🤑 Inside Tether's Mystery Banks,🎭Binance's Exec Drama,🥱Blockchain Excitement Fades in Africa

September 02, 2023

Your 5 minute emerging markets web3 weekly update

In This Issue

Latin America and the Caribbean
🔸A Glimpse Into Tether’s Secret Banking Relationships
🔸Challenges, Delays, and Early Successes: An Update on Brazil’s CBDC Pilot

Asia
🔸More Binance Exec Drama Amid Regulatory Storm
🔸$100 Million Altcoin Fund Targets Hong Kong High Net Worth and Institutional Investors

Eastern Europe
🔸When Evading Sanctions Is No Longer Lucrative, Binance Considers Russia Exit
🔸52% Of Turkish Adults Turn To Crypto Amid Punishing Inflation

Africa
🔸Blockchain Excitement Fades in Africa
🔸Africa's Trailblazers: CBDC Insights and Lessons for the World

Catch up on the latest episodes and clips from the second season of the EmergingVoices Podcast on YouTube!

Latin America and the Caribbean

Image Credit: Midjourney

Tether has reportedly added Britannia Bank & Trust, a private bank operating in the Bahamas, to process dollar transfers. The secrecy surrounding Tether’s banking relationships has been a topic of industry speculation, and the lack of transparency surrounding these connections is seen as a hindrance to regulatory approval and increased traditional asset manager involvement in the crypto space. Although it has been challenging for Tether, and many other crypto firms, to secure banking partners in the US, the total value for Tether stablecoins in circulation has increased by about 24% this year to $82 billion. Meanwhile, the stablecoins in circulation of Tether's main competitor, Circle, has plunged from $45 billion to $26 billion.

Two of Brazil's largest banks, ItaĂş Unibanco and BTG Pactual, have taken the lead in Brazil's CBDC pilot by conducting the first interbank transfer using the "Drex" (CBDC) prototype tokens. However, several other bank consortia members participating in the initiative are unable to meet bandwidth speed standards set by the central bank to integrate with Hyperledger Besu's permissioned protocol network, leading the Central Bank to extend the deadline so participants can join the network. Despite the success of the transfer, it also highlights the disparity between the participants in the initiative. The next test will measure Hyperledger's scalability to support the whole country while maintaining the necessary privacy so that the network does not violate Brazilian bank secrecy rules.

Asia

Image Credit: Midjourney

Binance Asia-Pacific's head, Leon Foong, is reportedly leaving the cryptocurrency exchange, marking another high-profile departure following recent regulatory challenges. Responsible for Binance's expansion in Asia, Foong's resignation follows other key executives leaving in the wake of regulatory crackdowns in various countries. As Binance faces increased regulatory scrutiny and disruptions in its US and European operations, its focus on growth in Asia and the Middle East has become more crucial, while regulatory challenges continue to affect its global dominance in crypto trading.

HashKey Capital, the investment arm of Hong Kong's HashKey Group, is launching its first secondary crypto market fund, targeting high-net-worth individuals and investment firms in Asia, and aims to raise $100 million for the fund over the next 12 months. In response to growing demand from professional investors seeking above-market returns in the cryptocurrency space, the fund will diversify its investments in altcoins, with less than 50% allocated to Bitcoin and Ethereum. Weakness in the Hong Kong stock market has pushed investors to look for diversified strategies. Meanwhile, the Hong Kong government has made a push to embrace crypto and fill market demand for alternative assets.

Eastern Europe

Image Credit: Midjourney

Binance is considering a full exit from the Russian market as it grapples with compliance issues and regulatory challenges. This decision comes in the wake of recent reports that Binance has been assisting Russians in moving money abroad, despite previous claims of compliance with Western sanctions and trading restrictions in Russia. The cryptocurrency exchange's uncertain stance in Russia is part of a broader global crackdown faced by Binance, as it navigates regulatory lawsuits and compliance concerns amid the evolving crypto landscape.

KuCoin has released its 15th "Understanding Crypto Users" report focusing on Turkey, revealing a remarkable surge in crypto investors among Turkish adults, with 52% participating in crypto investments. Despite current market conditions, this percentage has risen by 12% over the last 18 months, showcasing growing interest and acceptance of crypto as a hedge against inflation, especially with the Turkish lira losing over 50% of its value against the US dollar. The study also reveals the influence young people have in driving crypto growth, motivations for investing in cryptocurrencies, the dominance of Bitcoin and Ethereum in asset allocation, the prevalence of crypto trading in Turkey, and the significant role of personal connections in fostering crypto adoption.

Africa

Image Credit: Midjourney

The number of active fintech-focused blockchain startups in Africa has declined over the past two years, dropping from 45 startups in 2021 to 37 in 2023. Nigeria leads the blockchain scene with 21 startups, representing 58% of active companies. While there was a significant increase in blockchain startups between 2017 and 2019, the decline is attributed to volatility in cryptocurrency markets and fading excitement over crypto. Despite the decline, blockchain remained the third most funded category in African fintech, accounting for 4.9% of total funding between 2015 and 2023. The total number of fintech startups in Africa has increased by 17.7% to 678 in 2023, with notable growth in major markets like Egypt and Nigeria.

Smaller countries like Eswatini and Ghana are pioneering global Central Bank Digital Currency (CBDC) development, offering valuable insights for more developed nations, according to Wolfram Seidemann, CEO at Giesecke + Devrient Currency Technology (G+D). The German tech company, which is implementing CBDCs for both Eswatini and Ghana, emphasizes that these nations are leveraging CBDCs to innovate and enhance convenience, security, and cost-effectiveness, paving the way for other countries to embrace digital public money. However, Seidemann also points out that standardized regulations are crucial for the widespread adoption of CBDCs, and the process of establishing them as universally accepted digital currencies is expected to be complex and gradual.

Thanks for reading and have a great week ahead!

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Written by Jon Lira. Connect with him on LinkedIn.

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