Circle Back Around 🔄
Plus: Sony pictures its own exchange 📽️
In this week’s edition of The Context, Circle clears an EU regulatory hurdle, Sony jumpstarts a crypto exchange, and Consensys gets sued.
[Circle the Globe? 🌍]
Peer-to-peer payments firm Circle became the first crypto company to be licensed as an electronic money institution in the European Union (EU) under the bloc’s new MiCA regulations.
What Journalists Said 🧑💻:
The MiCA (Markets in Crypto Assets) regulatory framework became law last May and the stablecoin provisions were finalized last week, wrote Ryan Browne (CNBC). Because Circle is now registered in France as an electronic money institution, it can issue its USDC stablecoin and Euro Coin throughout the EU.
Why is this a big deal? “The license gives the company, whose USDC trails behind rival Tether's market-leading USDT, pole position in grabbing market share among the 27-nation trading bloc's 450 million people,” wrote Ian Allison & Krisztian Sandor (CoinDesk).
Circle has positioned itself as a compliant stablecoin issuer, in contrast to Tether. Although USDT is being delisted at European exchanges, Tether “does not currently aim to comply with MiCA,” wrote Lockridge Okoth (BeInCrypto). CEO Paolo Ardoino claims MiCA’s rules about maintaining at least 60% of reserves at banks would expose it to “bank failures.”
PR Perspective 🔎:
By obtaining this license, Circle strengthens its brand characteristics of legitimacy and trustworthiness. If it becomes a hit in Europe, other cryptocurrency firms may focus more on compliance, too.
[Ride My Sony? 🐎]
One of Sony’s many subsidiaries is rebranding Japanese crypto trading platform Whalefin, which it purchased last year, to S.BLOX in preparation for a relaunch.
What Journalists Said 🧑💻:
The exchange has switched hands a lot, reported Wu Blockchain. “Singapore market maker Amber Group acquired Japan's regulated cryptocurrency trading platform DeCurret in early 2022 and changed its name to Amber Japan. Later, due to the collapse of FTX, Amber Group fell into trouble and was suspected of a complete debt-to-equity transaction with Fenbushi.”
Now that Sony has acquired Amber Group, it’s renaming the exchange to S.BLOX. Though the launch date has not been announced, the subsidiary “plans to collaborate with Sony Group’s other businesses to generate additional value for its crypto trading services,” wrote Danny Park (The Block).
This isn’t “Sony’s first crypto rodeo,” said Radek Zielinski (ReadWrite). It filed an NFT gaming patent and co-founded a Web3 incubator, but an exchange would be its biggest move yet. That could be a boon for the popular brand. “The Japanese market is known for its progressive stance on cryptocurrency regulation…provid[ing] a stable environment for crypto businesses to operate.”
PR Perspective 🔎:
Sony is big enough that it didn’t make a big deal of this to Western media. In fact, the press release was only available in Japanese. Crypto trade publications jumped on it anyway, proving that Big Brand + Crypto Project = Reader Attention.
[Coming to Consensys? 🦊]
The US Securities and Exchange Commission (SEC) sued Web3 software company Consensys over its MetaMask wallet.
What Journalists Said 🧑💻:
You thought the SEC’s fight against Consensys was over? That was about Ethereum’s move to proof of stake, explained Leo Schwartz (Fortune). This lawsuit is similar to SEC actions against Coinbase and Kraken; the agency says Consensys didn’t “register as a broker and dealer while offering services for securities, ultimately collecting over $250 million in fees.”
The SEC is focused on two MetaMask products: Swaps and staking. “Swaps is a platform that helps facilitate trades of various cryptocurrency assets by aggregating quotes from different decentralized exchanges and market makers,” wrote Protos. According to the SEC complaint, MetaMask enabled trades in several assets it considers securities.
Conveniently, Consensys already sued the SEC in April, “alleging the regulator had orchestrated a campaign ‘to seize control over the future of cryptocurrency’ with enforcement actions aimed at regulating Ether,” noted Turner Wright (Cointelegraph). The judge this week approved an “expedited schedule,” so the case could conclude this year.
PR Perspective 🔎:
At this point, getting sued by the SEC is a rite of passage. And suing the agency is a badge of honor. Sure, there are big legal fees involved, but both lawsuits create favorable media attention for Consensys.
[Tweet Of The Week]
Credit: @reka_eth
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here.
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.
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 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).
The team: Founder Samantha Yap and consulting editor Jeff Benson, Andrew Wickerson, Ewan Brewster, Emma Murphy 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 brands through impactful storytelling. Find out more about us here.