Appold Market Watch - Week ending 25 October 2024

Market Update & Industry News - Week ending 25 October 2024

🔷 The UK Financial Conduct Authority (FCA) released clarification on its digital asset registration process, focusing on strict standards to prevent money laundering and other financial crimes. The FCA maintained that setting high standards ensures safety and sustainable growth within the digital assets sector. The FCA encouraged firms to engage early through pre-application meetings and emphasised that each application is assessed individually.

Appold view: The FCA’s approach is quite contentious. While traditional finance is subject to rigorous oversight with clear rules, the regulatory evolution in the digital asset sector does add extra layers of complexity, although many argue that the FCA approach is too excessive. This is not good for attracting business to the UK, something we are seeing acutely from our engagements where firms seek alternative jurisdictions which are equally tough but transparent and fairer in their approach.

🔷 Global payment processor, Stripe, announced it will acquire stablecoin infrastructure provider, Bridge. The $1.1bn acquisition aims to integrate Bridge’s technology into Stripe’s existing platform, enhancing its capabilities for blockchain and digital asset transactions.

Appold view: While competitors like PayPal have announced their own stablecoins, which have gained some traction, Circle’s USDC remains a popular stablecoin with a $34bn market cap. Stripe announced the onboarding of USDC in 2022, and the Bridge deal should enable Stripe to offer more options, including Tether.io (USDT), which is by far the most active stablecoin with a market cap of around $120bn.

🔷 Digital asset exchange, Kraken Digital Asset Exchange, announced plans to launch its own blockchain for DeFi trading, borrowing, and lending early next year to expand its platform. This move aligns with Kraken’s greater strategy to innovate within the digital asset space.

Appold view: This makes sense for strategic growth, particularly where DeFi has achieved substantial popularity with retail users, with increasing volumes and innovation in product offerings. However, without further regulatory clarity and institutional-grade market infrastructure, adoption among traditional financial institutions will likely remain cautious and incremental.

🔷 Ripple filed an appeal in the U.S. Court of Appeals for the Second Circuit, challenging an SEC ruling that deemed Ripple’s institutional sales of XRP to be securities transactions. The appeal contests the court’s application of the Howey test, which is used to assess if a transaction qualifies as an investment contract. 

Appold view: A complicated and ongoing case, the basis of which has affected many digital asset companies and issuers.

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