Looking back - ETFs, USDC issuer eyes IPO, and Bitfinex tightens UK operations

DATA from CryptoCompare shows that the price of Bitcoin started the week trading slightly above the $44,000 mark, and quickly surged to the $48,000 mark before enduring a significant correction, to now trade at $42,500.

Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, started the week at around $2,200 before surging rapidly to $2,700. Ether then endured a slight correction and is now trading around $2,550.

Headlines in the cryptocurrency space this week were initially filled with anticipation a spot Bitcoin exchange-traded fund (ETF) was going to be approved by the US Securities and Exchange Commission (SEC).

That anticipation kept on growing as the potential issuers sent the SEC documents detailing their fees and responding to minor tweaks the regulator asked for. The anticipation led to a massive price surge when the SEC’s account on the microblogging platform X (formerly Twitter) posted saying that a spot Bitcoin ETF was finally approved.

The price of Bitcoin surged in response, but shortly after SEC Chair Gary Gensler noted that the SEC’s account had been hacked, and no ETF had yet been approved. The SEC’s account, when back under the regulator’s control, clarified what happened as well.

A day later, however, the SEC approved 11 spot Bitcoin ETFs, in a move that Gensler called the “most sustainable path forward”. The ETFs are issued by various major financial powerhouses, including Fidelity, Invesco, Grayscale, and BlackRock and are seen as a game-changer for Bitcoin as US investors, both institutional and retail, will have the opportunity to access the cryptocurrency directly through a regulated product.

A spot Bitcoin ETF allows investors to gain exposure to the digital asset, without having to manage their own private keys. The decision to approve them in the US marks a U-turn for the SEC, which resisted approving spot Bitcoin ETFs for a decade as it cited risks of fraud and manipulation in the crypto market.

On their first day of trading, spot Bitcoin ETFs saw $4.37 billion in total trading volume in a trading frenzy. According to CCData’s Institutional Primer on the impact of the first US spot Bitcoin ETFs, Grayscale accounted for nearly half of the volumes as outflows grew, while BlackRock’s and Fidelity’s funds were the primary beneficiaries. The launch of spot Bitcoin Etfs sparked a trading frenzy on the CME, which saw its BTC futures contracts traded hit $7.33 billion.

Despite the approval, Gensler noted that the SEC “did not approve or endorse Bitcoin,” and added investors “should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”

USDC issuer Circle eyes initial public offering

Circle Internet Financial, the issuer of the widely used USDC stablecoin, has recently taken steps to go public, having filed a confidential draft S-1 document with the SEC. The specifics, such as the number of shares to be offered and their pricing for the potential initial public offering (IPO), are yet to be determined.

USDC, which holds the position of the world’s second-largest stablecoin, has an impressive market capitalization of around $25 billion, trailing only Tether, which has a market capitalization of $95 billion. The revenue of USDC is derived from the yield produced by the cash and cash equivalents that back the stablecoin.

Meanwhile, cryptocurrency exchange Bitfinex started restricting services for some UK customers in a bid to comply with local regulations. The move impacts all individual UK residents who use the platform, including corporate clients who don't qualify for exemptions under the UK’s Financial Promotions Order.

The exchange is halting the verification process for new UK accounts, and from January 10 affected UK customers stopped being able to make new deposits, enter new contracts, or boost outstanding positions.

Over the week, Nasdaq-listed cryptocurrency exchange Nasdaq was revealed to be looking to acquire a company that holds a MiFID II as it looks to launch cryptocurrency-linked derivatives in Europe.

Honduras Special Economic Zone embraces Bitcoin as unit of account

Próspera, a special economic zone in Roatan, Honduras, has adopted Bitcoin as a unit of account less than two years after it was made legal tender in April 2022, enabling it to be utilised for valuing goods and services.

This initiative was spearheaded by Jorge Colindres, the interim manager and tax commissioner of the Próspera Zone for Employment and Economic Development (ZEDE). Colindres defended the move on social media, stating that it was intended to provide greater financial autonomy to individuals and businesses in the area.

The adoption of Bitcoin as a unit of account implies that BTC can be employed as a monetary unit to ascertain the market value of goods and services.