Hugo Jack

ASX Suspends CHESS Replacement; Fireblocks First CCSS Level 3 provider; Basel Committee Updates Bank Crypto Capital Exposure Proposal; SEC vs LBRY

Thomas Murray Digital Newsletter

As we head towards the year end, here is a final round-up of institutional digital asset-related news for 2022. We will be back in the new year with a review of developments over the course of this year and a look ahead to what the major themes of 2023 may be.

In the post-trade sector, ASX has suspended its challenged attempt to replace its ageing but still serviceable CHESS clearing and settlement system with a blockchain-based platform, and more digital asset custodians receive regulatory approvals.

In other news:

The Basel Committee has made a new proposal to limit banks’ Tier 1 capital exposure to cryptocurrencies.
Technology provider Fireblocks has become the first organisation to attain CryptoCurrency Security Standard Level 3 certification.
SEC prevails in court over LBRY, setting a potential precedent for treating more tokens as securities.

Custody and Post Trade Developments

CBDC Corner

The Atlantic Council’s CBDC Tracker has been updated to show that all G7 countries and 18 out of 20 G20 countries are actively developing CBDCs, with 7 pilot schemes running. 11 countries have launched CBDCs. China will expand its pilot to most of the country in 2023, and over 20 countries will move towards their own pilot schemes, including Australia, Thailand, Brazil, India, South Korea and Russia, and likely also the ECB.

Central Banks Consider Backing Stablecoins Instead of Launching CBDCs (FinanceFeeds)
Antoine Martin, a research advisor at the New York Fed, has posited that central banks, rather than commercial banks, could hold the reserves that back stablecoins to increase bankruptcy protections and decrease risks. This would be simpler than central banks supporting retail use cases for CBDCs directly themselves.

US Banks Launch Digital Asset Settlement Platform PoC (Finextra)
Several US Banks including Citi, Wells Fargo, BNY Mellon, HSBC and US Bank have partnered with the innovation arm of the New York Fed to explore the feasibility of an interoperable digital money platform called the regulated liability network (RLN). The 12-week proof-of-concept project is designed to test the settlement of simulated US dollars from commercial banks through simulated central bank reserves using a shared ledger. The test is supported by technology provided by SETL and Digital Asset, running on Amazon Web Services.

Several more CBDC proof of concept projects are in the works:
Bank of Japan to Run CBDC Experiments With Country’s Megabanks: Report (CoinDesk)
Bank of England issues RFP for a CBDC wallet (Bank of England) to support testing, including compatibility with the BIS Innovation Hub’s Project Rosalind (an API for retail CBDC distribution)
The Reserve Bank of Australia’s eAUD pilot programme (Reserve Bank of Australia) has attracted 140 proposals from around 80 entities, spanning retail and wholesale CBDC use cases
Banco de España has issued a call for expressions of interest in wholesale CBDC experiments (Banco de España) regarding fund transfers and settlement, and comparing CBDC advantages and disadvantages with traditional processes

Naira Redesign Policy – Revised Cash Withdrawal Limits (Central Bank of Nigeria)
The Central Bank of Nigeria is limiting cash withdrawals to 100,000 naira per week for individuals and 500,000 naira per week for corporations, with excesses subject to withdrawal fees of 5% and 10% respectively, in an effort to drive adoption of traceable electronic transactions and Nigeria’s CBDC, the eNaira.

Kazakhstan Central Bank Recommends a Phased CBDC Rollout Between 2023–25 (Cointelegraph)

India’s Digital Rupee Fails to Excite Interest, Bankers Say (Reuters)

EIB Innovates Further with Project Venus, the First Euro-denominated Digital Bond on a Private Blockchain (European Investment Bank)
The French and Luxembourg central banks have completed Project Venus in which they settled a EUR 100 million digital bond issued by the European Investment Bank (its second digital bond) using a synthetic CBDC on a jointly operated private blockchain on Goldman Sachs’ GS DAP tokenisation platform. Société Générale Securities Services acted as digital custodian.

National Bank of Ukraine Releases Draft Concept for Digital Hryvnia (Cointelegraph)
The paper considers three use cases: retail (including payments and smart contract usage), wholesale (for operations related to cryptocurrency exchanges and other digital asset service providers), and for cross-border payments.
Crypto To The Rescue: Why The UN Is Sending War-Torn People In Ukraine Aid In Stablecoins (Bitcoinist)
UNHCR is partnering with Stellar Development Foundation to send USD Coin to Vibrant digital wallets of eligible Ukrainians displaced by the Russian invasion. Withdrawals can be made at MoneyGram outlets in USD, EUR or UAH.

Wishing you a Merry Christmas and a Happy New Year!

Thomas Murray Digital

Andrew Wright | Hugo Jack

Tel. +44 (0)20 8057 7100
Email: digital@thomasmurray.com
Web: thomasmurraydigital.com

Whilst reasonable care has been taken in the compilation of this information, neither Thomas Murray Network Management Limited, its affiliates or information contributors shall have any liability for any errors, omissions, delays or inadequacies in the information or for any loss or damage however occasioned (whether arising directly or indirectly), to any person or company relying on this information, or any decision made, action taken or inaction by any party in reliance upon this information (except to the extent permitted by law). Copyright © Thomas Murray Network Management Limited, company no. 03313014. All rights reserved. No reproduction without prior authorisation.

Leading Crypto Exchange Bites the Dust; UK Votes for Crypto Financial Instruments; MiCA Delayed Again; UBS Launches Bond on SDX and SIX

Thomas Murray Digital Newsletter

In this issue:

Leading exchange FTX and its sister hedge fund Alameda Research file for bankruptcy after revelations of a balance sheet black hole and unauthorised lending of customer deposits; further retail-focused crypto exchanges may also be vulnerable.
Germany finalises legislation to authorise the issuance of DLT-based securities, adding asset classes including equities and funds to the existing digital bearer bonds.
EU delays approval vote on the Markets in Crypto Assets Regulation (MiCA) to February 2023, further pushing back its implementation date.
UBS becomes first bank to issue a bond on a regulated digital exchange, with components trading on both SDX and the traditional SIX exchange.

Major Digital Asset Developments

Custody and Post Trade Developments

CBDC Corner

BIS and Four Central Banks Hail Pilot Trials of CBDCs in Cross-border FX Transactions (Finextra)

Singapore’s MAS Starts Wholesale CBDC Project Ubin+ for Cross-border Payments (CoinDesk)

BOK Completes Mock Test on Digital Currency (Bank of Korea)

New York Fed Tests Wholesale CBDC for Cross-border Payments (Finextra)

EU Ratifies MiCA; The World’s Largest Custodian Goes Live; SWIFT Acts Swiftly to Cement its Role in Blockchain Global Finance

Thomas Murray Digital Newsletter

Photo by Alexandre Lallemand on Unsplash

In this issue:

The EU’s landmark Markets in Crypto Assets legislation has finally been published and ratified, and the Transfer of Funds Regulation receives preliminary approval
SWIFT makes a play to keep itself at the heart of linking financial institutions in the developing DLT-based financial system by piloting a framework to link tokenisation and settlement systems and a system to ensure interoperability between digital and traditional finance
BNY Mellon, the world’s largest custodian, begins rolling out its digital asset custody service to select clients as more leading name banks including Société Générale announce and launch their own digital asset servicing offerings
OECD launches global Crypto-Asset Reporting Framework; EU extends Russia crypto sanctions; Basel Committee crypto reserve pushback continues; Coinbase partners with Google and continues service expansion; digital Euro plans updated

Major Digital Asset Developments

CBDC Corner

Progress on the Investigation Phase of a Digital Euro (European Central Bank)
A digital Euro will not be released until at least 2026. It will come with restrictions designed to slow the disintermediation of banks through conversions of bank deposits into CBDC holdings, and with an interest structure that disincentivises holding high digital Euro balances.

India Preps Digital Rupee Pilot (Finextra)

RBA and Digital Finance Cooperative Research Centre White Paper: Australian CBDC Pilot for Digital Finance Innovation (Reserve Bank of Australia)

Project Icebreaker: Central Banks of Israel, Norway and Sweden Team Up with the BIS to Explore Retail CBDC for International Payments (Bank for International Settlements)

Anchors and Catalysts: Central Banks’ Dual Role in Innovation – Speech by François Villeroy de Galhau, Governor of the Banque de France (Bank de France)
In this speech at the Conference on Opportunities and Challenges of the Tokenisation of Finance in Paris, the Banque de France announced wholesale CBDC projects to improve CBDC liquidity through automated market makers in DeFi markets and to issue and trade tokenised bonds.
The Banque de France has also joined a consortium of 14 banks and market infrastructures launched by SWIFT to conduct a new CBDC experiment for interbank settlement purposes.

Innovation in Post Trade Services – Opportunities, Risks and the Role for the Public Sector − Speech by Sir Jon Cunliffe (Bank of England)
The post-trade sector could see huge consolidation and disintermediation as smart contracts operated by single centralised or decentralised entities replace custodians, exchanges, CCPs and CSDs, removing settlement risk but reducing the ability to correct erroneous transactions and increasing liquidity risk. The FMI Sandbox being launched by the Bank of England, Financial Conduct Authority and HM Treasury will focus initially on testing DLT securities settlement systems and their integration with trading platforms.

SEC Guidance to Hold Client Cryptoassets on Balance Sheet Meets Resistance and Dampens Bank Plans; Staking Raises Prospect of Ether Being Classified as a Security

Thomas Murray Digital Newsletter

Securities and Exchange Commission Headquarters (SEC)

Reverberations from the SEC’s back-door attempt to move cryptoassets onto banks’ balance sheets – as we reported in May – continue as banks push back while their plans to offer digital asset services in the US falter. And the Ethereum Merge – a major and long-planned upgrade to the most widely used blockchain – passed uneventfully a week ago, shifting its operating model from Proof of Work to Proof of Stake and drastically reducing its energy consumption by an estimated 99.9%. While the change is welcome for environmental reasons, we examine whether the blockchain’s native ether token could be walking into a regulatory trap in which it could be reclassified from a commodity to a security.

Major Digital Asset Developments

SEC Accounting Guidance Issue Rumbles On
According to an article by Reuters, the US Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SEC), published in March earlier this year, is having a material dampening effect on banks looking to engage with digital assets. While ostensibly more of an expectation for organisations wishing to remain on good terms with the regulator than a rule, the accounting guidance requires public companies including banks to hold clients’ crypto assets as liabilities on their balance sheets, rather than off them as is customary for custodians of traditional client assets. This is problematic for banks which are subject to strict regulatory capital ratio rules.
Many of the largest banks in the US have announced intentions to support digital assets in one way or another, with some services already live, albeit primarily with select or private wealth clients. Nonetheless, the article makes clear that banks’ efforts in this space are undermined by the financial burden the capital requirements place on them, and some have had to ‘cease moving forward with [their] plans’. Both State Street and Bank of New York Mellon are reported to have been disrupted.
Nadine Shakar, head of State Street Digital, previously suggested at a recent Fund Forum panel discussion that this was no great imposition, and hinting that it could be an opportunity for large institutions like State Street to gain market share, saying ‘unless you have larger custodians moving into the space and be the big kids at the table, it’s [digital assets] unlikely to see institutional a doption’. It is now reported that she sees the SEC’s expectations as an issue for the bank, one that does not necessarily prevent them from custodying digital assets but that reduces its economic viability: ‘We do have an issue with the premise of doing that, because these are not our assets. This should not be on our balance sheet.’ (Reuters) U.S. Bancorp has paused onboarding new crypto custody clients, and anecdotally several European banks are pulling back from US advances until the issue is addressed.
Until there is clearer guidance, or changes to the capital impact faced by supporting crypto assets for banks – which seems unlikely in the short term – there may be a decline in ecosystem development, which is perhaps already being reflected in the value of the cryptocurrency market.

The Ethereum Merge and Securities Implications
The Ethereum blockchain successfully merged with the Beacon Chain on 15 September (CoinDesk), transforming it from a proof-of-work (PoW) to a proof-of-stake (PoS) protocol. The transition, which was many years in the making, has been welcomed as Ethereum is expected to consume 99.9% or so less energy as a result of the change (see previous newsletter). This, according to Bank of America (FXStreet), is an opportunity for greater institutional adoption of the blockchain’s native ether token, as those that were prohibited from investing in PoW systems due to ESG considerations may now acquire the cryptocurrency.
Ethereum and the thousands of tokens it supports have now removed themselves from potential moves by jurisdictions such as the EU and the US to ban or de-incentivise PoW: the EU has flip-flopped on including a ban in its pending Markets in Crypto-assets (MiCA) regulation, adding (The Block) then ultimately removing (CoinDesk) such clauses; the State of New York has implemented a moratorium on PoW mining using carbon-based energy sources (CoinDesk); and earlier this month one of the first responses to President Biden’s Executive Order on cryptoassets – from the White House Office of Science and Technology – asked the Environmental Protection Agency and the Department of Energy to consider a ban if the US cannot meet its climate goals through other means (Blockchain News).
However, by transitioning to PoS, with its reliance on the process of staking to secure and validate the network and its transactions, ether may have walked directly into the SEC’s securities oversight purview. In return for delegating ether to network validators (if they do not have enough tokens to qualify them to run staking nodes themselves), token-holders are rewarded in more ether tokens, which according to Chairperson Gensler of the SEC (Decrypt) and other regulatory agencies could constitute an investment contract under the US Howey test: ‘a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party’ (US Supreme Court).
While the SEC has not presented any formal analysis of the issue, it is assumed it does not consider ether to be a security, although the fundamentals are much harder to assess now and there is considerable scope for questions of consistency of approach to arise. Earlier this month, Gensler announced qualified support for Congress to hand more power to the Commodity Futures Trading Commission (CFTC) to regulate non-securities digital assets such as cryptocurrencies (Crypto Slate) so long as the move would not reduce the SEC’s power to regulate securities. He and the SEC have been the subject of notable dissatisfaction from the digital asset community and even the Commissioner of the CFTC due to the SEC’s failure to proactively shape a robust digital asset framework, receiving criticism for frequent cases of ‘regulation by enforcement’. Handing greater responsibility to the CFTC for such assets is seen by the community as a welcome development.
Bolstering the argument that ether and similar tokens should remain classed as commodities, Coin Center, a non-profit research and blockchain advocate, points out that the SEC looks at the economic realities underlying a project, rather than the terms and technologies used to create it, and given that the participation in the consensus mechanism is explicitly designed to be open to anyone, and not reliant solely on the efforts of others (Coin Center), staking, or mining for that matter, should not meet the criteria.

CBDC Corner

HKMA’s Policy Stance on e-HKD (Hong Kong Monetary Authority)
HKMA has concluded several consultations under its ‘Fintech 2025’ strategy and will take steps to prepare for a possible future retail CBDC based on broad support by working on technical and legal foundations while exploring application, implementation, and design issues.

IMF Says Crypto and Central Banks Could Set the Stage for Rich and Diverse Monetary Ecosystem – Here’s How (DailyHodl)

Crypto’s Adaptability, Openness Key to Ideal Monetary System, Say BIS Execs (Cointelegraph)

India’s Central Bank Plans CBDC Launch in 2022 with Help from Fintechs, Public Banks (Crypto Slate)

Digital Dollar Project Launches Sandbox Programme (Finextra)

Brazil, India Join CDBC Race: Will Start Pilot Projects in 2022 (The Tokenist)

Norwegian Central Bank Taps Ethereum for CBDC Work (Finextra)

ECB Taps CaixaBank and Amazon for Digital Euro Prototypes (Finextra)

China to Extend CBDC Trial to Most Populous Province, Guangdong, Three Others: Report (CoinDesk)

Iran to Start Testing a Digital Rial This Week (CoinDesk)

State of the Digital Asset Market: ‘Crypto Winter’ and Silver Linings

Hugo Jack

For investors in digital assets, and cryptocurrencies in particular, the last couple of months have been something of a nightmare. Ongoing macro and geopolitical pressures have continued to hit the digital asset ecosystem as investors – both retail and professional – have continued to exit the market as uncertainty around the regulatory and fiscal environment remains. While 2021 was officially the year in which institutional investors entered crypto in significant numbers, it is fair to say that the digital asset sector is still reminiscent of the early days of the Internet, evidenced by ecosystem failures, the misallocation of capital, and poor investor protection.

That said, while a much-needed shakeout (mostly of irresponsible leverage trading) is taking place, a digital asset future is still very much on the cards. Just as the tech bubble in 2001 paved the way for the Internet success stories of today, now global banks, financial institutions and FinTechs are continuing to invest and build new operational models and DLT-based infrastructure. The scope for this new environment is not just cryptocurrencies, which constitute a meaningful but relatively small asset class, but all financial instruments including equities, bonds, funds and alternative assets that will in time all likely run on blockchain rails. That said, as cryptocurrencies currently comprise the largest part of today’s real use cases for digital assets, it is worth taking a look at what is happening today: where things are going wrong, but also the continuing positives driving the industry forward.

Digital assets continue to dive amid macro uncertainty and ecosystem failures

In the past couple of weeks the cryptocurrency sell-off has continued as bitcoin crashed to its lowest level in two years. The period from May to June has seen one of the largest month-on-month declines with over USD 416 billion wiped from the total market capitalisation, which now sits at USD 933.0 billion. Considered a key line of support, bitcoin crossed its 200-week moving average (200W MA) last week, which has reportedly only occurred three times in its 13-year history. Historically, this has usually correlated with a market bottom. That said, central bank tightening is likely applying greater pressure to markets globally, which in crypto is compounded by miners of bitcoin needing to sell their BTC rewards to cover their operational costs which currently stand at approximately USD 20,000 per bitcoin. Consequently, there may still be some way to go before any sign of a true turnaround can be found.

The crypto markets are still reeling from the collapse of the Terra/Luna ecosystem in May, which impacted tens of thousands of investors globally including a well-known Dubai-based crypto focused hedge fund, Three Arrows Capital (3AC). It was quickly reported that 3AC was facing insolvency after incurring at least $400 million in liquidations. It failed to meet margin calls and is now considering multiple options including an asset sale, or a bail out by another firm. Celsius, a crypto lending platform which at one point claimed more than USD 20 billion in assets under administration, has come under pressure by investors in an old-fashioned “bank run”, with depositors scrambling to pull assets from the platform. On Monday 13 June Celsius released a community memo announcing its decision to pause all withdrawals, swaps and transfers between accounts, an option which it reserved under its terms of use. According to reports, Celsius is similarly in the process of considering insolvency proceedings and has appointed a legal firm that specialises in business restructuring, as well as hiring Citigroup as an independent advisor to brainstorm possible financing options. Nexo, another lending platform, put forward an unsolicited offer to acquire “any remaining qualifying assets”, although following a swift initial rejection it is unlikely the offer will be accepted.

It is unclear where the market goes from here. A significant amount of speculative capital has been put into the crypto ecosystem over the last couple of years during a period of exceptionally loose monetary policy and government stimulus; however, a flight to safety is now well underway across all asset classes. In addition, well established and high profile firms have put their reputations on the line and acquired significant amounts of bitcoin; the poster child for this tactic is MicroStrategy (Nasdaq: MSTR) which has 130,000 bitcoin, acquired at a cost of circa USD 3.97 billion, on its balance sheet, bought with cash from sequential debt offerings totalling nearly USD 2.4 billion. As a significant holder of bitcoin, all eyes are on the institution which at current prices is facing an unrealised loss of over USD 1 billion. In May it was reported that if bitcoin fell to USD 21,000 then a margin call would be triggered on a USD 205 million loan it took with Silvergate Bank in March to purchase additional bitcoin. That number was reached last week and has in the following thereafter gone as low as USD 17,744 as of Saturday 17 June. There is an inevitable concern that further liquidations would panic the market even further, however, MicroStrategy CEO Michael Saylor confirmed last week that a margin call had not been made, and that the company has reserves to protect against bitcoin dropping much lower.

Re-evaluation of business needs triggers firing and hiring

The bear market and general downturn is causing concern across the industry, as companies grapple with the implications of a looming recession and even stagflation. Financial considerations are being made a priority amidst declining revenues. Consequently, some digital asset institutions have announced reductions in head count. Coinbase (Nasdaq: COIN), one of the leading digital asset custodians and exchanges, announced cuts to staff of 18%, or approximately 1,100 staff, and furthermore rescinded 300 new hire offers. Gemini, an equally established exchange, expects to lay off 10% of its employees, while BlockFi and Crypto.com, more retail focused entities, will reduce headcount by 20% and 5% respectively, citing a “dramatic shift in macroeconomic conditions worldwide” which are impacting growth. However, at odds with the trend is Citibank, which this week announced its intention to hire 4,000 tech workers in a $10 billion effort to enhance online customer experience. It is joined by Binance and Kraken, two of the largest and most well-known cryptocurrency exchanges, which have similarly advertised their on-going efforts to recruit for 2,000 and 500 new positions respectively.

Longer-term sentiment remains positive as adoption increases

Despite the obvious pain that is being felt by the market during the latest crypto winter, sentiment around the future of the ecosystem and about cryptoassets remains positive. This week, Bank of America carried out a survey in which 91% of US adults said they plan to buy more cryptoassets over the course of the next six months, with 30% of respondents confirming their intention to hold their assets for at least the next six months despite the uncertainty. Echoing this sentiment, PwC’s Global Crypto Hedge Fund Report showed that allocations by crypto-focused and traditional hedge funds have increased over the past year, with 38% of traditional hedge funds currently investing in digital assets, up 21% from a year ago. Furthermore, 27% of the traditional funds that had not yet invested in digital assets reported that if the main barriers to adoption were removed they would accelerate their investments in them. Capgemini, a leading technology consulting firm, also released its 2022 World Wealth Report last week. Of the 2,973 global High Net Worth Individuals (HNWI) polled, 71% of them have allocated capital to cryptocurrencies and other digital assets. Furthermore, in assessing the demographic of respondents, 91% of under 40s have invested in digital assets, with Capgemini observing that cryptocurrencies remain their favourite digital asset investments for now. Even J.P. Morgan – whose chairman and CEO Jamie Dimon has been famously anti-bitcoin – has declared cryptocurrencies its new favourite alternative asset in preference to real estate, and has set a ‘fair value’ for bitcoin of USD 38,000, nearly twice its current price. And a joint PayPal and Deloitte survey of 2,000 senior U.S. retail executives found that nearly 85% of them expect digital currency payments to be ‘ubiquitous’ within the next five years.

Continued growth in institutional products and services

In other news, Goldman Sachs (GS) has launched a derivatives product linked to ether (ETH). The non-deliverable forward will enable investors to speculate on the price of ether without having to hold it directly. It comes at a time when investor confidence is low in the short term, however the firm reinforced its belief that digital assets are still desirable, stating that “institutional demand continues to grow significantly in this space”, with this offering helping the firm to evolve its nascent cash-settled cryptocurrency capabilities. And despite the reputation of stablecoins taking a knock of late, demand for them remains high as Circle Internet Financial – creator of the popular USDC dollar-pegged token – launches a new regulated euro-pegged stablecoin, EUROC, fully backed by euros held in custody by US qualified custodians.

Digital infrastructure for the repo market is also having a good month. BNP Paribas recently joined J.P. Morgan’s Onyx Digital Assets system, a tokenisation platform whose Intraday Repo application has processed over USD 300 billion of US treasury-based transactions in the year since it launched and is now looking to tokenise money market funds and other traditional securities as collateral. Meanwhile, Finteum’s DLT-based intraday FX swap and repo trading platform – due to go live next year – has been successfully tested by 14 banks, including Citi, NatWest and Barclays.

In Japan, the country’s two largest banks are making further moves in the digital asset space. Nomura – already one of the backers of custodian Komainu – will launch a new wholly-owned subsidiary to offer a range of digital asset services to institutional clients, with an unnamed executive quoted as saying, ‘If we don’t do this, then it’s going to be more difficult down the line to be competitive’. Meanwhile, Tokyo cryptocurrency exchange Bitbank has partnered with Sumitomo Mitsui Trust to create a new institutional digital asset custodian to be named Japan Digital Asset Trust. And the country has just become the first to pass legislation to limit yen stablecoin issuance to licensed institutions and guarantee their redemption back into fiat currency at par, a move that come into effect next year as a consortium of 74 Japanese banks and corporations moves to launch a private sector yen stablecoin.

Growing pains belie a maturing sector

The current market shake-up is inflicting short-term pain on investors, and the drying up of the previous flood of cheap capital that led to poor investment choices is now consigning thousands of weaker tokens and their associated projects to the scrap-heap. Investors are being reminded of the need to focus on utility and fundamentals over speculation. The last crypto market crash occurred in early 2018 when cryptocurrencies were the preserve of retail investors and the bravest of hedge funds, and institutional-grade services and infrastructure were not yet established. Four years later, the build-out of the foundations of the future financial system has got off to a strong start and continues apace. At the same time, regulation is beginning to catch up with the exuberant growth of this sector. We are witnessing the latest shift in a free market that should lead us to a more robust digital asset economy. Perhaps this moment will be seen in retrospect as an inflection point in the march towards a future financial system that encapsulates the best aspects of both stability and innovation.

Navigating the Future: Network Managers Get to Grips with Digital Assets

Digital assets become a strategic priority

Institutional exposures to digital assets are rapidly rising. A recent study conducted by Global Custodian and Citi found that 43% of asset managers anticipate interest in digital assets and their related services will grow, while 38% of respondents acknowledged they were already actively participating in the nascent market.

As institutional investors increasingly pile into digital assets, some of the leading banks are beginning to develop their own proprietary crypto-custody solutions, providing safekeeping of private keys to digital assets, as well as crypto-brokerage and even crypto-derivative clearing services. For example, SC Ventures, the innovation arm of Standard Chartered, recently collaborated with Northern Trust to launch Zodia, an institutional-grade custody solution for cryptocurrencies. Elsewhere, Citi is reportedly looking to expand upon its digital asset servicing capabilities including in areas such as trading, financing and custody.

Beyond the banks, a number of fintechs have also established digital asset custody solutions aimed at supporting the growing chorus of institutional investors now participating in the market. As institutional-standard providers increasingly offer these services, investors will become more comfortable with buying digital assets. This comes following the Citi/Global Custodian survey, which found that broker-dealers’ biggest concern about digital assets is the absence of secure market infrastructures.

Aside from investing into digital assets, a number of Central Banks are looking to launch so-called Central Bank Digital Currencies (CBDCs), i.e. digital versions of their own currencies. These are distinguished from today’s mostly electronic forms of money by their cryptographically secured and fault-tolerant distributed nature. While they differ from the original goal of cryptocurrencies to avoid centralised control, they still bring many of the advantages of crypto to governments’ toolkits. CBDCs should not necessarily be seen through an investment lens but rather as a tool by which to obtain massive trade settlement efficiencies.

Proponents of CBDCs argue that the technology could even result in the emergence of instantaneous settlement or DVP (delivery versus payment). “CBDCs [are] mostly about settlement and the unification of asset and payment cycles. The adoption of digital tokens would allow exchanging tokenised financial instruments by simple token swaps to enable instant and atomic exchanges where both legs of the transaction need to succeed or none of them will, thereby eliminating open positions in trading and all settlement and credit risks”, says an article by the London School of Economics.

A number of tests involving CBDCs have been conducted. For example, one high-profile CBDC pilot involved a EUR 100 million bond issuance by the European Investment Bank on the Ethereum blockchain, which was subsequently settled using a CBDC from the Banque de France, the country’s central bank. Elsewhere, The Bank for International Settlements is currently overseeing two pilot schemes – Project Nexus and Project Dunbar – to build prototype platforms in order to conduct cross-border settlements in CBDCs between multiple countries.

Network Managers must prepare for change

The shift away from traditional financial instruments towards digital forms will create challenges for Network Managers, but these ought not to be insurmountable. As demand for digital assets increases, Network Managers have a greater imperative to recalibrate their due diligence efforts to conduct checks on digital asset servicers and infrastructures. Today’s assessment questionnaires and methodologies are not entirely appropriate for the digital asset ecosystem, and omit several new critical considerations.

“At the most rudimentary level, Network teams will need to familiarise themselves with new technologies, principally the distributed ledger technology that facilitates the trading and settlement of digital assets, and how asset servicing requirements such as income distribution, tax, corporate actions and proxy voting work in this environment. They may also need to assimilate new ‘blockchain events’ such as forks, airdrops, staking and mining into their processes. Network Managers need a firm grasp of the mechanisms that support the core ‘custody’ of digital assets – chiefly the protection and management of the private cryptographic keys that unlock the transfer of assets which exist ‘live’ on the Internet (in the form of distributed ledgers). This differs greatly from the traditional model of a central ledger in which a trusted authority acts as the ultimate record-keeper of ownership. In addition, Network Managers should improve their understanding of cyber-security, given some of the challenges cyber-crime has caused in the digital asset marketplace. This is an area where Network Managers will need to call on IT experts from within their organisations and trusted advisors to support them. Apart from these new areas, assessments of digital asset service providers – versus traditional custodians – will still rely on most of the principles familiar today. Many of the standard risk assessment components such as reviewing balance sheet capital strength or monitoring Straight Through Processing levels and settlement rates will continue to contribute to the due diligence process when applied to digital asset service providers,” says Andrew Wright of Thomas Murray Digital.

Adaptations to the market review process will also need to be made. Whereas some of the more advanced economies are in the process of introducing meaningful regulations to help oversee digital asset trading and settlement, such as the EU’s Markets in Crypto-Assets Regulation (MiCA), there are concerns about some of the more laissez-faire policies being pursued in certain emerging markets such as El Salvador. “Network Managers must ensure regulatory standards, investor protection measures and asset safekeeping mechanisms – as they apply to digital assets – are robust across markets and at the service providers that operate in them. Again, this will require Network Managers to leverage the expertise that they have obtained when conducting traditional market reviews and to apply it in a digital asset context. Bringing this rigorous approach to the sector will be one of the ways that banks can begin to make up for the ground lost to fintech providers, who may lack the risk management approaches and depth of regulatory relationships enjoyed by traditional service providers,” notes Wright.

Moving into a new investment universe

Traditional assets are not going to be swept aside abruptly. Instead, the general consensus within the industry is that conventional financial instruments will co-exist alongside digital assets for a long time to come, until the point at which they have all transferred to run on digital rails – either as new assets issued natively on blockchains, or existing assets represented in new token form. As Wright concludes, “Network Managers undoubtedly need to improve their understanding of digital assets and how they work if they are to remain relevant and flourish moving forward. Fortunately, many of the skillsets synonymous with contemporary Network Management can be adapted so that they can be applied to digital assets. Opportunities are there for those that are willing to invest that effort.”

	ASX Will Reassess All Aspects of the CHESS Replacement Project and Derecognise Capitalised Software of $245-255 Million Pre-tax in 1H23 (ASX) The Australian exchange and financial market infrastructure provider ASX has paused its efforts to replace its Clearing House Electronic Subregister System (CHESS) clearing and settlement platform with a blockchain-based system that was being built in conjunction with Digital Asset. This follows a review by Accenture that cast doubt on the project’s timelines and suitability to provide the speed and scale required to replace the legacy system, which continues to work satisfactorily. Blame is apportioned to an under-estimation of the complexity of the market and weak project management, and not to the technical implementation. A new Project Director will oversee the next phase of development, which may or may not incorporate blockchain technology and components already built using Digital Asset’s Daml smart contract language.
	BitGo to Take Custody of FTX Assets in Bankruptcy Procedure (CryptoSlate)
	LCH Explores Crypto Derivatives Clearing (Risk.net) The central counterparty is in discussions with Global Futures and Options Exchange (GFO-X) with a view to partnering to clear cryptocurrency derivatives including crypto index-based futures and options.
	DBS Completes Repo Transaction on JPMorgan’s Onyx (Finextra) DBS has used JPM Coin for instant settlement and intraday maturity of a repo transaction, reducing the time requirement from the current standard of one to two working days. DBS is the first Asian bank to achieve this, following BNP Paribas as the first European bank to do so in May of this year (BNP Paribas).
	Komainu Secures MVP Licence from Dubai’s Virtual Assets Regulatory Authority (Komainu) Digital asset custodian Komainu has secured a licence from Dubai’s Virtual Assets Regulatory Authority (VARA) to provide digital asset custody and management services to institutional investors. Komainu is reportedly the first Digital Asset Service Provider (DASP) to receive such a licence.
	Bitpanda Receives Crypto Custody and Proprietary Trading BaFin Licence (Finextra)
	The Global Ambitions of Partior, the JP Morgan, DBS Blockchain Payment System (Ledger Insights) Partior, the joint venture of JPMorgan, DBS and Temasek, is drawing the attention of more settlement banks as the network – only announced last year – now has more than 60 banks across 15 jurisdictions engaged. The interbank network is designed to support multi-currency payments, which initially started with USD and SGD and are now expanding to include GBP, EUR, AUD, JPY, CNH and HKD. As noted in the article, the network is very similar to SWIFT in that it is not a payment system but rather a blockchain that supports the execution of instructions communicated through it, which makes it agile and a potential competitor to SWIFT.
	HSBC, Wells Fargo Extend FX DLT Settlement to Chinese Yuan (Ledger Insights)
	Zodia Expands Digital Asset Support to WBTC, USDC and UNI (LinkedIn) Digital asset custodian Zodia has expanded its support for digital assets, to include WBTC, an ERC20 (Ethereum blockchain-based) token that is backed 1:1 by bitcoin; USDC, the second largest stablecoin; and UNI, the utility token of the Uniswap network, a decentralised finance (DeFi) network that supports peer-to-peer trading, lending, and applications. Zodia Custody Rolls Out Service to Protect Client Assets from Exchange Insolvency (The Block) Zodia’s Interchange service will reduce counterparty risk by allowing clients to settle trades directly from custody, while ‘mirroring’ client balances to the exchange to facilitate trading.
	Fnality and HQLAX Demonstrate the First Cross-Chain Repo Swap Pilot (Fnality) The proof of concept, with Santander, Goldman Sachs and UBS, demonstrated a repo swap between the R3 Corda and Ethereum Enterprise blockchains, showing possibilities for intraday settlement and the provision of a cross-chain single pool of liquidity for payments, cross-currency payments (PvP) and delivery versus payment (DvP).

	Basel Committee Finalizes Policy Suggesting 2% Bitcoin Exposure Cap for Banks (Bitcoin Magazine) The Basel Committee proposes a 2% limit on riskier ‘Group 2’ digital assets such as unbacked cryptocurrencies as part of banks’ Tier 1 capital, increased from 1%, and still comfortably in excess of total cryptocurrency market capitalisation.
	Crypto Custody Tech Provider Fireblocks Receives First-of-Its-Kind Security Certificate (CoinDesk) Fireblocks, the underlying digital asset technology provider to major clients including Bank of New York Mellon, has become the first digital asset service provider to achieve Level 3 certification under the CryptoCurrency Security Standard (CCSS), satisfying requirements for robust segregation of duties, controls, geographic and organisational distribution, and IT security, as audited by Confide. The certification joins others in its portfolio including SOC2 Type II, ISO 27001, ISO 27017, and ISO 27018.
	Kenya Proposes Bill to Tax Crypto (CoinDesk) Given approximately 8.5% of Kenya’s citizens own cryptocurrencies (fifth by adoption globally according to this UN Report), the country’s lawmakers have proposed an amendment to the Capital Markets Bill that would allow for the taxation of crypto exchanges, wallets, and transactions, as well as the reporting of holdings and capital gains tax when selling or using digital assets.
	Italy to Impose 26% Crypto Gains Tax from 2023 (Crypto Slate)
	UK Lawmakers Support Easy Seizure of Crypto Linked to Terrorist Activity (CoinDesk) Lawmakers in the UK have approved new powers that will make it easier for law enforcement agencies to seize crypto assets. The Economic Crime and Corporate Transparency bill will be updated to give powers over crypto assets linked to terrorist activity that cannot readily be prosecuted under the criminal system, supplementing earlier amendments that do the same for assets linked to crime.
	Bitcoin Cash Could Be Legal Tender in St Kitts by March, Prime Minister Says (CoinDesk)
	Crypto Financial Services Firm Eqonex Files for Voluntary Debt Restructuring in Singapore (CoinDesk) Nasdaq-listed Eqonex puts its HK-based Diginex and Singapore-based Eqonex Capital into voluntary liquidation, ending plans to offer custody, brokerage and asset management services through these entities, following the August closure of its crypto exchange. Its UK-based entities, FCA-registered crypto custodian Digivault and Bletchley Park Asset Management, are also to be voluntarily wound down.
	Can Utility Tokens Be Securities? The Significance of SEC v. LBRY (Solidus Labs) A recent US court ruling found in favour of the SEC’s argument that the LBRY Credit token is an unregistered security, based on LBRY’s own marketing that promoted the token’s potential to appreciate in value. This blog from Solidus Labs summarises the case and assesses its potential as a precedent that could tip the balance towards SEC Chair Gary Gensler’s argument that many utility tokens also, or exclusively, bear the characteristics of securities, and therefore would fall under his agency’s jurisdiction.
	Gemini Secures Regulatory Approvals to Operate in Italy and Greece (Gemini)
	Sygnum Awarded Abu Dhabi In-Principal Approval (Finextra) Sygnum Expands its Offering into Luxembourg, Europe’s Largest Fund Market (Sygnum)
	USDC Stablecoin Issuer Circle Says Businesses Can Accept Apple Pay (CoinDesk) Business are now able to accept USDC, a USD pegged stablecoin, via Apple Pay.
	Vanguard Australia Deploys Blockchain-based Back Office Tech (Finextra) Vanguard’s Australian division has deployed a fund administration system based on the R3 Corda private blockchain. Use of a shared blockchain obviates the need for reconciliations between participants.
	Binance Starts Recovery Fund for Crypto Projects Facing Liquidity Crisis (CoinDesk)
	Accountant That Vetted Binance Reserves Halts Crypto Work (Bloomberg) Audit firm Mazars suspends its work on crypto reserves attestations, concerned that their scope is not correctly understood by the public and at media scrutiny. BDO is understood to be reviewing the situation but is continuing its own similar work.
	TP ICAP Wins Approval from FCA for Wholesale Spot Exchange for Digital Assets (Finextra)
	Goldman Sachs on Hunt for Bargain Crypto Firms After FTX Fiasco (Reuters)
	El Salvador Proposes Digital Securities Bill, Paves Way for Bitcoin Bonds (CoinDesk) Delivered to the legislative arm of the government on November 17, El Salvador’s Minister of Economy has proposed a bill that seeks to establish a National Digital Assets Commission that would be tasked with the oversight of the digital asset industry in the country. The bill is designed to create a regulatory regime that supports administration, safeguarding and investments in public digital assets, a precursor to the country’s ambition to raise USD 1 billion via bitcoin-backed bonds.
	Bitcoin Core 24, Bitcoin’s Controversial Upgrade is Now Live (Crypto Slate) The Bitcoin protocol has once again received another update. Bitcoin Core 24 was activated on November 26, and fully implements Replace-by-Fee (RBF) logic, a way for nodes to prioritise conflicting transactions based on which pays the highest fee, instead of in chronological order. Some fear the update will encourage double-spend attacks, and it will also disincentivise zero-confirmation transactions, which are accepted by the blockchain prior to validation by miners, with the secondary outcome of increasing transaction fees paid to those miners.

	New German Regulations Enable the Issuance of Securities on Distributed Ledger Technology (Bundesgesetzblatt) (German) The German government has published in its official journal, Bundesgesetzblatt, regulations and requirements that set out how electronic securities registers (eWpRV) can be used to support the issuance of securities, including equities and funds on a Distributed Ledger. This completes Germany’s approach to securities issuance using DLT, since only digital bearer bonds were supported in law until now.
	HSBC to Launch Orion Blockchain Bond Tokenization Platform (Ledger Insights) HSBC has announced plans to launch a permissioned DLT-based bond tokenisation platform, Orion. The solution is expected to be able to support the issuance and trading of digital bonds as well as the tokenisation of currencies such as GBP, such that assets can benefit from atomic settlement – the simultaneous exchange and instant settlement of assets – or true delivery versus payment (DvP).
	Binance Custody Turns to TRM Labs for Institutional Compliance (Finextra) In an effort to improve its institutional credentials and mitigate its many past regulatory challenges, Binance – the largest digital asset exchange by market capitalisation – is calling upon TRM, a leading blockchain analytics and intelligence firm, to bolster its risk management and compliance frameworks to support its custody activities, which it launched in December 2021. In signs of a maturing industry, the firm has reportedly secured specie insurance, certification under International Organisation for Standardisation (ISO) standards 27001 and 27701, as well as a SOC 2 Type 1 external audit attestation, and is currently pursuing a SOC 2 Type 2. These are standard credentials for traditional institutionally-focused custodians, and increasingly common for digital custodians.
	UBS Launches Bond Traded on Blockchain-based Exchange (Finextra) UBS has become the first banking entity to launch a bond on a regulated digital exchange. The CHF 375 million digital bond is trading on Switzerland’s SIX Digital Exchange (SDX) and also on the traditional SIX Swiss Exchange, in the same way that SIX’s own bond is traded following the launch of the Digital Exchange in November 2021. Utilising SDX’s atomic settlement technology, the bond is able to settle instantaneously within SDX’s distributed ledger-based CSD without the need for clearing via a Central Counterparty (CCP). Meanwhile, the analogue part will settle through traditional means via SIX Swiss Exchange. This Swiss dual digital/traditional model demonstrates a gentle path for other markets to introduce the tokenisation of traditional assets and the listing of digitally native securities.

	EU Delays Vote on MiCA Crypto Legislation Until February (CoinDesk) Further to our previous newsletter, the EU has decided to delay its vote on the implementation of the Markets in Crypto Assets Regulation (MiCA) until February next year, reportedly due to the complex and technical nature of the text. The delaying of the vote, which was anticipated to take place this December, means that MiCA will most certainly not be published in the Official Journal of the European Union (OJEU) originally slated for Q1 2023, which formally signifies the full applicability of the law. As such, this will likely impact the timing of the implementation of the regulatory and licensing regime which was due to come into effect in 2024, approximately 12 to 18 months after its publication in OJEU.
	UK Lawmakers Votes to Recognize Crypto as Regulated Financial Instrument (CryptoSlate) A proposal introduced to the House of Commons to recognise crypto assets as regulated financial instruments has received approval by the lower house after a second reading on October 25. The proposal seeks to include crypto assets and the services that support them under the Financial Services and Markets Bill which, if successful, will result in types of crypto assets including stablecoins falling under the same laws as other financial assets. If approved in law, the UK Treasury department would be empowered to enforce regulation over the crypto industry.
	IRS 2022 Tax Guidelines to Treat NFTs as Stablecoins, Cryptocurrencies (Decrypt) The US’s Internal Revenue Service (IRS) has introduced a draft update to its tax language which now considers a broader definition for digital assets as being “any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology”. As such, NFTs are now considered in scope, alongside virtual currencies such as stablecoins, and cryptocurrencies, all of which are set to be taxed under the same rules. Interestingly, the IRS has decided not to categorise NFTs as collectibles, such as art, which suffer from a the higher 28% rate of taxation, versus traditional equities bonds, and cryptocurrencies which are taxed at 0%, 15%, or 20% depending on the income level.
	South African Crypto Platforms Must be Licensed in 2023 – Regulator (Reuters) South Africa’s Financial Sector Conduct Authority (FCSA) has announced the need for companies that support cryptocurrency activities to apply for a licence in a time window between 1 June and 30 November, 2023, in order to operate legally within the country. NFTs are not covered under the announcement at present, given that they are considered to have characteristics more like traditional works of art. It appears that the licensing regime is being implemented in some part to mitigate the risk of potentially being added to the Financial Action Task Force’s so-called ‘grey list’, which has apparently identified material weaknesses in the country’s AML and CTF regime.
	Singapore Lays Down the Law for Crypto Trading and Stablecoins (Finextra)
	Japan Greenlights Tougher Anti-Money-Laundering Rules for Crypto (CoinDesk)
	UK Law Commission to Review International Laws on Crypto to Consider Legal Reforms (Coin Telegraph)
	Coinbase Piles on Support for Grayscale’s EFT by Filing Amicus Brief in Effort to Reverse SEC’s Rejection (CoinDesk)
	Canada Announces Crypto, Stablecoin Consultation in New Budget Statement (CoinDesk)
	EU Countries Must Be Ready to Block Crypto Mining, Commission Says (CoinDesk) The European Commission is once again coming after bitcoin and other proof-of-work cryptocurrencies on sustainability grounds, following an announcement in response to concerns over energy security this winter. Mining is fundamental to securing and ensuring the validity of the network, and therefore banning it across the EU would further undermine the decentralised nature of the blockchain which is integral to its security. The majority of bitcoin mining takes place in the US, China, Kazakhstan, Russia and Canada, with the EU’s Germany and Ireland considered key markets representing 4.48% and 4.68% of the hash rate respectively.
	HK to Legalize Retail Crypto Trading (Bloomberg Markets and Finance via YouTube)
	Stablecoin Issuer Paxos Receives Operating License from Singapore Regulator (CoinDesk)
	Fidelity 2022 Institutional Investor Digital Assets Survey: 58% of Institutional Investors Allocate to Digital Assets
	DBS Goes Live on SGX Unit’s Crypto Platform; Launches Programmable Money Pilot (Finextra)
	Israeli Government to Trial Blockchain Bonds with Stock Exchange TASE (Ledger Insights)
	France, Switzerland, Singapore to Test DeFi in Forex Markets (CoinDesk) Coordinated by the Innovation Hub of the Bank for International Settlements, Central Banks from France, Switzerland, and Singapore are collaborating on Project Mariana, which is designed to test the automation of foreign exchange markets across a decentralised financial infrastructure.
	JP Morgan to Launch Blockchain Euro Deposits Soon. Sees NFT Opportunity (Ledger Insights)
	Ethereum Records 1st Deflationary Month in History as Circulating Supply Declines (CryptoSlate) Following Ethereum’s transition to a proof-of-stake blockchain on 15 September 2022 the network has recorded its first deflationary month, in which more ETH was burned (introduced under the EIP-1559 proposal) than produced. As such, the circulating supply has been reducing by approximately 3,318 ETH daily.
	Ripple Begins Testing XRP Ledger Sidechain That’s Compatible with Ethereum Smart Contracts (CoinDesk)

	OECD Releases New Global Tax Reporting Framework for Crypto Assets (CoinDesk) The Organisation for Economic Co-operation and Development (OECD) has released a tax reporting framework for crypto assets. The Crypto-Asset Reporting Framework (CARF) was presented to the G20 last week, and attempts to address how crypto assets should be considered in context of the G20’s Common Reporting Standard (CRS), designed to foster greater global transparency and eliminate tax evasion.
	Uzbekistan Introduces Monthly Fees for Cryptocurrency Companies (Bitcoin.com) A new law has been adopted in Uzbekistan which requires digital asset service providers and cryptocurrency miners to pay monthly fees to the state depending on the service performed. Exchanges will reportedly be expected to pay as much as USD 11,000 per month, with failure to pay resulting in the suspension of their licences. Miners will be required to pay approximately USD 270 a month, while custodians will benefit from the lowest fee of approximately USD 135 per month.
	UK Shuts Down Temporary Crypto Company Licensing Program (CoinDesk) Following Copper Technologies’ retraction of its attempted registration with the Financial Conduct Authority (FCA), and Revolut’s successful application last month, the Temporary Registration Regime (TRR) has now come to an end. Subsequently, any and all firms looking to engage with certain types of crypto assets, or provide services for them, is required to seek full FCA registration.
	EU Issues Bitcoin, Crypto Ban on Russia with New Sanctions (Bitcoin Magazine) The EU has doubled down on its crypto sanctions against Russia by prohibiting the transfer of crypto assets from Russian-based cryptocurrency wallets. This comes a month after the Russian Ministry of Finance conceded that cryptocurrencies are needed to support its cross-border settlement needs.
	TRON Becomes Legal Tender in Dominica (CryptoSlate) The Commonwealth of Dominica has legalised the use of the TRON blockchain’s native tokens as a medium of payment in the country, in order to boost tourism as well as better position it within the context of an emerging global digital economy.
	France Approves its Third-Biggest Bank to Operate Digital Asset Services (The Block) Société Générale’s subsidiary, SG Forge, has received regulatory approval from the French financial markets regulator, Autorité des Marchés Financiers (AMF), to operate as a digital asset service provider (DASP), offering custody and exchange services.
	Crypto Exchange Binance Receives Licence to Operate in Kazakhstan (CoinDesk)
	Industry Pushes Back Again on Basel Committee’s Crypto Reserve Measures (Finextra) For the second time, the Bank for International Settlements’ Basel Committee on Banking Supervision has received further push back from industry associations including the Global Financial Markets Association, the Futures Industry Association and the International Swaps and Derivatives Association regarding its second consultation document published on 30 June on the ‘prudential treatment of cryptoasset exposures’. In 2021, the Basel Committee issued a proposal – largely viewed by the industry as unviable and even punitive – to require banks to reserve capital to cover the whole value of cryptocurrency holdings. Following stiff resistance, as we reported last November, the BIS withdrew that model and went back to the drawing board. The second proposal appeard to take a more refined and pragmatic approach, however, it has continued to be met with stiff resistance by numerous industry groups who argue yet again that the rules would reduce, and in some cases ‘preclude banks from utilising the benefits of distributed ledger technology (“DLT”) to perform certain traditional banking, financial intermediation and other financial functions more efficiently.’ Significant to the proposal is the idea of exposure limits to Group 1a/b (akin to traditional assets or those with effective stabilisation mechanisms, i.e. stablecoins) and Group 2a/b type crypto assets (unbacked crypto assets such as cryptocurrencies, as well as other assets that are not covered under Group 1). However, the proposal does not, according to the associations, take into account hedging that is often performed by financial institutions to limit their short and long term exposure. As such, they would still be subject to a 100% capital charge for Group 2 assets, which for all intents and purposes are the predominant digital asset type in circulation today, and those most in client demand.
	Coinbase Gets Singapore Digital Payment Token License (CoinDesk) Coinbase Expands Services in Australia, Calling Country a ‘Priority Market for Us’ (CoinDesk) Coinbase Commences Partnership with Signature Bank to Provide Real Time Settlement via Signet (Business Wire) Coinbase Hires Fintech Executive to Lead European Expansion (Bloomberg UK)
	Germany’s 2nd Largest Bank DZ to Launch Crypto Custody (Ledger Insights)
	Google Selects Coinbase to take Cloud Payments with Cryptocurrencies and Will Use Its Custody Tool (CNBC) Google is set to enable certain clients to pay for cloud services using digital currencies, reportedly as soon as early next year. It has appointed Coinbase (NASDAQ: COIN) to support it with the payment process and is also considering Coinbase’s Prime services for trading and custody. With reciprocity in mind, Coinbase is said to be moving some of its applications from Amazon’s Web Services to Google’s cloud.
	Paxos Wins Custody Deal for Fidelity, Schwab-backed Digital Asset Exchange EDXM (Ledger Insights)
	Custodian Anchorage Adds to Asia Push with Batch of Institutional Crypto Partners (CoinDesk)
	JPMorgan and Visa Link Blockchain Payment Networks (Finextra) J.P. Morgan (JPM) and Visa are due to establish a link between their proprietary blockchain networks, Liink and B2B Connect respectively, with Visa expected to benefit from JPM’s account validation tool, Confirm.
	SIX Integrates CryptoCompare’s Cryptocurrency Data Feed (Finance Feeds)

Thomas Murray Digital Newsletter

Custody and Post Trade Developments

Other News and Links

CBDC Corner

Wishing you a Merry Christmas and a Happy New Year!

Thomas Murray Digital Newsletter

Major Digital Asset Developments

Custody and Post Trade Developments

Other News and Links

CBDC Corner

Thomas Murray Digital Newsletter

Major Digital Asset Developments

Other News and Links

CBDC Corner

Thomas Murray Digital Newsletter

Major Digital Asset Developments

Other News and Links

CBDC Corner

Digital assets continue to dive amid macro uncertainty and ecosystem failures

Re-evaluation of business needs triggers firing and hiring

Longer-term sentiment remains positive as adoption increases

Continued growth in institutional products and services

Growing pains belie a maturing sector