In a year when it has seemed that US officials were determined to put much of the cryptocurrency market out of commission, the beaten-down digital asset industry has finally scored a significant legal win.
A US appeals court’s ruling to overturn the Securities and Exchange Commission’s decision to block the first exchange-traded fund tied to the spot price of Bitcoin sent the original cryptocurrency soaring more than 7 per cent, its biggest daily gain in months.
It boosted spirits in a sector contending with a near-constant blast of high-profile regulatory enforcement actions, bankruptcies and legal battles.
While it is only one victory against the US in a multipronged campaign, the win by Grayscale Investments shows that the SEC’s approach to policing the grey legal areas of cryptocurrency – what Coinbase Global has called “regulation by enforcement” – is far from foolproof.
Judge Neomi Rao wrote that the regulator’s denial of the ETF was “arbitrary and capricious” because the SEC had failed to explain its different treatment of similar products.
“This ruling is not just about Grayscale or Bitcoin. It sets a precedent for the broader crypto industry,” Ji Kim, general counsel and head of global policy for the Crypto Council for Innovation, said.
“This is big, positive, and precedent-setting news. It provides the obvious reminder that it is critical for regulators to provide much-needed clarity and rationale when making such critical determinations affecting such a significant industry.”
To be sure, the SEC will probably fight the ruling. The ultimate outcome of the case will have little bearing on other parts of the US clampdown on cryptocurrencies, including the watchdog’s legal case against digital-asset exchanges Coinbase and Binance Holdings for allowing trading of other tokens the regulator claims are unregistered securities, among other things. Both companies dispute the SEC’s legal claims.
Recall that a July ruling in another case between the SEC and Ripple Labs led to a similar market pop because it was widely viewed as cryptocurrency-friendly.
But then the SEC moved to appeal and a judge in a separate case sent a conflicting signal, dousing the optimism and making the outcome much less clear.
Tuesday’s court action potentially moves Bitcoin closer to more widespread acceptance in the traditional investment industry.
The court’s decision leaves “no doubt” that spot Bitcoin ETFs are coming to the market, probably in the first quarter of 2024, said Tim Bevan, chief executive at cryptocurrency exchange-traded product provider ETC Group.
In addition to Grayscale’s attempt to convert its closed-end mutual fund into an ETF, the SEC has also received 10 other Bitcoin ETF applications, including from BlackRock, VanEck Digital Assets, WisdomTree Digital Commodity Services and Invesco Capital Management – a number of which have deadlines looming right before this weekend's Labour Day holiday.
Watch: What happened to the Bitcoin price?
“We don’t believe the SEC will act as kingmaker,” Mr Bevan said. “The most likely outcome is a block approval of applications that meet requirements.”
The potential total market for spot Bitcoin ETFs could be somewhere in the neighbourhood of $150 billion, similar to the amount of assets in gold ETFs, according to Bloomberg Intelligence analyst Eric Balchunas.
With financial advisers overseeing $30 trillion in assets in the US, it would only take an allocation of about 0.5 per cent to swell Bitcoin ETFs to $150 billion, he said.
“The other thing you have to know is advisers are scared about this transfer of wealth from the Boomers” to the younger generations, Mr Balchunas said on a recent episode of the What Goes Up podcast.
“The advisers are going to want to look hip and cool to what the younger people want,” he said.
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
Bloomberg
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Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
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