Token Chronicle - Week 1 October 2024

Top cryptos

Meme of the week

Quick bites:

• Dan Gallagher, Chief Legal Officer at Robinhood, is a top contender for SEC Chair if Trump wins in 2024! Previously a Republican SEC commissioner, he’s critical of current digital asset regulations. Robinhood Crypto is facing potential SEC charges.

• Vitalik Buterin donates 100 ETH to Tornado Cash developers' defense fund, marking his third contribution. With over 327 ETH ($800k) raised, Buterin continues to back privacy rights in crypto.

• HBO's new documentary hints that Len Sassaman, a cryptographer and privacy advocate, could be Satoshi Nakamoto. Sassaman worked on privacy tech and passed away in 2011—the same year Satoshi disappeared.

• The IMF is urging El Salvador to narrow its Bitcoin law and limit public sector exposure to crypto.

• The U.S. added 254,000 jobs in September, surpassing the expected 150,000, with unemployment falling to 4.1%. Strong job growth eases recession fears and decreases the likelihood of the Fed implementing a major rate cut in November.

• Whales are accumulating Bitcoin at unprecedented rates, despite the price decline, says CryptoQuant's Ki Young-Ju. New whale purchases indicate anticipation of a bull run.

• Starting next year, Swift will trial digital asset and currency transactions with banks in North America, Europe, and Asia. This is Swift's first real-world blockchain settlement test, building on previous experiments with Chainlink to connect public and private networks.

Market update: Slight drop in BTC due to the geopolitical context (Iran, Lebanon, Israel), followed by a strong recovery around $63K as the U.S. economic context is favorable (stocks are also rising), with reassuring employment figures. Slight decline again to around $61K at the start of the week. Other cryptos are following more or less the same trend. The recent drop is partly linked to China's stimulus plan, which had boosted the economy and stocks so far but seems to lack substance in the latest announcements from the commission. We are seeing "higher highs & higher lows" trends, as the "experts" say. Several key events to watch this week: FOMC, CPI inflation, and BlackRock earnings on Friday.

Main points this week:

International Point:

1. This week, Gemini announced to its clients its upcoming exit from Canada. Although the cryptocurrency exchange lasted longer than some of its competitors, this departure adds to the list of players choosing to leave this jurisdiction.

2. The United Arab Emirates announces a tax exemption on cryptocurrency transfers and conversions.

3. Binance arrives in Argentina, a country opening up to cryptocurrencies: The cryptocurrency exchange Binance continues to make significant moves on the global stage, with a new victory in Argentina marking its 20th regulatory milestone. In a context where Argentinians' trust in institutions is shaken, this integration raises questions about the role of the state and cryptocurrency regulation in Argentina.

4. Japanese company Metaplanet announced on Monday that it has once again increased its Bitcoin reserve by purchasing an additional 109 BTC. Its treasury now amounts to more than $40 million.

Regulation:

1. Tether recently collaborated with the U.S. Department of Justice to freeze more than $6 million in USDT, linked to a trust scam in Southeast Asia. This cooperation highlights the company's commitment to combating illicit use of cryptocurrencies, but also reveals the blockchain's lack of censorship resistance. Since its first collaborations with authorities, Tether has been involved in over 180 investigations across 45 jurisdictions, freezing $1.8 billion, redistributing more than 128 million USDT to legitimate owners and authorities, and voluntarily blocking 1,850 wallets linked to illicit activities worldwide.

2. Less than 2 weeks ago, Telegram CEO Pavel Durov revealed that the IP addresses and phone numbers of messaging app users could be transferred to authorities, causing widespread surprise. However, Telegram has been providing this data for several years. This revelation shocked many users, as the app was previously known for its privacy and confidentiality, leading to an outcry on social media.

3. On Wednesday, the SEC created a new twist in its battle with Ripple (XRP) by appealing the ruling made in August. Yet Ripple was fined $125 million.

4. Gurbir S. Grewal, the director of the SEC’s Enforcement Division, resigned on Wednesday. During his 3-year tenure, he pursued more than 100 actions against players in the crypto ecosystem. His official departure is scheduled for October 11, and Sanjay Wadhwa, the current deputy director, will take over the position.

5. The UAE is enhancing its virtual asset regulations.VARA recently tightened rules on financial promotions,requiring disclaimers in ads to highlight risks.This aligns with global standards for digital asset consumer protection. Dubai’s DFSA also released a guide on crypto asset reg

6. The Securities Commission Malaysia (SC) announced three initiatives, including a regulatory sandbox for testing tokenized products, a tokenized bond pilot with Khazanah Nasional, and guidance on tokenization risks for intermediaries.

Institutional:

1. Robinhood Crypto launches cryptocurrency transfers in Europe, allowing its users to freely manage their assets via external wallets. This strategic expansion builds on the growth of the European crypto market, reinforced by the favorable regulatory framework of the European Union, particularly with the MiCA regulation.

2. After Bitcoin (BTC) and Ethereum (ETH) ETFs, could Ripple (XRP) be next? This is the hope of Bitwise, which has just filed an application for approval by the SEC.

3. Bank of America experienced a major outage, rendering the accounts of thousands of customers inaccessible. This disruption comes just weeks after Warren Buffett sold $6.2 billion worth of bank shares through Berkshire Hathaway, fueling speculation about potential internal weaknesses. As a result, some of the bank's 69 million customers encountered difficulties accessing their accounts, while others, although able to access their accounts, saw a zero balance.

4. Grayscale, the crypto fund giant, announced the launch of the Grayscale Aave Trust, which will provide exposure to the AAVE token, further strengthening its position in the digital asset market. This new product fits into a broader diversification strategy after the success of its flagship Bitcoin and Ether-focused funds. The product, aimed at accredited institutional investors, seeks to offer direct exposure to AAVE, the governance token of the decentralized finance (DeFi) protocol of the same name.

5. More than a year after the launch of its stablecoin PYUSD, PayPal has finally used it to make a transaction. For the payments giant, this is an opportunity to prove that PYUSD can be used for daily settlements. On September 23, the American online payment service settled a bill with the financial audit and advisory firm Ernst & Young (EY) using its own cryptocurrency.

6. As geopolitical tensions between Iran and Israel intensify, J.P. Morgan suggests that investors might turn to gold and Bitcoin to protect their capital. These assets are considered safe havens in the face of geopolitical uncertainty, as part of what the bank calls the “debasement trade.” The concept of the “debasement trade” reflects an investment strategy where distrust of traditional currencies, heightened by global tensions and economic policies, drives investors to diversify their portfolios by favoring assets independent of governments and central banks.

7. Visa introduces VTAP, a platform designed to allow banks to issue and manage stablecoins. BBVA, a major multinational bank based in Spain, is one of the first institutions to adopt this new Visa technology. Among the advantages of this solution, VTAP enables "advanced programmability", allowing banks to use smart contracts to automate various financial processes, such as managing credit lines or settling tokenized goods in real-time.

Funding and Partnerships:

1. OpenAI, the company behind ChatGPT, raised $6.6 billion in a funding round led by Thrive Capital, bringing its valuation to $157 billion. This investment strengthens Sam Altman's company in artificial intelligence (AI) research and potentially precedes its IPO. Microsoft, a strategic partner of OpenAI, contributed around $750 million, adding to the $13 billion it had already invested in the company. Nvidia, for its part, invested $100 million, while SoftBank put $500 million on the table.

2. Infinex, a new crypto startup by Synthetix founder Kain Warwick, raised $65.3M through a novel "patronage" fundraising model. The company sold "Patron" NFTs to VCs, angels, and the community, offering equal terms for all participants to gain a stake.

Tech:

1. Ethereum blockchain to soon become faster? Suggested by Ethereum community members, Ethereum Improvement Proposals (EIPs) play an important role in the development process of this blockchain. The latest EIP submitted by a well-known developer in the crypto ecosystem could take Ethereum to the next level. Over the weekend, Ben Adams, co-founder of Illyriad Games, the company behind the MMO of the same name, suggested his own Ethereum Improvement Proposal (EIP) under the name EIP-7781. This new blockchain improvement proposal aims to reduce the block time on the Ethereum network by 33%, bringing it from 12 seconds, as is currently the case, to just 8 seconds. Block time refers to the interval during which new blocks are finalized on the blockchain. EIP-7781 also aims to distribute bandwidth usage more evenly over time, which would reduce bandwidth requirements without having to further increase the number of blocks or blobs. This means that the Ethereum blockchain would be less likely to face data spikes, making it more efficient during periods of high activity. By reducing block time by 33%, Ethereum’s overall throughput could increase by about 50%, according to Ben Adams. Justin Drake, a researcher at the Ethereum Foundation, also approved the EIP on GitHub, stating that this proposal aligns with some of the goals recently suggested by Ethereum co-founder Vitalik Buterin.

2. MiCA: Tether (USDT) will modify its technology to adapt to the European market: The European MiCA regulation is strict for crypto-assets, especially stablecoins. After expressing concerns about the future of its USDT stablecoin in Europe, Tether seems to have found a solution. While the world's largest stablecoin was previously known for seeking to avoid regulations, it has been more compliant in recent years, including through full transaction monitoring made possible by a collaboration with Chainalysis.

Highlight: Let’s talk about a recent study about Bitcoin from Ark Invest:

ARK Invest envisions Bitcoin becoming a global settlement network—not just digital gold. It could revolutionize how banks and businesses settle transactions. Here’s the vision in key points:

Bitcoin as a Settlement Network:

• Always on, borderless: Unlike traditional systems (e.g., Fedwire), Bitcoin operates 24/7 globally without intermediaries. This allows for faster, cheaper cross-border settlements, bypassing middlemen.

• Censorship resistance: Bitcoin transactions cannot be blocked or reversed by third parties, offering complete financial sovereignty, unlike traditional systems under regulatory control.

• Massive potential: With the U.S. generating $1.3 quadrillion annually in settlement volume, if Bitcoin captures 10% of that market, its market cap could reach $1.5 trillion.

Bitcoin as a Safeguard Against Asset Seizure:

• Seizure resistance: Bitcoin’s decentralized nature means no government can control or confiscate assets. With proper key management, your wealth remains entirely under your control.

• Inflation protection: Bitcoin’s fixed supply shields wealth from inflation, a form of indirect asset seizure through currency debasement.

• Market opportunity: Allocating 5% of the global monetary base (excluding major currencies) to Bitcoin could raise its market cap to $2.5 trillion.

Bitcoin as Digital Gold:

• Scarcity & durability: Like gold, Bitcoin is scarce and durable, but it surpasses gold by being divisible, portable, and transferable in the digital economy.

• Verifiability & security: Bitcoin’s authenticity is instantly verifiable through its blockchain, making it more secure and harder to steal compared to gold.

• Market opportunity: With a global gold market worth $18 trillion, if Bitcoin captures 10%, its market cap could increase by $1 trillion.

Bitcoin as a Hedge in Emerging Markets:

• Protection from currency devaluation: Bitcoin provides stability as a store of value in countries experiencing hyperinflation and currency collapse.

• Decentralized & borderless: Operating beyond government control, Bitcoin offers financial freedom to individuals in unstable economies.

• Market opportunity: Capturing 5% of the monetary base in emerging markets could drive Bitcoin’s market cap to $1.2 trillion.

ARK Invest sees Bitcoin as the future of global value movement, with potential roles in safeguarding wealth, serving as digital gold, and providing financial solutions in emerging markets.

Let’s talk about: Geofencing

Great study to understand and learn to apply Geofencing for compliance within the crypto industry: A Practical Guide to Geofencing – Variant

It is, in simple words, to implement barriers around some countries and its citizens to avoid having to respect local regulations or dealing with certains countries. What comes to mind are countries targeted by international sanctions like North Korea or Russia but actually what is mainly described here is about the USA.

Indeed, as the crypto regulation framework in the USA is still confusing (not to say hostile) with current SEC approach, many companies try to avoid having US customers or to have any infrastructure/products that could be targeted by US regulators. Geofencing is then described here as the way "to ensure compliance with US law" (at least the time the country implements a clear and relevant set of regulations for the market, with US elections coming, we could see some changes soon).

The study depicts the necessity and the methods to (1) block all users located in the United States (even when KYC are not implemented) ; (2) use infrastructure location outside of the country (including servers) and (3) set up offshore entities to offer non-US products.

Some companies seem to under-comply by failing to geofence effectively, or not trying at all, despite the need to exclude a given crypto product or service from the territorial scope of U.S. law. Other companies seem to over-comply by geofencing products and services that they could have offered in the United States if they had used a different compliance strategy instead.

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Disclaimer: The information disclosed here does not constitute an investment advice ; it is for informational purposes only and does not constitute investment advice. You should do your own research while investing in crypto and only invest money you are ready to lose.