Top Stories of Last Week

Regulatory

  • U.S. Reps Tom Emmer, Darren Soto and Ro Khanna reintroduced Securities Clarity Act that would treat digital assets as commodities, not securities. Addition of Democratic co-sponsors may aid bill’s passage through Democrat-controlled House of Representatives.
  • U.S. Federal Reserve Chair Jerome Powell said he was undecided on whether benefits of central bank digital currencies outweigh costs, and that “the more direct route” would be to regulate stablecoins.
  • SEC pushed decision on WisdomTree’s Bitcoin ETF application to autumn, joining application filed by VanEck in waiting process for potentially approving ETF.
  • European Central Bank announced decision to launch investigation phase of digital euro project, saying it will look at how digital euro could be designed and distributed to everyone in euro area. Phase planned to last for two years.
  • Police in U.K. seized £180 million ($250 million) worth of cryptocurrency as part of money-laundering probe by detectives in Economic Crime Command division of Metropolitan Police.

Project Development

  • Square will create new business focused on creating “open developer platform” to make it easier to provide non-custodial, decentralized financial services, according to CEO Jack Dorsey. Initiative would be “open roadmap, open development, and open source” and would be establishing Twitter and Github accounts to provide updates on project.

Institutional

  • Investment firm J.C. Flowers agreed to buy 30% of LMAX Group for $300 million in cash. Stake values LMAX at $1 billion and will allow J.C. Flowers to accelerate growth of its foreign-exchange and crypto-asset businesses. LMAX operates five exchanges globally and started LMAX Digital, an exchange for spot crypto that has more than 500 institutional clients, in 2018.
  • S&P Dow Jones Indices rolled out five cryptocurrency index products, headlined by Broad Digital Market, or BDM, index that includes over 240 coins. Other indexes include: Crypto LargeCap, BDM Ex-MegaCap, BDM Ex-LargeCap and Crypto LargeCap Ex-MegaCap.
  • Grayscale Investments further signaled intent to turn GBTC into ETF by announcing BNY Mellon will handle accounting and administrative services for GBTC starting in October. Relationship will eventually morph into transfer agent and ETF services provider for converted GBTC ETF.
  • A division of asset management firm Capital Group conducted 12.2% purchase of MicroStrategy’s common stock, where Capital International Investors bought 953,242 shares of 7,782,568 outstanding. Purchase gives Capital Group, an asset manager with $7.6 billion in annual revenue and $2.3 trillion in assets under management, indirect exposure to Microstrategy’s 105,000 bitcoin reserves.
  • Fidelity Digital Assets plans to increase headcount by around 70% in anticipation of growing institutional demand for crypto services, according to Tom Jessop, who said firm is looking to add around 100 staff in Dublin, Salt Lake City and Boston.
  • Bullish set for public listing through merger with special purpose acquisition company Far Peak Acquisition, led by former NYSE President Thomas Farley. Deal expected to be completed by end of 2021 and will see Bullish list on NYSE at equity value of $9 billion, subject to value of assets when deal closes.
  • SelfWealth, one of Australia’s largest non-bank online brokers with 95,000 investors, looking to add crypto to platform. Company in discussions with cryptocurrency exchanges in bid to add functionality for trading up to 10 cryptocurrencies by year’s end.

Mining

  • Bit Mining raising $50 million through private placement to fund expansion out of Chinese market in response to crackdown on crypto mining, noting plans to “acquire additional mining machines, build new data centers,” and expand infrastructure.

Fundraising

  • Revolut raised $800 million in funding round led by SoftBank and Tiger Global Management and was valued at $33 billion, six times Revolut’s $5.5 billion valuation in February 2020. Revolut intends to use funds to boost offering to U.S. customers and expand into other international markets.
  • Axelar, a decentralized protocol designed by founding members of Algorand blockchain, raised $25 million in Series A funding round led by Polychain Capital. Other investors include Dragonfly Capital, Galaxy Digital, North Island Ventures, Robot Ventures, Collab+Currency,  Cygni Capital, Lemniscap and Divergence Ventures, among others.
  • Sorare expected to announce $532 million raise at valuation that could exceed $3.8 billion, led by SoftBank and Atomico, a venture firm, will also take part.
  • Blockchain security firm CertiK raised $37 million in Series B round led by Coatue Management and Shunwei Capital, with participation from Coinbase Ventures.
  • Clipper, a DEX that caters to retail traders, closed $21 million funding round led by Polychain Capital and included 0x Labs, DeFi Alliance and MetaCartel DAO. Clipper uses AMM that promises to offer guaranteed best prices for retail-sized trades under $10,000. 

Defi / NFT

  • ShapeShift closing its doors and turning into DAO controlled by holders of FOX token by airdropping 340 million tokens to all past users of ShapeShift (around 900,000 addresses) and 120,000 addresses of other DeFi protocols.
  • DeFi Education Fund, an organization funded by Uniswap to spearhead lobbying and educational initiatives, facing controversy after sudden move to liquidate half its UNI treasury. Organization said it needed to convert funds into stable assets to weather market volatility.
  • Uniswap announced alpha launch of Uniswap v3 on Optimistic Ethereum mainnet. Alpha launch is limited version of full system which helps developers deploy system gradually and address issues that may arise.
  • Nifty’s NFT platform announced partnership with Warner Bros. to launch collection of limited-edition NFTs featuring characters from upcoming movie Space Jam: A New Legacy. Space Jam NFTs were developed with technology of Palm NFT Studio by ConsenSys.

Things to Watch This Week

  • Federal Regulators Meeting on Stablecoins
    • U.S. Treasury Secretary Janet Yellen announced last week that the President’s Working Group on Financial Markets, the Treasury, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation will meet Monday to discuss stablecoins, in particular to “collaborate on the regulation of this sector and the development of any recommendations for new authorities.” This followed the statement last week by Federal Reserve Chairman Jerome Powell saying that proper regulation of stablecoins would be a “more direct solution” to U.S. payments than the Fed’s issuance of a central bank digital currency. This meeting will be important to monitor for an indication of whether regulatory clarity will be given in the near future. Comments from the meeting will be examined thoroughly and could be the catalyst for markets that have been seesawing within a tight range to react and lead to a broader directional movement. 
  • The B Word
    • This week will also see “The B Word” conference hosted by Jack Dorsey of Twitter and Square and ARK Invest’s Cathie Wood, which is slated to begin July 21. Although not yet confirmed since it was agreed to last month, the conference could potentially see a debate between Dorsey, one of the largest supporters of Bitcoin, and Elon Musk, a once-supporter turned critic, as its headlining event. Musk’s controversial outspokenness about Bitcoin as well as the market reactions that his comments have had in recent times will warrant monitoring should he attend the event. Additionally, the conversation between the two CEOs will potentially give more insight into the future plans surrounding the involvements that their companies have in the Bitcoin and cryptocurrency space, ranging from the recent open-source Bitcoin development initiative announced by Square to the Bitcoin Mining Council that Musk had a hand in initiating with MicroStrategy’s Michael Saylor. 
    • SBF@SBF_Alameda
      1) Do you feel bullish?

      3) Alright, so what’s going on with Bullish? Well really it’s two different companies combined into one. It’s an exchange, and it’s a pile of crypto. About $6B of crypto and USD:

      4) It’s SPACing at $9B, so that means $3B is the exchange if you value the crypto at market prices. So, what _should_ Bullish, the exchange, be worth?

      5) Well, they have a website, and a Twitter, but neither of those are going to help much: https://bullish.com https://twitter.com/Bullish

      6) As I understand it, Bullish is basically: a) build a centralized crypto exchange b) Require KYC c) write trades etc. to EOS blockchain c) have an AMM that provides on the exchange with the $6b of crypto Bullish owns d) let users provide in the AMM too (it’s not live yet)

      7) So basically, Bullish going to is a standard exchange, except that it’ll use it’s $6b of capital to provide a bunch of liquidity. Is that worth $3B? You can be the judge of that.
      READ MORE

      William Clemente III@WClementeIII
      User growth is doing the exact opposite of what it has following each major Bitcoin bull run peak. Without any euphoric spike that we’ve typically seen, net user growth just continues to grind higher.

      Caitlin Long @CaitlinLong_
      1/ THREAD ABT REGULATORY NEWS in #crypto, which I’ve been chronicling on twitter since April. Seems crackdown has begun. I dunno how it’ll turn out but: * it won’t impact #BTC #ETH etc directly. Base layers will keep addin’ blocks * it’ll impact intermediaries & US$ access points

      2/ Today was a key event that few in #crypto were probably watching, but it REALLY matters: the comment period ended for the Fed’s proposed payment system access guidelines. See comment letters here (including @AvantiBT’s 18-page tome–awaiting upload): https://federalreserve.gov/apps/foia/ViewAllComments.aspx?doc_id=OP-1747&doc_ver=1…

      3/ Why does it matter? Fed guidelines are partly aimed at #crypto (despite not mentioning crypto even once). Given what’s happening w/ US$ #stablecoins, the guidelines are esp relevant (see WSJ story last wk-FSOC wants Fed to regulate stablecoins per “ppl familiar w/discussion”)

      4/ So what are the guidelines? They set principles for depository institutions to be able to access the Fed & its US$ services directly. **I’VE BEEN WORKING TO OPEN UP DIRECT ACCESS FOR OUR INDUSTRY SINCE 2018.** Yep, playing the long game.

      5/ Why does such direct Fed payment system access matter? Let’s go back to first principles. Many start-ups in our industry were de-banked in Fall 2017 when banks did mass closures of bank accts connected to #crypto. Didn’t matter whether biz was legit or scam–all were de-banked
      READ MORE

      Kerman ノ@kermankohli
      Had a ton of fun writing this article about @indexcoop and how it’s designed its contributor experience. If you’re interested in DAOs, this should be a read on your list to understand the inner workings of it all:
      defiweekly.substack.com/p/understandin…

      Hayden Adams @haydenzadams
      1/  It’s happening  Instant transactions and a steady increase in scaling w/ the end goal of fully meeting demand for low cost, high speed DEX trading  All built on Ethereum and preserving decentralization

      2/ Building general purpose Optimistic Rollups is an extraordinary undertaking and a critical step for decentralized finance to gain mass adoption Huge shoutout to the magicians at @optimismPBC for all their incredible work
      READ MORE

      Storms@austorms
      My main takeaways:
      1) There’s a LOT of capital earmarked for ESG friendly companies.
      2) ESG standards are subjective, opaque, and amorphous.
      3) #Bitcoin miners who are ESG friendly will likely have a funding/lending advantage over those who aren’t(!)
      4) Bitcoin should compete with gold, real estate, etc. and not directly with the dollar – we should pick our battles.
      5) We all want 7.5B ppl to have access to #Bitcoin.
      6) It will become increasingly important to frame #Bitcoin mining and its energy usage as non-rival.
      7) The BMC isn’t here to appease anyone and isn’t developing industry ESG standards. The short-term effects of ESG standards applied to #Bitcoin mining are increased access to capital and (potential) mitigation of political risk. Long-term effects remain to be seen.

      Jackson Palmer @ummjackson
      I am often asked if I will “return to cryptocurrency” or begin regularly sharing my thoughts on the topic again. My answer is a wholehearted “no”, but to avoid repeating myself I figure it might be worthwhile briefly explaining why here…

      After years of studying it, I believe that cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificially enforced scarcity.

      Despite claims of “decentralization”, the cryptocurrency industry is controlled by a powerful cartel of wealthy figures who, with time, have evolved to incorporate many of the same institutions tied to the existing centralized financial system they supposedly set out to replace.

      The cryptocurrency industry leverages a network of shady business connections, bought influencers and pay-for-play media outlets to perpetuate a cult-like “get rich quick” funnel designed to extract new money from the financially desperate and naive.

      Financial exploitation undoubtedly existed before cryptocurrency, but cryptocurrency is almost purpose built to make the funnel of profiteering more efficient for those at the top and less safeguarded for the vulnerable.

      Cryptocurrency is like taking the worst parts of today’s capitalist system (eg. corruption, fraud, inequality) and using software to technically limit the use of interventions (eg. audits, regulation, taxation) which serve as protections or safety nets for the average person.

      Lose your savings account password? Your fault. Fall victim to a scam? Your fault. Billionaires manipulating markets? They’re geniuses. This is the type of dangerous “free for all” capitalism cryptocurrency was unfortunately architected to facilitate since its inception.

      But these days even the most modest critique of cryptocurrency will draw smears from the powerful figures in control of the industry and the ire of retail investors who they’ve sold the false promise of one day being a fellow billionaire. Good-faith debate is near impossible.

      For these reasons, I simply no longer go out of my way to engage in public discussion regarding cryptocurrency. It doesn’t align with my politics or belief system, and I don’t have the energy to try and discuss that with those unwilling to engage in a grounded conversation.

      I applaud those with the energy to continue asking the hard questions and applying the lens of rigorous skepticism all technology should be subject to. New technology can make the world a better place, but not when decoupled from its inherent politics or societal consequences.

      European Central Bank@ecb
      (THREAD) We have decided to launch a project to prepare for possibly issuing a digital euro. We will look at how a digital euro could be designed and distributed to everyone in the euro area, as well as the impact it would have
      ecb.europa.eu/press/pr/date/… 1/3

      Our experimental work has already allowed us to identify possible ways to protect privacy. It has also shown that the energy needs of the infrastructure would be negligible compared with the energy consumption and environmental footprint of crypto-assets, such as bitcoin 2/3

      A digital euro will be successful if it adds value for people, merchants and financial intermediaries in the euro area, says Executive Board member Fabio Panetta explaining the latest decision in The ECB Blog.
      Read it here ecb.europa.eu/press/blog/dat… 3/3

      Jameson Lopp@lopp
      China’s share of Bitcoin hashrate declined from 75.5% in September 2019 to 46% in April 2021. The USA’s share of hashrate increased from 4.1% to 16.8%, putting it in second place. This is BEFORE the restrictions recently imposed by China.
      jbs.cam.ac.uk/insight/2021/n…

      Alex Krüger @krugermacro
      When it comes down to inflation, most of it is in fact transitory. Pundits joke about it. The same pundits who don’t understand that inflation is a rate of change. Prices are supposed to increase on aggregate. Price increases are indeed not transitory. High inflation likely is.

      High inflation is likely transitory because – central banks’ reserves creation is slowing down – supply-side bottlenecks are temporary – population is ageing – household savings will mean revert (less $ to spend) – employers will hire less than before (limited wage pressures)

      jack@jack
      Square is creating a new business (joining Seller, Cash App, & Tidal) focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services. Our primary focus is #Bitcoin. Its name is TBD.

      Like our new #Bitcoin hardware wallet, we’re going to do this completely in the open. Open roadmap, open development, and open source. @brockm is leading and building this team, and we have some ideas around the initial platform primitives we want to build.

      How is this different from @SqCrypto? Square doesn’t give direction to @SqCrypto, only funding. They chose to work on LDK, and are doing an incredible job! TBD will be focused on creating a platform business, and will open source our work along the way.

      We’ll set up Twitter and github accounts soon and update this thread on where to find them.

       

      dave the wave@davthewave
      Monthly Bollinger Band Width and the MACD Time-wise, may only be looking out to the end of this year for the correction to be complete…

      Price currently 61% of way to *target*…

      Kyle Samani@KyleSamani
      0/ DeFi derivatives Probably the single most important question in DeFi over the next few years A thread on how we’re thinking about it

      1/ In order to really understand how DeFi derivatives are going to play out, you first need to understand CeFi derivatives And of course, the case study for that is @FTX_Official

      2/ Fun fact: we passed on the FTT seed round in Spring 2019. Oof Why? Because we thought it was impossible to compete with @binance This was just a few months after we published our initial BNB paper, so we were a little blind But, what did we miss?
      READ MORE

      Ari Paul @AriDavidPaul
      A quick thread on the current state of crypto regulation. This is going to be broad and superficial, probably nothing terribly surprising. @coincenter should be your go-to source for reliable, insightful, and minimally biased info. Will touch on ETFs, defi, Diem, and more. /1

      2/ On US ETFs – everyone is just guessing on possible timeline. SEC likely doesn’t have concrete plan. Most likely path is that first we get more law/regulation related to exchange oversight, then ETF proposals get seriously considered.

      3/ Defi – not on the SEC agenda for rulemaking in next quarter, probably not in next 2-3 quarters. And…it’s unclear if SEC thinks new regulation is even needed, or if existing rules cover it. Lack of new regs doesn’t mean lack of enforcement however.

      4/ we shouldn’t be surprised at possible SEC enforcement against defi in next 6 months, but likely to be similar to SEC actions in the past – targeting the worst actors, and very carefully picking a few high profile cases that might be mild in result (like BlockOne settlement).

      5/ to be clear – I have no hard data on possible defi enforcement. I’ll be surprised if we get anything terribly disruptive in the next 6 months, but maybe some scary headlines.

      6/ offshore exchanges and tether: lots of regulatory bodies looking at this from many angles today: SEC cares about trading of unregistered securities, CFTC cares about registration of deriv exchanges. DoJ/FINCEN cares about money laundering.

      7/ So many agencies running so many investigations, I’ll be surprised if we don’t get some action in the next year on an offshore exchange or two, but no idea what form that will take. Could be relatively mild like Bitmex principals indictment last year.

      8/ Facebook’s Diem project – likely launches this year. IMO, not really a cryptocurrency project (not a criticism). Will run on own blockchain, but likely only “hosted” wallets for forseeable future. Likely a slow and understated rollout.

      9/ Congress is treating ransomware somewhat seriously, there’s pressure to appear to do *something.* No idea what form that could take. Not scared of this at the moment, but that could change.

      10/ TLDR: most likely major regulatory action that would impact broader crypto industry is likely against offshore exchanges, but I can’t predict severity (and not even sure anything will happen on this in next year.)