Stablecoin Initiatives Announced by Fintech Companies, DeFi Protocols
In a significant move, a leading U.S. payments firm has unveiled plans to allow its “disbursement partners” to utilize the newly launched PYUSD stablecoin for cross-border money transfers via the company’s Xoom service. The recent press release highlighted that “Cebuana Lhuillier and Yellow Card are set to become the inaugural Xoom disbursement partners leveraging PYUSD,” enabling them to tap into the efficiency of blockchain technology, thus enhancing transaction speed and reducing costs. Additionally, these integrations are anticipated to foster financial inclusion, expanding access to digital financial solutions throughout the Asia-Pacific and Africa regions.
In further developments regarding stablecoins, Sky, formerly recognized for its Maker platform, has reportedly deployed its USDS stablecoin on the Solana blockchain network. This evolution marks a strategic shift, as USDS rebrands DAI, an established algorithmic overcollateralized stablecoin, signaling a renewed focus on enhancing liquidity and adoption within decentralized finance (DeFi) ecosystems.
In another encouraging advancement, Quantoz, a payments company operating from the Netherlands, has revealed plans to issue two new stablecoins, EURQ and USDQ, pegged to the euro and the U.S. dollar, respectively. According to their press release, both EURQ and USDQ stablecoins will be integrated onto the Ethereum blockchain and are engineered to comply with the Markets in Crypto Assets Regulation (MiCAR), as they prepare for listings on prominent global cryptocurrency exchanges.
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Digital Asset Companies Expand Across Globe Through Acquisitions, Licenses
Paxos, a prominent U.S.-based blockchain and digital asset solutions company, recently announced its acquisition of Membrane Finance, an e-money institution licensed and based in Finland. This strategic move is expected to bolster Paxos’ ability to issue USD-backed stablecoins to a broader audience, including both retail and institutional clients, while expanding its regulated framework to accommodate European customers in accordance with the European Markets in Crypto Assets (MiCA) regulations.
Additionally, a major U.S. cryptocurrency custody provider has officially launched its services in Singapore. This strategic launch aims to provide regulated and secure digital asset custody, trading, settlement, and token management services to the growing APAC market. This milestone follows the company’s successful acquisition of a Major Payment Institution License from the Monetary Authority of Singapore in August 2024, further establishing its foothold in the region.
Moreover, another leading cryptocurrency exchange has made headlines by acquiring a brokerage service and trading firm licensed by the Australian Securities and Investment Commission. This acquisition, being the second of its kind for the exchange, aims to enhance its capacity to offer traditional brokerage services, reflecting the company’s commitment to diversifying its offerings within the financial marketplace.
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Bitcoin ETF Options Trading Begins as CFTC Defers Jurisdiction to SEC
Recent reports confirm that the first spot Bitcoin exchange-traded fund (ETF) approved for options trading has commenced on a leading U.S. stock exchange, heralding a new chapter in cryptocurrency investments. This launch follows closely behind the issuance of an Advisory by the U.S. Commodity Futures Trading Commission (CFTC), addressing the clearing of options associated with various spot commodity-based ETF products.
According to the CFTC Advisory, since January 2024, shares of spot commodity ETFs based on Bitcoin have been actively traded on national securities exchanges. The U.S. Securities and Exchange Commission (SEC) recently greenlighted spot commodity ETF shares for Ethereum in May 2024, indicating a broader acceptance of cryptocurrency-based investment vehicles. The Advisory emphasizes that the CFTC recognizes that “Spot Commodity ETF shares would likely be considered securities,” noting that those shares listed on SEC registered exchanges fall under SEC oversight, relieving the CFTC of jurisdiction over their clearing.
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Blockchain Platforms Announce Capital Markets Initiatives
A prominent U.S. bank has recently announced a rebranding of its blockchain platform, Onyx, which will now operate under the name Kinexys. This rebranding move includes the release of a proof-of-concept white paper, along with an initiative to integrate the platform’s digital payments offerings with the bank’s financial exchange (FX) services. This strategic alignment aims to facilitate on-chain foreign exchange settlements in both USD and EUR, enhancing efficiency in cross-currency transactions.
In addition, a U.S. digital asset solutions company has been selected by the Central Securities Depository of the Czech Republic (CSD Prague) to implement a blockchain-based settlement system. This decision follows the approval of the company’s platform by the European Securities and Markets Authority (ESMA) for the European DLT Pilot Regime, which emphasizes the development of crypto-assets while prioritizing investor protection, market integrity, and overall financial stability.
Lastly, Tether announced the introduction of Hadron by Tether, a novel platform designed for users to tokenize various asset classes, including stocks, bonds, commodities, funds, and reward points. The platform will provide a suite of tools encompassing token issuance and burning, Know Your Customer compliance, blockchain reporting, capital market management, and essential regulatory guidance, enhancing the accessibility and utility of tokenized assets.
For more information, please refer to the following links:
CFTC Recommends DLT for Non-Cash Collateral, BIS Addresses DeFi Liquidity
By Isabelle Sterling
The Digital Asset Markets Subcommittee of the Commodity Futures Trading Commission’s (CFTC) Global Markets Advisory Committee (GMAC) has recently issued a report recommending the broadened utilization of non-cash collateral through blockchain technology or other distributed ledger technology (DLT). This report reveals that while non-cash collateral is currently permissible as margin, existing operational challenges hinder its effective use, leading to inefficiencies in the market. Key challenges noted include friction in transfer mechanics caused by multiple intermediaries, difficulties with secondary transfers of shares in money market funds, and limited operational hours of certain infrastructure providers. The report advocates that DLT could effectively mitigate these operational difficulties without necessitating changes to eligibility rules or the established procedures of market participants.
Additionally, the Bank of International Settlements has released a working paper entitled “Decentralised Dealers? Examining Liquidity Provision in Decentralised Exchanges.” This paper illustrates that despite the democratization of liquidity provision in DeFi, empirical data indicates a concentration of liquidity provision among a small, sophisticated group of participants who reap substantially higher profits compared to their less knowledgeable counterparts, particularly during volatile market periods. The report draws a stark comparison with traditional markets, where market makers assume inventory risk to balance buyers and sellers.
Notably, an individual author, currently serving as in-house counsel for the Ethereum Foundation, has published an updated version of “The Crypto Compendium: Technical Details, Law & Regulation.” This latest edition enhances and expands upon the 2023 version, now encompassing nearly 1,000 pages of technical insights into the crypto economy, including regulatory frameworks both in the U.S. and globally, alongside discussions surrounding central bank digital currencies.
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DOJ Crypto Enforcement Continues; SEC Pays Funds to ICO Investors
The U.S. Department of Justice (DOJ) has recently disclosed two press releases announcing fresh enforcement actions in the realm of cryptocurrency. In a significant case detailed in the first press release, an Ohio individual received a three-year prison sentence for operating the darknet cryptocurrency ‘mixer’ Helix, reputed for processing transactions exceeding $300 million worth of cryptocurrency from 2014 to 2017. The second press release outlined criminal charges against five individuals who allegedly orchestrated phishing attacks against business employees nationwide, subsequently compromising and stealing non-public company data, as well as hacking into virtual currency accounts to pilfer millions in cryptocurrency.
Additionally, according to reports, the U.S. Securities and Exchange Commission (SEC) recently disbursed $4.6 million to investors affected by the Ethereum-based search engine BitClave’s initial coin offering (ICO). This payout is part of a settlement that BitClave agreed to in 2020 after facing charges from the SEC for failing to register its 2017 ICO as a securities offering.
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How will compliance with regulations like MiCAR affect the market acceptance of new stablecoins such as EURQ and USDQ?
**Interview with Robert A. Musiala Jr.: Insights on Stablecoin Developments and Regulatory Changes**
**Interviewer:** Thank you for joining us today, Robert. Your recent piece outlines significant advancements in the stablecoin space, particularly related to new partnerships and technologies. Can you elaborate on the launch of PYUSD and its implications for cross-border transactions?
**Robert A. Musiala Jr.:** Absolutely! The introduction of PYUSD stablecoin by a major U.S. payments firm is a game-changer for cross-border money transfers. By partnering with disbursement companies like Cebuana Lhuillier and Yellow Card for their Xoom service, they’re leveraging blockchain technology to provide faster, cheaper transactions. This initiative should significantly enhance financial inclusion, especially for underserved regions in Asia-Pacific and Africa, where accessing traditional banking services has been a challenge.
**Interviewer:** That’s fascinating! You also mentioned the rebranding of DAI to USDS on the Solana blockchain. What does this shift indicate about the evolution of decentralized finance?
**Musiala:** The rebranding to USDS signifies a pivotal moment for DeFi. By moving onto the Solana network, it opens up avenues for improved liquidity and broader adoption. It reflects a strategic shift by DeFi protocols to align with different blockchain ecosystems that can support scalability and efficiency, enhancing user experience. Maintaining a strong liquidity position is essential for stability in these environments.
**Interviewer:** In your article, you highlighted Quantoz’s plans to issue EURQ and USDQ stablecoins. How important is compliance with regulations like MiCAR for the success of these new stablecoins?
**Musiala:** Compliance with regulations, such as the Markets in Crypto Assets Regulation (MiCAR), is crucial for market acceptance and longevity. By adhering to these regulatory frameworks, stablecoins like EURQ and USDQ can gain trust among users and regulatory bodies alike. It positions these coins favorably for listing on major exchanges, which not only provides legitimacy but can also lead to broader adoption by both retail and institutional investors.
**Interviewer:** You also touched on the recent developments in the Bitcoin ETF space. What does the CFTC’s advisory mean for the future of crypto investment vehicles?
**Musiala:** The CFTC’s advisory recognizing spot commodity ETFs as likely securities signals a major shift in how these investment vehicles are viewed and regulated. By deferring authority to the SEC, it streamlines oversight, which could pave the way for more crypto-based investment products to enter the mainstream market. This step could attract traditional investors, boost liquidity, and further legitimize the entire cryptocurrency ecosystem.
**Interviewer:** Lastly, your updated version of “The Crypto Compendium” seems to have extensive coverage of the evolving regulatory landscape. What do you think is the key takeaway for stakeholders in the crypto economy?
**Musiala:** The key takeaway is the importance of staying informed and adaptable in a rapidly evolving regulatory environment. As frameworks develop and become more comprehensive, stakeholders, including developers, investors, and users, must understand the implications of these regulations on their operations and investments. The crypto landscape is dynamic, and those who navigate these changes effectively will likely find new opportunities for growth and innovation.
**Interviewer:** Thank you, Robert, for sharing your insights on these vital developments in the crypto space. It’s clear that both technological innovation and regulatory evolution will play critical roles in shaping the future of cryptocurrencies.
**Musiala:** Thank you for having me! It’s indeed an exciting time in the crypto economy, and I look forward to seeing how these trends unfold.
