Nickel Research Centre

Nickel News Roundup - Week 23

9th June, 2022 

Market Overview:

Digital assets had another week of stable performance, as Bitcoin continued to fluctuate around the $30,000 mark.

  • Bitcoin experienced some minor volatility this week, with sharp rises and falls above and below $30,000 on several occasions, for a high of $31,670 on Monday, followed by a low of $29,350 on Tuesday
  • Bitcoin traded predominantly in the $29,760 to $30,340 range, and on Sunday snapped its record 9 week losing streak, by painting its first green candle since March
  • Bitcoin’s current price of $30,320 is broadly in line with last week’s performance
  • Ether again trailed Bitcoin, trading mainly between $1,760 and $1,830, with a weekly high of $1,915 and a low of $1,732
  • Ether’s current $1,802 price is down slightly from last week
  • Overall market capitalisation remained virtually unchanged, growing by around $10bn to $1.24tn
  • Total value locked in DeFi experienced a drop to $49.1bn according to industry monitor DeFi Pulse

Digital assets once again traded in relatively narrow ranges, but scope for optimism remains broad. Some of the world’s leading financial institutions are collaborating on a new digital asset exchange, a bipartisan effort brought forth “the most comprehensive piece of crypto legislation to date” in the US, Japan sought to liberalise its crypto asset listing processes, and several more nine-figure funds joined the fray as the industry continues to attract great investment interest. 


What happened: Citadel, Fidelity, Schwab reportedly developing digital asset exchange

How is this significant?
  • According to sources speaking to Bloomberg this week, Ken Griffin’s Citadel Securities are currently in the process of building a digital asset exchange, in conjunction with Virtu Financial Inc., as well as previous Citadel Securities investors Sequoia Capital and Paradigm
  • Other parties assisting the market makers include Fidelity Investments and Charles Schwab corp., indicating continued interest in the sector from Wall Street institutions despite the current market downturn
  • Although Citadel officials refused to comment, sources told Bloomberg that the platform could be ready by the end of the year
  • A source told industry publication Coindesk that additional institutions could join, with the goal of creating massive liquidity for institutional trading; “This marketplace is intended to create more efficient access to deep pools of liquidity for digital assets. So a group of industry leaders are working closely together to facilitate the safe, clean, compliant and secure trading of digital assets”
  • A spokesperson for Charles Schwab said they have “made a minority, passive strategic investment in a new digital asset venture… We know there is significant interest in this cryptocurrency space and we will look to invest in firms and technologies working to offer access with a strong regulatory focus and in a secure environment”
  • Schwab CEO Walt Bettinger had previously stated “there’s a tremendous void in that [digital asset] space for a firm like Schwab”, and the company spokesperson confirmed they “will consider introducing direct access to cryptocurrencies when there is further regulatory clarity”
  • In other Citadel news, the firm declared willingness for market-making on digital asset ETFs if they gain regulatory approval in the United States, saying “We will be ready if and when those products are approved, but we are taking a measured approach” and “We get a huge volume of calls about spot Bitcoin ETFs, but they are all from prospective issuers… The calls are not coming from clients”

What happened: Bipartisan draft bill on US crypto asset regulation is published

How is this significant?
  • As regulatory uncertainty remains an issue in the digital asset industry, a long-awaited bipartisan bill regarding crypto regulation was finally published this week; the Responsible Financial Innovation Act
  • Co-authored by Republican senator Cynthia Lumis and Democrat Kirsten Gillibrand, the bill has been dubbed “the most comprehensive piece of crypto legislation to date”, and comes at the end of a long consultation process
  • Rather than seeking to crush crypto, it stresses the need to “encourage innovation in the digital assets markets and protect consumers through thoughtful regulation”, due to a belief that “it is absolutely critical that the U.S. plays a leading role in this new frontier”
  • A key aspect of the bill is the proposal that regulatory purview belong to the CFTC, rather than the SEC, stating that many major digital assets are commodities or “ancillary assets” rather than securities; “Digital assets that meet the definition of a commodity, such as bitcoin or ether, which comprise more than half of digital asset market capitalization, will be regulated by the CFTC”
  • This would include regulatory oversight of spot trading markets in digital assets
  • Digital asset firms regulated by the CFTC would effectively pay fees to fund the agency
  • Other headline notes were tax exemption on small-scale purchases, commissioning a study for energy consumption by the industry, and specific federal laws for stablecoins (requiring them to be 100% reserve-backed, rather than algorithmically-issued like the recent collapsed Terra USD coin)
  • Additionally, the bill suggests the creation of an industry sandbox for theoretical testing of new innovations, and proposed a study for the creation of a self-regulatory body
  • As an expansive bill (weighing in at 69 pages)—and with the US facing mid-term elections in November—there remains the possibility that its final form may not be voted on until 2023
  • Reaction from within the digital asset industry was broadly positive, particularly in relation to the CFTC
  • On Wednesday, Senator Lummis affirmed her long-term belief in the power of digital assets, tweeting “I don’t want to understate how tough the road is ahead for our bill but I do agree that… America has crossed the ‘chasm’ of ‘is this real’ (yes) and ‘will it be banned’ (no). The questions/challenges are different now”
  • In other regulation news, digital asset executives are now one of the largest sources of political donations in the United States, with $26m from 2021 up to Q1 2022; “outpacing spending by internet giants, drug makers and the defence industry”
  • FTX exchange CEO Sam Bankman-Fried was identified as the largest single political donor after George Soros, personally donating $16m in April alone
  • Political consultant Eric Soufer told Bloomberg “The industry has been under so much scrutiny and early next year stands to be a real inflection point in Washington… It’s possible you’ll see a historic investment in this election season”

What happened: Japanese digital asset exchanges may loosen listing requirements

How is this significant?
  • Japan—regarded as one of the most stringent markets for the listing of new tokens—may be easing up the process of new projects being listed on digital asset exchanges, according to reports this week
  • Currently, the Japan Virtual and Crypto assets Exchange Association (aka JVCEA—a self-regulatory industry body) undertakes an exhaustive screening for any new digital assets applying to be traded on the country’s exchanges
  • Currently, US-based Coinbase lists over 100 different crypto assets on its platform, whereas one of Japan’s largest exchanges, GMO Coin Inc., lists only around 20
  • The proposed liberalisation of the country’s digital asset sector would involve regulators policing tokens after listing, with penalties such as delisting and banning from exchanges
  • The JVCEA could enact these policy changes by the end of the year, following criticism from Japanese Prime Minister Fumio Kishida that “the certified self-regulatory organization tends to spend a long-time pre-screening… [it should] ease the criteria while being mindful of the need to protect users”
  • Additionally, the upper house of Japanese parliament passed a law this week clarifying the legal status of stablecoins, ruling them as equivalent to digital money

What happened: Ledger team with Cathay Innovation for $110m Web3 VC fund

How is this significant?
  • Another new nine-figure digital asset venture capital fund launched this week, as hardware wallet manufacturers Ledger partnered with $1.5bn VC firm Cathay Innovation
  • Ledger Cathay Capital will take an investment approach of investing “in seed to Series A companies across a broad variety of segments across the crypto landscape, including emerging DeFi, security and infrastructure”, according to Cathay co-founder David Barrier
  • Cathay had previously been an investor in Ledger for the last five years, helping the French firm to cement their place as the world’s leading manufacturer of hardware wallets—physical devices intended to safeguard a user’s digital assets by preventing the private keys securing an account from being visible online
  • Ledger CEO Pascal Gauthier said the company had been an active investor in the sector for some time, but was formalising structure and processes more with the new partnership; “We invested from the balance sheet because the pressure from our partners was too high, so we had to start somewhere. Now, we are putting some structure around what we were doing, very naturally and very quickly … but we’ve been in the market for some time”
  • Investors in the new fund include Bpifrance; France’s public investment bank

What happened: Solana launches $100m Korea-exclusive investment fund

How is this significant?
  • Solana—a top 10 digital asset by market capitalisation, and one of the leading smart contract platforms—announced a new $100m investment and grant fund this week, limited entirely to South Korean digital asset startups and Web3 firms
  • Some industry commentators noted the timing of the launch, coming soon after the collapse of the Terra ecosystem—created by South Korean Do Kwon—created a funding and infrastructure gap in the local Web3 ecosystem
  • Co-funded by Solana Ventures and the Solana Foundation, a key focus of the fund is to leverage South Korea’s appetite for video games in order to generate long-term returns; “A big portion of Korea’s gaming industry is moving into web3… We want to be flexible; there’s a wide range of project sizes, team sizes, so some of [our investments] will be venture-sized checks”
  • Solana Labs general manager Johnny Lee believes the blockchain gaming industry is still at its nascent stages, and that as more game designers and developers are incentivised to join, gameplay will improve, and gamers will invest time and money, leading to a positive feedback loop
  • Lee said that blockchain games could become the industry-leading means of gaming monetisation within the decade; “Free-to-play adoption probably took eight years, so if we say it’ll take four years for web3 games to be the dominant revenue model, I’m pretty comfortable with that”

What happened: Sources report SEC investigation over Binance’s BNB token

How is this significant?
  • On Monday, Bloomberg reported from “people familiar with the matter” that the SEC has launched an investigation into digital asset exchange Binance, regarding whether or not its initial sale of the platform’s proprietary BNB tokens was an unlicensed security
  • The “Initial Coin Offering” occurred back in 2017, helping to fund the exchange launch, with ownership of the BNB token entitling users of the exchange to lower transaction fees, and subsequently participation in a variety of additional products and services
  • Due to the growth of Binance as a digital asset exchange, BNB is currently the fifth-most valuable digital asset by overall market capitalisation
  • In a statement, Binance said “it would not be appropriate for us to comment on our ongoing conversations with regulators, which include education, assistance, and voluntary responses to information requests….we will continue to meet all requirements set by regulators”
  • The SEC refused to comment when contacted by Bloomberg, but if legal action is taken this would represent the most significant project targeted since the Commission’s ongoing litigation against Ripple, issuers of the XRP digital asset

What happened: Grayscale hires former Obama lawyer in continued push towards ETF

How is this significant?
  • Grayscale have been one of the most vocal and avid applicants and advocates for a spot Bitcoin ETF in the United States, seeking to convert their existing $20bn Bitcoin trust into a physically-backed ETF
  • Now, the company has intensified the legal assistance at its disposal towards this goal, hiring former US solicitor general Donald Verrilli
  • CEO Michael Sonnenschein previously stated that “all options are on the table”—including litigation—if the SEC denies their ETF application as it has done to all previous applicants
  • Grayscale believes that conversion of their GBTC fund into an ETF could potentially unlock $8bn in value for investors
  • Grayscale Chief Legal Officer Craig Salm welcomed the new hire, stating “In the name of being prepared for all possible outcomes, if one option is potentially bringing a lawsuit against the SEC, well what better person to have as a legal strategist than somebody who has represented the US government?”, adding that Verilli “has really strong background experience, especially in cases involving the Administrative Procedure Act”

What happened: PayPal boosts in-app digital asset functionality

How is this significant?
  • PayPal made several moves forward in the digital asset space this week, including the addition of functionality that finally allows customers to withdraw their digital assets from the PayPal app to other digital wallets
  • Customers will also be able to transfer crypto assets to friends and families on PayPal with no network fees, and transfer digital assets into their PayPal account (previously they had to be purchased on the PayPal platform)
  • Jose Fernandez da Ponte, PayPal’s SVP and General Manager of crypto stated “Allowing PayPal customers the flexibility to move their crypto assets (Bitcoin, Ethereum, Bitcoin Cash, or Litecoin) into, outside of, and within our PayPal platform reflects the continuing evolution of our best-in-class platform and enables customers to interact with the broader crypto ecosystem. Customers who transfer their crypto into PayPal can extend the utility of their crypto by spending using our Checkout with Crypto product at millions of merchants”
  • Additionally, the company became the first to have a conditional Bitlicence upgraded into a full Bitlicence by the New York Department of Financial Services (NYDFS), providing them full access to customers and businesses in New York
News Roundups