Now that the shock of the SEC’s Binance and Coinbase suits is receding, let’s focus on what’s going on outside the US. The news this week takes us to the UK.
The usual disclaimer: This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/Web3/NFT land and tries to provide unbiased context. It's aimed at anyone who wants to keep an eye on the space. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
[tl;dr]
Andreessen Horowitz announces London office 🇬🇧
FCA moving forward with UK crypto rules 🇬🇧
Ripple unseals SEC documents related to William Hinman 📄
[a16z 2 UK]
a16z crypto is opening its first international office in London. 🏢 The move comes shortly after aggressive regulatory actions against the crypto industry in the US. The London office will be headed up by a16z general partner Sriram Krishnan, who will be launching a UK-based crypto startup school while making web3 investments in the UK and Europe. 🏫
What a16z Said: This is about the regulatory environment, wrote a16z general partner Chris Dixon. Crypto and web3 “can only succeed with a clear regulatory regime that provides an open pathway for startups while also protecting consumers from fraud and manipulation.” The VC firm believes the UK is committed to creating industry-friendly policies.
What Journalists Said: The move is a “notable win” for UK Prime Minister Rishi Sunak, who wants to make the country a “global crypto hub” but has watched as France has attracted firms like Circle and Binance, said Bloomberg’s Anna Irrera. 🇫🇷
Actually, London’s been home to plenty of VCs and successful startups over the past 15 years, argued TechCrunch’s Mike Butcher. But it’s also “lost public listings, blocked mergers, and been criticized by exiting entrepreneurs.” 🚪
a16z crypto’s new second home could also give it influence and prevent web3 from falling by the wayside. As Leo Schwartz of Fortune noted, “The U.K. is still grappling with how to approach regulation.” But “a16z hopes to guide discussions.”
[UK’s FCA: Subtract the Crypto Ads ➖]
The UK's Financial Conduct Authority (FCA) proposed new rules to govern crypto promotional material, including a ban on free NFT giveaways, ✋ airdrops, and potentially misleading terms such as “inflation resistant.” The new rules go into effect on October 8.
What the FCA Said: “It is up to people to decide whether they buy crypto,” said the FCA’s executive director of consumers and competition, Sheldon Mills. “But research shows many regret making a hasty decision. 🧇 Our rules give people the time and the right risk warnings to make an informed choice.” ⚠️
What Journalists Said 🧑💻: The news seems to be going down quite well with those in the UK crypto industry, said CoinDesk’s Sandali Handagama and Camomile Shumba — at least in terms of the inflation-resistance theme. While it’s theoretically plausible that some cryptocurrencies can be an inflation hedge, the “lack of data combined with the volatility of crypto assets” renders the claim dubious.
But CoinTelegraph’s Amaka Nwaokocha argues this rhymes with what’s going on stateside, saying it “underscores ongoing scrutiny faced by the crypto industry.”
Let’s not forget that the FCA wants to keep a tight leash on crypto, suggested Decrypt’s Nivesh Rustgi. 🪢 It’s “repeatedly voiced the opinion that it considers crypto assets ‘high risk’” and it previously said that “firms must follow one of four mandated routes for promoting cryptocurrencies or face criminal punishment, including ‘up to two years imprisonment.’”
[Ripple Effects of Hinman’s Speech 💬]
Ripple published emails from SEC officials regarding a 2018 speech by the agency’s then-Director of Corporation Finance William Hinman, during which he suggested Ether is not a security. The agency sued Ripple in 2020, alleging that it sold unregistered securities in the form of XRP tokens. Ripple has argued that the agency is holding it to a double standard; it won a 2021 court ruling that mandated the SEC hand over internal documents about Ethereum.
What Ripple Said ⛲: “We now can all see Hinman ignored multiple warnings that his speech contained made-up analysis with no basis in law, was divorced from the Howey factors, exposed regulatory gaps, and would create not just confusion, but ‘greater confusion’ in the market,” tweeted Ripple CLO Stuart Alderoty.
What Journalists Said 🔎: There was plenty of discussion around Hinman’s speech, suggested CoinDesk managing editor Nikhilesh De, who highlighted the key passages.
None of it appears particularly damning, though, argued Decrypt’s Nicholas Morgan. 🦫Surveying the reactions of crypto lawyers and regulatory experts, he found that “rather than a smoking gun…the emails reveal little” that can help Ripple beat the SEC. 💨🔫
Fortune’s Leo Schwartz found the industry to be more divided, ➗ with some sources he talked to suggesting the “emails will aid the crypto industry more broadly than Ripple.” One lawyer he spoke with suggested that Ripple is quite centralized but that others in crypto are hesitant to say so because of the tactics of the “XRP Army,” a vocal group of XRP mega-fans.
Don’t expect the XRP Army to give up, 🪖 wrote CoinDesk’s Jeff Wilser just before the release of the emails. 📩 And XRP’s supporters are gaining real traction: “The final plot twist is that the wider crypto community, which has for so long held its nose at XRP, is now beginning to root for Ripple.” 🌲
[Tweet of the week]
[The Future of Crypto Regulation – Navigating Uncharted Waters 🌊]
In this instalment of YAP Cast: The Story of Money Season 3, Samantha Yap continues her conversation with Nikhilesh De, Managing Editor for Global Policy and Regulation at CoinDesk. Covering the world of crypto since 2017, Nik provides a unique perspective on the crypto industry. In this episode, we will explore the changing landscape of crypto regulation and its impact on the industry. Listen to the first episode of YAP Cast: The Story of Money here.
[Tidbits]
“Uniswap Labs, the team behind the leading decentralized exchange by trade volume, 🔊 has published the draft code for Uniswap’s next iteration, dubbed v4.” Story by Samuel Haig (The Defiant)
“Two months after the collapse of Silvergate Capital Corp. and Signature Bank, a new banking landscape for crypto companies is taking shape amid an expanding crackdown on the industry in the US.” Story by Yueqi Yang, Suvashree Ghosh, and Emily Nicolle (Bloomberg)
“A pair of House Republicans introduced a bill to remove the Securities and Exchange Commission (SEC) chairman from his post.” Story by Houston Keene (Fox News)
“Francis X. Suarez, mayor of Miami, has filed to run for U.S. President. Known as the ‘Bitcoin Mayor,’ Suarez has previously said he wants Miami to be a global crypto hub.” Story by Jason Nelson (Decrypt)
“Banq, a subsidiary of embattled crypto custodian Prime Trust, has filed for bankruptcy in a U.S. bankruptcy court in the district of Nevada.” Story by Sam Reynolds (CoinDesk)
[Events]
Dutch Blockchain Days | 14th June 2023 | Amsterdam, Netherlands
Non Fungible Tokyo | 22nd June 2023 | Tokyo, Japan
ETHGlobal Waterloo | 23rd - 25th June 2023 | Waterloo, Canada
Solana Hacker House | 25th - 29th June 2023 | Tel Aviv, Isreal
IVS Crypto 2023 Kyoto | 28th - 30th June 2023 | Kyoto, Japan
Blockchance 2023 | 28th - 30th June 2023 | Hamburg, Germany
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: “Market Maker” by Debra Nita.
Market makers are high-volume traders that "make a market" or provide liquidity for securities by always standing at the ready to buy or sell. They profit on the bid-ask spread, and they benefit the market by adding liquidity.
In traditional markets, whenever an investment is bought or sold, there must be someone on the other end of the transaction. If someone wanted to buy 100 shares of XYZ Company, for example, they must find someone who wants to sell 100 shares of XYZ. It's unlikely, though, that they will immediately find someone who wants to sell the exact number of shares they want to buy. This is where market makers come in.
Market makers earn money on the bid-ask spread because they transact so much volume. So, if a market maker is buying shares on average for a few pennies less than it sells them for, with enough volume it generates a significant amount of income.
If market makers didn't exist, each buyer would have to wait for a seller to match their orders. That could take a long time, especially if a buyer or seller isn't willing to accept a partial fill of their order. This ensures investors can trade quickly and at a fair price under all conditions. In turn, this generates confidence in the markets.
The team: founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Andrew Wickerson, Tiffany Mac Sherry, Becky Corbel and Delon Chan. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and Web3 brands through impactful storytelling. Find out more about us here.