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.

April 9, 2024

Bitcoin halving; MakerDAO comments on MiCA; BIS launches ‘Project Ágora’

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. 


This week’s memo comes from Philipp as Timo is away. Comments available on the following news items:


  • Bitcoin halving imminent
  • Rune Christensen’s DeFi regulation comments
  • BIS announces new tokenized project


Bitcoin halving imminent – with wider market implications


Bitcoin is less than two weeks away from its latest halving event. The implications for the crypto asset and the wider market could be profound.


Firstly, it will change the economics of mining. This is predictable because it will be twice as hard for miners to create new tokens. At previous halvings the outcomes for miners have been mixed, with the overall token price dictating how profitable the process becomes. 


Data from cryptoquant’s Ki Young Ju suggests breakeven rates could be at least $80,000 – still some way from where the token is currently trading. But despite some retracement having already taken place, there are fears in the market that some of the halving price discovery may have already taken place. 


With the token moving to the landmark right ahead of Summer – when trading volumes and activity fall – then we could be in for a bit of a bumpy few months for the token, which could leave some miners using up capital to stay afloat. 


The broader crypto market has seen some of bitcoin’s shine rub off with tokens such as ETH and others rising in value too. There is a wider sense of market ebullience here with the end of the Crypto Winter, those projects still operating have proven themselves robust and sustainable. 


It’s unlikely the crypto market will be dull in the months ahead, but indications are currently positive, particularly as wider economic conditions normalize and investors begin to look to alternative areas of markets for ideas again. 


Rune Christensen’s comments on MiCA regulation


We noted Rune Christensen’s recent comments around DeFi frontends and the issues that regulation poses such operations in the near future, which has caused some consternation in the crypto community.


While there’s certainly a lot to unpack around developing regulation in the EU, our view is that regulation always was, and always should be, central to considerations for DeFi development. 


You can create brilliant decentralized technologies but these projects always require some element of central management, be it a foundation, government initiative or business, to function. 


Putting aside the first two – what is clear here is businesses looking to operate in the space, in the EU or otherwise, are going to be subject to regulation one way or another simply from the fact that they exist and conduct commercial activities. 


The choice here then is to launch truly decentralized platforms that require no CeFi oversight and produce no fees for the creator – or comply with the regulations. This is a high bar for many to clear and will take some adaptation. But TradFi operates within such parameters so it is ultimately up to the industry to work to comply too. 


BIS launches tokenization project, but CBDC concerns persist


The Bank for International Settlements (BIS) has launched a new tokenization project, dubbed ‘Project Ágora’. 


While it is encouraging to see increasing institutional engagement with the technology of asset tokenization, it raises some significant concerns around the potential role of Government-managed CBDCs. 


BIS recently announced a ‘unified ledger’ concept which this project would appear to be building towards. While creating rails on which much of the world’s finance can operate could be transformational, what kind of token is able to use those rails does matter.


CBDCs are at varying stages of development with limited pictures of what government intentions are with the technology. But the critical argument against CBDCs is the major privacy and usability concerns they raise. 


Unlike traditional cash, CBDCs could potentially allow Government actors to have control over people’s money at a much more fundamental level than could ever reasonably be considered safe.


The involvement of major private banking institutions in this project suggests a real appetite for major financial institutions to look at tokenized asset opportunities. But in global TradFi infrastructure it is the rails rather than the tokens that are given for institutions to use. 


In that sense it will allow private money creation, something already underway with stablecoins, rather than inherently problematic CBDCs.