Appold Market Watch - Week ending 6 September 2024

Market Update & Industry News - Week ending 6 September 2024

🔷 The U.S. Securities and Exchange Commission (SEC) challenged FTX's plan to repay $16.3 billion to users in stablecoins, raising concerns about the legality of transactions involving crypto assets. FTX's liquidation proposal, which had not specified a stablecoin, aimed to settle claims in cash or stablecoins. The SEC also noted that FTX had not appointed a distribution agent, potentially delaying the process.

Appold view: The SEC’s objection emphasises the ambiguity around the legal treatment of stablecoins in such large-scale financial settlements. In addition, creditors are concerned about potential tax implications and the overall fairness of the repayment plan. This will most likely cause further delays in reimbursing creditors.

🔷 The UK Financial Conduct Authority (FCA) rejected or saw the withdrawal of 87% of digital asset business registration applications due to insufficient fraud and anti-money laundering (AML) controls. Only 4 out of 35 applications were approved in the past year. The FCA cited poor quality or missing components in submissions as reasons for rejection.

Appold view: Last week, we reported that applications had significantly dropped, and now there is further reporting of low approval rates. It’s not surprising; we continually observe some levels of immaturity in the industry when it comes to governance and compliance, as well as a gap in understanding the readiness of certain firms to meet regulatory expectations in a tier-one jurisdiction.

🔷 Mastercard launched a digital asset debit card in Europe in collaboration with Mercuryo, allowing users to make purchases directly from self-custodial wallets. Named "Spend," the card supports multiple blockchains like Ethereum, Solana and Injective.

Appold view: Another card to add to the growing list of issuers, allowing users to spend digital assets directly. However, users should be aware that these payments trigger a “crystallisation” or capital gains event in many jurisdictions, obliging the user to report the capital gains (or loss) on the digital asset at the time of each transaction.

🔷 Siemens has issued a €330 million digital bond using a private blockchain (SWIAT) in collaboration with major German banks, including Deutsche Bank, Commerzbank AG, and DZ BANK AG. The bond, with a maturity of one year, is part of Siemens' ongoing efforts to leverage blockchain technology for financial instruments.

Appold view: The trade was settled on Germany’s Central Securities Depository (CSD) and Clearstream.

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