Terra founder gets bail, institutional adoption surges, regulatory efforts endure | Weekly Recap
The crypto space witnessed an eventful week with several key developments. Authorities in Montenegro agreed to release Kwon Do-Hyung, founder of the failed Terra ecosystem, on bail despite the US and South Korea calling for his extradition.
Meanwhile, institutional adoption of cryptocurrencies saw a marked uptick, with more mainstream companies setting up measures to embrace digital assets and blockchain. In addition, regulatory efforts continued with new updates on increased scrutiny.
Do Kwon gets bail
In what came as a shocking development considering his record of evading authorities, Kwon Do-Hyung, the founder of Terra, was released by Montenegrin authorities on a $436,000 bail this week. Do Kwon was granted bail alongside Terra’s former chief financial officer Han Chong-Joon. The duo was arrested barely two months ago while trying to leave Montenegro with falsified documents.
The reports of Do Kwon’s bail came up shortly after he pleaded not guilty to charges leveled against him by Montenegrin authorities. The authorities had charged Kwon with forgery and the use of falsified documents. The prosecutors objected to the bail, but the court granted it. Kwon promised to appear in court when required and not evade the authorities. He will be kept on house arrest.
Meanwhile, reports suggested that South Korean authorities had fixed a date for the trial of Shin Hyun-Seung, another Terra co-founder, and seven other individuals. The trial is set to commence on May 26, in which Shin will be tried on charges related to the collapse of the Terra ecosystem.
Uptick in institutional adoption
The digital asset and blockchain industries have continued to attract the attention of retail investors and institutions despite the setbacks presented by recent implosions. This week saw a marked uptick in institutional interest, evidenced by several developments.
Reports from May 8 suggested that Alibaba Cloud, the cloud-focused subsidiary of Alibaba, formed a collaboration with the Avalanche blockchain protocol to launch Cloudverse. Cloudverse will be a platform for firms to develop and launch their blockchain-based metaverse projects.
In addition, several leading global companies, including Goldman Sachs, Microsoft, Deloitte, and Cboe Global Markets, formed a partnership on May 9 to launch a new blockchain system by integrating different financial institutional platforms.
Two days later, reports revealed that Standard Chartered, a leading British multinational bank, is looking to introduce a digital asset custody product for institutional clients through the subsidiary Zodia Custody, in Dubai. The bank is currently awaiting regulatory approval from the financial authorities.
Government adoption
Besides private institutions, governments across the globe also demonstrated their readiness to leverage the blockchain and digital asset industries. This week, Daniel Risch, the prime minister of Liechtenstein, disclosed that the government would start allowing citizens to pay for public services using bitcoin (BTC).
In a separate development, Liechtenstein and Norway collaborated with the European Blockchain Services Infrastructure (EBSI) to launch an official publicly-accessible blockchain protocol for the European Union. Node operations are distributed among countries in the EU, including Germany, the Netherlands, France, and Italy.Â
Meanwhile, the Kenyan government partnered with Venom Foundation, the team behind the Venom blockchain in Africa. Reports suggest that the Venom Foundation seeks to establish a blockchain hub in the country.
This week, China took another step toward leveraging blockchain’s power. The National Technology Innovation Center in China launched operations in Beijing on May 10, three months after its introduction.Â
US regulatory atmosphere is still worrisome
As observed every week in recent times, the United States made headlines for its stance on crypto regulations amid the worrisome unclarity plaguing the local crypto industry. The US House of Representatives gathered on May 10 to discuss the concerning state of the regulatory climate in the country.Â
While most lawmakers, like Rep. Patrick McHenry, championed introducing new laws tailored to the crypto scene, others, such as Rep. Stephen Lynch vehemently opposed this view, arguing that the crypto industry should be regulated with existing financial laws.
Meanwhile, industry leaders have continued to kick against recent policies introduced by the US Securities and Exchange Commission (SEC). Most recently, representatives from five prominent investment companies issued a statement to the SEC on May 8, opposing the regulatory watchdog’s new custody rule proposal unveiled in February.
Barely 24 hours after the statement was released, Paul Grewal, Coinbase’s chief legal officer, also called attention to the proposed custody rule’s issues. According to Grewal, the rule automatically assumes that all digital assets covered are securities, which raises concerns. Grewal urged the SEC to ensure that the rule properly represents distinct asset classes.
Coinbase and Ripple set their sights abroad
Amid the regulatory uncertainty within the US crypto industry, Coinbase and Ripple, two of the country’s largest digital asset-focused firms, have intensified efforts to establish a presence overseas.Â
Following the launch of the global exchange, Coinbase International, in Bermuda, Brian Armstrong, Coinbase’s CEO and Nana Murugesan, the company’s VP of international and business development, visited the United Arab Emirates this week to discuss expansion strategies. Coinbase is seeking an operating license in the UAE for its global platform.
Ripple, the Silicon Valley FinTech company behind the issuance of XRP, also has its eyes set on the UAE. Ripple, which has had to fight one of the longest-running crypto-related legal battles with the SEC, recently opened a new office in Dubai. Brad Garlinghouse, the CEO of Ripple, also disclosed the company’s plans to extend its operations in the city.
Recall that both Ripple and Coinbase had, in the past, disclosed that there is a possibility of leaving the United States if the regulatory uncertainty surrounding the digital asset industry persists. While Coinbase is not caught in long-standing litigation with the SEC, the exchange has also had its regulatory run-ins with the watchdog.
Crypto inclusion in Texas; Florida moves to ban CBDCs
Despite the stagnation in crypto regulations within the country, Texas, the second-largest state in the United States, has introduced legislation that supports digital asset inclusion. Lawmakers in the state voted this week to pass a proposition that sought to include digital assets as a medium of exchange in the Texas Bill of Rights.
Meanwhile, lawmakers in the state of Florida expressed their opposition to a central bank digital currency (CBDC), following in the footsteps of North Carolina, which banned the use of a CBDC as payment to the state last week. Similarly, on May 12, Ron DeSantis, the governor of Texas, expressed his approval of a bill that seeks to prohibit CBDCs in the state.
Despite the hype surrounding CBDCs and the progress made by several countries, numerous industry leaders have voiced concerns. Most of these critical players cite security issues and the presence of a central point of control, which eliminates the basic point of blockchain technology.Â
Moreover, in a recent report, 80% of surveyed central banks highlighted concerns about an increase in cybersecurity threats with the use of central bank digital currencies. In addition, up to 73% of the respondents noted a growing problem with keeping up with the pace of growth in the FinTech industry and the ensuing regulations.
New York leans toward stablecoins
In another positive development on the regulatory front, New York proposed a bill permitting the use of fiat-collateralized stablecoins to pay bail. The New York Assembly Bill 7024, introduced on May 10, would recognize these fiat-backed stablecoins as a valid means of bail payment, further increasing their real-world use cases.
Fiat-backed stablecoins, such as USDC, USDT and TUSD, use reserves from fiat currencies to maintain their parity with the currency. However, the bill, which is still in its infancy, does not explicitly mention which stablecoins will be accepted and which will be discarded.
SEC is on a rampage
In what appears to be a customary practice, the US SEC continued its regulatory efforts this week. The watchdog has begun cracking down on crypto-related websites promising unrealistically high returns for investors. The SEC filed a complaint against an entity known as GA Investors, demanding the closure of multiple associated websites promising high returns. The agency requested a jury trial.
The SEC also has its eyes set on Marathon Digital, a US-based digital asset company focused on crypto mining operations. Marathon Digital disclosed in its latest filing that it received a second subpoena from the SEC regarding its data center in Montana. The agency is investigating the center for possible securities law violations.
Binance leaves Canada amid new regulations
This week, Binance, the world’s largest crypto exchange by 24-hour trade volume, made a decision to wind down operations in Canada and exit the country on the back of new regulations. In a disclosure on May 12, the company cited Canada’s latest set of rules for the local crypto industry, which industry leaders believe is unfavorable to stablecoins.
Notably, in February, the Canadian Securities Administration (CSA) issued a set of new guidelines for using cryptocurrencies in the country. Exchanges operating in the country are expected to comply with the rules, which include the prohibition of stablecoin deposits by customers without prior consent from the regulatory agency.
Amid the unfavorable regulatory atmosphere, several leading crypto-focused entities have wound up operations in the country over the month, including Paxos, OKX, dYdX, and Bittrex. Binance is the latest to join this growing list. However, Kraken has decided to remain in the country despite the growing concerns.
Asian regulators warm up to digital assets
The regulatory trajectory in Asia has continued to take a turn for the better in recent weeks, and this week was no different. The Hong Kong Securities and Futures Commission (SFC) issued a license of operation to OSL Assets Management Limited, a leading Hong Kong-based digital asset trading platform.
The license would allow OSL to provide services related to asset management and securities offerings to its institutional clients in Hong Kong. OSL claims to have been the first digital asset-focused entity to receive this sort of licensing approval in the city-state.
Meanwhile, in what appears to be a landmark ruling in China, the Supreme People’s Court of the Republic of China, the country’s highest court, ruled in favor of using digital assets to settle debt in the country. This came as the revision of existing guidelines and will be implemented, supposing all parties involved agree to using digital assets.
