First Mover Asia: Amazon’s Web3 foray will be a compliance nightmare; Bitcoin tops $23.9K

Good morning. Here’s what’s happening:

Prices: Bitcoin topped $23.9K before slipping slightly under investor optimism. One market observer believes that the biggest cryptocurrency in terms of market capitalization may be about to make a U-turn.

Insights: Rumours have it that Amazon will unveil an NFT initiative as part of its larger push into Web3. This project could pose significant regulatory challenges.

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Bitcoin continues to fly high…for now

James Rubin

Crypto investors were buoyant on the weekend that the U.S. central banks announced its latest interest rate decision.

They sent bitcoin to the tune of $24,000, which is more than it has been since mid August. At one point, the largest cryptocurrency market capitalization was at $23,900. Then it retreated to $23,760. This is a nearly 3% increase over the previous 24 hours. Despite some conflicting economic data and worrying fourth quarter earnings reports by some of the biggest brands in the world, markets have been largely optimistic over the past week.

The U.S. Commerce Department announced that December’s personal consumption expenditures (PCE), which excludes food and energy, had recorded its moderatest annual rate increase since October 2021. Although the Federal Reserve considers the PCE a crucial inflationary measure in making monetary decisions, it provided the latest evidence that there was a cooling economy. However, it also indicated that services inflation remains stubbornly resilient.

First Republic Bank sent investors a weekly note in which it stated that while the decline in goods inflation was welcome as it brings inflation closer towards the Fed’s goal of reducing inflation by 2%, services inflation remains stubborn. This highlights the fact that the Fed still has a lot to do,” First Republic Bank said.

Joe DiPasquale (CEO of BitBull Capital), noted in a text that CoinDesk that the Federal Open Market Committee was likely to carry out a widely anticipated 25 basis point rate increase at its two-day meeting which starts Tuesday. After eight months of more severe increases, investors’ hopes for a more dovish stance in monetary policy have been driving much of January’s rise in crypto prices and other risk assets.

DiPasquale stated that the “more modest rise is part of why many crypto prices have risen.” It’s a positive economic sign that is being baked into bitcoin demand. It has been positively associated with the equity markets in recent years, and the lower rate for bitcoin is a bullish sign to the stock market.

Ether, second-largest crypto by market value, performed even better than BTC Sunday. It rose nearly 5% to trade above $1,650 at one time. In the past nine days, ETH has risen more than this threshold twice. The market capitalization of major cryptos was high on Sunday. MANA, which is the token of 3D virtual world platform Decentraland, and SAND (the native currency of the metaverse gaming Sandbox), both rose more than 15% and 7.7% respectively. SOL, the token for the Solana Blockchain, rose 8.2%.

Recently, the CoinDesk Market Index(CDI), which measures cryptos’ performance has risen to more than 3.3%.

The equity markets continued their positive January with Friday’s close by the tech-heavy Nasdaq (which has a large technology component) and S&P 500 (which has a heavy technology component), each closing up more than a percentage point. The S&P has surpassed its low point in 2022 by nearly two months. Investors remain cautiously optimistic about inflation, macroeconomic uncertainties, and even though powerhouses like Amazon, Salesforce, and Microsoft have announced job reductions in anticipation of an economic recession.

Crypto news: Friday’s sad story of Sam Bankman-Fried continues with Federal prosecutors Asking U.S. District Judge Lewis Kaplan will ban former CEO of FTX, Alameda Research, from communicating with former and current employees of the embattled exchange. Prosecutors claimed Bankman-Fried reached out to a former FTX employee as a thinly disguised attempt to influence potential testimony.

BitBull’s DiPasquale stated that market conditions are still ripe to fall after the week-long surge, which was fueled by investor optimism and a short squeeze. “Investors may choose to profit now, given the downside potential and the possibility of bitcoin testing $20k again in near future,” DiPasquale wrote.

Amazon moves into Web3. But is the world ready for Amazon Web3 yet?

Sam Reynolds

According to a report, Amazon may be unveiling a Web3 initiative. Blockworks report. The final form of this project is not known. It could involve gaming, NFT marketplaces or some combination thereof.

Either the project will be killed by the complexity and uncertainty of regulatory compliance, or Amazon will have the scale and size to make this a market and mainstream the Web3 economy.

Fly Blind?

Web3 has been avoided by major blue-chip corporations mainly because of legal uncertainty. While payment companies such as Visa and Mastercard have made efforts to integrate stablecoins in their networks, many crypto nodes remain unintegrated. Hosted on Amazon’s cloud service AWS, and large tech and TradFi companies are Regular investors In the crypto economy.

However, they don’t have to be stakeholders in the Web3 economy. They can still embrace the decentralized ownership ethos. Uncertainty and regulatory uncertainty can cause confusion. If Amazon can succeed, its efforts could be transformative. This will require that regulatory issues are addressed.

Are NFTs Securities

Amazon’s NFT ventures would be hindered if they were securities.

This issue is being considered in Friel v. Dapper Labs, and it has been discussed by many legal experts.

The consensus is that it’s possible, but not likely.

In Friel v. Dapper LabsJeeun Friel (the plaintiff) claims that Dapper Labs’ NBA Top Shot NFTs and NBA: Top Shot NFTs can be considered securities since their value increases as a result of the project’s success. Dapper Labs also owns the blockchain on which they are issued and takes a cut from every transaction.

Also, the exchanges between Friel & Dapper Include theories of horizontal and vertical commonality. Horizontal commonality is the ability to determine if each item’s value, in this instance Moments, are independent or dependent on one another (investment contracts issued in the same company could move up or down in sync). Vertical commonality refers to the connection between the Moments’ value and the success or failure of Dapper.

The Plaintiffs claim that this is horizontal commonality.

Concerning vertical commonality: Dapper states in court that there is no vertical similarity because there is no link between each Moments collector’s fortunes and Dapper.” The plaintiffs argue that Dapper’s success as a company depends on the continued sale of Moments in secondary markets and so create vertical commonality.

A recent article in the UNC School of Law’s North Carolina Banking Institute Journal, Highlights. Citing another example of basketball clubs selling NFTs (the presence of a royalty would encourage continued promotion and satisfy the “vertical similarity test” because the NFT owner would be affected by the GSW’s efforts).

However, this doesn’t necessarily mean that all NFT transactions will be considered securities. An article published by JD SupraGargi Chaudhuri, III and James Masella, III, argue that buyers, even if they are planning to resell NFT for profit later, expect the transaction to be completed at the time of purchase. They do not expect the NFT’s quality to change or improve over time.

They write that although the buyer might be interested in the asset’s value and want to resell it later for a profit, they didn’t invest in a “common enterprise” that would pay them a share of the profits.

OpenSea, the largest NFT marketplace, is also cautioning its employees to refrain from using language that resembles securities. Fortune reported Last year. TechCrunch: Talk to usA former SEC lawyer stated that these marketplaces might attract attention if there was a case involving unregistered securities. However, nothing has yet happened.

Uncertainty can be a killer.

Copyright: What’s the deal?

Copyright and NFTs can be a difficult one.

One, unless otherwise stated You don’t have any control over the copyright When you purchase a work.

It doesn’t appear that the market is aware of this. See: Spice DAO’s attempt at purchasing the ‘Dune Bible. Create a new adaptation for the screen that is based on the book.

“A buyer purchasing an NFT attached with a copyrightable piece of work may only be buying a license to display that work in a limited capacity,” said Silas K. Alexander and Ryan W. McBridge, IP attorneys. In a 2021 paper. The copyright holder usually retains the rights to reproduction, adaptation, publication, performance, and publication of the work. An NFT is a digital asset that allows you to edit and redistribute work.

This is not the only exception. Yuga Labs has granted full commercial rights to NFT holders on their entire collection. Bored Apes. However, this license is not a right. Yuga Labs still owns the IP rights to the Ape.

Report from August 2022Galaxy Digital accused NFT industry, allegedly misleading the public, with its language about NFTs and copyright ownership.

The arrangement between NFT issuers, token holders, resembles a distinctly Web2 maze, consisting of opaque, misleading and complex licensing agreements.” Alex Thorn, head Galaxy Digital Research, wrote the report. Tell DecryptAccording to them, “the public has a misinterpretation of what they are buying”

A Recent judgment In a court case Yuga Labs was accused of making knockoffs of its NFTs (which were generated by an artificial intelligence algorithm) as well as infringing its copyright. The court refused to comment on the subject of NFTs or copyright.

“[The] The Court will again issue an advisory opinion to defendants on copyright and NFTs. The standing requirement in Article III prohibits federal courts from adjudicating hypothetical questions as it did in the defamation context.

This is a minefield. Is Amazon really looking to expand in this market?

Crypto Gaming and Gambling

Blockworks reports that Amazon’s NFT efforts might include some form of Web3 gaming engagement. This is a fascinating possibility considering GameFi’s $10 billion market cap According to CoinGecko data.

Play to Earn, one of the most popular Web3 gaming genres, has many legal pitfalls.

Many markets in Asia have specific laws that allow for the trading of gaming tokens for cash. CoinDesk previously reported on this.

Seatalk was a 2004 game that had a physical token component. The Korean government made specific laws against converting gaming tokens into cash. China banned it after Tencent created QQ Coins, a virtual currency that can be used online and which could be exchanged for Yuan.

Osler is a Canadian law firm. Highlighted in the October 2022 issue Paper that the whole play-to-earn system might be in violation of the country’s gambling laws.

They write that “Generally, the Criminal Code prohibits gaming that is fundamentally premised: the payment of money or money’s value by the user; the possibility that the player can make money (or even money’s worth),”

Ifrah, a Washington-based law firm Also, they said Because Play-to-Earn requires participants to pay a certain amount (the NFT), it could be in violation of federal and state gambling laws.

Amazon: Can it pull this off?

Amazon is facing a difficult task, but this is not to belittle.

The company has almost unlimited legal resources and compliance staff to create Web3 that isn’t in violation of the law, despite limited legal guidance and existing paradigms being compliance and regulatory hellscapes.

One might argue that now is the right time, citing the declining market for NFTs, and overall bear sentiment for cryptocurrency. However, it is possible to create market momentum by entering the bottom market. Amazon’s scale in the Web2 World makes this possible.

Amazon’s entry into this market would legitimize it in many eyes, and it would be a significant step towards creating an institution-grade asset from NFTs. They must first overcome the regulatory hurdles.

3 p.m. HKT/SGT(7 a.m. UTC): Gross domestic product of Germany (Q4 preliminary/QoQ/YoY).

6 p.m. HKT/SGT(10 a.m. UTC): January, European Commission Business Climate Report (January).

6 p.m. HKT/SGT(10 a.m. UTC): Consumer confidence in the European Commission (January)

If you haven’t seen it yet, here’s the latest episode of “First Mover” (CoinDesk TV):

Core PCE Price Index rose 4.4% in December; AptosLabs CEO on Token Surge

The PCE data, which shows that core inflation continues to cool, is being processed by crypto markets. The Personal Consumption Expenditures index (PCE), rose 4.4% last month, compared with 4.7% in November. This report is the last major economic data released before the Fed makes its next rate increase decision. Devin Ryan, JMP Securities Director for Financial Technology Research, joined “First Mover” to talk about the topic. Mohammad Shaikh, Aptos Labs CEO & Co-Founder, was also present.

Sam Bankman-Fried Wants to Transfer FTX’s Bitcoin: Lawyers representing the founder of the crypto exchange that went bankrupt said there was no evidence to restrict his access to crypto kept by FTX under bail conditions during a fraud trial.

DOJ Claims Sam Bankman Fried tried to Influence Witness Testimony. Prosecutors filed a court document Friday alleging that Bankman-Fried sent FTX US General Counsel Ryne Mill Signal asking for a reconnect and to “vet things” with one another.

WazirX: Binance Claims Ownership in Dispute Over India’s Largest Exchange Scales The dispute over WazirX ownership could have devastating consequences for the Indian exchange as well as its users.

Crypto Markets Analysis: Ether and Bitcoin Trading Activity is Lessening as Investors Wait for the FOMC’s Next Interest rate Hike The markets were quiet before a 25 basis point rate rise. Bitcoin and Ethereum were trading in new support areas.

Decentralized Exchange Vela’s DXP token surges ahead of Beta Release on Arbitrum The utility token rose 50% over the last 24 hours, more than doubling since Wednesday before the beta version of the widely anticipated beta was released next week.