Kiffmeister’s #Fintech Daily Digest (01/08/2021)

UK regulatory approach to crypto-assets and stablecoins: consultation and call for evidence

The U.K. government published a consultative paper seeking views on how it can ensure its regulatory framework is equipped to harness the benefits of new technologies, supporting innovation and competition, while mitigating risks to consumers and stability. Additionally, this document includes a call for evidence on investment and wholesale uses of crypto-assets, and the broader use of distributed ledger technology (DLT) in financial markets. The consultation closes on March 21, 2021. 

Also, the Bank of England is planning to publish a discussion paper in March which will lay out the central bank’s thinking on CBDCs.

78% of the Bitcoin Supply is Not Liquid

According to Glassnode analysis, only 4.2 million BTC (22%) are currently in constant circulation and available for buying and selling. As a measure of an entity’s liquidity, Glassnode uses the ratio of the cumulative outflows and cumulative inflows over the entity’s lifespan, excluding “in-house” transfers. This ratio yields a number L between zero and one, with larger values indicating higher liquidity. Liquidity is therefore the extent to which an entity spends the assets it receives. Illiquid entities are those that hoard coins in anticipation of a long-term BTC price appreciation. The analysis suggests that the present bull market is driven by the staggering illiquidity growth. 

Grayscale Holds Over 3% of Bitcoin, Sees Pension Interest

Grayscale has 10 funds and currently manages $25 billion in crypto-assets, up from $2 billion a year ago. The Grayscale Bitcoin Trust has accumulated more than 3% of the total Bitcoin supply, and it is seeing participation broaden out of the hedge fund segment to other institutions, pensions and endowments. Grayscale’s funds operate as trusts that hold growing hoards of crypto-assets that are not redeemable by investors. Holders can sell their shares in most of the trusts in the secondary market. 

Deutsche Bank to Pilot Digital Assets Proof-of-Concept With STACS

Deutsche Bank Securities Services and Hashstacs Pte Ltd (STACS) will collaborate to jointly explore a proof-of-concept (POC) related to the technological and practical feasibility of digital assets. The POC will explore interoperability, liquidity, cross-border connectivity, and smart contract templates, including the support of sustainability-themed digital bonds. STACS is focused on capital markets use cases, such as the trade lifecycle management of bonds, Environmental, Social, and Governance (ESG) fintech, structured products, and exchange-traded derivatives (ETD). 

Crypto Regulation Commences in Serbia: Trading, Mining Legalized

Serbia’s new Law on Digital Assets went into effect and the country’s crypto-asset service providers have six months to comply. The Serbian parliament has also adopted a set of amendments to the tax regulations covering digital assets. The law recognizes stablecoins, and permits crypto-asset mining, issuance and trading through organized platforms, including when facilitated using smart contracts. Furthermore, crypto services are permitted after the service providers obtain a license from the authority.