Market Overview:

Digital assets cooled off after several weeks of explosive growth, pulling back slightly after trading across a wide range throughout the week.

• Bitcoin experienced volatile trading this week, dropping to a low of $34,950 on Tuesday, before rebounding to a weekly high of $37,960 (a new 18-month high) a day later
• Outside of these spikes, the majority of trading still took place across a broad range, between approximately $36,250 and $37,310
• The market seemingly remains optimistic on possible ETF approvals before the final January deadlines, and new data from analytics firm Glassnode shows that there’s no immediate intention to liquidate Bitcoin “the amount of supply held in wallets with minimal history of spending is at an all-time high of 15.4 million Bitcoins”
• Ether pulled back from last week’s major bullish moves, hitting a weekly high of $2,116 on Monday, before dropping to a low of $1,939 on Tuesday
• Overall digital asset market capitalisation decreased slightly to $1.38tn
• Inflows across digital asset investment products reached $293m; this marked seven consecutive weeks of inflows, worth a cumulative $1bn
• This brings the annual net inflows across such products to $1.14bn year-to-date, a new record
• Additionally, the crypto industry fear/greed index dropped 6% to 71/100; still denoting “greed” in the market, but more caution than last week’s exuberance
• According to industry monitoring site DeFi Llama, total value locked in DeFi this week grew to $46bn, with Ether’s pullback offset by strong growth in altcoins like Solana

Digital assets took a breather after breakneck growth over the last few weeks, although some altcoins still posted significant gains. There were major fundraises, confirmation from BlackRock on their spot Ether ETF intentions, and major adoption news from the likes of JP Morgan, Siemens, pension funds, Goldman, BNP Paribas, Commerzbank, and a roll call of top financial institutions in the latest leg of Singapore’s central bank “Project Guardian” digital asset development initiative.

What happened: JP Morgan carries out programmable money transaction with Siemens

How is this significant?

• After settling the first trade on its tokenised collateral network (TCN) last month, JP Morgan (alongside their client Siemens) made further strides in their blockchain infrastructure integration this week, with the successful execution of programmable transfers within the JPM Coin infrastructure on their Onyx blockchain, using “advantages and features from the crypto world” in “the holy grail” of money movement
• Siemens configured their account on the JPM access online treasury portal to automatically transfer money to fill potential value shortfalls. Clients can set a variety of conditions to automate value transfers—covering overdue payments and margin calls, delivery of goods, fulfilled contractual obligations, and even arbitraging exchange rates; far beyond the date-based conditions of standing orders
• Blockchain money transfers have a host of other benefits as well, including 24/7 functionality that can maximise interest returns, versus Monday-Friday banking hours
• JPM Onyx’s head of coin systems Naveen Mallela explained; “When rates are close to zero, treasurers are less bothered, but when rates are 5.5% or rising all these capabilities start becoming more attractive. When we talk about digital currencies and tokenised deposits, the holy grail has always been the ability to program payments”
• Mallela added “If you think of the current bank account provided by any financial institution, there is only so much you can do in terms of configurability and set of rules. We believe this is the first instance of a traditional financial firm building programmable payments at scale, using existing commercial bank money”
• Dr Peter Rathgeb, Group Treasurer of Siemens AG, celebrated their move; “Advantages and features from the crypto world are now available for fiat currencies by JP Morgan’s provision of 24/7 blockchain-based bank accounts, combined with programmability”
• He added that efficiencies were considerable compared to legacy systems; “This will take Siemens to the next level of automation to not only optimise the use of working capital but also enable data-driven digital business models and support the scalability of our Siemens business from the treasury side”
• Siemens are just the first of many JPM clients using blockchain to bolster their money’s capabilities and transactional efficiencies—other clients participating include the likes of FedEx and Cargill
• Rebeca Wiadacz, FedEx staff director of Global Cash Management looked forward to their integration of the new system, saying “Our collaboration with J.P. Morgan is one example of how we use innovative technologies, like blockchain, to fuel our future”
• This represents a compelling case of DeFi influencing TradFi; and since JPM Coin is used as a proxy for the banking giant’s physical USD or Euros, it is perhaps the closest thing to bringing such functionality to the classic image of “money”

What happened: BlackRock publicly confirms last week’s spot Ether ETF filing reports

How is this significant?

• After last week’s widespread expectation of a BlackRock spot ETF (following their registration of an “iShares Ethereum Trust” in Delaware), the world’s largest asset manager definitively confirmed their plans for such a product, filing an S-1 form with the United States SEC
• This builds on the aforementioned entity registration in Delaware and subsequent Nasdaq filing, confirming the company’s plans to duplicate their spot Bitcoin ETF efforts with the market’s second-largest digital asset
• The new filing confirms the ETF’s name as “iShares Ethereum Trust”, and once again names Coinbase as the chosen custodian for the underlying assets of the product, which intends to “reflect generally the performance of the price of Ether”
• Ether jumped following the news on Wednesday, reaching around $2,080 before pulling back to current levels
• Although the US has yet to approve any spot-crypto ETFs, BlackRock CEO Larry Fink pointed towards a brief but significant rally last month following false reports of an ETF approval as evidence for “pent-up interest in crypto” during a FOX Business interview

What happened: Commerzbank gains licence for digital asset custody

How is this significant?

• Following recent news that DZ Bank—the largest local custodian in Germany—was launching a crypto custody service, another German banking giant followed suit this week
• Now Commerzbank—Germany’s 4th-largest bank with over 11 million private and small business customers—received a crypto custody licence from the nation’s financial regulator, BaFin
• In a press release, Commerzbank stated that this makes them “the first German full-service bank to be granted the Crypto Custody Licence”, and that “the licence will enable the bank to build up a broad range of digital asset services, with particular emphasis on crypto assets”
• COO Dr Jörg Oliveri del Castillo-Schulz commented that the licence was an “important milestone” in serving client demand; “ it forms the foundation for supporting our customers in the areas of digital assets”
• Industry analysts identified this as a sign of European banks becoming more comfortable with the asset class, citing other recent examples such as DZ Bank and SocGen

What happened: South Korean national pension service invests in crypto industry exposure

How is this significant?

• South Korea’s NPS (the world’s third largest pension fund according to asset value) elected to pursue digital asset exposure within its investment strategy recently—and profited handsomely
• According to SEC filings, NPS purchased around $20m worth of Coinbase (COIN) shares in Q3 this year; allowing it to gain exposure to the crypto industry, although its guidelines prevent it from directly holding any specific digital assets
• Their investment thesis appears to have paid off; as of Wednesday’s closing bell, the fund’s Coinbase shares were worth around $27.7m, far outperforming the 9.09% average return posted by the fund in the January-June period
• Coinbase beat analysts’ estimates in its last earnings report, and as a proxy for the digital asset industry has benefit from strong year-to-date growth across board, with COIN up around 190% in 2023
• A survey earlier this year in pensions industry publication PensionAge, sponsored by Nomura subsidiary Laser Digital, found that an overwhelming majority (95%) of pension schemes view digital assets as a diversification opportunity

What happened: CoinShares seeks digital asset ETF acquisition from rival Valkyrie

How is this significant?

• Industry asset manager CoinShares secured an option this week allowing it to acquire the crypto ETFs issued by its competitor Valkyrie
• Valkyrie will remain an independent business until CoinShares actually exercises its acquisition option, which will bring Valkyrie’s entire fund division under its wing
• This fund division includes futures ETFs for Bitcoin and Ether, a Bitcoin mining exposure fund (one of the best-performing non-leveraged equities ETFs this year), and pending filings for a spot Bitcoin ETF
• CoinShares CEO Jean-Marie Mognetti identified US market entry as their impetus for the deal, telling Bloomberg “the point is to be a global leading player. We want to be the number-one player globally. To make that happen, we need to have a play in the US, we need to have the right partner in the US”
• Some enthusiasm around a potential spot Bitcoin ETF was deflated this week, as the SEC deferred a decision on an application by Hashdex to convert an existing futures ETF into a spot product
• However, Bloomberg Intelligence analyst James Seyffart remained optimistic, stating “it’s really not that surprising, the SEC goes early on decisions like this fairly frequently”

What happened: Digital asset VC news

How is this significant?

• Several major investment deals took place within the industry this week, perhaps most notably Goldman Sachs and BNP Paribas leading a $95m funding round for blockchain wholesale payments firm Fnality
• Other participants in the Series B round included Nomura and clearinghouses DTCC and Euroclear, as well as a veritable Who’s Who of banking participants from the previous round; Santander, BNY Mellon, Barclays, Commerzbank, ING, Lloyds, State Street, Sumitomo Mitsui, and UBS
• Elsewhere, com raised $110m in a round led by Kingsway Capital—but at a valuation far below previous rounds during prior to 2022’s crypto winter
• The new round leaves the firm valued at less than half the previous $14bn, raised just before industry contagion torpedoed valuations across the industry
• Industry publication TheBlock was valued at $70m when selling a majority share to Singapore VC firm Foresight Ventures, allowing them to buy out the ownership share of former CEO Mike McCaffrey, who was revealed to have taken multiple millions in loans from FTX to buy out other shareholders and purchase properties
• Disney partnered with NBA TopShot developers Dapper Labs for the release of Disney NFTs, modelled on physical collectible pins, to be released under the new “Disney Pinnacle” brand

What happened: Republican presidential hopeful Ramaswamy outlines pro-crypto position

How is this significant?

• Vivek Ramaswamy—regarded by several analysts as a potential frontrunner for the Republican presidential nomination—provided insight into his potential policy positions on digital assets this week; and they were overwhelmingly supportive
• Ramaswamy is the first Republican candidate to specifically release a crypto plan, and it involves a 75% reduction in SEC headcount, which he views as dogmatically antagonistic towards the industry
• He issued a statement on Thursday declaring “Since the inception of crypto, the shadow government in the administrative state in Washington, DC, and its cronies on Wall Street have tried to quash its rise. That ends on my watch”
• It should be noted however that his calls for widespread deregulation are not shared with the majority of colleagues in Washington, where working towards regulatory clarity via specific unambiguous guidelines remains the preferred course of action
• He also claims that code should be protected under the United States’ first amendment (free speech), opposes CBDCs, and believes the SEC and CFTC “appointed themselves the key gatekeeper for innovation, and deployed ambiguity and politicised hostility” to the crypto industry

What happened: Singapore awards licences for stablecoin issuance

How is this significant?

• This week, Singapore issued several in-principle licences for firms wishing to issue stablecoins in the city-state, “intensifying the competition among Asian financial hubs for a slice of a key crypto segment with a market value of $127 billion”
• Although it has moved to restrict retail access to crypto assets, Singapore nonetheless remains a significant player in the digital asset industry from an institutional investor and corporate perspective
• The licences were issued concurrently with a fintech festival, in which the central bank (MAS)’s chief Ravi Menon said that stablecoins can serve “a useful role as digital money”
• The firms to gain licences include StraitsX, who have issued a SGD-pegged stablecoin for the local market
• In other stablecoin news, leading stablecoin issuer Tether revealed plans to become a major Bitcoin miner as an additional revenue stream, aiming to control 1% of the total network computing power
• CEO Paolo Ardoino says that to realise these plans, the company will spend approximately $500m over the next half-year “both through constructing its own mining facilities and by taking stakes in other companies”
• In other news from the South East Asian region, the Philippines government announced plans to issue a $180m tokenised one year treasury bond, with an issuance and settlement date of November 22nd
• Binance and Gulf Energy Development Pcl set up a joint venture to launch a digital asset exchange in Thailand, following approval from the Thai SEC on Wednesday
• Gulf Energy owns a 51% stake in the joint venture and is one of Thailand’s largest businesses, with CEO Sarath Ratanavadi currently ranking as the country’s second richest person

What happened: New research reveals popularity of digital asset investment in France

How is this significant?

• A new survey on French investors’ attitudes published by national regulators AMF found that the pandemic spurred a rise in investment across the population—and crypto is one of the most popular investment classes
• According to the survey results, around a quarter of French citizens own some form of investment; and half of them first entered the investment market during the pandemic and widespread lockdowns
• Of particular interest is the fact that “More French people own crypto (9%) than stocks (7%) or ETFs (2%)”
• Pitchbook data also reveals an increase in France’s share of total VC deals within the industry, despite a contraction of deals globally

What happened: Leading Chinese gaming firm seeks to invest $100m in Bitcoin and Ether

How is this significant?

• Boyaa, a leading Chinese gaming firm listed on the Hong Kong stock exchange revealed a new strategy, aiming to invest $100m in major digital assets
• According to its filing with regulators, Boyaa believes such a move is vital for the evolution of its business; “The purchase and holding of crypto assets is a pivotal move for the Group to path its business layout and development in the field of Web3. The online gaming business has high compatibility with Web3 technology, and its focus on communities, users and virtual assets may enable an easier and wider application of Web3 technology to the online gaming industry”
• Additionally, they stated that “the allocation of part of the Group’s idle reserve funds to crypto assets as a diversified means of holding cash for capital management is also an important arrangement for the Group’s asset allocation”
• The $100m acquisitions would take place over the next 12 months, and represent around 38% of the company’s total assets; reflecting strong confidence in the potential opportunities within Web3
• Boyaa plans to split the bulk of earmarked funds between Bitcoin ($45m) and Ether ($45m), with the rest allocated to stablecoins

What happened: Monetary Authority of Singapore teams up with top banks on tokenisation

How is this significant?

• BNY Mellon, DBS, and JP Morgan are amongst the banking heavyweights participating in the latest round of the Monetary Authority of Singapore (MAS) ongoing “Project Guardian” digital asset experiments; this time focused on tokenisation
• According to an MAS statement published on Wednesday, the central bank is “working with the financial industry to expand asset tokenisation initiatives and develop foundational capabilities to scale tokenised markets. These developments will catalyse institutional adoption of digital assets, with the aim of freeing up liquidity, unlocking investment opportunities, and increasing the efficiency of financial markets”
• JP Morgan collaborated with Apollo on a proof of concept for tokenisation of funds by asset managers; Tyrone Lobban, head of (JPM’s) Onyx digital assets division said“Our goal is to create solutions that bring significant efficiencies and enable better outcomes for asset and wealth managers and investors through personalised, highly scalable portfolios, regardless of asset class or where those assets are managed and recorded”
• The Project Guardian tokenisation efforts include 17 major financial institutions across multiple different pilot programs; according to the MAS press release
• Citi, T. Rowe Price Associates, Inc. and Fidelity International are testing institutional-grade mechanisms for efficient bilateral digital asset trade pricing
• BNY Mellon and Singaporean bank OCBC are trialling a network-agnostic interoperable cross-border FX payment solution
• Ant International is trialling a treasury management solution to enhance liquidity management funding globally across more than 40 currencies
• Franklin Templeton is exploring the issuance of a tokenised money market fund through a Variable Capital Company (VCC) structure
• BNY Mellon, DBS, JP Morgan and MUFG are collaborating to explore the design of an open, digital infrastructure (dubbed “Global Layer One”) that will host tokenised financial assets and applications