Around the block

Off the block

• A crypto winter became entrenched in the first half of 2022. Key crypto sectors fell over 70%. Even stablecoins were not left unscathed highlighted by the collapse of TerraUSD and Tether, the largest stablecoin, temporarily breaking its peg. Key catalysts behind the first half rout include:
  • Macroeconomic uncertainty with tightening financial conditions.
  • An equity bear market led lower by highly correlated technology shares.
  • Disruption in the DeFi (decentralized finance) sector spilling across the crypto ecosystem.
• The SEC rejected Grayscale’s bid to convert its Grayscale Bitcoin Trust into an ETF structure citing concerns for potential market manipulation and fraud. While not unexpected, this decision likely anchors the SEC’s opposition to spot-based ETF products without greater regulatory clarity from Congress. These regulatory efforts are likely to slow due to the congressional recess and mid-terms.

Industry developments

• Crypto miner Core Scientific highlights a list of crypto miners selling bitcoin to purchase equipment and pay down debt. 
• Big Four accounting firm, KPMG, opened a metaverse collaboration hub connecting its employees and clients with Web 3.0. 
• eBay acquired KnownOrigin, an NFT marketplace allowing artists and collectors to transact authenticated digital items.

Regulatory developments

• The SEC rejected Grayscale Bitcoin Trust’s proposed conversion to an ETF structure.
• A bi-partisan draft of the Responsible Financial Innovation Act was released addressing key regulatory priorities.
• The U.S. Treasury issued its framework for international engagement on digital asset oversight on July 7th.

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