The crypto space has had an eventful week with several major developments. Authorities in Montenegro have agreed to release Kwon Do-hyung, founder of the failed Terra ecosystem, on bail despite calls from the United States and South Korea for his extradition.
Meanwhile, institutional adoption of cryptocurrencies has been on the rise, with more mainstream companies putting in place measures to embrace digital assets and blockchain. Additionally, regulatory efforts continued with new updates on increased scrutiny.
Do Kwon is released on bail
In a shocking development given his record of evading authorities, Kwon Do-hyung, founder of Terra, was released on $436,000 bail by Montenegro authorities this week. Do Kwon has been released on bail along with former Tera Corporation CFO Han Chung Joon. The duo was arrested almost two months ago while trying to leave Montenegro with fake documents.
Reports of Do Kwon’s bail emerged shortly after he pleaded not guilty to the charges by the Montenegrin authorities. Authorities accused Kwon of forgery and use of forged documents. The prosecution objected to bail, but it was granted by the court. Kwon promised to appear in court when required and not evade the authorities. He will be kept under house arrest.
Meanwhile, reports indicated that the South Korean authorities had set a trial date for Shin Hyun Song, one of the founders of Terra, and seven other individuals. The trial is scheduled to begin on May 26, when Shen will stand trial on charges related to the collapse of the Terra ecosystem.
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Speed in institutional adoption
The digital asset and blockchain industries have continued to attract the attention of retail and institutional investors despite the setbacks brought about by the recent implosion. This week saw a significant rise in institutional interest, manifested in several developments.
Reports released on May 8 suggested that Alibaba Cloud, the cloud-focused subsidiary of Alibaba, has formed a collaboration with Avalanche blockchain protocol to launch Cloudverse. Cloudverse will be a platform for companies to develop and launch blockchain-based metaverse projects.
In addition, several leading global companies, including Goldman Sachs, Microsoft, Deloitte, and Cboe Global Markets, formed a partnership on May 9 to launch a new blockchain system by integrating the platforms of various financial institutions.
Two days later, reports revealed that Standard Chartered, a leading British multinational bank, is looking to offer its digital asset custody product to institutional clients through its Dubai subsidiary, Zodia Custody. The bank is currently awaiting regulatory approval from the financial authorities.
Government accreditation
Besides private enterprises, governments around the world have also shown their willingness to benefit from the blockchain and digital asset industries. This week, Daniel Resch, the Prime Minister of Liechtenstein, revealed that the government will begin allowing citizens to pay for public services using Bitcoin (BTC).
In a separate development, Liechtenstein and Norway have teamed up with European Blockchain Services Infrastructure (EBSI) to launch a formal blockchain protocol available to the public in the European Union. The node operations are distributed among the countries of the European Union, including Germany, the Netherlands, France and Italy.
Meanwhile, the Kenyan government has partnered with the Venom Foundation, the team behind the Venom blockchain in Africa. Reports indicate that the Venom Foundation is seeking to establish a blockchain hub in the country.
This week, China took another step towards harnessing the power of the blockchain. China’s National Technology Innovation Center launched operations in Beijing on May 10, three months after its launch.
The US regulatory atmosphere remains worrying
As has been observed every week lately, the United States has made headlines for its stance on crypto regulations amid the worrying lack of clarity plaguing the local crypto industry. The US House of Representatives met on May 10 to discuss the state of the country’s regulatory climate.
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While most lawmakers, such as Rep. Patrick McHenry, advocated the introduction of new laws tailored to the crypto landscape, others, such as Rep. Stephen Lynch strongly disagreed with this view, arguing that the crypto industry should be regulated by existing financial laws.
Meanwhile, industry leaders have continued to oppose recent policies introduced by the US Securities and Exchange Commission (SEC). Most recently, representatives from five prominent investment firms issued a statement to the Securities and Exchange Commission on May 8, opposing the new regulatory guard rule proposal that was disclosed in February.
Barely 24 hours after the statement was released, Coinbase’s chief legal officer, Paul Grewal, also drew attention to the issues with the proposed custody rule. According to Grewal, the rule automatically assumes that all digital assets covered are securities, which raises concerns. Grewal urged the SEC to ensure that the rule properly represents the distinct asset classes.
Coinbase and Ripple set their sights abroad
Amid regulatory uncertainty within the cryptocurrency industry in the United States, Coinbase and Ripple, two of the country’s largest digital asset-focused firms, have stepped up efforts to establish their presence overseas.
Following the launch of the global exchange in Bermuda, Coinbase International, Coinbase CEO Brian Armstrong and Nana Murugesan, the company’s vice president of international and business development, visited the UAE this week to discuss expansion strategies. Coinbase is seeking an operating license in the UAE for its global platform.
Ripple, the Silicon Valley FinTech behind the XRP issuance, also has its eyes on the UAE. Ripple, which had to fight one of the longest crypto-related legal battles with the Securities and Exchange Commission, recently opened a new office in Dubai. Ripple CEO Brad Garlinghouse also revealed the company’s plans to expand operations in the city.
Remember, both Ripple and Coinbase have, in the past, disclosed the possibility of leaving the US if regulatory uncertainty surrounding the digital asset industry persists. While Coinbase is not locked in a long-running dispute with the SEC, the exchange has also been subject to regulatory impulses with the watchdog.
Inclusion of crypto in texas; Florida moves to ban CBDCs
Despite the stagnation in cryptocurrency regulations within the country, Texas, the second largest state in the US, has introduced legislation supporting the listing of digital assets. State lawmakers this week voted on a proposal that aims to include digital assets as a medium of exchange in the Texas Bill of Rights.
Meanwhile, lawmakers in Florida have voiced their opposition to a central bank digital currency (CBDC), following in the footsteps of North Carolina, which banned the use of a central bank digital currency as state payment last week. Similarly, on May 12, Texas Governor Ron DeSantis announced his approval of a bill that seeks to ban CBDCs in the state.
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Despite the hype surrounding central bank digital currencies and the progress made by several countries, many industry leaders have expressed concerns. Most of these important players point to security issues and the existence of a central control point, which negates the essential point of blockchain technology.
Furthermore, in a recent report, 80% of central banks surveyed highlighted concerns about increasing cybersecurity threats using central bank digital currencies. In addition, as many as 73% of respondents cited a growing problem with keeping up with the pace of growth in the financial technology industry and subsequent regulations.
New York leans towards stablecoins
In another positive development on the regulatory front, New York has proposed a bill that would allow the use of collateralized stablecoins to pay bailouts. New York Assembly Bill 7024, introduced on May 10, would recognize these security-backed stablecoins as a valid means of paying bail, increasing their real-world use cases.
Fiat-backed stablecoins such as USDC, USDT, and TUSD use reserves of fiat currencies to maintain parity with the currency. However, the bill, which is still in its infancy, does not explicitly say which stablecoins will be accepted and which will be dumped.
The SEC is on a rampage
In what appears to be standard practice, the US Securities and Exchange Commission continued its regulatory efforts this week. The watchdog has started cracking down on crypto-related websites promising unrealistically high returns for investors. The Securities and Exchange Commission (SEC) has filed a complaint against an entity known as GA Investors, demanding the closure of several linked sites that promise high returns. The agency requested a jury trial.
The SEC also has its eyes on Marathon Digital, a US-based digital asset company focused on cryptocurrency mining operations. Marathon Digital disclosed in its latest filings that it has received a second subpoena from the Securities and Exchange Commission regarding its data center in Montana. The agency is investigating with the Center for possible violations of securities law.
Binance leaves Canada amid new regulations
This week, Binance, the world’s largest cryptocurrency exchange by 24-hour trade volume, made the decision to wind down operations in Canada and exit the country on the back of new regulations. In a disclosure on May 12, the company cited Canada’s latest set of rules for the domestic digital currency industry, which industry leaders believe are unfavorable to currency stability.
Notably, in February, the Canada Securities Administration (CSA) released a set of new guidelines for the use of cryptocurrencies in the country. Exchanges operating in the country are expected to comply with the rules, which include prohibiting stablecoin deposits by customers without prior approval from the regulatory agency.
Amid the unfavorable regulatory atmosphere, several leading crypto-focused entities ended operations in the country over the course of the month, including Paxos, OKX, dYdX, and Bittrex. Binance is the latest to join this growing list. However, Kraken decided to stay in the country despite the growing concerns.
Asian regulators prepare for digital assets
The regulatory trajectory in Asia has continued to take a turn for the better in recent weeks, and this week was no different. The Hong Kong Securities and Futures Commission (SFC) has issued an operating license to OSL Assets Management Limited, a leading Hong Kong-based digital asset trading platform.
The license will allow OSL to provide services related to asset management and securities offerings to its institutional clients in Hong Kong. OSL claims that it was the first entity focused on digital assets to receive this type of license approval in a city state.
Meanwhile, in what appears to be a landmark ruling in China, the Supreme People’s Court of the Republic of China, the country’s highest court, has ruled in favor of using digital assets to settle debts in the country. This was stated as a revision to existing guidelines and will be implemented, assuming all parties involved agree to use digital assets.
