SEC’s Peirce Proposes Cross-Border Crypto Sandbox

The Breakdown First Five - Friday, May 31, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. A16Z Adds to War Chest

A16Z has topped up crypto’s political war chest with a further $25M donation to the Fairshake SuperPAC. Fairshake now has more than $100M to spend during election season according to FEC filings, making them one of the top PACs in Washington. SuperPACs are not allowed to contribute or coordinate with individual candidates, but have already demonstrated their effectiveness in the primaries by spending $10M to oust Californian Democrat Katie Porter. 

4. JPM: ETH ETF will Underwhelm

JP Morgan analysts think the Ethereum ETFs will flop compared to their Bitcoin counterparts. They think that Ethereum demand will not be in the same league and that Bitcoin had a “first mover advantage" that sopped up crypto allocations earlier this year. They also noted the elephant in the room, outflows from Grayscale’s ETHE, which they predicted will lose around $1B after converting to an ETF. Analysts believe the ETF launch will be a sell the news event. 

3. Kwon Settles

Terraform Labs and CEO Do Kwon have reached an in principle settlement in their SEC enforcement case. The SEC are pursuing securities fraud allegations and have already secured a ‘liable’ finding against Terraform. The regulator was asking for $5.3B in penalties to be assessed but at this stage we don’t know the terms of the set. Terraform claims to be down to it’s last $150M. Kwon himself is still fending off extradition to face criminal charges. 

2. ETH ETFs on the Fast Track

The SEC has requested revised S-1 filings for the ETH ETFs be submitted by today. Sources said these revisions are not informed by SEC comments, with the first round coming after this submission deadline. It’s unclear how long this unorthodox approval process will take, but this filing request suggests that the SEC is getting a move on. 

1. Transatlantic Sandbox

SEC Commissioner Hester Peirce has proposed a cross-border crypto sandbox. The suggestion is that US firms and regulators should collaborate in the UK regulatory sandbox set to begin in January. The sandbox will allow firms to experiment with digital asset trading and settlement in real world assets under a regulatory exemption. Volumes would be limited to a small amount, but the experimentation could yield a huge innovation dividend.