Blockchain
Top News, Key Updates and Market Analysis
This analysis report, backed by quality data, covers the major developments the Web3, Blockchain, and Crypto sector has experienced this week.
1. Breaking News This Week
- Ryan Salame Forfeits Bahamas Property in FTX Plea Deal
Former FTX Digital Markets co-chief executive Ryan Salame transfers his multimillion-dollar Bahamas property to settle a plea agreement. This follows his guilty plea on criminal charges, with $5.6 million in restitution owed.
- Dutch Police Arrest Suspect Linked to ZKasino Crypto Scam
Dutch law enforcement apprehended a man tied to fraudulent activities at ZKasino, an internet gaming platform. The operation seized assets worth 11.4 million euros, including cryptocurrency, real estate, and luxury vehicles.
- Crypto User Loses $68 Million to Clever Wallet Hack
A once-wealthy Ethereum user lost $68 million in Bitcoin after hackers tricked him into sending funds to a contaminated wallet. His holdings plummeted, leaving him with just $1.6 million in cryptocurrency assets.
- DOJ Investigates Block for Transactions with Sanctioned Countries
U.S. prosecutors are investigating Block, co-founded by Twitter’s Jack Dorsey, for processing transactions linked to sanctioned countries and possibly people associated with terrorist activities. The investigation raises significant compliance concerns.
- Robinhood Connect is Now Available on the Uniswap Mobile App
Robinhood announced its crypto Connect feature is now on the Uniswap mobile app. Eligible users can earn $10 in the USD Coin stablecoin by purchasing an equivalent amount of crypto using Robinhood Connect within Uniswap.
- Coinbase Integrates Lightning Network for Faster Bitcoin Payments
Coinbase added support for the Lightning Network to reduce Bitcoin transaction costs. This integration makes sending Bitcoin up to 20 times cheaper compared to traditional credit card transactions, with significant cost savings for users.
- Roger Ver Arrested for Tax Evasion by DOJ in Spain
Roger Ver, a prominent Bitcoin investor, has been arrested by the U.S. Department of Justice in Spain for allegedly evading up to $50 million in taxes. The indictment was unsealed, highlighting serious tax compliance issues.
- Uniswap’s Share of Layer 2 Trading Volume Reaches 37%
Uniswap, a popular decentralised exchange on Ethereum, now accounts for 37% of the total trading volume on Layer 2 networks. This significant growth underscores the increasing popularity of decentralised finance (DeFi) platforms.
- Ripple Partners with HashKey Group to Expand in Japan
Ripple announced a partnership with HashKey Group to introduce XRP Ledger enterprise solutions to the Japanese market. This joint venture aims to deploy supply chain finance solutions through HashKey DX, expanding Ripple’s reach in Asia.
- Bitcoin Miners Feel the Pinch of the Latest Halving Event
Bitcoin miners face lower revenues following the recent halving, reaching levels not seen since early 2023. The tighter profit margins raise questions about the industry’s sustainability and potential impacts on Bitcoin’s market price.
- dWallet Network Integrates with EVM-Compatible Blockchain Monad
dWallet Network, an infrastructure for programmable native Bitcoin, integrates with the EVM-compatible Layer 1 blockchain, Monand. This collaboration aims to enhance Monad’s multi-chain capabilities, providing more flexibility for developers.
- Aethir Partners with Magic Eden to Boost Web 3.0 Gaming
Aethir, a GPU cloud computing platform, collaborates with NFT giant Magic Eden to promote Web 3.0 gaming. The partnership offers access to Aethir’s GPU services and promotes Magic Eden as the primary NFT platform for Aethir’s gaming partners.
- Hong Kong Launches Spot Bitcoin and Ethereum ETFs
Hong Kong Stock Exchange introduced spot Bitcoin and Ethereum exchange-traded funds, marking a significant step in mainstream crypto adoption. The new ETFs offer investors direct exposure to these cryptocurrencies, reflecting growing interest in the asset class.
- Australia Readies Spot Bitcoin ETFs for ASX Launch by 2024
Australia’s Securities Exchange is expected to greenlight spot Bitcoin ETFs by the end of 2024. At least two organisations have submitted applications, indicating growing interest in expanding crypto investment opportunities in Australia.
- Tether Invests $200M in Brain-Computer Interface Tech
Tether has invested $200 million in Blackrock Neurotech, a brain-computer interface technology platform, becoming its majority stakeholder. The investment signifies Tether’s focus on merging human capabilities with technology in innovative ways.
2. Blockchain Performance
In this section, we will analyse two factors primarily: the top-performing blockchains based solely on their 7-day change and the top performers among the top five blockchains with the highest TVL.
2.1. Top Blockchain Performers by 7-Day Change
This week’s top blockchain performers, based on their 7-day change, are Core, ZetaChain, StarkNet, Scroll and Filecoin.
Blockchain | 7-Day Change (in %) | TVL |
Core | +154.8% | $15,969,972 |
ZetaChain | +20.6% | $4,400,626 |
StarkNet | +19.9% | $255,441,690 |
Scroll | +11.1% | $82,379,674 |
Filecoin | +7.2% | $55,120,910 |
This week, Core emerges as the top blockchain in terms of 7-day change. Core registers a 7-day change of +154.8%. ZetaChain and Starknet follow with +20.6% and +19.9%, respectively. Scroll records a change of +11.1% and Filecoin +7.2%.
In the previous week, Chiliz, which recorded a change of +182.0%, was the top blockchain in terms of 7-day change. Among those blockchains, found place in the top five chains last week, only Scroll and Filecoin retain their position among the top five list this week.
2.2. Top Performers: 7-Day Change in Top 5 Blockchains with Highest TVL
Ethereum, TRON, BNB Smart Chain, Solana, and Arbitrum One are the top five blockchains in the market on the basis of TVL and market dominance. Let’s see how the top five blockchains have performed this week, using 7-day TVL change.
The data shows no significant change in the dominance scenario this week, in comparison with the previous week.
Blockchain | Dominance (in %) | 7d Change (in %) | TVL |
Ethereum | 63.26% | +0.8% | $55,066,346,332 |
TRON | 9.57% | -1.4% | $8,332,611,660 |
BNB Smart Chain | 6.18% | +0.1% | $5,383,238,003 |
Solana | 4.54% | +4.5% | $3,949,608,116 |
Arbitrum One | 3.03% | -0.8% | $2,640,597,147 |
Others | 13.42% |
Among the top five blockchains with the highest TVL, Solana emerges as the best performer this week with +4.5% 7-day change. Ethereum follows with +0.8%. BNB Smart Chain also records a positive change of +0.1%. Conversely, TRON, with -1.4% remains as the worst performer. Arbitrum One follows with -0.8%.
Last week, Ethereum, with +7.3%, was the best, and BNB Smart Chain, with -11.2%, was the worst. Solana’s 7-day change was -2.2%.
Also Check Out: Blockchain Report & Market Insights for April 2024: What You Should Know
3. Crypto Market Analysis
The crypto 7-day price change and dominance analysis and top gains and losers analysis are the two prime areas of the crypto market analysis.
3.1. Crypto 7-D Price Change and Dominance Analysis
Bitcoin, Ethereum, Tether, BNB, and Solana are the top cryptocurrencies as per the market cap and dominance indices. Let’s analyse their seven-day price change.
Cryptocurrency | 7-D Change (in %) | Dominance Percentage | Price | Market Cap |
Bitcoin | +0.1% | 50.6% | $63,111.74 | $1,242,908,975,424 |
Ethereum | -0.2% | 15.23% | $3,118.30 | $375,321,800,809 |
Tether | +0.2% | 4.52% | $1.00 | $111,424,676,804 |
BNB | -1.5% | 3.69% | $585.93 | $90,202,182,862 |
Solana | +6.5% | 2.62% | $154.34 | $65,098,302,498 |
Others | 23.34% |
Among the top five cryptocurrencies with the highest market cap, Solana shows the biggest 7-day change. It displays a 7-day change of +6.5%. Tether and Bitcoin follow with +0.2% and +0.1%. Meanwhile, BNB and Ethererum mark negative changes. The former registers a change of -1.5% and the latter -0.2%.
In the previous week, BNB, with +6.7%, was the best, and Solana, with -4.2%, the worst.
3.2. Top Gainers & Losers of the Week in Crypto Market
Here is the list of top gainers and top losers of the week in the cryptocurrency market. The analysis is made using the 7-day Gain and 7-day Lose indices.
3.2.1. Top Gainers of the Week in Crypto
Cryptocurrency | 7-Day Gain | Price |
Pepe | +22.61% | $0.000008731 |
dogwifhat | +22.14% | $3.28 |
Bonk | +17.48% | $0.00002836 |
FLOKI | +11.24% | $0.0001945 |
Worldcoin | +9.11% | $5.09 |
Pepe, dogwifhat, Bonk, FLOKI and Worldcoin are the top gainers of the week in the cryptocurrency market. Pepe shows a gain of +22.61%. Dogwifhat and Bonk follow with +22.14% and +17.48%. FLOKI marks a gain of +11.24%, and Worldcoin +9.11%.
The data indicates that there exists a trend favourable to Memecoin. Pepe, Dogwifhat and FLOKI are prominent memecoins. Last week also, a similar trend was visible, as Bonk, with +57.15%, and FLOKI, with +20.62%, found place in the top five gainers list.
3.2.2. Top Losers of the Week in Crypto
Cryptocurrency | 7-Day Loss | Price |
Helium | -29.59% | $5.32 |
Sui | -6.77% | $1.09 |
Ondo | -6.57% | $0.8174 |
Polkadot | -6.11% | $7.17 |
Beam | -5.44% | $0.02478 |
Helium, Sui, Ondo, Polkadot and Beam are the top losers of the week in the cryptocurrency market. Helium demonstrates a loss of -29.59%, and Sui exhibits a loss of -6.77%. Ondo, Polkadot and Beam follow with -6.57%, -6.11% and -5.44%, respectively.
Sui was among the top losers list last week also, with a loss of -12.99%.
3.3. Stablecoin Weekly Analysis
Tether, USDC, DAI, First Digital USD, and Ethena USDe are the top stablecoins in the market in terms of market capitalization. Let’s analyse their weekly performance using seven-day market capitalisation, market dominance and trading volume indices.
Stablecoins | Market Dominance (7d) [in %] | Market Capitalisation (7d) | Trading Volume (7d) | Market Capitalisation |
Tether | 70.59% | $110,688,767,951 | $48,469,081,256 | $111,386,755,324 |
USDC | 21.20% | $33,242,855,124 | $7,940,761,464 | $33,612,955,658 |
Dai | 3.40% | $5,336,560,680 | $699,215,253 | $5,342,236,832 |
First Digital USD | 2.46% | $3,856,684,773 | $6,968,393,815 | $3,871,335,998 |
Ethena USDe | 1.46% | $2,291,832,770 | $64,348,596 | $2,297,475,051 |
Others | 0.89% |
This week also, Tether dominates the market with 70.59%. USDC follows with 21.20%. Notably, the data shows no significant change in dominance in the top stablecoins, in comparison with the previous week. Dai marks a dominance of 3.40%. First Digital USD and Ethena USDe record 2.46% and 1.46% dominance.
3.3.1. Stablecoin Weekly Price Analysis
Let’s analyze the weekly performance of the top stablecoins further using the seven-day price change index.
Stablecoins | 7-Day Price Change (in %) | Price |
Tether | +0.2% | $1.00 |
USDC | +0.1% | $1.00 |
Dai | -0.0% | $0.994 |
First Digital USD | +0.4% | $1.00 |
Ethena USDe | +0.2% | $1.00 |
Among the top stablecoins with the highest market cap, First Digital USD registers a positive 7-day price change of +0.4%. Dai records -0.0% change. Tether and Ethena USDe, both, mark a change of +0.2%. USDC displays a change of +0.1%.
In the previous week, the two extremes were Dai and First Digital USD. Dai showed a change of +0.2%, and First Digital USD a change of -0.2. Ethena USDe was -0.0%.
Read Also: Stablecoin April 2024 Report: An In-Depth Performance Analysis
4. Bitcoin ETF Weekly Analysis
Bitcoin Futures ETFs and Bitcoin Spot ETFs should be analysed separately, in order to get the right picture of the Bitcoin ETF market, as they represent two different segments. Let’s start!
4.1. Bitcoin Futures ETF Weekly Analysis
ProShares (BITO), VanEck (XBTF), Valkyrie (BTF), Global X (BITS), and Ark/21 Shares (ARKA) are the top Bitcoin Future ETFs, as per the Asset Under Management index. Let’s use the price change percentage index to analyse these ETFs.
Bitcoin Futures ETFs | Price Change (Gain/Loss) [in %] | Asset Under Management (in Million) | Price |
BITO | +4.52% | $598.78M | $25.22 |
XBTF | +0.33% | $42.41M | $39.22 |
BTF | +3.82% | $38.20M | $18.22 |
BITS | +2.35% | $26.10M | $61.77 |
ARKA | +4.72% | $8.01M | $59.31 |
Among the top five Bitcoin Futures ETFs with the highest Asset Under Management, ARKA showcases the highest positive price change this week, with +4.72%. BITO follows with +4.52%. BTF and BITS record +3.82% and +2.35% price change. XBTF marks the lowest change of +0.33%.
In the previous week, only XBTF showed a positive change. It reported a change of 0.33%. The highest negative change of -1.84% was recorded by BITO.
4.2. Bitcoin Spot ETF Weekly Analysis
Grayscale (GBTC), Blackrock (IBIT), Fidelity (FBTC), Ark/21 Shares (ARKB), and Bitwise (BITB) are the top Bitcoin Spot ETFs, as per the Asset Under Management index. Let’s analyse them using the price change index.
Bitcoin Spot ETFs | Price Change (Gain/Loss) [in %] | Asset Under Management (in Billion) | Price |
GBTC | +4.63% | $24.33B | $55.31 |
IBIT | +4.73% | $17.24B | $35.40 |
FBTC | +4.72% | $9.90B | $54.38 |
ARKB | +4.65% | $2.85B | $62.14 |
BITB | +4.73% | $2.16B | $33.89 |
Among the top five Bitcoin Spot ETFs with the highest AUM, IBIT and BITB, both, report the highest price change of +4.73. FBTC closely follows with +4.72% price change. ARKB registers a change of +4.65% and GBTC a change of +4.63%.
In the previous week, all the four Bitcoin spot ETFs demonstrated negative changes.
What the data indicates is that there exists a trend supporting the Bitcoin ETFs. Interestingly, all the top ETFs, both Spot and Futures, mark positive changes this week.
This Might Interest You: Should You Invest in Bitcoin ETFs? Detailed Monthly Review and Analysis for April 2024
5. DeFi Market Weekly Status Analysis
Lido, EigenLayer, AAVE, Maker, and JustLend are the five top DeFi protocols on the basis of TVL. Let’s analyse its weekly performance using the 7d Change index.
DeFi Protocols | 7d Change (in Total Value Locked) [in %] | TVL |
Lido | +0.01% | $29.265B |
EigenLayer | +1.08% | $15.492B |
AAVE | +0.42% | $10.59B |
Maker | +0.95% | $8.174B |
JustLend | +0.17% | $6.062B |
Among the top five DeFi protocols with the highest TVL, EigenLayer shows the highest 7-day change in TVL of +1.08%. Maker follows with +0.95%. AAVE marks a change of +0.42%. JustLend and Lido record the lowest changes of +0.17 and +0.01%.
In the previous week, the highest change was recorded by EigenLayer, like this time, but the change reported was as high as +16.20%. The lowest was reported by JustLend, which recorded -2.77% change.
6. NFT Marketplace: A Basic Weekly Analysis
Blur, Blur Aggregator, Cryptopunks, Gem and X2Y2 are the top NFT marketplaces on the basis of market share. Let’s analyse them using the Volume Change (change of last 7d volume over the previous 7d volume) index.
In comparison with the previous week, Blur Aggregator’ market share registers a slight increase this week; it has risen from 19.31% to 24.04%. Superrare, with 8.85%, and OpenSea, with 1.47% market share, though were prominent members of the top five list last week, has failed to enter this week’s list. Gem and X2Y2 replace Superrare and Opensea in the new list.
NFT Marketplaces | Volume Change [Last 7 Day over the Previous 7 Day Volume] | Market Share | 7-day Rolling Volume | 7-day Rolling Trades |
Blur | +17.82% | 69.55% | 16999.36 | 25188 |
Blur Aggregator | -10.43% | 25.04% | 7322.82 | 12106 |
Cryptopunks | -73.99% | 2.99% | 1315.65 | 26 |
Gem | -31.44% | 0.60% | 273.12 | 1492 |
X2Y2 | -59.07% | 0.42% | 227.05 | 218 |
Others | 1.40% |
Among the top five NFT marketplaces with the highest market share, Blur displays the highest positive volume change of +17.82%. All the others show negative volume change. Among those showing negative changes, Cryptopunks records the most extreme value of -73.99%. X2Y2 follows with -59.07%. Gem and Blur Aggregator record -31.44% and -10.43% change, respectively.
6.1. Top NFT Collectible Sales this Week
CryptoPunks #7846, CryptoPunks #1568, Uncategorised Ordinals #3beb59221, Azuki #308, and CryptoPunks #9842 are the top NFT collectable sales reported this week in the NFT market landscape.
NFT Collectibles | Price (in USD) |
CryptoPunks #7846 | $557,802.94 |
CryptoPunks #1568 | $332,610.84 |
Uncategorised Ordinals #3beb59221 | $256,550.47 |
Azuki #308 | $214,830.30 |
CryptoPunks #9842 | $210,869.27 |
CryptoPunks #7846 is sold for $557,802.94 – the highest amount received this week. CryptoPunks #1568 follows with $332,610.84. Uncategorised Ordinals #3beb59221 gains $256,550.47. Azuki #308 and CryptoPunks #9842 receive $214,830.30 and $210,869.27 respectively.
7. Web3 Weekly Funding Analysis
7.1. General Crypto Fundraising Trend Analysis
Between April 29th and May 4th, 2024, the number of fundraising rounds reported is over 25. The total funds raised in this period is around $129.50M.
The two prime areas of the general crypto fundraising trend analysis are the crypto fundraising by category analysis and the top crypto investment locations analysis.
7.1.1. Crypto Fundraising by Category This Week
Blockchain Infrastructure, Blockchain Services, CeFi, Chain, DeFi, GameFi, and Social are the categories, which witnessed activities this week. Let’s analyse them using the Number of Fundraising Rounds and Funds Raised in USD indices.
Category | Number of Fundraising Rounds April 29 – May 4, 2024 | Funds Raised in USDApril 29 – May 4, 2024 |
Blockchain Infrastructure | 4 | $8.40M |
Blockchain Services | 4 | $11.00M |
CeFi | 1 | $47.00M |
Chain | 1 | N/A |
DeFi | 5 | $28.00M |
GameFi | 6 | $15.10M |
Social | 4 | $20.00M |
The category, which raised the highest amount, is CeFi, which raised $47.00 million. DeFi, which raised around $28.00 million, is in the second position. The third and fourth are Socal, with $20.0 million raised, and GameFi, with $15.10 million raised, respectively. Blockchain Services, with $11.00 million raised, and Blockchain Infrastructure, with $8.40 million raised, are in the fifth and sixth positions, respectively.
7.1.2. Top Crypto Investment Locations This Week
Apart from the undisclosed, the US, Switzerland, Spain and Singapore are the top crypto investment locations this week.
Crypto Investment Locations | Funds Raised in (%) | Funds Raised in USD | Number of Fundraising Rounds |
United States | 45% | $58.80M | 5 |
Undisclosed | 43% | $56.00M | 16 |
Switzerland | 7% | $9.50M | 1 |
Spain | 2% | $3.20M | 1 |
Singapore | 2% | $2.00M | 1 |
Others | 1% |
The United States remains as the top most investment location, with $58.80 million. The undisclosed location follows with $56.00 million. Switzerland is the third biggest investment location with $9.50 million. Spain, with $3.20 million, and Singapore, with $2.00 million, is in the fourth and fifth positions, respectively.
7.2. ICO Landscape: A Weekly Overview
XSwap, Renzo Protocol, Runecoin and Mocaverse are the major ICOs that ended this week. Let’s analyse how much amount they received.
ICO | Fund Received | Token Price | Fundraising Goal | Total Tokens | Token (Available for Sale) |
XSwap | $2,100,000 | $0.05 | $250,000 | 350,000,000 | 13% |
Renzo Protocol | $3,200,000 | N/A | 250,000,000 Tokens | 10,000,000,000 | 2.5% |
Runecoin | N/A | N/A | 420,000,000 Tokens | 21,000,000,000 | 2% |
Mocaverse | $36,890,000 | $0.03938 | $5,000,000 | 8,888,888,888 | 14.5% |
Mocaverse is the one which raised the highest amount this week; it collected nearly $36,890,000. Renzo Protocol secured over $3,200,000. With $2,100,000 fund raised, XSwap is in the third position.
8. Weekly Blockchain Hack Analysis
As of May 4, 2024, hackers have stolen a total of $7.82 billion, mostly from decentralised finance (DeFi) platforms and blockchain bridges. DeFi platforms suffered the most significant losses, about $5.9 billion, while bridges connecting different blockchains lost around $2.83 billion.
In the past week, two major hacks were reported. On April 30, 2024, Yield Protocol lost about $181,000 due to a balance disparity exploit. On the same day, Pink Finance lost about $1.6 million due to a storage misalignment exploit.
April 2024 saw five major hacks. Besides Yield Protocol and Pink Finance, other platforms that experienced significant hacks were Magpie, Hedgey, and Grand Base. Magpie was hacked on April 23, 2024, losing about $129,000. Hedgey was hacked on April 19, 2024, with a loss of around $44.7 million. The first major hack in April occurred on April 15, 2024, when Grand Base lost about $1.7 million.
Endnote
In this week’s comprehensive analysis of Web3, Blockchain and Crypto, we have brought out powerful insights, which can be used to stay-to-data about the market developments. As the landscape evolves, the strategic integration of technology and data-driven decision-making becomes paramount for stakeholders navigating the dynamic realms of decentralised technologies.
Blockchain
Bitcoin (BTC) Price Crashes as Donald Trump’s Win Odds Dip
Markets received nominally good news on Thursday morning, with the US ISM manufacturing PMI for July falling much more than economists expected, sending interest rates to multi-month lows across the board. Additionally, initial jobless claims in the US jumped to their highest level in about a year. Taken together, the data adds to the sentiment that the US is on the verge of a cycle of monetary easing by the Federal Reserve, which is typically seen as bullish for risk assets, including bitcoin.
Blockchain
Terra Blockchain Reboots After Reentry Attack Leads to $4M Exploit
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Blockchain
$6.8M Stolen, ASTRO Collapses 60%
In the latest news in the blockchain industry, there has been a turn of events that has severely affected Terra and its users and investors, with the company losing $6.8 million. The attack, which exploited a reentry vulnerability in the network’s IBC hooks, raises questions about the security measures of the once celebrated blockchain protocol.
A web3 security company, Cyvers Alerts reported that the exploit occurred on July 31st and caused the company to lose 60 million ASTRO, 3.5 million USDC500,000 USDTand 2. 7 BitcoinThe flaw was discovered in April and allows cybercriminals to make payments non-stop by withdrawing money from the network.
Earth’s response
Subsequently, to the hack employed on the Terra blockchain, its official X platform declared the Suspension network operations for a few hours to apply the emergency measure. Finally in its sendTerra’s official account agreed, sharing that its operations are back online: the core transactions that make up the platform are now possible again.
However, the overall value of the various assets lost in the event was unclear.
Market Impact: ASTRO Crashes!
The hack had an immediate impact on the price of ASTRO, which dropped nearly 60% to $0.0206 following the network shutdown. This sharp decline highlights the vulnerability of token prices to security breaches and the resulting market volatility.
This incident is not the first time Terra has faced serious challenges. Earlier this year, the blockchain encountered significant problems that called into question its long-term viability. These repeated incidents underscore the need for stronger security measures to protect users’ assets and maintain trust in the network.
The recent Terra hack serves as a stark reminder of the ongoing security challenges in the blockchain space. As the platform works to regain stability, the broader crypto community will be watching closely.
Read also: Record Cryptocurrency Theft: Over $1 Billion Stolen in 2024
This is a major setback for Terra. How do you think this will impact the blockchain industry?
Blockchain
Luxembourg proposes updates to blockchain laws | Insights and resources
On July 24, 2024, the Ministry of Finance proposed Blockchain Bill IVwhich will provide greater flexibility and legal certainty for issuers using Distributed Ledger Technology (DLT). The bill will update three of Luxembourg’s financial laws, the Law of 6 April 2013 on dematerialised securitiesTHE Law of 5 April 1993 on the financial sector and the Law of 23 December 1998 establishing a financial sector supervisory commissionThis bill includes the additional option of a supervisory agent role and the inclusion of equity securities in dematerialized form.
DLT and Luxembourg
DLT is increasingly used in the financial and fund management sector in Luxembourg, offering numerous benefits and transforming various aspects of the industry.
Here are some examples:
- Digital Bonds: Luxembourg has seen multiple digital bond issuances via DLT. For example, the European Investment Bank has issued bonds that are registered, transferred and stored via DLT processes. These bonds are governed by Luxembourg law and registered on proprietary DLT platforms.
- Fund Administration: DLT can streamline fund administration processes, offering new opportunities and efficiencies for intermediaries, and can do the following:
- Automate capital calls and distributions using smart contracts,
- Simplify audits and ensure reporting accuracy through transparent and immutable transaction records.
- Warranty Management: Luxembourg-based DLT platforms allow clients to swap ownership of baskets of securities between different collateral pools at precise times.
- Tokenization: DLT is used to tokenize various assets, including real estate and luxury goods, by representing them in a tokenized and fractionalized format on the blockchain. This process can improve the liquidity and accessibility of traditionally illiquid assets.
- Tokenization of investment funds: DLT is being explored for the tokenization of investment funds, which can streamline the supply chain, reduce costs, and enable faster transactions. DLT can automate various elements of the supply chain, reducing the need for reconciliations between entities such as custodians, administrators, and investment managers.
- Issuance, settlement and payment platforms:Market participants are developing trusted networks using DLT technology to serve as a single source of shared truth among participants in financial instrument investment ecosystems.
- Legal framework: Luxembourg has adapted its legal framework to accommodate DLT, recognising the validity and enforceability of DLT-based financial instruments. This includes the following:
- Allow the use of DLT for the issuance of dematerialized securities,
- Recognize DLT for the circulation of securities,
- Enabling financial collateral arrangements on DLT financial instruments.
- Regulatory compliance: DLT can improve transparency in fund share ownership and regulatory compliance, providing fund managers with new opportunities for liquidity management and operational efficiency.
- Financial inclusion: By leveraging DLT, Luxembourg aims to promote greater financial inclusion and participation, potentially creating a more diverse and resilient financial system.
- Governance and ethics:The implementation of DLT can promote higher standards of governance and ethics, contributing to a more sustainable and responsible financial sector.
Luxembourg’s approach to DLT in finance and fund management is characterised by a principle of technology neutrality, recognising that innovative processes and technologies can contribute to improving financial services. This is exemplified by its commitment to creating a compatible legal and regulatory framework.
Short story
Luxembourg has already enacted three major blockchain-related laws, often referred to as Blockchain I, II and III.
Blockchain Law I (2019): This law, passed on March 1, 2019, was one of the first in the EU to recognize blockchain as equivalent to traditional transactions. It allowed the use of DLT for account registration, transfer, and materialization of securities.
Blockchain Law II (2021): Enacted on 22 January 2021, this law strengthened the Luxembourg legal framework on dematerialised securities. It recognised the possibility of using secure electronic registration mechanisms to issue such securities and expanded access for all credit institutions and investment firms.
Blockchain Act III (2023): Also known as Bill 8055, this is the most recent law in the blockchain field and was passed on March 14, 2023. This law has integrated the Luxembourg DLT framework in the following way:
- Update of the Act of 5 August 2005 on provisions relating to financial collateral to enable the use of electronic DLT as collateral on financial instruments registered in securities accounts,
- Implementation of EU Regulation 2022/858 on a pilot scheme for DLT-based market infrastructures (DLT Pilot Regulation),
- Redefining the notion of financial instruments in Law of 5 April 1993 on the financial sector and the Law of 30 May 2018 on financial instruments markets to align with the corresponding European regulations, including MiFID.
The Blockchain III Act strengthened the collateral rules for digital assets and aimed to increase legal certainty by allowing securities accounts on DLT to be pledged, while maintaining the efficient system of the 2005 Act on Financial Collateral Arrangements.
With the Blockchain IV bill, Luxembourg will build on the foundations laid by previous Blockchain laws and aims to consolidate Luxembourg’s position as a leading hub for financial innovation in Europe.
Blockchain Bill IV
The key provisions of the Blockchain IV bill include the following:
- Expanded scope: The bill expands the Luxembourg DLT legal framework to include equity securities in addition to debt securities. This expansion will allow the fund industry and transfer agents to use DLT to manage registers of shares and units, as well as to process fund shares.
- New role of the control agent: The bill introduces the role of a control agent as an alternative to the central account custodian for the issuance of dematerialised securities via DLT. This control agent can be an EU investment firm or a credit institution chosen by the issuer. This new role does not replace the current central account custodian, but, like all other roles, it must be notified to the Commission de Surveillance du Secteur Financier (CSSF), which is designated as the competent supervisory authority. The notification must be submitted two months after the control agent starts its activities.
- Responsibilities of the control agent: The control agent will manage the securities issuance account, verify the consistency between the securities issued and those registered on the DLT network, and supervise the chain of custody of the securities at the account holder and investor level.
- Simplified payment processesThe bill allows issuers to meet payment obligations under securities (such as interest, dividends or repayments) as soon as they have paid the relevant amounts to the paying agent, settlement agent or central account custodian.
- Simplified issuance and reconciliationThe bill simplifies the process of issuing, holding and reconciling dematerialized securities through DLT, eliminating the need for a central custodian to have a second level of custody and allowing securities to be credited directly to the accounts of investors or their delegates.
- Smart Contract Integration:The new processes can be executed using smart contracts with the assistance of the control agent, potentially increasing efficiency and reducing intermediation.
These changes are expected to bring several benefits to the Luxembourg financial sector, including:
- Fund Operations: Greater efficiency and reduced costs by leveraging DLT for the issuance and transfer of fund shares.
- Financial transactions: Greater transparency and security.
- Transparency of the regulatory environment: Increased attractiveness and competitiveness of the Luxembourg financial centre through greater legal clarity and flexibility for issuers and investors using DLT.
- Smart Contracts: Potential for automation of contractual terms, reduction of intermediaries and improvement of transaction traceability through smart contracts.
Blockchain Bill IV is part of Luxembourg’s ongoing strategy to develop a strong digital ecosystem as part of its economy and maintain its status as a leading hub for financial innovation. Luxembourg is positioning itself at the forefront of Europe’s growing digital financial landscape by constantly updating its regulatory framework.
Local regulations, such as Luxembourg law, complement European regulations by providing a more specific legal framework, adapted to local specificities. These local laws, together with European initiatives, aim to improve both the use and the security of projects involving new technologies. They help establish clear standards and promote consumer trust, while promoting innovation and ensuring better protection against potential risks associated with these emerging technologies. Check out our latest posts on these topics and, for more information on this law, blockchain technology and the tokenization mechanism, do not hesitate to contact us.
We are available to discuss any project related to digital finance, cryptocurrencies and disruptive technologies.
This informational piece, which may be considered advertising under the ethics rules of some jurisdictions, is provided with the understanding that it does not constitute the rendering of legal or other professional advice by Goodwin or its attorneys. Past results do not guarantee a similar outcome.
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