Crypto Scoop: Bitcoin Takes A Nosedive to $58,400

While top cryptocurrencies might be trading in red, institutional interest in crypto has only grown. In this edition of the Crypto Scoop, we review the following:

• Price moves of top cryptocurrencies
• Tether’s milestone celebration
• Circle’s Apple Pay initiative
• Global crypto initiatives and regulation

Price Moves of Top Cryptocurrencies

This week, the crypto market recorded significant price fluctuations, with Bitcoin’s price dropping to $58,400 and Ethereum trading at $2,600. Despite these declines, institutional interest in cryptocurrencies, primarily through exchange-traded products (ETPs), remained robust. According to CoinShares, crypto investment products experienced a notable inflow of $176 million, mainly driven by Ethereum, which accounted for 88% of the inflows. Ethereum saw $155 million in inflows last week alone, bringing its year-to-date total to $862 million, the highest since 2021. This surge is linked to the recent launch of U.S. spot-based ETFs, which have drawn substantial investor interest.

Institutional investors have shown sustained interest in Bitcoin ETFs. Bitwise revealed that despite market volatility, 66% of U.S.-based institutional investors maintained or increased their Bitcoin ETF holdings during Q2. Matt Hougan, Bitwise’s chief investment officer, highlighted a 30% increase in institutional filings related to Bitcoin ETFs from Q1 to Q2.

Meanwhile, Morgan Stanley disclosed an investment in Blackrock’s Bitcoin Trust. The firm acquired 5,500,626 shares of BlackRock’s iShares Bitcoin Trust (IBIT), valued at $187.8 million as of June 30. This new position places Morgan Stanley among the top five holders of the IBIT fund. Goldman Sachs has also deepened its involvement in crypto, holding positions in 7 of the 11 available Bitcoin ETFs in the U.S., totalling approximately $419 million as of June 30. Notably, the bank’s largest holding is in the iShares Bitcoin Trust, with $238.6 million invested, followed by significant stakes in the Fidelity Bitcoin ETF and Grayscale BTC.

Tether Celebrates A Milestone As Circle Announces An Initiative

Tether’s USDT supply has surpassed $115 billion, marking a historic milestone for the company. This achievement, announced by CEO Paolo Ardoino on August 8, has solidified USDT’s dominance in the stablecoin market, now commanding approximately 70% of the market share. Tether plans to grow its compliance team and strengthen its operational framework as part of its expansion strategy.

Meanwhile, Circle, another major player in the stablecoin market, is making significant strides. Circle's CEO, Jeremy Allaire, hinted at upcoming developments that could further integrate USDC into everyday transactions. With Apple recently opening its NFC payment functionality to third-party developers, Allaire predicted that tap-to-pay payments using Circle's USDC on iPhones could be imminent. This move would allow iOS wallets supporting USDC to initiate blockchain transactions through a simple tap, utilising Apple’s FaceID for confirmation. This development could pave the way for USDC to be used directly for merchant payments and other applications, including NFTs and stablecoins.

In addition to these advancements, Circle has proactively shaped the regulatory landscape for stablecoins. On July 5 2024, Circle became the first stablecoin issuer to comply with the European Union’s Markets in Crypto-Assets (MiCA) regulatory framework. Building on this, Circle recently published a white paper proposing a new risk-based capital management model for stablecoins and other digital cash tokens. The paper advocates for a Token Capital Adequacy Framework (TCAF) that goes beyond the existing Basel banking regulatory standards, addressing unique risks associated with stablecoins, such as market volatility and operational challenges. Circle argues that current banking regulations do not adequately reflect the dangers posed by these digital assets and that a more tailored approach is necessary to ensure stability and confidence in the stablecoin market.

Recent Developments in Global Cryptocurrency Regulation and Adoption

El Salvador’s ambitious Bitcoin City project has taken a significant step forward with a historic $1.6 billion investment from Turkish company Yilport Holdings to upgrade two critical ports in the country. This investment, the most significant private investment in El Salvador’s history, will focus on modernising the ports of Acajutla and La Unión, the latter being the proposed site for Bitcoin City. President Nayib Bukele announced that this investment marks the third phase of the government’s economic development program, emphasising its potential to create new and improved trade opportunities for the Central American nation. The project will be executed in phases, beginning with infrastructure upgrades and new equipment at Acajutla, followed by efforts to revive the long-unused port of La Unión, including dredging and acquiring new equipment.

In Dubai, the legal landscape for cryptocurrency is evolving, as the Dubai Court of First Instance has recognised salary payments in crypto as valid under employment contracts. The case involved an employee who was paid partly in EcoWatt tokens, and the court ruled in favour of the employee, ordering the payment of the crypto portion of the salary as stipulated in the contract. UAE lawyer Irina Heaver highlighted this ruling as a progressive step toward integrating digital currencies into the country’s legal and economic framework, setting a precedent for future crypto-related financial transactions.

Meanwhile, the Bank of Ghana has introduced draft guidelines to regulate digital assets, focusing on exchanges and consumer protection. These proposed regulations, currently open for public and industry feedback, are part of the central bank’s efforts to address Ghana's growing appetite for cryptocurrencies. The guidelines propose an eight-pillar framework with stringent registration and reporting requirements for cryptocurrency exchanges and virtual asset service providers (VASPs). The regulations aim to mitigate risks associated with money laundering, terrorism financing, and fraud, with the bank planning to collaborate with external stakeholders such as commercial banks and offshore regulators.

In Iran, the government is taking a different approach to cryptocurrency by rewarding citizens who report illegal crypto mining operations. Amidst a severe heatwave that has strained the country’s power grid, the state-run electricity company Tavanir offers a bounty of 1 million toman (approximately $24) for every report of unauthorised cryptocurrency mining. The government claims that illegal mining operations exploiting subsidised electricity are exacerbating the power shortages.

Another notable development is that the Lagos state government in Nigeria has announced plans to tokenise real estate as part of an initiative to enhance transparency, efficiency, and ease of transfer in property transactions. The project aims to boost the state’s internally generated revenue. It will convert physical property assets into digital tokens on a blockchain, allowing for more streamlined and accessible real estate investment. The initiative is set to unfold over 16 months, with a budget of 500 million naira ($314,465) allocated to support the project.