In this week’s recap, we highlight several developments from the U.S. Securities and Exchange Commission (SEC), Circle’s plans for an initial public offering, and the effects of President Trump’s tariffs.
SEC to reconsider guidance on digital assets and securities laws
- Mark T. Uyeda, the acting SEC Chair, has directed agency staff to reassess previous statements regarding cryptocurrency investments and securities laws, in line with Executive Order 14192 focused on deregulation.
- This review encompasses previous guidance on identifying if digital assets qualify as securities under the Howey test—a controversial legal matter—as well as a 2021 advisory concerning Bitcoin (BTC) futures investments in mutual funds because of their speculative risks and volatility.
- Additional materials under scrutiny include a 2022 advisory on crypto-related risks and disclosures following significant bankruptcies, as well as risk alerts pertaining to digital asset trading from 2021 and 2020.
SEC determines ‘covered stablecoins’ fall outside its jurisdiction
The SEC has released guidance to clarify the application of federal securities laws to stablecoins, particularly focusing on “Covered Stablecoins.” These are defined as tokens pegged to the U.S. dollar that maintain a 1:1 value with USD and can be redeemed on a 1:1 basis for USD.
According to the SEC, Covered Stablecoins are supported by safe, liquid assets with reserves that match or surpass the redemption value of all circulating tokens. The guidance specifically excludes algorithmic, yield-bearing, and non-USD-pegged stablecoins. The two principal stablecoins that fit this category are Tether (USDT) and USDC (USDC).
Circle nervous about IPO
- Circle, the entity behind the USD Coin (USDC) stablecoin, has filed for an IPO with the SEC and intends to list its Class A common stock on the New York Stock Exchange under the ticker “CRCL.”
- Experts were consulted to analyze how this IPO could influence institutional adoption and the dynamics of the stablecoin market moving forward.
- While JPMorgan Chase & Co. and Citigroup Inc. are preparing to act as lead underwriters, it was reported that Circle is reconsidering its IPO timeline in light of economic uncertainties.
Uncertainty surrounding tariffs
- The decision to postpone the IPO mirrors wider market conditions. The markets reacted quickly to Trump’s tariff announcements, with U.S. small-cap stocks leading a significant equity sell-off and a downturn in crypto.
- The U.S. dollar weakened against key currencies, and the yield curve bull-flattened, indicating rising recession concerns. Analysts from Nansen suggest that markets have begun to reflect a stagflation scenario, expecting sluggish growth coupled with increasing inflationary pressures.
Crypto funding rates decline sharply
- Traders are exercising extreme caution within the crypto markets as Trump’s tariffs generate a pervasive bearish outlook.
- The intensifying trade conflict between the U.S. and its major trading partners is causing apprehension among traders. On April 4, funding rates on most centralized and decentralized exchanges fell below the 0.005% threshold, signaling significant bearish sentiment.
- Concurrently, liquidation rates have decreased by 42% over the last 24 hours. While this may initially appear positive, it likely indicates that traders are hedging and remaining on the sidelines. This trend aligns with a notable drop in trading volumes, which fell by 22.71% within 24 hours to $247.6 billion. Collectively, these metrics point to a significant decline in market activity.
CLS Global faces sanctions following sting operation
- A federal court in Boston has sentenced CLS Global on criminal charges related to the manipulation of trading volumes for the NexFundAI token. NexFundAI was initiated in March 2024 as part of a sting operation known as “Operation Token Mirrors” conducted by the FBI.