Author: Faith Yakubu

Settlement Details

Crypto lending platform Abra, officially known as Plutus Lending LLC, has settled with the U.S. Securities and Exchange Commission (SEC) following charges related to the sale of unregistered securities and operating as an unregistered investment company. The settlement includes civil penalties, the amount of which is yet to be determined by the court.

Allegations and Abra Earn Program

Abra Earn, a program offered by the startup, allowed retail investors to deposit their crypto assets in exchange for interest, with promotions describing returns as generated “auto-magically.” At its peak, the Abra Earn program managed approximately $600 million in assets, including nearly $500 million from U.S. investors. The SEC’s complaint alleges that Abra exercised discretion in investing consumer funds to deliver high yields and operated as an unregistered investment company for at least two years.

Regulatory Issues

The SEC’s complaint highlights that Abra held more than 40% of its total assets, excluding cash, in investment securities, including loans of crypto assets to institutional borrowers. In June 2023, Abra began to wind down the Abra Earn program and instructed U.S.-based customers to withdraw their assets.

Stacy Bogert, associate director of the SEC’s Division of Enforcement, stated that Abra sold nearly half a billion dollars of securities to U.S. investors without adhering to registration laws intended to provide investors with accurate information for informed decision-making.

Investor Impact and Company Status

Abra’s investors included notable entities such as Amex Ventures, Blockchain Capital, and the Stellar Development Foundation. At one time, the startup achieved a $500 million valuation. The SEC’s action follows a trend of similar crypto lenders, including BlockFi, Celsius, and Voyager, which filed for bankruptcy in 2022.

An Abra spokesperson clarified that no consumers were harmed by the settlement or the wind-down of Abra Earn. All assets, including accrued interest, were transferred to U.S. customers’ Abra Trade accounts in 2023. Abra continues to operate in the U.S. through Abra Capital Management, an SEC-registered investment adviser.

Conclusion

The settlement underscores the regulatory challenges facing crypto firms and highlights the importance of compliance with securities laws. Abra’s case follows a pattern of increasing scrutiny and enforcement actions within the cryptocurrency sector.

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Hong Kong’s spot Bitcoin exchange-traded funds (ETFs) have crossed a significant milestone, surpassing HKD$2 billion (approximately $256 million) in assets under management (AUM). This achievement highlights the growing interest in cryptocurrency investments within the region.

Initial Performance and Comparisons

Despite reaching this milestone, Hong Kong’s Bitcoin ETFs have had a slower start compared to their U.S. counterparts. Launched on April 30, the ETFs attracted $262 million in initial inflows, with $14 million coming from actual asset inflows during their first week. This is notably less than the billions that flowed into U.S. Bitcoin ETFs when they debuted in January.

Current Holdings and ETF Breakdown

Over the past week, the three Bitcoin ETFs in Hong Kong have seen a net inflow of approximately 247 BTC, bringing their total holdings to around 4,450 BTC. The AUM for these ETFs is currently HKD$2.1 billion (about $269 million). The breakdown of assets is as follows:

• ETFs managed by China Asset Management and Harvest Asset Management, in collaboration with digital asset trading platform OSL, hold over HKD$1.3 billion ($167 million).
• The third ETF, which operates independently of OSL, holds HKD$776 million ($99.5 million), representing about 42% of the market.

Market Challenges and Future Outlook

The slower uptake of Bitcoin ETFs in Hong Kong can be attributed to fewer options compared to the 11 offerings available in the U.S. market. Many Hong Kong investors may be cautious about diving into the cryptocurrency space, preferring to observe initially. This cautious approach presents challenges for Hong Kong as it aims to establish itself as a global cryptocurrency investment hub.

Innovative Features and Potential for Growth

Hong Kong’s Bitcoin ETFs offer unique features, such as the ability for in-kind creations, where actual cryptocurrencies are used to create new ETF shares, unlike the cash creation limited to American ETFs. This feature could enhance investor confidence and potentially increase participation over time.

Conclusion

Hong Kong’s Bitcoin ETFs have made significant strides but still face challenges in gaining market traction compared to their U.S. counterparts. However, innovative features and growing interest suggest the potential for future growth in the region’s cryptocurrency investment landscape.

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Bitcoin briefly touched $65,000 for the first time in about three weeks, driven by renewed interest in US exchange-traded funds (ETFs) and expectations of a Federal Reserve rate cut. The cryptocurrency surged as much as 1.2% to $65,030 on Monday before retreating slightly to $63,780 as of 9:19 a.m. in New York. Last week, Bitcoin saw a notable 7.4% increase, marking its largest weekly gain since mid-July.

Fed’s Influence on Bitcoin

Federal Reserve Chair Jerome Powell’s recent comments indicating potential rate cuts have provided a favorable backdrop for global markets, including cryptocurrencies. Powell’s signals have spurred significant activity in Bitcoin ETFs, with a net inflow of $252 million recorded on the day of his speech. This represents the highest inflow in over a month and reflects a seven-day streak of positive inflows into US spot Bitcoin ETFs.

Divergent Trends in Cryptocurrency ETFs

While Bitcoin ETFs are experiencing robust inflows, Ether-related products are facing challenges. Investment products holding Ether saw a $36 million net outflow last week, and a US spot-Ether ETF experienced a net outflow on August 23. Ether itself dropped by as much as 2.1% on Monday.

Market Reactions and Other Tokens

In addition to Bitcoin’s rise, Toncoin, associated with Telegram’s blockchain, saw losses following the detention of Telegram co-founder Pavel Durov in France. Other major cryptocurrencies remained relatively stable amid these developments.

Looking Ahead

Cici Lu McCalman, founder of blockchain adviser Venn Link Partners, anticipates that a rate cut in September could further boost Bitcoin, emphasizing that market attention remains fixed on the Fed’s next moves.

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Grayscale Introduces Avalanche Trust

Grayscale Investments, a leading cryptocurrency asset manager, has introduced the Grayscale Avalanche Trust, providing investors with exposure to the AVAX token. This token is crucial for transaction fees and securing the Avalanche blockchain, known for its high-speed and scalable capabilities as a competitor to Ethereum.

This launch is part of Grayscale’s broader expansion into decentralized finance and AI tokens. The firm has recently introduced several new products, including decentralized AI token funds. The Avalanche Trust announced on Thursday, marks a significant addition to Grayscale’s suite of investment options.

Growing Interest in Crypto Investment Products

Interest in publicly traded cryptocurrency products has surged since the Securities and Exchange Commission (SEC) approved the first Bitcoin (BTC) ETFs for U.S. trading in January. Grayscale, a prominent player in the industry and part of Digital Currency Group, has been a pioneer in bringing digital assets to traditional investors. Its Bitcoin Trust was among the first ETFs to receive approval, and it recently transitioned its Grayscale Ethereum Trust (ETHE) to an ETF structure.

Under the leadership of new CEO Peter Mintzberg, who took over from Goldman Sachs, Grayscale now offers over 20 crypto investment products. Recent additions include the Grayscale Bittensor Trust and Grayscale Sui Trust, focusing on the TAO and SUI tokens, respectively.

Rayhaneh Sharif-Askary, Grayscale’s head of product and research, highlighted Avalanche’s role in advancing real-world asset (RWA) tokenization through strategic partnerships and its multi-chain structure. At the time of writing, the AVAX token was trading at approximately $23.

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M^0’s New Partnership with Fireblocks

M^0, a protocol for minting stablecoins backed by U.S. Treasury bills, has announced its collaboration with Fireblocks to provide advanced cryptocurrency custody services. This integration ensures that institutions using Fireblocks for crypto key management can seamlessly operate with M^0’s stablecoin-minting and validation system.

M^0 aims to address the limitations of current stablecoin systems, where yield is either retained by token issuers or distributed to token holders. With Fireblocks’ key-management technology, M^0’s protocol enables users to transfer, update collateral balances, retrieve, burn tokens, and interact with validators to verify reserves more efficiently.

Revolutionizing Stablecoin Yield Management

M^0 Labs, the developer behind the protocol, highlights a unique feature of its business model—flexible revenue sharing. Unlike traditional models where issuers like Tether (NASDAQ) or Circle (USDC) either keep all the yield or pass it entirely to token holders, M^0 offers a more versatile approach. Users can choose to retain the full yield or distribute it based on custom criteria, thus promoting a more dynamic ecosystem.

The protocol, governed by the decentralized M^0 Foundation, allows for complex yield management and incentivization directly on-chain. M^0 has already achieved a collateralized float of approximately $30 million, with reserves validated on-chain every 30 hours. Note that the service is not available to users in the U.S.

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