BitGo: Crypto Water Cooler — Apr 26
GM. It’s Wednesday, April 26.
Newsmakers
Watershed Moment: EU Passes the First Comprehensive Regulation
In a historic vote, the European Union Parliament passed the Markets in Crypto Act (MiCA) on April 20, 517–38. MiCA, the most?comprehensive industry regulation to date, will be formally approved in July and take effect?in stages?through at least July 2024. The Parliament also passed the Transfer of Funds regulation, which requires companies to monitor, record, and share information on crypto transactions between senders and recipients. In?a statement, the EU Parliament said that together these two pieces of legislation will “trace crypto-asset transfers, prevent money laundering, as well as [provide] common rules on supervision and customer protection.” MiCA gives the European Securities and Markets Authority (ESMA) the ability to restrict or ban non-compliant firms.
Although it imposes many new rules on platforms, token issuers, and traders, unified legislation across the bloc is expected to make the EU more attractive to the industry. Once MiCA takes effect, crypto companies with a license in one EU country will be able to “passport” it to others among the twenty-seven member countries, providing a streamlined path to compliance in multiple jurisdictions. It?may also attract banks?that were reluctant to deal in crypto.
The legislation was widely hailed for providing the kind of clear framework the industry needs to continue to innovate and grow. However, regulatory certainty may still be a ways off. Work on MiCA began in 2018 and it is already outdated due to recent firm failures and new developments in crypto lending, DeFi, and NFTs, suggesting that a second round of legislation is likely. Another potential bugbear: each of the twenty-seven member states will?enforce the law?in their own countries, which could lead to unevenness or undercutting to draw crypto firms to a jurisdiction.
Read more →Decrypt
U.S. May Be Back to the Drawing Board on Stablecoin Legislation
While the EU Parliament was approving comprehensive, jurisdiction-wide rules, the U.S.’s best hope of passing at least one piece of its piecemeal approach to legislation in 2023 floundered in committee.
Last year, the collapse of the Terra algorithmic stablecoin spurred legislators to action with legislators on both sides of the aisle expressing confidence that a?bill could be passed in 2022. Two bills were introduced:?The Stablecoin TRUST Act of 2022?by Sen. Patrick Toomey (R-PA) and the?Stablecoin Transparency Act?by Rep. Trey Hollingsworth (R-IN) and Sen. Bill Hagerty (R-TN). Work was also begun on a third, bipartisan bill. Then FTX imploded, paralyzing lawmakers. The bipartisan “McWaters”?stablecoin regulatory bill?— sponsored by Rep. Patrick McHenry (R-NC) and Rep. Maxine Waters (D-CA) — was finally released by the House Financial Services Committee last week with only minor changes.
But a lot has changed since then — in the industry and in Congress. Leading dollar-backed stablecoin Circle depegged during the recent banking crisis, and committee chairmanship flipped from Waters to McHenry. When the bill was discussed in a?hearing?on April 19,?cracks in bipartisan?support appeared. Waters said that the bill did not account for lessons from the FTX collapse, and that issues of federal versus state oversight and overlap with other proposed legislation needed to be resolved. Whereas she had previously indicated that the bill was ready to go, in the hearing she suggested it be?completely revamped.
For his part, McHenry admitted the bill had many shortcomings. However, both he and Waters expressed confidence that a viable bill could be constructed. If a bill makes it through the House, it may face stiff opposition in the Senate, where Banking Committee Chair Sherrod Brown (D-OH) has expressed concerns about stablecoin risks and crypto in general.
Read more →Barron’s ($)
Meme Coin Renaissance Brings Fun, Profit, and High Gas Fees
If you spent any time in the Twittersphere lately, you may have seen $PEPE trending. As?covered here last week, a meme coin called PEPE (yes, after the frog) leapt to a 500X gain, accruing a market cap of $86MM in five days. Other meme coins were quickly hatched, including?WOJAK, which hit $10MM in market cap in a day. While PEPE’s website says that it is challenging dog-themed meme coins like Dogecoin and Shiba Inu, the wallet holding the most PEPE also?holds $1.1M of Shiba Inu and $1M of Floki Inu. And of course, a hybrid “Pepe Inu” coin has already sprung up.
While the trading frenzy brought back memories of 2021’s dog-coin mania and generated quick profits for some, it wasn’t all fun and games. Boosters crowed about Ethereum generating?28x the daily revenue of Bitcoin?and?growing its usage. But gas fees?skyrocketed?to a new multi-month high as more newly minted meme coins clogged the network, laying bare its scalability issues and leading to complaints about?$40 gas fees while trying to buy a $20 NFT.
An additional concern is that the concentration risk and low liquidity for PEPE means prices could plummet if a whale liquidates. One Twitter user opined that a few thousand users trading meme coins was a far cry from the “future of finance.” Ryan Watkins, co-founder of crypto-focused hedge fund Syncracy Capital described the meme coin renaissance as a double-edged sword. “On the one hand, meme coins make crypto more fun and accessible,” he said. “On the other, they reaffirm many skeptics’ criticisms that the industry’s only use case is gambling.”
Read more →The Defiant
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Midweek Market Pulse
Total Market Cap:?$1,149,033,537,180–7 day change as of Tuesday 4/25/23 Noon EST: -9.85%
Source: Messari
Crypto’s scorching 2023 performance cooled down this week with?Bitcoin (BTC, -9.8%)?and?Ethereum (ETH, -13.6%)?both slumping. Bitcoin had its worst week since November while Ethereum’s losses?erased the price gains it made following the Shapella upgrade. Other top alt coins followed their decline with most falling by double-digit percentages.
Earlier this month, the?Crypto Fear & Greed Index, a popular sentiment indicator that ranks those emotions on a 0–100 scale, veered its?farthest into ‘Greed’ since BTC peaked in late 2021, so perhaps a selloff was inevitable after. The index?is now at a more “Neutral” 53.
Traders and investors are also likely awaiting the release of key macroeconomic data later this week, including GDP and unemployment numbers as well as PCE inflation stats for March. The Fed’s upcoming meeting on May 2–3, in which?most observers expect the Fed to raise interest rates again, also looms large.
The Last Word
zkEVM
noun
: Zero-knowledge Ethereum Virtual Machine
/ A type of Ethereum Virtual Machine that generates zero-knowledge proofs for verifying smart contracts.
About BitGo
BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.
Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.
Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.
BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.
Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 1500 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.
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