Ten31 Timestamp 845,078
Seismic changes in the regulatory landscape took center stage this week, as the White House, Congress, and the SEC all made sudden and substantial pivots to a more accommodating stance toward bitcoin and other digital assets. Seemingly on the heels of Donald Trump’s recent positive commentary about bitcoin, US politicians discovered that their ambition for an “anti-crypto army” does not appear to be a winning stance among voters with the next Presidential election under six months away. This drove a remarkable about-face from all corners of the federal government: Congress overwhelmingly passed the “FIT21” bill aimed at providing a regulatory framework for bitcoin and cryptocurrencies; the Biden administration did not threaten to veto the bill and did not move forward with its threatened veto of last week’s SAB-121 repeal; and the SEC suddenly dropped its longstanding objections to an Ethereum ETF and approved all outstanding applications. While we continue to view the non-bitcoin “crypto” ecosystem largely as a distraction and note that we probably haven’t heard the last from anti-bitcoin legislators, this week’s rush of sudden regulatory pivots certainly seems to point to a softening of the US’s regulatory posture, perhaps indicating that the political incentives long hypothesized by many bitcoiners are beginning to play out.
Portfolio Company Spotlight
AnchorWatch provides bitcoin insurance policies powered by innovative use of Miniscript. The company’s Trident Vault platform leverages bitcoin’s native properties to offer bitcoin holders an intuitive, enterprise-grade collaborative custody solution that allows for highly composable and dynamic custody schemes, all with the backing of regulated insurance products that further mitigate risks of theft, key mismanagement, natural disasters, and more. Trident Vault, which integrates with most popular bitcoin signing devices, was designed with distributed teams and complex workflows in mind, and AnchorWatch’s embedded specie insurance offerings are set to unlock further bitcoin adoption among various enterprises and institutions of all sizes.
Selected Portfolio News
Strike enabled instant bank withdrawals for US customers:
AnchorWatch completed its first bitcoin mainnet transaction from its Trident Vault platform:
Zaprite added support for CoinCorner account integrations:
Media
Strike Founder and CEO Jack Mallers made appearances on Bloomberg TV and the Pomp Podcast to discuss recent changes in the regulatory environment and bitcoin’s differentiation.
Ten31 Managing Partner Matt Odell and Primal Founder Miljan Braticevic joined the latest episode of the Bitcoin.Review podcast.
Market Updates
Following last week’s in-line CPI print that sent US equity indices to new all-time highs, benchmark commodities all continued to rip to new highs as well this week.
This trend was at least partially captured by the concerns expressed in the latest Federal Reserve minutes, though this only seemed to spook investors for a brief moment on Wednesday.
Negative commercial real estate headlines continued to proliferate this week, as lenders in the AAA-rated tranche of bonds for 1740 Broadway in New York took 25%+ losses this week, the first such loss for a AAA CRE bond since the 2008 financial crisis.
Meanwhile, ratings agency Moody’s indicated the proportion of office loans in delinquency has risen to a six-year high. Under the hood, only 24% of borrowers with loans maturing in April made full repayments, down from 45-50% last year.
Following the US’s freezing of $300 billion in Russian US Treasuries and the Biden Administration’s ongoing attempts to mobilize those assets for its own foreign policy objectives, Russia seized ~$770 million of assets belonging to three Western banks this week.
Later in the week, Russian President Vladimir Putin signed a decree allowing Russia to confiscate assets of US companies held within Russia in response to the US’s February 2022 Treasury seizure, further escalating the conflict over the dollar’s status as a politically neutral settlement asset.
After several weeks of flattish to negative flows, US spot bitcoin ETFs have seen a return to sustained inflows over the past two weeks, notching nine straight days of net inflows totaling nearly $2 billion.
Regulatory Update
After ongoing spurts of adversarial behavior toward bitcoin and “crypto” throughout the past three years of the Biden administration’s tenure, this week marked a rapid reversal in regulatory posture on multiple fronts, potentially motivated by Republican Presidential candidate Donald Trump’s recent tone change on bitcoin.
The US House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21) with strong bipartisan support, including a majority of House Democrats and former House Speaker Nancy Pelosi. The bill seeks to establish a “regulatory framework for US crypto markets,” proposes criteria for designating tokens as securities and commodities, and establishes consumer protections for self-custody.
While President Biden’s office did not express approval of the bill, the administration also did not threaten a veto, instead indicating an appetite to work on a “balanced and comprehensive regulatory framework” for digital assets.
Meanwhile, the White House has not yet executed on its threatened veto of Congress’s repeal of the controversial SAB-121 accounting regulation (which inhibits banks from custodying cryptocurrencies), and this week’s updates may point to eventual Presidential approval of the bill.
In parallel, former President Donald Trump escalated recent warmer comments about bitcoin and “crypto” by announcing his campaign would begin accepting donations paid in cryptocurrency, the latest move that increasingly sets up digital assets as a real campaign issue heading into the 2024 Presidential election this fall.
Perhaps most surprisingly, this week saw a breakneck pivot by the SEC in the form of approvals for spot Ethereum ETFs, an outcome most analysts viewed as highly unlikely for a number of reasons as recently as last week.
Notably, the vehicles are structured as commodity-based trust shares, apparently implying the agency now views Ethereum as a commodity, a reversal of its historical stance that it appeared to have reiterated last week. This would make Ethereum the first commodity with a founding team, insider allocations, a product roadmap, and periodic discretionary changes in its supply issuance.
Several international jurisdictions moved in the opposite direction of the US this week, as Venezuela moved to ban bitcoin mining and disconnect all mining farms in the country, ostensibly to “alleviate pressure on the country’s electricity supply.”
In a similar vein, Paraguay’s electricity administration proposed higher rates for bitcoin mining companies.
Noteworthy
The Bitcoin Policy Institute launched the Peer-to-Peer Rights Fund, an initiative dedicated to supporting bitcoin non-custodial tools and their developers.
New research released this week by the New York Federal Reserve suggests that last spring’s bank runs were more widespread than initially reported, with 22 banks experiencing net deposit outflows exceeding 5 standard deviations from historical norms.
The bankruptcy of banking middleware provider Synapse has led to a growing wave of frozen accounts for users of a variety of financial applications that depended on the Synapse platform.
Travel
Austin BitDevs, June 20
Bitcoin 2024, July 25-27
BitcoinMENA, Dec 9-10