new stablecoin was launched through Mynt, BTG Pactual’s crypto platform, and will be custodied by BTG Pactual. The bank will provide the security framework for BTG Dol, including due diligence, money laundering prevention, and compliance processes, and has also guaranteed the backing of the stablecoin and will manage its reserves. BTG Pacutal customers can now purchase the stablecoin through the BTG Pactual investment platform and on the Mynt app, with the minimum investment starting at R$100.
Climate awareness meets crypto - Crédit Agricole CIB, the corporate and investment banking arm of Credit Agricole Group, has partnered with Swedish bank SEB to develop “so|bond,” a sustainable and open platform for digital bonds built on blockchain technology. The new platform is designed to enable issuers in capital markets to issue digital bonds directly onto a blockchain network, helping to improve efficiency and enable real-time data synchronization across participants. The underlying blockchain network uses a “Proof of Climate awaReness” consensus mechanism to help participants minimize their environmental impact.
Related news
SEC Nears Settlement Agreement with Wahi Brothers in Coinbase Insider Trading Case
Ethereum price turns bullish ahead of next week’s Shanghai and Capella upgrades
MicroStrategy adds to massive bitcoin bet, takes total to 140,000 BTC
MEV Blocker Wants to Help You Outrun the Front-Runner
OpenSea Launches Platform Geared Toward ‘Pro’ NFT Collectors
Ditch the dollar movement grows as Moscow calls for the creation of a common BRICS currency
ISSUE #37
31 Mar 2023
Market Overview
Regulators and law enforcement officials had a busy week with crypto-related developments as Operation Chokepoint 2.0 remains in full effect while several of last year’s most prominent figureheads, Sam Bankman-Fried and Do Kwon, have seen their luck fade and the reality of justice begin to set in.
Late last week, TerraForm Labs founder Do Kwon – who was a fugitive on the run with a red notice issued by Interpol – finally ran out of luck as he was arrested at an Airport in Montenegro trying to board a plane with falsified passports. A battle is now underway by authorities in the U.S., South Korea and Montenegro as to who gets first dibs at Kwon, and when he could be extradited to face numerous charges related to the collapse of Terra/Luna.
Sam Bankman-Fried’s 2023 went from bad to worse as the Justice Department introduced a new charge to go along with the 12 that had already been revealed. A new superseding indictment filed on Tuesday alleges that SBF and other parties at FTX and Alameda used $40 million in Alameda funds to pay off officials in the Chinese government so they would release funds belonging to Alameda that were held on Chinese exchanges. SBF also had the terms of his bail modified so that he can only access a cell phone with basic calling and texting privileges and his internet use has been significantly limited and will be continuously monitored.
Bitcoin kicked off the week with a dip to $26,685 after the U.S. Commodity Futures Trading Commission (CFTC) revealed a lawsuit against Binance for illegally providing services to U.S. citizens, among other allegations. The top crypto traded sideways near support at $27,000 for a couple of days, before bulls managed to reestablish support above $28,000 on Thursday. There was no clear reason behind the rally, and many crypto traders remain hesitant to adopt a more bullish stance as long as BTC trades below $30,000.
At the time of writing, the total cryptocurrency market cap stands at $1.175 trillion, a decrease of 0.9% over the past week. The DeFi market cap currently stands at $55.5 billion with a 24-hour trading volume of $5.17 billion, which is 10.1% of the total crypto market volume.
Crypto News
Mystery NFT purchase - The rumors that Amazon is working on launching its own non-fungible token (NFT) marketplace received further validation after a CoinDesk employee received an email telling him that his order had been completed and his digital token is now in his gallery. This simple email was packed full of details, including the fact that Amazon will be supporting NFT technology, has a dedicated support team to help answer any questions, and will be allowing users to sign up as NFT creators and re-sellers. CoinDesk reported that the employee had not purchased any NFTs from Amazon and did not have any prior knowledge of the platform’s plans to integrate NFTs, so it's a mystery as to why he received this email in the first place.
Institutional crypto - Nasdaq Inc., the firm behind the Nasdaq stock market, has revealed that it plans to launch a custody service for digital assets by the end of the second quarter, giving hope to many crypto proponents who see it as a move by larger firms to step in and fill the void left by smaller crypto-supporting banks that have experienced difficulties. Nasdaq has applied with the New York Department of Financial Services for a limited-purpose trust company charter, which would oversee the new business that was originally announced in September. Ira Auerbach, senior vice president and head of Nasdaq Digital Assets, has said that the global exchange group is working to get all the necessary technical infrastructure and regulatory approvals in place so that it can launch its services in the near future.
Fed security - After having $3.3 billion of its USDC cash reserves temporarily inaccessible due to the collapse of Silicon Valley Bank (SVB), Circle has called for its cash reserves to be held with the Federal Reserve to help avoid such mishaps in the future. Amid the worry that USDC would go the route of TerraUSD and collapse, the stablecoin lost its peg as crypto traders dumped it en masse, at one point hitting a low of $0.82 on some exchanges. While USDC has since regained its peg and remains fully backed, Circle would prefer to have its cash reserves held directly by the Fed so as to avoid another SVB-type situation. All of the cash reserves are currently being held at one of the 30 globally systemically important banks (GSIB).
And in the world of government enforcement…
Last call for crypto services - Crypto-related businesses that had funds at the now-defunct Signature Bank have been given until April 5 to remove their funds and find another banking institution. Failure to do so will result in having their accounts closed by the Federal Deposit Insurance Corporation (FDIC), which will then mail a check covering any remaining balance. The FDIC is also looking to sell Signet, the real-time payments network for crypto companies once operated by Signature Bank. Signet has been under FDIC receivership since New York Community Bankcorp (NYCB) purchased the majority of Signature’s deposits and some of its loans earlier in March. It was widely reported at the time that the NYCB deal excluded roughly $4 billion in deposits from Signature’s digital-assets banking business, validating earlier reports that terminating crypto-related dealings was a contingency of Signature’s purchase.
Anon limited - Lawmakers in the European Parliament voted on Tuesday in favor of new anti-money laundering (AML) and terrorist financing regulations which seek to impose a $1,000 cap on transactions coming from unverified crypto wallets. If passed, the law will require entities such as banks, asset managers, real and virtual estate agents and high-level professional football clubs to verify their customers’ identity, what they own and who controls the company. The transaction limit is part of the EU’s overhaul of its AML regulations. As part of the overhaul, the Parliament also voted to create a new European Union Anti-Money Laundering Agency, the AMLA, which has been granted supervisory and investigative powers to ensure compliance with AML/CFT requirements.
Taking on the head honcho - Binance and its CEO Changpeng Zhao (CZ) have been sued by the U.S. Commodity Futures Trading Commission (CFTC) for allegedly breaking trading and derivatives rules and serving clients in the U.S. after it was instructed not to. The lawsuit was filed on Monday in a federal court in Chicago, with the CFTC accusing Binance of neglecting its obligations by not properly registering with the regulator. The CFTC has been investigating the exchange since 2021 on allegations that it has allowed U.S. residents to use the exchange to buy and sell crypto derivatives. Current laws require any entity offering such services to U.S. citizens to register with the CFTC. CZ has pushed back against the allegations made in the suit and said that the exchange looks forward to finding an amicable solution to the current situation.
Related news
U.S. and South Korea seek Do Kwon's extradition, but Montenegro charges come first
Mysterious entity may be collecting BTC users’ IP addresses — Bitcoin developer
US regulator sues Beaxy in expanded crypto crackdown, as platform shuts down
Bankman-Fried accused of bribing one or more Chinese officials with $40 million
Euler Exploiter Says ‘Sorry,’ Returns Stolen $177M
Elon Musk, Steve Wozniak Urge OpenAI to Halt ChatGPT Upgrades
ISSUE #36
24 Mar 2023
Market Overview
The crypto banking collapse has now been overshadowed by a systemic banking contagion as multiple financial institutions, including Credit Suisse, the second-largest bank in Switzerland, have either been bought out or are in dire straits as depositors seek a safe haven to store their wealth.
Last week’s moves by the U.S. government to put a halt to the bank crisis initiated by Silicon Valley Bank helped to calm the fears of many U.S. investors, but not before the contagion spread to Europe, resulting in a consolidation of Switzerland’s two largest banks. The country’s largest bank, UBS, finalized a deal to buy its distressed competitor for $3 billion Swiss Francs ($3.25 billion), a steal of a deal as the purchase price was 60% below what Credit Suisse was worth at the close of markets last Friday.
While the Federal Deposit Insurance Corporation (FDIC) denied reports that it made the purchase of Signature Bank’s assets contingent upon ceasing any crypto operations, it was announced on Monday that the bank’s deposits and loans have been sold to Flagstar Bank, a subsidiary of New York Community Bankcorp, but that its crypto-related deposits were not included as part of the deal. The FDIC said it “will provide these deposits directly to customers whose accounts are associated with the digital-asset banking businesses.”
South Korean police stated that cryptocurrency fugitive Do Kwon was arrested in Montenegro on Friday after picking up a suspect using a false name and fake documents. Do Kwon, the man behind the $40bn Luna crash, faces charges of securities fraud, wire fraud, commodities fraud and conspiracy. Officials are working on repatriating him to South Korea to be prosecuted.
After hitting a low of $24,777 last Friday, Bitcoin (BTC) steadily climbed in price throughout the week, hitting a high of $29,100 on Wednesday afternoon before an announcement from Federal Reserve Chair Jerome Powell sent a whipsaw wave across global financial markets. Despite falling in line with expectations, the 25 basis point hike and dovish comments from the central bank head sent markets plunging, with BTC briefly falling to a low of $26,781 before being bid back above support at $28,300.
At the time of writing, the total cryptocurrency market cap stands at $1.186 trillion, an increase of 8.43% over the past week. The DeFi market cap currently stands at $58.2 billion with a 24-hour trading volume of $4.35 billion, which is 7.81% of the total crypto market volume.
Crypto News
PS-NFT - Sony Interactive Entertainment, the Japanese entertainment giant and maker of the PlayStation gaming console, recently filed a patent application showing plans to integrate non-fungible tokens (NFT) into its gaming consoles. The patent – which was originally filed in September but only recently published to prevent Sony’s rivals from copying the idea before it was fully ready – allows for the transferring of digital assets between various devices and even other gaming platforms, such as Microsoft’s Xbox. In the text contained within the patent, Sony highlights the benefits that blockchain technology offers and notes that NTFs could represent artwork or an in-game asset, such as a character or weapon, but notes that “current systems are technologically inadequate for the owner to use the asset across different games and/or platforms.”
SWIFT workaround - As the world’s embroiled in a banking crisis, Xapo Bank, a leading Bitcoin custodian, has become the first licensed bank in the world to integrate the payment rails for Circle’s USDC stablecoin as an alternative to SWIFT. The private bank collaborated with Circle to complete the integration and is promising a 1:1 conversion rate from USDC to USD. All USDC deposits held at the bank will automatically be converted to USD, which means that depositors will be able to receive a 4.1% annual interest rate return on their deposits. While it's not protected by FDIC insurance, Xapo Bank is a member of the Gibraltar Deposit Guarantee Scheme (GDGS), which guarantees its members’ USD deposits up to $100,000 USD equivalent. It also differs from traditional banks in that it doesn’t issue loans, and therefore does not rely on fractional reserve banking as its core business model to make money.
Europe, here Circle comes! - In other news from Circle, as the U.S. government develops a more aggressive stance towards crypto firms, the stablecoin issuer has announced that it is looking to expand its operations to France and has applied to become a licensed Electronic Money Institution and a registered Digital Asset Service Provider (DASP) under the country’s strict financial regulations. Aside from USDC, Circle also issues a euro-based stablecoin, the Euro Coin (EUROC), and it is now looking to deepen its ties with the region by establishing a European base of operations. If Circle succeeds in gaining full approval from the Autorité des Marchés Financiers (AMF), it would become the first company to receive full authorization under the DASP regulations.
And in the World of Government Actions…
Digital dollar roadblock - Ron DeSantis, the Republican Governor of Florida who is expected to enter the 2024 Presidential race, has called for a ban on the creation of a central bank digital currency (CBDC) in the United States, also referred to as the digital dollar. At a press conference, DeSantis claimed that the creation of a digital dollar would grant “more power” to the government and give it “a direct view of all consumer activities. The presidential hopeful cited concerns over rising inflation in the U.S., increasing interest rates, and the recent pressure on banks as examples of how government policies have directly had a negative effect on U.S. consumers. The governor has introduced a new legislative proposal in Florida that is looking to protect consumers and businesses by “Expressly prohibiting the use of a federally adopted Central Bank Digital Currency as money within Florida’s Uniform Commercial Code (UCC).
NFTaxes - The U.S. Treasury Department and Internal Revenue Service (IRS) have issued new guidance on non-fungible tokens (NFTs) and are asking for feedback on their plan to tax them as a collectible under the current tax law. There have been numerous accusations of rampant wash trading and money laundering occurring via NFT markets, leading the industry to become a point of focus for global regulators looking to clamp down on illegal activities. U.S. regulators appear to be particularly concerned about the purchase of NFTs in retirement accounts and the dangers they pose to the long-term financial health of retirees. Until a clear regulatory framework is established in regard to NFTs, the IRS will use a “look-through analysis” to determine when an NFT is treated as a collectible.
Crypto bad, FedNow good - The Biden Administration released the latest “Economic Report of the President” on Monday, and for the first time, the report contained a dedicated section on digital assets – but had nothing positive to say about decentralized cryptocurrencies. After listing some of the benefits often claimed by crypto proponents - such as improving payment systems and increasing financial inclusion – the report said that “so far, crypto assets have brought none of these benefits,” while the “costs generated by several of their aspects are not only substantial but are also being accrued in the present.” Instead of a system based on cryptocurrencies, the government is recommending the use of the forthcoming FedNow payment system and eventually, the digital dollar.
Related News
National cash shortage forces Nigerians to use the eNaira for payments
Coinbase could face SEC enforcement action for 'potential violations of securities law'
Tron Founder Justin Sun Sued by U.S. SEC on Securities, Market Manipulation Charges
Telegram Announces USDT Stablecoin Payments on Tron Network
ConsenSys' MetaMask Institutional to add staking marketplace
Signature Bank's assets, minus the crypto, are now owned by Flagstar Bank
ISSUE #36
24 Mar 2023
Market Overview
The crypto banking collapse has now been overshadowed by a systemic banking contagion as multiple financial institutions, including Credit Suisse, the second-largest bank in Switzerland, have either been bought out or are in dire straits as depositors seek a safe haven to store their wealth.
Last week’s moves by the U.S. government to put a halt to the bank crisis initiated by Silicon Valley Bank helped to calm the fears of many U.S. investors, but not before the contagion spread to Europe, resulting in a consolidation of Switzerland’s two largest banks. The country’s largest bank, UBS, finalized a deal to buy its distressed competitor for $3 billion Swiss Francs ($3.25 billion), a steal of a deal as the purchase price was 60% below what Credit Suisse was worth at the close of markets last Friday.
While the Federal Deposit Insurance Corporation (FDIC) denied reports that it made the purchase of Signature Bank’s assets contingent upon ceasing any crypto operations, it was announced on Monday that the bank’s deposits and loans have been sold to Flagstar Bank, a subsidiary of New York Community Bankcorp, but that its crypto-related deposits were not included as part of the deal. The FDIC said it “will provide these deposits directly to customers whose accounts are associated with the digital-asset banking businesses.”
South Korean police stated that cryptocurrency fugitive Do Kwon was arrested in Montenegro on Friday after picking up a suspect using a false name and fake documents. Do Kwon, the man behind the $40bn Luna crash, faces charges of securities fraud, wire fraud, commodities fraud and conspiracy. Officials are working on repatriating him to South Korea to be prosecuted.
After hitting a low of $24,777 last Friday, Bitcoin (BTC) steadily climbed in price throughout the week, hitting a high of $29,100 on Wednesday afternoon before an announcement from Federal Reserve Chair Jerome Powell sent a whipsaw wave across global financial markets. Despite falling in line with expectations, the 25 basis point hike and dovish comments from the central bank head sent markets plunging, with BTC briefly falling to a low of $26,781 before being bid back above support at $28,300.
At the time of writing, the total cryptocurrency market cap stands at $1.186 trillion, an increase of 8.43% over the past week. The DeFi market cap currently stands at $58.2 billion with a 24-hour trading volume of $4.35 billion, which is 7.81% of the total crypto market volume.
Crypto News
PS-NFT - Sony Interactive Entertainment, the Japanese entertainment giant and maker of the PlayStation gaming console, recently filed a patent application showing plans to integrate non-fungible tokens (NFT) into its gaming consoles. The patent – which was originally filed in September but only recently published to prevent Sony’s rivals from copying the idea before it was fully ready – allows for the transferring of digital assets between various devices and even other gaming platforms, such as Microsoft’s Xbox. In the text contained within the patent, Sony highlights the benefits that blockchain technology offers and notes that NTFs could represent artwork or an in-game asset, such as a character or weapon, but notes that “current systems are technologically inadequate for the owner to use the asset across different games and/or platforms.”
SWIFT workaround - As the world’s embroiled in a banking crisis, Xapo Bank, a leading Bitcoin custodian, has become the first licensed bank in the world to integrate the payment rails for Circle’s USDC stablecoin as an alternative to SWIFT. The private bank collaborated with Circle to complete the integration and is promising a 1:1 conversion rate from USDC to USD. All USDC deposits held at the bank will automatically be converted to USD, which means that depositors will be able to receive a 4.1% annual interest rate return on their deposits. While it's not protected by FDIC insurance, Xapo Bank is a member of the Gibraltar Deposit Guarantee Scheme (GDGS), which guarantees its members’ USD deposits up to $100,000 USD equivalent. It also differs from traditional banks in that it doesn’t issue loans, and therefore does not rely on fractional reserve banking as its core business model to make money.
Europe, here Circle comes! - In other news from Circle, as the U.S. government develops a more aggressive stance towards crypto firms, the stablecoin issuer has announced that it is looking to expand its operations to France and has applied to become a licensed Electronic Money Institution and a registered Digital Asset Service Provider (DASP) under the country’s strict financial regulations. Aside from USDC, Circle also issues a euro-based stablecoin, the Euro Coin (EUROC), and it is now looking to deepen its ties with the region by establishing a European base of operations. If Circle succeeds in gaining full approval from the Autorité des Marchés Financiers (AMF), it would become the first company to receive full authorization under the DASP regulations.
And in the World of Government Actions…
Digital dollar roadblock - Ron DeSantis, the Republican Governor of Florida who is expected to enter the 2024 Presidential race, has called for a ban on the creation of a central bank digital currency (CBDC) in the United States, also referred to as the digital dollar. At a press conference, DeSantis claimed that the creation of a digital dollar would grant “more power” to the government and give it “a direct view of all consumer activities. The presidential hopeful cited concerns over rising inflation in the U.S., increasing interest rates, and the recent pressure on banks as examples of how government policies have directly had a negative effect on U.S. consumers. The governor has introduced a new legislative proposal in Florida that is looking to protect consumers and businesses by “Expressly prohibiting the use of a federally adopted Central Bank Digital Currency as money within Florida’s Uniform Commercial Code (UCC).
NFTaxes - The U.S. Treasury Department and Internal Revenue Service (IRS) have issued new guidance on non-fungible tokens (NFTs) and are asking for feedback on their plan to tax them as a collectible under the current tax law. There have been numerous accusations of rampant wash trading and money laundering occurring via NFT markets, leading the industry to become a point of focus for global regulators looking to clamp down on illegal activities. U.S. regulators appear to be particularly concerned about the purchase of NFTs in retirement accounts and the dangers they pose to the long-term financial health of retirees. Until a clear regulatory framework is established in regard to NFTs, the IRS will use a “look-through analysis” to determine when an NFT is treated as a collectible.
Crypto bad, FedNow good - The Biden Administration released the latest “Economic Report of the President” on Monday, and for the first time, the report contained a dedicated section on digital assets – but had nothing positive to say about decentralized cryptocurrencies. After listing some of the benefits often claimed by crypto proponents - such as improving payment systems and increasing financial inclusion – the report said that “so far, crypto assets have brought none of these benefits,” while the “costs generated by several of their aspects are not only substantial but are also being accrued in the present.” Instead of a system based on cryptocurrencies, the government is recommending the use of the forthcoming FedNow payment system and eventually, the digital dollar.
Related News
National cash shortage forces Nigerians to use the eNaira for payments
Coinbase could face SEC enforcement action for 'potential violations of securities law'
Tron Founder Justin Sun Sued by U.S. SEC on Securities, Market Manipulation Charges
Telegram Announces USDT Stablecoin Payments on Tron Network
ConsenSys' MetaMask Institutional to add staking marketplace
Signature Bank's assets, minus the crypto, are now owned by Flagstar Bank
