The Crypto Compass Issue #43

Hello to our dear readers!

In this week’s edition, we’ve meticulously curated a series of insightful articles to guide you through the latest happenings and trends in the world of digital assets and decentralized technology.

From the bustling streets of Brazil, where stablecoins are taking center stage, to the regulatory chambers of the UK, shaping the future of crypto governance, we've got you covered.

Additionally, we delve into the intricate world of tokenized bonds, exploring how this innovative financial instrument is carving out its space in the market. So, buckle up and prepare for a deep dive into the exciting and ever-evolving universe of cryptocurrency and blockchain technology!

Bitfinex Securities announces tokenized bond

Bitfinex Securities is making strides in real-world asset tokenization with the introduction of ALT2611, a 36-month tokenized bond with a 10% coupon, set to be listed in November. This bond, issued by microfinance leader Mikro Kapital and denominated in Tether (USDT), represents an innovative blend of traditional finance and blockchain technology. It opens up investment opportunities in microfinance entities and small financial institutions across various developing regions, including the historic Silk Road.

From our perspective, this development is a bullish indicator for the crypto sector, showcasing a practical and impactful use case of blockchain technology in tokenizing real-world assets. It not only enhances liquidity in the market but also demonstrates the versatility of crypto assets in traditional financial setups. However, potential investors should note the minimum investment threshold of 125,000 USDT and the exclusion of U.S. citizens from this offering. Governed by Luxembourg law, ALT2611 is a testament to the growing integration and acceptance of crypto assets in broader financial landscapes.

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Brazil Sees Surge in Stablecoin Activity as USDT Volume Tops Other Digital Assets

Brazil's Special Department of Federal Revenue, Receita Federal, has noted a surge in stablecoin usage, particularly Tether (USDT), surpassing the trading volumes of all other cryptocurrencies combined in 2022. Stablecoins now constitute around 10% of global crypto trading volumes, serving as a safe haven amid market volatility and bridging the gap between fiat and digital assets.

In Brazil, USDT, USDC, and BRZ are the leading stablecoins, with USDT transactions making up 80% of all reported crypto activities in the first part of 2023. The shift towards stablecoins became particularly pronounced following the Terra LUNA collapse in 2022, indicating a preference for stability in turbulent times.

While this trend highlights the increasing adoption of crypto in South America, it also draws regulatory scrutiny. The Receita Federal’s close monitoring of USDT’s rapid growth reflects concerns about potential impacts on Brazil's tax and regulatory landscape, suggesting that further legislation for the digital asset industry may be on the horizon. This trend underscores the region's openness to crypto innovation, while also highlighting the need for balanced regulatory frameworks to ensure stable and secure adoption.

UK Treasury Finalizes Crypto Regulatory Proposals

The UK Treasury has finalized its regulatory proposals for crypto assets, responding to extensive consultation and learning from industry mishaps, notably the FTX collapse. The proposals mandate authorization by the Financial Conduct Authority for any firms dealing with UK retail consumers, regardless of their location. This move brings several crypto asset activities under financial services regulation for the first time, setting specific requirements for crypto exchanges, including standards for asset listings and mandatory disclosures.

However, decentralized finance (DeFi) is left untouched in this regulatory wave, with the government recognizing the prematurity of regulating this sector. Instead, the UK will contribute to international efforts in shaping future domestic frameworks for DeFi. By integrating these rules into existing market laws rather than establishing a standalone regime, the UK aims to position itself as a global leader in crypto asset technology and innovation, fostering a conducive environment for crypto service providers while mitigating consumer and stability risks.

Happenings of the week

• Building and expanding the Onchain Credit Layer

• Why Web3 is still thriving in Asia

• Thousands of Coinbase users sign up as potential amicus curiae in legal fight with SEC

• Vitalik Buterin invests in Nocturne Labs, which aims to bring private accounts to Ethereum

• Binance has set up trading platform in Hong Kong to apply for a license: report

IRS proposes unprecedented data-collection on crypto users

The IRS has proposed new crypto regulations under the Infrastructure Investment and Jobs Act, potentially expanding financial surveillance. The initial act, aimed at infrastructure funding, included provisions for monitoring cryptocurrency activities to increase tax revenue, though recent estimates question the financial gains of such surveillance. The IRS proposal, open for comments until October 30, takes a "collection by default" approach, potentially pressuring decentralized platforms and wallets to disclose customer information. This move highlights a growing trend of financial surveillance in the U.S., underscoring the need for Congress to reassess and reform financial privacy norms to protect citizen rights.

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!