Block 1: Key news

  • FTX customers soon to be reimbursed?

FTX has been granted approval by a Delaware court to sell cryptocurrency assets valued at up to $3.4 billion. However, given current market conditions and the liquidity of tokens and stablecoins, it's estimated that the actual value may be around $1.3 billion. The sale will occur gradually, with increments of $100 million per week (up to $200 million) to prevent significant market disruptions. The primary goal is to compensate affected customers, and the funds will be distributed in cash.

  • Europe's crypto framework gets tougher

The European Parliament has passed DAC8 regulation, mandating crypto firms in the EU to report all cryptocurrency transactions, including transaction amounts. The goal is to eliminate tax evasion and fraud. This regulation covers all transactions, including crypto exchanges and transfers, and requires disclosing user identities to tax authorities. Member states must implement these rules by the end of 2025, with enforcement starting on January 1, 2026.

  • Binance: does it smell?

Binance.US, the U.S. arm of the cryptocurrency exchange Binance, is facing difficulties, including the departure of its CEO, Brian Shroder, and the termination of one-third of its workforce. These challenges follow regulatory issues and legal disputes with the Securities and Exchange Commission (SEC). Binance.US attributes these difficulties to the SEC's aggressive actions, which have had an impact on the industry. Nevertheless, the company asserts that it has a strong financial foundation for the next seven years and will continue to exclusively operate as a cryptocurrency platform.

  • PayPal continues its development in cryptocurrencies

PayPal now offers a service that lets users convert and use their cryptocurrencies for payments at merchants. It's an extension of their "PayPal On and Off Ramps" initiative, allowing crypto holders to convert their assets into US dollars (USD) for spending. While currently available only to U.S. residents, this marks a significant shift in PayPal's strategy towards cryptocurrencies. Alongside this service, PayPal has introduced its stablecoin, PYUSD, and is partnering with companies like Ledger.

  • Everyone wants their own Bitcoin ETF

On September 12, 2023, Franklin Templeton, the world's third-largest asset manager, applied to the US SEC to launch a cash Bitcoin ETF, with Coinbase handling Bitcoin purchase and custody. Concurrently, Hashdex, in partnership with Nasdaq, also submitted an application for a spot Ethereum ETF, becoming the third entity to do so. The market is eagerly anticipating the SEC's approval decision on these ETFs in the upcoming weeks, with anticipation mounting.

Block 2: Crypto Analysis of the week

The recent actions taken by the Commodity Futures Trading Commission (CFTC) against major decentralized finance (DeFi) entities have stirred controversy in the crypto world. Last week, the CFTC took legal action against Deridex, Opyn, and ZeroEx, accusing them of offering financial products to U.S. consumers without the required registration. This has raised questions about the future of DeFi in the United States.
This situation delves into the complexities of U.S. regulatory compliance. Could these DeFi platforms have avoided legal action if they had complied with registration requirements? It's a question without a clear answer, partly due to the decentralized nature of these platforms and the absence of legal precedent in such cases.
The CFTC specified the specific licenses these entities should have obtained. For instance, Opyn, operating as a decentralized insurance entity, would have needed licenses like "swap execution facility" and "futures commission merchant."
This brings up another question: if platforms like Opyn had acquired the proper licenses and implemented robust customer verification measures (KYC) in accordance with the Banking Secrecy Act, could they have stayed out of legal trouble? Or is DeFi fundamentally at odds with existing U.S. regulations? Is the goal to discourage American users from accessing these platforms permanently?
Perhaps the biggest challenge lies in the nature of DeFi itself. Rooted in a global blockchain architecture, it's challenging to enforce geographical restrictions. While Opyn attempted to prevent American users from accessing the protocol through its front-end website, the CFTC found this effort insufficient, stating that "these measures were not sufficient to prevent U.S. users from accessing the Opyn protocol."
While the debate over the CFTC's jurisdiction over DeFi continues, one clear and consistent point is the importance of proper registration.
The benefits of DeFi, such as transparency and a level playing field, are undeniable. However, it also faces real challenges, including security vulnerabilities, token distribution issues, and governance challenges. As CFTC Enforcement Director Ian McGinley pointed out, the presence of smart contracts does not automatically make transactions legally valid.
So, a broader question emerges: is the discussion around decentralized finance (DeFi) solely about the technicality of registration, at least for now? Or is it time for a comprehensive and holistic examination of its role and future in the broader financial landscape? Only time will tell.

Block 3: Tops & Flops

Crypto chart(Click to enlarge)


Block 4: Readings of the week

Roblox expands its metaverse vision into video chat (Wired)

Finance strikes back at US regulator's regulatory frenzy (Financial Times)

Why opt for an evil orb (The Atlantic)

The crypto paradigm shift that never happened (The Information)