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Binance’s office in Australia has been searched by local regulators as part of an ongoing probe into the cryptocurrency exchange, Bloomberg reported Wednesday.

The Australian Securities and Investments Commission (ASIC) staged the search as part of a review of Binance’s derivatives operation focused on client classification, the report said, citing sources familiar with the matter.

“We are cooperating with local authorities and Binance is focused on meeting local regulatory standards in order to serve our users in Australia in a fully compliant manner,” a Binance Australia spokesperson told The Block on Wednesday via email.

Derivatives license canceled in April

The Australian authority’s move comes after the world’s largest crypto exchange said in April that its derivatives license was canceled in the country and that it would wind down related operations.

ASIC said at the time that it had been conducting a “targeted review of Binance financial services business in Australia, including its classification of retail and wholesale clients.”

Binance is facing heightened regulatory scrutiny around the world, with the U.S. Securities and Exchange Commission last month accusing the exchange and its founder Changpeng Zhao of violating securities rules.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The 90-day rolling correlation between bitcoin and Nasdaq, S&P 500 is now at the lowest level observed since July 2021, according to data tracked by crypto derivatives analytics firm Block Scholes.

PLUS: Dismissing the very real prevalence of Ponzi schemes in GameFi isn’t a good look for Web 3.

The bill, introduced in September, now enters its final stages in Parliament.

As the memecoin frenzy gave way to spot exchange-trade fund exhuberance in the crypto market, traders increasingly flocked from decentralized trading venues to centralized ones, The Block’s Data Dashboard data shows. 

Monthly decentralized exchange volumes relative to their centralized counterparts declined sharply between May and June, declining from 22% 16.8%. Four days into July, the ratio has dropped further, falling to just under 14%. 

The surge in popularity of DEXes in May was well-documented, with The Block previously reporting that traders flocked to decentralized venues to punt memecoins. Volumes on Ethereum-based DEXes for trading of the memecoin Pepe surged above $600 million on May 5. 

The newfound interest in large caps like Bitcoin and Ethereum, kicked off by BlackRock’s surprise spot bitcoin exchange-traded fund filing on June 15, appears to have lured institutional investors to the market’s centralized venues. Bitcoin is up more than 20% since BlackRock’s filing. 

Institutional interest in crypto

Devin Ryan of equity research shop JMP attributed the recent increase in trading volumes to institutions entering the space.

“We believe the uptick in trading volume during the week ended 6/24, which was accompanied by a 12% W/W appreciation in total crypto market cap, can likely be attributed to some momentum in the space after BlackRock (BLK, NC) filed an application with the SEC for a spot Bitcoin ETF,” he said, referring to the asset manager’s June 15 filing. 

In the wake of BlackRock’s filing on June 15, a wide range of companies from WisdomTree to Invesco to Bitwise have refiled their own applications for funds to track the price of the largest cryptocurrency.

 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Still, bitcoin miners’ inventory sales climbed to a record as they took advantage of the cryptocurrency’s strong performance, the report said.

The crypto market rally kicked off by BlackRock’s surprise spot bitcoin exchange-trade fund filing has brought tens of millions of new inflows into a futures-based fund managed by ProShares.

ProShare’s BITO fund saw an additional $14.9 million of inflows on June 29 and $11.9 million of inflows on July 3, bringing its total assets under management to $1.04 billion, according to ETF.com. By way of comparison, the fund’s AuM on June 15 — the day on which BlackRock’s ETF application was submitted — stood at $822 million. 

ProShare’s futures-based fund made its market debut in late 2021. There’s a long list of issuers vying to launch a spot bitcoin ETF, which could bring further legitimacy to bitcoin as well as its underpinning market structure. The U.S. Securities and Exchange Commission has historically denied such a product because of a lack of proper surveillance across spot trading venues.

As noted by European asset manager CoinShares, the crypto fund space has benefited from the excitement around a spot bitcoin ETF coming to market. Weekly inflows into crypto asset management products were strong for the second week in a row, with CoinShares reporting $125 million coming into the industry last week. That brought total inflows into such products to $334 million over the past two weeks, according to the European asset manager. 

 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A new policy proposal encourages the Hong Kong government to issue its own stablecoin, HKDG, backed by its foreign exchange reserves — in order to compete with existing stablecoins such as USDT and USDC.

The paper is co-authored by Wang Yang — Vice Chancellor of the Hong Kong University of Science and Technology and Chief Scientific Advisor of the Hong Kong web3 Association — angel investor Cai Wensheng, BlockCity founder Lei Zhibin and Ph.D. student Wen Yizhou. Wu Blockchain first reported the news.

The proposal emphasizes the importance of stablecoins as a bridge between traditional finance and the digital economy, highlighting the authors’ perceived benefits of a Hong Kong Dollar-pegged stablecoin in enhancing financial inclusiveness, boosting transaction efficiency, reducing costs, improving payment systems and strengthening the Chinese special administrative region’s fintech capabilities.

The experts argue that the government’s current plan, allowing private institutions to issue stablecoins, is not ambitious enough and may result in limited market share. They say it draws a parallel between Singapore’s XSGD stablecoin issued by Xfers with a market cap of $6.6 million, compared to more than $110 billion for USDT and USDC combined. 

With Hong Kong’s foreign exchange reserves — some $430 billion as of March — exceeding the combined market capitalization of USDT and USDC, an HKDG stablecoin backed by the government would offer higher credibility and lower risk, the proposal said.

Potential risks of a stablecoin

The proposal did acknowledge potential risks, such as legal and regulatory challenges, technical risks and short-term exchange rate fluctuations, but argues that the risks borne by government-issued HKDG were lower than those of stablecoins issued by private institutions. 

HKDG would benefit from government regulation and the transparency provided by blockchain technology, the authors said. 

Additionally, the paper argued HKDG would help Hong Kong to take a substantial step toward de-dollarization and challenge the dominance of the U.S. Dollar in the crypto ecosystem. The experts claimed it could also provide additional liquidity for government investment projects, facilitate the digitization of traditional assets, promote financial innovation and competitiveness and increase transparency. 

Hong Kong has recently signaled its desire to reestablish itself as a global hub for the crypto industry, setting up a web3 task force to help “build a thriving ecosystem” in the region.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Financial Conduct Authority (FCA) wrote to firms marketing crypto-assets to UK customers to comply with the incoming financial promotions regime or risk criminal charges.

The FCA’s order is effective from 8 October, and includes overseas firms that market their products to UK customers.

In a statement, FCA crypto financial promotions lead Jayson Probin said, “Failure to comply may result in firms committing a criminal offence… This is a critical change for the industry.”

“It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice,” FCA executive director Sheldon Mills added. 

The FCA has outlined the requirements for promoting crypto-assets in the UK, with four legal methods:

1. An authorized person communicates the promotion.
2. An unauthorized person communicates the promotion, but an authorized person approves it.
3. A crypto asset business registered with the FCA communicates the promotion.
4. The promotion otherwise meets the conditions of an exemption in the Financial Promotion Order.

The FCA letter issued Tuesday stated: “Promotions that are not made using one of these routes will be in breach of section 21 of the Financial Services and Markets Act 2000 (FSMA), which is a criminal offence punishable by up to 2 years imprisonment, an unlimited fine, or both.”

Those seeking registration with the Financial Conduct Authority (FCA) must be prepared for a stringent application process, pay a registration fee, and wait for up to three months.

 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

There’s one sector of the crypto market that hasn’t fully benefited from the widespread rally that’s sent the price of bitcoin to near all-time highs for the year: stablecoins. 

As noted in a report by ratings agency Fitch, volumes in stablecoins and the aggregate market capitalization of the sector is lower. The Block’s data dashboard shows total stablecoin supply has declined from $138 billion at the start of the year to $124 billion on July 3. 

To be clear, Tether’s USDT has bucked this trend — picking up market share from its rivals since USDC’s de-pegging event in March. 

Still, the monthly average of daily trading volumes of the top ten stablecoins declined from $53 billion in March 2023 to $28 billion in May. 

However, Fitch notes that there is better liquidity in the assets backing stablecoins. Stablecoins are meant to trade one to one against a fiat currency — typically the US dollar — but are not backed exclusively by them. The underpinnings of stablecoins include a wide range of assets with different liquidity profiles. 

“Within USDT’s reserve portfolio, the portion of treasury bills and repos rose by 6pp and 5pp in 1Q, respectively, reaching 65% and 10% of reserves by end-1Q23,” the firm noted. 

Binance also improved the liquidity position of its stablecoins. “The repos in the portfolio are overcollateralized by long-term US treasury securities and are callable daily,” Fitch said. 

 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.