Cryptocurrency roundup: Binance “ban” and a bitcoin ETF

It was an eventful week for cryptocurrencies, with the FCA “banning” crypto-exchange Binance, and the launch of a bitcoin ETF. Saloni Sardana rounds up the week in crypto.

The last week was busy for crypto markets with a regulatory crackdown by the FCA dominating headlines.

Here are some of the top stories that caught our eye.

The FCA “bans” Binance

Binance, the world’s largest cryptocurrency exchange, came under fire from the UK’s Financial Conduct Authority last week when it said the company is not authorised to carry out any regulated activity in the UK.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The move is the latest measure by a regulator aimed at suppressing digital currencies, which have been growing at breakneck speed.

The FCA’s latest action against Binance will force it to display a warning on its website – effective from 30 June – telling investors that it doesn’t have permission to operate in the UK.

The FCA doesn’t regulate cryptocurrencies themselves, but it does regulate derivatives – eg, futures contracts, contracts for difference (CFDs) and options – as well as crypto assets that it considers to be securities.

But in October last year, the FCA said it would ban the sale, marketing and distribution to all consumers of any derivatives (ie, CFDs, options and futures) and exchange-traded notes that reference unregulated transferable crypto-assets by firms acting in or from the UK.

The FCA said its decision was prompted by the high risks and extreme volatility posed by underlying assets to retail investors.

So the announcement enforces an existing ban and isn’t exactly new.

But the higher levels of due diligence may be positive for the space. “Investors see the crackdown as a sign that the crypto markets are maturing, and that the company will have to accelerate its process of becoming a regulated exchange, which will likely lead to increased trust among crypto traders,” says Naeem Aslam, chief market analyst at Avatrade.

Cathie Wood’s ARK Invest launches a new bitcoin ETF

Cathie Wood, the veteran fund manager behind ARK Invest, is launching a bitcoin ETF – the ARK 21Shares Bitcoin ETF – in partnership with Switzerland-based 21Shares.

The ARK 21Shares Bitcoin ETF’s objective is to “track the performance of bitcoin, as measured by the performance of the S&P Bitcoin Index”, says a filing with the Securities and Exchange Commission (SEC), the US regulator.

Until now, ARK has been piling into companies with heavy exposure to digital currencies, including the likes of Coinbase Global and Grayscale Bitcoin Trust. But launching a crypto ETF is big news even for a prominent crypto-bull like Wood.

The ARK ETF is still pending approval from the SEC, so the fund may not launch for some time yet. But it’s not the only one in the pipeline. As Bloomberg points out, 14 cryptocurrency ETFs are currently awaiting approval from the SEC.

How the SEC treats crypto ETFs may ultimately determine whether the FCA approves crypto ETFs. As it stands, they are currently banned in the UK.

Bitcoin billionaire dies leaving behind a fortune

Mircea Popescu, a bitcoin billionaire and blogger, is reported to have drowned off the coast of Costa Rica.

The billionaire is rumoured to have held more than $1bn in bitcoin. The crypto world is speculating on what happens to the fortune following Popescu’s death.

This is not exactly the first time large swathes of cryptocurrencies are locked following the death of its owner. In 2019, the death of Geald Cotten, the founder of Canada’s largest crypto exchange, also led to more than $135m worth cryptocurrencies being displaced as only Cotten knew the private keys to the wallet.

Popescu’s death is perhaps the latest reflection of the vulnerabilities in holding cryptocurrencies and the risks posed if details to a private key get lost.

Crypto markets update

Here’s what happened in the crypto market over the last seven days:

  • Bitcoin fell 1% to $33,189.
  • Ether rose 9% to $2,051
  • Dogecoin fell 3% to $0.24
  • Cardano fell 3% to $1.30
  • Binance coin fell 3% to $279

What investors need to watch out for next week

The price of ether

In July, the ether network is getting a makeover, effectively a hard fork update that aims to address the problem of high gas fees (transaction fees). Prices could remain volatile in the run up to the update.

Is altcoins’ bull run over?

Growth in altcoins – cryptocurrencies other than bitcoin – may have matured according to a metric called the Altcoin Season Index (ASI). It is worth keeping an eye on the index, which tracks the performance of the best performing 50 altcoins relative to bitcoin. It shows bitcoin is outperforming the cumulative price movement of the 50 altcoins, meaning “altcoin season” may be over.

Saloni Sardana

Saloni is a web writer for MoneyWeek focusing on personal finance and global financial markets. Her work has appeared in FTAdviser (part of the Financial Times),  Business Insider and City A.M, among other publications. She holds a masters in international journalism from City, University of London.

Follow her on Twitter at @sardana_saloni