Top Stories of Last Week

Regulatory

  • U.S. Sen. Elizabeth Warren gave Securities and Exchange Commission until end of month to figure out role in regulating cryptocurrencies in letter to SEC Chair Gary Gensler saying she needs answers by July 28.
  • SEC extended review of SkyBridge Capital’s application for First Trust SkyBridge Bitcoin ETF, extending initial 45-day review period to Aug. 25.
  • Vietnam’s Prime Minister Pham Minh Chinh asked State Bank of Vietnam to pilot cryptocurrency implementation from 2021 until 2023 after approving country’s e-government development strategy.
  • Argentina congressman José Luis Ramón presented bill to allow employees and service exporters to receive full or partial salary in cryptocurrencies. Project defines what Argentina treats as cryptocurrencies and other terms in crypto market. 
  • Hideki Murai of Liberal Democratic Party said Japan would soon have “clearer view” of what to expect from digital yen by end of 2022, saying more details on CBDC’s design may kick up debate on how issuance could impact financial institutions.
  • Bank of France carried out fifth experiment with CBDC conducted with LiquidShare and involved issuance and settlement of both unlisted and listed securities using blockchain technology.
  • Federal Police in Brazil arrested members and leader of Bitcoin Banco group Claudio Oliveira for alleged involvement in embezzlement scheme. Group is alleged to have embezzled R$1.5 billion (US$300 mil).
  • South Korean prosecutors indicted Lee Jung-hoon, former chairman of Bithumb Holdings, on charges of fraud. Lee allegedly stole $100 mil from chairman of BK Group during deal to negotiate acquisition of Bithumb Holdings.
  • Deputy governor of People’s Bank of China voiced concern stablecoins could pose risk to stability of global financial ecosystem, saying digital currencies pegged 1:1: to fiat currency had bank “quite worried ”and “may bring risks and challenges to the international monetary system, payments and settlement system.”
  • Israeli officials seized millions of dollars in cryptocurrency from addresses allegedly controlled by Hamas. 84 wallets held mix of cryptocurrencies, according to files from National Bureau for Counter Terrorist Financing, with estimates saying wallets held over $7.7 million in total.

Project Development

  • Ethereum’s London hard fork final release date was decided and is set to launch on mainnet Aug. 4 between 13:00 UTC and 17:00 UTC at block 12,965,000. Protocol update includes EIP 1559.
  • EY released layer 2 protocol focused on scaling Ethereum blockchain called “Nightfall 3,” which combines zero-knowledge proofs and aggregates transactions into rollups to lighten transaction load.
  • BlockFi launched Bitcoin rewards credit card, available to select approved customers on United States waitlist. BlockFi Rewards Visa Signature Credit Card allows recipients to earn 1.5% back in Bitcoin and rewards will be transferred to cardholders’ BlockFi Interest Account.
  • Square announced plans to build Bitcoin hardware wallet and has begun assembling team to handle project, according to Hardware Lead Jesse Dorogusker, emphasizing product is very much in drawing-board stage.

Institutional

  • Circle announced deal that values firm at $4.5 billion and will take it public by way of Concord Acquisition Corp, a publicly traded special purpose acquisition corporation. Circle’s deal with Concord anticipated to close in Q4 2021, and deal’s backers lined up additional $415 million of capital commitments from investors including Marshall Wace, Fidelity, ARK Investment Management’s Adage Capital and Third Point. 
  • Hedge fund Marshall Wace reportedly plans to start investing in digital assets, according to Financial Times, in areas such as blockchain technology, payments systems for digital currencies and stablecoins. Firm, which manages $55 billion, also intends to take stakes in privately owned digital finance companies. 
  • CoinShares agreed to buy Elwood Technologies’ ETF index business for $17 million in shares. ETF business was partnership with Invesco through Invesco Elwood Global Blockchain Equity UCITS ETF, and purchase also gives Elwood’s equity-research team to Coinshares.
  • N26, the Berlin-based neobank valued at $3.5 billion, planning to launch crypto trading tools as part of new marketplace initiative, according to German publication Finance FWD, which stated neobank’s customers will be able to trade Bitcoin and other cryptocurrencies by end of year.
  • First Midwest Bank Trust Division reported holding 29,498 shares of Grayscale Bitcoin Trust as of June 30. According to 13F SEC filing, bank purchased one lot of 20,655 shares and another lot of 8,843 shares of Grayscale Bitcoin Trust.
  • Bank of America created team dedicated to researching cryptocurrencies and related technologies, according to internal memo from Candace Browning, Bank of America’s head of global research. 

Exchanges

  • Cayman Islands’ financial regulator joined list of watchdogs globally scrutinizing Binance and its business dealings, stating “Binance Group and Binance Holdings Limited are not registered, licensed, regulated or otherwise authorized by the Authority to operate a cryptocurrency exchange from or within the Cayman Islands.” Additionally, Thailand’s SEC filed criminal complaint against exchange for allegedly operating in country without license.
  • Crypto.com will become UFC’s first official fight kit partner, with brand appearing on athletes’ kit worn both in and out of Octagon competition arena. Sponsorship is reportedly worth $175 million and will last over 10 years.

Fundraising

  • Revolut reportedly in “detailed talks” with SoftBank about fundraising round that could value firm between $30 billion and $40 billion.  Revolut and advisers have asked investors at SoftBank’s Vision Fund 2 to submit proposals for investment of between $750 mil to $1 billion with deal expected to be some weeks away. 
  • Index Cooperative closed $7.7 million funding round led by Galaxy Digital and 1kx. Group develops and oversees collection of structured DeFi products.
  • DeFi platform Zerion raised $8.2 million in Series A funding round led by Mosaic Ventures, with participation from Placeholder, Digital Currency Group, Lightspeed Venture Partners, Blockchain.com Ventures, and several others.

Defi

  • Aave announced plans to launch permissioned version of platform for institutional investors this month in partnership with Fireblocks. Aave’s institutional product “Aave Pro” intends to launch in response to “extensive demand from various institutions” and will only support BTC, ETH, AAVE, and USDC, with its pools segregated from Aave’s other deployments. 
  • Crypto lobby group Global DeFi Coalition called for well-balanced approaches to regulating DeFi sector in open letter to FATF’s executive secretary David Lewis, producing six guiding principles for governing DeFi organizations. Letter aims to help authorities avoid potential pitfalls by providing regulatory recommendations by industry, and coalition is comprised of ACCESS (Singapore), Bitcoin Association (Switzerland), Blockchain Association (U.S.), Blockchain for Europe, CryptoUK, and International Association for Trusted Blockchain Applications.

Things to Watch This Week

  • GBTC Unlock
    • A topic that has been garnering much interest and ink lately is the Grayscale Bitcoin Trust unlock, where over 16,000 BTC will be available on July 18th due to the release of the six-month lock-in period for GBTC shares. This will be the largest GBTC unlocking ever and these shares consist of positions that were locked in during January 2021. Much speculation has been focused on what this will mean for the price of Bitcoin when these shares become available, with JPMorgan analysts stating the event could pose a “downside risk.” However, several other reports have suggested that the trades which were completed 6 months ago were likely initiated to capture the GBTC premium that existed during that time, and were probably accompanied by a corresponding BTC short leg that, when unwound, would translate into buying pressure instead. We’ll be keeping a close eye on the run-up to the unlocking event that is to happen towards the end of this week.   
  • Paraguay Bill
    • Paraguayan Congressman Carlitos Rejala and Senator Fernando Silva Facetti plan to introduce a Bitcoin bill to Paraguay’s Congress on July 14th to formulate a digital asset strategy for the country. Some lawmakers have mentioned that it could follow in El Salvador’s lead in making Bitcoin legal tender, potentially making Paraguay the second country to propose doing so since El Salvador’s President Nayib Bukele announced his bill in early June. However, when pressed for comment, Congressman Rejala acknowledged the difficulty that approach would have in being implemented in his country this quickly. Nevertheless, it will be important to monitor the details of this bill when it comes out and the reaction it elicits from Paraguayans to determine whether the future holds promise for this outcome. Additionally, the momentum of a second country’s interest in, at the very least, becoming more crypto-friendly in regards to regulation could bode well for other countries to begin piling into the same boat. 
    • Adam Cochran@adamscochran
      1/25 What the invention of the internet can tell us about where web3.0 is going and how long it will take to get there.

      2/25 I saw this tweet that noted how even after 5 years of smart contracts it seems the decentralized web hasn’t really solved any fundamental problems at scale. Which in all honesty, is correct and expected.

      3/25 When we talk about the time it takes to change something at a global scale, 5 years from point 0 is a really small amount of time. It’s part of the reason that VCs put 10 year time horizons on their initial investments.

      4/25 Look at it this way. The core technology that makes up the internet was a stacking series of protocol research that dates back as far as 1945 with Vannevar Bush writing a conceptual article about Memex, the idea of following links between documents on microfiche.

      5/25 In the 1960’s Doug Engelbart prototypes the NLS hypertext system, in 1980s Tim Berners-Lee creates the ENQUIRE system to search through HTML pages and then in 1990 Berner’s-Lee starts building the core of his WWW system.

      6/25 Now we’re more than 30 years into a tech stack, but with no users yet. But a few more years of development among academics, and suddenly in 1994, you can get the first “Internet in a Box” product from O’Rielly.

      7/25 Consider this graph of internet users in millions per year. By the end of 1994, there were over 16M internet users or 0.4% of the world population. And that rate of growth has been slowly curving up for the last 27 years to now be 5.1B users, 65%~ of the world population

      Jason Choi@mrjasonchoi
      1/ When it comes to liquidly traded cryptoassets, my investment strategy can be summed up as follows:
      Image

      2/ First, some background: When I first started investing in crypto, I focused on making thesis-driven bets with a multi-month to year time frame. There wasn’t any real process besides finding what seems like a good project and buying it.

      3/ However, even after coming up with the most meticulous valuation models, market prices rarely seemed to reflect any of my fundamental projections. One of the reasons was no one can predict when adoption for new technologies happen, so growth assumptions are way off.

      4/ But more importantly, I was blindly applying equities analysis framework today to a market that was nascent and had no consensus around valuation approaches.
      READ MORE

      Tim Beiko | timbeiko.eth @TimBeiko
      … and it’s merged ! Expect client releases end of this week / early next week, and a proper announcement early / mid next week
      twitter.com/TimBeiko/statu…

      croissant@CroissantEth
      24 reasons $ETH is extremely undervalued… A thread by
      1. Smart Contracts A smart contract automatically executes code once specific terms are met It is the first form of programmable money to exist, & users can rely on it to create decentralized money legos free of censorship Lend, borrow, swap, & do much more with them!

      2. Stablecoins $ETH is home to many stablecoins which have grown tremendous use cases:
      $USDT: $62B
      $USDC: $25B
      $DAI: $5B
      $TUSD: $1.5B
      They are very popular for use in DeFi, & VISA will soon accept tx settlement in $USDC $USDC has grown from a $4B mcap, to $25B this year
      READ MORE

      Ryan Watkins@RyanWatkins_
      In the long-run DeFi protocols’ value will depend on three key variables:
      1) Global Reach
      2) Market Structure
      3) Pricing Power 
      These variables may not only determine just how high DeFi valuations may get, but also determine how much value DeFi captures relative to ETH. 1/

      Global Reach – DeFi protocols will scale more efficiently across the world than legacy financial institutions.

      Like the internet protocols we take for granted today (TCP/IP, HTTP), DeFi protocols are not beholden to any jurisdiction and are available everywhere. This allows DeFi protocols to reach far more users and achieve true internet scale like the Facebooks and Googles of the world.

      Market Structure – Will DeFi be a “winner-take-all / most” market? It’s unclear how many winning protocols there will be per vertical, or whether “everything protocols” may emerge that completely absorb their rivals.
      READ MORE

      Wu Blockchain@WuBlockchain
      After receiving warnings and investigations from 6 countries, CZ said: We know that we are at the tipping point. Binance have grown international compliance team by 500% since last year. We are committed to being compliant with appropriate local rules wherever we operate.
      binance.com/en/amp/blog/42…

      Tony Stewart@PelionCap
      These are the kind of markets where staring at the screen is pointless when you can collect theta, farm productive tokens; whatever, to get paid both financially and mentally while reading well-produced, essential research such as the @arca #GSEnotESG paper. Then act on it.

      Jeff Dorman, CFA@jdorman81
      We respond to the anti-Bitcoin #ESG rhetoric that ignores other digital assets besides #bitcoin and also conveniently dismisses the S&G (Social & Governance) which are staples of the digital asset revolution!

      Here’s our whitepaper

      ICO Analytics@ICO_Analytics
      Web traffic to crypto exchanges in June 2021. According to the data from SimilarWeb in June a cumulative web traffic to cryptocurrency exchanges has decreased by 42%

      Taylor Monahan@tayvano_
      Its the middle of August. EIP-1559 is here. The current Base Fee is `40.` For simplicity, and 0% of confidence in the future state of the network, let’s say there’s an equal probability that the base fee is any number between `30` and `50` if your TX is included in block….

      What TX fee do you use? Oh what’s that? You don’t have enough information? Okay fine.

      Background: Base Fee = Set by network, is burned, changes each block by <12.5%. You know the Current Base Fee (40). Tip = Set by user/wallet. Paid to miner. Max Fee = Set by user/wallet. Amt you send your TX with. Max you could pay.

      You pay the Future Base Fee—whatever it is—when your TX is mined. (You can only be mined if Max Fee – 1 < Future Base Fee.) You pay a tip. The tip is either Tip or (Max Fee – Future Base Fee), whichever is lower, so long as > 0. Get refunded anything that’s leftover.
      READ MORE

      Chainalysis  @chainalysis
      THREAD: Here’s a quick summary of the news of Israeli gov’s seizure of Hamas cryptocurrency donations.

      This is the first known terrorism financing-related cryptocurrency seizure to include such a wide variety of currencies, as Israeli authorities seized Bitcoin, ETH, XRP, Tether, and even Dogecoin.

      The Chainalysis Reactor Graph below shows how funds moved from donation addresses to addresses at a large crypto exchange, often passing through intermediary wallets and services. Many addresses were attributed to individuals involved in donor campaigns.
      READ MORE

      Sαlly W 嘎知 @sallywang666
      For those of you who’s wondering what this #China FUD is all about and what it leads to. First time coauthored with @jon_ftx talking about what our thoughts are and what messages China is delivering to the market —- Have a read! : )

      The “China Monetary Policy Implementation Report for Q1 2021” released by the PBOC in May 2021 set the tone for the next stage of the country’s monetary policy, clarifying that “a prudent monetary policy should be flexible, targeted and appropriate,

      put the service of the real economy in a more prominent position, cherish the normal monetary policy space, and handle the relationship between economic recovery and risk prevention.”

      At its speculative height, Chinese retail investors were pouring money into “hot assets” some of which were lower quality altcoins (e.g. LoserCoin, QiongB etc). Despite government warnings this hype spiralled and became a concern for officials.
      READ MORE

      Jeremy Allaire@jerallaire
      1/6 A separate thread on being a public company and increasing public transparency around USDC.

      2/6 As we partner with major companies and financial institutions, and as people around the world interact with USDC, becoming a public company is a critical step in providing greater transparency as a firm.

      3/6 As part of our transformation from private to public company, that also creates an opportunity for Circle to also provide significantly more transparency about the business we are building around USDC, and about the reserves that back USDC.

      4/6 Circle intends to become the most public and transparent operator of full-reserve stablecoins in the market today. With upcoming public filings, and new USDC reserve attestations, our intention is to provide a detailed summary of USDC reserves.

      5/6 Not only will all of Circle’s overall financial accounts be held to the highest standards of accountability, but ultimately all of these public disclosures will be held to the standards of the top financial regulator in the United States, the SEC.

      6/6 With scale and success comes greater expectations and the need for greater transparency. We also recognise that this is a journey, and that self-governance and regulatory models in this space will also evolve. We intend to be a leader throughout this.

      John Paul Koning @jp_koning
      Some interesting details about Circle, issuer of the USDC stablecoin, now that it is going public: circle.com/hubfs/investor… Circle forecasts 2021 revenues for USDC of $40 million. That’s on $35 billion USDC issued, which implies a pencil-thin 0.11% return on USDC’s investments.

      Of this $40 million in USDC revenue, Circle uses up $19 million on Ethereum fees & income sharing with third-parties. (And it still has to pay salaries and other expenses.) So USDC is not a terribly profitable business, one that is dependent on higher interest rates.

      Circle hints that USDC issuance could reach $190 billion by 2023. This is very aggressive. It would make USDC almost as big as Goldman Sachs Bank, which is currently the 13th largest US bank by deposits.

      One of the threats to USDC reaching $190 billion by 2023 is the government requiring an end to stablecoins’ hands-off approach to KYCing users. If all USDC users are subject to ID requirements, then a big driver behind the stablecoin growth story disappears.

      Circle hasn’t yet disclosed any additional information about its “approved investments,” which I wrote about here: coindesk.com/circle-is-not-… But I suspect we’ll learn more as it proceeds with its IPO and provides additional balance sheet information.