In the Gray: Weekly News & Insights
Gray Market News
Jul 26, 2023
Weekly News & Insights
Crypto Staking in 2023
In recent news, there have been significant developments in the regulation of crypto staking services in the United States and other countries. Coinbase, a major US-based crypto exchange, announced a temporary suspension of staking services in certain states due to legal actions taken by local regulators. The US SEC has filed a lawsuit against Coinbase for allegedly offering unregistered securities, prompting regulatory bodies in 10 states to initiate their own legal proceedings.
Both Singapore and Thailand are also taking steps to regulate the crypto industry, with a focus on staking services. The Monetary Authority of Singapore (MAS) aims to restrict Digital Payment Token (DPT) service providers from facilitating lending and staking of DPT tokens by retail customers. In Thailand, the SEC has announced a complete ban on lending and staking services.
Additionally, the SEC charged Kraken, another crypto exchange, for failing to register its staking-as-a-service program. Kraken agreed to settle the charges by discontinuing its staking services and paying a $30 million penalty. The SEC's concern was the lack of full and fair disclosure of the risks associated with staking to investors.
While these regulatory actions may have an impact on the crypto markets, it is important to note that not all staking services are affected. Direct staking, where users have control over their assets and rewards are determined by the blockchain, may continue to be an option for investors.
Industry experts believe that despite regulatory crackdowns on pooled staking services, investors may turn to direct staking options, which are becoming more user-friendly and secure. However, there are concerns that such regulatory uncertainties may encourage innovation to move offshore, potentially leading to the loss of consumer protections provided within the US.
Overall, the future of the crypto staking industry remains uncertain, and there is a call for regulators to provide clarity and work with industry partners to build critical infrastructure for a more inclusive financial system without stifling technological growth.
US SEC Processing BTC ETF Applications
On July 18 and July 19, the US SEC officially started processing the applications for a Spot Bitcoin ETF. Initially, the SEC rejected the first round of ETF applications, citing that they were "inadequate", and "aren't sufficiently clear and comprehensive". BlackRock responded to the rejection by making some changes to the application and adding Coinbase as their custodian for the Bitcoin in order to satisfy their surveillance-sharing agreement.
The SEC has published documents seeking public consultations last week on BTC ETFs. The SEC has started the process of making determinations related to the approval or rejection of six BTC ETF applications. The six ETF applications that are on the Federal Register are currently BlackRock, Bitwise, VanEck, WisdomTree, Fidelity, and Invesco. Initially, this sets a deadline of 45 days for a response by the SEC, but that can be extended to as long as 240 days.
Bitcoin Supply on Exchanges Continues to Shrink
Several Bitcoin (BTC) analysts are pointing out that the supply of BTC is steadily decreasing since July of 2021. Less than 2.1 million bitcoin are available on exchanges as of June 20th. This brings in a 5 year low for BTC available supply which has not been seen since 2018. Up until the 3rd halving (05/11/2020), the supply balance on exchanges was steadily increasing over time. Since the 3rd halving event, the BTC supply balance has decreased.
Many analysts are saying that the sharp decline in BTC supply is a result of long-term holders and will spark a potential supply shock to the BTC ecosystem. As reported last week, approximately 70% of all BTC has not moved in 1 year despite the longest bear market on record, and nearly 55-60% of all bitcoin have not moved in two or more years. More than 1 million individual wallets held by retail investors have 1 or more BTC.
Sooner or later, the market realization of BTC becoming rarer and more desirable could positively impact the price of the asset as the number of circulating BTC continues to shrink rapidly.
Bitcoin, as well as the rest of the crypto market, is highly influenced by news and geopolitical situations. Therefore, it's crucial to keep an eye on current events and global affairs that could potentially impact the market.
That's it for this week. Let's stay vigilant and smart in our trades, and here's to a successful week!
Important News This Week
Fir Tree Provides Update on GBTC Litigation - Fir Tree
Regulation and Taxation:
Aug 11 - SEC response date for Ark 21Shares ETF
Sept 1 - Expected SEC response date for BlackRock iShares ETF