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.

October 18, 2022

FCA; Binance; SBI

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. 

  • FCA steps up crypto hiring, but sector needs UK regulatory clarity, fast
  • Binance offering miners $500 million lending pools
  • SBI launching digital asset securities platform

FCA expands crypto hires but UK regulatory environment desperate for more clarity

The UK’s financial regulator the FCA is reportedly expanding its crypto-focused hiring at an important time for regulatory developments in the market. But more clarity is needed on the overall environment, not just attention from one regulator.

The EU has really taken the lead on outlining serious proposals for regulation. With the formal introduction of the MiCa bill, crypto providers in the EU have a tangible framework to function within and goals to meet. But the same cannot be said of the UK, despite lots of positive noises from certain institutions.

This issue is massively amplified by the current political instability in the country right now, which appears to have lost any focus on future trends and changes in the face of extreme short-term TradFi market risks. But not everyone is ignoring the issue.

Former Government minister Matt Hancock has had something of a political rebirth since losing his role as Health Secretary and is now one of the most high-profile political proponents of crypto in the UK. Speaking at the Merge 2022 conference yesterday Hancock affirmed our view that the UK needs more clarity in order to not get left behind on crypto. 

But Hancock wants to see a ‘risk on’ approach to the sector. While this is admirable to an extent, the sector needs clear rules commensurate with those that already regulate TradFi. The UK’s Financial Services and Markets Bill is working its way through parliament but this contains fairly limited interventions, mainly around stablecoins and nebulously described “digital settlement assets.”

Ultimately if crypto is going to pick one jurisdiction over another, we’re now at the point where regulatory competition is going to make or break regional markets. The UK and US are at risk of being left behind, or constantly playing catch up. While increasing regulatory knowledge is important, the sector needs something more tangible to commit. 

Binance offering a $500 million mining loan facility

Binance, one of the world’s largest crypto exchanges, has announced it is going to offer crypto miners access to a new $500 million lending facility to aid mining efforts. It comes at a curious moment for miners scrambling to shift away from Ethereum, and facing ever-harder mining difficulty for bitcoin. 

The importance of access to credit cannot be understated at a time like this – for any industry facing the kind of headwinds now being imposed upon crypto asset miners. A combination of high energy prices, volatile markets and increasing difficulty is making mining a tough job at the moment. And Binance is not alone in beginning to offer such facilities. 

Here Binance is providing the kind of facility typically offered by Governments or central banks – but the terms of it might be described as somewhat tougher (although not by much in the current environment), with interest rates on these loans ranging from 5-10%. 

But unless you’re operating on Ethereum – which is about to see its one-month Merge anniversary – mining is still an important aspect of the crypto ecosphere. But the market does continue to build despite the bearish conditions. In this context the offer of liquidity to miners might prove to be an extremely savvy decision for Binance in the long run. 

SBI launches digital assets securities platform

SBI Digital Markets is set to launch a digital assets securities platform in the wake of regulatory approval in Singapore. The development speaks to a growing space for DeFi and an improving approach from regulators in the sector. 

What is really key here for the SBI initiative is something that Swarm is working on here in Europe. TradFi is increasingly looking toward DeFi to solve new and old problems in finance, and the SBI platform is directly designed to help TradFi institutions access these new ideas.

What is key though here is the regulatory aspect of the idea. Financial institutions aren’t going to accept platforms and providers that exist simply in a vacuum – they want providers that take a guided regulation-first approach to innovation. 

This provides protection that gives all parties more protection from the getgo and is a fundamental underpinning ethos of a functional financial system. This, coupled with yield-generating and efficiency driven innovations that DeFi is offering will prove to be the potent mix that unifies both sectors into a unified future financial system.