Welcome to the Genfinity Weekly News Recap! As you navigate through your busy work week, staying informed about the latest developments in the realm of Web3 and finance can be a challenge. However, we are here to provide you with an overview of the recent news you might have overlooked this week.
Genfinity Weekly News Recap
Bitcoin
The beginning of the week entailed positive sentiments, with rumors of more institutional investors starting to show interest in Bitcoin. Some analysts predicted a large influx of money, further speculated by the approval of spot Bitcoin ETFs and big investment firms like Merrill Lynch offering Bitcoin investment options to clients. Even a small allocation of funds from these institutions, in lieu of where they stand now, could significantly increase the price of Bitcoin.
You can read more about these “rumors” below!
The price of Bitcoin has been relatively stable recently, but there are factors that could cause volatility in the near future. The US Federal Reserve’s interest rate decisions and upcoming economic data will be closely watched by investors. Most analysts are optimistic about Bitcoin’s future, pointing out similarities between the current market and the 2021 bull market.
Bitcoin’s price has grown significantly in 2024, and if this trend continues, it could surpass other assets like silver, Amazon or Microsoft, for example, in market capitalization. The upcoming Bitcoin halving event, which reduces the number of new Bitcoins created, is another factor that could affect the price. Historically, Bitcoin has experienced price increases following halving events, but some analysts are concerned about a potential sell-off, or “sell the news” reaction, after the event.
Tuesday – Thursday
Bitcoin’s price dropped sharply on April 2, causing over $165 million in losses for traders using leverage. The price fell from nearly $70,000 to $66,000 in less than 30 minutes. Bitcoin and Ethereum holdings made up the majority of the liquidated positions, with Dogecoin and Solana also impacted. Cointelegraph reported that this price drop coincided with a shift in Bitcoin ETFs, which saw a net outflow of $86 million after a period of inflows. While some funds like BlackRock’s saw inflows, Grayscale’s large outflow led to the overall negative daily total.
On Wednesday, the price of Bitcoin recovered slightly after a dip near $64,500. This came right after news that the US government moved and sold a portion of Bitcoin they seized from Silk Road. While some worried this would spook the market, various analysts argued it wasn’t a significant amount and that the recent inflows into Bitcoin ETFs easily eclipsed the government’s sale.
Notably, Bitcoin rose in price Thursday, with this upward trend following dovish comments from the Federal Reserve Chair, who hinted at potential interest rate cuts later in 2024. The news caused some analysts to be optimistic about Bitcoin’s future price movement, pointing to technical indicators like the RSI crossing above 50 and a hidden bullish divergence. However, jobless claim data came in slightly higher than expected, and the actual likelihood of a rate cut remains uncertain.
At the time of writing, Bitcoin is hovering near 68.8K, up 4.6% on the daily.
Exchanges
In a major shift for the decentralized exchange dYdX, its community voted overwhelmingly to establish a foundation in the Cayman Islands. This foundation entity will replace the existing dYdX Operation Trust (DOT) and provide legal advantages to those involved with the protocol. The Cayman Islands, known for its more manageable regulations on digital assets, is a popular destination for crypto companies seeking to avoid stricter regulatory environments like the United States.
Reported by The Block, this move comes amidst growing scrutiny of DeFi protocols by U.S. regulators. The SEC’s recent actions against SushiSwap and ShapeShift highlight the potential legal risks faced by DeFi projects. By establishing a foundation in the Cayman Islands, dYdX hopes to safeguard its contributors from such threats. The Cayman Islands’ legal structure, including the concept of “separate legal personality” for foundation companies, offers protection to the personal finances of those managing the dYdX Foundation.
Blockchain businesses embrace the Cayman Islands
The Cayman Islands are a top destination for blockchain startups, offering a more attractive environment than the US. Here’s why:
- Favorable Regulations: The Cayman Islands embrace digital assets with clear regulations through the Virtual Asset (Service Providers) Act (VASP Act). This provides certainty for businesses while ensuring adherence to anti-money laundering (AML) standards.
- Streamlined Licensing: Blockchain businesses can obtain a VASP license or registration, or even a sandbox license for innovative models, with a focus on flexibility and future-proofing regulations.
- Tax Advantages: Unlike the US, the Cayman Islands boast zero income, capital gains, or corporate taxes, making it a financially attractive location for blockchain businesses.
- Innovation Hub: The Cayman Islands actively promote blockchain and fintech with initiatives like the Special Economic Zone (SEZ). This offers streamlined work permits, trade licenses, and faster operational setup.
- Focus on Security: Anti-money laundering (AML) and KYC (Know Your Customer) requirements are crucial, but the Cayman Islands strike a balance between innovation and security, allowing businesses to flourish.
The Cayman Islands are emerging as a hub for the fintech industry. Nearshore Americas reported on a recent multi-million dollar investment deal between two Caymanian companies is a major sign of this growth. Ether.fi, a Cayman-based company that helps secure the Ethereum blockchain, received $23 million in funding. This investment will allow them to expand and create new high-value jobs in the Cayman Islands. Fintech is expected to become a significant driver of the Cayman economy, attracting further investment and creating high-value jobs.
Web3’s Regulatory Hurdles
Beyond this instance, the absence of clear regulations surrounding Web3 raises concerns for both individual users and businesses considering large-scale adoption. This hesitancy is further amplified when Web3 solutions involve digital assets, which themselves face regulatory uncertainty.
In the United States alone, a complex web of regulatory bodies are scrutinizing Web3, including:
- Securities and Exchange Commission (SEC): Oversees financial markets and could potentially classify certain Web3 projects as securities.
- Commodities and Futures Trading Commission (CFTC): Regulates derivatives markets and may have jurisdiction over specific Web3 products.
- Financial Crimes Enforcement Network (FinCEN): Combats money laundering and financial crime, and has issued guidance on Web3’s potential anti-money laundering (AML) risks.
- Internal Revenue Service (IRS): Responsible for tax collection and has issued guidance on classifying and taxing cryptocurrency transactions, which are often prevalent in Web3.
- Federal Trade Commission (FTC): Protects consumers from unfair or deceptive business practices, and may be involved in regulating misleading claims related to Web3 projects.
- Office of Foreign Assets Control (OFAC): Enforces economic and trade sanctions, and could potentially restrict Web3 activity in sanctioned countries.
- Financial Accounting Standards Board (FASB): Sets accounting standards for public companies, and may need to develop new guidelines for companies holding or interacting with Web3 assets.
- Public Company Accounting Oversight Board (PCAOB): Oversees audits of public companies, and may need to adapt its oversight practices to the unique accounting challenges posed by Web3.
This list is not exhaustive, and many state-level regulators also have a stake in Web3’s regulation. While these agencies have issued some guidance, a lack of clear and comprehensive regulations remains a major obstacle to widespread Web3 adoption.
Furthermore, crypto proponents criticize the SEC’s approach as unclear rather than overly strict. They argue the SEC selectively enforces regulations instead of establishing clear guidelines. This lack of clarity allows bad actors to evade scrutiny, while well-intentioned projects struggle to navigate the regulatory landscape, and thus, choose to start or move their operations outside of the United States.
Fighting back
The Tron Foundation, the group behind the Tron blockchain, is fighting a lawsuit from the SEC. Tron argues the SEC doesn’t have authority as a “worldwide regulator” regarding the sale of tokens primarily to foreign users on global platforms. They claim the tokens weren’t offered in the US and that secondary sales on US platforms serving international users don’t qualify as US securities. Even if the SEC did have authority, Tron argues the tokens aren’t securities under US law.
Moreover, they also deny the SEC’s claims of market manipulation and celebrity endorsement payments. Reported by Cointelegraph, Tron further argues the SEC’s lawsuit lacks specific details and relies on vague accusations. Finally, they say the case should be dismissed because it grants too much power to the SEC, echoing arguments made by other crypto firms. The SEC has two weeks to respond to Tron’s motion.
Additionally, the SEC is currently suing Coinbase over whether certain cryptocurrencies Coinbase sells are securities. Coinbase lost an initial court fight on this but the case is ongoing. This is important because it sheds light on how courts view the crypto industry.
- The judge ruled against Coinbase on most points but allowed the SEC’s lawsuit to continue.
- The judge rejected several arguments by Coinbase including that the major questions doctrine applies or that a written contract is needed for an investment contract.
- The judge did however accept the SEC’s argument that some cryptocurrencies could be securities because they are part of a larger digital network.
Ripple
Ripple, a well-known blockchain company, is launching its own stablecoin to compete in the $150 billion market. This stablecoin will be pegged to the US dollar and aims to be a reliable and transparent option for users. Ripple plans to back the stablecoin with assets like US treasuries and publish monthly reports to verify its reserves. Additionally, Ripple hopes to offer its stablecoin in other regions besides the US in the future.
This launch comes after Ripple acquired several companies to expand its services and regulatory compliance. They are also working to integrate Automated Market Makers (AMMs) into their system, which will improve liquidity and trading efficiency. Overall, Ripple’s entry into the stablecoin market shows their commitment to innovation and growth in the digital finance space.
Regulation
CoinDesk broke the news that a group of central banks, including those from the UK, Japan, and Europe, are launching a project called Agora to explore how tokenization can be used to improve the current financial system. Tokenization refers to the process of converting an asset into a digital token.
Project Agora will look into how digital tokens representing commercial bank deposits can be integrated with digital tokens representing central bank money. This could potentially lead to a more efficient payment system by bringing together different payment systems. The project will involve both central banks and private financial institutions.
We hope you enjoyed our Genfinity Weekly News Recap! Stay tuned to our website for podcasts, news, and other relative Web3 information.
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