Portfolio Update – May 2023

Let’s start with the general news

• On 01/05/2023, Mr Charlie Munger warned about the trouble in the commercial property market. The 99-year-old investor told the Financial Times that U.S. banks are packed with “bad loans” that will be vulnerable as “bad times come” and property prices fall. “It’s not nearly as bad as it was in 2008,” he told the Financial Times in an interview. “But trouble happens to bank just like trouble happens everywhere else.”
• First Republic Bank got bailed out this time. The California Department of Financial Protection and Innovation said it had taken possession of the bank and appointed the Federal Deposit Insurance Corporation receiver of the bank. The FDIC accepted JPMorgan’s bid for the bank’s assets.
• On 02/05/2023, in an unexpected move, the Reserve Bank of Australia increased its cash rate by 25 basis points, signaling a resumption of its tightening cycle after pausing in the previous meeting. The new rate stands at 3.85%, which goes against market predictions, as economists polled by Reuters had anticipated a steady rate of 3.6% for the second consecutive meeting.
• Again, Treasury Janet Yellen once again warned the government that it might not be able to pay its debt by June 1, even after raising the recent debt ceiling. 
• President Biden also issues a statement that the taxpayers would not pay for the failure of the banks. However, the question is who would pay for this mess. There are only 2 ways to get the funding – through taxpayers or printing money, do the math you figure it out.
• More laid-offs – Morgan Stanley plans to cut 3,000 more jobs and IBM will stop hiring jobs that AI could do, which can come up to 7,800 positions.
• On 03/05/2023, US job market is loosening as employment openings hit nearly a two-year low in March, according to the Labor Department. Job vacancies fell to 9.59 million from 9.97 million in February, and layoffs and discharges increased to just over 1.8 million. This could potentially lessen pressure on inflation.
• On 04/05/2023, the Federal Reserve raised its benchmark borrowing rate by 0.25 percentage points, marking its 10th interest rate hike in a little over a year. The decision, which was widely anticipated by the market, was made by the Federal Open Market Committee in a unanimous vote. The benchmark rate affects the cost of overnight lending between banks and has an impact on consumer debt products such as mortgages, auto loans, and credit cards. The Federal Reserve also hinted that the current tightening cycle may be coming to an end. The current FED funding is 5%-5.25%.
• Lol, another bank just got shredded, and this time the name is PacWest Bancorp. Its shares tumbled 56% after FED raised the interest rate.
• On 05/05/2023, PacWest bank continued sliding down another 50% today and was halted.
• The European Central Bank raised its benchmark interest rate by 25 basis points, with the aim of controlling a rise in consumer prices. This brings the rate to levels that have not been seen since November 2008. The ECB stated that inflation remains high, and that this increase in the benchmark rate is necessary. As of May 10, the new rate will be 3.25%.
• On 06/05/2023, nonfarm payrolls increased by 253k in April according to the statistics, more than the Dow Jones estimate of 180,000. The market is more resilient than we thought, after all the interest rate rise.
• On 08/05/2023, Warren Buffett expressed caution towards the banking industry on Saturday, stating that Berkshire Hathaway (NYSE:BRKa) is wary of it due to inadequate communication from officials concerning government-insured deposits. He also highlighted the distorted incentives that arose from banking regulations. The U.S. banking sector is facing a crisis of confidence, resulting in the collapse of three mid-sized banks since March. Smaller banks have seen depositors withdraw their money due to fear, and there are demands for the Federal Deposit Insurance Corp (FDIC) to increase its deposit guarantee limit of $250,000.
• At the same time, JP Morgan wanted to ban short-selling in the banking sector. 
• O 10/05/2023, Following a crucial meeting with President Joe Biden on Tuesday, top congressional leaders emerged with little indication that they had made progress in resolving the impasse over the debt ceiling, which poses a looming threat of a default. With less than a month before the federal government runs out of money, officials plan to hold another meeting on Friday to address the issue. During the meeting with Biden, House Speaker Kevin McCarthy, R-Calif., Minority Leader Hakeem Jeffries, D-N.Y., Senate Majority Leader Chuck Schumer, D-N.Y., and Minority Leader Mitch McConnell were all in attendance.
• On the same day,
  According to its latest quarterly earnings report, Berkshire Hathaway, owned by Warren Buffett, sold off $13.30 billion in equities and increased holdings in cash and U.S. Treasuries during Q1. In addition, it spent $4.4 billion buying back its own stock and $2.9 billion on shares of other publicly traded companies. Due to the wide range of industries that Berkshire Hathaway invests in, its performance is considered a crucial indicator of the overall health of the U.S. economy. However, despite previously attributing the success of his company to the growth of the U.S. economy, the 92-year-old Buffett is now less optimistic, stating that most of their businesses will report lower earnings this year than last year, and that the “incredible period” for the U.S. economy is coming to an end.
• On 11/05/2023, The consumer price index, which tracks the cost of a wide range of goods and services, showed an increase of 0.4% in April, as predicted by Dow Jones. Although the annual rate of increase was 4.9%, which was slightly lower than the projected 5%, it was still higher than April 2021’s annual rate. This gives some hope that the cost of living may decrease later this year. Excluding the unstable food and energy categories, the core CPI increased by 0.4% monthly and 5.5% annually, which was as expected.
• SoftBank’s Vision Fund reported a record loss, despite the recent rally in tech stocks, adding to another difficult year for the investment unit. The Japanese firm’s Vision Fund segment posted a loss of ¥4.3tn ($32bn) for its fiscal year ending Mar. 31, compared to a loss of ¥2.55tn in the same period a year earlier. SoftBank reported an overall loss on investments at its Vision Funds of ¥5.28tn, up from ¥3.43tn in the previous year. While tech stocks have rebounded this year, they are still lower than they were a year ago, with the tech-heavy Nasdaq 100 index declining about 11% during SoftBank’s fiscal year.
• On 12/05/2023, “U.S. President Joe Biden piled pressure on Republican lawmakers on Wednesday to move quickly to raise the country’s $31.4 trillion debt ceiling or risk throwing the U.S. economy into a recession that would kill thousands of jobs.” – by Reuter.
• The Labor Department released a report on Thursday, showing that wholesale prices had risen less than anticipated in April. This provides some hope that inflation may be decreasing. The producer price index, which measures the prices of final demand goods and services, only rose 0.2% as opposed to the expected 0.3%. This is after a 0.4% decrease in March. The core PPI, which excludes food and energy, also rose 0.2%, as expected. The annual headline PPI increased only by 2.3%, a drop from 2.7% in March, and the lowest reading since January 2021.
• PacWest, a regional bank, saw its shares fall even further on Thursday due to reports of resumed deposit outflows in the first week of May. The company’s stock fell 22.7%, continuing its recent downward trend. Over the course of the year, PacWest’s shares have fallen nearly 80%. According to a securities filing, deposits at the bank dropped 9.5% during the week of May 5, with most of the outflows occurring after reports emerged that PacWest was exploring strategic options.
• On 13/05/2023, Linda Yaccarino, the global advertising chief at NBCUniversal, has resigned from her position to become the new CEO of Twitter, according to a tweet by Twitter owner Elon Musk on Friday. Musk confirmed that Yaccarino’s primary focus will be on business operations while he focuses on product design and new technology. Yaccarino is joining Twitter at a time when the social media platform is experiencing significant growth and looking to expand its advertising business.
• On 14/05/2023, According to the Congressional Budget Office’s updated guidance released on Friday, the government’s tax revenues and emergency measures after June 15 should provide enough financing to operate until the end of July. However, the CBO also reiterated that there is still uncertainty about the debt ceiling during the first few weeks of June. While mid-June tax revenues could alleviate some pressure on the Treasury, there is still a risk of default in the first few weeks of June, as per the government’s key forecaster. The report states that if the debt limit remains unchanged, there is a significant chance that the government may not be able to pay all of its obligations in the first two weeks of June.
• Data recently released by the Federal Reserve indicates that over 700 banks in the United States are at significant risk of safety and soundness due to large unrealized losses on their balance sheets. The Fed’s report, which includes self-reported data from February, states that over 700 banks have reported unrealized losses exceeding 50% of their capital. The report notes that the banks have been taking steps for several months to prevent further losses.
• On 15/05/2023, A recent report from the U.S. Congressional Budget Office (CBO) highlights a significant risk of the United States government no longer being able to meet its financial obligations as early as June. The report states that this risk arises from reaching the statutory debt limit of $31.4 trillion on January 19. If the debt limit remains unchanged, the CBO predicts that the government could face severe financial challenges as early as June. Additionally, the report indicates that the federal budget deficit for 2023 is estimated to be $1.5 trillion, which is $100 billion higher than the initial estimate provided in February.
• On 16/05/2023, George Soros’ family office, Soros Fund Management, sold its entire stake in Tesla during Q1, capitalizing on the stock’s rebound. They had gradually increased their holdings in Q2 2022 but decided to cash out and likely made significant gains. Soros’ fund also reduced its holdings in Rivian Automotive and First Horizon Bank amidst industry turmoil.
• Billionaire hedge fund manager Paul Tudor Jones believes that the Federal Reserve has completed its campaign of raising interest rates to combat inflation. He stated that the stock market could continue to move higher this year. Jones noted the decline in the consumer price index for 12 consecutive months and suggested that the Fed could declare victory. The central bank has raised rates 10 times since March 2022, with the latest target range at 5%-5.25%. The consumer price index has cooled significantly from its peak in June 2022, reaching 4.9% in April.
• On 17/05/2023, President Joe Biden and House Republicans had a lengthy meeting in the Oval Office to discuss the debt ceiling, with the participation of all four top congressional leaders. While they remained far apart, some progress was made. An agreement was reached to shift the negotiations from multilateral discussions to direct talks between a representative of House Speaker Kevin McCarthy and two White House aides representing President Biden. McCarthy acknowledged that reaching an agreement was not guaranteed but expressed optimism about the improved process.
• During JPMorgan Chase’s annual shareholder meeting, CEO Jamie Dimon expressed that it is unlikely for the bank to acquire another struggling lender following its government-brokered acquisition of First Republic. When asked about acquisitions, Dimon responded curtly with “unlikely.” He pointed out that the recent turmoil in mid-sized banks, triggered by the collapse of Silicon Valley Bank, highlights the fact that meeting regulatory requirements alone is not sufficient. Dimon acknowledged that many of the risks faced by these banks, such as interest rate risks, were visible but not adequately addressed.
• Consumer debt reached a new high of over $17 trillion in Q1 2023, despite a decline in home borrowing. The increase in total indebtedness was around $150 billion, or 0.9%, during that period. However, new mortgage originations were at their lowest level since Q2 2014, indicating a decrease in borrowing for home loans. This decline is attributed to rising interest rates after a period of rate cuts by the Federal Reserve.
• On 19/05/2023, Dallas Federal Reserve President Lorie Logan expressed her view on Thursday that the current economic data does not warrant skipping a rate increase at the central bank’s upcoming meeting in June. While acknowledging some improvements in curbing inflation and stabilizing the labor market, Logan emphasized that the Federal Reserve still needs to work towards achieving its goal of price stability. As a voting member of the Federal Open Market Committee this year, Logan stated that although future data could potentially justify skipping a meeting, the current conditions do not support such a decision. Her remarks were prepared for a speech to bankers in San Antonio.
• On 20/05/2023, Federal Reserve Chair Jerome Powell stated on Friday that stresses in the banking sector may have implications for interest rates in controlling inflation. Speaking at a monetary conference in Washington, D.C., Powell highlighted that the Fed’s measures to address issues at mid-sized banks have mitigated the worst-case scenarios. However, he acknowledged that the problems at Silicon Valley Bank and other institutions could still have repercussions for the broader economy. Powell noted that these developments could lead to tighter credit conditions and impact economic growth, hiring, and inflation. As a result, he suggested that the policy rate may not need to increase as much as previously anticipated to achieve the Fed’s goals, although the uncertainty surrounding this remains high.
• On 21/05/2023, The White House and Republican congressional negotiators held a second meeting on Friday to discuss raising the federal government’s debt ceiling. However, no progress was made, and no additional meeting has been scheduled. The talks have been characterized by acrimony, and with less than two weeks before June 1, the Treasury Department has warned of the potential for a default if the government is unable to pay its debts. The White House and House Republicans, who control the House of Representatives, have acknowledged “serious differences” and Republicans have insisted on sharp spending cuts before approving an increase in the borrowing limit.
• On 22/05/2023, with just 11 days remaining before a potential debt default, President Joe Biden and House Speaker Kevin McCarthy are set to meet at the White House on Monday to resume discussions on the debt ceiling, according to NBC News. McCarthy described his call with Biden on Sunday as “productive,” and staff members from both parties will continue negotiations later that day. A spokesperson from the White House confirmed that staff would restart talks on Sunday evening and that Biden and McCarthy would meet on Monday. The exact timing of the meeting is yet to be determined. Raising the debt ceiling is crucial to cover approved spending commitments and avoid default. While increasing the debt ceiling does not authorize new spending, House Republicans have insisted on future spending cuts as a condition for lifting the limit.
• On 23/05/2023, according to JPMorgan Chase CEO Jamie Dimon, commercial real estate poses a potential risk for lenders, with certain locations, office properties, and construction loans being of particular concern. During an investor conference, Dimon highlighted that while not every bank will be affected, there is a possibility of problems arising in this sector. Dimon’s remarks came in the context of three U.S. banks collapsing this year due to deposit runs, but he identified commercial real estate as a potential upcoming challenge for lenders.
• Minneapolis Federal Reserve President Neel Kashkari expressed openness to delaying another interest rate hike in the upcoming month. However, he cautioned against interpreting a pause as an indication that the tightening cycle is over. Kashkari emphasized the importance of gathering more information before making a decision. The markets currently assign an 83% probability of the Federal Open Market Committee holding off on a rate increase in June. As a voting member of the FOMC, Kashkari’s remarks highlight the ongoing deliberations regarding the timing of future rate hikes.
• House Speaker Kevin McCarthy described his meeting with President Joe Biden on raising the debt ceiling as “productive” and “professional,” although they did not reach a deal during the meeting. McCarthy noted that the tone of the discussion was better than previous ones. The meeting also provided valuable information to the negotiating teams working on the complex deal, offering more details that are necessary to formulate a package that can gain Congressional approval. GOP Representative Patrick McHenry, who is negotiating on behalf of McCarthy, expressed that the meeting helped the team understand the specific details required for a successful package.
• On 24/05/2023, U.K. inflation experienced a significant decline in April, primarily due to a retreat in energy prices and the fading impact of Russia’s invasion of Ukraine on the annual consumer price comparison. The Office for National Statistics reported that headline Consumer Price Index (CPI) inflation was 8.7% year-on-year, down from 10.1% in March. Although it exceeded the consensus estimate of 8.2% from a Reuters poll of economists, the decrease indicates a notable drop in inflation levels.
• On 25/05/2023, Fitch Ratings has placed the United States’ AAA long-term foreign-currency issuer default rating on negative watch due to concerns over political brinksmanship surrounding the debt ceiling. Fitch cited increased political partisanship and the failure to reach a solution to raise or suspend the debt limit despite the approaching deadline. Following Fitch’s announcement, futures tied to the Dow Jones Industrial Average briefly declined by approximately 100 points. Fitch is one of the major credit rating agencies.
• Bitcoin slid under the $27,000 level during the Asia trading day, which lead to a market-wide decline in major cryptocurrencies as traders in broader equity markets reacted to poor U.K. inflation figures. The hotter-than-expected U.K. core Consumer Prices Index (CPI) rate came in at 6.8% – the highest since 1992 – against an expected figure was 6.2%. This means gains in core prices, excluding food, energy, and tobacco, accelerated by 6.8% last month from 6.2% in March.
• On 26/05/2023, The German economy experienced a technical recession in the first quarter of this year, primarily driven by reduced household spending. Data released by the German statistics office on Thursday revealed a downward revision of the country’s gross domestic product (GDP) from zero to -0.3% for the first three months of the year. This follows a 0.5% contraction in the previous quarter of 2022. A technical recession is defined by two consecutive quarters of negative growth.
• Following its remarkable surge on Thursday, chipmaker Nvidia is poised to join the exclusive trillion-dollar club on Wall Street. The company’s shares soared by 26%, pushing its market value to nearly $1 trillion, around $950 billion according to FactSet. This significant increase occurred within a short period, as Nvidia’s market value stood at $755 billion at the close of Wednesday’s trading session. If it reaches the trillion-dollar milestone, Nvidia would become the fifth publicly traded U.S. company to achieve this feat, following Apple’s initiation of the club in 2018. Microsoft, Alphabet, and Amazon are the other companies currently holding this distinction.
• On 27/05/2023, Inflation remained high in April, potentially increasing the likelihood of prolonged higher interest rates, according to the personal consumption expenditures (PCE) price index, a key gauge closely monitored by the Federal Reserve. The PCE index, which accounts for changes in consumer behavior and measures a range of goods and services, rose by 0.4% in April excluding food and energy costs, surpassing the estimated 0.3% increase. On an annual basis, the index recorded a 4.7% increase, 0.1 percentage point higher than expected. When including food and energy, the headline PCE also rose by 0.4% in April and was up 4.4% compared to the same period last year, surpassing the 4.2% rate observed in March. These figures suggest that inflation pressures persist, potentially influencing the Federal Reserve’s decision on interest rates.
• On 28/05/2023, House Republicans have reached a tentative deal with the White House on raising the nation’s borrowing limit to prevent a potential default on U.S. sovereign debt. House Speaker Kevin McCarthy announced the agreement in principle, stating that although there is still work to be done, he believes it is a worthy agreement for the American people. McCarthy had discussions with President Joe Biden on the plan and expects to finalize the bill, consult with the White House, and have it ready for voting on Wednesday. The agreement aims to address the urgent issue of raising the borrowing limit and avoiding a catastrophic default on the nation’s debt.
• On 29/05/2023, President Joe Biden and House Speaker Kevin McCarthy have reached a final agreement on a deal to raise the nation’s debt ceiling just days before a potential government default. The two leaders spoke on Sunday evening and negotiators are working to draft the bill text for lawmakers to review. The goal is to secure enough votes from both Republicans and Democrats in the political middle to pass the measure in the coming week. The urgency stems from the looming June 5 deadline to prevent a damaging federal default. By seeking support from the center of the political spectrum, the leaders hope to gather enough backing to avert a crisis.
• On 30/05/2023, Youth unemployment in China has reached a record high, posing challenges for college graduates who are facing a difficult job market. Official data indicates that urban employment for individuals aged 16 to 24 in China reached a record rate of 20.4% in April, which is approximately four times higher than the overall unemployment rate. This comes at a time when millions more college students are expected to graduate this year, exacerbating the competition for jobs and leading some graduates to accept low-paying jobs or positions below their skill levels. The situation highlights the difficulties faced by young people in finding suitable employment opportunities in China’s evolving labor market.
• On 31/05/2023, according to the latest data from the Australian Bureau of Statistics (ABS), inflation in Australia rose to 6.8% on an annual basis, higher than the 6.3% reported in March. However, it remains below the peak of 8.4% recorded in December 2022. Michelle Marquardt, head of price statistics at the ABS, attributed the consistently high inflation in April to the soaring prices of fuel. She highlighted that the annual movement in April was significantly influenced by the changes in the fuel excise tax, which was halved in April 2022 and fully reversed in October 2022. The market reacted badly following this news, with ASX down by 1.64%.

• On 01/05/2023, people blamed crypto for the failure of Signature Bank. The United States Federal Deposit Insurance Corporation’s (FDIC) post-mortem assessment of Signature Bank (SBNY) revealed poor management and inadequate risk management practices as the root cause for its collapse. Now we are clear about what caused the collapse.
• On 02/05/2023, Binance CEO Changpeng “CZ” Zhao issued a warning to Tron founder Justin Sun regarding a deposit of 56.1 million TrueUSD (TUSD) to Binance. This is to prevent Justin Sun’s team from grabbing the Binance LaunchPool Sui Token. 
•  On 03/05/2023,  “U.S. President Joe Biden is looking to impose a punitive tax on crypto mining operations for the “harms they impose on society,” the White House’s Council of Economic Advisers (CEA) argued Tuesday in an online post.”, again attacking crypto with the reason “climate change”.

• The lawyers and consulting firms assisting cryptocurrency exchange FTX through its bankruptcy proceedings are set to cash in a total of $103 million over the first quarter. March saw five firms — Sullivan & Cromwell, Alvarez & Marshal, AlixPartners, Quinn Emmanuel Urquhart & Sullivan, and Landis Rath & Cobb — bill FTX a combined $36.4 million, according to several court filings between April 28 and May 2.

• On 05/05/2023, The U.S. Securities and Exchange Commission (SEC) has been ordered by a U.S. court to respond to cryptocurrency exchange Coinbase’s (COIN) complaint over how it applies securities laws to digital assets. The Third Circuit Court of Appeals said in a Wednesday filing that the SEC must file its response within 10 days. Coinbase may then file a response seven days thereafter.
• At the same time, Florida Governor and potential Republican presidential candidate, Ron DeSantis, has put forward a legislative proposal to ban the use of a national central bank digital currency (CBDC) as a medium of exchange in Florida. In a press release, DeSantis stated that the proposal aims to safeguard Florida consumers and businesses from the adoption of a “centralized digital dollar” that could restrict innovation and promote government-endorsed surveillance.
• “Nayib Bukele, president of El Salvador and a Bitcoin supporter, has recently signed a law that removes taxation on technological innovations in the country. The Innovation and Technology Manufacturing Incentive (ITMI) Act revealed a broad spectrum of sectors where complete tax removal applies.” – from Bitcoinist
• On 06/05/2023, the South Korean prosecutor leading the investigation into crypto entrepreneur Do Kwon said he believes extraditing him to his native country would be the best way to bring justice to victims of the TerraUSD cryptocurrency crash, which wiped out some $40 billion from digital currency markets – according to Wall Street Journal.
• Good news in the US – On May 3, the North Carolina House of Representatives unanimously passed a bill that aims to prevent payments to the state using a central bank digital currency (CBDC). The bill, known as House Bill 690, received 118 affirmative votes with no opposing votes and only two representatives absent. The legislation prohibits the use of CBDCs for any payments to the state and bars the Federal Reserve from using North Carolina as a potential testing ground for its own CBDC pilot.
• On 07/05/2023, a good news for the mining industry, Montana’s governor has officially signed crypto mining-friendly legislation that passed the state’s house and senate earlier this year, while similar laws remain on the precipice. The Montana bill, officially signed Tuesday, allows industrial and at-home miners to conduct their business free from government interference. It notes that such activities offer “positive economic value” for US individuals and companies.

• New York’s Attorney General announced on May 5th that they are taking more stringent measures to tackle the fraud and dysfunction that have become characteristic of the cryptocurrency industry. This move is expected to draw national attention to the multi-billion dollar crypto business. The bill is considered to be one of the most robust ones yet and aims to address fraud patterns that are prevalent in an industry that has minimal federal oversight, potentially causing customers to lose hundreds of millions of dollars annually.

• On 09/05/2023, Crypto traders are shelling out exorbitant amounts to gain early access to newly-issued meme coins, acquiring a significant portion of the coin’s supply. According to on-chain data, one trader spent 64 ETH in fees on Monday to purchase 84 ETH worth of FOUR, a newly-issued meme token on the Ethereum blockchain, likely inspired by the “4” meme on Crypto Twitter. This means that the trader spent $120,000 to acquire $156,000 worth of FOUR tokens. However, some people noticed that the trader was only the second entity to purchase FOUR and is now holding an unrealized profit of almost $240,000.

• A surprising new from Bittrex – they filed for Chapter 11 bankruptcy after SEC charges and also the announcement they would move out of the US. Bittrex estimated it had more than 100,000 creditors, between $500 million and $1 billion in assets, and between $500 million and $1 billion in liabilities as part of bankruptcy proceedings.

• On 10/05/2023, report shows that Paypal has increased their crypto holdings by 56% over the company’s previous quarter.

• Another big tech company joins the Web3 – Alibaba Cloud. They will partner with Avalanche’s blockchain to create a new launchpad Cloudverse.

• On 11/05/2023, Bitcoin NFTs, known as Bitcoin ordinals, are gaining popularity in the Web3 industry, and many marketplaces are now adopting and offering these digital assets. Binance, a cryptocurrency exchange, has announced that it will support Bitcoin ordinals on its NFT marketplace by the end of May. This move will extend Binance’s multichain NFT ecosystem to include the Bitcoin network. Earlier, Binance’s NFT market was integrated with other decentralized networks such as BNB Chain, Ethereum, and Polygon.
• On 12/05/2023, according to JPMorgan Chase CEO Jamie Dimon, as the U.S. approaches a potential default on its sovereign debt, the markets will experience panic. In a televised interview with Bloomberg, Dimon described an actual default as “potentially catastrophic” for the country. Nevertheless, he expects that the worst-case scenario will be averted since lawmakers will be compelled to react to the mounting concerns. Dimon warned that the markets would experience panic in the form of stock market volatility and turmoil in Treasuries as the deadline draws closer.
• An Argentinian coffee shop named CrypStation has seen a surge in the number of customers paying with cryptocurrencies over the past year. CrypStation, which has two branches in Buenos Aires, reported that over 10% of its customers paid their bills using crypto in the past 12 months. The majority of these crypto customers paid using Tether (USDT). The coffee shop reported that in May 2022, only 1.2% of its customers paid with cryptocurrencies. CrypStation is planning to expand overseas and open a branch in Chile. The coffee shop noted a constant upward trend in the number of customers paying with crypto for coffee and other goods.
• The United States Federal Reserve has developed FedNow, an instant payment system that facilitates near-instant payments between banks, available 24/7. Currently, U.S. residents are limited to making instant payments domestically through third-party apps like PayPal, Venmo, or crypto wallets. The Federal Reserve has announced that the new service will be launched in July. Metal Blockchain, a crypto network created by Metallicus, is based on a fork of Avalanche’s code and offers compliance-friendly options for DeFi developers. Metal’s developers stated in their May 11 announcement that the network is “built on the foundation of BSA [Bank Secrecy Act] Compliance,” implying that it has identity verification and Anti-Money Laundering features incorporated into its design.
• On 13/05/2023, Binance, a cryptocurrency exchange, has declared that it will stop operating in Canada, blaming the difficult regulatory climate. The Canadian Securities Administrators (CSA) issued new guidelines in February prohibiting crypto asset trading platforms from allowing customers to buy or deposit stablecoins without prior approval from the CSA. To gain permission, the cryptocurrency trading platform would have to undergo various due diligence checks by the CSA. Binance tweeted that it disagrees with the new regulations but is optimistic about collaborating with Canadian regulators to enhance a regulatory structure for cryptocurrencies.
• On 15/05/2023, the number of Bitcoin (BTC) wallet addresses holding one whole BTC or more crossed the one million mark, as reported by Glassnode, a blockchain data platform. This milestone indicates the growing presence of “wholecoiners” in the Bitcoin community. The increase in the number of wallet addresses holding one Bitcoin or more can be attributed to various factors. The significant decline in Bitcoin’s price, which exceeded 65% throughout the previous year, created favorable conditions for accumulation by investors. Notably, there were notable surges in the number of such addresses during the market crash in June and following the collapse of FTX and subsequent bankruptcy filing on November 11. These events presented opportunities for individuals to acquire or increase their holdings of one whole Bitcoin or more.
• Despite a warning from the International Monetary Fund (IMF), the Reserve Bank of Zimbabwe proceeded to sell 14 billion Zimbabwean dollars’ worth of gold-backed digital tokens, equivalent to approximately $39 million. The central bank announced on May 12 that it had received 135 applications, totaling 14.07 billion Zimbabwean dollars, for the purchase of the gold-backed cryptocurrency. The official exchange rate of the Zimbabwean dollar to the United States dollar is 362:1, according to XE.com, although street rates are much higher. Consequently, the value of the sold tokens amounts to roughly $38.9 million. These cryptocurrency tokens, which were introduced in April, are backed by 139.57 kilograms of gold. The sale of the tokens took place from May 8 to May 12.
• On 16/05/2023, the developers of Cardano (ADA), a rival blockchain platform to Ethereum (ETH), have reported rapid evolution and growth in Cardano’s decentralized finance (DeFi) ecosystem. According to Input Output Global (IOG), a Cardano developer, recent developments, particularly the introduction of the ADA-backed stablecoin Djed, have contributed to this expansion. Djed, which was created by the payments platform COTI Network (COTI), was launched earlier this year and has played a significant role in the growth of Cardano’s DeFi ecosystem.
• On 17/05/2023, a controversial regarding the Ledger wallet – The recent introduction of Ledger’s retrieval solution called Ledger Recover has received criticism from members of the crypto community, including Ledger wallet owners. The feature offers an additional layer of protection for private keys by dividing the user’s seed phrase into three encrypted fragments and distributing them to external entities. These fragments can be combined and decrypted to reconstruct the seed phrase if needed. Ledger emphasizes that Ledger Recover is an optional subscription and users can continue managing their recovery phrase themselves. However, this concept has sparked anger among many in the crypto community, including security specialists who express concerns about the involvement of external entities in the key reconstruction process. Mudit Gupta, the chief information security officer at Polygon Labs, strongly advised against enabling this feature, highlighting potential risks associated with the involvement of corporations in reconstructing the keys.
• On 18/05/2023, A former executive of Signature Bank has faced criticism for attempting to shift blame onto cryptocurrency for the bank’s collapse, while reportedly benefiting from significant bonuses and stock options. During a Senate Banking Committee hearing, Senator Cynthia Lummis confronted Scott Shay, the former chairman of the defunct bank, regarding his prepared statement on the reasons behind the bank’s failure. Shay acknowledged that the bank started accepting deposits from digital asset businesses in 2018 but reduced such deposits in 2022 due to industry volatility. He claimed that the bank was seized by regulators after another bank associated with the digital asset sector failed, resulting in a significant withdrawal of funds from Signature Bank. Senator Lummis challenged Shay’s deflection of blame onto digital asset depositors and regulators, suggesting that he had not taken personal responsibility for the bank’s collapse.
• Tether, the stablecoin issuer, revealed its new investment strategy, which involves regularly purchasing Bitcoin (BTC) for its stablecoin reserves using a portion of its profits. Starting this month, Tether plans to allocate up to approximately 15% of its realized investment profits (excluding unrealized price appreciation) to buy BTC. The purchased tokens will be added to Tether’s reserve surplus and stored in its own custody, without relying on third-party custodians. This move highlights Tether’s focus on Bitcoin as the largest cryptocurrency by market capitalization.
• France is offering a welcoming environment for crypto companies fleeing regulatory uncertainty in the United States. With a predictable regulatory framework, France already has numerous registered crypto companies and expects more to join as the EU’s crypto asset rules come into effect. American players looking for short-term benefits are encouraged to explore the French regime, with opportunities for European arrangements starting in 2025. The French authorities maintain positive relations with their U.S. counterparts.
• Not a great new for Binance Australia, AUD Fiat Deposit will be stopped due to the third-party decision. I will need to find a new place to continue buying Bitcoin now.
• The SEC has requested Grayscale Investments to withdraw its application for a Filecoin Trust, citing concerns that the underlying asset, Filecoin (FIL), could be considered a security. Grayscale had submitted a Form 10 application to launch an updated Filecoin Trust, which would require quarterly financial reporting. The SEC’s comment letter stated that FIL meets the definition of a security under federal law. Grayscale disagrees with this classification and plans to provide an explanation to the SEC supporting its viewpoint.
• On 19/05/2023, Westpac, one of Australia’s major banks, is implementing scam protection measures to address fraudulent activities associated with cryptocurrencies. These measures aim to minimize losses and mitigate potential risks. Investment scams account for a significant portion of customer losses related to scams, with a notable number involving direct transfers to cryptocurrency exchanges, which complicates tracking efforts. This initiative by Westpac coincides with Binance customers being informed that they can no longer utilize PayID for transferring Australian dollars to their accounts due to restrictions imposed by a third-party provider, impacting bank transfer withdrawals temporarily.
• Cuscal, the third-party payments provider for Binance Australia, has refrained from providing specific details about why it withdrew its support for the exchange. When questioned, Cuscal hinted at the impact of “scams and fraud” associated with “account fraud, ID takeover, and crypto activity.” Binance Australia recently announced the suspension of its Australian dollar fiat services following a decision made by the third-party payment service provider, which was later revealed to be Cuscal, a financial services company. While Cuscal declined to elaborate further on its decision regarding Binance Australia, its official statement did not explicitly mention Binance or crypto exchanges.
• Legislation in Texas, known as House Bill 1666, has moved one step closer to becoming law after passing a vote in the state Senate. The bill, which seeks to amend the Texan finance code, is now awaiting the governor’s signature. The proposed amendments would require digital asset providers with more than 500 customers and at least $10 million of customer funds to maintain reserves sufficient to meet all obligations to customers. They would also prohibit comingling customer funds with operational capital and restrict the use of customer funds for any transactions other than those requested by the customers themselves. The bill has undergone no significant changes since passing through the state’s House of Representatives earlier this year.
• On 21/05/2023, The ongoing legal battle between the Securities and Exchange Commission (SEC) and Ripple Labs has the potential to shape the future of cryptocurrency regulations. Ripple, established in 2012, aimed to offer faster and more affordable cross-border fund transfers through its XRP Ledger and native cryptocurrency, XRP. In December 2020, the SEC filed a lawsuit against Ripple, alleging that the sale of XRP constituted an unregistered securities offering. The SEC also named Ripple’s co-founders, Chris Larsen and Brad Garlinghouse, in the charges. Typically, entities facing SEC enforcement actions opt for settlements. However, Ripple has chosen to challenge the charges in court, incurring significant expenses in the process. The outcome of this case will likely have broader implications for the regulatory landscape surrounding cryptocurrencies.
• On 22/05/2023, An attacker has exploited the decentralized crypto mixer Tornado Cash by gaining complete control over its governance through a malicious proposal. The attack occurred on May 20, granting the attacker 1.2 million votes for their proposal. With the proposal receiving over 700,000 legitimate votes, the attacker now has total control over Tornado Cash’s governance, allowing them to withdraw locked votes, drain tokens, and render the router useless.
• On 24/05/2023, Following intense criticism from the crypto community, Ledger, a hardware wallet company, has announced the postponement of the launch of Ledger Recover. During a Twitter Spaces session attended by over 13,000 users, Ledger’s CEO Pascal Gauthier acknowledged the company’s miscommunication and apologized for any surprises caused. In response to the concerns raised, Ledger has committed to accelerating its plans to open-source more of its codebase. This will begin with the core components of its operating system, and Ledger Recover will not be released until this work is completed.
• Coinbase has submitted a reply in support of its petition for a writ of mandamus to the United States Securities and Exchange Commission (SEC). The petition seeks rulemaking from the SEC on digital assets. Coinbase’s chief legal officer, Paul Grewal, referred to the mandamus as a fitting solution given the unique circumstances. In July, Coinbase initially filed a petition to the SEC, urging the Commission to propose and adopt regulations for securities offered and traded through digital means. The petition included 50 questions for the SEC to consider while formulating these rules.
• On 26/05/2023, According to recently disclosed court filings, the cryptocurrency consortium Fahrenheit has been revealed as the winning bidder to acquire the insolvent crypto lender Celsius Network. The acquisition includes Celsius Network’s assets, which were valued at around $2 billion. The consortium, as per the court filings submitted on May 25, will take ownership of Celsius Network’s institutional loan portfolio, staked cryptocurrencies, mining unit, and other alternative investments. To finalize the agreement, the consortium is required to make a deposit of $10 million within three days.
• According to the European Systemic Risk Board (ESRB), the risks associated with the crypto industry pose a growing threat to the global economy, and tighter scrutiny of the digital assets market is needed. The ESRB, an oversight body within the European Central Bank, published a report on crypto assets and decentralized finance (DeFi) on May 25. The report highlights the increasing growth and interconnectedness of the volatile crypto industry with the traditional financial market. While the shocks experienced in the crypto market in 2022 did not have a significant impact on the traditional financial sector, the current risk monitoring system is deemed insufficient to identify and address potential risks in the future. The ESRB calls for enhanced scrutiny and monitoring of the crypto industry to mitigate potential systemic risks.
• On 27/05/2023, Stably, a venture-backed Fintech company based in Seattle, has announced the launch of its native stablecoin, Stably USD (#USD). Stably USD is a BRC20 token created using Bitcoin ordinal protocols introduced in January 2023 after the Taproot upgrade. The stablecoin is backed by the US dollar at a 1:1 ratio, meaning that each #USD token is fully collateralized by US dollars. Stably will hold the corresponding US dollar amount in a regulated custodian account, which will be monitored by a third-party stablecoin attestor to ensure full collateralization of the #USD tokens. This launch aims to provide a stable and reliable digital asset pegged to the value of the US dollar.
• On 28/05/2023, The Beijing Municipal Science and Technology Commission, also known as the Administrative Commission of Zhongguancun Science Park, has unveiled a white paper titled “Web3 Innovation and Development” to promote innovation and advance the Web3 industry. The white paper recognizes Web3 technology as a significant trend for future Internet industry development. The goal is to position Beijing as a leading global innovation hub for the digital economy. To support this initiative, the commission plans to allocate a minimum of 100 million yuan ($14 million) annually until 2025. This funding aims to foster the growth and development of the Web3 industry in Beijing, with the Zhongguancun area being recognized as China’s Silicon Valley.
• On 30/05/2023, Both attorney John Deaton and Ripple CTO David Schwartz have expressed the belief that the emails of former SEC director William Hinman will inevitably be unsealed, even if Ripple reaches a settlement with the SEC. According to them, the authority to keep the emails confidential does not rest with Ripple, as a judge has previously ruled that these emails are considered judicial documents. Deaton and Schwartz argue that the public’s right to access these documents outweighs the possibility of a settlement, emphasizing the importance of transparency in the ongoing legal proceedings.