Is Wall Street Issuing a Legitimacy Signal for Crypto with EDX Markets?
It has been a busy year for the SEC. Operating in the legislative void, the watchdog agency has pursued an aggressive enforcement campaign against the entire US crypto market. Genesis Global Capital, Gemini Trust, Kraken, Bittrex, Coinbase, and Binance.US have all received the SEC’s attention for dealing with unregistered securities.
Even Paxos, the issuer of Binance-commissioned BUSD stablecoin, received a Wells Notice, an enforcement notification, for improper securities handling. Most recently, the Fed Chair Jerome Powell said on Wednesday’s House testimony that they “see payment stablecoins as a form of money.”
SEC’s FUD Creation
Without going into the technicalities of each case, it is indicative that the federal judge Amy Berman Jackson rejected the SEC’s motion to seize Binance.US assets. Furthermore, court proceedings show the agency attempted to obfuscate if the exchange mishandled customer assets.
Binance lawyers are now on the offensive, claiming that the “SEC’s press release also appears to be designed to introduce unwarranted confusion into the marketplace.” They also claim that the SEC “risks tainting the jury pool with misleading descriptions.”
The judge will now rule on the Binance/Binance.US/CZ motion to comply with “applicable rules of conduct.” If granted, this would prevent the agency from publicly commenting on the case, i.e., creating more FUD – fear, uncertainty, and doubt.
However, such an environment has already been created. Coinbase, as the top US crypto exchange, has had a proactive regulatory stance to the point of supplying government agencies with blockchain analytics tools. Moreover, BlackRock, previously hired by the Fed to manage lockdown fallout, also picked Coinbase for its institutional custody.
Yet, the SEC’s novel legal doctrine on securities still caught Coinbase in its legal net, to the point of seeking an offshore license in Bermuda. In the FUD aftermath, the US crypto landscape has been sufficiently subdued. This was hinted at by Dawn Fitzpatrick, CEO of Soros Fund Management, earlier in June.
“…right now I actually think it’s a huge opportunity for the incumbent financial firms to actually take the lead.”
Like clockwork, those incumbent financial firms indeed showed up.
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EDX Markets: Who’s Who of Wall Street
On Tuesday, EDX Markets went live after being announced in September 2022. The new crypto exchange is backed by the leading US market-maker, Citadel Securities, known for its prominent role in GameStop’s short squeeze.
Other EDX backers are equal heavyweights, from Fidelity Digital Assets, Virtu Financial, and Charles Schwab to Sequoia and Paradigm. Although a centralized exchange (CEX), EDX follows a non-custodial model that will likely be attractive to crypto investors in the post-FTX crash world.
In addition to its reputation from prestigious backers, EDX aims for competitive ‘retail-only’ quotes and high liquidity. Retail price competitiveness is poised to be boosted further with EDX Clearing as a centralized counterparty system for settling transactions by the end of the year.
Traders will have the pick of four cryptocurrencies, Bitcoin (BTC), Litecoin (LTC), Bitcoin Cash (BCH), and Ethereum (ETH), available for 24/7 trading. In a statement to Fortune, EDX CEO, Jamil Nazarali, was quite clear on the exchange’s mission:
“We deliberately built our business model in a way that avoids some of the problems that the other exchanges are facing right now,”
This is evident from EDX’s selection of digital assets, which have avoided being explicitly named as ‘crypto asset securities.’ The EDX experience is entirely intermediated, akin to high-end stock brokerages for risk-averse investors with deep pockets.
Wall Street Issuing Major Legitimacy Signal
Notwithstanding the purported Operation Chokepoint 2.0 and the #FireGary campaign, the TradFi move into the crypto market is a major bullish signal. It closely coincides with BlackRock’s Bitcoin ETF application, followed by BitWise, Invesco, and WisdomTree.
The hype surrounding a spot-traded ETF, inferring a buying pressure for ‘physical’ BTC instead of paper derivative, pushed Bitcoin over $30k within a week, now heading into $31k territory.
Simultaneously, both the IMF and the Federal Reserve also signal crypto legitimacy. In the same week, as the monetary arm of the US government, IMF stated that:
“While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run,”
And before Wednesday’s semi-annual House Financial Services Committee appearance, Jerome Powell, as Fed Chair, boosted the crypto market further with this statement:
“Crypto appears to have staying power as an asset class.”
Combined with the aforementioned statement on stablecoins as money, the establishment embraces digital assets. That’s because they are exceedingly unlikely to threaten the existing monetary system.
The tell is in the International Bank for Settlements (BIS) blueprint for the tokenization platform. Together with the IMF’s CBDC interoperability platform, the goal is to have a unified global ledger of money consisting of regional ledgers.
But the central banking system sets the conditions for the digital money flow. Conversely, both individuals and businesses will have to interface with it. And by doing so, crypto asset flows will enforce it, not detract from it.
Do you think Wall Street whales have already accumulated large sums of bitcoins? Let us know in the comments below.