Top Stories of Last Week

Regulatory

  • FinCEN released proposed rule that would instill record keeping and reporting requirements for transactions by or to bank or money service business involving unhosted wallet. Proposed rule titled “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets” would subject transactions sent to self-hosted wallets and wallets held at financial institutions to heightened AML standards, calling for enhanced KYC requirements for withdrawals greater than $3,000. For transactions larger than $10,000, firms would have to report to FinCEN information pertaining to customer’s transaction and counterparty, including names and physical addresses to verify both parties’ identities. 
  • International Monetary Fund report titled “Reserve Currencies in an Evolving International Monetary System” concluded that dollar is safe for now, but authors said reserve currency landscape would likely shift and that private digital currencies could “emerge as important international currencies,” with libra/diem possibly becoming first example of global stablecoin. Additionally, global stablecoins could also increase demand for reserve fiat currencies they’re backed by. Paper theorizes that rather than be differentiated by macroeconomic factors, digital currency competition would differentiate along network lines and by users.
  • SEC charged Robinhood Financial with misleading customers on source of revenue and failing to secure best possible trades because its “largest revenue stream” came from trading firms paying Robinhood to handle execution. Payment for order flow partnership not disclosed to customers, SEC alleged, and it came at cost of best execution. Robinhood settled charges with $65 mil penalty.
  • U.K.’s FCA announced “temporary registration regime” for existing crypto businesses, which allows crypto firms that have applied for registration to continue operating until July 9, 2021. Previous deadline was January 10. Regulator said it is extending deadline as it could not assess and register all firms that have applied for registration “due to complexity and standard of applications received, and pandemic restricting FCA’s ability to visit firms as planned.”
  • Sweden’s government considering adoption of central bank digital currency e-krona. Riksbank finance committee launched review into prospects of moving country to digital currency, a study that will be completed in Nov 2022. Currently, Sweden’s central bank is running e-krona pilot project with Accenture Plc.

Project Development

  • Cboe Global Markets to launch cryptocurrency indexes as part of suite of tools in Q2 2021 via licensing partnership with execution provider CoinRoutes. Cboe will initially focus on providing indexes, historical data and real-time ticks data for high market cap cryptocurrencies, likely 10 or fewer top trading pairs to start. Rollout will come in three phases, with backfill of historical price data in Q1 2021. It will then begin distributing real-time price data to clients.
  • CME Group announced it would list Ethereum futures product next year. Product is coming to market February 8, subject to regulatory approval, will be cash-settled and based on firm’s CME CF Ether-Dollar Reference Rate. One contract will be equal to 50 ETH.

Exchanges

  • Coinbase Global Inc. filed confidentially with Securities and Exchange Commission to go public and expects its draft registration filing to become effective after SEC completes review process. Company didn’t provide further details of listing plans and representative declined to comment beyond announcement. Coinbase valued at more than $8 billion in 2018 after $300 million funding round led by Tiger Global Management. Company has raised more than $500 million from Andreessen Horowitz, Y Combinator and Greylock Partners, among others.
  • Mt. Gox’s trustee Nobuaki Kobayashi filed draft plan for rehabilitation of creditors including former users of exchange. Trustee’s announcement states: “Tokyo District Court and examiner will review the draft rehabilitation plan and determine whether to proceed with the rehabilitation proceedings relevant to the draft rehabilitation plan.” No details yet provided on plan.
  • OSL digital asset platform, a unit of Fidelity-backed BC group, has been officially licensed by Securities and Futures Commission of Hong Kong. New license allows OSL Digital Securities to operate regulated brokerage and automated trading services for digital assets. OSL Digital Securities’ digital asset trading platform will support major digital assets like Bitcoin and Ether, as well as select security token offerings, or STOs.

Institutional

  • Alan Howard of Brevan Howard Asset Management among backers of One River Asset Management, which is eyeing as much as $1 billion allocation to bitcoin and ether by early next year. CEO Eric Peters set up new company to capture institutional interest in major cryptocurrencies and said he’d bought “more than $600 million” in bitcoin and ether in November. Northern Trust will serve as fund’s administrator and Coinbase as initial trade execution and custody partner. 
  • Ruffer Investment Company sent update to shareholders notifying them of company’s allocation to bitcoin in Nov equivalent to around 2.7% of firm’s assets under management, totaling £550m ($744 million) or roughly 45,000 BTC. London-based investment manager stated in memo that strategy was “potent insurance policy against the continuing devaluation of the world’s major currencies.”
  • American Express invested in cryptocurrency trading platform FalconX via venture unit Amex Ventures, which invests in startups to stay on top of emerging spaces in payments ecosystems. Unknown how much was invested into FalconX, but development represents another step in AmEx’s exploration of cryptocurrency. 
  • SBI Financial Services acquired cryptocurrency trading firm B2C2 and will become first major financial group to run digital asset dealing desk. Financial terms were not disclosed. SBI has been allowing clients to trade through B2C2’s platform since July, when it acquired minority stake in crypto firm.

Mining

  • U.S. blockchain and AI infrastructure provider Core Scientific expanded fleet of crypto miners to over 77,000, comprising largest grouping of Bitmain Antminer S19 rigs outside of China. Core Scientific ordered additional 59,000 S19 and S19 Pro Antminers earlier this year. New order brings total computational power hosted with Core Scientific to 7.26 EH/s while using approximately 250MW of electricity at existing facilities in North Carolina, Georgia and Kentucky.

Fundraising

  • Paxos raised $142 million in Series C funding round to expand stablecoin offerings, white-label crypto brokerage services, and blockchain settlement from lead investor Declaration Partners, PayPal Ventures, RIT Capital Partners, and Ken Moelis. New cash brings total amount raised to more than $240 million. Firm plans to leverage new capital to lure Wall Street to settlement and crypto products and also plans to expand regulatory efforts by seeking national bank charter from Office of the Comptroller of the Currency. 
  • Banca Generali, a subsidiary of Italy’s largest insurer, is leading $14 million investment round in Conio, a crypto wallet provider. Commercial distribution agreement to start offering Conio’s services to Banca Generali customers in 2021 has also been signed. Prior to this round, Conio raised $3 million in seed investment and then $3.5 million round in mid-2018 from various investors.
  • Venture capital firm Bloccelerate closed $12 million fund to bet on both enterprise blockchain adoption and Ethereum-based financial applications. Fund will allocate 80% of equity investing in infrastructures enabling enterprise adoption, and other 20% will be invested in tokens of protocols.

Defi

  • Compound Labs released white paper detailing plans to create Compound Chain, an application-specific blockchain that can provide money market services across multiple networks. Compound Chain is reimagination of Compound Protocol as stand-alone distributed ledger, capable of solving limitations of interoperability efforts. Compound Chain’s native CASH token will be used to pay for transactions on network.

Things to Watch This Week

  • Bitcoin CME Futures December / Options Expiry
    • Although the end of this week will bring with it the beginning of the holiday period, it also coincides with the expiration of the CME Bitcoin Futures December contracts on December 24, followed by the expiration of other crypto exchanges’ futures contracts on December 25. The Bitcoin futures aggregate open interest currently sits above USD 8.7 billion, with the CME now holding just over USD 1.5 billion of that amount. A sizeable number of options contracts are also expiring on Christmas Day, particularly on Deribit where 80k contracts, or USD 1.85 billion, are set to expire. During a period when most would expect markets to quiet down, the aforementioned events coinciding with potentially lower volumes than usual due to the holidays could lead to sharp movements happening at any moment this week. It will be important to keep an eye on Bitcoin’s progress as it continues to break all-time high records.
    • Mira Christanto@asiahodl
      Exchange volumes up 5x compared to 3 days ago. Lots of new investors are coming in. Coinbase is seeing ~93% Fiat-to-Token volumes.
      messari.io/exchanges
      Mira Christanto @asiahodl
      Following Coinbase’s IPO announcement, we value the company at $28 billion. Coinbase is one of the most prominent exchanges with $1 billion daily volume in Dec-20. Check out our model and edit it to your own assumptions.
      messari.io/article/coinba…
      In our model, we split Coinbase’s business segments by trading fees, custody fees, debit cards and others. Trading: volume mostly comes from insitutional clients but average holdings per client is $703 Custody held $7bn in 2019, growing to $20bn in 2020
      Rohan Grey@rohangrey
      Some thoughts on @nic__carter‘s piece on regulating stablecoins:
      1. Nic is correct that “fiat-backed stablecoins are simply a crypto-native wrapper for commercial bank dollars.” That is exactly the problem.
      2. Nic is also correct that the *actual* debate we should be having is whether stablecoin issuers should be regulated via a new federal money transmitter charter or via updated bank chartering laws. What he gets wrong about the STABLE Act is that it specifically allows regulators to create new rules for narrow banks,
      coindesk.com/nationalizing-…
      READ MORE
      Winson Tang@winsontang
      #Bitcoin should be worth $400,000, based on its scarcity and value versus gold, according to #Guggenheim‘s #ScottMinerd
      businessinsider.com/bitcoin-should…

      dave the wave@davthewave
      Whereas I wouldn’t lighten up here much, I would *IF* price did a runner to something like this…

      … but indicators on the weekly are still favoring a correction.

      Ryan Sean Adams – rsa.eth @RyanSAdams
      This ain’t 2017
      2020 era tokens produce revenue
      When mainstream finance takes a look at crypto this bull cycle they’re in for a surprise
      These tokens are capital assets! This is how to analyze them using @tokenterminal
      Let’s front-run wall street
      bankless.substack.com/p/how-to-analy…

      Ryan Watkins@RyanWatkins_
      MicroStrategy now holds 40,824 bitcoins worth $797 million. MSTR has now made $322 million on the cumulative $475 million it invested in #Bitcoin

      The above doesn’t even include MSTR’s just completed $650mm convertible note raise whose proceeds will be used to buy BTC. This will take MSTR’s total BTC holdings well over $1 billion. Depending on the price it pays, MSTR could end up owning 0.4% of the circulating BTC supply.

      Jay_OKEX_CEO@JayHao8
      The correlation between S&P500 & #Bitcoin has reached the lowest in the past 6 months.
      Mr Blue@WillemKadijk
      JP Morgan on #Bitcoin prospects : “MassMutual $100m purchase is a milestone in Bitcoin adoption for pension funds and insurance companies. Possibly $600 billion in new demand for satoshi tokens assuming a 1% asset allocation”. I agree (Source Bloomberg)

      Joseph Young @iamjosephyoung
      This is a stunning bitcoin stat coming from JPMorgan strategists: “If pension funds and insurance companies in the U.S., euro area, U.K. and Japan allocate 1% of assets to Bitcoin, that would result in additional Bitcoin demand of $600 billion, the strategists said.”

      Where bitcoin would be by the next block reward halving in 2024, and what percentage of gold’s market cap it would eat up, is astonishing to think about.

      Bloomberg’s report on JPMorgan strategists talking about bitcoin bullishly this week.
      bloomberg.com/news/articles/…

      Hannah Murphy@MsHannahMurphy
      NEW: Evidence is emerging of what might become one of the most devastating cyber security failures on record A security flaw has enabled attackers (likely Russian) to break into the IT systems of “numerous” govts & companies, including several US agencies
      ft.com/content/3a635e…

      This according to FireEye, a US cyber security company that was itself a casualty of the attack They have found “government, consulting, technology, telecom and extractive entities in North America, Europe, Asia and the Middle East” were also hit
      fireeye.com/blog/threat-re…

      FireEye said the hackers took advantage of a flaw in products from US company SolarWinds, which offers network management software SolarWinds has acknowledged the flaw, and says it’s investigating but has not said how many of its customers may have been exposed

      The US cyber agency issued an emergency directive ordering federal agencies to disconnect SolarWinds’ products:
      cyber.dhs.gov/ed/21-01/
      SolarWinds’ client list also includes UK defence agencies, the NHS, the European Parliament, plus US govt & military:
      solarwinds.com/federal-govern…

      Ellie Frost@BlockBytch_
      Who are the investors backing Michael Saylor’s big play into Bitcoin? And how did he convince them? 1 / A thread 

      2/ Russell Investment is the 8th largest shareholder in MicroStrategy (~2%). They’ve their position 70%+. They’ve bullishly blogged on BTC since 2018 with quotes like…

      3/ “While many are questioning Bitcoin’s foundations, perhaps even more importantly, Bitcoin is questioning the foundations of the central banks.”
      READ MORE