It’s been an emotional week for SEC President Gary Gensler. Mr. Gensler received a letter earlier this week from a bipartisan group of Congressional representatives demanding approval of the Bitcoin Spot ETF. The SEC president also appeared before the United States Financial Services Commission, which did not spare him on the topic of Bitcoin. We return to it in Cryptic Analysis after the week’s major news.
Block 1: Essential news
- Kraken plans to expand into stock trading
Kraken Cryptocurrency Platform plans to expand services to include stock trading in 2024. To this end, while respecting the regulations, Kraken plans to launch “Kraken Securities”. Initially, these new services will be available in the United States and the United Kingdom, where Kraken has already obtained the necessary licenses. This expansion would allow Kraken to diversify its offering and take on rivals such as eToro and Robinhood, while differentiating itself from the struggling Binance.
- Tether invests in Germany
Tether (USDT) invested 420 million dollars in Germany-based cryptocurrency mining company Northern Data Group, acquiring 10,000 graphics processors “H100 GPUs” and becoming a major shareholder. Although the exact amount of the deposit is not confirmed, these powerful and sought-after GPUs are used in cryptocurrency mining and artificial intelligence. The investment illustrates the diversification of Tether, which, while remaining a stablecoin leader with a market capitalization of $83 billion per USDT, is expanding into other sectors such as energy generation, bitcoin mining, and communications technology.
- Binance scares its French customers
Binance France customers currently cannot deposit or withdraw funds from the termination of the partnership with the Paysafe payment processor. Although Binance has promised a seamless transition, many customers remain locked out of their accounts. Binance is in talks to extend its partnership with Paysafe, but in the meantime, withdrawals and deposits remain unavailable. This critical situation comes in the context of regulatory and legal challenges for the platform in France, with an ongoing investigation into the compliance of its services and practices.
- MicroStrategy continues to hoard bitcoins
MicroStrategy, led by Michael Saylor, bought an additional 5,445 Bitcoins (BTC) for $150 million, bringing the total to 158,245 BTC, equivalent to more than $4.68 billion. The recent purchase was financed by the sale of MSTR stock for $147.3 million. The company thus consolidates its position as the largest corporate holder of BTC in the world with an average purchase price of $29,582 per bitcoin. It has acquired 25,745 BTC since the start of 2023, with the largest transaction taking place in June for nearly $350 million.
MicroStrategy acquired an additional 5,445 BTC for approximately $147.3 million at an average price of $27,053 per #bitcoin. Ace of 24 September 23 @MicroStrategy HODL 158,245 $BTC raised for ~$4.68 billion at an average price of $29,582 per bitcoin. $ MSTR https://t.co/GbJtUoQfXv
— Michael Saylor⚡️ (@saylor) September 25, 2023
Block 2: Cryptic analysis of the week
First letter on Gary’s desk – Tuesday, September 26th
In the complex landscape of cryptocurrency regulation, this week saw a tense episode. A bipartisan assembly of congressional representatives took a definitive stand by sending a salty letter Gary Gensler, Chairman of the United States Securities and Exchange Commission (SEC). This letter signed by Reps. Tom Emmer (R-Minn.), Mike Flood (R-Neb.), Ritchie Torres (DN.Y.) and Wiley Nickel (DN.C.) unequivocally called for immediate approval of a bitcoin exchange-traded fund (ETF).
The representatives’ joint message was unequivocal: the denial of approval of the spot bitcoin ETF is indefensible and contradictory given the similarity between the spot bitcoin ETF and the futures bitcoin ETF. They emphasized that without a rational explanation, such discriminatory regulatory treatment is illegal.
The letter emphasizes the urgent need for Congress to ensure that the SEC approves investment products in accordance with Congressional requirements and calls for swift approval of Bitcoin spot ETFs. Here are some quotes from that letter:
- A spot bitcoin ETF is indistinguishable from a futures bitcoin ETF. The SEC’s current position is therefore unsustainable going forward.
- The appeals court concluded that “in the absence of a coherent explanation, this disparate regulatory treatment of similar products is unlawful.”
- Following the decision of the Court of Appeal, there is no reason to continue to reject such applications under inconsistent and discriminatory standards.
- Congress has a duty to ensure that the SEC approves investment products that meet the requirements established by Congress.
- To this end, we ask that you immediately approve the listing of spot bitcoin ETFs.
Second letter on Gansler’s desk – Tuesday, September 26
The first letter was not the last of the week. Another letter, equally important, arrived on Mr. Gensler’s desk. The letter came from Republican members of the House Financial Services Committee and was carefully timed to arrive just before a crucial hearing the following day. While not specifically dealing with cryptocurrencies, it highlights the SEC’s shortcomings in creating financial compliance rules, problems that are spreading through the corridors of the cryptosphere.
#NEW: Ahead of today’s hearing, all Republicans on the Financial Services Committee are sending a letter to @SECGov Chairman Gary Gensler criticized the agency for failing to assess the cumulative effects of its interlocking rules.
⬇️ Read more 🔗https://t.co/iSGizF2plS pic.twitter.com/d87PJ5Vum6
— Financial Services GOP (@FinancialCmte) September 27, 2023
Gary Gensler hearing from Financial Services Commission (Financial Services Committee) of the United States House of Representatives – Wednesday, September 27
At the hearing, Patrick McHenry, Chair of the Financial Services Committee, led discussions on a wide range of issues – from environmental, social and governance (ESG) criteria to capital markets and the ubiquitous issue of cryptocurrencies. The hearing was punctuated by praise and criticism of Mr. Gensler. While some praised his efforts, others were outspoken in their criticism. Representatives bombarded Gensler with pointed questions and remarks about transparency, consolidation of power and regulatory overreach.
President McHenry was fearless from the start. He immediately put the question to Mr. Gensler, asking him to clarify the status of Bitcoin as a security. Mr. Gensler’s reluctance was palpable, but after a series of tense exchanges he conceded that “Bitcoin does not meet Howey’s testwhich is the law of the land to be a security.’
Furthermore, let us recall that the second American regulator, PUSH CFTC (Commodity Futures Trading Commission), does not consider bitcoin a “security” but a “commodity”. This shows how far from clear the situation is on the other side of the Atlantic.
Finally, Mr. McHenry didn’t mince words when discussing the relationship between Gensler and the defunct FTX platform. “Our patience is wearing thin. You refuse to be transparent with Congress about your interactions with FTX and Sam Bankman-Fried. I don’t want to be the first president to issue a congressional subpoena, and you don’t want to be the first SEC president to get one,” he said.
Ultimately, we’ll see if this hearing has any effect on the SEC’s acceptance of the many bitcoin spot ETF applications. America’s stock cop is getting a noose anyway.
For the more daring, here’s Gary Gensler’s full hearing, lasting more than five hours: here
Block 3: Tops & Flops
(Click to enlarge)