Top Stories of Last Week

Regulatory

  • Hong Kong’s Financial Services and Treasury Bureau stated cryptocurrency exchanges operating in Hong Kong will have to be licensed by city’s markets regulator and will only be allowed to provide services to professional investors. It also said “confining the services of a VA exchange to professional investors…. is appropriate at least for the initial stage of the licensing regime.” FSTB intends to propose legislative changes to turn proposals into law in upcoming 2021-22 session of city’s legislative assembly.
  • Bank of Korea said it intends to select technology supplier through open bidding process to research practicalities of CBDC, with plans to build pilot platform. Test will run from August to December and involve simulations of banks and retailers, and include mobile-phone payments, funds transfers and deposits.
  • Ontario Securities Commission filed Statement of Allegations against Poloniex for violating Ontario securities law, alleging they did not register as crypto asset trading platform after OSC warned exchanges that trade securities and derivatives in province that they had “to contact OSC staff or face regulatory action.”
  • Bipartisan bill introduced by Reps. French Hill and Jim Himes seeks to direct Treasury Department to publish report that evaluates current policy and governance around currency, including details around CBDC, digital yuan, digital dollar and actual dollar’s role in global economy. “21st Century Dollar Act” would require Treasury Secretary to submit report to Senate Banking and House Financial Services committees that includes “a description of efforts by major foreign central banks to create an official digital currency, as well as any risks to the national interest of the United States posed by such efforts” and to develop strategy for boosting dollar’s reserve status.
  • SEC Chair Gary Gensler said DeFi could pose fresh challenges for U.S. investors and that cryptocurrency sector poses various risks to investors in markets and challenges to securities regulator, in prepared testimony before House Appropriations Committee.
  • Bank Indonesia is planning to issue digital currency to speed up payments. Central bank of Indonesia is currently assessing which technology to use for digital rupiah, and will be a legal payment instrument in Indonesia, alongside banknotes. No timeline yet on when it will be issued.

Project Development

  • Securitize, a digital asset securities firm, launched two crypto security yield funds based on Bitcoin and USDC. Funds will be open for participation in early June and will be issued as digital asset securities on Algorand blockchain. Securitize Capital BTC Yield Fund will “offer investors exposure to BTC with 2% annualized yield and amount of Bitcoin the fund contains grows 2% over the year.” USDC Yield Fund will offer yield of 6% to 8% annually.
  • Dfinity Foundation announced grant fund of 200 million Swiss francs (approximately $223 million) to support initiatives to get developers working on Internet Computer, a new blockchain system from Dfinity that it claims enables decentralized services by running smart contracts on made-for-purpose machines in data centers around the world. 
  • Galaxy Digital bought Vision Hill Group, an asset manager and data shop, for undisclosed sum, saying Vision Hill will become part of Galaxy’s fund management division. Vision Hill develops market intelligence products such as hedge fund indices and buy-side database called “VisionTrack” for institutional clientele.
  • Blockstream reportedly buying Adamant Capital, the hedge fund founded by Tuur Demeester, who will remain as adviser. Blockstream said purchase lays foundation for new division, Blockstream Finance, which will offer Bitcoin investment products on Liquid Network.

Institutional

  • Fidelity Investments’ first Bitcoin fund raised $102 million from investors since launching last August. Wise Origin Bitcoin Index Fund I, LP, is passively-managed vehicle Fidelity sold to 83 qualified investors through Fidelity Digital Funds subsidiary.
  • SEC kickstarted review of Bitcoin ETF applications from SkyBridge Capital and Fidelity Investments’ Wise Origin Bitcoin Trust. SkyBridge’s offering would trade on New York Stock Exchange; Wise Origin’s on Cboe’s BZX Exchange. SEC will render initial decision on respective applications within 45 days unless it extends window, which it can do for maximum of 240 days.
  • One River Digital Asset Management filed with SEC for Bitcoin ETF that would be carbon neutral. One River Carbon Neutral Bitcoin Trust would be listed on New York Stock Exchange and would buy and dispose of carbon credits to account for emissions associated with Bitcoin in fund. Coinbase Custody partnered as custodian for ETF’s Bitcoin assets.
  • WisdomTree filed for Ethereum ETF called WisdomTree Ethereum Trust, which would list on Cboe BZX Exchange. No crypto custodian yet lined up.
  • PayPal plans to let users withdraw cryptocurrency to third-party wallets, according to blockchain lead Jose Fernandez da Ponte, saying withdrawal function is in works. Company ships new developments every two months, though unclear when withdrawal functionality is coming. 
  • Apple looking to hire business development manager with experience in cryptocurrency industry to lead “alternative payments” partnership program. Apple said manager would be Apple’s chief negotiator for alternative payments space. Apple has made no public statements about plans for crypto space.
  • Bridgewater Associates founder Ray Dalio said during conversation with CoinDesk for Consensus 2021 that Bitcoin looks increasingly attractive as savings vehicle and that “personally, I’d rather have bitcoin than a bond” in inflationary scenario. Additionally stated “I have some bitcoin,” but also warned “Bitcoin’s greatest risk is its success.”
  • Carl Icahn told Bloomberg he’s set to enter crypto market and considering large investment to tune of $1.5 billion. “I mean, a big way for us would be a billion dollars, billion-and-a-half dollars … I’m not going to say exactly,” he stated. Billionaire expanded further on views about crypto, saying he now thinks skepticism over value of crypto is “little wrong-headed,” as he questioned intrinsic value of U.S. dollar in comparison to crypto.

Exchanges

  • FTX reportedly in process of closing funding round said to value company at around $20 billion. Raise, which could be announced in next month, could bring in anywhere from $400 million to $1 billion that would go towards improving relationships with large financial services firms and broaden reach beyond crypto-native market participants.
  • Huobi and OKEx have begun to block Chinese customers from accessing some services, with Huobi temporarily ceasing crypto derivatives trading for “customers in certain markets,” citing “recent dynamic changes in the market.” OKEx also said it will temporarily delist OKB for Chinese users due to regulatory compliance.

Fundraising

  • Crypto trading engineering firm Talos raised $40 million in Series A funding led by Andreessen Horowitz, with PayPal Ventures, Fidelity Investments and others also taking part. Firm provides technology that supports digital asset trading to financial institutions, with services including liquidity access, direct market access, price discovery, automated execution, reporting, clearing and settlement. 
  • Balancer raised $24.25M investment led by Blockchain Capital, Fintech Collective, LongHash Ventures, Fenbushi Capital, Continue Capital and Kain Warwick, the founder of Synthetix. Funds will be used to strengthen Balancer’s role as core infrastructure provider of DeFi.
  • Blockchain development platform QuickNode raised $5.3 million in seed funding round led by Seven Seven Six, a VC firm created by Reddit co-founder Alexis Ohanian. Softbank’s Opportunity Fund, Arrington XRP Capital, Crossbeam, Anthony Pompliano and more also participated. Startup, which has been building Web 3 cloud platform to enable developers to more easily develop blockchain apps, will use funding to expand product range and provide more tools.
  • Cryptocurrency lending platform Ledn raised US$30 million in Series A financing with Alan Howard joining Kingsway Capital, Coinbase Ventures, Susquehanna, ParaFi, Alexis Ohanian, John Pfeffer, CMT Digital, Global Founders Capital and others in round.
  • Cowen raised over $46 million for fund that will apparently make digital-asset-focused investments. Cowen Digital Asset Investment Co. LLC raised capital from 80 investors in pooled investment fund. Investment strategy of fund and whether it will directly invest in cryptocurrencies or instead via investment vehicles or industry firms hasn’t yet been made clear.
  • Crypto venture capital firm 1confirmation raised $125 million for latest fund investing in cryptocurrency startups and digital assets. Fund III’s backers were not disclosed.
  • Solidus Labs, which makes market surveillance tools to flag manipulation across cryptocurrency trading platforms, raised $20 million in Series A led by Evolution Equity Partners and included Hanaco Ventures, FTX, Avon Ventures, Chris Giancarlo and former SEC Commissioner Troy Paredes.
  • Chia Network raised $61 million in Series D funding, with Andreessen Horowitz and Richmond Global Ventures leading round. Chia now has valuation of about $500 million, more than double company’s previous valuation. Company plans to use funding for hiring and to become payment method for financial services firms, government and other institutions.

Defi / NFT

  • Sorare, an NFT startup which allows soccer fans to trade digital playing cards, allegedly in discussions for major new tranche of funding from investors including SoftBank at a near-$4 billion valuation.
  • NFT platform OneOf raised $63 million to support mission to become more environmentally sustainable marketplace for artists and fans. Participating investors in seed funding round included Bill Tai, Nima Capital’s Suna Said, Sangha Capital, and Tezos Foundation. Platform built on Tezos will launch next month.
  • Associated Press is auctioning off series of 10 NFTs representing some of history’s most recognizable photographs. First in series, a representation of AP’s famous shot taken in 1945 of six U.S. soldiers raising American flag on Mount Suribachi, Iwo Jima, Japan, has been put up for bid on OpenSea.

Mining

  • Bitcoin Mining Council announced by Elon Musk and Michael Saylor to promote sustainable energy practices and transparency in industry while reiterating that fungibility and essential properties of Bitcoin wouldn’t be interfered with. Argo Blockchain, Hut 8, Galaxy Digital, Riot Blockchain, Marathon, Core Scientific, Hive Blockchain and Blockcap were included in tweet, with all entities combined in control of less than 10% of global computing power on Bitcoin network.
  • Inner Mongolia’s branch of National Development and Reform Commission issued detailed draft guideline explaining how local authorities can crack down on crypto mining activities in region. Guideline is part of efforts to implement earlier notice released by NDRC to eliminate mining operations due to environmental concerns and mining’s adverse effects on realizing China’s national goal to reduce carbon emissions, including eight specific measures to monitor and punish companies and individuals involved in crypto mining activities.

Things to Watch This Week

  • Bitcoin Taproot Activation Watch
    • Bitcoin’s mining difficulty saw a large decrease this past weekend, with on-chain data showing the adjustment to be a roughly 16% drop. The past three adjustment periods that occurred this month have seen large swings, with the May 2nd adjustment registering at -12.6% followed by the May 13th period registering at +21.5%. These swings have mainly been due to the uncertainty in the mining situation in China, beginning with government scrutiny due to coal mining accidents at the beginning of the month followed by the State Council’s notice of cracking down on Bitcoin mining activities recently. On a positive note, this adjustment also brings with it a new 2016 block period for Taproot signaling from miners, and the initial signs are pointing to Taproot likely surpassing the required 90% activation signaling ratio needed for the process to begin. The current signaling period is showing 96.82% of the 152 blocks mined signaling for activation, at time of writing. Although the ratio needs to be kept above 90% for the remainder of the period, it is looking likely that we’ll be one step closer to witnessing a long-awaited upgrade to the Bitcoin network, which is currently slated for November should this signal persist. We’ll be keeping an eye on this activation status throughout the week, as news of a successful period should bring with it some much-needed positivity to start off the month of June.        
  • Sichuan Energy Regulatory Meeting
    • While on the topic of Chinese mining activity importance, the Sichuan Energy Regulatory Office will meet with local power companies June 2 to discuss crypto mining activities amid China’s nationwide crackdown. It remains to be seen whether and how the Sichuan government will react to the State Council’s high-level policy signal in terms of cracking down on Bitcoin mining activities. However, given that regulators have stated they would be taking a stricter approach, the results of this meeting should be watched closely this week as it could potentially lead to further turmoil for Bitcoin mining in the country. 
    • Taylor Monahan@tayvano_
      I know a lot of research and technical brilliance went into EIP-1559. And I know I’ve stayed relatively quiet on the subject for a variety of reasons but…ugh. fml. EIP-1559 does NOT deliver. (ps: read before you speak. this isn’t personal so don’t @ me like it is. )

      EIP-1559, along with other EIPs, were initially conceived and proposed because the gas limit/gas price mechanism could be better. It’s could be more efficient. It could be better for users. It could introduce more certainty. Improving things is GOOD.

      https://timroughgarden.org/papers/eip1559.pdf…
      Image

      EIP-1559 was one of few EIP’s that gained social attention and traction. I was EXCITED to see a wider range of people involved in the process. I would even sacrifice a perfectly perfect solution if it meant more people were more empowered to better the system.
      READ MORE

      Georgios Konstantopoulos@gakonst
      Sober thread on EIP-1559 by Taylor, agree & disagree with many of the points brought up. Thoughts below..
      It indeed smooths out gasprice vol, not ‘make fees low’ Periods of rapidly increasing demand are controlled via the BASEFEE’s exp. increase Miner incentives remain the same, the EIP does not introduce any new attacks! That’s a good thing!
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      Edward Evenson@WillHash4Coins
      For those interested in the #Bitcoin mining news coming out of China I’ve had 300-400MW of mining machines contact me to help them distribute their machines across NA and some parts of EU. Some have also begun shipping machines to Kazakhstan.

      ASICs already mining are primarily coming from Xinjiang (mostly coal powered) and moving to nearby regions in Central Asia.

      Much of the capacity is new machines that miners are shipping directly from Bitmain and MicroBT. These are mostly headed for NA. These parties were interested in having more geographically distributed operations for some time. Recent events have simply accelerated the process

      This is merely the continuation of a trend that was already well underway by Chinese miners, who have been expanding in Central Asia, the Middle East, Russia, and to a lesser extent, NA. Chinese hashrate isn’t falling for the most part. It’s just moving, as it has been.

      Good news: hashrate is becoming more distributed across the globe, reducing attack vectors and easing concerns around usage of coal energy in Xinjiang. Good timing considering recent happenings around the topic of energy usage and mining.

      Bad News: None really comes to mind. However this does nothing to solve long-standing issues around ASIC manufacture centralization or global chip shortages. Many are cheering this development but the more serious challenges still remain.
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      CL@CL207
      US spot basis looks good for putting in a longer term bottom unless spot strength gives away, prolly chop over the next few weeks then up only

      if you highlighted the chart every time this indicator ticked above a score of 7

      Frank Chaparro@fintechfrank
      Absolutely nuts. Crypto exchanges saw more than $2 trillion in volumes this month. These volumes aren’t just giving equity exchanges a run for their money, they’re blowing them out of the park.

      Some context. A month ago I wrote this: February’s crypto exchange volumes made up nearly half the volumes on NYSE Group’s stock markets theblockcrypto.com/post/102740/fe…

      I’d be so embarrassed if I was an exec at NYSE and Nasdaq and not running a spot crypto market. LOL

      FTX fiat exchange volumes in May 2020: ~$0 May 2021: $66.9bn

      SpartanBlack @SpartanBlack_1
      0/ Been getting a lot of questions from investors about China’s recent crackdown on crypto. While thinking through this, I recalled an important date – July 1st. That marks the 100th year anniversary of the founding of the Chinese Communist Party, an all important date.

      1/ As such China’s recent “crackdown” on crypto needs to be viewed in the context of similar attempts to curb speculative activity in the commodities and real estate market in recent months. I would argue this is not crypto specific.

      2/ This also explains the sudden “change” in the government’s stance toward crypto assets, which the PBOC had termed as an alternative asset class only a few weeks prior.

      3/ The CCP needs to ensure stability ahead of the CCP centennial celebrations on July 1st. Heads will roll if there are any social disturbances ahead of one of the most important events in CCP history.

      4/ Anyone who has spent time in China knows that such administrative action ahead of major party events is nothing new and things typically go back to normal if nothing flares up during this period.

      5/ the crackdown on coal-based crypto mining is a different issue and will probably have a more lasting impact. However, this policy direction is consistent with China’s energy and environmental goals long term so they should not come as a surprise.

      Tuur Demeester@TuurDemeester
      Bitcoin’s electricity mix vs China, US, World. By @FriarHass

      Raoul Pal@RaoulGMI
      Something to get your head around: Head Line: A major asset class crashed 42% in 14 days, wiping out $1.02trn in value in an orgy of liquidation of people up to 100 x levered, with very low regulation. Many tokens fell up to 70%, including unregulated lending and borrowing biz.

      Beneath the head line: Crypto had a major, major VAR-shock test and NOTHING happened. Leverage liquidation was offset by overcollateralisation. No one was left holding the baby. No firm went under. The Fed didn’t need to step in. Defi didn’t break and carried on near normal

      There were no daisy chains of collateral losses. There was no collateral pressure. Stablecoins remained stable. A few exchanges went down for an hour or two. No exchange big losses occurred, no need to mutualise losses either. No protocol failed. No firms needed rapid funding.

      No one had open ended losses. The system didn’t break. It offered zero systemic risk to the broader financial world. Speculators lost money and that is it.

      This is what I first saw in crypto back in 2012. A new, anti-fragile financial system that doesn’t break in times of stress, where ownership of assets is clear and losses are not mutualised to tax payers. This was a big two weeks for crypto and for the future financial system.

      John Paul Koning@jp_koning
      MakerDAO ingested over $650 million in USDC stablecoins over the last week and now holds $1.46 billion of the stuff. (Around 38% of all Dai is now backed by USDC.) What’s the story? What caused the big jump?

      @nanexcool @cyounessi1 @marcandu Any idea what could have caused this change in USDC utilization?

       

      cyrus.ismoney.eth  @cyounessi1
      Yes. Demand for Dai from market crash completely overpowering demand for borrow / mint / leverage. That vault (thankfully) keeps the cap at $1.001. The rate at which it’s filling up gives you an idea of how bad the peg (*otherwise*) would be.

      The slightly less good news is that organic borrow isn’t anywhere close to matching up with organic holding. And the fact that that vault cannot be liquidated poses somewhat of a long-term existential risk, depending on your philosophical viewpoint on what MakerDAO should be.

      Matthew Graham @mattysino
      releasing an abbreviated version of the memo has need approved. memo is from a Beijing expert who is extremely qualified to comment but is not part of the Chinese government. in my view just about as authoritative as it’s possible to get.
      1)
      Hayden Adams @haydenzadams
      Full piece on @Uniswap in the Wall Street Journal today
      wsj.com/articles/upsta…
      The Wall Street Journal  @WSJ
      Coinbase, which has made billions running cryptocurrency markets, is facing competition from a new breed of upstarts that look less like the New York Stock Exchange and more like Napster
      on.wsj.com/2RJmEld

      Elon Musk@elonmusk
      Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.

      Michael Saylor@michael_saylor
      Yesterday I was pleased to host a meeting between @elonmusk & the leading Bitcoin miners in North America. The miners have agreed to form the Bitcoin Mining Council to promote energy usage transparency & accelerate sustainability initiatives worldwide.

      Execs from ArgoBlockchainblockcapCore_ScientificGalaxyDigitalHQHiveBlockchainhut8miningMarathonDH & RiotBlockchain were present & decided to establish an organization to standardize energy reporting, pursue industry ESG goals, & educate+grow the marketplace.

      江卓尔 Jiang Zhuoer BTC.TOP@JiangZhuoer
      Some thoughts about the impact of China’s policy on #Bitcoin mining industry: The current situation of #Bitcoin mining in China is not as serious as you think.

      According to the minutes of “China Financial Stability Board”: We resolutely prevent and control financial risk…. we shall crack down #Bitcoin mining and crypto trading activities in order to prevent individual risks from being spread to the social level.

      From there, we can see that the main spirit of the meeting is to “prevent and control financial risks”, to restrain social capital from flowing into #crypto mining sector which might lead to risks tranferring from individuals to the whole society.

      In other words, individual mining is and has always been allowed as long as you’re responsible for your own risks and profits, whilst the mining operated by financial capital might be forbiddend.
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