Monthly Report: SEC’s campaign against Bitcoin Spot ETFs continues

January has been a rough month for the cryptocurrency market. Many crypto coins have bled in the last three weeks erasing gains from the broader market rally at the end of last year. Meanwhile, the larger crypto ecosystem has seen several developments this month. However, no direct crypto ETF has been approved in the US and odds for one being given the green light within Q1 of 2022 are long.

Here is a breakdown of this and other important headlines in January, from regulations to crowdfunding.

The US SEC is yet to approve a Bitcoin spot ETF

The SEC's preference for ETFs that track Bitcoin futures rather than the digital asset itself has remained unchanged. Citing a failure to reach the standards of a surveillance-sharing agreement, the SEC said on January 20th that it would not accept the First Trust SkyBridge's Bitcoin ETF Trust application.

A week later, the SEC rejected an application to allow the Cboe BZX to list shares of Fidelity Investments' proposed Wise Origin Bitcoin Trust. Via the filing, the regulator explained that the application had failed to demonstrate investor protection standards and safety against fraud and market manipulation.

The financial watchdog also put off reaching a resolution on applications by some investment firms. It said last week that a verdict on the filings by ARK 21 Shares and Teucrium had been pushed to April 3rd and April 8th, respectively.

Moreover, earlier in the month, the financial regulator had postponed reaching a decision on an ETF application by NYDIG. Initially expected on January 15th, the decision deadline was pushed forward by an additional 60 days to allow adequate time to consider the proposal.

VC firms are ploughing more money into crypto projects

On January 13th, Near Protocol announced that it had completed a $150 million raise. Led by Three-Arrows Capital with participation from several other venture capital firms such as a16z, Jump Capital and Circle Ventures, the Protocol said the funds would be used to accelerate awareness around blockchain and decentralised technology.

Blockchain gaming firm Animoca Brands also completed a raise this month. On January 18th, the firm said it summed $360 million at a $5.4 billion valuation. The company explained that it would channel the funds into building an open and financially inclusive metaverse via strategic acquisitions, investments, obtaining licenses and developing new products.

A day later, Tom Brady's NFT platform Autograph revealed the completion of a $170 million raise in a Series B funding round. Venture firms Kleiner Perkins and Az16 led the round with executives from the firm joining the Autograph board. Following the raise, Autograph said it intends to expand the possibilities of NFT technology to the mainstream.

Elsewhere, Sapphire and Tiger Global led a $207 million funding round for crypto infrastructure firm BlockDaemon at a $3.25 billion valuation. The firm, which provides blockchain backend support, intends to launch a DeFi fund and grow its product suite.

With reports of a raise first coming in December, crypto custodian Fireblocks said it completed a raise worth over $500 million this month. The firm plans to invest in NFTs, DeFi and payment applications.

The Fed on a US Digital Dollar and hiked interest rates

The US Federal Reserve is toying with the idea of a Digital Dollar, but it's not one close to becoming a reality. On January 20th, the Fed finally published its report on a CBDC following a series of delays.

The report explained that a digital dollar would be the equivalent of paper money in the US, only in digital form. In essence, it would simply be digital money backed by the Fed and as readily available to the public as physical cash.

The report also found that while a digital dollar would simplify cross-border payments and expand the Dollar's role as an international currency, its effects on the broader financial ecosystem would be possibly damaging. For instance, it could cut the numbers of people depositing money to traditional banks, affecting the institutions' lending ability.

Implementing such a currency would further redefine the central bank's policies on monetary matters such as interest rates and inflation levels.

The Fed also held a briefing on its monetary policy last week following a Federal Open Market Committee (FOMC) meeting. With plans to halt the acquisition of asset classes by March this year, the Fed said it would keep interest rates near zero until then. When the bond purchases taper in March, it plans to implement a series of interest rate hikes.

Social media could be the path to mainstream NFT adoption

The popularity of non-fungible tokens is rising, and social media platforms are largely responsible for this latest push. Over the month, Twitter, Reddit, Facebook, Instagram, and YouTube have shown interest in NFT initiatives.

Twitter recently added NFT profile pictures support via a new feature available to iOS Twitter Blue subscribers. The users can now display their digital collectibles on hexagonal-shaped profile pictures, far from the traditional circular ones.

Initially unconfirmed, news of Reddit developing a similar feature came out last week. The said reports, showing plans by the social media outfit to add NFT support, were verified by the firm. Spokesperson Tim Rathschmidt confirmed the development of a verifiable NFT profile picture feature but said things could change as it was only a small internal test.

Facebook and Instagram also confirmed their interest in the NFT's sector. According to a Financial Times report on January 20th, Meta (the parent company) plans to launch an NFT marketplace, with developers on Facebook and Instagram working on a feature to enable users to flaunt NFTs on their profiles.

The last to join the party was YouTube. Via an open letter to the community, YouTube CEO Susan Wojcicki implied that the video-sharing company would expand into NFTs to allow more autonomy to creators via this "previously unimaginable opportunity" that NFTs have created.

Cryptocurrency regulation – a seemingly never-ending headache

Regulation of cryptocurrencies is still the talk of the town, and some financial watchdogs want to implement bans as a way out. Regulators are also increasingly getting worried about the impact of crypto mining on the energy supply, and some have taken measures to curb the possible effects.

About three weeks ago, news agencies in Pakistan reported that the federal government and State Bank of Pakistan (SBP) had decided to ban crypto. Citing countries that have outlawed crypto, including China and Saudi Arabia, the SBP said a ban was necessary to protect investors and fight money laundering/ terrorism financing.

In addition, early in the month, Kosovo implemented a ban on crypto mining to address the energy crisis the country has faced this winter. Since then, the Kosovar government has seized hundreds of ASIC miners and conducted arrests for unauthorised mining.

On its end, Russia has shown intent to regulate cryptocurrencies rather than outright ban them as its central bank had recommended.

The European Union has also become increasingly worried about energy-intensive forms of crypto mining. Labelling Bitcoin an environmental and climate change risk, Vice-chair of the European Securities and Markets Authority (ESMA) Erik Thedéen recommended banning proof of work mining in preference for proof of stake due to its low energy profile.