Disclaimer: Everything we write in "The Crypto Insider Report" is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors.
The SEC Keeping Busy
The past 7 days have been a really active one in terms of regulation, fear, theories and predictions about the future. First off, the SEC cracked down on Kraken, forcing them to shut down their Crypto staking services in the US and pay a 30 million USD fine in a settlement. The charges brought were that Kraken was offering unregistered securities through these services. Furthermore, they accused Kraken of offering very little protection to investors, while touting the ease of use of the service.
The SEC press release reads: “Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws,” said SEC Chair Gary Gensler. “Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.”
However, Commissioner Hester M. Peirce, member of the SEC, put out another press release, expressing her disagreement and condemning the way the SEC is enforcing, and not really regulating the markets. Quoting her: “We have known about crypto staking programs for a long time. Although it may not have made a difference, I should have called for us to put out guidance on staking long before now. Instead of taking the path of thinking through staking programs and issuing guidance, we again chose to speak through an enforcement action [...] Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating.”
We will have to see what this means for the other staking providers in the US, but I think it’s fair to expect similar shutdowns.
Next, we also learned that the SEC intended to sue Paxos over BUSD (the stablecoin they emit for Binance) being a security as well. Then, the New York Department of Financial Services (NYDFS), a different entity, directed Paxos to stop minting any more BUSD. The story is not done here and we will keep following to see what will be the end result, and whether this is actually a move by the US entities towards Binance itself. In the meantime, the market cap of BUSD already dropped by about 2 billion USD, most of it being captured by rival USDT.
These are definitely interesting times for Crypto regulation in the US. It will be interesting to see what other countries decide to do with regards to staking services and stablecoins, and whether this will start some sort of competition over blockchain native financial services.
Crypto projects delay launching projects
Bear markets are notoriously hard for new launches because there is a lack of liquidity in the market and fewer investors whose attention you can grab. And this is even more true for token launches, usually a means for the teams behind protocols to fund their efforts while giving back to the community.
We know the best builders usually appear in (or hang around during) bear markets, but how long can they last with little to no new inflows? Well, it seems that the data supports these past statements. For example, Coinmarketcap has seen almost barely half of 2022 Q4’s applications for new coins on their website. And we’re already halfway through February, which indicates we will probably end the month with fewer coins than last time, confirming another quarter of clear decrease:
And wit market makers straight-up blowing up, there is hardly anyone to provide liquidity to these new projects. So in turn, teams prefer to wait for a better moment to launch their tokens, when liquidity has hopefully picked up.
In an article by Coindesk, they discovered that large, familiar firms now hold 1/3 or even 1/10 of what they had in the bull market… if they’re still around (looking at you, Alameda). However, the market is currently experiencing quite a surge and we’re definitely not in the same place we were 3 months ago. Will this be enough to finally break the downtrend in token launches (and applications)?
It remains to be seen but until we’ve seen the entire wrath of US legislators against crypto and macroeconomic conditions improve, it’s hard to be sure things are taking a turn for the better.
Applications open for the European Blockchain Sandbox
The European Commission launched on Tuesday, 14th of February, a regulatory sandbox for innovative use cases involving Distributed Ledger Technologies (DLT). The European Commission's blockchain regulatory sandbox, or testing environment, aims to "facilitate the cross-border dialogue with and between regulators and supervisors on the one hand, and companies or public authorities on the other hand," an official announcement said.
Funded by the Digital Europe Programme and delivering on the SME strategy, the sandbox is running from 2023 to 2026 and will annually support 20 projects including public sector use cases on the European Blockchain Services Infrastructure. Projects will be chosen through calls for expression of interest. Every year, the most innovative regulator participating in the sandbox will also be awarded a prize.
The sandbox will be facilitated by a consortium under the leadership of Bird & Bird and its consulting arm OXYGY supported by blockchain experts of WBNoDE and web-designers of Spindox, which has been procured through an open call for tenders in 2022. The selection process will be overseen by a panel of independent academic experts. Amongst the consortium expert members is also a Romanian law firm, Stratulat Albulescu.
Applications for the first cohort will remain open until 23.59 CET on 14 April 2023. If you are interested in becoming a participant in the Sandbox, you can apply here.
For more educational crypto content, check out the links below:
The Stakeborg DAO Talks on YouTube: https://www.youtube.com/playlist?list=PLOrFZZifNn4Nx4nSQL3WS52ALPXgrTSVG
Discord channel: https://discord.com/channels/901898461568442458/903006233584341052
StakeborgDAO Quarterly Reports: https://docs.stakeborgdao.com/reports/dao-quarterly-reports
Stakeborg Academy: https://academy.stakeborg.com/