Highlights:
Traditional finance (TradFi) getting more involved
TradFi firms made fresh commitments to digital assets in the areas of custody, exchanges and product development. Deutsche Bank applied to BaFin (Germany’s financial regulator) for their crypto custody license. Blackrock applied to the SEC for a spot bitcoin ETF with a surveillance sharing arrangement (SSA) to appease the SEC. Finally, the launch of a new non-custodial institutional cryptocurrency exchange (EDX) was funded in part by Fidelity, Schwab and Citadel Securities to trade in four of the most liquid tokens.
Fed Chair Powell crypto comments to Congress
Fed Chair Jerome Powell testified to Congress that “crypto appears to have staying power as an asset class”. Additionally, he stated, “We do see payment stablecoins as a form of money” and clarified that “it would be appropriate to have quite a robust role in what happens to stablecoins going forward”. Crypto markets interpreted his comments as validation.
SEC vs Ripple Labs (XRP) ruling
In 2020, the SEC sued Ripple Labs, a crypto payments firm focusing on cross-border payments, alleging it violated securities laws by issuing its XRP cryptocurrency as a non-registered security. The Southern District Court of New York ruled that Ripple did not violate federal securities laws by selling on public exchanges but did violate laws by selling to sophisticated buyers in private markets. This is a win for the crypto industry, with other cases such as SEC vs Coinbase waiting in the wings.
Chart of the month – Focus on stablecoins
Stablecoin values are typically pegged to an underlying asset such as a fiat currency, like the dollar, and collateralized by an underlying portfolio of short-term fixed income securities such as Treasury bills. Their primary use case is as a medium of exchange accounting for 80% of trade volume on centralized crypto exchanges.
- Tether (USDT) is the largest stablecoin valued at $83 billion or 67% of the stablecoin sector.
- USD Coin (USDC), the second largest stablecoin has seen its market cap cut in half due as investors fled once it was learned USDC had $3 billion on deposit with failed Silicon Valley Bank.
- Stablecoins have become a regulatory flashpoint with proof of reserves and regulatory oversight a primary focus.
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