Top Stories of Last Week

Regulatory

  • President Joe Biden’s 2022 budget proposal includes several new crypto reporting requirements that would give Treasury Department additional requirements around what type of information financial institutions must report to IRS. First proposal to “expand broker information reporting by allowing to share information across different jurisdictions partnered with U.S.” Second proposal to introduce “comprehensive financial account reporting” structure for tax compliance purposes, would require financial institutions to report data on accounts with breakdown on different types of transfers above de minimis threshold of $600.
  • Reserve Bank of India issued clarification stating commercial banks cannot quote now-invalid April 2018 crypto banking ban to deny services to customers involved in digital assets dealings.
  • Thailand’s Securities and Exchange Commission announced any activities related to DeFi involving digital tokens such as liquidity provider tokens, governance tokens or tokens issued to those transacting in DeFi projects “must be licensed and abide by specified rules.”
  • U.S. Office of the Comptroller of the Currency Acting comptroller Michael Hsu said he would like U.S. officials to work in lockstep to set a “regulatory perimeter” for cryptocurrencies. 
  • U.K. Financial Conduct Authority extended deadline for crypto businesses to register under Temporary Registrations Regime from July 9 to March 31 of next year. Firms will now be able to continue operating until March 31, 2022, while organization examines their applications.
  • European Central Bank report titled “The international role of the euro” outlined threat to countries that elect not to launch CBDC, stating domestic and cross-border payments could be dominated by non-domestic providers.
  • U.S. Rep. Carolyn Maloney requested Colonial Pipeline and CNA Financial to disclose decision-making processes that led them to pay cryptocurrency to recover data from ransomware attackers.
  • SEC chose last week to delay decision on WisdomTree’s Bitcoin ETF application, extending WisdomTree’s application review by 45 days. 

Project Development

  • China will hold third lottery to trial CBDC, giving out free wallets containing total of over $6 million in digital yuan. Lottery will take place in Beijing this month, making it third city to trial CBDC after Shenzhen and Suzhou.
  • Paxful launched e-commerce tool to allow businesses worldwide to receive Bitcoin payments. Paxful Pay exchanges customers’ payments from over 400 different methods into Bitcoin, which is then sent to merchant’s digital wallet.
  • Bank of Thailand hired German technology company Giesecke+Devrient to develop CBDC prototype. Bank allocated 10 million baht (US$320,000) for project, which includes taxes, transportation, registration fees and other expenses, and is moving in line with its three-to-five-year target for rolling out CBDC.

Institutional

  • DBS issued 15 million SGD (US$11.3 million) digital bond in first security token offering. DBS Digital Bond, issued via Digital Exchange, is to be accompanied by sixth-month expiry and coupon rate of 0.6% per annum. Bank is sole bookrunner for transaction, which was completed by way of private placement.
  • Guggenheim Investments registered new fund, Guggenheim Active Allocation Fund, with SEC that might seek investment exposure to cryptocurrencies.
  • Anchorage Digital expanding lending service with Ethereum-backed loans through BankProv, a traditional bank formerly known as Provident Bank. 
  • ETC Group launching first Bitcoin ETP in U.K. on Aquis Exchange Multilateral Trading Facility in London on June 7. Trading of ETP will take place in GBP, CHF, Euro, and U.S. dollar. Clearing will be carried out by SIX x-clear.

Exchanges

  • SC Ventures and BC Technology Group formed venture to create digital asset brokerage and exchange platform for institutional and corporate clients in Europe, which aims to launch in Q4.
  • Okcoin integrated with Polygon to allow users to directly access DeFi ecosystem without using Ethereum wallet.
  • Coinbase announced their Visa debit card will sync with Apple Pay and Google Pay, and that it will begin offering cash-back spending reward features. Debit card converts users’ cryptocurrency balances to fiat at point of sale, with promise of 4% rewards in XLM and 1% in Bitcoin.

Fundraising

  • Circle raised $440 million from Fidelity Management and Research Company, Marshall Wace, Willett Advisors, Intersection Fintech Ventures, Atlas Merchant Capital, DCG, FTX, Breyer Capital, Valor Capital Group, Pillar VC, and more. Circle spokesman declined to comment on company’s valuation. Paxos valued at $2.4 billion after raising $300 million Series D in April.
  • Andreessen Horowitz reportedly doubling size of third crypto fund to $2 billion.
  • Cryptology Asset Group, founded by Mike Novogratz and Christian Angermayer, looking to pour $100 million into crypto venture funds over next two years. Company will take equity stakes in blockchain and crypto-related businesses and offer both retail and institutional clients liquid shares.
  • Borderless Capital to launch $25 million fund for blockchain investment in Miami harnessing Algorand and USDC operator Circle.
  • Set Labs, a platform for creating structured DeFi investment products on Ethereum, raised $14 million.
  • DeFi protocol Impossible Finance raised $7 million via seed funding round with participation from True Ventures, CMS Holdings, Alameda Research, Hashed, Sino Global Capital, among others.

Defi / NFT

  • Candy Digital, a sports NFT company backed by Galaxy Digital, teamed with Major League Baseball to build ecosystem to buy, trade and share officially licensed baseball content NFTs.
  • OIO Holdings, a provider of engineering and blockchain-related services, said it bought Moonstake for undisclosed amount in all-stock transaction. Moonstake is second-largest staking business in Asia, with assets staked passing $900 million as of end of May.
  • Belt Finance, a platform that provides automated market making for DeFi, was hacked in flash loan attack that resulted in profit of $6.23 million for perpetrator and overall $50 million loss for platform.
  • Korbit launched South Korea’s first NFT trading platform. All transactions on platform will be carried out ETH.

Other

  • Google lifted three-year-old policy banning cryptocurrency exchanges from using ad services. Requirements exchanges have to pass include needing to be either registered with “FinCEN as a Money Services Business and with at least one state as a money transmitter” or “a federal or state chartered bank entity.”

Things to Watch This Week

  • Bitcoin Legal Tender El Salvador announcement
    • The biggest news to come out of the Bitcoin 2021 Conference in Miami this weekend was the announcement that El Salvador is developing a bill to recognize Bitcoin as legal tender, according to President Nayib Bukele. To be submitted this week, the bill must still be reviewed by the country’s legislative assembly, but the bill’s approval would make El Salvador the first nation to adopt a Bitcoin standard. Details are scarce as the bill is still under construction, but the submission will need to be monitored closely as it could have significant implications on not just citizens of El Salvador, but also Bitcoin users and businesses in other countries as well. In particular, the manner in which the U.S. IRS declares Bitcoin in IRS Notice 2014-21 shows that Bitcoin is property and not a currency because “it does not have legal tender status in any jurisdiction.” If Bitcoin’s legal tender changes in El Salvador, it could qualify as a nonfunctional currency, allowing individuals to forgo reporting gains on personal transactions. This could have wide-reaching implications for individuals and businesses throughout the world, as countries will need to reassess how they view Bitcoin in their framework, and potentially could bring with it a shift in Bitcoin being legally accepted as a currency. Further details of the proposed bill and the comments it elicits from regulatory bodies should be watched closely this week. 
  • Taproot Upgrade Activation Impending  
    • We’re currently on pace for the current signaling period for Taproot activation to surpass the 90% mark that is needed for the softfork to lock in. The current signaling ratio stands at 97.85%, at time of writing, and with just over 850 blocks remaining, an additional 676 blocks signaling positively are needed for the mark to be passed. It is currently estimated to take place sometime around the beginning of this upcoming weekend. Although it is looking likely that activation will happen, a little less than half of this signaling period still remains, and any unexpected change could have an impact on markets. We’ll be keeping a close eye on progress as we get closer to potential activation of this upgrade this week. 
    • John Street Capital@JohnStCapital
      0/ Druckenmiller has now had a similar interviews for CNBC, USC, & The Hustle w/ their own twist. Tech Bubble vs. Today- “Today, you have something similar & something different. Monetary policy is absolutely insane. We had no QE back then. And our rates weren’t 0%. They were

      1/ 4% or 5% when they probably should have been 6% or 7%. No comparison. So we have an asset bubble. Now that’s not just in tech stocks, it’s in everything. I know some of the backers of $DOGE might disagree. If you’re an asset, you’ve been moving. From ’95 to ’00, you had an

      2/ incredible wave while the internet was being built. What you have now is this incredible wave of digital transformation, particularly moving onto the cloud. I used to say 2-3 years ago in some interviews that we’re in the bottom of the 1st or 2nd inning in terms of digital

      3/ transformation. And this is a 10-year runway. COVID jumped you from the bottom half of the 1st inning to the 6th inning. I think $SHOP CEO @tobi said we went from ’19 to ’30 in terms of e commerce sales in 1 year. The biggest problem you have now is asset prices
      READ MORE

      Jason Choi @mrjasonchoi
      Amidst all the Twitter pontification about whether the market has topped or bottomed, refreshing to hear from @jdorman81 drawing on his decade-long experience trading distressed assets.
      open.spotify.com/episode/0CZJqy…

      Key highlights: – Distressed selling lasts for 18-24 months in tradfi, crypto can end in weeks to months – Most forced sellers have sold, now it’s more of a buyer’s strike than mass exit – In distressed, you average down assets you believe in and don’t try to time bottoms

      Bobby Lee – Ballet: World’s EASIEST wallet!@bobbyclee
      We now have seen the ~55% correction! The 2021 #Bitcoin bull market is NOT over. What you saw these past 2 weeks is just a temporary correction for a double-peak this year. The bull market will resume, and don’t complain later this summer/fall when prices climb back above $50k.

      Bobby Lee – Ballet: World’s EASIEST wallet!  @bobbyclee
      Jan 3
      Given the huge and fast run upon #Bitcoin prices, we might have a double top this year, like in 2013. (The first mini-peak in 2013 was in April, followed by the real bull market peak in December.)

      So the first mini-peak takes out some air, allowing prices to fall back down a bit, and then subsequently builds up in the summer/fall again.
      READ MORE

      Peter Brandt@PeterLBrandt
      Challenge to $BTC price historians
      In past 10 years (since May 2011) please identify a single (even one) instance:
      1. When a 50%-plus correction did not lead to at least a 70% correction
      2. When a 50%+ correction made a new ATH within 7 months

      Willy Woo@woonomic·
      All drops of that scale with long recoveries was from a starting point where price was over extended above fundamental valuation. This setup is different in that price is BELOW fundamentals. As a guide, the COVID dump dropped below fundamentals and therefore recovered quickly.

      Matti @mattigags
      1/5 One would think that the most successful projects are those with ironclad narratives. BTC and ETH tell the opposite story: flexibility of narratives is key. *Adaptive tribalism* to form a community and *adaptive narratives* are essential for a crypto project to survive.

      2/5 An old article by @hasufl dives deeper into changing narratives of BTC. BTC appears to be macro-reactionary. The recent “inflation hedge” is an updated “digital gold” + “uncorellated asset” narrative. BTC is very good at continuos pivoting of Narrative/Market Fit (N/MF).

      3/5 ETH is similar but not the same. Its technology is still evolving making it micro-reactionary; community adapts its narrative based on what happens on ETH. ETH’s product evolves, still in search for Product/Market Fit which then spins new N/MF.
      tokeneconomy.co/visions-of-eth…

      4/5 BTC attempts at product development (Sidechains, LN etc.) fall short of the core “digital commodity” use case. BTC is mostly a finished product relying on the narrative building rather than product building. Adaptive narratives make BTC extremely resistant (but volatile).

      5/5 ETH’s mass startupization make it potent both on the product and narrative side. The “productive asset” and “blue chip” meme refer to FANG stocks’ successful market run of the last decade. Misunderstood in the early days & over-performing in the long run.

      croissant@CroissantEth
      @elonmusk has had a big impact on crypto recently, & because some of his actions have been a bit unconventional, I was inspired to dig in a little deeper to find out what exactly his “end game” is & what I’ve found does not disappoint. I’ll compile all of the info below 

      This story begins a short time ago after Elon made the now-infamous tweet that Tesla will accept $BTC $BTC rallied from this news, only for the hype to be cut short by complete reversal in policy from Tesla Tesla will NOT accept $BTC for payments, citing environmental concerns
      READ MORE

      Daniel Frumkin @dfrumps
      1/ I did some analysis on mining #bitcoin with solar power and gave my two sats on the energy FUD. In case you’d rather keep scrolling than go read the full thing, I’ll summarize below  
      braiins.com/blog/economics…

      2/ My biggest hope in general is to help more people understand that energy consumption amounts & even the denomination of that energy which is renewable doesn’t actually tell us everything about bitcoin mining’s environmental impact. For example…

      3/ The amount of natural gas being flared & vented in the USA alone is enough to generate ~162 TWh/year of electricity. The latest estimates from the Cambridge Center for Alternative Finance put the Bitcoin network’s total consumption at 115 TWh/year.

      Leia Fisher@0xLeia
      What does NFT x DeFi look like?
       I wrote about the significance of financial NFTs within the Unicly ecosystem, featuring Uniswap v3 NFTs.
      Read more: medium.com/unicly/nfts-me…

      Ryan Watkins@RyanWatkins_
      The reason many people don’t get crypto is because they’re too busy looking for technical innovation rather than institutional innovation. The most exciting attributes of blockchains are about how we design and run internet institutions, not computational performance.

      This insight is foundational to crypto imo. Two pieces that really drove the point home for me:
      Money, Blockchains, and Social Scalability.
      unenumerated.blogspot.com/2017/02/money-…
      Disrupting Governance: The New Institutional Economics of Distributed Ledger Technology
      papers.ssrn.com/sol3/papers.cf…

      Flood Capital@FloodCapital
      1/ Thread on the macro cycle and crypto interest rates. Crypto interest rates are set by the market and self-correct, facilitating an anti-fragile digital economy. Contrast this with centralized interest rates that have created an extremely sensitive system drowning in debt.

      2/ Interest rates in crypto will eventually approach the staking rate of top L1 blockchains. I will be using the mechanics behind ETH staking as a reference (post EIP-1559 and Merge). The ETH staking rate is generated in 2 components: 1) Block Rewards 2) Fees (Economic Activity)

      3/ Firstly, block rewards will be the stable portion of the staking rate that provide a base rate/interest rate floor. It is important to have this base issuance to secure the network over time and provide a minimum rate for lenders.
      READ MORE

      Molly @bigmagicdao
      Sichuan -where most of bitcoin mining farms located hosted a symposium about bitcoin mining,, a friend who went to the meeting says all’s good , local authorities still shows positive attitude towards to bitcoin mining.

      Sally W 嘎知@sallywang666
      Yep, according to various Chinese media sources, the meeting was held yesterday, evaluated and analysed the impact of the shutdown of crypto mining on the amount of water and electricity. In the end, no specific rules have been issues on how to regulate crypto mining in Sichuan

      According to industry insiders, the conference level is not high and it has no policy significance. Yesterday’s news was more market sentiment dominated, shorters are hyping news

      China’s policy guidance is top-down. No matter what provincial govs such as Sichuan issue, they follow the guidance of the central gov.

      Jim Bianco @biancoresearch
      Thread about stablecoins/Tether(USDT) to pushback on the FUD about USDT. Something bigger is happening, the next reserve currency! 1/15

      Bottom line, Tether is never redeemed, so the Trust is more or less irrelevant. Stablecoins are a trading pairs and transfer tokens in wallets. They are not a money market funds like Tim Massad opined. Staking pools are like money markets.
      bloomberg.com/opinion/articl… 2/15

      And this is what makes stablecoins so powerful, and worrisome to regulators/TradFi. They are backed by the same thing as the $$$, full faith and credit…of the crypto universe! USDT’s problem is its centralized. A decentralized stablecoin (DAI, LUSD) has more potential. 3/15
      READ MORE

      Thomas Davies@ThomasDavies33
      Binance is in deep trouble with their margin lending platform and interest-bearing “savings” accounts. Investors funds are seriously at risk of being devalued. The best that can happen? Interest rates get reduced. The worst? Investors lose a % of their invested funds. Pt1

      Binance recently announced this, which has gone unnoticed by the community: https://binance.com/en/support/announcement/907318ffc70546feb9d61199302e4a70?ref=JLI1VBLA…

      In short, Binance is admitting that the insurance fund has been bled dry by liquidations. They are now putting their own “profits” into the fund to try and replenish it. Pt2

      When somebody gets liquidated, the insurance fund pays out the “investors” – the people who are staking / liquid swapping. With BTC’s recent crash – billions was liquidated, and this probably caused the insurance fund to be bled dry. There is minimal reserves now. Pt3

      Binance has also reduced the interest rates on Flexible savings on USDT/BUSD from 6.5% to 2%. They have done this to try and reduce expenditure, while they try and replenish the insurance fund. This is the first major warning sign of immediate danger to investors. Pt4

      By paying less to investors, they are trying to avoid a catastrophe – hoping that enough time goes by without any major liquidation events, while they replenish the Insurance Fund. It’s the first warning sign of trouble – happened in 2008 with traditional banks. Pt5

      Their “Liquid Stake” rewards change also went unnoticed. They are now paying rewards to stakers in BNB – rather than USD. This is because they hold BNB reserves, and can’t afford to pay out USD while the margin/interest platform is in dire circumstances. Pt6

      Image

      The problem here is – If there is no reserves in the Insurance Fund, and another catastrophic liquidation event happens – like BTC’s drop to $30k – then who pays back the investors? The insurance fund is dry already. Is Binance going to pay back investors themselves? Pt7

      If $5 billion gets liquidated next week because BTC drops to $24k, can we really trust Binance to compensate investors $5b of their own money? Probably not. The most likely outcome would be that Binance would compensate investors in BNB. Pt8

      The problem with that is – if everybody gets their “capital” compensated in BNB – then BNB is going to drop 50% in 24-hours as everybody rushes to sell it. This is the first warning sign of an unsustainable high-interest lending platform collapsing. Pt9