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Bitcoin was trading lower on Friday, ending the week around $39,000. Its 2% slump in the last 24 hours may reflect some profit-taking—following a recent 35% surge. But news out of Europe was both positive and troubling for the cryptocurrency.
On the positive front, Germany will allow institutional funds to own up to 20% of their assets in Bitcoin and other crypto products, according to a report in Bloomberg.
The funds, including insurance and pension portfolios, manage $1.8 trillion euros, or about $2.1 trillion, in assets. While they’re generally conservatively run, they may be eager to put a slug in Bitcoin or other cryptocurrencies. Even at 5% of their assets, it would be more than $100 billion in crypto purchases.
At the same time, the world’s largest crypto exchange, Binance, is facing new regulatory pressures and is pulling its futures products out of some European markets.
Binance on Friday said it will “wind down” futures and derivatives offerings in Germany, Italy, and the Netherlands. Traders in these countries won’t be able to open new futures or derivatives accounts, and they’ll have 90 days to close their open positions, Binance said.
According to a Wall Street Journal report, U.S. investors are also trading crypto derivatives on foreign exchanges based abroad, avoiding U.S. regulatory requirements.
Binance leads all exchanges in open interest futures volume, according to Fundstrat, a crypto research firm. “This is yet another step taken by the company to work with local authorities following a global backlash against the firm for its general ambivalence towards financial regulation,” Fundstrat said in a note.
Indeed, regulators appear to be circling around Binance, both in the U.S. and abroad. The IRS and Justice Department launched an investigation of the exchange in May, focusing on money laundering and tax offenses, according to media reports. “We have a strong track record of assisting law enforcement agencies around the world, including in the United States,” Binance said in a statement at the time. “We don’t comment on specific matters or inquiries.”
Binance also faces trouble in Europe and Asia. Italian regulators recently warned the exchange about providing unauthorized investment services. The exchange is also facing a class-action lawsuit in Italy related to futures trading.
In an email to Barron’s, the company said that “Binance.com does not operate out of Italy. This has no direct impact on the services provided on Binance.com.”
Malaysia is also cracking down: Authorities ordered Binance to shut down its website and mobile app on Friday, accusing the company of “illegally operating a Digital Asset Exchange.” Malaysia has reprimanded Binance before, but it now appears to be closing the door on the exchange’s activities.
“Binance.com does not operate out of Malaysia,” the company said, adding, “we take our compliance obligations very seriously. We are actively keeping abreast of changing policies, rules and laws in this new space.”
Meanwhile, investor interest in crypto only appears to be accelerating. According to a new report from crypto.com, the number of global crypto users hit 221 million in June, doubling over the last four months. While Bitcoin drove much of the market’s growth in January and February, “altcoin adoption in May led to a massive surge in crypto users,” the report said.
That may be great for crypto demand, but it’s one more reason for the regulatory posse to keep riding in.
Write to Daren Fonda at daren.fonda@barrons.com
