THE COIN STREET JOURNAL
Market News - June 14th, 2024
SEC INDICATES THAT ETHER ETFs SHOULD SEE FINAL APPROVAL SOON
Securities and Exchange Commission (SEC) Chair Gary Gensler indicated that the final approvals for ether (ETH) exchange-traded funds (ETFs) should be completed by the end of the summer. This was revealed during a budget hearing before the Senate Appropriations Committee, where Gensler explained that the registration details for these ETFs are currently being finalized at the staff level.
Gensler clarified that the process for approving these ETFs is moving smoothly. The initial approval phase has been completed, and now the final step involves handling the S-1 filings, which are necessary for the official listing of these funds. Once these filings are approved, the ether ETFs can be listed and traded on the market, similar to the previously approved bitcoin spot ETFs.
Despite the advancements, Gensler refrained from definitively classifying ether as a commodity or security. When asked directly about its status, he maintained the SEC’s ambiguous stance. In contrast, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam stated unequivocally that he considers ether a commodity.
The classification of digital assets is crucial for determining regulatory oversight. The SEC is responsible for securities, while the CFTC oversees commodities. Gensler has repeatedly emphasized that most digital assets should be regarded as securities, but he has avoided specifying which ones apart from those mentioned in SEC enforcement actions.
Gensler criticized the crypto industry for ignoring regulatory rules, suggesting that many digital assets remain unregistered and are violating securities laws. He argued that those categorized as securities have a legal obligation to disclose relevant information to the public, a requirement largely unmet by the industry.
Gensler, having chaired both the SEC and CFTC, expressed doubts about the CFTC’s readiness to regulate a disclosure-based system, which is the SEC’s specialty. He suggested that the CFTC lacks the necessary framework and experience for such regulatory oversight.
Behnam acknowledged that the CFTC does not possess all the required authorities to effectively oversee crypto markets. He highlighted that traditional regulatory tools like registration, custody, surveillance, and oversight are not fully available to the CFTC, which limits its ability to manage the evolving crypto landscape.
Behnam also addressed the agency’s recent efforts to ban contracts predicting election outcomes, which have been popular on platforms like PredictIt and Polymarket. He argued that commoditizing elections is contrary to existing laws and emphasized that the CFTC is actively working to prohibit such contracts.
Overall, both Gensler and Behnam underscored the need for clear regulatory frameworks and additional resources to effectively manage the growing and complex crypto market. While the approval of ether ETFs is a significant step forward, the broader regulatory landscape for digital assets remains in flux, with key issues around classification and oversight still unresolved.
RIOT PLATFORMS BUYOUT OFFER FOR BITFARMS SPARKS RESISTANCE
Riot Platforms’ $950 million buyout offer for Bitfarms has sparked significant resistance from Bitfarms’ stakeholders and a special committee, which deems the offer undervalued and not in shareholders’ best interests. The conflict escalated when Riot Platforms proposed the buyout based on Bitfarms’ one-month volume-weighted average share price as of May 24, 2024. Bitfarms stakeholders were particularly displeased with the prospect of relinquishing more than 15% of their stake in a corporate takeover.
In June, Riot Platforms purchased approximately six million Bitfarms common shares for $111 million, increasing its stake to 13.1%. Bitfarms interpreted this acquisition as an attempt to undermine the integrity of the acquisition process, accusing Riot Platforms of not aligning its interests with those of Bitfarms shareholders. The Bitfarms special committee expressed concerns that Riot’s actions were disruptive and aimed at pushing a low-ball bid.
Riot Platforms CEO Jason Les responded to these allegations, stating that Riot had attempted to engage constructively with the Bitfarms Board. Les claimed Riot had proposed adding at least two new independent directors to the Bitfarms Board but was met with a “Poison Pill” defense strategy by Bitfarms, which was seen as an attempt to thwart Riot’s buyout attempt. Les emphasized that Riot would continue to address corporate governance issues at Bitfarms and advocate for shareholders’ rights in deciding the company’s future.
Bitfarms’ special committee, comprised of independent directors, reviewed the unsolicited proposal and concluded that it significantly undervalued Bitfarms and was not in the shareholders’ best interest. Consequently, on June 10, Bitfarms adopted a shareholder rights plan to prevent an unsolicited takeover bid from Riot Platforms, reflecting its commitment to protecting shareholders from what it considered an undervalued offer.
Bitfarms accused Riot of attempting to “short circuit” the decision-making process by pushing its agenda through aggressive acquisition tactics. Despite Riot’s actions, Bitfarms maintained that its approach served the best interest of its shareholders. The mining company operates 12 Bitcoin mining facilities across Canada, the United States, Paraguay, and Argentina, and is dealing with internal challenges as well.
In May, Bitfarms’ former CEO Geoffrey Morphy stepped down after filing a lawsuit against the company. Nicolas Bonta has been acting as the interim president and CEO while the company searches for a permanent replacement. Riot’s CEO Les criticized Bonta, attributing Bitfarms’ poor corporate governance practices directly to him and calling for his removal from the board.
The clash between Riot Platforms and Bitfarms represents a broader struggle over corporate control and shareholder value in the highly competitive Bitcoin mining industry. Bitfarms’ strategic resistance to the takeover bid underscores the company’s resolve to maintain autonomy and ensure any acquisition proposal genuinely reflects the company’s market value.
Bitfarms’ stakeholders and special committee have made it clear that they will not easily cede control to Riot Platforms, especially under terms they consider unfavorable. This ongoing battle highlights the complexities and high stakes involved in mergers and acquisitions within the cryptocurrency mining sector.
As the conflict continues, both companies face significant challenges in navigating shareholder expectations, corporate governance, and strategic decision-making, with the outcome likely to impact the broader industry dynamics.
CARDANO SEES SIGNIFANCT INCREASE IN FUTURES TRADING
In the last 24 hours, Cardano (ADA) experienced a significant 29% increase in its futures trading volume, surpassing half a billion dollars, as reported by CoinGlass. This notable rise in ADA perpetual futures trading has overtaken the spot market. According to CoinMarketCap, Cardano’s spot trading volume on exchanges reached $466 million, bringing the total trading volume close to $1 billion.
The shift towards futures trading indicates a more speculative approach among traders, focusing on potential short-term gains rather than long-term investment. The modest activity in the spot market supports this trend, underscoring the preference for futures trading in the current market environment.
During this surge in ADA futures trading, the broader crypto market faced considerable turbulence. In the past 24 hours, nearly a quarter of a billion dollars worth of positions were liquidated. CoinGlass data reveals that long positions bore the brunt of these liquidations, with 66% occurring in long positions, primarily impacting the bulls.
Bitcoin and Ethereum led in the liquidation of overly optimistic traders’ deposits, while Cardano also saw significant liquidations, though to a lesser extent. Of the $400,000 liquidated positions in ADA, $350,000 (87.5%) were from long positions, emphasizing the speculative and high-risk nature of recent trading activities.
The surge in ADA derivatives trading volume amidst market chaos underscores its role in speculative trading strategies. Despite the challenges faced by the overall crypto market, the increased activity in Cardano futures highlights ongoing interest and engagement with ADA during uncertain times.
This trend suggests that traders are leveraging ADA futures to navigate market volatility and capitalize on short-term price movements. The substantial liquidations in long positions indicate that many traders were caught off guard by the market’s unpredictable swings.
As Cardano futures trading volume continues to rise, it reflects a broader trend in the crypto market where speculative trading is gaining prominence. The disparity between futures and spot trading volumes points to a strategic shift among traders aiming for quick profits.
Overall, the recent developments in ADA trading activities highlight the dynamic and speculative nature of the cryptocurrency market. Traders’ focus on futures over spot trading underscores the pursuit of short-term gains amidst ongoing market volatility and uncertainty.
TURKEY DRAFTING CRYPTOCURRENCY TAX REFORMS
Turkey is drafting significant tax reforms to boost revenue after last year’s devastating earthquakes. A key proposal is a 0.03% tax on cryptocurrency trading, aimed at the growing crypto market used as a hedge against the lira’s instability. President Erdogan’s party is also introducing regulations for crypto service providers to comply with global standards. These measures are part of broader efforts to replenish funds and repair Turkey’s finances, though they risk driving away investment if taxes rise too high.
The Turkish government is preparing to overhaul its tax system, marking the most significant change since taxes were raised post-1999 earthquake. The new legislation, to be debated in parliament, is expected to bring in an additional 226 billion liras ($7 billion), critical for economic recovery. The proposals include a tax on the booming cryptocurrency market, estimated to generate 3.7 billion liras annually. This move reflects Ankara’s recognition of digital currencies’ growing importance in Turkey’s financial system.
The proposed crypto tax comes amid persistent lira weakness and soaring inflation, which have driven many Turks to invest in digital assets. The government’s tax reforms aim to stabilize the economy but are likely to face heated debate in parliament. With these changes, Turkey signals its determination to get its fiscal house in order during economic turmoil.
President Erdogan’s party, with its parliamentary majority, has been pushing controversial new tax laws. They have already backtracked on a proposed tax on stock trading transactions after significant opposition from traders and investors. This decision shows the government’s sensitivity to market reactions, though they remain committed to taxing crypto transactions.
The administration argues that new crypto regulations are necessary to meet global anti-money laundering standards set by the Financial Action Task Force. This includes requiring crypto firms to get licensed and registered, aligning Turkey with international financial rules and norms. The government aims to tighten oversight of the crypto industry without disrupting the market excessively.
Despite the pullback on the stock trading tax, the crypto sector remains a primary target for new taxes and regulations. The government’s approach reflects a cautious strategy, balancing the need for increased revenue with the potential for market disruption. By focusing on the crypto market, they aim to tap into a lucrative revenue source while enhancing regulatory compliance.
These tax reforms are part of a broader strategy to address economic challenges and stabilize Turkey’s financial situation post-earthquakes. However, the potential impact on investment and market activity remains a concern. Lawmakers will need to carefully navigate these reforms to avoid adverse effects on the economy.
In summary, Turkey’s new tax proposals, particularly the crypto tax, highlight the government’s efforts to boost revenue and regulate the growing crypto market. While aiming to stabilize the economy and align with global standards, these measures risk driving away investment if not carefully implemented. The coming weeks will see heated parliamentary debates as the government seeks to balance fiscal recovery with market stability.