Weekly Blockchain Blog – April 2024 #3 | JD Supra

In this issue:

• U.S. Firms Launch New Stablecoin Products, Crypto Debit Card Launches
• Bitcoin and Ether ETF Products Set To Launch in Australia, Germany, Hong Kong
• Total Value Locked in Liquid Restaking Reaches Over $8.5 Billion
• BIS Report Addresses Stablecoins, U.S. Fintech Firms Respond to BIS Approach
• Uniswap Labs Receives Wells Notice from SEC
• Treasury Dept. Addresses Crypto Illicit Finance, Darknet Market Data Published

US Firms Launch New Stablecoin Products, Crypto Debit Card Launches

By Robert A. Musiala Jr.

A major U.S. financial technology firm recently announced plans to launch a U.S. dollar-backed stablecoin. According to a blog post by the company, the stablecoin will be “pegged 1:1 to the US dollar (USD) … 100% backed by US dollar deposits, short-term US government treasuries, and other cash equivalents.” According to the blog post, the stablecoin’s reserve assets will be audited by a third-party accounting firm, and the company will publish monthly attestations. The blog post further notes that “[t]he stablecoin market is about $150B today, and is forecasted to exceed $2.8 trillion by 2028.”

Another major U.S. fintech firm recently announced that U.S. users of its cross-border money transfer service “now have the option to fund money transfers to friends and family abroad using USD converted from … PYUSD … a U.S. dollar-denominated stablecoin.” According to a press release by the company, “the new funding option will allow U.S. … users to easily convert … PYUSD in their linked … Cryptocurrency Hub to USD and use that as a funding source to send money to recipients in approximately 160 countries globally with no … transaction fees.”

In a related development, according to reports, a major Japanese bank is experimenting with issuing a stablecoin pegged to the Japanese yen. The bank is reportedly planning to trial the stablecoin on the Polygon blockchain.

And in a final notable item, the 1inch Network recently announced the launch of the 1inch Card, a “Web3 debit card.” According to a blog post, the 1inch Card is underpinned by the payment processing network of a major U.S. financial services firm. The blog post notes that the card “will allow users to use their crypto for online and in-person purchases, and make cash withdrawals at supported ATMs through seamless crypto to fiat conversion.”

For more information, please refer to the following links:

Bitcoin and Ether ETF Products Set To Launch in Australia, Germany, Hong Kong

By Robert A. Musiala Jr.

An Australian investment management company recently announced plans to move its Bitcoin exchange-traded fund (ETF) application to the Australian exchange of a major global derivatives and exchange network. According to a press release, the company’s “Bitcoin ETF stands as the first spot Bitcoin ETF in Australia which allows direct holding of bitcoin.”

In related news, a major German asset manager recently announced that it has launched new digital asset exchange-traded commodities (ETCs) that track the performance of bitcoin and ether. According to a press release, “[t]he new ETCs offer investors the opportunity to participate in the performance of the two biggest digital assets by market capitalization and to integrate them easily and cost-effectively into their portfolios.” The April 4 press release notes that the “physical Bitcoin ETC securities and the … [p]hysical Ethereum ETC securities were listed on Deutsche Börse today.”

In more Bitcoin ETF news, according to recent reports, Bitcoin ETFs could be launched in Hong Kong later this month. At least four Hong Kong and Chinese asset managers have reportedly submitted Bitcoin ETF applications, and Hong Kong regulators have reportedly sped up the approval process.

For more information, please refer to the following links:

Total Value Locked in Liquid Restaking Reaches Over $8.5 Billion

By Robert A. Musiala Jr.

According to recent reports, the total value locked in liquid restaking tokens (LRTs) has risen to over $8.5 billion. LRTs are distinct from traditional liquid staking, which involves staking assets through a staking service provider and receiving receipt tokens in return. In contrast, liquid restaking protocols allow users to deposit and “restake” ETH from various liquid staking tokens. Liquid restaking protocols use LRTs to secure actively validated services, which in turn secure new features in Ethereum such as data availability layers, rollups, bridges, oracles and cross-chain messages.

For more information, please refer to the following links:

BIS Report Addresses Stablecoins, US Fintech Firms Respond to BIS Approach

By Robert A. Musiala Jr.

The Bank of International Settlements (BIS) and the Financial Stability Institute recently published a report assessing regulatory responses to issuers of fiat-pegged stablecoins. Among other things, the report discusses various risks of fiat-pegged stablecoins, including risks related to maintaining parity to fiat currency, illicit activity risks and redemption risks. The report also “compares regulatory frameworks issued by 11 authorities in seven geographically diverse jurisdictions to identify emerging trends and commonalities in their respective frameworks.” The report notes that “[s]tandard-setting bodies and international organisations, including the International Monetary Fund (IMF), the Financial Stability Board (FSB) and the Financial Action Task Force (FATF), are working to achieve a consistent policy response” to fiat-pegged stablecoins.

In related news, two major U.S. cryptocurrency companies recently published their responses to a BIS consultative document addressing stablecoins. Among other things, the companies commented that the approach proposed by BIS would “severely limit the holding, and therefore use, of stablecoins by banks” and criticized BIS’ treatment of permissionless blockchain networks.

For more information, please refer to the following links:

Uniswap Labs Receives Wells Notice from SEC

By Christopher Lamb

In a recent blog post, Uniswap Labs, a development firm that publishes software used to access the Uniswap decentralized cryptocurrency exchange, announced that “Uniswap Labs received a Wells notice from the Enforcement Division of the U.S. Securities and Exchange Commission (SEC), notifying us that they are planning to recommend a legal action against us.” According to reports, the SEC action appears to focus on whether Uniswap operated as an unregistered securities exchange or an unregistered broker. According to the Uniswap Labs blog post, despite the Wells notice, Uniswap will continue to offer its current suite of products and will continue to launch new products as they become available.

For more information, please refer to the following links:

Treasury Dept. Addresses Crypto Illicit Finance, Darknet Market Data Published

By Robert A. Musiala Jr.

In a recent press release, the U.S. Department of the Treasury published prepared testimony given by Deputy Secretary of the Treasury Wally Adeyemo before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, in which the deputy Secretary addressed the illicit finance risks of cryptocurrencies. According to the Deputy Secretary, “As we take steps to cut terrorist groups and other malign actors off from the traditional financial system, we are concerned about the ways these actors are using cryptocurrencies to try and circumvent our sanctions.” The Deputy Secretary provided several examples of how various terrorist groups and state-based threat actors have used cryptocurrencies to acquire, launder, and store illicit funds. The Deputy Secretary highlighted three proposed reforms to address cryptocurrency threats: (1) introduction of a secondary sanctions tool targeted at foreign digital asset providers that facilitate illicit finance; (2) modernizing and closing gaps in existing authorities by expanding their reach to explicitly cover the key players and core activities of the digital assets ecosystem; and (3) addressing jurisdictional risk from offshore cryptocurrency platforms.

In related news, a recent blog by blockchain analytics firm Chainalysis provides new data on darknet markets. According to the blog, darknet markets were one of two categories of crypto crime that saw revenues rise in 2023, having received $1.7 billion in value. Among other things, the blog lists the top 10 darknet markets by crypto inflows and provides related data.

For more information, please refer to the following links: