Bitcoin ETF Proposals Surge as Nasdaq and BlackRock Team Up, SEC Remains Open to Talks – Critical Developments to Shape the Market
Bitcoin and cryptocurrencies concluded a notably positive week, with several critical developments taking center stage. These developments could potentially influence the market’s direction in the near future. Let’s delve into the most significant updates from the past week.
Nasdaq, in collaboration with BlackRock, submitted a proposal for an Ethereum spot exchange-traded fund (ETF) to the U.S. Securities and Exchange Commission (SEC) on November 10. This move marks a significant milestone, as it showcases the growing interest in expanding the availability of crypto-related investment products. The proposed Ethereum ETF will utilize the services of Coinbase Custody Trust Company as its custodian and will be based on the CME CF Ether-Dollar Reference Rate. BlackRock had previously filed for the iShares Ethereum Trust asset. This recent development further highlights the growing acceptance and recognition of cryptocurrencies in mainstream finance.
In a related development, the SEC is reportedly engaged in discussions with Grayscale Investments regarding its trust product GBTC’s application to convert into a spot Bitcoin ETF. The Chief Legal Officer of Grayscale, Craig Salm, indicated that the company is actively involved in constructive dialogues with trading and market divisions. These discussions align with the SEC’s efforts to advance the application process, following previous rejections based on subjective reasons. While the SEC declined to comment on these latest discussions, they signify a potential shift in the regulatory landscape surrounding Bitcoin ETFs.
Meanwhile, SBI Holdings, a prominent Japanese financial giant, has announced its plans to launch a fund that will focus on investing in ventures related to Web3, artificial intelligence, metaverse, and other innovative technologies. The fund’s expected size is approximately ¥100 billion (around USD 663 million), with investments ranging from several hundred million to one billion yen in each company. Notable institutions, including Sumitomo Mitsui Banking Corporation, Mizuho Bank, Nippon Life Insurance, and Daiwa Securities Group, have committed to investing over ¥50 billion in the fund. This initiative demonstrates the growing interest in emerging technologies and the potential for significant investments in these sectors.
In another significant development, French regulatory authorities are considering making compliance and security certificates mandatory for smart contracts. The French Prudential Supervision and Resolution Authority (ACPR) revealed a proposal that would require DeFi developers to rewrite most smart contracts to obtain certification from regulatory authorities. Smart contracts that do not adhere to these new regulations could be marginalized, while suitable ones would receive certification. This move aims to enhance the overall security and compliance of smart contracts within the decentralized finance space.
On the cybersecurity front, ICBC Financial Services LLC (ICBCFS), a subsidiary of the Industrial and Commercial Bank of China (ICBC), fell victim to a ransomware attack on November 8. The attack resulted in partial system disruptions and briefly impacted the U.S. Treasury market, leading to the inability to fulfill certain transactions. The attack is believed to be the work of a Russian-linked hacker group known as LockBit, which has previously targeted organizations such as Boeing. LockBit employs malicious software to encrypt victims’ files and demands ransom payments in cryptocurrencies like Bitcoin, Monero, or Zcash.
In the crypto exchange realm, Binance has officially launched the Binance Web3 wallet within its app. The wallet operates using a unique custody mode and integrates with Binance Bridge, enabling users to transfer assets across different blockchain networks. It also provides access to decentralized trading services. Notably, the Binance Web3 wallet adopts a self-custody model, leveraging Multi-Party Computation (MPC) technology that eliminates the need for private keys or mnemonic phrases. While currently supporting 37 blockchain networks, the wallet does not yet support Bitcoin.
During the recent Binance Blockchain Week event, CZ, the CEO of Binance, emphasized the company’s significant interest in the decentralized finance (DeFi) sector. CZ highlighted the need for improved security and usability in existing DeFi wallets and committed to allocating more resources to enhance the Binance Web3 wallet. He advised industry participants to focus on building user-friendly products rather than getting caught up in price fluctuations and market cycles. CZ also shared his anticipation of significant developments in the crypto sector following the Bitcoin halving event scheduled for May 2024.
Binance continues to maintain transparency with its monthly reserve reports. The latest report, as of November 1, shows a slight decrease in BTC reserves, a moderate increase in ETH reserves, and a notable increase in BNB reserves compared to the previous month. The user’s BTC reserves stand at 584,000 BTC, ETH reserves at 3,910,000 ETH, and BNB reserves at 31.21 million BNB. Notably, user’s USDT reserves decreased slightly to 15.27 billion USDT.
SEC Chairman Gary Gensler mentioned at the Washington D.C. FinTech Week event that operating within a legal framework is possible for platforms like FTX, provided their leadership has a clear understanding of the law. This statement suggests that FTX and similar platforms might have an opportunity to operate legally if they adhere to regulatory requirements.
According to reports, three companies, including Tom Farley (former president of the New York Stock Exchange), financial technology startup Figure Technologies, and cryptocurrency venture capital firm Proof, are competing to acquire the remaining assets of FTX through the cryptocurrency exchange platform Bullish. The winner will have the opportunity to relaunch the trading platform after the expected bankruptcy proceedings in the coming year.
FTX has requested permission from the court to sell approximately $744 million worth of Grayscale and Bitwise trust assets through an investment advisor. This move aims to facilitate future cash distributions to creditors by allowing for the swift sale of these trust assets at the opportune time.
Celsius Network, a cryptocurrency lending company, has received approval from the bankruptcy court to transform into a Bitcoin mining company. Celsius plans to redistribute around $20 billion worth of assets, including Bitcoin, Ethereum, and shares in a new entity, to its creditors. The platform aims to begin distributing these assets early next year, pending SEC approval. If the transformation plan fails to receive approval, Celsius may go into liquidation.
Circle, the issuer of the USDC stablecoin, is reportedly considering going public in 2024, although the valuation has not been determined yet. The company’s previous plans to go public through a SPAC merger in 2022, with an estimated valuation of $9 billion, did not materialize. Circle boasts notable investors, including Goldman Sachs and BlackRock. Despite experiencing a drop in market value since June 2022, the USDC stablecoin has reached a market cap of up to $56 billion.
In its third-quarter financial report, Robinhood revealed a 55% decrease in cryptocurrency-related revenue compared to the same period last year, amounting to $23 million. The report also mentioned Robinhood’s intentions to expand cryptocurrency trading to the European Union and establish a cryptocurrency brokerage in the United Kingdom.
Looking ahead, investors should keep an eye on two crucial data points in the coming week: U.S. inflation data and the Producer Price Index (PPI) data. These releases on November 14 (inflation data) and November 15 (PPI data) have the potential to create volatility in the Bitcoin and cryptocurrency markets.
Furthermore, the SEC will decide on spot Bitcoin ETF applications filed by Franklin Templeton and Hashdex on November 17. While the SEC has the authority to defer these decisions, ETF analysts anticipate the approval of spot Bitcoin ETFs before 2024, despite possible delays.
Overall, the past week has seen significant advances in the crypto space, from the submission of Ethereum ETF proposals to discussions surrounding Bitcoin ETFs and various developments in DeFi, cybersecurity, and industry partnerships. These critical developments have the potential to shape the future trajectory of the market and solidify the growing acceptance of cryptocurrencies in mainstream finance.