WEEKLY: good news from the SEC, and stablecoins
plus, the significance of Carnaval and of masks
Hello everyone! I hope you’re doing well!
You’re reading the free weekly Crypto is Macro Now, where I reshare/update a couple of posts from the week, and include something from outside the crypto/macro sphere that is currently inspiring me (it’s a fascinating world out there).
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Earlier this week, I was on Yahoo Finance TV, talking about crypto markets, you can see that clip here.
And the latest episode of Bits & Bips is out, with me filling in for Jeff Seyffart as host and special guest Eli Ndinga from 21 Shares. You can see that here, or listen here (Spotify link).
In this newsletter:
The rhythm of good news
Stablecoins: who makes the rules?
Some of the topics discussed in this week’s dailies:
Lessons from a hack
Macro gets brittle
Germany scrapes through for now
The battle of the narratives
A forest of stablecoins
Crypto markets: A pause, but why?
Stablecoins: who makes the rules?
The rhythm of good news
The “strong gods” divide
The rhythm of good news
Champagne must be flowing in crypto boardrooms around the US this week.
Last Friday, Coinbase revealed that the SEC had agreed to drop its case against the exchange, pending final confirmation which came through on Thursday.
The agency sued Coinbase back in June 2023, accusing it operating an unregistered securities exchange, broker and clearing agency. It also claimed Coinbase’s staking-as-a-service program constituted the offer and sale of unregistered securities. And it named a list of tokens it said were securities, leaving no room for the token issuers to push back or engage in dialog. The list included SOL, ADA, MATIC, FIL, SAND and others.
The SEC case was flimsy at best and would most likely have been struck down in court. But its cancellation removes an oppressive overhang, not just in terms of time and monetary cost for both the agency and Coinbase, but also in uncertainty as to the listed tokens’ status. It potentially clears the way for platforms such as Robinhood to reverse their delisting.
Dropping the case does not mean that the named tokens are not securities – rather, it removes the presumption that they are, and opens a path to a careful consideration of criteria and requirements. It also moves a decision on this from the courtroom to Congress, via the passage of relevant digital asset bills – a longer-lasting, less antagonistic and more efficient outcome.
Warming up
It turned out that the Coinbase reprieve was just the beginning.
Also on Friday, OpenSea revealed that the SEC had ended its investigation into the NFT platform after suggesting last year in a Wells notice that it believed OpenSea’s sale of NFTs constituted offerings of unregistered securities.
On Monday, we got the news that the SEC was also ending its investigation into Robinhood, which had received a Wells notice last year warning it of pending action for selling unregistered securities.
On Tuesday, it was the turn of defi app Uniswap – yes, the SEC also served them a Wells notice last year, informing them of pending action for operating an unregistered securities exchange, issuing unregistered securities and engaging in unregistered brokerage and clearing activity. This investigation has been dropped.
On Wednesday, crypto exchange Gemini announced that it, too, had received word from the SEC that the investigation against it had been closed.
And on Thursday, Consensys got the good news that its SEC case was being wound down.
None of this is a surprise, given the change in regulatory tone in the US since the new Administration took office. And yet, it still comes as a huge relief for those directly affected as well as for the market as a whole – this new SEC is serious about building a constructive relationship with the crypto industry, one focused on frameworks rather than punitive enforcement of unclear rules and unreasonable interpretations.
Still ongoing, as I type, are the legal cases against Binance, Kraken and Ripple. But these will be more complicated to untangle.
Earlier this month, a federal judge put the SEC’s lawsuit against Binance on hold for 60 days to give time for more clarity on new regulation, but the claims against the exchange are not exclusively based on grievances about registration and issuance. Binance is also accused of fraud and volume manipulation.
What’s more, the Binance case is further along and has some relevant rulings – the SEC could pause at least part of the process, but there are more moving parts.
Ripple and Kraken have a similar situation to contend with – there are existing rulings, and in the case of Ripple, an ongoing appeal from the SEC. The agency could decide to walk that back, although the next court deadline isn’t until mid-April. Kraken’s is at the end of March.
The timing matters in that the nominee for Chair has not yet started his confirmation process, and the SEC may prefer to leave more complex untanglings for when he is in his seat. When President Biden took office, Gary Gensler didn’t assume his role until late April. We could see Paul Atkins’ nomination move faster… unless, of course, the government shuts down on March 14 in the absence of a budget deal.
Stepping back, the speed with which the new SEC under Acting Chair Mark Uyeda is undoing the previous SEC’s damage is head-spinning. It’s not just the cancellation of spurious and expensive cases, it’s also the pace of meetings with both insiders and skeptics, and the breadth of questions posed in Commissioner Hester Peirce’s recent memo.
We’re not yet seeing this reflected in crypto startup funding announcements and blockchain-related acquisitions from traditional financial institutions – but that is likely to change over the coming months.
Stablecoins: who makes the rules?
An interesting debate is raging regarding stablecoin regulation in the US. I’ve referred to this before as the “low hanging fruit” of the much-needed crypto framework since it is relatively bipartisan and definitions are comparatively simple.
That doesn’t mean it is without contention, however.
On Monday, Framework Ventures co-founder Vance Spencer flagged in a post on X that the stablecoin bill currently making the rounds in DC included wording that would shut off access to US treasuries for international issuers. Put differently, only US-based stablecoin issuers would be able to hold their reserves in US treasuries.
This would presumably mean that Tether, the market’s largest stablecoin issuer and one of the world’s largest holders of US treasuries, would have to register in the US, or change its reserve policy.
The latest attestation reveals that Tether holds almost 80% of its reserves in Treasury bills, equivalent to $114.7 billion. The rest are held in overnight and term reverse repo facilities, money market funds, cash, gold, bitcoin, non-US treasury bills (0.06%) and corporate bonds (0.01%).
So, if reporting is correct, Tether would be expected to either register in the US if it is able and willing to do so, or dump over $100 billion worth of US government debt. This is more than the US debt held by Mexico and Germany, according to the latest end-2024 Treasury figures.
On Tuesday, Avichal Garg reported on X that he had spoken to some of those drafting the bill, and explained that the aim was not to shut out non-US participants, but to ensure that only entities that passed certain financial health and reputation checks would be allowed to issue dollar-backed tokens, in order to protect consumers and the dollar “brand”.
This makes some sense but raises doubts as to what the cutoff would be, who gets to decide, and whether this could be used to marginalize potential and even actual issuers for political reasons.
Then, also on Tuesday, Bloomberg reported that Jeremy Allaire, CEO of Circle – Tether’s main competitor – thinks all USD stablecoin issuers should be US-registered. This also makes some sense: as Allaire points out, if a company wants to sell digital dollars in the US, it should have passed some scrutiny. The tricky part is, what kind of scrutiny? And, how would you stop a Hong-Kong based issuer (to pick an example) from “selling” digital dollars in the US? You could insist that platforms don’t list that token, but it’s much harder to geofence transfers directly to individuals and businesses.
Tether, of course, is taking this personally, which is not unreasonable. In a response post on X, CEO Paolo Ardoino did not hold back:
“While our competitors [sic] business model should be to build a better product and even bigger distribution network, their real intent is "Kill Tether".
Every single business or political meeting that they have culminates with this intent.
While might [sic] seem an overstatement, it's a fact and it's being reported independently by hundreds of people inside and outside the digital assets industry in touch with the US administration.
I'll leave it to you to define a competitor trying to use lawfare to kill an opponent, instead of focusing on better products.”
The reason many of us are bristling here is that this is reminiscent of when FTX founder Sam Bankman-Fried (I was really hoping I’d never have to type his name again) was doing the rounds in Washington DC convincing regulators that he, a good guy with the financial industry’s interests at heart, could help draft industry regulation. It does feel like “regulatory capture”, a slippery slope that reduces choice and limits innovation.
Tether has hinted in the past that it is interested in the US market, and so I imagine the need to register is itself not the objection – it’s the principle, and the nature of the participants involved in the rule setting.
What’s more, as Ardoino points out in his post, Tether does have influential friends in Washington DC – Secretary of Commerce Howard Lutnick is the former chairman and CEO of Cantor Fitzgerald, which during his tenure acquired a Tether convertible bond representing an approximately 5% ownership. Cantor Fitzgerald is also the custodian of the bulk of Tether’s reserves.
In sum, this will not be an easy call for regulators to make, and the protection vs innovation instinct will no doubt be yet again duking it out in Congress. Let’s fervently hope that motives are questioned and that a reasonable balance is achieved.
HAVE A GREAT WEEKEND!
(in this section, I share stuff that has NOTHING to do with macro or crypto, ‘cos it’s the weekend and life is interesting)
This weekend, Carnaval draws to a close. Celebrated in many different places in many different ways, each variation carries the central theme of anonymous excess before the stark duty of Lent.
The festival’s name apparently comes from the Latin terms “carne”, or meat, and “levare”, to take away, and even though most revellers may not observe the Catholic rites that come after, it is still seen as a societal release of structural tension, an acknowledgement of the exuberant human spirit, and an excuse or perhaps even an obligation to dress up and have fun.
One of the Carnaval variants with the deepest history and most enduring glamour is that of Venice, where dazzling masks have become a defining feature. Their role in subterfuge and secrecy was cemented in a 14th century law that banned anyone from wearing them outside of Carnaval. As time progressed, the city’s wealth and artistry converted them into a symbol of Venetian mystique, while highlighting the role masks play in our psyche: they’re not just a beautiful proxy for privacy and anonymity. They’re also a mirror, reminding us that identity is something we wear.
In a futile attempt to do justice to the effort invested in creating a beautiful yet fleeting impression, below are some photos from this year’s Venice Carnaval, taken by Claudia Greco for Reuters.
But before I get to that, I want to share one of my favourite WB Yeats poems which frames the mask as a question on the superficial vs the intimate, desire vs trust, the short-term vs the longer horizon – in sum, tensions we navigate every day.
The Mask – William Butler Yeats
“PUT off that mask of burning gold
With emerald eyes."
"O no, my dear, you make so bold
To find if hearts be wild and wise,
And yet not cold."
"I would but find what's there to find,
Love or deceit."
"It was the mask engaged your mind,
And after set your heart to beat,
Not what's behind."
"But lest you are my enemy,
I must enquire."
"O no, my dear, let all that be;
What matter, so there is but fire
In you, in me?"
All images below by Claudia Greco, for Reuters.
DISCLAIMER: I never give trading ideas, and NOTHING I say is investment advice! I hold some BTC, ETH and a tiny amount of some smaller tokens, but they’re all long-term holdings – I don’t trade.