weekly roundup – THE FED | SEC | BIG BANKS | PAYPAL UK CRYPTO

This week, there is crypto news from the big banks, the Fed and Paypal. We dive into these and the other industry news highlights below.

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WALL STREET

WELLS FARGO AND JPMORGAN TO LAUNCH PASSIVE BITCOIN TRUSTS

Wells Fargo and JPMorgan both registered a passive bitcoin trust with the Security Exchange Commission on Thursday. The two mega-banks separately partnered with NYDIG for the trusts, according to SEC filings.

In JPMorgan’s case, NYDIG would hold the cryptocurrency while the bank would be used as a sales agent. The trust will allow its wealthiest client base to utilise its crypto investment vehicle. In Wells Fargo’s case, the bank will also be working with FS Investments on the offering.

Wells Fargo said in a May report on “The investment rationale for cryptocurrencies” that it believes that cryptocurrencies have evolved into a viable investment asset. “There are over 9,000 cryptocurrencies, with $2.4 trillion in capitalisation, and this depth and breadth allow additional analysis of their trends,” the report said. “Short-term factors suggest further deepening of the market. We believe long-term supply and demand trends support further industry growth, the potential for further compression in price volatility, and a possible role as portfolio diversifiers.”

In a partnership with NYDIG, JPMorgan also filed for a passive bitcoin trust with the SEC on Thursday. 

JPMorgan originally became the first US mega-bank to give wealth management clients access to cryptocurrency funds through its advisors in June. Leading up to Thursday’s filing, the financial institution offered its passively managed bitcoin fund to in-house clients in early-August. This was two of many recent efforts by large financial institutions to try and adopt crypto-related services for their qualified clients.

US FLAG BUILDING

FED MAY START TO TAPER ASSET PURCHASES THIS YEAR

The Federal Reserve may start tapering asset purchases and scale back its easy-money monetary policies this year, minutes from the July Federal Open Markets Committee (FOMC) meeting show. 

Most Fed officials said that the central bank’s inflation expectations have been sufficiently met and there has been progress made toward reducing unemployment. 

“All participants assessed that the economy had made progress toward the Committee’s maximum-employment and price-stability goals since the adoption of the guidance on asset purchases in December,” the minutes read. “Most participants judged that the Committee’s standard of substantial further progress toward the maximum-employment goal had not yet been met.” 

In terms of tapering execution, committee members, who met in late July, vary in how they think about the timing, pace and type of tapering.

Committee members also discussed stablecoins in July. Officials remarked that these “new financial arrangements” lack structural maturity and exist within an “underdeveloped regulatory framework.”

The FOMC meets next in late September. Investors are also awaiting the Jackson Hole Economic Policy Symposium on 26th- 28th August, when central bankers, finance ministers, academics, and financial market participants from around the world will meet to discuss issues related to economic policy.

pylon

CRYPTO’S DEFI PROJECTS AREN’T IMMUNE TO REGULATION – SEC’S GARY GENSLER

According to an interview with the Wall Street Journal last Wednesday, Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC) has said that the agency could regulate decentralised finance DeFi projects. Specifically, DeFi projects that reward participants with valuable tokens or similar incentives could be regulated, no matter how “decentralised” they say they are, Gensler confirmed.

“There’s still a core group of folks that are not only writing the software, like the open source software, but they often have governance and fees,” said Gensler. “There’s some incentive structure for those promoters and sponsors in the middle of this.”

According to Gensler, the term DeFi is “a bit of a misnomer” because these platforms “facilitate something that might be decentralised in some aspects but highly centralised in other aspects.”

Some DeFi platforms can be compared with peer-to-peer lending platforms, which are regulated by the SEC, said Gensler.

BUILDING WITH ARCHITECTURAL FOCUS

COINBASE TO LAUNCH CRYPTO EXCHANGE IN JAPAN WITH MITSUBISHI UFJ

As reported in The Block, Coinbase is entering the Japanese market through its partnership with Japanese financial giant Mitsubishi UFJ Financial Group (MUFG).

Coinbase said in an announcement on Wednesday that it is launching Coinbase Japan as part of its global strategy in one of the largest markets by crypto trading volumes. 

“In line with our global strategy, we will aim to be the easiest to use and most trusted exchange in Japan that’s fully compliant with local regulations,” the firm said in the statement. “That’s why we are also excited to announce our partnership with MUFG – one of the largest banks in Japan serving 40 million Japanese customers.”

The partnership will give Japanese customers the access to fiat on- and off-ramp through MUFG’s Quick Deposit services, according to the statement.

The exchange said it will initially support the trading for five largest crypto assets by trading volume with more assets to come.

magnifying glass

DELOITTE SURVEY ON BLOCKCHAIN AND DIGITAL ASSETS: CRYPTO WILL RIVAL OR REPLACE FIAT

Deloitte’s annual global blockchain survey has found that 76% of finance professionals think that digital assets “will serve as a strong alternative to, or outright replacement for, fiat currencies in the next 5–10 years.”

The firm surveyed more than 1,000 finance professionals based in Brazil, China, Hong Kong, Japan, Singapore, South Africa, the United Arab Emirates, the United Kingdom, and the United States. It was conducted between ​​March and April, the heyday of the cryptocurrency market this year.

81% of respondents agreed that the technology is “broadly scalable and has achieved mainstream adoption.” 73% thought that their business should adopt blockchain and digital assets, and would lose a competitive advantage if they do not adopt the technology.

earth global network

CRYPTO VENTURE FUNDING – ALL-TIME HIGH

There is a record amount of venture capital money pouring into the digital asset space, and non-fungible tokens (NFTs) may come out on top. As of mid-June, an all-time high of $17 billion has been invested into crypto projects in 2021. 

“We have many data points that show that institutional interest in this space is large and growing still, and venture funding is one really obvious one,” said Alex Thorn, head of firm wide research at Galaxy Digital. “We’ve seen enormous funds raised.” 

Dan Tapiero’s 10T Holdings and Akuna Capital have invested $100 million in bitcoin futures exchange Deribit, one of the world’s biggest crypto options exchanges by volume, confirmed the transaction occurred but declined to state its current valuation.

FinTech Collective, a venture capital firm investing across fintech and digital assets, has raised $250 million in fresh capital; $200 million will be poured into the firm’s existing early-stage strategy, which targets fintech and digital assets, with $50 million assigned to a newly formed DeFi fund.

“There is a growing disparity between the median valuation in crypto and the broader VC space. It’s massive. It’s about 50% higher,” said Thorn. “It’s an enormous explosion and that’s a recent phenomenon. Just this year, basically.” 

GALAXY

GALAXY LAUNCHES DEFI INDEX TRACKER FUND

As per Coindesk last Thursday, Galaxy Digital has confirmed the launch of a DeFi Index Fund, a passively managed vehicle that tracks the performance of the newly launched Bloomberg Galaxy DeFi Index.

The Galaxy DeFi Index Fund seeks to provide institutional investors access to returns based on the performance of DeFi tokens. It offers exposure to major decentralised lending and exchange platforms like Uniswap, Aave, Maker, Yearn and others.

Explosive yields being created on cryptocurrencies and stablecoins placed on decentralised lending platforms have caught the attention of institutions, and an index fund tracking a benchmark backed by heavyweight names like Galaxy Digital and Bloomberg is an attractive proposition.

According to a statement in the press, Steve Kurz, Galaxy Digital’s head of asset management, said:“The blockchain-based infrastructure behind DeFi is maturing at an accelerating rate and clear examples of how this new technology can disrupt financial services are emerging in real-time. Our unique DeFi Index Fund provides investors with institutional-grade exposure to the future of financial services.”

MICROPHONE

PAYPAL LAUNCHES CRYPTO TRADING SERVICE IN UK

ICYMI: PayPal has launched its crypto service in the U.K. Starting next week, the company will allow its users in the country to buy, sell, and hold cryptocurrencies. The U.K. is the first international market PayPal has expanded into for its crypto service after the U.S. launch last October. Like its U.S. users, PayPal’s U.K. customers will also be able to trade and hold four cryptocurrencies: Bitcoin (BTC), ether (ETH), litecoin (LTC), and bitcoin cash (BCH).

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