The securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended or with any other regulatory authority of any State or other jurisdiction of the United States or Canada and (i) may not be offered, sold or delivered within the United States or Canada, or to, or for the account or benefit of any U.S. Person or Canadian, and (ii) may be offered, sold or otherwise delivered at any time only to transferees that are Non-United States Persons and Non-Canadians.

March 12, 2024

Bitcoin flips silver; UK approves Bitcoin ETNs; Hong Kong’s tokenization warning

Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, on key industry news that has caught our eye, plus our own developments.

Comments available on the following news items:

  • Bitcoin flips silver as it hits new ATH – but could it overturn gold?
  • UK playing catchup on bitcoin instruments for institutional investors
  • Hong Kong tokenization plan comes with a health warning


Bitcoin hits fresh ATH as it flips silver 


Bitcoin has hit a new all-time high and is now in effect in a ‘price discovery’ phase as investors look at what sort of level the digital asset can maintain a price. 


On its way to a fresh ATH it has also flipped silver by market cap, to now sit at the 8th largest financial asset in the world, after the ‘magnificent seven’ stocks and gold. 


Could Bitcoin, medium- to long-term overturn gold? Bitcoin proponents will tell you it is well within reach – that the digital asset is in development curve not a bubble. The current cycle is hard to pin a high water mark on but for it to overturn gold would require a $750,000+ price (notwithstanding if gold continues to rise as it has done). No small target and certainly ambitious even by bitcoin’s now lofty standards.


All that said, the movements of recent weeks have been a real vindication of the ETF process to launch Bitcoin-backed instruments to the market. It is quenching a clear institutional thirst for alternative assets and products which show a clear direction of travel for the wider digital assets market to now accommodate. 


Bitcoin is the ‘thought leader’ in the space but other tokens such as ETH and Solana are also making significant moves. Digital asset tokenization is going to be at the center of this revolution as TradFi money looks to new horizons amid an increasingly unbalanced stock market and repressive conditions in the bond market. 


The fervor of the market shows little signs of diminishing right now – particularly in the run down to the next halving, which is due in as little as a month from now. As supply continues to tighten as a result, we might just be entering a new era for the digital asset and the wider market. 


UK approves Bitcoin ETNs 


The UK’s financial regulator the FCA is playing catch up with the burgeoning Bitcoin instrument market as it looks to cash in on the ETF wave.


While it is welcome to see bitcoin ETNs now approved for commercialization in the UK, the market and its participants have lost out significantly thanks to a lackluster approach to approving brand new bitcoin ETFs from the US. ETNs are not quite as all-encompassing as ETFs, but institutional investors will likely take advantage of the liberalized rules nonetheless. 


There is a clear regulatory arms race underway to ensure that particular jurisdictions remain relevant and competitive in an increasingly busy segment. Many regions now approve of digital-asset markets as long as they come via regulated products such as ETFs or ETNs. This isn’t just about Bitcoin either. The wider tokenized asset market is moving in a significant way.


If regulatory regimes such as the UK fall behind then it will only be to the detriment of their wider economies. The UK has done an OK job of positioning itself as a stablecoin leader, but lacks punch in other areas where progress has been slow compared to other regions. 


However, regulators can only work within the confines of what they are given by governments. Ultimately it is up to leaders to legislate to introduce and widen access to new markets. ETNs are a good start, but the UK should look to approve digital asset ETFs at the earliest opportunity. 


Hong Kong tokenization efforts come with a health warning 


Hong Kong’s central bank is looking to improve its tokenization offering with a new wholesale CBDC project. While it is welcome to see yet another authority take further steps toward the tokenization of financial assets, this one must come with a skeptic’s health warning.


CBDCs are a questionable aspect of the blockchain ecosystem. One in which state control of digital assets is not necessarily clear. With the politics behind Hong Kong’s leadership and its relations with mainland China, the use of a CBDC at the center of a tokenization project should raise some alarm bells for anyone with privacy concerns, or concerns around the control and management of assets.


In fairness to the Hong Kong Monetary Authority (HKMA) for now ‘Project Ensemble’ as it has been dubbed is just a sandbox to look at the viability of tokenized deposits. But it is underpinned by an interest in creating a wholesale CBDC – i.e. one that the bank has full oversight of. 


Without clear protocols in place to protect users’ assets, investors and other market participants should take the development with a healthy dose of caution. HKMA has said if the sandbox is successful then it intends to launch a live issuance of the token. Plans are currently not clear for a retail CBDC although it has expressed an interest in the past.