Thursday 05 October, 2023

Bitcoin back above US$30,000 after surprising comments from Fed chair

In Token Issue this week, we examine the comments Jerome Powell made, an announcement by BlackRock, and a new exchange backed by big banks.

Welcome to Token Issue! Delivered every Friday, this free newsletter breaks down the biggest stories in Asia’s crypto scene and beyond. View past issues here or sign up here to receive future newsletters.

Good news everybody,

We may actually be seeing the beginning of a truce in the US’ war on crypto. Now, I’m not the type of person who automatically assumes the best outcome. I was training on the old journalism adage of “If your mother says she loves you, go check it out.”

So when I saw that Bitcoin’s price had jumped 20% in just five days, my first response was not – unlike many on Twitter – to post “We told you so!” My thoughts were more like, “What kind of skeezy rugpull is this?” ’Cause ya know: crypto.

But then I saw the news that US Federal Reserve chair Jerome Powell had actually made some slightly positive comments about crypto assets in general and stablecoins in particular. This could be real.

In all fairness, the crypto shills out there will grab on to any bit of news to support their thesis that crypto is the future of money. So before we all go running off to crypto exchanges, let’s see if the other shoe drops. Powell’s comments will surely come with some caveats, or, more precisely, regulation.

With that in mind, let’s get right into our main stories.

— Scott


What everyone’s talking about.

1️⃣ Crypto surges after Powell says crypto has “staying power”

On Wednesday, US Federal Reserve chair Jerome Powell said that “crypto appears to have staying power as an asset class,” and that the Fed sees “stablecoins as a form of money.” Powell was speaking to lawmakers in Washington.

Image credit: Timmy Loen

Those may not appear to be overly positive statements, but to the crypto industry – which has endured years of scorched-earth legal actions and the “all-your-crypto-are-belong-to-us” rhetoric of Security Exchange and Commission (SEC) chair Gary Gensler – Powell’s words are seismic.

His statements also indicate that the Fed will likely step in to regulate stablecoins.

“In all advanced economies, the ultimate source of credibility in money is the central bank,” Powell said. “We believe it would be appropriate [for the Fed] to have quite a robust federal role.”

Powell added that the Fed is in talks with lawmakers on crypto legislation and two bills could be introduced in late July. He also said the US is still a “long way” from establishing a central bank digital currency (CBDC).

Crypto markets usually respond positively to any announcement of wider acceptance by mainstream financial institutions, and this wasn’t an exception.

Crypto markets were already rising on the news of a new crypto exchange backed by Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp. Then came news that BlackRock and WisdomTree had filed for spot Bitcoin exchange-traded funds (ETF) with the SEC. (You can read more about those below.)

Powell’s statement pushed Bitcoin’s price over the US$30,000 mark for the first time since April 2023. This represents a jump of almost 20% since June 16.

This news comes on the tail end of a mass exodus of Bitcoin from US markets.

Data from Kaiko shows liquidity on Binance US, the US-based affiliate of Binance, has plunged by nearly 80% since the SEC sued Binance on June 5 for operating illegally in the country.

The news doesn’t have any impact on the legal actions against both entities by the SEC. However, on Saturday, Binance US was able to reach an agreement that allows it to continue operations.

Under the agreement, Binance US can only use its corporate assets to cover the costs of running its business, while US customers will still be able to redeem their assets from the platform.

2️⃣ MAS proposes protocol to set standard for digital money usage

The Monetary Authority of Singapore (MAS) has released a whitepaper on the concept of purpose-bound money (PBM), which enables money to be directed towards a specific purpose.

PBM features a protocol designed to work with different ledger technology and forms of money, which includes CBDCs, tokenized bank deposits, and stablecoins.

The PBM protocol allows senders to specify conditions when making transfers in digital money. This includes factors such as how long the money is considered valid and on which platforms it can be used on.

The whitepaper was produced in partnership with the International Monetary Fund (IMF), Banca d’Italia, and Bank of Korea, as well as industry partners including Grab, Amazon, and Fazz Financial Group.

According to its managing director Kristalina Georgiva, the IMF has been working on developing a platform for cross-border transactions using CDBCs, Reuters reported.

The organization has called for central banks to agree on a regulatory framework that will allow global interoperability of digital currencies.


Impactful developments and projects in Web3.

1️⃣ Crypto exchange backed by banking heavyweights starts operations

EDX Markets, a new crypto currency exchange, announced on Tuesday that it had started trading. It’s backed by a number of banking giants, including Charles Schwab, Citadel Securities, and Fidelity Digital Assets. Additional investors include Paradigm, Sequoia Capital, and Virtu Financial.

The exchange will trade Bitcoin, Ether, Litecoin, and Bitcoin Cash. It will use a non-custodial model designed to mitigate conflicts of interest. Translation: We’re not FTX.

2️⃣ BlackRock applies for spot Bitcoin ETF with SEC

BlackRock filed a notice with the SEC of its intention to open a Bitcoin spot ETF.

The move has drawn attention because the SEC previously rejected all attempts to establish a BitCoin ETF. BlackRock, the world’s biggest asset management firm, is known for its success rate in getting products through the agency.

Nate Geraci, president of advisory firm The ETF Store, said there is “absolutely no indication that the SEC is ready to entertain a spot Bitcoin ETF,” as reported by Bloomberg. “The likely assumption is that BlackRock may know something,” Geraci added.

3️⃣ Deutsche Bank applies for digital asset license amid growth push

Deutsche Bank, Germany’s biggest bank, has applied for a license from financial regulator BaFin to offer custody services for digital assets.

According to Bloomberg, the bank’s move reflects the growing adoption of digital assets in Germany.


Stuff that’s good to know.

1️⃣ Court may order Hodlnaut to dissolve at August hearing

A Singaporean court is likely to decide whether to dissolve or restructure Hodlnaut at a hearing scheduled for August 7.

The Singapore-based crypto lender halted operations last year after it lost US$317 million in TerraLabs’ Anchor Protocol, a staking protocol based on the Luna/TerraUSD algorithmic stablecoin pairing, which collapsed in May last year.

2️⃣ Romanian prosecutors to seize bitcoins worth $560K from Andrew Tate

Romanian prosecutors have sought to seize bitcoins worth US$560,000 from social media influencer Andrew Tate as part of an indictment on rape and trafficking charges.

Tate, infamous for his misogynistic content, was arrested in December last year and detained in a Romanian prison. While he’s now under house arrest, authorities are investigating the human-trafficking and sexual assault allegations against him.

3️⃣ Do Kwon sentenced to four months in Montenegro for forging documents

Do Kwon, the former CEO of Terraform Labs who is wanted in the United States and South Korea on multiple charges, has been sentenced to four months in a Montenegro jail.

On Monday, a court sentenced Do Kwon and Han Chang-Joon, formerly the finance officer at Terraform Labs, after they were found guilty of forging documents, a spokesperson for the Basic Court in Podgorica told CNN.

4️⃣ Binance under investigation in France, quits Netherlands

The Paris public prosecutor’s office is investigating Binance for allegedly failing to follow France’s know-your-customer (KYC) and anti-money laundering (AML) procedures.

The investigation will center on money laundering, concealment and conversion, and whether the exchange illegally provided cryptocurrency services, according to Le Monde.

Binance also announced its intention to withdraw from the Dutch market after the exchange was denied a license by the country’s central bank.

5️⃣ Gemini to grow team size in Singapore, calls city-state its next crypto hub

Gemini, the US-based crypto exchange, said on Monday that its plans to expand into Asia Pacific (APAC) include increasing the headcount in Singapore to over 100 people over the next 12 months.

The Singapore office will serve as the hub for Gemini’s APAC operations. The exchange also plans to launch an engineering base in India.


Scott Shuey

I'm a journalist who covers the wild world of crypto. My travels have taken me from San Jose to Chicago, Dubai and now Southeast Asia. I'd happily do some sketchy stuff for a really good burrito.

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