11 March

Finance Headed Toward Bank-Free, Decentralized Future: Bernstein

“The future of finance will be bank-free, Bernstein said in a research report Friday. Banks will still exist, but in the background as “custodians of old wealth.”

New wealth creation and financial-services innovation will move to a new financial app universe on the Ethereum ecosystem.

A revival of decentralized finance (DeFi) is in the works, one that is far more sustainable, scalable, transparent and with improving token economics.

Bernstein estimates that by 2028, bank-free DeFi will have revenue of $40 billion and total assets will grow to $1 trillion from about $65 billion now. It forecasts $5 trillion in assets over the next decade due to rapid adoption.

The next generation of DeFi will be built on a layer 2 network that is scalable with 95% lower transaction costs and products that generate real revenue and sustainable yields rather than being driven by token incentives, the note said.”

Stablecoin issuer Circle is launching a new token backed by the euro in the U.S. (Sandali Handagama/ CoinDesk)

Scrutiny Falls on $43B USDC Stablecoin’s Cash Reserves at Failed Silicon Valley Bank

“Circle’s USDC, the second-largest stablecoin, with $43 billion market capitalization, held an undisclosed part of its $9.8 billion cash reserves at failed Silicon Valley Bank.

SBV was one of the six banks that the firm used for managing the approximately 25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of Silicon Valley Bank will impact its depositors, Circle and USDC continue to operate normally.

The full list of banks that held cash for Circle’s USDC are Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank (a division of Flagstar Bank, N.A.), Signature Bank, Silicon Valley Bank and Silvergate Bank. Circle also keeps some part of USDC reserves in a dedicated BlackRock fund.

Circle said last week it had cut ties with Silvergate Bank, the crypto-friendly bank that halted operations and said it would “voluntarily liquidate” its assets earlier this week. Circle’s chief executive Jeremy Allaire said the firm held ‘most of their cash is in BNY Melon.’“

É oficial: Silicon Valley Bank fecha portas - Banca & Finanças - Jornal de Negócios

Silicon Valley Bank Shuttered by State Regulators

“The DFPI said in a statement that it had taken possession of the bank, “citing inadequate liquidity and insolvency.” The Federal Deposit Insurance Corporation has taken receivership of the bank. SVB’s collapse with $211 billion in assets is among the largest in history, second only to Washington Mutual Bank’s failure during the Great Financial Crisis in 2008.

While not perceived as “crypto-friendly” as Silvergate, the tech-forward Silicon Valley Bank did count a number of crypto entities as clients – especially hedge funds and VC firms. Blockchain Capital, Castle Island Ventures, Dragonfly and Pantera all had relationships with the bank.

Among the bank shares moving lower on the news are fellow West Coast lenders First Republic Bank (FRC), now off 15%, and Western Alliance Bancorp (WAL), now down 25%. Crypto-friendly Signature Bank (SBNY) has also added to losses, the stock now off 13%.

The broader stock market has turned from modest gains to modest losse. The S&P 500 is now lower by 0.3%. Bitcoin is little changed at just above $20,000.

All insured depositors will have full access to their insured deposits no later than Monday morning.”

SEC Commissioner Hester Peirce Says Washington Doesn't Need a New Crypto Regulator

SEC Denies VanEck Spot BTC Trust Product, Commissioners See Double Standard

“On March 10, the United States Securities and Exchange Commission ruled against a change that would allow investment manager VanEck to create a spot Bitcoin (BTC) trust. Commissioner Mark Uyeda joined his colleague Hester Peirce in releasing a statement criticizing the commission’s decision not to approve the listing.

In our view, the Commission is using a different set of goalposts from those it used—and still uses—for other types of commodity-based ETPs to keep these spot bitcoin ETPs off the exchanges we regulate.

The commissioners said the SEC had not required any connection between the spot and futures markets to be demonstrated for other commodity-based ETPs. The SEC is required by law to explain changes to its policy for approving commodity-based ETPs, they added.”

Ether a Security? That Could Have Huge Ramifications for Crypto, Legal Expert Says

“Tonya Evans, a professor at Penn State University Dickinson Law, said that if the New York Attorney General prevails, defining ether as a security could have huge ramifications for the crypto world. Whether it is deemed one is likely to depend on what approach state and federal regulators take in defining the digital asset, but she said she doesn’t see how ether could be considered a security.

Once there are ‘federal guidelines, rules, regulations and laws that may preempt state law, oftentimes you’ll see things percolate up from the states and eventually make it before the [U.S. Supreme Court] to render the ultimate determination. And this is what we often see‘ in new and emerging asset classes and industries, she said.

Nonetheless, the U.S. should be cautious about alienating the crypto industry and forcing it out of the country because it would be operating without U.S. regulatory oversight to protect investors, she said.

If we’re pushing this type of ecosystem offshore it will be more and more difficult for lawmakers and regulators to actually reach the point of keeping this ecosystem vibrant in the United States with clear and defined rules.”

Nigerian President-elect Aims to Use Blockchain Technology in the Banking Sector

“The manifesto suggests reviewing existing Nigerian Security Exchange Commission (SEC) regulations on digital assets to make them more business-friendly. The manifesto’s release coincides with Nigerians’ increasing crypto adoption, which is among the highest in the world.

We will reform the policy to encourage the prudent use of blockchain technology in banking and finance, identity management, revenue collection and use of crypto assets. We will establish an advisory committee to review SEC regulation on digital assets creating a more efficient and business-friendly regulatory framework.”

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