Market Update & Industry News - Week ending 5 January 2024

🔷 Bitcoin (BTC) turned 15 last week with the network facilitating settlements of over $41.3tn, generating around $3.3bn in fees for miners. When compared to the competition in digital assets, Bitcoin still holds the greatest market share with over 50% of the market. Ethereum comes a distant second.

APPOLD VIEW: A true piece of innovation and one which is fully decentralised without the individual founders having the ability to easily control and manipulate, unlike some other blockchain protocols. With more yielding products being developed around BTC along with a potential SEC approval for BTC spot ETFs, the use cases remain strong.

🔷 New regulations imposed by the United Kingdom’s Financial Conduct Authority (FCA) will force crypto exchanges operating in the UK such as Coinbase and Crypto.com, to categorise their users. From the 8th of January exchange users will be required to complete a declaration about their investor profile and complete a questionnaire acknowledging risk in an alleged effort by the FCA to protect UK consumers.

APPOLD VIEW: This harmonises the processes of educating market participants and ensuring that exchanges understand their client’s financial and personal positions. Essentially, it will make them liable if inadequate KYC (Know Your Client) checks are not undertaken. Something already in existence with TradFi assets.

🔷 The Financial Services Commission (FSC) of South Korea proposed a ban on the use of credit cards for payment of cryptocurrency. The FSC voiced concerns alleging illegal outflow of domestic funds overseas and money laundering. Last month the FSC proposed rules to make government officials’ crypto holdings public and for crypto exchanges to store at least 80% of users’ deposits in cold wallets.

APPOLD VIEW: This is only a proposal requiring a public consultation. But note that South Korea has been ahead of most for technology innovation in the payments sector. They announced in November that a test will be running for 100,000 people using their own central bank digital currency (CBDC) in 2024. This could all tie into greater controls and visibility of transactions and tax liabilities.

🔷 Global crypto exchange, Coinbase, announced plans to acquire a Cyprus-based MiFID (Markets in Financial Instruments Directive) licensed entity to further expand into the European Union. Acquiring a MiFID-licensed entity will enable Coinbase to offer crypto-based derivatives alongside its current spot trading in the EU, all pending regulatory approval.

APPOLD VIEW: It makes commercial sense from a European gateway perspective but, surprisingly, Coinbase didn’t appear to pursue a MiFID license in a tier 1 financial markets jurisdiction (e.g. Germany, France) to gain more comfort from potential Institutional investors.