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:
Binance entered the crypto exchange landscape historically late. Founded in 2017, the new trading platform faced tough competition. By cleverly utilizing international grey areas in crypto regulation, Binance nonetheless gained an advantage. The platform operated without a fixed headquarters, had low KYC requirements and also allowed US users to trade. As a result, Binance surpassed other crypto exchanges that placed a stronger focus on regulation. However, such regulatory arbitrage is a double-edged sword. Last year, both the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) filed lawsuits against the crypto exchange. The US Department of Justice also investigated sanctions violations in connection with customers from Russia, Iran and members of Hamas. With a settlement of USD 4.3 billion and a possible prison sentence for founder Changpeng Zhao (“CZ”), at least the criminal proceedings by the public prosecutor’s office should now be off the table. This paves the way for Binance to continue operating as a regulated trading venue. The fine is little more than a slap on the wrist and the corresponding amount of Tether (USDT) has already been converted into fiat money, according to blockchain analyses. Richard Teng will serve as the new CEO. Prior to his role at Binance, Teng was Managing Director of the Abu Dhabi Global Market (ADGM), Chief Regulatory Officer of the Singapore Exchange (SGX) and Director of Corporate Finance at the Monetary Authority of Singapore (MAS).
The US Department of Justice is demanding more than 4 billion US dollars from Binance to settle a multi-year criminal case.
The SEC’s crusade against the crypto industry continues. Six months ago, the US Securities and Exchange Commission sued one of the largest and most heavily regulated crypto exchanges – Kraken – for offering a staking service. According to the SEC, these offerings constitute investment contracts under US securities law and would have to be registered as such. While competitor Coinbase took the same allegations to court, Kraken agreed to pay a fine of USD 30 million. Apparently, this was not enough for the SEC. This week, the next lawsuit followed for the illegal operation of an exchange, a broker, a trader and a clearing house. The entire argument is once again based on the questionable core idea of the supervisory authority that almost all cryptocurrencies should be classified as unregistered securities. According to public statements, Kraken is now preparing for a legal fight.
In a recent development, the Securities and Exchange Commission (SEC) has once again taken legal action against cryptocurrency exchange Kraken.
In Switzerland, regulators and decision-makers of the financial world are taking a more progressive approach to digital assets. Since 2021, even tokenization – the representation of a traditional asset on the blockchain – has been a legally regulated practice. The Swiss National Bank (SNB), in collaboration with the leading big banks, is taking advantage of this in the latest pilot project for a central bank digital currency (CBDC). “Project Helvetia III” is the first to test the use of a real e-franc in the form of a wholesale CBDC (wCBDC) for processing digital securities transactions. As part of the projekt, the cantons of Basel and Zurich issued their own digital bonds on the regulated digital exchange of SIX. These will be tradable with the SNB’s CBDC franc starting on December 1st.
The canton of Zurich has issued its first bond that can be settled with digital central bank currency (CBDC) through the SIX Digital Exchange (SDX). The issuance is part of the Swiss National Bank’s (SNB) Wholesale CBDC pilot project.
Argentina elected a new president over the past weekend. The self-proclaimed anarcho-capitalist Javier Milei represents a classic libertarian economic policy and declared the abolition of Argentina’s central bank to be his top election campaign goal. Like other Latin American countries, Argentina should return to the dollar, whereby a private form of money would be the ideal for Milei. As such, the president, who takes office on December 10, has expressed ideological support for both physical and digital gold – Bitcoin. Some market participants are therefore hoping for the introduction of the cryptocurrency as a legal tender based on the El Salvador model. However, the potential resistance of the Bitcoin-critical International Monetary Fund (IMF) should not be underestimated. Argentina is currently by far the largest borrower and owes the international organization over USD 31 billion. And an explicit condition of the last credit line a year ago was to discourage the already high crypto adoption in Argentina. Passive support for the industry through liberal regulations therefore seems more likely.
The newly elected president of Argentina, Javier Milei, could use his sympathy for Bitcoin to support the cryptocurrency on a national level.
In addition: just like cryptocurrencies, the infamous non-fungible tokens (NFTs) experienced an impressive upward trend after 2020, followed by a sharp downturn over the next two years. Various groups accordingly declared the sector “dead” – similar to what they did with Bitcoin in the bear markets of 2015, 2019 and 2022. However, a detailed analysis of the current state of the NFT markets shows that both prices and user numbers are stabilizing.
Are NFTs really dead? No, a close look at the state of the market reveals a stabilizing consolidation period in both prices and users.
