Market Update & Industry News - Week ending 20 October 2023

• Earlier this week, the European Central Bank (ECB) took a significant step towards introducing a digital version of the Euro, which would enable residents in the 20 nations that share the common currency to conduct secure electronic transactions without incurring fees. The ECB announced that it would commence a "preparation phase" for the digital euro, slated to begin on November 1 and last for approximately two years. During this period, the ECB will finalise regulatory frameworks, select private-sector partners, and conduct testing and experimentation. Following this two-year preparation phase, the ECB's Governing Council will make a decision on whether to proceed to the subsequent stage of preparations, laying the groundwork for the potential issuance and rollout of the digital euro.

• The U.S. Securities and Exchange Commission (SEC) dropped allegations against Ripple Labs CEO Brad Garlinghouse and Co-Founder Chris Larsen in its lawsuit accusing the blockchain company of violating U.S. securities law, as stated in a court filing in New York last week. The previous SEC lawsuit accused Ripple of illegally raising more than $1.3bn in an unregistered securities offering by selling XRP. Manhattan’s US District Judge granted a partial win for Ripple citing XRP on public exchanges were not unregistered securities offerings. However, sales to hedge funds and other sophisticated buyers had violated the law. 

• Binance has halted the onboarding of UK clients following the failure to gain approval from the UK regulator, the FCA, over crypto financial promotions along with its local partner, rebuildingsocierty.com. A small number of exchanges have departed the UK having been unable to meet FCA requirements with over one hundred companies added to the FCA’s warning list.

• J.P. Morgan research indicated that US regulatory approval for multiple spot Bitcoin ETFs could occur in the coming months, possibly before 10 January which is the final deadline for the Ark 21Shares applications. The bank highlighted the view that multiple applications will be approved at once to prevent a “first mover advantage” from a single approval.

• The European Union has passed a new law requiring cryptocurrency companies to share customer holdings, which are automatically exchanged between tax authorities, as announced by the European Council earlier in the week. The directive will cover digital assets including stablecoins, NFTs and assets issued in a “decentralised manner”. The European Council said that there will be a mandatory automatic exchange between tax authorities and service providers. The exact publication of the directive is pending.