The next leap forward?
CME looking at spot Bitcoin trading, Ether ETF rumors, Gala hack, S&P envisions tokenized Treasuries
The CME is reported to be in talks over Bitcoin futures trading.
In Loose change: US seeks mixer ban, bill to regulate sector.
Gala Games victim of $220m hack attempt.
Digital tokens backed by US government bonds take off.
The revolution is just a t-shirt away.
Bitcoin futures trading
Future perfect: The world’s largest futures exchange hopes to capitalize on the surge of institutional interest in Bitcoin by launching trading in the cryptocurrency.
We want in: Chicago-based CME is reported by the Financial Times to have been holding talks with traders who have expressed a desire to be able to buy and sell Bitcoin futures on a regulated marketplace.
The CME already hosts Bitcoin futures but by opening up spot trading it would allow for so-called basis trading, which involves borrowing money to sell futures while buying the underlying asset.
A profit is realized by extracting gains from the small gap between the two prices.
Old world meets new world: The plan would mark the further encroachment of the established Wall Street community into an area that is currently dominated by crypto-endemic trading concerns Coinbase and Binance.
A move into Bitcoin spot futures trading would follow on the heels of the launch of Bitcoin ETFs back in January. Notably, the BlackRock Bitcoin ETF is the most successful ETF launch in history having brought in $10bn from investors.
The success of Bitcoin ETFs is generally considered to have been a major contributory factor in the rising price of Bitcoin itself, which has grown over 60% in the YTD.
🚀 Bitcoin surges over 60% in the year to date
Ether ETF rumors
It could be you: The price of Ether is enjoying similar benefits as rumors circulate that ETFs for the second-largest cryptocurrency will be approved in the coming months.
Media reports on Monday that the SEC had requested key document updates from potential ETF issuers and exchanges. A spokesperson for the SEC said it doesn’t comment on individual filings.
Previously, experts believed the agency was unlikely to green light the ETF over a lack of engagement, but that view has since changed. Final decisions on applications by VanEck and Ark Invest are expected this Thursday and Friday, respectively.
BlackRock, Fidelity, Invesco, Grayscale and Bitwise Asset Management have also filed applications, which will be decided on later in the year.
Ether futures ETFs opened for trading in October, after the courts ruled against the SEC in a case brought by Grayscale that eventually led to spot bitcoin ETFs.
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Loose change
US seeks mixer ban: US representatives are proposing a two-year ban on cryptocurrency mixers. Members have drafted legislation that would forbid financial institutions, cryptocurrency exchanges, virtual asset service providers (VASPs), and money service businesses from accepting transactions that have passed by a service of this kind.
The two-year timeframe is to allow regulators – including the Department of the Treasury, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and the Department of Justice – to conduct a detailed study on the inner workings of mixers.
Lawmakers alleged that around half of North Korea’s nuclear program had been funded through cryptocurrency theft made possible by mixers.
Make it so: Crypto lobbyists are working overtime to help the US House of Representatives approve a bill that would effectively regulate the sector in the country. The Financial Innovation and Technology for the 21st Century Act is to be voted on this week.
Behind the push are the Crypto Council for Innovation, a coalition of digital assets organizations and companies, including Coinbase, Kraken, Andreessen Horowitz, the Digital Currency Group and about 50 others.
The bill would place the CFTC as the leading regulator of digital assets, with a clear distinction of what that agency would handle and what would be left to the SEC.
Consumer protections, including what happens when investors lose all their money, are contained in the legislation along with further protection against risky behavior.
Changing tunes: India may be loosening its anti-crypto stance with noises from the country’s markets watchdog that it would be keen to allow trade in virtual private assets. Reuters reported that the Securities and Exchange Board of India (SEBI) has submitted documents to lawmakers advising on policy formation.
The SEBI view contrasts that of the Reserve Bank of India (RBI), which sees private digital currencies as a macroeconomic risk.
In 2018, the central bank banned lenders and other financial intermediaries from dealing with crypto users or exchanges.
India’s Supreme Court later overruled the decision and, last year, when it was president of the G20, India laid the ground for a global framework to regulate digital assets.
Fools rush in: Two brothers have been arrested after allegedly hacking the Ethereum blockchain and stealing $25m worth of crypto in about 12 seconds. Anton and James Peraire-Bueno were charged with conspiracy to commit wire fraud, wire fraud and conspiracy to commit money laundering, according to the US Department of Justice.
US Attorney Damian Williams called the charges the first of their kind.
The case involved ‘maximal extractable value’ (MEV), the maximum amount of value that can be extracted from a given DeFi protocol or smart contract by a user or group of users.
The brothers targeted traders with MEV bots that focus on crypto arbitrage trading, according to the indictment, which described a “technologically sophisticated, cutting-edge scheme” the pair “plotted for months and executed in seconds.”
The 12-second hack could result in more than 20 years’ jail time per count.
What we’re reading
It’s in the stars: “There is no clear mechanism that would explain why planetary movements would be linked to asset prices on planet Earth, but these crypto astrologers are finding a following anyway.” Wired on crypto astrologers.
Gala fesses up
Got game: The Web3 gaming network Gala Games has admitted to a hack of its smart contracts that allowed the perpetrator to mint $220m of tokens and sell on $21m-worth before the exploit was noticed and quickly shut down.
Taking to X, Gala CEO Eric Schiermeyer, who co-founded Zynga, said the compromise was identified and dealt with within 45 minutes.
“It's important to note our ETH contract for $GALA is secure and under the protection of a multi-sig wallet,” he added. “It was never compromised.”
We messed up: Schiermeyer added that “this shouldn't have happened,” saying the company was “taking steps to ensure it doesn’t ever again.”
“We believe we have identified the culprit and we are currently working with the FBI, DoJ and a network of international authorities.”
A fuller explanation of how the hack happened was posted on the Gala website. Gala is a big player in the GameFi ecosystem with popular games such as Mirandus, Spider Tanks, Town Star and Echoes of Empire.
The $GALA token is used for in-game purchases, rewarding node operators and also giving both players and operators decision-making powers over what games should be added to the system.
Annals of crypto gambling
Soft machine: A report from Softswiss has suggested that 93% of crypto-based transactions are facilitated via its own in-game currency conversion tool.
The company said the mechanism allows operators to engage players with cryptocurrency assets in games initially tailored for fiat only.
Operators that adopt such options are gaining more competitive advantages in the market.
Caution, horses: The Q1 crypto bet sum showed “moderate” growth of 2.4% YoY vs. a 20%-plus increase in the preceding quarter. The bet count remained level QoQ but represented a 21% rise YoY. The average bet size rose from €1.66 to €1.71 vs. the average fiat bet, which fell back to €0.81 vs. €0.93 this time last year.
COO at Softswiss Vitali Matsukevich said the lack of a substantial increase in the number of crypto bets in Q1 could be partly attributed to the significant rise of Bitcoin over the period.
He noted this led to players being more cautious with their crypto bets.
“This trend mirrors the situation in the first quarter of the previous year when the Bitcoin exchange rate surged following a decline at the end of 2022,” he added.
What we’re reading
No-brainer: Tim Heath tells the NEXT Summit in Valletta that operators must understand how to build user journeys and interfaces that make crypto a “no-brainer payment method.” “We need to make it seamless, like one-click transactions in apps.”
Tokenized Treasuries take off
Bond, Digital Bond: Digital tokens backed by US government obligations are catching on with institutional investors, analysts at S&P Global have said, with more than $1bn in notes sitting on public blockchains.
In a note to clients, the firm said the market for Tokenized Treasuries – which are digital tokens created on a public blockchain and backed by a portfolio of US government bonds – is growing rapidly.
Blockchain-native firms and traditional institutions such as BlackRock and Franklin Templeton have so far taken the lead as issuers.
The digital tokens offer significant benefits for money market fund issuers and investors, analysts said, such as managing liquidity and allowing on-chain businesses to access real-world yields.
Take it on the run: While also supporting broader asset management innovation, S&P’s primary credit analyst Andrew O’Neill said the main benefit is helping money market funds and their investors to manage liquidity and diversify.
During periods of market volatility, investors may need to meet margin calls on some positions and, if a run happens, liquidity risk for the fund rises.
Tokenization would ensure investors have round-the-clock access to liquidity on-chain, O’Neill said.
BlackRock’s BUIDL fund, issued on Ethereum, allows investors to redeem their shares for USDC stablecoin through a smart contract without relying on any intermediary.
Investors could also use their tokens as liquid collateral rather than needing to redeem, thereby reducing the risk of a run.
That old chestnut: Regulatory challenges have so far inhibited broad adoption, particularly for US banks, O’Neill noted.
“Banks’ tokenization efforts have mainly used private permissioned blockchains, supporting operational efficiencies but not a liquid market in tokenized products,” he said.
“Asset managers are less restricted, however, and have been able to issue Tokenized Treasuries on public blockchains, primarily on Ethereum – allowing a broader investor base to access these products.”
Gimme danger: There are some headwinds, analysts noted, not least interoperability challenges that limit the growth of tokenization and the general hesitancy and regulatory disapproval that accompanies high-risk crypto investing.
“Investors need to access the blockchains on which the tokenized assets are built and institutions need to connect their legacy systems to those blockchains,” O’Neill said.
“Emerging regulatory frameworks in key jurisdictions will enhance investors’ appetite to engage with stablecoins and the features they enable, such as the BUIDL example of disintermediated redemption through a smart contract.”
Events calendar
May 27: BlockSplit 2024, Croatia
May 28: Blockchain Week Rome 2024
May 29-31: Consensus, Austin
June 6: Crypto Valley Conference, Switzerland
June 19: Nordic Blockchain Conference 2024, Copenhagen
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