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.

August 8, 2023

Revolut; Curve; German real estate 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. 

Comments available on the following news items:

  • Revolut drops US crypto offering
  • Regulation-led standards to prevent another Curve hack
  • German real estate tokenization underway

 

Revolut exits US crypto

 

News broke over the weekend that UK fintech startup unicorn Revolut would be shuttering its crypto offering in the US. The move is no real surprise given the regulatory challenges in the market.

 

The US has fostered something of a toxic environment for crypto firms in recent months. This comes primarily thanks to the, perhaps inevitable, backlash to the sorry episodes of 2022 that saw many investors left in the lurch after the collapse of high-profile exchanges. 

 

Revolut has had its own regulatory issues recently, particularly with attempting to gain a banking licence in the UK. The retreat from crypto in the US would seem to be a response partly to this too as it looks to concentrate efforts to gain authorization in one major jurisdiction at the expense of another. 

 

While Revolut says crypto is a small part of its services in the US, what is clear here is there was little appetite from the firm, which is not alone, to navigate what is a very difficult environment. The lack of prevailing frameworks for regulation in the US have left a vacuum in which the SEC is attempting to exert itself. 

 

Until there is a codified set of ground rules for the sector in the country more will move to wash their hands of the space entirely, which is bad for the developing industry in the US and more generally globally considering the powerhouse nature of the US economy. That being said it looks evermore like the EU (and to a lesser extent UK) will be the regional to fill the void with constructive opportunities for innovation. 

 

Curve hack timely reminder of need for regulation-led standards

 

While there is no regulatory panacea to protect market participants from hacks and criminal losses, the presence of a framework of regulator-led best practices to ensure the security and quality of blockchains is essential now more than ever.

 

Crypto has had much bad press in terms of fraud losses in recent times, of which Curve is just the most recent example. The setting of a bounty, and subsequent success of this bounty are something of a sideshow to the real issue here. 

 

Traditional finance (TradFi) is far from immune from experiencing crime-related losses. Indeed thousands of people lose billions each year to such criminal enterprises. But what TradFi has that many aspects of crypto still lack (at least in developed markets) is a path for recourse for market participants in the event of losses. 

 

Schemes that protect banks such as the FDIC in the US, FSCS in the UK, or emoney regulations and ring fencing in the EU are all strong examples of good protective practices at work in TradFi. There is no reason why such protections can’t exist for crypto, but regulators have yet to arrive at such solutions. 

 

It is incumbent on the industry to work with regulators to form the strongest possible protections for participants while still allowing for fast-paced innovation. Curve’s bounty is certainly eye-catching, but there’s no reason why we should have gotten to such a curious wild-west-esque situation in the first place. 

 

German real estate tokenization underway

 

Deutsche Börse affiliate 360X has conducted a fresh real estate digital security issuance, underlining some of the potential applications for the tokenization of real-world assets (RWA). 

 

The issue has demonstrated yet another example of the tantalising potential of RWA tokenization and its potential to change the face of financial services in the future. 

 

The property market and its component parts are one of the most messy, old fashioned and inefficient markets in finance, with myriad working parts, rules and physical paperwork required to confer ownership of a physical asset from one party to another.

 

This is where tokenization becomes an extremely interesting prospect. By creating immutable digital records of ownership, transactions and value, blockchain has extraordinary potential to change the market, and save enormous costs for all participants.

 

The same is true for other markets, where Swarm is active, such as the bond and stock market. Again, the use of digital RWA technology is a gamechanger here in terms of security, transparency and for the creation of new markets that aren’t dependent on decades old financial infrastructure. 

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