It’s CFTC vs. Liquidity
Good morning Bitcoin started the trading day in Asia down 3.8% to $26,958 after the US Commodity Futures Trading Commission (CFTC) sued crypto exchange Binance and founder Changpeng Zhao, claiming they offer unregistered crypto derivatives in the USA
Binance’s BNB token is down 5.9% to $308 on the allegations.
The question on the minds of traders is how good is Binance now that the CFTC dealt that blow. On one hand, Binance’s CEO called the CFTC complaint “unexpected and disappointing,” but in February the exchange said it was willing to pay fines to “make amends” for past sins.
At the same time, there is some debate over how much traders shrug off the CFTC’s allegations versus Bitcoin’s ability to respond to news due to a lack of liquidity.
“When you have low liquidity, you tend to get very quiet markets,” Dan Gunsberg, co-founder of Solana-based derivatives liquidity protocol Hxro, said during a recent CoinDesk TV appearance. “You get these jumps in the market and these liquidity vacuums where things move to a new price and then immediately settle down.”
As the CFTC tracks Binance, the narrative of decentralization continues.
Decentralized derivatives exchange GMX has seen tokens surge 4% over the past 24 hours, almost paralleling the surge in tokens from decentralized ether-liquid staking platforms in February as the SEC targeted staking.
Chinese banks’ push for crypto business in Hong Kong is facing headwinds
Hong Kong branches of China’s state-owned banks – semi-autonomous entities operating under Hong Kong rules – are actively soliciting crypto deals in anticipation of the first phase of the SAR’s regulatory framework in June. But opening an account with them is another matter entirely.
Bloomberg reported on Monday that the banks making the pitches have received the green light from Beijing and their respective headquarters.
Sources from several crypto companies in Hong Kong, who were either approached by the banks’ sales reps or received inbound inquiries, all say that the criteria for opening an account are cumbersome and the KYC/AML process takes longer than opening a regular business account.
For example, banks prefer crypto company executives and key personnel to reside in Hong Kong. A definite blocker would be if they are Mainland Chinese citizens or US citizens. If the company is owned by a Singapore-based parent company, that company would need to be an entity licensed by the Monetary Authority of Singapore.
The sources were also told to expect a long account opening process.
These banks, like Bank of China and Bank of Communications, are among the largest in the world and it would have been unthinkable a few years ago that they would actively solicit crypto deals given Beijing’s tough stance on the issue and that general reluctance accounts for large banks to delve into crypto.
After all, Silvergate and Signature in the US have found their market niche for precisely this reason, with analysts saying that once the crypto industry declines, it will “have a difficult time finding traditional banks that will work with it.” These two banks made – and lost – their fortunes in crypto: They were both small, unknown banks at the turn of the decade before embracing crypto; Silvergate reported $2.12 billion in assets in December 2019 and peaked at $16 billion in December 2021.
Although both Silvergate and Signature have grown significantly during crypto’s boom years and institutionalization, their relatively small size means they have declined faster than if they were larger like some of their peers.
But not everyone thinks this is the first chapter of something new considering the tough onboarding process.
“Regulation of the city’s digital assets is overall friendly and encourages banks to partner with crypto companies, but banks currently still have strict requirements that make it difficult for crypto companies to expand and grow,” Adrian Wang, Founder and CEO of Metalpha, an in Hong Kong-based digital asset management company told CoinDesk, “We still need to see big strides in the banking sector to embrace crypto. Hopefully that will change soon.”
A deal was struck for the remains of the Silicon Valley Bank. J. Christopher Giancarlo, senior counsel at Willkie Farr & Gallagher and former chairman of the Commodity Futures Trading Commission, shared his reaction. Also on Friday, ARK Invest bought $12.6 million worth of Coinbase shares from Cathie Wood. Martin Leinweber, MarketVector Indexes digital asset product strategist, shared his analysis of the crypto markets.