The Crypto Compass Issue #40

Hello to our dear readers and crypto enthusiasts!

Welcome back to our weekly crypto and Web3 newsletter! As the global financial landscape rapidly evolves, both traditional and decentralized sectors are witnessing transformative shifts. From the rise of on-chain Real-World Assets (RWAs) in decentralized finance to the contrasting approaches of European and U.S. banks towards cryptocurrencies, the financial ecosystem is at a crossroads. Meanwhile, geopolitical tensions in the Middle East have sent shockwaves through the crypto markets, resulting in significant trader losses. Here, we delve into these pertinent topics, highlighting the key developments and their implications for the future of finance.

DBS Bank's Measured Pace in the Crypto Space

Singapore's prominent DBS Bank possesses the licenses required for purchasing traditional securities using stablecoins. Yet, unlike competitors, the bank hasn't yet capitalized on this capability.

Evy Theunis, who leads digital assets at DBS, explained that while they have been proactive in the digital assets field, they prioritize safety and security. The bank ensures stringent tracking for tokens to guarantee foolproof transactions.

Although DBS began its digital asset platform in 2020, it approaches the crypto domain not as a sprint but as a long-term evolution. Under Theunis's guidance, DBS has seen a significant 150% YoY growth in its digital assets.

While DBS has made considerable strides in crypto, they emphasize cautious advancement, working closely with the government on various digital initiatives. The bank's strategy, deeply influenced by regional monetary policies, manifests a steady and secure approach to the burgeoning realm of cryptocurrency.

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On-Chain Real-World Assets (RWAs) Growth Overview

As DeFi's landscape continues to evolve, Real-World Assets (RWAs) have emerged as a driving force. By the close of September 2023, the value secured in RWAs rocketed from $1.44 billion to a staggering $2.5 billion. This growth isn't just a random spike; it's deeply entwined with broader macroeconomic shifts. The conjunction of surging interest rates and a prevalent crypto bearish trend has notably amplified the allure of RWAs.

Delving deeper, three assets—U.S. Treasuries, private credit, and real estate—stood out, accounting for an impressive 82% of the onchain RWA growth this year. The RWAs realm has also witnessed the entrance of significant players, with Centrifuge, Franklin Templeton, and WisdomTree leading the charge. It's particularly intriguing to observe traditional finance giants like Franklin Templeton making decisive moves towards RWAs, signaling a potential mainstream shift.

However, as with all financial instruments, RWAs aren't without risks. They bring along real-world challenges and often necessitate users to undergo various verification procedures. Additionally, the Federal Reserve's monetary policies, especially those concerning interest rates, play a pivotal role in shaping the trajectory of RWAs in DeFi. In essence, the article paints a picture of a rapidly evolving DeFi sector, with RWAs standing firmly at its forefront, shaped by global economic currents and further legitimized by the entry of traditional finance behemoths.

Bitstamp Engages with European Banks Amid Regulatory Shifts

Bitstamp, a veteran cryptocurrency exchange, revealed its ongoing negotiations with three major European banks to initiate crypto services in early 2024. This engagement reflects the European Union's regulatory approach, particularly through the Markets in Crypto Assets (MiCA) initiative, which is seemingly fostering traditional finance's involvement in digital assets.

This positive reception is juxtaposed with the U.S., where regulatory stringency has made traditional entities wary of crypto and prompted some crypto firms to consider relocating. Robert Zagotta, the Global Chief Commercial Officer of Bitstamp, indicated that their "Bitstamp-as-a-service" has garnered considerable attention from European banks.

In contrast to Europe's openness, significant U.S. institutions are transferring their crypto ventures to more amenable jurisdictions, like Singapore. While Europe advances its regulatory framework, global banking giants like Deutsche Bank and HSBC are taking strategic steps in the crypto space. Meanwhile, Bitstamp has been benefiting from a regulated and governance-focused approach, especially after the downfall of FTX.

Happenings of the week

• Vitalik considers implications of adding ZK-EVM, other features to Ethereum mainnet

• VanEck Launches EFUT, the Only Ethereum Futures ETF Structured as a C-Corp

• IMF floats "matrix" on crypto risk as use grows around the world

• FTX fraud trial: court hears Sam Bankman

Middle East Tensions Spark $100M Crypto Liquidation

Amid escalating tensions in the Middle East, cryptocurrency traders faced over $100 million in losses due to liquidations as digital assets plummeted. CoinGlass data reveals that $105 million worth of long positions, which predicted a rise in prices, were eliminated. This marks the heaviest single-day liquidation since September 11th.

This downturn in the cryptocurrency market was largely attributed to conflicts involving Israel and Hamas, causing apprehension among investors. Notably, bitcoin saw a decrease of over 2%, briefly recovering to $27,600. Ether experienced a near 5% dip. Other significant digital currencies like solana, Polygon's token, and Polkadot saw declines between 6% and 7%, although there was a slight recovery later on.

Liquidations are typically triggered when traders can't maintain their leveraged positions due to insufficient funds or failing to meet the margin requirements. Ether derivatives traders were hit hardest, enduring $32.78 million in liquidations, the most significant of which was a $4.5 million ETH-BUSD long order on Binance. Meanwhile, Bitcoin's liquidated long positions amounted to $18.25 million. Bitcoin cash and Bancor's token both experienced over $3 million in liquidations.

Stay tuned for more updates next week! If you haven't yet, hit that subscribe button to ensure you never miss an issue. Found value in this edition? Please consider sharing it with your friends, colleagues, and fellow crypto enthusiasts. Together, let's navigate the world of crypto with clarity and insight!