SEC rejects again Bitcoin ETFs; Thai Central Bank Digital Currency in the works; FICE: Shariah compliant cryptocurrency exchange.


The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.

For the intro to this weekly series, please go here.

Story 1: SEC Rejects 9 Bitcoin ETF Proposals

Decrypted: Another day, another Bitcoin ETF rejection. Similar to rejecting the Winklevoss ETF last month, on August 23, the U.S. SEC rejected all of the pending Bitcoin exchange-traded funds (ETFs) filed by ProShares, GraniteShares and Direxion, on concern prices could be vulnerable to manipulation.

The proposed ETFs were disapproved, as the SEC emphasized that the US Bitcoin futures market is not large and mature enough, to allow institutions to launch ETFs.

Our take: Over the past year we have become all too familiar with hearing about Bitcoin ETF rejections by the SEC.

This brings the count of rejected Bitcoin ETFs so far this year, to ten.

But the rejections of these proposals do not represent a rejection of Bitcoin. Considering the reasoning behind the recent rejections, their disapproval rested on the proposers’ failure to meet the standard or threshold under Section 6(b)(5) of the Securities Exchange Act. The SEC has clearly indicated that the disapproval had nothing to do with Bitcoin as an investment or with the value of Blockchain as an innovation. The applications were rejected because the applicants failed to satisfy the test under the Act.

While the SEC has yet to approve a cryptocurrency-based ETFs, there are still other pending applications, including an ETF that would track a basket of cryptocurrencies, that was filed in July by Bitwise, and the VanEck SolidX Bitcoin Trust. The SEC announced that it will deliver its a decision on the VanEck ETF by end of September.

The importance of an ETF cannot be underestimated. Investors want exposure to Bitcoin digital assets, and a Bitcoin ETF would certainly help expand the market, bring in new money and make the entire buying process simple. Bitcoin the top crypto by market cap, is down 0.55% over the past 24 hours, with a market cap of $115 billion and a 24 hour volume of $3.3 billion.

Eventually, as the Bitcoin futures market increases in size and other regulated financial institutions like Goldman Sachs, which already have started to clear futures on behalf of their clients, expand their businesses to create a major futures market alongside CME and Cboe, it is very likely that derivatives-backed ETFs, will eventually receive the approval of the SEC.

There’s been a lot of hype surrounding Bitcoin ETFs these last several weeks. The SEC has shown extreme caution so far. As the industry stands right now, for Bitcoin to have any kind of future, its very important to protect customers. The SEC is just looking for assurance that the public will be safe if a proposal is accepted.

Although the next Bitcoin ETF decision at the end of September could be rejected, eventually an application will be approved. When the first Bitcoin ETF gets approved, it will be the next bull run, that drive the price of BTC far beyond its price in December 2017 and at least one trillion in market cap.

Arthur Hayes, BitMEX CEO predicted that BTC could reach $50,000 by the end of 2018, during the show Fast Money by CNBC on June 29: “We’re one positive regulatory decision away, maybe an ETF approved by the SEC to climbing through 20,000 and even the 50,000 by the end of the year.” 

Story 2: Thailand’s Central Bank Is Developing a Digital Currency Based on R3 Tech

Decrypted: The central bank Thailand is developing a country-owned cryptocurrency and has partnered with eight commercial banks, that are working jointly to develop a national digital currency.

The operating platform that will be used is R3, a centralized blockchain solution. New York City-based R3 has developed its own enterprise level distributed ledger platform, Corda, which will be used for the Thai bank’s digital currency.

The project has been codenamed “Inthanon”, after the highest mountain in the country. Its expected that the first phase of the project will be completed in the first quarter of 2019.

Our take: Central banks’ and their stance towards crypto-currencies is well documented. Banks make money from charging customers for transactions and digital currencies eliminate these revenues. So you can understand why banks oppose cryptocurrencies. However, even central banks are coming around and are starting to understand the advantages that a blockchain based currency can bring.

The central bank of Thailand is one of these banks. The BoT understands full well the impact technological changes have on financial services globally. The Inthanon project, is another step in the country’s crypto regulatory framework, that recently went into effect.

Many developments have taken place in the Thai crypto space, since the country decided to adopt a friendly regulation for cryptocurrencies.

In early August, the Bank of Thailand (BOT) gave the commercial banks the green light to invest in cryptocurrencies. Thailand’s central bank announced rules under which financial institutions, including commercial banks, and their subsidiaries can engage in cryptocurrency activities. They include securities, asset management, and insurance firms.

The Securities and Exchange Commission of Thailand (SEC) announced that it has legalized seven crypto exchanges, granting them a permit to operate legally in the country, while their applications are reviewed. Also, around 50 ICOs are interested in applying for a license.

After an uncertain start with a number of proposed taxes in the beginning of 2018, Thailand’s government has increasingly warmed to crypto. Thailand appears to be adopting a more open model, but one that is heavily regulated. Any company that wants to operate in the space must obtain approval before starting its activities. While Thailand may not be one of the most crypto-friendly countries in the world, cryptocurrencies are not banned as they are in China, it has created a possible scenario of how regulation could come into play in other countries.

Thailand is not the only Asian country looking to adopt its own crypto-currency. The Monetary Authority of Singapore and the Hong Kong Monetary Authority are reportedly developing similar projects.

The concept of a Central Bank Digital Currency continues to draw both flak and appreciation from authorities around the world. While the concept has been around for some time, few countries have moved in this direction, with only Sweden’s e-Krona and a yet unnamed Carribean CBDC being other noteworthy mentions.

In March 2018, the Bank of International Settlements (BIS) published a 34-page report on state-issued digital currencies, concluding that “a general purpose CBDC could give rise to higher instability of commercial bank deposit funding.”

The Thai national digital currency represents a milestone in the country’s positioning towards cryptocurrencies. From its codename, you can understand the significance of the project. With Inthanon the Bank of Thailand wants to establish, not only a new digital currency, but to transform the entire infrastructure of the Thai financial market.

Story 3: First Shariah-compliant crypto exchange set to launch in the UAE

Decrypted: ADAB Solutions is planning to launch the world’s first Shariah compliant cryptocurrency exchange. The project is named as the First Islamic Crypto Exchange (FICE). To make sure Shariah law is not violated, the exchange will utilize the Shariah Advisory Board (SAB), ensuring that FICE is operating under Shariah law at all times.

The cryptocurrency exchange will operate globally, targeting 22% of the world’s population that controls Islamic financial assets worth more than $3.8 trillion.

Adab Solutions will also be launching an Initial Coin Offering in September. Adab tokens will be essential to the FICE exchange and will be used to pay for commissions on the exchange.

Our take: One quarter of the inhabitants of the planet earth are Muslims. They are characterized by faith and a desire to follow the teachings of their faith. Before using new technologies, it is necessary to obtain Sharia permission. Everything new must pass through the filter of Scripture and Sharia.

Cryptocurrencies have long been a topic of debate among Islamic scholars, as some have questioned whether crypto is forbidden under Sharia law. In the Islamic faith, it’s believed that economic activity should be based on real physical assets (eg. gold), not speculation. Therefore, many Muslims don’t consider Bitcoin, Ethereum, and other cryptos to be compliant with Sharia law.

The First Islamic Crypto Exchange (FICE) believes that the new crypto exchange will solve the problem of halal (permissible) cryptocurrency transactions and provide an entry point into the crypto market for Muslims around the world.

To ensure compliance, the exchange intends to set up an in-house Shariah Advisory Board comprised of renowned Shariah experts from all parts of the world. The experts will be given the task of guiding the exchange according to the tenets of Islam. In line with the principles of Shariah, the First Islamic Crypto Exchange will only list projects that are deemed permissible and will not list tokens related to gambling, usury immoral services, production of alcoholic beverages and tobacco products, of financial pyramids.

Earlier this year, Bitcoin was recognized as permissible under Sharia law according to a report released by a Sharia compliance officer at Jakarta-based investment firm Blossom Finance. The author of the report, Muhammad Abu Bakar, argues that Bitcoin is Halal (permitted) for investors, since it is recognized as a legal currency in some countries and widely accepted for payment in others. But he also concludes with a warning, suggesting that traders should not purchase them for investment purposes.

Last month, Stellar, the seventh-largest cryptocurrency network, became the first distributed ledger technology to obtain Sharia certification for payments and asset tokenization.

Until now, governments in Saudi Arabia and the UAE did not officially ban cryptocurrencies, but they did issue warnings to their citizens about purchasing them.

UAE is one of the countries in the region which are taking big steps in the implementation of blockchain technology across various government departments. In 2018, the country’s is poised to roll out at least 20 blockchain projects. Emirate bank’s initiative to minimize frauds related to checks and vehicle management system planned by the transport authority of Dubai are some of the notable projects based on blockchain technology. Abu Dhabi, the capital of UAE, has also entered into a partnership with Ripple to trial cross-border payments using distributed ledger technology.

Now that Bitcoin and other cryptocurrencies may be recognized as Sharia compliant, it opens doors for further investment from this region coming to crypto. Places like the UAE and Saudi Arabia are home to some of the wealthiest investors in the world, who are seeking new investment vehicles. Bitcoin and other cryptocurrencies may be exactly what the are seeking.

Image Source

Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.