Digital asset diaries: March 2024

The month in brief

March brought the seventh consecutive month of green for BTC – a first since 2012 – though a cool-off is to be expected after such an extended rally.

This showed through in continued strong trading volume for the month, with total spot & derivative trading volume almost doubling month over month to reach a high of $9.12 trillion, and spot trading volumes posting highs not seen since May 2021.

Alongside the crypto recovery, mainstream institutional attention continues to grow, in March expressed in the return of the ‘real-world asset’ (RWA) narrative. 

As the BoE and FCA opened consultation on the UK’s Digital Securities Sandbox, developments in the month also included a much publicised investment fund tokenisation by Blackrock, continued strong growth in stablecoins, an announcement from Ripple that it will be offering a new stablecoin of its own, and the progress of BIS Project Helvetia phase III, which explores ways to settle transactions of tokenised assets with tokenised central bank money.

In other news, the previously futures-based Hashdex Bitcoin Futures ETF (DEFI) has been converted and renamed the Hashdex Bitcoin ETF. It will invest at least 95% of its assets in spot Bitcoin and becomes the 11th live US spot bitcoin ETF product.

WalletConnect also released a pulse report on the experience of crypto wallet users based on YouGov polling of UK/US consumers, with NFTs, web3 social and messaging, and community & governance ranking as the most appealing consumer areas.

From the market

• Netcoins USA will enable crypto trading in 48 US states. 
• Fintech Robinhood posted February 2024 crypto trading volume of $6.5B – an increase of 10% month-on-month, and 86% year-on-year.
• PostFinance, one of Switzerland’s systemically important retail banks, went live with its retail crypto offering, with private bank PKB the latest to make a digital asset integration announcement. 
• Fireblocks expanded its C-Suite with the hire of new Chief Marketing Officer Michal Ferguson. This follows the appointment of Michael Levine as Chief Financial Officer and Maden Gadde as Chief Customer Officer.
• Banking giant HSBC will offer a Gold Token to Hong Kong retail customers, backed by physically held gold bullion. HSBC has been reported to be working with Ripple acquired Metaco on its DLT tokenisation initiatives. 
• Decentralised infrastructure provider Gnosis announced a new on/off ramp solution aiming to undercut the significant fees currently associated with current on-off ramp providers.
• All in all, this is a good time for investment-oriented cryptoasset propositions as trading volumes surge and momentum returns. 

In the UK

• The London Stock Exchange will accept applications for both bitcoin and ether exchange traded products within Q2 2024; though these will be restricted to professional investors only.
• The FCA published its Business Plan for 2024/5. Its crypto priorities are: developing a market abuse regime for cryptoassets; continuing to supervise cryptoasset firm financial promotions; continued work with the BoE on the creation of the Digital Securities Sandbox; and supporting asset management industry groups on tokenisation.
• HMT’s Technology Working Group also released its second report outlining use cases for tokenisation in asset management. 
• Finally, proptech firm Coadjute raised a £10M funding round from backers including Lloyds Banking Group, Nationwide, NatWest and Rightmove for its property transaction management platform. Coadjute uses the R3 Corda enterprise blockchain platform.

Regulatory and operational

• HMT opened a consultation on improving the effectiveness of the Money Laundering Regulations MLRs (under which UK cryptoasset firms are currently obliged to register). 
• The BoE and FCA have published their joint consultation paper on their proposals to implement and operate a Digital Securities Sandbox for instruments such as tokenised shares, bonds, funds and money market instruments.
• ESMA will shortly conclude the third of its packages of consultations on details of MiCA implementation, which in this round includes strict interpretations of reverse solicitation and guarding of the EU market. It remains to be seen whether this is a foreshadow of the UK approach, or whether the UK will provide more latitude to third-country-based service providers.

Upcoming 

• Following previous months’ reporting on UK crypto framework phase 1 (stablecoins), the FCA will be gradually turning its attention to public consultation on phase 2 (which includes the bulk of requirements for cryptoasset trading venues). 
• Public consultation on phase 2 is officially expected in H2 2024 – though there is a chance this may now come forward in light of an added urgency to lay groundwork before elections later in the year.
• In February, City Minister Bim Afolami had previously stated a Government commitment to a timeframe of 6 months for phase 1 implementation – leaving a constrained window within which to make headway under the current Government. 
• MiCA will be the largest piece of crypto-specific legislation entering into operational application in 2024; a global 2024 calendar can be found here.

Sustainability in cryptoassets

• KlimaDAO and Polygon DEX Sushi announced a programmatic carbon offsetting facility leveraging automation from Chainlink – a similar concept to Algorand’s smart contract-based carbon offsetting functionality reported in 2022.
• The Digital Pound Foundation will be launching a new Sustainable Digital Finance working group.
• Pitchbook published its State of Private Market ESG and Impact Investing 2024 report. Climate solutions are the increasingly dominant proxy of the ESG and impact investing narrative (p.12), and the UK ranks highly, together with other European countries including Sweden, France, the Netherlands and Germany (p.5) in the offering of Article 8 compatible funds under the EU’s Sustainable Finance Disclosure Regulation (SFDR).

As the digital asset landscape evolves, stakeholders will need to stay informed and adapt to changing market conditions and regulatory requirements. With innovation driving the industry forward, collaboration and compliance will be key to unlocking the full potential of cryptoassets in the global economy.