Author: Kristen Moran

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The Bank of England (BoE) and the Financial Conduct Authority (FCA) are eyeing autumn 2024 for the debut cohort of participants in the UK Digital Securities Sandbox (DSS), designed to facilitate the adoption of digital assets within financial markets.

Presently, the central bank and regulatory body are seeking feedback on their proposed operational framework for the DSS, with plans to open applications during the summer.

In a joint consultation and draft guidance released on Wednesday, the BoE and the FCA outlined their aspirations for the inaugural group of entrants into the Digital Securities Sandbox, a venture aimed at fostering innovation in digital assets. This initiative involves adapting regulations to permit eligible UK firms to utilize emerging technologies, such as blockchain and distributed ledger networks, in the trading and settlement of digital securities, excluding derivative contracts and “unbacked crypto assets” like bitcoin and ether.

FCA Executive Director Sheldon Mills emphasized the transformative potential of the DSS, stating, “The new Digital Securities Sandbox reshapes how we regulate by allowing firms to test regulatory changes using real-world situations before these changes are made permanent.” Mills added, “The new sandbox also helps strengthen the U.K.’s leading position as a global and vibrant financial center, by driving adoption of new technologies for trading and settling traditional assets.”

It’s crucial to note that the DSS differs from the Digital Sandbox, launched by the FCA in August 2023, which supports firms in the nascent stages of digital product development.

Timeline and Implementation

The UK Treasury initially proposed the DSS in July 2023, followed by the government’s response to the consultation and plans to enact legislation to implement the initiative in November. Subsequently, the government introduced new regulations in December, providing supervisory guidelines for the sandbox under the Financial Services and Markets Act 2023, which took effect on January 8.

Following the release of the joint consultation paper, interested parties have until May 29 to provide feedback. Subsequently, the BoE and FCA will issue a response and begin accepting applications for the DSS, scheduled for the summer of 2024. The regulators anticipate that the first cohort of DSS participants will join the initiative as early as autumn.

BoE Executive Director for Financial Market Infrastructure, Sasha Mills, emphasized the importance of the Digital Securities Sandbox, highlighting its role as a crucial tool for regulators to understand how to adapt safely to technological advancements and changes in critical financial market processes such as securities settlement. Mills also expressed a warm welcome to input from potential participants and expressed anticipation for collaboration with the FCA, government, and industry throughout the DSS.

Successful applicants will have the opportunity to offer securities depository and settlement services and operate a trading venue under a single legal entity. The DSS aims to encompass a diverse range of firms to maximize learning opportunities and foster innovation within the UK financial system. This endeavor could pave the way for expedited and cost-effective trading, settlement, and utilization of securities among financial market participants. The initiative is slated to run for five years, contingent upon entry limits, and could culminate in permanent regulations governing the trading and settlement of digital assets.

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Spot Bitcoin exchange-traded funds (ETFs) witnessed a significant surge in trading volume in March, reaching a staggering $111 billion. This notable increase, nearly tripling the trading volume from February, underscores the sustained interest of investors in BTC.

According to data provided by Bloomberg ETF analyst Eric Balchunas, spot Bitcoin ETF trading volume soared to $111 billion in March, compared to the $42.2 billion recorded in February. The remarkable performance in March reinforces the growing appeal of spot Bitcoin ETFs among investors.

BlackRock’s Bitcoin ETF, IBIT, continues to dominate the market share in trading volume, followed closely by Grayscale’s GBTC and Fidelity’s FBTC. Balchunas highlighted IBIT’s growing dominance, surpassing GBTC in market share, and likened it to the “GLD of Bitcoin.”

On April 1, cumulative spot Bitcoin ETFs experienced net outflows totaling $86 million, with Grayscale’s GBTC witnessing significant outflows of $302.6 million. Conversely, BlackRock’s IBIT ETF saw inflows of $165.9 million, while Fidelity’s FBTC recorded inflows of $44 million.

BlackRock and Fidelity’s spot Bitcoin ETFs amassed approximately $18 billion and $10 billion, respectively, in assets under management last month and have proven to be the most successful in terms of inflows.

However, Grayscale’s GBTC has faced substantial outflows, surpassing $15 billion in total outflows after experiencing over $300 million in outflows on April 1. GBTC’s assets under management have plummeted by 46% to $22 million, according to data from Coinglass.

Spot Bitcoin ETFs have significantly impacted the BTC markets, contributing to a surge to new all-time highs in March. Market participants anticipate a new market cycle fueled by the success of ETFs and the upcoming Bitcoin supply halving, which is less than 20 days away.

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Agora, a stablecoin issuer, has successfully raised $12 million in seed funding, according to reports. Leading the round is venture firm Dragonfly, with additional contributions from General Catalyst and Robot Ventures.

Agora’s primary objective is to introduce a USD-pegged stablecoin, backed by cash reserves, U.S. Treasury bills, and overnight repurchase agreements. The company aims to establish partnerships with exchanges and other crypto entities, initially targeting non-U.S. clientele.

Nick Van Eck, co-founder of Agora and son of Jan Van Eck, CEO of investment firm VanEck, will oversee the management of funds in Agora’s reserves, as reported by Bloomberg.

Despite strong competition in the USD-pegged stablecoin market, with Tether and Circle dominating a significant portion, Agora is poised to carve its niche. Tether holds 55.34% of the total Ethereum stablecoin supply, while Circle’s share comprises 30.61%, according to data from The Block’s Data Dashboard.

Notably, VanEck’s spot bitcoin exchange-traded fund HODL garnered significant attention following its approval on January 11. The ETF experienced a surge in volume, with a reported 1,000% increase in early February. On April 1 alone, HODL recorded $22.82 million in USD volume, indicating substantial investor interest.

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Tether, one of the leading stablecoin issuers, has announced the completion of a System and Organization Controls 2 (SOC 2) audit, marking the highest level of security compliance achievable for an organization. This independent audit, developed by the American Institute of Certified Public Accountants (AICPA), highlights Tether’s dedication to ensuring a secure user experience.

Paolo Ardoino, CEO of Tether, emphasized the significance of this compliance measure in assuring customers that their assets and data are managed in an environment adhering to the highest standards of data protection and information security. Ardoino highlighted Tether’s dedication to being the most trusted and compliant stablecoin in the world.

In line with its ongoing dedication to security, Tether has pledged to undergo annual SOC 2 audits to verify that its security practices consistently align with established standards. The firm aims to achieve SOC 2 Type II certification by the end of 2025, which evaluates the effectiveness of internal controls over 12 months.

Tether’s flagship stablecoin, USDT, boasts a market capitalization exceeding $104 billion, making it the third-largest cryptocurrency by market capitalization after Bitcoin and Ether. The recent milestone of reaching a $100 billion market cap on March 4 reflects a notable 9% year-to-date growth.

Beyond stablecoins, Tether is venturing into new territories. The company plans to invest approximately $500 million in constructing Bitcoin mining facilities in Uruguay, Paraguay, and El Salvador. With the goal of growing its computing power to represent 1% of the Bitcoin mining network, Tether aims to expand its direct mining operations to 450 MW by the end of 2025. The company’s approach involves setting up facilities within movable containers to adapt to changing electricity prices.

Ardoino emphasized that Tether’s mining endeavors are focused on gradual learning and growth, with no rush to become the largest miner globally. This strategic expansion aligns with Tether’s broader vision of innovation and resilience in the cryptocurrency ecosystem.

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Bitkub Capital Group Holdings, the parent company of Thailand’s leading cryptocurrency exchange, is ramping up its workforce as it prepares for its anticipated initial public offering (IPO) on the Stock Exchange of Thailand (SET) in 2025.

CEO Jirayut Srupsrisopa revealed to Bloomberg on April 1 that Bitkub is actively seeking financial advisors to support its IPO listing, aiming to secure new capital and enhance its market presence.

In a strategic move, Bitkub is embarking on a hiring spree despite previously reducing its headcount by 6% in 2022 and 2023. The exchange plans to recruit 1,000 new employees by 2025, effectively doubling its current workforce of 2,000 individuals.

Bitkub’s IPO plans were initially hinted at in a shareholder letter in 2023, with the company now solidifying its intentions.

Based in Bangkok, Bitkub dominates the Thai crypto market, commanding 77% of the market share as of December 2023, according to HashKey data. The exchange handles approximately $30 million in daily trading volumes.

Thailand’s burgeoning crypto landscape has attracted significant attention, with the country boasting over 13 million crypto users as of 2023, representing about 18% of its population. This figure is projected to rise to 17.7 million users by 2028.

Competitive pressures in Thailand’s crypto sector are intensifying, with industry giants like Binance establishing local subsidiaries and domestic banks, such as Kasikornbank, making strategic investments in crypto exchanges like Satang.

Bitkub’s IPO plans follow its sale of a 9.2% stake in its crypto exchange unit, Bitkub Online, to tech holding company Asphere Innovations in July 2023, signaling confidence in the platform’s growth potential.

Jirayut anticipates a surge in Bitkub Online’s valuation as trading volumes approach levels reminiscent of the 2021 crypto bull market. The platform currently contributes around 80% of Bitkub Capital’s earnings.

Despite regulatory challenges, including a failed acquisition attempt by SCB X in 2022, Bitkub remains optimistic about its prospects in Thailand’s evolving crypto landscape.

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Chainage, a decentralized finance (DeFi) hub with approximately $100 million in total value locked, is pursuing a $13 million capital raise for protocol expansion, subject to approval from its tokenholders within its native decentralized autonomous organization (DAO).

In a snapshot proposal dated April 1, Chainage outlined plans for the $13 million raise, led by an undisclosed venture capital firm. This raise would involve the issuance of 50 million additional XCHNG protocol tokens, constituting roughly 10% of Chainage’s circulating supply. The issuance price of $0.26 aligns closely with XCHNG’s token price at the time of publication.

Tokenholders can participate in the proposal by staking their native XCHNG tokens to receive “vXCHNG,” granting them voting rights. Chainage aims to implement various strategies to enhance usage and profitability, committing to generating a minimum of $1 million in profit for Q2, with 80% of profits allocated to vXCHNG holders through a profit-sharing mechanism.

The primary objectives of the $13 million raise include global expansion, increased visibility, and the recruitment of top-tier talent to integrate AI with cutting-edge technology, positioning Chainage as a leader in AI-powered crypto innovation. The capital would also be utilized to incentivize liquidity, establish new partnerships, undertake marketing initiatives, and reward tokenholders.

As of the time of publication, the proposal has garnered 186 million XCHNG votes in favor and 7.2 million XCHNG votes against, with a circulating XCHNG balance of 474 million.

This move represents a departure from traditional venture capital fundraising methods, with Chainage opting for tokenholder approval within its DAO. This approach aligns with the growing trend among Web3 startups to leverage decentralized governance structures, particularly as the crypto industry experiences a surge in investment amid a bullish market.

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According to a note from TD Cowen, House Republicans’ efforts to pass an anti-central bank digital currency (CBDC) bill could disrupt bipartisan backing for a stablecoin bill. The CBDC Anti-Surveillance State Act, introduced by House Majority Whip Tom Emmer, aims to prevent the Federal Reserve from directly issuing a CBDC to individuals. Despite the bill’s advancement from the House Financial Services Committee in September, it faced significant criticism from Democrats.

House conservatives are reportedly considering voting for the CBDC bill alongside a long-awaited stablecoin bill, although this strategy isn’t led by Rep. Emmer. TD Cowen’s Washington Research Group, led by Jaret Seiberg, expressed concerns that tying a ban on a digital dollar to stablecoin legislation could jeopardize bipartisan support. Democrats generally see value in exploring a central bank cryptocurrency.

Maxine Waters, the top Democrat on the House Financial Services Committee, and its chair, Patrick McHenry, have engaged in lengthy discussions to find common ground on regulating stablecoins. Although the bill cleared the committee, disagreements persist, particularly regarding the primary regulator for stablecoin issuers.

TD Cowen emphasized that while it’s premature to declare the stablecoin bill in jeopardy, passing any legislation remains challenging. Any developments complicating the stablecoin bill further narrow the path to enactment.

While the central bank has explored the idea of issuing a CBDC, Fed Chair Powell clarified that the Fed is far from making recommendations or adopting a CBDC without congressional approval.

Additionally, the Heritage Foundation has pressed for the passage of a CBDC bill, warning lawmakers that their score on the Heritage Action Scorecard could suffer if they don’t cosponsor the legislation. Sen. Ted Cruz has introduced a bill to ban CBDCs, supported by the Heritage Foundation and the Blockchain Association, among others.

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After experiencing record outflows of nearly $1 billion just a week prior, crypto-based investment products made a significant turnaround, with approximately $900 million in net inflows reported, according to data from CoinShares.

CoinShares analyst James Butterfill disclosed that crypto-based investment vehicles collectively saw a remarkable rebound last week, accumulating $862 million in net inflows. This resurgence follows a challenging period when funds managed by prominent asset managers like BlackRock, Fidelity, and Grayscale witnessed record outflows totaling $942 million.

Driven by bitcoin’s price surging above $70,000 for a significant portion of last week, the combined assets under management for all crypto funds tracked by CoinShares soared to $97.9 billion.

Bitcoin-Related Funds Remain Dominant

Bitcoin-related funds continue to attract the bulk of investor activity. Both BlackRock and Fidelity’s spot bitcoin ETFs recorded inflows exceeding $600 million each during the past week. However, Grayscale’s spot bitcoin ETF experienced outflows amounting to $960 million, reducing its assets under management to approximately $35 billion.

An Exceptional Performance by Ark Invest 21 Shares

One standout performer last week was the Ark Invest 21 Shares spot bitcoin fund, which witnessed over $300 million in net inflows. This marks a substantial increase compared to the previous week when the fund attracted only $30 million in capital inflow. With its assets under management now exceeding $3 billion, the fund demonstrated exceptional growth.

Overall, the rebound in net inflows suggests renewed investor confidence in crypto-based investment products, particularly amidst the backdrop of Bitcoin’s impressive price performance.

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BNB experienced a notable 12% rise in value over the past week, reaching a nearly two-week high of $620 by March 29. This surge, while impressive, prompts speculation about whether BNB has hit its peak or if it’s poised for further growth. Compared to its competitor Ether, which saw a 5% increase over the same period, BNB’s surge narrowed the valuation gap between the two. However, insights from on-chain BNB Chain data suggest that the recent rally might have pushed the limits too far.

Factors Influencing BNB’s Price

Market analysts observe a correlation between the crypto market’s upward trajectory and inflows into spot Bitcoin exchange-traded funds (ETFs). However, the week ending March 23 marked a setback as these ETFs experienced a net outflow of $890 million for the first time since their introduction in January. Despite this, recent data indicates a reduction in outflows from the Grayscale GBTC fund, with only $104 million exiting the fund by March 28.

In early March, BNB’s price surged by 61.7%, reaching a peak of $645 and a market capitalization of $96.4 billion. Yet, momentum slowed afterward. For context, BNB reached an all-time high valuation of $116 billion in November 2021. Notably, the total value locked (TVL) on BNB Chain, representing deposits in the network’s smart contracts, peaked at $15.7 billion but has since fallen to $7.1 billion, marking a 55% decrease.

Contextualizing BNB Chain’s Performance

Considering the overall decline in the crypto market, particularly in decentralized finance (DeFi) since late 2021, it’s important to contextualize BNB Chain’s TVL decline. The total market data for all tracked blockchains has decreased from nearly $205 billion to $155 billion, indicating a 25% drop. Hence, a thorough analysis of BNB Chain’s TVL, especially concerning competitors like Ethereum and Solana, is necessary.

Activity on BNB Chain

TVL isn’t the sole indicator of a blockchain’s success. Numerous decentralized applications (DApps) on the BNB Chain, spanning nonfungible token (NFT) marketplaces, gaming platforms, decentralized betting systems, collectible platforms, and social networks, operate without necessitating significant deposits. In the past week, nearly 2 million active addresses engaged with DApps on the BNB Chain, showcasing significant activity levels comparable to Ethereum’s most active layer-2 networks.

Forecasting Future Trends

Predicting cryptocurrency trends is challenging, but examining derivative metrics such as the demand for leverage in BNB perpetual futures contracts provides insights into market sentiment. While the demand for leveraged long positions has stabilized, with the 8-hour funding rate holding around 0.03%, optimism remains despite BNB’s price struggle with the $620 level. Typically, a positive funding rate above 1.2% per week indicates bullish market sentiment.

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During a panel discussion at the recent BUIDL Asia summit in Seoul, the issue of racist meme coins and how to handle them was debated among panelists. These meme coins, containing offensive terms and themes, have become increasingly prevalent in the crypto space in recent months, raising concerns within the community.

Austin Federa, the head of strategy at the Solana Foundation, offered his perspective on the matter. He argued that while users should have the ability to reveal content if they choose to, the core network should remain permissionless. Federa likened the situation to the internet, where it’s impractical to expect internet service providers (ISPs) to filter out offensive content. Similarly, in the crypto space, wallet developers can implement block lists to filter out certain tokens, but the core network should remain decentralized and permissionless.

On the other hand, Marc Zeller, founder of the Aave Chan Initiative, highlighted the legal obligations in some jurisdictions, such as France, where ISPs are required to block certain content. Zeller acknowledged the cultural differences in approaches to censorship and emphasized the importance of censorship resistance in the blockchain ethos.

Federa also mentioned the legal obligations faced by validators and nodes, citing instances where the U.S. Office of Foreign Assets Control (OFAC) imposed sanctions on certain crypto transactions. However, he noted that addressing racist meme coins should be kept in perspective, as they represent a small fraction of the overall crypto market.

In summary, while there are differing views on how to address offensive meme coins, the discussion at the BUIDL Asia summit highlighted the complexities involved and the importance of balancing censorship resistance with legal obligations and community standards.

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