In this issue:

Stablecoin Initiatives Announced by Fintech Companies, DeFi Protocols

By Robert A. Musiala Jr.

Major U.S. payments firm recently announced plans to enable “disbursement partners” to use the PYUSD stablecoin to settle cross-border money transfers with the company’s Xoom service. According to a press release, “Cebuana Lhuillier and Yellow Card will be the first Xoom disbursement partners to use PYUSD to settle cross-border money transfers, allowing them to leverage the cost and speed advantages of blockchain technology.” The press release states the integrations “will help drive financial inclusion by providing more widespread access to digital financial solutions across Asia-Pacific and Africa.”

In more stablecoin news, Sky (formerly Maker), a decentralized finance (DeFi) lending and borrowing protocol, has reportedly deployed its USDS stablecoin on the Solana blockchain network. According to reports, USDS is a rebrand of DAI, an algorithmic overcollateralized stablecoin.

In a final stablecoin development, Quantoz, a Netherlands-based payments company, recently announced that it intends to issue two stablecoins, EURQ and USDQ, which will be pegged to, respectively, the euro and the U.S. dollar. According to a press release, the EURQ and USDQ stablecoins will be issued on the Ethereum blockchain, are designed to be “MiCAR compliant” and will be listed by two major global cryptocurrency exchanges.

For more information, please refer to the following links:

Digital Asset Companies Expand Across Globe Through Acquisitions, Licenses

By Keith R. Murphy

According to a recent press release, Paxos, a U.S.-based blockchain and digital asset solutions company, announced that it has agreed to acquire Membrane Finance, an electronic money institution licensed and based in Finland. As noted in the press release, Paxos issues USD-backed stablecoins to retail and institutional users, and the acquisition reportedly will allow Paxos to expand its regulated platform to serve European customers in compliance with the European Markets in Crypto Assets (MiCA) regulations.

Another recent press release announced that a major U.S. cryptocurrency exchange launched in France after previously registering there as a Virtual Asset Service Provider. According to the press release, users in France reportedly may now open an account to deposit, trade and store over 70 digital assets.

In further global expansion news, according to a press release, a major U.S. cryptocurrency custody provider announced its official launch in Singapore “to provide regulated and secure digital asset custody, trading, settlement, and token management services to the broader APAC region.” The launch reportedly comes following the company’s receipt of a Major Payment Institution License from the Monetary Authority of Singapore in August 2024.

Finally, in a recent press release, another major cryptocurrency exchange reported that it has acquired a brokerage service and trading company licensed by the Australian Securities and Investment Commission. According to the press release, this is the company’s second acquisition aimed at allowing the company to offer traditional brokerage capabilities.

For more information, please refer to the following links:

Bitcoin ETF Options Trading Begins as CFTC Defers Jurisdiction to SEC

By Robert A. Musiala Jr.

According to reports, the first spot bitcoin exchange-traded fund (ETF) approved for options recently began trading on a major U.S. stock exchange, with options trading on additional bitcoin ETFs expected to follow. The development occurred shortly after the U.S. Commodity Futures Trading Commission (CFTC) issued an Advisory addressing the clearing of options on various spot commodity-based ETF products.

The CFTC Advisory notes that since January 2024, spot commodity ETF shares based on bitcoin have been listed and traded on national securities exchanges, with the U.S. Securities and Exchange Commission (SEC) recently approving spot commodity ETF shares on Ethereum in May 2024. According to the Advisory, CFTC staff believes “[b]ecause … it is substantially likely that Spot Commodity ETF shares would be held to be securities, we believe that these shares listed on SEC registered national securities exchanges do not implicate the [CFTC’s] jurisdiction, and therefore, the clearing of these options … would be … subject to SEC oversight.” Accordingly, the Advisory takes the position that the CFTC “does not have any more role regarding the clearing of these options.”

For more information, please refer to the following links:

Blockchain Platforms Announce Capital Markets Initiatives

By John Robertson

In a recent press release, a major U.S. bank announced its blockchain platform, Onyx, has rebranded as Kinexys. The release also announced a proof-of-concept white paper and an update that will integrate the platform’s digital payments products with the bank’s financial exchange (FX) services to enable on-chain FX settlement in USD and EUR.

In other news, a U.S. digital assets solutions company announced its selection by the Central Securities Depository of the Czech Republic (CSD Prague) to implement a DLT-based settlement system. According to a press release, the selection follows the company’s platform being approved by the European Securities and Markets Authority (ESMA) for the European DLT Pilot Regime, which seeks to develop crypto-assets and DLT market infrastructures while preserving investor protection, market integrity, financial stability and transparency.

Finally, Tether announced the launch of Hadron by Tether, a platform designed to allow users to tokenize stocks, bonds, commodities, funds and reward points. According to a press release, the platform will also offer “a range of tools” including token issuance and burning, Know Your Customer compliance, blockchain reporting, capital market management, and regulatory guidance.

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) recently sent a report to the CFTC recommending expanding the use of non-cash collateral through the use of blockchain or other distributed ledger technology (DLT). The report states that currently non-cash collateral is permitted to be used as margin, but that operational challenges limit the use of non-cash collateral, causing inefficiency. The operational challenges identified include transfer mechanics friction caused by multiple intermediaries with difficulty doing secondary transfers of shares in money market funds, and limited hours of operation of certain infrastructure providers. The report suggests that DLT can help reduce or eliminate some of those operational challenges without requiring any changes to collateral eligibility rules or market participants’ policies and procedures. It concludes by providing a legal and regulatory framework for how market participants can apply their existing policies and procedures to support use of DLT for non-cash collateral. 

In other news, the Bank of International Settlements recently issued a working paper titled “Decentralised dealers? Examining liquidity provision in Decentralised Exchanges.” The paper says that although liquidity provision is democratized in DeFi, as anyone can commit their assets to a liquidity pool, data shows that liquidity provision in DeFi is done by a small set of sophisticated participants who extract significantly higher profits than their unsophisticated counterparts, with particularly high profits in relative terms during periods of high volatility. The paper contrasts this with market makers in traditional markets that carry inventory to intermediate buyers and sellers.

And in a final notable item, an individual author who serves as in-house counsel for the Ethereum Foundation recently released an updated version of “The Crypto Compendium: Technical Details, Law & Regulation,” which updates and expands on the 2023 version. The document, the new version of which is nearly 1,000 pages, provides technical information about crypto, how it is used, and the laws and regulations that apply to it in the U.S. and internationally. It also includes a discussion on central bank digital currencies. 

For more information, please refer to the following links:

DOJ Crypto Enforcement Continues; SEC Pays Funds to ICO Investors

By Robert A. Musiala Jr.

The U.S. Department of Justice (DOJ) recently published two press releases announcing new crypto enforcement actions. According to the first press release, “An Ohio man was sentenced … to three years in prison for his operation of the darknet cryptocurrency ‘mixer’ Helix, which processed transactions involving over $300 million worth of cryptocurrency from 2014 to 2017.” A second DOJ press release announced “criminal charges against five defendants who allegedly targeted employees of companies nationwide with phishing text messages and then used the harvested employee credentials to log in and steal non-public company data and information and to hack into virtual currency accounts to steal millions of dollars in cryptocurrency.”

In other news, according to reports, the U.S. Securities and Exchange Commission (SEC) recently sent $4.6 million to investors in Ethereum-based search engine BitClave’s initial coin offering (ICO). The payment is reportedly part of a settlement BitClave agreed to pay in 2020 after the SEC charged the search engine for failing to register its 2017 ICO as a securities offering.

For more information, please refer to the following links: