New US crusade against cryptocurrency, how far is Russia from the DPRK and an unexpected oil record

New US crusade against cryptocurrency, how far is Russia from the DPRK and an unexpected oil record

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American regulators are launching a new attack on the cryptocurrency market. Its goal is to create a “Chinese wall” between the crypto market and the traditional financial system, which will not allow cryptocurrency risks to spread to banks and cause a new big crisis. The main victim of this policy can be stablecoins – cryptocurrencies pegged to the dollar and representing the main “bridge” between crypto and traditional finance.

What’s happened

US regulators dealt an indirect blow to the largest crypto exchange Binance through its associated stablecoin (cryptocurrency, the rate of which is pegged to a physical currency – in this case, the dollar) Binance USD (BUSD). The issuer of BUSD is Paxos Trust, an independent and well-known company on the crypto market. Formally, neither she nor BUSD are associated with Binance in anything other than a license agreement to use the brand. But in fact, in January, about 40% of Binance’s turnover came from BUSD, notes FT. BUSD is the third stablecoin in the world in terms of capitalization (about $16 billion) and market share (about 12%) after Tether (USDT) and USD Coin (USDC).

On Sunday it became known that the US Securities Commission (SEC) warned Paxos is going to sue her for violating investor rights. And on Monday, the New York City Department of Financial Services imposed direct ban for issuing BUSD. Regulators believe that BUSD is not a digital asset, as Paxos claims, but a security released to the market without proper authorization and traded bypassing regulation.

The main reason for regulators’ claims to BUSD is suspicions of incomplete security issued cryptocurrency with real assets. On her, by the way, indicated competitor is a USDC issuer. Paxos herself statedwhich will meet the requirements of regulators, BUSD is fully backed by real assets, and customers will be able to redeem tokens by exchanging them for dollars 1: 1, at least until February 2024.

There has been no full-scale flight from the now doomed BUSD, but investors are still taking their money. Immediately after the ban, on Monday, BUSD lost parity against the dollar, dropping to 98 cents and trading at a discount to Tether. The conversion of BUSD to USDT immediately skyrocketed — investors were urgently looking for a way out, and Tether is also traded on Binance. Binance’s native exchange token BNB fell 10% while overall within an hour of first reporting BUSD issues by customers brought out with Binance $500M

Why is it important

Bloomberg, who spoke with a dozen former and current regulators, industry insiders and lobbyists, comes to the conclusion that what is happening is part of the first coordinated attack by regulators on the decentralized finance (DeFi) sector since the collapse of the FTX crypto exchange, which could result in its isolation from the banking system. The main task is to prevent such a growth of cryptocurrency projects and such a degree of their integration into the traditional financial infrastructure that cryptocurrency crashes become a threat of a major systemic crisis.

At the beginning of the year, three regulators – the Fed, the Office of Foreign Exchange Control and the Federal Deposit Insurance Corporation – issued joint statement, which warned American banks about the need to be more careful in the crypto market and prevent the spread of cryptocurrency risks into the core activities of banks. Privately, regulators are warning banks of liability for violations when dealing with crypto clients, especially those not registered in the US, Bloomberg sources say.

A typical example is one of the latest news from the same Binance, which last week stopped accepting and issuing deposits in dollars, because a long-time partner, Signature bank, stopped working with it. Its competitor, Crypto.com, has the same problems with Metropolitan Bank Holding. Cryptobank Custodia Fed recently denied access to the interbank payment system.

“Regulators are building walls between the crypto market, banks, and the derivatives market to pre-empt the systemic vulnerabilities that caused the 2008 financial crisis,” says Todd Baker, a senior fellow at the Richman Center at Columbia University, for example. The researcher himself thinksthat crypto trading is built according to the laws of gambling and should have regulation fundamentally different from financial. Nick Carter, a partner at the blockchain investment company Castle Island Ventures, called what is happening “enclosing the cryptocurrency sector with its cutting off from traditional finance.”

What’s next

Fear of regulatory action has fueled a sell-off in crypto assets and has been a factor in bitcoin’s fall over the past two weeks, starting this year well. Tether looks better than other stablecoins so far, and BUSD capitalization will almost certainly fall.

The significance of BUSD as such is not that great. The main question is what will happen if the regulators come for USDC and even more so for Tether. It is possible that in this way, stablecoins, having ceased to be a “bridge” between the world of cryptocurrencies and traditional money, will lose their main anti-crisis function – the possibility of decentralized withdrawal of funds, including from Russia. How this is done was described in detail by The Bell.

The main American financial regulator SEC, headed by Gary Gensler, has long failing industries in any special position, the position is guaranteed not to change. He continues to believe that crypto assets are just unregistered securities, and it’s good if they were issued without violations. From these positions, the SEC recently won case against the Kraken crypto exchange, jeopardizing one of the main sources of income for crypto sites.

INVESTMENTS

US inflation fell short of expectations

Inflation in the US slows down for the seventh month in a row and in January amounted to 6.4% year on year. Compared to December, the price increase amounted to 0.5%, which was the highest figure in the last three months. A significant contribution to inflation was made by energy and housing costs.

monthly inflation coincided with the expectations of economists surveyed by Bloomberg. On an annualized basis, they expected a more significant slowdown, to 6.2%. Despite the Fed’s aggressive policy, price pressure remains, and this may push the regulator to raise the rate higher than previously expected, the agency notes.

We write about what is happening in the markets, what the largest investment banks recommend to their clients, and how to look at the markets through the eyes of a long-term investor in the weekly Bell.Investments mailing list (this is a paid product, but worth it).

INTERVIEW

How far is Russia from North Korea?

Because of the invasion of Ukraine, Russia found itself in complete international isolation. The transformation of Russia over time into North Korea is one of the most common pessimistic scenarios. The DPRK itself, almost a year after the start of the war, officially supported Russia. Can North Korea be called an ally of Russia? What is written about the war in the North Korean press? Is it true that North Korean workers are being sent to Donbass? We talked about this with Andrei Lankov, one of the world’s leading experts on North Korea, a professor at Kunming University in Seoul.

What else happened

• Businessman and creator of the Kremlin’s media monitoring system Vladislav Klyushin was found guilty in the United States in hacking the networks of large American companies and insider trading worth tens of millions of dollars. Klyushin is the founder and owner of the M13 IT company, which for several years has been monitoring the media and social networks (Katyusha system) by order of Russian government agencies. According to the American investigation, he was engaged in hacking for the purpose of insider trading on the exchange along with Russian hackers who hacked into the servers of the US Democratic Party in 2016.
• The sanctions did not prevent Russian oil companies from breaking a multi-year drilling record in 2022, having completed more than 28 thousand kilometers of new wells, writes Bloomberg. 85% of the market is occupied by domestic oilfield services, foreign companies are involved in the most difficult cases – but two of the big four (SLB and Weatherford) did not leave Russia, and two more (Halliburton and Baker Hughes) sold the business to management, which retained both staff and competencies .
• The European Union has included Russia in the “black list” of jurisdictions that do not cooperate on tax issues. The reason was last year law, allowing companies to use internal offshore companies in Russia, as well as the termination of the dialogue of tax authorities in connection with the war in Ukraine. Countries that are on the EU “black list” face reputational risks and an increased level of control over financial transactions, notes Archyde.com.