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 17, 2024

Hong Kong Bitcoin ETF; SEC attack on Uniswap; Central bankers and tokenization

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:

  • Hong Kong approves bitcoin ETFs – what about Europe?
  • SEC’s regulatory short-sightedness on Uniswap
  • Central bankers are talking tokenization


Hong Kong approves bitcoin ETFs – why is Europe so far off?

Hong Kong has become the latest region to approve the use of bitcoin ETFs, according to the funds involved in their setup. The move is no surprise and opens up a tantalising market in China – which could see a major uplift of inflows. 

With both North America and Asia now firmly moving toward the ETF pathway, it is salient to ask, where is Europe in all this? Critics of European regulatory authorities will be quick to complain that investors in the EU and UK are far away from being given access to user-friendly bitcoin products – but this belies the point of using ETFs to access these assets in the first place.

ETFs have been approved to invest in bitcoin because of the regulatory hesitance, primarily in the US, for allowing investors to just use cryptoasset tokens and infrastructure in the first place. The implicit message in the approval of ETFs is ‘if we’re going to let people access them, it has to be through institutions we trust to provide them safely.’ 

Although in the wake of certain controversies in crypto, this is the wrong approach. The European approach is better because it involves regulators and legislators working with crypto projects and innovators to provide crypto-centric and DeFi solutions.

The issue here is one of timing. It’s going to take longer for consumer investors to access mass market crypto products and services that are regulated and reliable, but the long-term benefit of that will be much more powerful, compared to a short-termist approach of allowing crypto ETFs – which are fundamentally a TradFi invention and no longer particularly bold or innovative.

SEC’s attack on Uniswap is deeply misguided

The SEC issued a Wells notice to Uniswap last week, confirming again the US regulator’s intention to stamp its authority on crypto services and assets. 

The notice is another land grab from the regulator that will likely end being decided in court. The SEC has form for losing these kinds of cases, most recently against DEBT Box, where the judge on the case ended up accusing the regulator of “gross abuse of power”.

The Uniswap case could provide an intriguing indicator for the DeFi sector in the US. Were the decentralized proposition of the firm to win out, then it would potentially green light the reassurance that much of the sector is looking for in the vacuum that has existed in the past few years in regulatory terms. 

The SEC in its intention to come after Uniswap has indicated it is not interested in considering the culture behind an organisation, or its goals.This approach fails to recognise that Uniswap is actively involved in the creation of DeFi infrastructure which the SEC finds hard to get its head around because it is so totally new and innovative.

The lack of a central party in the process is what is key here. The SEC functions to regulate the middleman in a financial transaction, ensuring all parties involved are dealing fairly and treated fairly. Take away that middleman and what happens? The SEC’s role is redundant. This is why it is so aggressively pursuing the goal of staking its power over the sector – which so far it has not done convincingly. 

Central bankers are talking about tokenization 

At a recent event hosted by the Swiss National Bank, a group of central banking figures including from the Bank of England (BoE), Bank for International Settlements (BIS).

The content of this meeting shows that the momentum for tokenization is there. If central bankers are talking about it, then it is all but guaranteed as a growth area for the financial system. The questions they pose, however, run to the fundamental structure and make up of how that system develops.

One of the chief concerns raised in the discussion was the pace of innovation, and whether the wave of tokenization, which is now sweeping into frame, will cause disruption. Participants were also worried whether those creating these new technologies would pass the benefits onto users (i.e. in cost terms).

We take these views with a certain pinch of salt, because much of the central bankers’ arguments tend to end in some sort of suggestion that a centralized pathway and means for financial exchange tends to be the ultimate suggestion, which generally implies CBDCs. 

Decentralization and competition is a positive not a drawback of the DeFi model, as it gives users choice and risk mitigation through access to a range of options and tooling. In a truly decentralized model all the benefits are inherently distributed to users as there is no middleman to take a cut at all.