Cebu Meeting of FSB Highlights Crypto Risks

The Chinese authorities are reportedly mulling over the possibility of approving the use of stablecoins pegged to and backed by the Chinese yuan. That’s according to a report published by Reuters on Aug. 20, with the publication citing “sources familiar with the matter.”Photo by Eric Prouzet on UnsplashInternationalization of the Chinese yuanChina’s State Council, its cabinet and primary administrative authority, has scheduled a review of yuan-backed stablecoins for later this month, a development that could potentially lead to their approval. The Chinese have been leaders in recent years in the development of a central bank digital currency (CBDC), the digital yuan. The digital yuan was further along in its development than any other CBDC globally, with the Chinese making concerted efforts to bring the digital currency into use at home, with an eye toward global use for international trade. While the U.S. dollar has enjoyed an extended period as the world’s reserve currency, the weaponization of the currency by the U.S., particularly through the application of sanctions, has led BRICS (Brazil, Russia, India, China and South Africa) nations to consider alternatives. One of Reuters sources asserted that the Chinese authorities are now homing in on the potential to internationalize the yuan via stablecoins. Setting the tone for stablecoin useMembers of the Chinese government leadership are expected to establish the tone for stablecoin use following their upcoming review, outlining the parameters within which the Chinese authorities will permit their use. Reacting to this development, Robin Brooks, a senior fellow at the Brookings Institution, asserted that China’s newfound interest in yuan-backed stablecoins is a sign of “how insecure China is in the global financial system.” Brooks added that the way to internationalize a sovereign currency is to promote the rule of law and property rights rather than pursue the use of stablecoins, which he described as “ridiculous.”  Growing global interestWhile the Brookings Institution is not directly backed by the U.S. government, the organization is nevertheless a Washington, D.C.-based think tank. Despite Brooks’ objection to the use of stablecoins, China is not the only nation to show interest in using them.Taking to X, Raphaël Bloch, co-founder of crypto media platform The Big Whale, pointed out that increasingly, nations around the world are embracing stablecoins due to the efficiency of global currency distribution that is possible via public blockchain networks.  Additionally, stablecoins offer an effective means of government debt financing, given that stablecoin reserves are backed by government bonds. In the U.S., President Donald Trump has ruled out the pursuit of a CBDC. Last month, the U.S. House of Representatives passed the Anti-CBDC Act to prohibit the development of a CBDC by the Federal Reserve. Instead, Trump has said that a stablecoin regulatory bill working its way through the legislative system will ensure global dominance for the U.S. in the crypto sector. In June a Deutsche Bank strategist claimed that the legislation would strengthen the U.S. dollar’s global dominance, with several American politicians having since expressed the same view.Earlier this week, Japan’s Financial Services Agency (FSA) signaled that it is likely to approve the issuance of a yen-pegged stablecoin. Meanwhile, the authorities in South Korea are working on a bill related to won-pegged stablecoins.

India Blockchain Week (IBW) 2024 was held on Dec. 4-5 in Bangalore with venture capital and blockchain advisory firm Hashed Emergent presenting a report at the event, with positive findings with regard to India’s Web3 sector. Titled “India's Web3 Landscape 2024 Report,” the research was presented at IBW 2024 by Hashed Emergent Senior Associate Sharanya Sahai. Photo by Asif Methar on PexelsGlobal frontrunnerThe report claims that the Web3 ecosystem in India has risen to the point where it is a global frontrunner when its progress is measured against Web3 development internationally. A broad network of Web3 startups has emerged, comprising of over 1,000 fledgling businesses.  Those enterprises are being supported in India by global investment, with Indian Web3 businesses having secured funding in excess of $3 billion since 2020. Taking a more recent snapshot, the report outlines that from January to September 2024, Indian Web3 startups received investment funding to the tune of $462 million, an 82% growth compared with the same period last year. These startups are spread across finance, infrastructure and entertainment niches within Web3, although the study found that the bulk of investment funding was placed with Web3 infrastructure businesses.  Home to 12% of Web3 developersHashed Emergent claims that India is home to 12% of the global pool of Web3 developers, second in the rankings on this metric with the greatest number of such developers living in the United States. However, the report maintains that India is in line to surpass the U.S. relative to the Web3 developer metric by 2027. The world’s most populous country also has strength and depth in terms of Web3 founders. It ranks third globally in terms of the overall size of its Web3 founder base. The Hashed Emergent report suggests that Indian founders, accounting for 5.4% of global Web3 startups, are responsible for driving growth in India relative to AI, decentralized physical infrastructure networks (DePIN) and scaling solution projects. Stand-out examples of Indian Web3 enterprises include exchange platforms CoinSwitch, WazirX and CoinDCX, crypto developer integration toolkit provider Transak, blockchain scaling platform Polygon, blockchain-based AI startup Sentient and blockchain protocol Biconomy. Hashed Emergent singled out Sentient and Web3 infrastructure platform Avail Network as projects which have showcased “India’s growing influence in decentralized technologies” in 2024. Adoption challengesThe report points to what Hashed Emergent terms as “an undeniable picture of India’s dominance in global crypto adoption.” That finding falls in line with a report produced by Chainalysis earlier this year, establishing India as the global leader in crypto adoption according to data it compiled.  However, in an opinion piece written by Mithil Thakore recently, an Indian co-founder and CEO of Dubai-based Velar, a Bitcoin liquidity protocol, Thakore claims that there is a disconnect between such metrics and the reality of adoption on the ground in India. In the case of the Chainalysis adoption index, the Velar CEO suggests that a “mirage of adoption” is presented, with massive signup numbers not translating into tangible active participation in the market.  While adoption rates are high, he feels that a greater level of active participation is being prevented due to what he terms as an “ambiguous” stance on cryptocurrencies by the Indian government. Regulatory ambiguity puts uncertainty in the minds of investors, holding back the industry’s growth, Thakore claims. 

Newly Published CoinGecko Index Tracks Alleged Crypto SecuritiesKuala Lumpur-based crypto data aggregator CoinGecko has unveiled a ground-breaking index spotlighting prominent cryptocurrency tokens that the US Securities and Exchange Commission (SEC) has earmarked as potential securities.Through its “Top Alleged Securities Coins by Market Cap” page, the Malaysian aggregator categorizes a spectrum of cryptocurrency assets based on their market capitalization. At the forefront of this classification stands BNB, the native token of the Binance exchange and the BNB blockchain. It is closely followed by other prominent names such as Cardano, Solana, and Tron.Photo by Shubham Dhage on Unsplash$90 billion in valueThe alleged securities amount to a whopping $90 billion in value according to their combined market capitalization right now. Putting this in context, the overall market capitalization of the entire crypto market currently stands at $1.2 trillion, of which Bitcoin accounts for over half a trillion dollars. This estimation paints a vivid picture of the immense scale of the cryptocurrency market and the potential reverberations of regulatory interventions.CoinGecko’s index came to fruition in the first week of August, meticulously pooling the tokens that the SEC has previously classified as securities during legal proceedings. The decision to consolidate these tokens into a single index underscores the increasingly intricate interplay between the cryptocurrency market and regulatory frameworks.Lack of clarityWhen project teams and other market participants have asked for explicit clarity, SEC Chair Gary Gensler has frustratingly indicated that people need to make a simple determination based on the Howey Test — a historic securities case that has been used in the US to determine what constitutes a security. The case dates back to 1946, long before the onset of digitization let alone digital currencies.Another issue is that the SEC is simply expressing an opinion based on its interpretation of existing securities law and securities case law. Without legislation in the US, clarity can only be provided in the courts. This is a flawed approach, as market participants have to wait for actions taken by the SEC against crypto entities to be adjudicated in the US courts in order to get a better understanding of the legal standing of these assets.This comprehensive analysis provided by CoinGecko’s new index presents invaluable insights into the dynamic terrain of cryptocurrency regulation. It underscores the intricate dynamics between the digital currency market and the regulatory bodies that seek to govern it.Taking the regulation of derivatives as a case in point, their emergence led to a very messy process of arriving at regulatory clarity. The very same thing is playing out with digital assets. While it is imperfect, there is no doubt that clarity will eventually be reached.In the meantime, as the US fumbles where digital assets are concerned, regional authorities in East Asia and the Middle East are capitalizing on US regulatory shortcomings, implying that we will likely see further growth in crypto and Web3 in these locations until the US recovers.