In Token Issue this week, we look at the potential for yen-pegged stablecoins in Japan and analyze the regulatory power grab in the US. [Read from your browser]( Token Issue Welcome to Token Issue! Delivered every Friday, this free newsletter breaks down the biggest stories in Asiaâs crypto scene and beyond. View past issues [here]( or [sign up here]( to receive future newsletters. Written by Shihan Fang
Crypto journalist Hi {NAME} Mondayâs clampdown on the Binance USD (BUSD) stablecoin, still the worldâs third-largest stablecoin by market cap at the time of writing, has thrown the market into turmoil. Under orders from the New York Department of Financial Services (NYDFS), BUSD issuer Paxos will stop minting the stablecoin by February 21, driving investors toward other stablecoins - [namely Tether](. Binance CEO Changpeng Zhao apparently has had enough and on Tuesday, commented in a [Twitter Space chat]( that the crypto industry should start reducing its dependence on stablecoins pegged to the US dollar. âAs a result of this we probably will see more euro based or other Japanese yen, Singapore dollar based stablecoins, so it's actually prompted us to look for more options in different places,â said Zhao. That Asia-Pacific stablecoins are strong contenders should not be a surprise, given cryptoâs popularity in the region and improving regulatory clarity in various jurisdictions, including Japan and Singapore. This weekâs premium story looks at Japanese yen (JPY) stablecoins. Pegged to the currency of the worldâs third-largest economy, JPY stablecoins could give the domestic crypto sector a boost while serving as efficient payment rails for Japanese conglomerates that operate globally. -- Shihan
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𤿠THE DEEP DIVE
 [US stablecoin clampdown may give Japan a chance to shine]( Japan has banned all stablecoins that arenât issued by banks - whether pegged to the US dollar or the Japanese yen. But the government, under the leadership of Prime Minister Fumio Kishida, has put Web3 on high priority and will allow certain stablecoins with the release of new regulations starting in June. I spoke to Ken Nakamura, the CEO of GMO Trust, to find out how the company is positioning itself for a crypto-friendlier Japan. GMO Trust is a New York-based subsidiary of the Japanese conglomerate GMO Internet Group. Regulated by the NYDFS, it issues the JPY-pegged GYEN and the US dollar-pegged ZUSD stablecoins.
 --------------------------------------------------------------- ð ALL EYES ON... *What everyoneâs talking about.* Whatâs going on with BUSD?
In addition to the NYDFS directive, Paxos is facing a potential lawsuit from the US Securities and Exchange Commission (SEC), having [received a âWells Noticeâ]( from the regulator on February 3. The notice [alleges that BUSD is a security]( and that Paxos should have registered BUSD under federal securities law. The Wells Notice has serious implications for the global crypto industry: If the SEC pushes through and is successful in its lawsuit against Paxos, all stablecoins issued by US-based companies will be classified as unregistered securities. Paxos âcategorically disagreesâ with the characterization of BUSD as a security in a [press release]( and said it is âprepared to vigorously litigate if necessaryâ. That said, BUSD appears to be the only stablecoin currently facing regulatory scrutiny. Paxosâ other stablecoin USDP is unaffected. Likewise, Circle has not received a Wells Notice, nor was it asked to stop minting its stablecoin USD Coin (USDC) by the NYDFS. Itâs unclear if Tether has received similar notices, though it is [being investigated]( by the Southern District of New York (SDNY) for possible bank fraud. Fun fact: [Bloomberg reported]( that it was Circle that blew the whistle on BUSD to the NYDFS. While Circle has neither confirmed nor denied the comments in the report, Binanceâs CZ dismissed the allegation and commented on Twitter spaces on Tuesday, saying, âI wouldn't take that article too seriously right now.â Word has it that the BUSD ban is really an attempt to crack down on Binance and not on stablecoins. In its [BUSD consumer notice]( published on Monday, NYDFS noted that it has no issue with Paxos issuing BUSD on Ethereum. However, it did not authorize the Binance-peg BUSD, the wrapped version of BUSD, which is distributed on other blockchains such as Binanceâs own BNB Chain. Early in January, analysts found that the Binance-peg BUSD was [regularly undercollateralized]( and by at least US$1 billion at one point in time. Binance is currently the subject of an ongoing US Department of Justice (DOJ) [criminal investigation)]( which began in 2018 and is focused on Binanceâs compliance with US anti-money laundering laws and sanctions. In June last year, a [Reuters investigation]( found that the worldâs largest cryptocurrency exchange served as a conduit for laundering at least US$2.35 billion in illicit funds. To be fair, Binance has been strengthening its compliance department by hiring [former investigators from the Internal Revenue Service](. This week, it also hired [former Gemini COO Noah Perlman]( as its Chief Compliance Officer. SECâs regulatory power grab
The Wells Notice on BUSD is the latest move that the SEC has made in what appears to be its attempt to be the overarching regulator of the crypto industry. The Commodity Futures Trading Commission (CFTC) has also been [jostling for the position]( lobbying the US Congress for the authority to oversee trading in tokens that arenât securities. Last week, crypto exchange Kraken [shut down its staking service in the US]( and paid a US$30 million fine to the SEC for failing to register the program. "When a company or platform offers you these kinds of returns, whether they call their services 'lending,' 'earn,' 'rewards,' 'APY,' or 'staking' - that relationship should come with the protections of the federal securities laws," SEC chair Gary Gensler [said]( last Thursday. (He appears to be addressing an audience that often confuses âstakeâ with âsteak.â) The SEC is also in the final phase of its two-year-long lawsuit against crypto remittance platform Ripple. The market watchdog alleges the firm was [selling its token, XRP, as an unregistered security](. However, Ripple says that XRP is not an investment contract as it is used as a [bridging asset]( for cross-border transactions between banks and other financial institutions. The Kraken crackdown, Ripple lawsuit, and the Wells Notice issued to Paxos together encompass the potential remit of the SEC. If Gensler had his way, heâd classify everything related to crypto as a security.
 --------------------------------------------------------------- â TO THE STARS Impactful developments and projects in Web3. 1ï¸â£Â [OpenSea competitor Blur releases native token](
The five-month-old NFT marketplace saw a trading volume of [US$2.5 million in the first 24 hours]( of its launch and is reportedly [raising funding at a billion-dollar valuation](. Blurâs highly anticipated blur tokens were airdropped on Tuesday. The project looks like itâs about to take to the moon, but at least two influencers, ([Doodhwala]( and [Matt Hussey]( have raised concerns that most of the tokens were airdropped to just three wallet addresses that have been trading NFTs back and forth with each other. 2ï¸â£Â [Quiz-to-earn app takes off in Indonesia](
Wild Cash, an app that pays users crypto tokens to take quizzes, has become an unexpected hit in Indonesia. Itâs been ranked number 1 in the trivia games category on Google Play, with 3 million monthly active users in Q4 2022 after launching on Binanceâs BNB Chain. 3ï¸â£Â [Hoptrail launches âsolvency transparencyâ index for centralized exchanges](
The Hoptrail leaderboard is used by the compliance teams in traditional finance and family offices to gauge risk as part of their crypto diligence processes. Deribit is ranked at the top with this new metric, scoring 100% for having extensive wallet disclosure, a merkle-tree audit, liabilities disclosure, user verification, a 1:1 solvency ratio, and a daily snapshot of its proof of reserves.
 --------------------------------------------------------------- MORE TO CHEW ON Stuff thatâs good to know. 1ï¸â£Â [A16z Crypto backs YGGâs $13.8m round to advance soulbound tokens](
[Yield Guild Games (YGG)]( a Web3 platform that rents [NFTs]( for use in blockchain games, said on Friday that it had sold US$13.8 million in [tokens]( to a group of investors led by [DWF Labs]( and [A16z Crypto]( - a Web3-focused fund managed by VC firm [Andreessen Horowitz](. YGG will use the funds to further develop its [soulbound reputation token](. 2ï¸â£Â [1 out of 4 tokens launched in 2022 are likely pump-and-dump schemes: Chainalysis](
24% of the 40,521 tokens launched in 2022 saw drastic price declines of 90% or more in the first week of trading. This indicates that the tokensâ originators dumped the tokens extremely quickly after launch and that they were likely pump-and-dump schemes. Further, only 445 individuals or groups accounted for these suspected pump-and-dump tokens, with the most prolific scammer launching 264 tokens. 3ï¸â£Â [Bitcoin NFTs exploding in popularity: BitMEX research](
Analysis by the crypto derivatives exchange shows that 13,000 Ordinals NFTs were minted between their debut on December 14 and February 7. Moreover, the number of Ordinals transactions - which involves attaching image data to the Bitcoin blockchain - follows a steep âhockey stickâ curve, indicating that NFT activity on Bitcoin has been exponential. [Not everyone is happy, though](. At least one prominent Bitcoiner has likened the NFTs to blockchain spam. 4ï¸â£Â [Most expensive NFT of 2022 was a US$12.4 million cryptopunk: NFTGo report](
Blue-chip NFTs such as CryptoPunks or Bored Apes Yacht Club (BAYC) were resilient in the bear market of 2022, according to the NFT Annual Report 2023 released by NFTGo. But with the most expensive NFT of 2022 being sold for 8,000 ether (US$12.4 million), the days of eye-popping NFT prices may be over - remember the US$69 million Beeple NFT in 2021?
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