24th September 2024 > > Hamster Kombat & SAB 121.

tl;dr

Hamster Kombat update. The dismantling of SAB 121 has begun, with significant implications for the adoption of BTC as an investment asset by institutional investors.

Market Snap

Market Wrap

Bloomberg reports that “China Unleashes Stimulus Package to Revive Economy”.

Once one country starts with quantitative easing, then the others will follow. Global assets priced in dollars will all be heading northwards soon. Unfortunately, the strength of sterling works against us in the UK, but that is a direct consequence of the deliberately inflationary policies that the UK is embracing.

Curious Cryptos’ Commentary – Hamster Kombat

Now that allocations for the first airdrop have been made, let’s do a little totting up shall we.

I know you have been furiously involved since the early stages much like me. I reached level 7 out of 11, which is my best score on any type of video game except the original Space Invaders (I am proud to report I got so far that it reverted back to the beginning when I played on an old Commodore Pet in 1980 or so) and Galaxians. I could keep a 10p game of Galaxians going for nearly a quarter of an hour on the machine in my 4th form’s common room. That was probably the only time my peer group ever expressed anything complimentary about me, but that’s par for the course at an all-boy’s school in the eighties.

Anyway, I have been allocated just over 1,000 HMSTR of which 900 or so vest in just two days. What does this actually mean? Well, with 100bn HMSTR to be issued, I now own a whopping 0.000001% of the total. If the market cap gets to $10bn – about where ADA and TRON are right now – on launch I will be richer to the tune of $100. That high a valuation seems a touch unlikely to me. I suspect it will be about a tenth of that amount. We will know soon.

It transpires that the only way to get a decent fist of an allocation was by inviting friends to join in the game using the referral code, and I was never going to stoop that low for a freebie.

Ho hum.

Curious Cryptos’ Commentary – SAB 121

I know some think that this ongoing discussion about SAB 121 is somewhat dry, and of little interest. It is in fact of great import, which is why we return to it so often in this (almost) daily missive.

A quick recap might perhaps be in order.

SAB (Staff Accounting Bulletin) 121, issued by the SEC at Gensler’s direction, states that any regulated bank that provides custody of cryptos for its clients must record the market value of those cryptos as a liability on its balance sheet. In effect, the bank is forced to take a 100% capital charge against its clients’ assets, making it uneconomic for any regulated bank to provide crypto custodial services.

This is a unique situation – no other asset is treated in this fashion. SAB 121 is a key plank of Operation Choke Point 2.0, and it is a despicable example of regulatory overreach to stifle a perfectly legitimate business practice.

You will recall that both houses approved a bill to force the SEC to rescind SAB 121, but Joe Biden, clearly a supporter of Operation Choke Point 2.0, vetoed that bill.

For some institutional investors, the provision of custodial services from the regulated banking sector is a prerequisite for their involvement in cryptos. SAB 121 is a huge impediment to wholesale crypto adoption. Its removal would be a signal for another, very large and new source of demand to buy BTC. This is why SAB 121 is so important to all of us.

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Perhaps the cracks are beginning to show.

It has been reported that the largest custodian bank in the US, BNY Mellon, has received a “variation” from the SEC for the implementation of SAB 121. During Wyoming’s recent Select Committee on Blockchain, Financial Technology, and Digital Innovation Technology, Chris Land, general counsel for U.S. Senator Cynthia Lummis, had this to say:

“BNY is looking to get more involved in the crypto custody business. They had some problems with Staff Accounting Bulletin (SAB) 121, and the SEC has apparently given them some kind of variance from SAB 121 to move forward.”

The unfortunately named Paul Munter, Chief Accountant at the SEC, backs up this claim during a speech he made earlier this month, though you might notice that his forte is not to be found in making himself easy to understand:

“I would like to highlight certain observations from recent accounting consultations with entities where the staff in the Office of the Chief Accountant has not objected to an entity’s conclusion that its arrangement was not within the scope of SAB 121 and that it should not recognize a liability for an obligation to safeguard crypto-assets held for others.”

Wowzer.

The whole speech is worth a read, in my opinion:

https://www.sec.gov/newsroom/speeches-statements/munter-speech-safeguarding-crypto-assets-09-09-24

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Further piling the pressure on Gensler and the SEC, House Financial Services Committee Chair Patrick McHenry, Senator Cynthia Lummis, and forty of their colleagues have written to Gensler stating:

“Issuing staff guidance to impose policy changes is not appropriate and violates both the spirit and the letter of the Administrative Procedure Act. We urge you to rescind SAB 121 and work with Congress to ensure Americans have access to safe and secure custodial arrangements for digital assets.”

Gensler will of course ignore this reasonable request but the ongoing campaign to banish SAB 121 is starting to yield results, to the benefit of us all.