Welcome to the latest edition of our Market Roundup, where we cover the highlights of the past week in the rapidly evolving world of blockchain and decentralized technologies.
The week’s price movements were turbulent. A market-wide selloff happened at the start of the week, when the United States Securities and Exchange Commission (SEC) took aim at Binance and filed a lawsuit against the exchange. This was followed up by a second lawsuit targeting Coinbase.
(as of 1:30 AM UTC, June 9, 2023)
These were significant developments that led Bitcoin and Ethereum to both dip by more than 5% after the news broke, with Bitcoin reaching its lowest point since March. Most tokens’ prices recovered partially two days later.
These lawsuits may have a long-lasting impact. If the SEC prevails, the crypto sector will be transformed, even though the commission’s jurisdiction is limited to within the US. It isn’t clear how long it will take for the lawsuits to reach their conclusions.
While it may feel like the SEC is taking on the entire crypto industry, this hasn’t impacted the confidence of some investors. Cathie Wood’s ARK Invest seized the opportunity to scoop up US$21.6 million worth of Coinbase shares as the SEC’s lawsuit sent the company’s stock down by more than 19%.
There will likely be even more swings as the lawsuits develop. Be sure to familiarize yourself with the different trading styles of crypto investors, and keep an eye on our weekly news roundup for updates.
- Ahead of Apple’s release of the Vision Pro headset at the company’s annual Worldwide Developers Conference, the prices of tokens associated with virtual reality surged. Decentraland (MANA), which has a market capitalization just under US$1 billion, was up by 5.4% as the week started, even while the broader market was in the red. Another notable token, Wilder World (WILD), gained nearly 19%. On Monday, US$905 million in trading volume was registered for metaverse tokens, a slight reversal of the downturn within this category since the tokens hit their all-time highs.
- Chainlink (LINK) is providing connectivity for a series of experiments being conducted by SWIFT to find out how financial institutions can interoperate with blockchain networks. Chainlink will function as an abstraction layer between the SWIFT network and Ethereum’s Sepolia network, and its Cross-Chain Interoperability Protocol (CCIP) will connect source and destination blockchains for asset transfers.
- A study commissioned by the European Parliament has found that the Markets in Crypto Assets (MiCA) policy package, recently signed into law by the European Union, has several areas where it falls short in regulating the crypto industry. The study, authored by legal and financial experts, highlights gaps in token classification, staking, and non-fungible tokens (NFTs), among other areas. Specifically, it points out that MiCA fails to adequately consider the nuances of different decentralized finance (DeFi) protocols and their levels of decentralization. The report suggests that the EU should consider the US Howey Test for token classification, particularly in relation to lending and staking protocols. Despite these shortcomings, industry members and lawmakers acknowledge that MiCA is a positive step forward for Europe. The EU Parliament voted overwhelmingly in favor of passing MiCA with 517 votes in favor and 38 against during an April vote.
- Swiss fintech company Taurus has partnered with Polygon, a proof-of-stake blockchain network, to tokenize traditional financial instruments such as equity and debt. The integration with Polygon allows Taurus to offer its banking, consumer goods, and sports and entertainment clients the benefits of low fees and faster transactions for tokenization use cases. As transaction fees on Ethereum’s main blockchain can spike during periods of high demand, Polygon provides a more cost-effective alternative with quick settlement speeds. Taurus reports that many tier-1 financial institutions are interested in issuing tokenized securities, and the partnership with Polygon creates a foundation for robust opportunities in the tokenization space. Tokenized securities have gained traction, attracting the attention of prominent figures like Michael Saylor, who suggested tokenizing stocks and ETFs to enable personal custody.
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- JPMorgan Chase & Co has partnered with six Indian banks, including HDFC Bank, ICICI Bank, Axis Bank, Yes Bank, IndusInd Bank, and its own banking unit at Gujarat International Finance Tec-City (GIFT City), to introduce a blockchain-based platform for settling interbank dollar transactions in India’s newest international financial hub. The pilot project will run for several months to assess the banks’ experience. This initiative aims to bolster GIFT City’s positioning as an alternative trading center to Singapore and Dubai. The real-time blockchain system will enable round-the-clock settlement, removing delays caused by traditional systems that operate within specific hours and days. JPMorgan’s blockchain platform, Onyx, which was established in 2020, will be utilized for the project.
- MUFG, Japan’s largest bank, has announced plans to issue bank-backed stablecoins on public blockchains using its Progmat Coin solution. The stablecoin issuance will be conducted on multiple blockchains, including Ethereum, Avalanche, Cosmos, and Polygon. MUFG is working with blockchain interoperability startup DataChain and cross-chain bridge solution TOKI to support cross-chain swaps, payments, and lending. The Progmat platform also supports security and utility tokens, and it is evolving into a joint venture with backing from JPX, Mizuho, SMBC, SBI, and others. While the solution appears to focus on the Japanese market, the timeframe for launch and customer compliance requirements for holding stablecoins are not confirmed. Société Générale and BTG Pactual have previously issued stablecoins on public blockchains.
- The Reserve Bank of Australia (RBA) has submitted its views on a digital assets bill, emphasizing the potential role of stablecoins in the financial system. While stablecoin activity is currently limited, the RBA believes there is potential for these digital currencies to play a more significant role in the future. The bank supports the development of regulatory frameworks for stablecoins to encourage innovation while protecting investors and users. The RBA also mentioned its engagement in research on central bank digital currencies (CBDCs) but clarified that no decision has been made regarding a digital Australian dollar. Additionally, the RBA highlighted the possibility of CBDCs being used by non-residents and outside the issuing jurisdiction. The bank’s submission also touched upon the importance of gathering comprehensive data on Australians’ use of foreign CBDCs, particularly if provided by entities other than banks or credit unions. While the RBA remains neutral, it acknowledges the global interest among advanced economies in digitally issued government currencies, as evidenced by the collaboration of several central banks on a CBDC research paper.
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