1st July 2023 > > ETFs, Australia and the UK.

tl;dr

The WSJ tries to ruin our party but fails to do so. Australia is in two minds about a CBDC. The UK makes great strides towards creating a favourable regulatory framework for cryptos, challenging the EU’s current legislative hegemony.

Market Snap

Market Wrap

A breach of $31k was rather spoiled by a report in the WSJ that the SEC had rejected the recent spot BTC ETF applications filed on behalf of Blackrock, Fidelity, and others, for not being “sufficiently clear and comprehensive”. In mere moments, BTC was trading below $30k.

Personally, I think the sell-off has been overdone. The SEC comments have been made regarding the SSA (“surveillance sharing agreement”) – the new Blackrock clause specifically designed to mitigate the fears that the SEC harbours about the potential for market manipulation of the spot price of BTC.

Putting aside the logical inconsistency that the SEC doesn’t care about this issue with regards to futures-based ETFs, this latest development suggests to me (whilst potentially wearing the deepest shade of rose-tinted glasses) that the concept of the SSA has not been rejected by the SEC, but that the SEC needs more information about how it will work in practice.

Blackrock has an enviable record of working with the SEC to gain approval of ETF applications, having failed just once to do so. Given that the SEC’s response has been made so soon after these new applications (or amended application for ARK Invest) it seems to me that the SEC is taking the SSA clause seriously enough to warrant raising the probability of an approval for a spot BTC ETF soon.

Curious Cryptos’ Commentary – Australia’s CBDC

Dilip Rao is research program director at the Digital Finance Cooperative Research Centre. This body has been collaborating with the Reserve Bank of Australia to explore the feasibility of a CBDC. Rao has given us some insights into his thought processes during the pilot project.

A key element was to look at 14 possible use cases for an AUD CBDC, but it seems that maybe little progress has been made. According to CoinTelegraph, Rao said “ … the question is yet to be answered why individuals would want or need to use one.”

Hear, hear, to that conclusion sir.

He also pointed out that legislation would be required in Australia to implement a CBDC:

“You have to go through … with legislation to make sure that people were comfortable with what you were doing.”

At this point it seems that Australia is ready to join the US, Switzerland, and Slovakia, in fighting the good fight against CBDCs.

…

Then he goes and ruins it all:

“It may not solve a problem today, but maybe it solves a problem the day after tomorrow.”

A solution in search of a problem. Where have I heard that criticism before?

Curious Cryptos’ Commentary – The UK

The Financial Services and Markets Bill 2023 has been given the Royal Assent and is now the law of the land.

It has been claimed that this bill “…represents (a) major milestone in shaping a regulatory framework for UK financial services outside of the EU.”

Which may or may not be to your taste, but that need not concern us here. What does matter to us are some late changes that affect cryptos in the UK.

Stablecoins are now explicitly regulated in the bill’s “oversight of payment regulations”. This is undoubtedly a good thing. A collapse of any of the large stablecoins would be a seismic event greater than any seen before. The more transparency and regulation over all asset-backed stablecoins is welcome, as well as the impossibility of gaining approval for an algorithmic stablecoin (Terra/LUNA ring any bells?).

Crypto as an asset class is now characterised as a regulated activity. This isn’t the same debate as in the US about which cryptos are securities or commodities but what it does mean is that regulatory oversight will now be required for all crypto activities.

This is potentially a very good thing, or potentially a very bad thing. It all depends on what rules and regulations will be demanded by the regulator, but we won’t know the details for a year or so. But on the upside, responsible crypto firms can now engage with the regulator to help shape suitable rules that allow for consumer protection without stifling innovation and development. Or so we hope at any rate.

The final change is that there will be supervision over all crypto promotions. When I first saw that advert “When you see BTC on the side of a bus you know it’s time to buy” my only conclusion was that all crypto promotions needed to be supervised immediately. That kind of irresponsibility needs to be stamped on and stamped on hard.