Crypto Spotlight - Hong Kong’s Web3 fund and proposed stablecoin regulation, Coinbase Q4 earnings, and Google Cloud to be Tezos validator

Bitcoin's recent rally has slowed but its price remains buoyant, currently hovering between $24,000 - $25,000. However, the industry's flagship coin has failed so far to get over $25,000 in 2023, a strong resistance point in August 2022. 

 Bitcoin - 7-Day Price Movement (Source: CoinGecko)


According to some analysts, Bitcoin's ability to break above this level depends on the performance of tech companies, as it tends to move in sync with the tech-heavy Nasdaq index. Crypto traders are currently parking money in the stablecoin Tether (USDT), which is causing bitcoin's rally to pause. However, some market participants expect a potential breakout above the $25,000 resistance level to bring a sharp rally. 

Heightened regulatory risks have also dented market sentiment, and there is evidence of investors pulling money out of crypto funds. The industry claims the SEC has not issued clear rules for cryptocurrencies, but the agency has asserted that the law is straightforward. 

Gary Gensler, president of the SEC claims the agency has been building a shadow standard of implied standards with every enforcement action, application ruling, or policy decision it makes. The result? A flurry of enforcement actions, with the agency pursuing everything from token issuers and platforms to staking services, stablecoins, and celebrity promotions.

However, the industry continues to air it grievances that the SEC has not issued clear rules, leaving companies in a holding pattern, and that the agency needs to provide more specific guidance. At the heart of the matter is the question of whether most tokens in circulation are securities.

Gensler argues that other than bitcoin, where there is not a group of entrepreneurs in the middle, almost all tokens are securities. The outcome of the Ripple lawsuit is expected to have far-reaching implications for the industry, and recent SEC actions suggest that the agency is taking a hardline approach to crypto regulation. Here are all the day's headlines.

1 -The Hong Kong Monetary Authority (HKMA) is planning to introduce stablecoin legislation this year. The new law requires entities that actively market or operate in Hong Kong to obtain stablecoin licenses. Additionally, stablecoins must be fully backed by high-quality liquid assets and be redeemable to their referenced fiat currencies at par. Stablecoin issuers may also need to set up a locally incorporated branch.

However, the HKMA may look to welcome talent and maintain its position as an international financial center. The regulator will likely take a commercially friendly stance to "make it work for both the industry and also from the investor protection perspective," according to Michael Wong, partner at law firm Dechert.

2 - Hong Kong has allocated $6.4 million in its 2023-2024 budget to develop its Web3 ecosystem. The funds will be used for organizing international seminars, cross-sectoral business cooperation, and workshops for young people. A task force led by Hong Kong's financial secretary will be dedicated to the development of virtual assets and composed of members from policy bureaux, regulatory bodies, and industry. The city's chief executive announced the establishment of an investment company and a co-investment fund to attract non-local businesses to Hong Kong. The city aims to become a virtual asset hub and published proposed rules for virtual asset platforms.

3 - Coinbase, the crypto exchange, reported its Q4 earnings with net revenue of $605 million, beating analyst estimates, and an adjusted loss of $2.46 per share, which also exceeded expectations. However, its transaction volume fell 12% quarter-over-quarter to $322 million. Coinbase warned investors not to extrapolate the positive results from January 2023 since the market can quickly change. The company expects more crypto regulation in the coming year both in the U.S. and abroad, and it expects to benefit from this. Coinbase CEO Brian Armstrong said during the earnings call that policy is his top priority this year, and he has been spending a lot of time in Washington D.C.

4 - Google Cloud is set to become a validator on the Tezos network, allowing its corporate customers to deploy Tezos nodes to build Web3 applications. This move follows Google Cloud's previous integrations with Ethereum and Solana, indicating the growing interest of tech giants in the blockchain and Web3 space. The integration with Tezos also highlights Google's awareness of the specific security risks in the digital asset industry.

5 - Australian crypto gaming company Immutable is cutting 11% of its workforce to maximize its cash reserves, according to The Sydney Morning Herald. CEO James Ferguson announced the job cuts, offering affected staff 10 weeks' redundancy pay, laptops, counseling, coaching, and outplacement services, with healthcare extended to U.S. staff. Immutable earned $27 million but had $83 million in expenses in the past financial year. The company has $280 million in cash on its balance sheet, providing over four years of cash reserves at its current spending rate.