Monthly Archives: March 2023

The Banking Crisis: A Boon for Stablecoin Experimentation

• The U.S. government has announced plans to backstop all deposits at two failed banks, while also pledging to secure at least 8% of the collateral for the USDC stablecoin.
• Circle CEO Jeremy Allaire discussed emergency measures his company took to keep USDC from depegging from the U.S. dollar as well as their plan to turn stablecoins into “straight-through government obligation money.”
• Arthur Hayes proposed NakaDollar (NUSD), a stablecoin backed by bitcoin and bitcoin derivatives, which could provide liquidity and stability if accepted by investors and crypto exchanges.

The Banking Crisis Has Been Good for Stablecoin Experimentation

Sovryn, a Bitcoin DeFi protocol, announced a new dollar proxy as others look at alternative models for collateralizing stablecoins amid a banking system crisis. By Daniel Kuhn

Stablecoin Backed by U.S Government

The U.S Treasury Department, Federal Reserve and FDIC announced plans to backstop all deposits at two failed banks, they were also pledging to secure at least 8% of the collateral for the USDC stablecoin. Circle, the stablecoin’s issuer, said it keeps around a quarter of USDC’s reserve assets at about six banks in order to avoid depegging from the U.S dollar during times of crisis or instability in banking systems worldwide.

NakaDollar: A Potential Alternative

Arthur Hayes co-founder of crypto exchange BitMEX proposed NakaDollar (NUSD), a stablecoin backed by bitcoin (BTC) and bitcoin derivatives which would theoretically be deeply liquid and attractive to traders providing stability if accepted and used by investors and crypto exchanges .

Circle’s Strategy

Circle CEO Jeremy Allaire spoke about the emergency measures his company took, as well as the serious game theorizing Circle has played over the past two years to spread out its cash and one day essentially turn stablecoins into “straight-through government obligation money.”

“The Hash” Panel Discussion

The panel discussed Hayes’ proposal on how it will affect future of the stablecoin market along with other possible solutions that can be implemented in order to make them more secure during financial turmoil or market crashes .

Block.one Exits Silvergate Stake, Citing No Exposure to FTX Turmoil

• Block.one, a Peter Thiel-backed blockchain software company, has exited its equity position in Silvergate Bank due to the bank’s inability to file its annual report last week.
• The company made a contrarian bet on Silvergate in November when its exposure to FTX’s collapse became public.
• Opimas LLC CEO Octavio Marenzi said that macroeconomic conditions are having a bigger effect on crypto markets more generally.

Block.One Exits Silvergate Stake

Peter-Thiel backed blockchain software company Block.one announced it had exited its equity position in Silvergate Bank after the bank was unable to file its annual report last week.

Bet On Silvergate In November

In November, when the bank’s exposure to FTX’s collapse first became known, Block.one made a contrarian bet on Silvergate citing their “strong balance sheet, their strategic positioning, or their market-defiant growth trajectory” which made the bank a “unique investment opportunity.”

Macroeconomic Impact On Crypto Markets

Opimas LLC CEO and founder Octavio Marenzi discussed the crypto market impact of the Silvergate Bank turmoil saying, “the markets reacted with a big yawn.” He adds that the macroeconomic backdrop, with U.S. Federal Reserve Chair Jerome Powell saying interest rate hikes are not finished, “is definitely having a bigger effect on crypto markets more generally.”

Bullish Has No Exposure To Silvergate

Block.one also said its portfolio company Bullish has no exposure to Silvergate whose holding company announced Wednesday the bank would “voluntarily liquidate” its assets and wind down operations.

Conclusion

The exit of Block.one from their equity position in Silvergate illustrates how macroeconomic conditions can have an impact on crypto markets as well as how investors need to be aware of potential exposures within investments before investing into them and assess any associated risks appropriately before making such investments in future.

Dubai Crypto Industry Booms with Ambitious Licensing Regime

• Dubai has announced its new crypto regulatory framework, which requires all entities offering one or more crypto-related services to seek authorization and licenses.
• The framework is accompanied by four compulsory rulebooks as well as seven activity-based rulebooks that set out requirements for different types of services.
• Dubai is aiming to become a global hub for crypto and blockchain activity, and is courting companies to set up shop in the emirate.

Dubai’s New Crypto Regulatory Framework

Dubai has unveiled its ambitious new crypto regulatory framework, designed to attract firms seeking regulatory clarity. All entities planning to offer one or more crypto-related services in the jurisdiction must seek relevant authorization and licenses. The framework is accompanied by four compulsory rulebooks for service providers and seven activity-based rulebooks that set out requirements by the type of service offered.

Aim To Become A Global Hub For Crypto And Blockchain Activity

The emirate aims to become a global hub for crypto and blockchain activity, and is courting companies to set up shop in the emirate. By creating a transparent regulatory regime with clear licensing rules, Dubai hopes to create an environment conducive for innovation while ensuring investor protection.

Reaction From The Crypto Industry

The response from the industry has been positive overall, with many praising how “elegantly designed” the framework is. Talal Tabbaa, founder of regional crypto exchange CoinMENA was particularly impressed with this “groundbreaking” effort from Dubai regulators. He noted that it comes at a time when other countries are struggling with knowing where regulation should be headed due to global uncertainty surrounding cryptocurrency markets.

Background on Regulatory Changes

Crypto markets went into a tailspin in 2022, prompting regulators everywhere to double down on setting up or enforcing safeguards which left companies and investors uncertain of their future prospects. This move by Dubai shows that they are serious about creating an enabling environment for blockchain projects within their jurisdiction while ensuring investor protection remains paramount – something other countries would do well emulate if they want their own ecosystems to thrive too.

Conclusion

Dubai’s new regulations show that they are serious about becoming a leader in the global blockchain space whilst protecting investors at all times – something other countries would do well emulate if they want their own ecosystems to thrive too!