Crypto Legislation, Enforcement Highlights Busy Autumn for Financial Supervision; Bitcoin holds steady above $19K
Good morning. Here’s what happens:
Prices: Bitcoin held its latest perch above $19,000, despite the latest hawkish comments from Federal Reserve officials.
Insight: Financial regulators in Asia face a fall season of crypto reckoning.
Watch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter that puts the latest moves in crypto markets into context.
Prices
●Bitcoin (BTC): $19,375 +0.8%
●Ether (ETH): $1638 +0.8%
●S&P 500 daily close: 4,006.18 +0.7%
●Gold: $1,729 per troy ounce +1.2%
●Ten-year Treasury yield daily close: 3.29% +0.03
Bitcoin, Ether and Gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the spot price for COMEX. Information on CoinDesk indices can be found at coindesk.com/indices.
Bitcoin Holds Firm Above $19K
By James Rubin
Bitcoin spent a second day in a row anchored above its recent $19,000 support line.
The largest cryptocurrency by market capitalization recently traded above $19,350, nearly a percentage point higher than where it stood 24 hours ago as investors weighed the latest hawkish comments from US Federal Reserve officials. With only a couple of blips, bitcoin has spent much of the past two weeks hovering above $19,000.
Ether, the second largest crypto by market cap and token of the Ethereum blockchain, recently changed hands above $1,600, up 0.8% from a day earlier. Ethereum’s Merge, which will shift the protocol from proof-of-work to a more energy-efficient proof-of-stake protocol and has excited investors, is about a week away.
Other major altcoins spent much of the day in the green with LINK and SOL recently up more than 8% and 5%, respectively.
Crypto prices followed a recent trend in tracking stocks, which closed higher on Thursday. The tech-heavy Nasdaq, the S&P 500, which has a large technology component, and the Dow Jones Industrial Average (DJIA) all climbed more than half a percentage point as markets seemed untroubled by the latest remarks from Fed Chairman Jerome Powell, who reiterated the bank’s commitment to tame inflation on Thursday at an event hosted by the libertarian think tank, the Cato Institute. “History strongly cautions against loosening policy prematurely,” Powell said.
The release next week of the latest consumer price index (CPI) will show whether the Fed has made progress in the fight against inflation, although most monetary policy observers expect the bank to raise interest rates by a robust 75 basis points for the third time in a row. Faced with high rates across the continent, the European Central Bank raised interest rates on Thursday, the first increase since it began setting monetary policy in 1999.
In a bad news, good news data point, mortgage rates rose to their highest level in nearly 14 years, the latest sign of the kind of cooling economy the Fed is looking for. The 30-year fixed mortgage rate is now approaching 6%, roughly double what it was a year ago, a weekly report from mortgage provider Freddie Mac showed.
In crypto news, Powell reiterated his stance that the Fed does not want to disrupt crypto innovation, but that regulation is important. Powell emphasized the need for proper regulation of stablecoins if these are to have the characteristics of money such as clarity, transparency and full reserves. “I don’t think you want to take money and turn it into another consumer product where sometimes it fails and sometimes it’s good,” he said.
In an interview with CoinDesk TV’s First Mover program, Andre Portilho, head of digital assets at Brazilian financial services firm BTG Pactual, also highlighted the need for smart rules. “Regulation needs to evolve,” Portilho said, referring to comments by SEC Chairman Gary Gensler that appeared earlier on the program. He added: “We actually need better regulation and more modern regulation to get the technology benefits and gains [to] come to market.
Biggest winners
Biggest losers
Insight
A fall season of cryptocurrency in Asia?
By Sam Reynolds
This summer was a busy one for the enforcement arm of the US Securities and Exchange Commission (SEC), as it pursued four crypto-related cases that ranged from insider trading at Coinbase, to crypto-related Ponzi schemes, and the all-time classic. ‘sells unregistered securities.
In Asia, regulators are preparing for an equally busy autumn with everything from legislation to enforcement measures on the table.
Korea
The crypto industry likes to think of itself as “everywhere but nowhere.” Register in a friendly jurisdiction and provide service through the world wide web is the prevailing mantra.
But South Korean authorities don’t like the idea. The Korea Financial Intelligence Unit (KoFIU) has targeted 16 crypto exchanges for conducting “illegal business activities” by operating in Korea without a proper VASP (Virtual Asset Service Provider) license.
It is yet to be seen what the Korean authorities will do about this. Regulators in Ontario faced a similar situation with KuCoin, which was accused by the OSC of selling unregistered securities to residents of the province.
Seychelles-registered KuCoin is said to have been uncooperative with the investigation, questioning the regulator’s authority over them and completely ghosting them. Time will tell if they do the same with Korean authorities. Meanwhile, South Korea’s Financial Services Commission (FSC), the parent organization of KoFIU, wants crypto legislation to be fast-tracked through the country’s National Assembly to give it a post-Terra toolkit to manage the crypto landscape.
There are 13 proposals for new crypto legislation pending, CoinDesk previously reported, including the country’s upcoming digital asset framework, the Digital Asset Basic Act.
Thailand
Thailand is not considered a traditional financial hub in Asia, but its banks and trading community have enthusiastically embraced crypto. Siam Commercial Bank, for example, has a blockchain fund of $50 million and at the beginning of 2022 used Compound to generate returns.
And for a non-financial hub, that name isn’t exactly associated with good governance. The regulator has been proactive in creating a rules-based crypto market that wants to protect consumers. Last year, the regulator banned NFTs and meme tokens from local exchanges as they have “no clear goals or substance.”
Now, the central bank, in partnership with the SEC, is set to get a full regulatory toolkit as lawmakers prepare to debate a crypto framework in the country’s parliament.
It should be noted that the Thai authorities are not trying to ban retail trading of crypto. Thai SEC Secretary General Ruenvadee Suwanmongkol has been quoted as saying that the commission’s mandate is to “provide more protection for small investors, some of whom put most of their savings in these assets.”
This is a far cry from Singapore’s approach, which is an outright ban (although officials say it is unrealistic to enforce such a ban). For example, while Thailand regulates retail-focused crypto advertising to ensure risk disclosures are present and the numbers in the ads are accurate, Singapore bans it entirely.
Thailand’s regulators will have a complicated case in the coming weeks over Zipmex, a Thai-based but Singapore-registered exchange that had to temporarily suspend withdrawals earlier this year because of debt exposure that soured during the broader market downturn.
Thailand’s SEC wants the police to force Zipmex to hand over important documents. But Zipmex says those documents are contained in the Singapore unit, which is not under the jurisdiction of Thai authorities.
Another case of crypto companies wanting to be everywhere but nowhere.
Singapore
Singapore is the de-facto crypto hub in Asia, but regulators in the country are not too comfortable with the term.
They would much rather it be the region’s digital asset hub, a term that encompasses crypto but also includes digitized financial products such as security token offerings (STOs). Institutional crypto is fine, but retail is a hard no.
“Yes to digital asset innovation, no to cryptocurrency speculation,” is how the director of the Monetary Authority of Singapore put it in a recent speech.
Perhaps part of the hostility regulators have towards crypto is that, as a hub, Singapore’s institutions have to work through crypto’s biggest problems. Singapore’s legal system is tasked with helping to clean up the mess left by Three Arrows Capital. Many of the world’s Web3 projects are registered in Singapore, despite their presence in the city being little more than a mailbox or a rented desk in a workplace. Terraform Labs comes to mind, as does Three Arrows Capital.
As a result, stricter regulations are coming. The Monetary Authority of Singapore is trying to do a voluntary audit of crypto firms that have a digital payment license to determine their exposure to other firms, especially with lending and borrowing.
The exact details of Singapore’s new crypto legislation are expected in the fall, likely around the time of the city’s Token2049 crypto conference.
If there’s any clue as to what that might entail, look at a recent quote from Ravi Menon, chief executive of the Monetary Authority of Singapore.
“Cryptocurrencies have taken on a life of their own outside of the distributed ledger, and this is the source of the crypto world’s problems,” he said during a recent speech.
Important events
Practicing Law Institute: SEC Talks in 2022
09:30 HKT/SGT(01:30 UTC): China’s Consumer Price Index (month. August/year)
CoinDesk TV
In case you missed it, here’s the latest episode of “First Mover” on CoinDesk TV:
Gensler tells CoinDesk: “Very few” tokens are not securities, platforms have an obligation to register
Speaking to CoinDesk’s Nikhilesh De about crypto regulation, SEC Chairman Gary Gensler emphasized that most cryptocurrencies are securities and that crypto service providers, including exchanges, have an obligation to register. Andre Portilho of BTG Pactual also joined the program with his crypto market analysis and an update on inflation and crypto adoption in South America.
Headings
Crypto Influencer Cooper Turley Creates $10 Million ‘Coop Records’ Music Startup Fund: The FWB co-founder’s latest creation will function as an incubator, venture capital firm and record label all rolled into one.
Celsius, Creditors Agree to Independent Government Inquiry, Call for Limited Scope: The U.S. trustee’s office asked for an independent examiner last month.
Three senior executives jump from BlockFi ahead of FTX acquisition: Sources: BlockFi’s global head of institutional distribution David Olsson, head of private clients Samia Bayou and senior director of institutional sales Shane O’Callaghan are leaving the company, according to people familiar with the matter.
Celsius Crypto Borrowers Ask for Bankruptcy Trustee, Oppose US DOJ Move to Appoint Investigators: While a bankruptcy court should appoint an independent examiner to examine Celsius’ finances, the examiner should not work for the U.S. Trustee’s office, a group of Celsius borrowers said.
Crypto Engineers, Investors Sue US Treasury Over Tornado Cash Sanctions: Treasury’s sanctions watchdog, OFAC, overstepped its authority in blacklisting smart contract wallets, plaintiffs allege in a new lawsuit.
