U.S. CFTC Sues Binance And CEO, Reinforcing View Of ETH As A Commodity

Weekly News Wrap Up

Rather uneventful close to the last week of March as markets experienced fatigue from the prior two weeks of banking-induced volatility. Nonetheless, Powell started the week reassuring the public that the banking system “remains sound and resilient” as nearly $100 billion in deposits were pulled from banks. In crypto, the U.S. Commodity Futures Trading Commission (CFTC) allege that Binance and CZ sold unregistered derivative products. However, in the process, the CFTC reinforced the view of ETH as a commodity and not a security. Elsewhere, Chinese state-owned banks have been offering banking services to crypto firms in Hong Kong, a sign that the city’s push to become a major digital asset center has backing from Beijing, even though crypto trading has been banned in mainland China for over a year.

U.S. equities:  SPX+3.48%, DJIA +3.22% and NASDAQ +3.37% for the week. The more interest-rate sensitive Technology-sector has benefitted this year as markets expect a less aggressive U.S. Federal Reserve with NASDAQ +16.77% YTD vs. SPX +7.03% and DJIA +0.38% (as of 31 Mar 2023). Cryptocurrency majors wobbled early in the week on CFTC/Binance news but eventually traded up for the week: BTC +0.67% and ETH +1.12%, trading around $28K and $1.8K respectively. Lest we forget, BTC +70.47% YTD and ETH +50.23% YTD has had an amazing rally in 1Q2023 despite the uptick in U.S. regulatory action we’ve seen so far.

Cryptocurrency News

  • Binance and its CEO, Changpeng Zhao (CZ), was sued by The U.S. Commodity Futures Trading Commission (CFTC) over ‘willful evasion’ of U.S. laws and unregistered crypto derivatives products. The lawsuit also alleges that Binance directed U.S. customers to evade compliance controls through the use of VPNs. CZ refuted the CFTC’s claims, and an increase in withdrawals from Binance was observed.
    Our View: We are likely to see more price volatility as new developments emerge in a market that has been scarred by the recent collapse of FTX in Nov 2022. An ideal/less-disastrous outcome would be a series of fines paid to settle the claims, while the worst outcome would be a total collapse of the platform, in our opinion.
  • U.S. CFTC Chief Behnam reinforces the view of Ether as a commodity, differing from the U.S. SEC’s view that ETH is a security. He reiterated this at a congressional hearing.
  • Tighter crypto regulations to be discussed at the upcoming G7 meeting in May. Among G7 members, Japan already regulates cryptocurrencies, while the European Union’s Markets in Crypto-Assets (MiCA) regulation is set to go into effect in 2024. The United Kingdom is gradually developing its crypto framework, with plans for a digital pound. Canada treats digital assets as securities and the United States currently applies existing financial regulations to crypto.
    Our View: As mentioned previously, we are seeing an increasing trend of regulatory focus globally as the demand and interest for digital assets grows. Ideally we see other G7 countries take a less restrictive approach from the U.S. that looks to be choking off the FIAT channels for crypto companies. 
  • Custodia Bank’s membership was denied for ties with crypto markets. The United States Federal Reserve released an 86-page report on 24 Mar detailing the reasons for denying Custodia Bank’s application for membership. The board raised “concerns about banks with business plans focused on a narrow sector of the economy,” with a high concentration of activities related to the crypto industry.
    Our View: The report is a clear indication of the U.S. government’s attitude towards the crypto industry, in parallel with the recent regulatory action we’ve seen.
  • Asset Managers’ Bitcoin exposure rises, reversing recent trend. Data from the Commodity Futures Trading Commission (CFTC) showed that they increased their open long positions by 975 contracts as of 21 Mar, a reversal from the prior three weeks where they reduced positions by 1,482 contracts. Additionally, data from CoinShares showed a weekly inflow of $160 million into crypto investment products, the largest since July 2022 on fears in TradFi.
  • Franklin Templeton sees Web3 driving the next wave of tech innovations. In a new report, the asset management giant outlines tech-driven megatrends – decentralization among them – that are shaping society.
    Our View: It is great to see a huge TradFi investment manager with $1.4 trillion of assets under management embracing digital assets as an asset class. This will potentially promote the acceptance of cryptocurrencies as a viable asset class in the industry.
  • Fujitsu interested in crypto trading services, trademark application reveals. The trademark application hinted at its intent to offer financial services, including accepting deposits, financing loans, financial management and the exchange of crypto assets.
  • Sony eyes  non-fungible tokens (NFT) transfers across multiple game platforms. The patent application for its framework covering the transfer and utilization of NFTs hints at the intent to integrate NFTs into gameplay, with the technology representing skins and other popular in-game functionalities.
    Our View: The trend of big brand names, like Fujitsu and Sony, investing into crypto/blockchain continues, serving as a testament to the growing demand and interest from consumers and the benefits that the technology can serve.

Investment Consideration

Our best strategy for medium to long term investment is to take at least 1-3 years in Moderate Portfolio because it has a good defense with 50% Fixed Deposit , 30% In DCD and 20% in Staking because we still have potential return in DCD and Staking especially in BTC.

Sign me up for crypto investor briefing newsletter

The above information and views provided by Tokenomy are for general informational purposes only and do not constitute an opinion nor offer or recommend, by or on behalf of Tokenomy, that any person enter into or buy or sell any particular security, investment product, or token, or participate in any other transactions. Tokenomy does not make any representation as to the accuracy, reliability, or completeness of the information herein and does not accept liability for any direct, indirect, incidental, specific, or consequential loss or damages arising from the use of, or reliance on, the information contained herein. This information is for general purposes only and is not intended, and should not be construed or relied upon as legal, accounting, tax, or financial advice or opinion provided by Tokenomy and should not be used or relied on by anyone for any other purpose.
This information herein is made available to you as confidential information. It may not be disclosed, reproduced, or redistributed to any other person, in whole or part, except with the prior written consent of Tokenomy.
Copyright © Tokenomy. All rights reserved.

You might also like

%d bloggers like this: