The Crypto Stories You Need to Know This Week (#181-16 June 2024): FTX Update, Flowbank Shuts Down, Nigeria Drops Some Charges Against Binance Execs

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1. FTX Liquidator Expects Creditors to Receive 119-143 Cents on the Dollar

The FTX liquidators announced this week via email to creditors that they expect creditors to receive 119-143 cents on the dollar.

First this is generally good news. Very few would have expected this 18 months ago when FTX collapsed. The is due to the various assets and investments that FTX had, from SOL tokens to equity stakes in AI firms and most importantly to the rise in the price of crypto assets since then.

The reality is that the creditors would have been better off if they would be able to get back the actual crypto like it was the case in the Gemini Earn program where clients received 100% of their actual asset and thus were able to benefit from the price appreciation. But this is difficult in many bankruptcy cases as the dollar amount of the assets at the date of insolvency is taken as the snapshot.

However this is still relatively good news in the circumstances. The big question now is what will be the timing of this distribution. A development to follow.

2. Swiss Regulator Shuts Down Flowbank

The Swiss financial regulator shut down Flowbank, an Swiss bank that also serviced crypto firms, after finding it allegedly didn't satisfy the minimum capital requirements. 

This matters as Flowbank was one of the leading crypto banks in Europe. They even offered a tripartite agreement with Binance.

The big question the market will ask now is whether this action was taken by FINMA purely due to the bank's financial situation or whether FINMA accelerated this due to the bank's crypto involvement

If Flowbank was shut down due to objectives financial reasons, then FINMA is absolutely correct. But if Flowbank can show that the bank was unfairly treated due to its crypto activities, then it could be a different story. Time (and probably litigation) will tell.

The other bigger question is whether this is an isolated event or a new Operation Choke Point 2.0 EU /Swiss version. Unlikely at this stage but definitely a development worth following.

3. EU Report Highlights Risks With Layer 2 Protocols and Privacy Coins

The EU Innovation Hub for Internal Security took aim at privacy coins, mixing protocols and layer 2 platforms in their inaugural report on encryption.

Whilst the conclusion of this report is not surprising, this is another example of how the debate on privacy in payments is becoming increasingly important. 

The irony now is that you have arguably more privacy today when doing a bank transfer via SWIFT rather than when making a Bitcoin transfer. This is a problem when it comes to using crypto for payments in businesses. For example, if you have the wallet address of a business that accepts crypto, you could quickly reverse engineer its cash flows by looking up the wallet, as you can see all transactions. 

This is what most layer 2 solutions (or even privacy coins) try to address. You get all the benefits of crypto but with the expected layer of privacy in payments that we have come to expect (in addition to many other benefits from lower cost and speed). However, the downside here is that law enforcement or governments are not able to easily trace those transactions. This is why much work is being done in zero-knowledge proofs/ZK solutions and other tech innovations to provide privacy in payments but without sacrificing the inherent benefits of blockchains and digital assets.

So expect this topic to pop up increasingly over the coming months not only in crypto circles but also policy ones as well.

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4. Nigeria Drops Tax Charges Against Binance Executives

Nigeria dropped tax charges against Binance executives Tigran Gambaryan and Nadeem Anjarwalla.

However, money laundering charges remain, and the next court date is June 20. Whilst this is a positive first step, the reality is that these two executives should have never been charged in the first place, and Gambaryan, who has been spending over 100 days now illegally detained, should be released immediately. 

5. Peru Adopts India’s UPI System

India’s UPI system is probably the most advanced payment infrastructure globally that operates at scale. I never cease to be amazed at how many people in the West have not heard about it, as it is rarely talked about in mainstream media or traditional finance circles.

Many countries with large Indian diasporas, from Singapore to the UAE, already support the UPI system. Peru adopting it is another example of how soft power from rising countries like India may play a role in building the future of finance. 

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Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with. This newsletter is for educational purposes only, and none of its content should be construed as investment or financial advice of any kind. 

Who is Henri?

Henri Arslanian is the co-founder and managing partner of Nine Blocks Capital Management, an institutional-grade hedge fund focused exclusively on digital assets, with a market-neutral crypto fund focused on generating alpha from inefficiencies in crypto markets using relative value, arbitrage, and quantitative strategies. 

Henri was previously a partner and global crypto leader at PwC. In that role, he advised many of the world’s leading crypto exchanges, investors, financial institutions, and tech firms on their crypto initiatives and numerous governments, regulators, and central banks on crypto regulatory and policy matters.

With over 500,000 LinkedIn followers, Henri is a TEDx and global keynote speaker, a best-selling published author, and is regularly featured in global media, including Bloomberg, CNBC, CNN, BBC, The Wall Street Journal, The Economist, and the Financial Times. 

Henri was named by LinkedIn as one of the 2022 global Top Voices in Finance and is the host of the CryptoCapsules™ social media video series as well as The Future of Money podcast and newsletter.