February 22, 2024

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U.K. Law Commission Proposes Crypto and NFTs as Recognized Property

The Law Commission of England and Wales has initiated a consultation for draft legislation to classify cryptocurrencies and non-fungible tokens (NFTs) as property, following its report last year identifying that digital assets could hold property rights. This move aims to address the legal challenges posed by the unique nature of digital assets, which do not conform to traditional personal property categories. Responses to the consultation are requested by March 22, with the aim of proposing a final version of the bill to the government. Additionally, the Commission seeks input on its project regarding digital assets and electronic trade documents in private international law by May 16, to explore the compatibility of existing legal frameworks with the digitization and decentralization of assets. This effort reflects the U.K.'s broader initiative to modernize legal recognition of digital assets and facilitate the transition towards a more digitalized trade documentation process, as highlighted by the recent enactment of the Electronic Trade Document Act.

South Africa Eyes Regulatory Framework for Stablecoins and Asset Tokenization

South Africa's Intergovernmental Fintech Working Group is set to explore the potential uses and regulatory implications of stablecoins and the tokenization of real-world assets within the country's markets throughout this year. The group aims to draft a discussion paper by December to address the regulatory landscape for tokenization and blockchain-based financial systems. This initiative follows South Africa's recent regulatory steps, including the classification of cryptocurrencies as financial products and the commencement of registration for crypto asset service providers by the Financial Sector Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC). Furthermore, the Treasury Department plans to specifically recognize stablecoins as a unique category of crypto assets. Despite the upcoming presidential election on May 29, which poses a challenge to the ruling party's majority, significant changes in the government's stance on cryptocurrency policy are not anticipated.

KODA's Asset Management Surges Amidst Rising Crypto Institutional Interest

Korea Digital Asset (KODA), South Korea's leading institutional crypto custody service, reported a 248% increase in the value of assets under its management in the second half of 2023, reaching approximately 8 trillion Korean won ($6 billion). This growth coincided with a 38% rise in Bitcoin prices, partly fueled by the excitement surrounding the launch of the U.S. spot Bitcoin exchange-traded fund (ETF) in January. With the GMCI 30 Index also seeing a 42.5% increase, KODA's market dominance soared to 80%, serving around 50 corporate clients with over 200 wallets. This surge reflects a growing institutional interest in crypto, despite current South Korean regulations that limit direct crypto investments by institutions and corporations. The potential further increase in demand for crypto custody services is anticipated, especially with both ruling and opposition parties in South Korea advocating for the approval of local spot Bitcoin ETFs and the lifting of institutional investment restrictions in the upcoming general election. KODA's CEO, Cho Jin-seok, emphasized the irreversible trend toward the institutionalization of digital assets and KODA's pivotal role in this transformation within the Korean market.

Trading Desk Insights

Bitcoin experienced a notable surge yesterday following Nvidia's outstanding earnings report. Prices surged by 2%, rising from $51,000 to a peak of $52,000. Currently, we remain within a trading range spanning $50,600 to $53,000. A breakout beyond this range could catalyze further momentum. However, considering various technical indicators and recent flows, there's a possibility of a downside breakout being in play.

Reviewing BTC spot ETF flows, Wednesday marked the occurrence of net outflows totaling $35.7 million, marking the first instance of such outflows since January 25th. Concurrently, Grayscale outflows have been gradually increasing, reaching $199.3 million, the highest level since January 30th.

Nvidia's exceptional quarterly report propelled AI tokens even higher, with AGIX up by 30%, RNDR by 20%, and FET by 20%.

The minutes from the Fed reiterated their stance on maintaining higher rates for an extended period, given the stagnant progress in inflation. Additionally, the Fed emphasized the appropriateness of QT tapering soon in March. Overall, Fed officials exhibited caution regarding swift rate cuts during the last meeting.

Thursday's stock futures saw an uptick, driven by Nvidia's remarkable performance as the chip giant reported record revenue and issued optimistic guidance. Nvidia shares surged by over 12% in premarket trading, fueled by the company's fiscal fourth-quarter revenue of $22.10 billion, marking a 265% year-on-year increase, with net income skyrocketing by 769%, propelled by its flourishing artificial intelligence sector. Notably, Nvidia has ascended to become the fifth-largest company in the U.S. by market capitalization.

In other developments, Turkey concluded its eight-month hiking cycle, maintaining its key rate at 45%.

Lastly, Goldman's risk appetite index has reached its highest level since 2021.

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Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

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