Top Stories of Last Week

Regulatory

  • SEC filed lawsuit against Ripple Labs, stating they violated federal securities laws in selling XRP to retail consumers. Ripple raised $1.3 billion over seven-year period to retail investors through sale of XRP on an ongoing basis. Impact could be wide-ranging, as several exchanges list XRP in U.S., and if SEC prevails, platforms that continued to list crypto may have to register as securities exchanges.
  • Presidential Working Group on Financial Markets published report detailing how it views retail payments using stablecoins and asking for public feedback on issue. According to document, stablecoins should meet same regulatory standards as other aspects of financial system, in that “associated risks may require additional safeguards. We encourage relevant participants engaged in the design of such stablecoin arrangements and their functions, operations, transactions, and risk management to align with key principles.” Working group includes Treasury Secretary Steven Mnuchin, Federal Reserve Chair Jerome Powell, Securities and Exchange Commission Chair Jay Clayton and Commodity Futures Trading Commission Chair Heath Tarbert. 
  • SEC announced it would let crypto-focused broker-dealers operate for five years without fear of enforcement action provided they can verify they have possession and control of customers’ digital asset securities. SEC is looking for feedback on proposal, which comes after months of industry requests for clarity around issue. Securing broker-dealer registration would let companies offer securities for trading in U.S., including security tokens. 

Project Development

  • Puerto Rico-based FV Bank, a digital challenger bank, is launching custody service for digital assets from early 2021 after receiving permission from Puerto Rico Office of Commissioner of Financial Institutions. FV Bank has chosen custody tech infrastructure partner, but name has not been made public yet. FV Bank’s regulated custody offering also comes with $20 million-worth of insurance cover, sourced from Lloyd’s of London market.

Institutional

  • Christopher Wood, global head of equity strategy at investment firm Jefferies, reportedly cut exposure to gold for first time in years in favor of bitcoin. Wood said he will be cutting gold position in long-only asset allocation for U.S.-dollar-based pension funds to 45% from 50% and initiating a 5% holding of bitcoin. Wood also said he’d add more BTC to fund should cryptocurrency drop significantly.
  • Anthony Scaramucci announced Skybridge has invested $25 million in in bitcoin in fund called SkyBridge Bitcoin Fund L.P. during interview with CNBC, and that new investors can participate starting Jan. 4 2021. Fidelity Digital Assets was announced as custodian.
  • MicroStrategy said it had purchased an additional 29,646 bitcoin, worth about $650 million, taking total bitcoin purchase to more than $1 billion. MicroStrategy raised $650 million via senior convertible notes earlier this month, and all that amount has been utilized to buy bitcoin. MicroStrategy now holds total of 70,470 bitcoin, purchased at an average price of about $15,964.

Exchanges

  • Coinbase asked U.S. Treasury Department to extend comment period on proposed KYC requirements from 15 days to typical 60 days normally afforded such proposals. Coinbase noted FinCEN asked for comments on 24 questions, each requiring detailed analysis and extensive cost assessments, and “addressing all of the questions FinCEN has posed and the additional issues FinCEN has not yet considered would take much longer than 15 days.”
  • Bitwise liquidated $9.3 million worth of XRP in Bitwise 10 Crypto Index Fund shortly after SEC sued Ripple Labs Inc. for conducting unregistered and ongoing securities offering. Prior to sale of asset, XRP was approximately 3.8% of fund, which was reinvested in other portfolio assets. Additionally, OSL, a digital asset trading and brokerage platform in Hong Kong, announced it is suspending trading in XRP due to SEC action. 
  • Huobi Group trust license has been approved by Nevada Financial Institutions Division for subsidiary Huobi Trust Company. License will enable company to offer custodial and compliance services in U.S. market early in 2021. Huobi US ceased operations in December 2019 citing regulatory concerns and need to take steps in making businesses more compliant with U.S. laws and regulations. 

Mining

  • Bitmain expected to undergo major spinout process as solution to end year-long internal power struggle between co-founders Wu Jihan and Zhan Ketuan, who have been negotiating since September. Zhan agreed to pledge his Bitmain shares to borrow $600 million and buy out Wu’s ownership stake, with Wu taking BitDeer, BTC.com and overseas mining farms while Zhan will take charge of Bitmain’s manufacturing and AI businesses, Antpool, and domestic mining farms.
  • Mining firm Linzhi Inc. has begun rolling out new Ethereum ASIC miner dubbed Phoenix, reportedly three times more powerful than top options available. Mining pool F2 Pool released demo of new machine on YouTube, and Phoenix allegedly outpaces next best A10+ Pro at 2,600 MH/s.
  • Riot Blockchain announced purchase of 15,000 additional mining ASIC machines from Bitmain, pushing total number of machines ordered by mining company to over 31,000 in 2020. Miner expects expanded hashrate capacity of 3.8 EH/s in 2021, a 65% increase from current 2.3 EH/s capacity.
  • Bitfarms announced deployment of 1,000 Whatsminer M31S mining machines with another 3,000 set to be deployed in Q1 2021. Mining capacity expansion is set to push Bitfarm’s hashrate above 1.2 EH/s.

Fundraising

  • Hashed Ventures, Inc. raised $120 million for fund that will be focused on new era of distributed networks. Company declined to disclose investors, but indicated that backing came primarily from Korea’s information technology firms and other conglomerates. 
  • SEBA Bank raised 20 million Swiss francs ($22.48 million) in Series B funding round, saying investment primes company to boost product offerings, as well as accelerate growth and international expansion. Company said it plans to tokenize shares of Series B round once expected Swiss blockchain law comes into force. SEBA offers cryptocurrency trading as well as custody services and a platform for issuance and management of tokenized securities.
  • Flexa Network completed additional raise of $6 million in private sale of AMP token and infrastructure overhaul of crypto payment platform co-developed with ConsenSys. Newly disclosed investors include Compound Finance founder Robert Leshner’s Robot Ventures II, Starwood Capital’s Barry Sternlicht, AlpInvest founder Volkert Doeksen and Innopay founder Douwe Lycklama.

Defi

  • Injective Protocol, a decentralized derivatives exchange platform, launching trading in tokenized stocks of companies using Band Protocol’s oracle technology to provide decentralized price data for market. Second collaboration with payments firm Terra will provide historical price data from outside traditional market hours, allowing trading around the clock.

Other

  • Hacker allegedly behind breach of personal data from hardware wallet Ledger in June has made all information they obtained available online. This reportedly includes 1,075,382 email addresses from users subscribed to Ledger newsletter, and 272,853 hardware wallet orders with information including email addresses, physical addresses, and phone numbers.
  • Rapper Lil Pump, with 25 million social media followers, is latest celebrity to dip into realm of social tokens with listing of “PumpCoin” on social money platform Fyooz, following Lil Yachty crypto playbook of token sale on Fyooz and subsequent NFT auction on Nifty Gateway. PumpCoin will give fans exclusive access to singer with opportunity to play Call of Duty or NBA 2k21 live and 1:1 with Lil Pump.

Things to Watch This Week

  • FinCEN KYC Comment Period Deadline
    • This week, we should have some more indication as to whether an extension will be given for the public comment period of FinCEN’s self-hosted wallets KYC proposal. The U.S. Treasury’s proposed new rules aim at closing anti-money laundering regulatory gaps for convertible virtual currency and digital asset transactions by requiring money service businesses to collect identifying information associated with all wallet addresses. With only 15 days given after the initial announcement, a range of efforts by industry members, including D.C.-based outfits like Coin Center and the Blockchain Association, as well as exchanges such as Kraken and Coinbase, are lobbying for the typical 60 days normally afforded such proposals. This deadline extension decision could be a factor in market volatility this week, as it could mean the difference between delaying a rushed ruling by an outgoing administration attempting to bypass the required public consultation.
  • XRP Exchange delistings
    • On another regulatory front, Coinbase and other exchanges will be faced this week with the decision of whether to delist XRP from their offerings due to the SEC’s lawsuit alleging XRP is an unregistered security issued by Ripple Labs. Several entities have already begun to disassociate themselves from XRP, such as Bitstamp, B2C2, Bitwise, OSL, Galaxy Digital, and Jump Trading, among others. If the SEC prevails in its lawsuit, XRP may be classified as a security, meaning entities offering it for trading must register as securities exchanges. Further news of exchange delistings could not only affect the price of XRP, but other altcoins as well, as they would have to consider whether they are at risk of similar regulatory action. Coinbase, in particular, is in an interesting position currently due to its impending IPO, and their interest in eliminating anything the SEC views as a potential risk factor might force them to take action sooner rather than later.
    • Caitlin Long @CaitlinLong_
      WOW–#crypto lawyers will be EVEN BUSIER over the break (as if the Mnuchin rule, SEC v Ripple & CSBS v OCC lawsuits weren’t enough…). There are weeks when decades happen, as they way. For crypto law, this is one of those weeks

      Drew Hinkes@propelforward
      #SEC issued a statement /request for comment re: #digitalasset custody; 5 year relief if BD deems itself to have obtained &maintained physical possession or control of customer fully paid & excess margin digitalasset securities under (b)(1) of Rule 15c3-3.

      https://sec.gov/rules/policy/2020/34-90788.pdf…

      Image

      2/ PS–I suspect both SEC moves this week are tied to @coinbase‘s IPO filing, which will force the open questions re: which cryptos are securities to be answered in 2021. As mentioned earlier, IMHO the SEC will be one of (if not *THE*) most important players in US #crypto in 2021

      4/ OVERALL this is positive from the SEC bc it’s enabling rather than restrictive (ie, if a b/d does these things, it’ll be safe). WOW–do I ever see common themes btwn SEC’s expectations & #Wyoming‘s digital asset rules.

      Jake Chervinsky@jchervinsky
      The President’s Working Group on Financial Markets has issued a statement calling for *on-chain* stablecoin KYC: “[Stablecoins] should have the capability to obtain & verify the identity of all transacting parties, including for . . . unhosted wallets.”
      https://home.treasury.gov/news/press-releases/sm1223
      Soona@soonaorlater
      It’s that time of year again: Announcing the 2021 @tokendaily Crypto Crystal Ball. We asked builders and investors in the space to play industry fortune tellers for this post – here’s the full compilation of their predictions
      https://medium.com/tokendaily/the-2021-crypto-crystal-ball-fac70de8aac3
      Palley@stephendpalley
      So, this Ripple lawsuit, let’s talk about it, shall we?

      The SEC begins this Complaint with a little bit of history, demonstrating that in their view of history XRP & Ripple were pretty much the same thing at the outset.

       
      Ohhhh, they also got legal advice that it was probably a securities offering (and thus need to be registered). Curious to know how that memo came into the hands of the SEC. That’s an ouch.

      Image

      Katherine Wu@katherineykwu
      As requested- my annotated guide to reading and understanding the SEC complaint against Ripple

      2020 has truly broken my brain but ty lovely people for encouraging me to put on my analytical hat again- hope this helps! Plus some quick thoughts here :
      https://www.katherinewu.me/writings/sec-ripple-lawsuit

      Mira Christanto@asiahodl
      Whatever the U.S. SEC says, regulators around the world will follow.
      Hong Kong is fast to act.
      Japan, Korea & Philippines as the largest Ripple markets.
      Korean exchanges: $XRP is 2nd largest (see chart)
      Japan: SBI is a key supporter
      Phils: 2nd most active is $XRP spot
      twitter.com/osldotcom/stat…

      CaseBitcoin@case4bitcoin
      1/ The Bitcoin story this year has been dominated by institutional investors taking positions in BTC, or expressing supportive views. This includes traders/investors such as Stan Druckenmiller and Paul Tudor Jones, plus large firms such Blackrock and Guggenheim. A summary: 

      2/ These are all $1B+ money managers, and we track their BTC comments & allocations here: casebitcoin.com/money-manager-…
      First in the list is Paul Tudor Jones, with his May macro update calling bitcoin the “fastest horse” to benefit from the post-covid macro environment.
      READ MORE

      glassnode@glassnode
      1.78 million bitcoins have never left their miner address. That is 9.5% of the circulating #Bitcoin supply. Our analysis shows that 98% of those coins were mined more than 7 years ago, and 94% more than 10 years ago. Most could be lost forever.
      studio.glassnode.com/metrics?a=BTC&…

      Tarun Chitra@tarunchitra
      Paper Alert
      Q: Have you wondered about math for the following? a) Optimal token qty to emit for yield farming incentives b) Hedging impermanent loss w/ options c) When do LPs not get rekt? A: New paper from moi, @alexhevans@GuilleAngeris
      https://arxiv.org/abs/2012.08040

      We highlight how to relate hedging costs and optimal yield farming in our final blog post 1. Greeks (∆, Γ, not @gakonst) are bounded by the curvature of the impact function 2. Curvature of CFMM controls how much you need to pay to avoid attacks
      READ MORE

      Michael Saylor@michael_saylor
      Replying to @elonmusk
      If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to #BTC. Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1 trillion favor.
       
      Elon Musk@elonmusk
      Are such large transactions even possible?
       
      Michael Saylor@michael_saylor
      Yes. I have purchased over $1.3 billion in #BTC in past months & would be happy to share my playbook with you offline – from one rocket scientist to another.