This edition of “Crypto’s Last Week” accounts for the most notable, and crypto-related — institutional, investment, and regulatory — news published between Saturday, September 12, and Friday, September 18.
The Bank of Thailand (BOT) has successfully launched a new platform “leveraging blockchain technology for government bond issuance.” Thailand’s Central Bank has efficiently and securely sold 50 billion Baht (approximately $1.6 billion) worth of government savings bonds in 7 days, substantially surpassing internal expectations on the timeframe for this sale to be completed. Additionally, the positive results of this operation open the way for what was described as the application of this infrastructure to retail and wholesale government bonds to “fully serve the demand of all stakeholders” while reducing associated operational costs for all parties involved.
Weeks before achieving this feat, the Ministry of Finance had announced a pilot program to sell extremely low face value of 1 Thai Baht ($0.032) bonds through the state-owned Krugthai Bank’s blockchain wallet.
The coordinated collaboration between the BOT, the Public Debt Management Office, Thailand Securities Depository Co., LTD, Thai Bond Market Association, Bangkok Bank, Krungthai Bank, Kasikorn Bank, and Siam Commercial Bank, has proven to be a valuable step forward for the use of blockchain technology supplied by private and state institutions to empower and promote the digital economy by harnessing large quantities of data from three tax collecting agencies — the Revenue Department, the Customs Department, and the Excise Department — as a way to increase working and inspection efficiency as well as streamlining procedures.
We now have evidence of an increasing trend in the use of blockchain to sell government bonds, after the Philippines Bureau of the Treasury along with Union Bank and Philippines Digital Asset Exchange launched a blockchain-based mobile application for distributing government-issued treasury bonds, considerably reducing the threshold for common citizens to invest while increasing connectivity among adults in the country, since around 77% of adults still do not possess a bank account. Also, the Korean Central Bank announced earlier this year that they were developing a blockchain platform with the same purpose and could potentially include the use of a CBDC, while the nodes of the network would be hosted by several financial institutions including the KFTC.
On August 11, crypto news sites around the world reported groundbreaking news of the first publicly-traded company, MicroStrategy (MSTR), allocating a portion of its cash reserves to bitcoin (BTC). At that moment, the Nasdaq-listed organization announced the purchase of 21,454 BTC worth $250 million as a way to avoid inflation. Michael J. Saylor, MicroStrategy CEO, stated:
“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders, this investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
Over a month later, the MSTR ticker has increased by approximately 15% in price, which could be interpreted as a positive reaction from shareholders in light of the expectations a number of known actors or institutions — Jim Rogers, Ray Dalio, George Ball, Jim Cramer, Software firm Snappa, Restaurant chain Tahini’s– in the global market have expressed regarding the dangers of excessive liquidity central banks have been injecting to the markets, as a way to avoid a slow down in global economies due to the health and economic crisis COVID 19 has brought upon us, with the growing risk of uncontrollable inflation and an overall decrease in currency values.
On September 15, Michael J. Saylor’s new announcement made waves through the crypto-focused news portals a day after disclosing to the Securities and Exchange Commission (SEC) that MicroStrategy’s board of directors had voted to make BTC its primary reserve asset, followed the next day by a confirmation from the company’s CEO that this move had already been done and totaled $175 million in addition to its initial allocation of $250 million, bringing the total cash reserves held in BTC to $425 million, which is close to the 2019 revenue disclosure of $486 million. This announcement has raised the MSTR stock value an additional 15% since announced.
These moves also mean that a single entity has accumulated 0.18% of the total BTC supply, which should make you think, taking into account the amount of BTC held by private individuals or institutions within the digital assets ecosystem, how long can organizations such as MicroStrategy, Snappa, or Tahini’s be the only players to buy BTC as a way to hedge against inflation? More importantly, how long can other organizations wait while the value of their fiat currency decreases and the value of BTC or even gold increases?
The European Commission has been drafting the Markets in Crypto-Assets (MiCA) legislation, which was leaked the past week, providing a sneak-peak to users and service providers around the world of an initial idea regarding a legislative framework that could possibly be the stepping stone for the next decade’s development of crypto assets, cryptocurrencies, security tokens and stablecoins in an important region of the world, that accounts for an estimate of 15% of global gross domestic product (GDP).
The European Union (EU) joins the United States of America, the People’s Republic of China, and other non-EU nations in its further clarification of how crypto will be treated and considered within their markets. At the moment, we have observed mid-level regulation on digital assets and virtual asset service providers (VASP) from individual states such as Germany, France, Spain, and Luxemburg among others. Largely, this region has been following the standards established by the 5th Anti Money Laundering Directive (5AMLD) introduced to clarify the meaning of a cryptocurrency — a digital representation of value that can be digitally transferred, stored, or traded and is accepted… as a medium of exchange — or the requirements to avoid money laundering and financial support to terrorist activities, therefore, having a vague set of regional rules being used as the foundation for each nation’s financial regulator to handle crypto activities as they see fit, leaving a gap in between nation members of the bloc spanning from taxes to VASP registration requirements.
Another important factor to note is the significant input and relevance, not only for the current management of the “crypto issue” within Europe but also to the MiCA bill, emanating from the Financial Action Task Force (FATF) guidelines regarding what determines an organization as a VASP or the widely discussed FATF “Travel Rule.”
At the moment, and until the bill is effectively passed, there are and will be two clear doubts that will dominate discussions, first, will this bill leave the EU behind the rest of the world when it comes to regulation over what could be the future of the financial services markets? And second, is this the final missing piece of the puzzle to achieve important institutional involvement in the digital asset and cryptocurrency ecosystem?
Thank you for joining us and reading “Crypto’s Last Week.”