| Market Reports

The Weekly Hash – July 29 – August 2

In the Weekly Hash, the experts at Kraken highlight the week’s most important events in the crypto world.

This digest is prepared for informative purposes only and does not represent an investment recommendation or investment advice. Please see our full disclaimer at the bottom for more information.

See below all the important happenings this week in the world of crypto, presented by the experts at Kraken:

  1. Mehr News Agency: Iranian govt. authorizes crypto mining
    • The Iranian gov’t endorsed crypto mining as an industrial activity and noted that those involved must acquire licenses from the Ministry of Industry, Mine and Trade
    • Those who use crypto must accept its risks because neither the gov’t nor the banks will provide any guarantee and using digital money in domestic txs is prohibited
    • Crypto mining is taxable unless individuals export crypto and bring back the revenues to the country
    • The gov’t has yet to approve the final price rate for miners, however, speculators believe the exported rate for mining farms will likely be ~$0.07/kWh (currently is ~$0.02/kWh)
  2. The Block: Court says AT&T SIM hack plaintiff’s $24M crypto loss not result of security lapse, must amend suit
    • The federal judge overseeing Terpin Vs. AT&T dismissed every cause of action in Terpin’s complaint – except for a declaratory judgment claim – with leave to amend in 20 days
    • The court found that while the plaintiff was right in that AT&T should’ve foreseen the criminal acts, “Mr. Terpin fails to sufficiently allege proximate cause. Mr. Terpin does not connect how granting the hackers/fraudsters access to Mr. Terpin’s phone number resulted in him losing $24 million”
    • Crypto-focused lawyer Stephen Palley commented, “I suspect that Plaintiff will be able to overcome the pleading defect in an amended pleading…It does seem rather astonishing that a sophisticated crypto holder would leave this much crypto on an exchange, continuing to use SMS two-factor authentication with a phone that had already been compromised. This isn’t to excuse AT&T but, well, you can see the argument they will make”
  3. Ripple: Ripple Sends Open Letter to Congress Asking For Fair Crypto Regulation
    • Ripple CEO, Brad Garlinghouse, & Ripple Co-founder/Executive Chair, Chris Larsen, wrote an open letter to Congress asking for regulatory leniency ahead of hearings on crypto regulation this week, “Many in the blockchain and digital currency industry are responsible actors. We are responsible to U.S. and international law. We are responsible to serving the greater good”
    • Garlinghouse mentioned trust as an essential component of a currency gaining wider acceptance, “We don’t take for granted the vital role of central banks in issuing currencies and setting monetary policy in concert with the complex dynamics of economies around the world. For centuries, governments have been well suited for the job because paramount to the acceptance of any currency is trust”
    • Garlinghouse concluded that the country was in the int’l spotlight over its response to the innovative sector, “We urge you to support regulation that does not disadvantage U.S. companies using these technologies to innovate responsibly, and classifies digital currencies in a way that recognizes their fundamental differences — not painting them with a broad brush”
  4. The Block: Bakkt is eyeing a launch in Q3, but part of its plan is risky, sources say
    • According to sources close to the situation, Bakkt is eyeing a 3Q19 launch pending NYDFS approval, but leaked plans shows a guarantee fund that some say is too small to cover positions at risk; while Bakkt’s funds will have ~$400M in open positions at risk, ICE will contribute only $35M to Bakkt’s guarantee fund
    • Bakkt ostensibly acknowledged the inflated risk, as ICE explained that there are plans to increase the guarantee  after the launch
  5. O Povo: Brazil’s fifth-largest city to accept bitcoin payments for public transportation
    • The Ceara State Co-operative Autonomous Passenger (Cootraps) will provide citizens in Fortaleza, the fifth-largest city in Brazil with a population of ~2.7M, the option to buy bus tickets using BTC, credit and debit cards by EOY
    • Cootraps CFO Carlos Robério Sampaio said the new payment options are aimed at attracting more users and reducing bureaucracy in the system, “This is a way of reducing bureaucracy, even bringing more users into transport. We expect a larger flow of people, we will make it easier for users”
    • Users will be able to pay for tickets through a mobile application and a QR code
    • Link to The Block’s report
  6. Galaxy: Galaxy Digital Announces Approval of License to Underwrite Registered Public Offerings of Securities
    • Adding to its existing abilities to lead private placements of securities as a placement agent and advise on M&As, Head of Advisory Services for Galaxy Digital Ian Taylor announced that FINRA granted the business expansion of its broker dealer, Galaxy Digital Advisors LLC, “This is an important step in the development of our advisory franchise. With this approval, we now have the ability to finance digital asset and blockchain technology companies through their entire life cycle – from founding, through private capital raisings, to their initial public offering and beyond”
    • This approval permits the firm’s broker dealer it to act as an underwriter to registered public offerings of equity, debt or other corporate securities in the US
  7. CoinDesk: Tether Stablecoin Launches on Blockstream’s Liquid Network Sidechain
    • Blockstream CSO Samson Mow announced that USDT is launching on Blockstream’s Liquid sidechain, allowing for atomic swaps between Liquid BTC and Liquid USDT, “The addition of Tether is a major milestone in increasing the utility of the Liquid Network. In combination with the latest developments in the Liquid ecosystem, traders can now achieve some really cool things, such as OTC atomic swaps, super-fast arbitrage between exchanges, and easy Tether custody with Blockstream Green”
    • Liquid’s faster block times allow traders to quickly complete fiat transfers between exchanges, making more efficient arb trades
    • Blockstream Green, the firm’s wallet offering, will allow holders to store Liquid USDT when idle and move them to exchanges when trading
    • Tether & Bitfinex CTO Paolo Ardoino said, “Issuing stablecoins, and various other digital assets under one blockchain platform makes a lot of sense and greatly improves industry efficiency whilst allowing traders to manage all their assets from a single wallet application”
    • Liquid USDT will be supported for D/W at Bitfinex, while Liquid member firms are working to add the token
  8. SEC: Robert A. Cohen, Cyber Unit Chief, to Leave SEC After 15 Years of Service
    • SEC’s Chief of the Division of Enforcement’s Cyber Unit, Robert A. Cohen, is leaving the agency in August after 15 years of service
    • The Cyber Unit is in charge of securities violations pertaining to crypto and digital assets, in addition to cyber-related trading violations and cybersecurity disclosures and procedures
    • Cohen supervised a number of investigations during his time, including a lawsuit against the startup Kik for running an unregistered $100M ICO and unlawful ICO advertising charges against DJ Khaled and Floyd Mayweather Jr. 
    • Co-Director of the SEC’s Division of Enforcement Steven Peikin said, “The Cyber Unit has been a great success under Rob’s strategic leadership […] Soon after its creation, the Cyber Unit immediately began filing impactful cases that protect investors and demonstrate the SEC’s ability to respond nimbly to new and difficult challenges”
  9. Cointelegraph: US Defense Dept. to Experiment With Blockchain-Based Security
    • According to the US DoD’s four-year roadmap on July 12th, entitled “DoD Digital Modernization Strategy: DoD Information Resource Management Strategic Plan FY19–23,” the Dept. plans to pursue blockchain solutions for cybersecurity as part of its digital modernization strategy
    • The DoD’s research branch, the DARPA, is currently engaged in at least two exploratory blockchain projects focused on cybersecurity: utilizing blockchain to construct a new/improved communication and tx platform, including communications between units and headquarters as well as between intel officers and the Pentagon and utilizing blockchain to create an “unhackable code” (citing blockchain’s ability to gather intel on bad actors who attempt to hack into databases)
  10. Kraken: Kraken Adds Global Funding Options in Five Major Currencies
    • Kraken clientele across 180+ countries now have D/W options with USD, EUR, CAD, GBP and JPY globally through Etana Custody (i.e., clients wire almost any currency to their Etana wallet, then convert to one of the five major currencies to fund their Kraken account)
    • The new options are available to Intermediate and Pro accounts (Starter accounts can upgrade to get access)
    • In cooperation with Etana, Kraken markets are now available through the Meta Trader (MT4 or MT5) trading platforms
  11. The Block: Libra crypto may never launch due to regulatory scrutiny, warns Facebook
    • Facebook (FB) itself warned that Libra may never launch due to “significant” regulatory scrutiny, “There can be no assurance that Libra or our associated products and services will be made available in a timely manner, or at all”
    • FB added that “uncertain and evolving” laws and regulations surrounding crypto and investigations from regulators worldwide may “delay or impede” Libra’s launch
    • The firm concluded that it doesn’t have “significant” prior experience with crypto and blockchain, which could “adversely” affect its ability to successfully develop and market such products, “We will also incur increased costs in connection with our participation in the Libra Association and the development and marketing of associated products and services, and our investments may not be successful. Any of these events could adversely affect our business, reputation, or financial results”
  12. The Block: Kraken acquires crypto accounting specialist Interchange, aiming to serve institutional clients under one roof
    • Kraken acquired trading services provider Interchange to provide institutional investors better tools to monitor and report their crypto portfolios
    • Interchange was co-founded by Dan Held, former director of product at wallet provider Blockchain.com and co­founder of ZeroBlock, and Clark Moody, RTBTC founder; Interchange offers crypto accounting and reporting tools that help crypto funds track trading across various venues, reporting taxes, and reporting quarterly earnings to investors
    • Interchange is already providing services for 60+ institutions, however Kraken CEO Jesse Powell believes it will be able to scale beyond its 60 current clients since it won’t have to worry about the bottom line, at least in the short term
    • Powell highlighted a number of synergies between Interchange and real-time data portal Cryptowat.ch (acquired by Kraken in 2017) that will allow it to offer products including historical and current data, advanced charting, multi-exchange trade executions, research and insights, critical accounting and portfolio reconciliation tools, and crypto indices, “Cryptowatch has been building these tools for the entire ecosystem, not just for Kraken…Interchange road map was going to converge with a lot of what we were doing. We could have built this ourselves, but the [Interchange team] has this expertise already”
    • Kraken’s CEO noted that the acquisition could also incentivize new clients to open trading accounts at Kraken, as traders might be compelled by the one-stop-shop approach, “The comprehensive approach is appealing. It will reduce barriers to entry and it is a big part of what our mandate is”
    • For some of its clients, access to Kraken Futures, Kraken’s OTC desk, and Interchange’s services will be available side-by-side
    • Powell stated that while the market has seen a number of participants attempt to capture large trading clients with the promise of faster markets to which they can more easily connect, Kraken is avoiding such services and instead aims for a broad-ranging platform that will appeal to all users
    • Powell stated he was against utilizing co-location services to increase trading speeds for customers because he believes co-location and other services provide specific traders unfair advantages, “We probably share the same sentiment on a lot of this stuff. I don’t think faster markets are necessarily a better thing. The more complex the market is, the more it puts certain traders at a disadvantage”
    • Powell concluded, “I couldn’t be more excited to welcome Dan, Clark and the Interchange team to Kraken. What’s great about Interchange is that it makes accounting, trade reconciliation and reporting so much easier for institutions and individuals trading on Kraken, so our clients can stay focused on tapping the tremendous value that cryptocurrency markets offer”
    • Link to CoinDesk’s report
  13. CoinDesk: Beating Bakkt, LedgerX Is First to Launch ‘Physical’ Bitcoin Futures in US
    • Beating Bakkt and ErisX to the punch, LedgerX launched the first physically-settled BTC futures contracts in the U.S. today
    • Retail customers can trade the product using LedgerX’s recently-launched Omni platform, while institutional clients can trade futures as with any of LedgerX’s other products
    • Customers can deposit BTC when buying a contract and will in turn not need to wait for bank transfers or on other limitations of the U.S. banking system to participate
  14. CoinDesk: UK Finance Watchdog Issues Guidance on Regulation for Bitcoin and Crypto Assets
    • The UK’s FCA finalized its guidance on crypto assets, clarifying which tokens fall under its jurisdiction without drastically altering the regulatory landscape
    • True cryptos like BTC and ETH, which the FCA classes “exchange tokens,” aren’t regulated but AML rules do apply
    • Some 92 responses to the consultation paper were received from an assortment of firms, including banks, trade associations and crypto exchanges, with most respondents supporting the proposals
    • When STOs are issued they behave like shares or debt instruments and fall under the category of a “specified investment” and, in turn, the FCA’s remit (vast majority of respondents agreed)
    • Utility tokens don’t grant the same sorts of rights as regulated financial instruments and will generally fall outside the FCA’s remit, except in circumstances when they meet the definition of e-money, “Any token that is not a security token, or an e-money token is unregulated. However, market participants should note certain activities that use tokens may nevertheless be regulated, for example, when used to facilitate regulated payments”
    • The watchdog added, “Market participants should use the Guidance as the first step in understanding how they should treat certain cryptoassets, however definitive judgements can only be made on a case-by-case basis”
    • A firm can issue security tokens without needing a regulatory license, in the same way that issuing shares doesn’t require a license; in any scenario in which the tokens are traded, the advisors and brokers handling the tokens, and the financial promotions regime, will need authorization
    • If a security token is tradeable on the capital market it will be considered a transferable security under the EU’s MiFID, and that regime will apply too
  15. Ripple: Ripple Expands University Blockchain Research Initiative Program to Japan, Supports 33 University Partners Across 14 Countries
    • Ripple partnered with Kyoto University and the University of Tokyo as part of its University Blockchain Research Initiative (UBRI), bringing the initiative’s total # of university partners to 33
    • The University of Tokyo will award scholarships to students doing blockchain research, and its economics dept. is arranging public seminars on blockchain and settlement
    • Graduate students at Kyoto University are conducting blockchain research in areas such as remittances by migrant workers, digital ID mgmt. for refugees and supply chain mgmt.
    • Ripple provides financial resources, expertise and technical resources to support research
  16. Pundi X: Pundi X payment app integrates Samsung Blockchain Wallet
    • Pundi X integrated Samsung Blockchain Wallet (SBW) to become the first Fintech app in the Samsung’s blockchain ecosystem
    • Samsung Galaxy S10 users can now move crypto stored in the SBW into the XWallet and vice-versa, which they can then use as a checking account for instant crypto tx with Pundi X’s global payment ecosystem
    • Currently, the XWallet supports BTC, ETH, BNB, KCS, XEM, KNC, QTUM, as well as Pundi X’s native tokens NPXS and NPXSXEM
    • Th XWallet is also available via XPOS, a blockchain POS device deployed across 25 countries
  17. Crypto.IQ: The SEC Set To Begin Running Bitcoin and Ethereum Nodes
    • The SEC is looking for quotes from contractors who will run the ETH & BTC full nodes for them, in addition to “as many as possible of the following blockchains: Bitcoin Cash, Stellar, Zcash, EOS, NEO, and XRP Ledger”
    • The providers will be required to add new blockchains as soon as three months after they start work, and will have to make additions of new blockchains as the SEC requires
    • The agency didn’t provide a concrete reason as to why they need to run their own nodes except for stating it is “to support its efforts to monitor risk, improve compliance, and inform Commission policy with respect to digital assets”
    • The SEC specified that all the data received from the genesis block forward will be required, and it should then undergo regular updates throughout the day through a feed or an API method of their preference
    • Link to Trustnodes’ report
  18. Dapper Labs: NBA, NBPA and Dapper Labs Bring First-of-its-Kind Blockchain Game to Basketball Fans Around the Globe
    • The NBA, NBPA and the creator of ‘CryptoKitties,’ Dapper Labs, partnered to launch NBA Top Shot, a digital platform for basketball fans to collect and trade blockchain-based NBA collectibles/tokens
    • NBA Top Shot, which is scheduled to launch in the fall, will feature a social experience built around digital collectibles (e.g., a “Kevin Durant 3-point shot” or “Joel Embiid dunk”) and a game
  19. The Block: Actually, LedgerX might not have launched physically settled bitcoin futures contracts after all
    • News of LedgerX’s physically-settled BTC futures launch broke yesterday, but currently it’s unclear whether the product has gone live as the CFTC announced today that the product “not yet been approved by the Commission”
    • LedgerX deleted a tweet about the product launch which said, “It’s official: we’re live with retail trading on Omni! If you signed up for our waitlist, you’ll hear from us soon. […]”, and there are no official rule filings about the contracts yet
    • Link to Coindesk’s report
  20. Cointelegraph: Bitcoin Passes New Milestone as Network Mines 85% of Its Total Supply
    • BTC has 85% of its supply (17.85M / 21M) in circulation as of Aug. 1st, leaving 3.15M new coins to be mined from now until 2140
    • Chainalysis estimated in 2017 that up to 4M (+20%) of BTC’s total supply is lost
    • The BTC halving will occur in <1yr at block #630,000 (approximately May 24th, 2020), cutting BTC’s issuance rate in half from 12.5 BTC/block to 6.25 BTC/block; we are currently 79% of the way to the halving, which occurs roughly every four years as part of BTC’s monetary policy
    • Shakepay reported that total daily BTC txs are at an ATH of +350k, meaning it’s on track to do more txs in 2019 than any other year in history
  21. Federal Reserve: Fed cuts interest rates for the first time since the birth of Bitcoin
    • Fed chair Jerome Powell announced that the U.S. Central Bank is cutting interest rates by 25bps for the first time since the 2008 financial crisis (same year as BTC whitepaper release) in hopes of spurring economic activity, although the Fed cautioned that the impact of a rate cut remains uncertain
    • While the U.S. economy has seen inflation running below 2%, steady growth, low unemployment, and household spending up from earlier in the year, the agency still decided to cut the interest rate “in light of the implications of global developments for the economic outlook as well as muted inflation pressures”
    • Link to The Block’s report
  22. The Block: Analysis: Ether holdings of ICO projects gradually falling
    • The Block analyzed 57 ICOs, and on average, each of them liquidated/moved ~2.5k ETH (~$530k) per month over the past 12 months; these projects raised 8.2M ETH in total, 5.9M (72%) of which has been either moved/liquidated since launch
    • 11 of the companies are currently trading at a discount to the value of their ETH treasury balance
    • ETH holdings of projects that raised funds via ICOs have been steadily declining
  23. Blockade Games: Using Bitcoin Lightning Network as an Interface to Ethereum Smart Contracts
    • Blockade Games bridged the Ethereum and Bitcoin networks by sending a BTC lightning network (LN) tx in such a way that an Ethereum smart contract will execute on July 31st
    • Blockade Games CTO Ben Heidorn said the code was ran on the Rinkeby testnet and the firm plans to deploy it on mainnet (using real ETH) in the next couple of weeks
    • These tests feed into plans to add LN support to Neon District, its upcoming role-playing game built on top of Ethereum
    • Heidorn added that the firm believes ETH is the future of “non-fungible assets … We also believe that bitcoin is the future of money, and many of our players will prefer to hold most, if not all, of their funds in bitcoin. We want to make it possible to serve our biggest supporters and players on the bitcoin network while utilizing all of the infrastructure present on ethereum and other blockchain networks … By integrating bitcoin lightning network payments, we are able to accept instant payments in bitcoin directly, and instantaneously kick off a series of events on any other chain, such as minting a brand new Neon District asset to a buyer’s ethereum or Loom Network wallet”
    • Heidorn noted that the code for this unique type of LN tx isn’t yet public, “we will open it once we’re sure it’s ready and secure for people to pull down and use”
    • Cointelegraph reported that Ethereum co-founder Vitalik Buterin encouraged the move, claiming that the future of crypto is “diverse and pluralist”
  24. CoinDesk: Walmart Wants to Patent a Stablecoin That Looks a Lot Like Facebook Libra
    • Walmart applied for a crypto patent with the USPTO that outlines a method for “generating one digital currency unit by tying the one digital currency unit to a regular currency [i.e., stablecoin]; storing information of the one digital currency unit into a block of a blockchain; buying or paying the one digital currency unit”
    • The proposed stablecoin bears similarities to Facebook’s (FB) Libra, such as the goal of banking the unbanked, “Using a digital currency, low-income households that find banking expensive, may have an alternative way to handle wealth at an institution that can supply the majority of their day-to-day financial and product needs”
    • Like FB, Walmart’s filing also indicates its coin could have features that apply to a token being used within the ecosystem of a high-street retail company, “The digital currency may be pegged to the US dollar and available for use only at selected retailers or partners. In other embodiments, the digital currency is available for use anywhere. The digital currency can provide a fee-free, or fee-minimal place to store wealth that can be spent, for example, at retailers and, if needed, easily converted to cash”
    • The stablecoin could alternatively be developed so that it can be spent anywhere, with prospective USD backing ensuring greater ease of D/W; it could, in another scenario, be tied to other digital currencies rather than just fiat
    • A notable difference is that “Walmart Coin” users could earn interest, while with Libra, interest earned on the scheme’s reserve funds would go to Libra’s node operators that back the company to the tune of $10M
    • Walmart’s stablecoin could store user’s purchasing histories on the blockchain and then apply related savings to their subsequent purchases in a similar way to loyalty points
    • Other features include the ability to remove the need for credit cards, and acting as a “pre-approved biometric (e.g., fingerprint or eye pattern) credit … A person is the ‘credit card’ to their own digital value bank”
    • The token could be used to restrict what product categories can be bought and by whom, (e.g., blocking minors from purchasing cigarettes, alcohol, or an R-rated DVD)
    • Link to Cointelegraph’s report
  25. Brave: Tipping on Twitter with Brave
    • Brave users can now send individual or monthly recurring tips to content creators on Twitter with BAT
    • To kick off the feature, Brave will allocate 100k BAT grants (each grant is the BAT equivalent of ~$1) to Brave desktop users in regions not currently receiving Brave Ads
    • Tips are sent immediately to verified creators and are visible in their Brave Rewards account within minutes, with payment occurring the first week of each month
    • If the creator hasn’t yet verified, the tip will be held locally in the browser until that creator verifies with Braves Creator program; if they verify within 90 days, the tip will be sent, and if not, it remains in the user’s Brave Rewards wallet
    • Brave claims Reddit, Vimeo and GitHub are next on the list, while it already supports YouTube and Twitch
  26. Cointelegraph: Nexo Launches MasterCard-branded Crypto Credit Card
    • Crypto lender Nexo is launching a MasterCard-branded crypto credit card, dubbed the Nexo Card, that will have zero foreign, annual, or monthly exchange fees, “When using the Nexo Card to purchase goods and services, you actually pay using your Nexo flexible open-ended revolving credit line that is backed with your crypto holdings and thus not selling any of them, which is giving you the freedom to spend today and sell your holdings whenever you want in the future to pay back the loan”
    • Nexo provides a fully automated Instant Crypto Credit Lines service, which allows crypto owners to borrow against a basket of an array of digital currencies such as BTC, ETH, XRP, LTC and others
    • Users can earn interest on fiat such as USD, EUR, GBP, and stablecoins
  27. The Block: Bakkt may have acquired DACC for $11M
    • 2Q19 reports from Bakkt’s majority shareholder ICE suggest the exchange paid $11M for the April acquisition of Digital Asset Custody Company (DACC); ICE spent $352M on M&A in 1H19, $322M of which was paid for Simplifie and $19M was likely spent on RCG in 1Q, leaving an outstanding sum of $11M
    • The $19M figure for the RCG acquisition is based on the fact the only purchase seemingly made in 1Q was of RCG, to which ICE’s cash flow statement attributed the figure of $19M
    • On ICE’s 1Q earnings call in May, Jeff Sprecher, ICE’s CEO, said the crypto winter helped make the purchase of DACC affordable, “[We] acquired a company earlier this week that wouldn’t have been available to us had this market been really hot because valuations were really hot”


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