Monday, July 29, 2024

a lot about crypto regulation today, mainly from the weekend but also from the regular overview

“A people that can no longer distinguish between truth and lies cannot distinguish between right and wrong.” – Hannah Arendt ||

Hello everyone, I hope you’re all doing well! Weren’t summer weekends supposed to be lazy, hazy and relatively quiet? I mean, the past few have been anything but.

Below I combine a breakdown of Saturday’s seminal Bitcoin 2024 conference appearances with the scheduled rundown of key developments in crypto regulation. Also, in the “In Brief” section, I share some items that reflect rapidly shifting geopolitics and crypto sentiment.

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IN THIS NEWSLETTER:

• A smashed Overton window

• Lummis’ bill

• Now we’re talking

• More from the monthly crypto regulation overview

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IN BRIEF:

• This weekend’s election in Venezuela unfortunately ended up pretty much as expected: what looks like a landslide victory for the opposition according to exit polls has been turned into an unverified and yet official victory for Maduro. I have a feeling we’ll be seeing the repercussions of this soon.

• Yesterday, US defence secretary Lloyd Austin announced the creation of a new military command to oversee all US forces in Japan. The country currently hosts over 50,000 American troops, hundreds of US aircraft and the only forward-deployed US aircraft carrier strike group. But this latest move significantly ramps up not just American presence but also investment and influence. What’s more, it comes at a time when Japan is committed to almost doubling its defence spending before 2027 (from 2022 levels), and is acquiring missiles with enough range to reach mainland China. The justification for the decision is the perceived threat from China, and it’s entirely possible that China sees this as further provocation. Either way, this is a reminder that 1) defence spending is going to ramp up significantly in coming years on pretty much all sides, further aggravating budget deficits and diluting currencies. And 2) we do seem to be marching right up to the line.

• On to a more cheerful note: as I type, BTC and ETH are up 3% and 4% respectively, over the past 24 hours.

(chart via TradingView)

• It’s interesting to finally see ETH outperform – this could mean that expectations are high for net ETH spot ETF inflows this week. Or, it could be a technical bounce after last week’s drop. Or both. We could also be seeing the impact of news that VP Harris’ team has reached out to some crypto industry insiders for a dialogue – in my opinion, this has a much greater potential short-term impact than either Trump’s Nashville promises or Senator Lummis’ Bitcoin Strategic Reserve bill (see below for more), as both will be very hard to get through Congress. A thaw with the Democratic Party, on the other hand, could produce meaningful policy changes or at least agency head substitutions even before the current Administration’s term is up. One can hope.

(chart via TradingView)

• Meanwhile, traditional, conservative institutional investors continue to accumulate positions in crypto assets: on Friday, the State of Michigan Retirement System disclosed that it owns almost $7 million worth of BTC spot ETFs.

• The University of Wyoming has established a Bitcoin Research Institute. Finally, scholars get support from faculty that actually understand bitcoin. This should produce useful insights, unlike many of the papers we’ve seen circulate over the years.

• Crypto platform Gemini has released the preliminary results of a survey carried out on its behalf by the Data Driven Consulting Group, that shows one in five Americans hold crypto, and three quarters will choose their November vote according to the candidates’ crypto stances. While the poll was small (only 1,200), it does support the idea that crypto is more popular than most politicians realize, and that a crypto stance on the political stage is actually about much more than crypto itself.

• US financial services firm Cantor Fitzgerald has announced plans to launch a bitcoin financing business, enabling clients to leverage their BTC holdings, with an initial total funding of $2 billion but with more to follow. This is actually a big deal, as the implosion of Genesis Trading (for whom I used to work, full disclosure) left an institutional lending gap in the market. There were still firms engaging in the activity, in which institutional clients can deposit BTC as collateral and get a cash or crypto loan. But it was muted, and until lending comes back (hopefully with better safeguards!!!), some large institutions will find the market opportunities relatively constrained. What’s more, the firm’s CEO Howard Lutnick disclosed at Bitcoin 2024 that he himself owns BTC, and that Cantor Fitzgerald holds a “shedload” (which I assume is a politer version of the more familiar term for “a lot”). This is worth keeping an eye on.

• Another issuance in the EU wholesale DLT settlement trials: late last week, we saw the EU’s first sovereign digital bond issuance. Slovenia issued a €30 million short-dated digital bond on the Neobonds platform, operated by BNP Paribas (France’s largest bank). Ownership was recorded on the Canton blockchain, with smart contracts generating coupon payments and lifecycle events.