What happened this week around blockchain and cryptocurrencies? The most relevant local and international events as well as appealing background reports in a pointed and compact weekly review.
Selected articles of the week:
In 2020, Germany included the custody of cryptocurrencies as a new financial service in the German Banking Act. Since then, companies have had to obtain explicit approval from the German Federal Financial Supervisory Authority (BaFin). Previously, BaFin had only issued seven such licenses to cryptocurrency exchanges and FinTech companies. This week, the first established financial institution followed suit: Commerzbank. With the crypto custody license, the bank is now allowed to develop a broad range of services. Similar to its German competitors and Swiss retail banks, the launch could take place in early 2024.
This week marked the seventh consecutive week of positive inflows into crypto investment products. This brings the total for the year to USD 1.14 billion. Most of the capital flowed into Bitcoin-linked products, but Ether (ETH) and Solana (SOL) in particular also benefited from the increased interest. Among the providers, the US ETF providers and the Swiss ETP issuer 21Shares recorded the largest increases. The last time there were comparable inflows was during the bull market in December 2021, which suggests considerable market interest.
The inflows into traditional crypto investment vehicles are particularly noticeable in the US. Exchange-traded funds (ETFs) based on futures are now available for the largest cryptocurrencies by market capitalization, Bitcoin and Ether. However, alternative digital assets are still difficult to access. When interest is high, investors therefore resort to suboptimal investment vehicles such as the investment trusts from the provider Grayscale. These have the disadvantage that, as closed-end funds, they cannot be redeemed for the underlying cryptocurrencies at any time. This can lead to a discrepancy between the trust price and the spot price. Some of the crypto trusts therefore achieved a premium of over 800% this week.
In the past, the SEC has cited insufficient sharing of surveillance data and the potential for manipulation as reasons for rejecting previously submitted applications for spot-based Bitcoin ETFs. Providers such as BlackRock have therefore entered into partnerships with the US crypto exchange Coinbase. Some observers see these as decisive for the upcoming approval of a spot fund. After all, a detailed look at the market data shows that Coinbase, as the largest US trading venue, fulfills all SEC requirements for a “significant market”.
In addition: One of China’s largest video game developers will acquire up to USD 100 million in Bitcoin (BTC) and Ether (ETH) over the next twelve months. In doing so, Hong Kong-based Boyaa Interactive wants to gain a foothold in the Web3 sector. After all, there are countless synergies between the gaming and blockchain worlds. On the one hand, Boyaa wants to take advantage of these by allocating capital to cryptocurrencies. On the other hand, the firm will also work on blockchain-based video games. The legal basis for the Web3 plans is provided by Hong Kong’s latest crypto push.