| Market Reports

The Weekly Hash – October 7 – 11

Check out the most important happenings in crypto over this past week, presented by the experts at Kraken.

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. Cointelegraph: Hong Kong’s SFC Releases Regulations for Crypto Fund Managers
    • Hong Kong’s SFC published crypto regulations, dubbed “Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets,” that require crypto fund managers in HK to always maintain a minimum liquid capital of HK$3M ($383,000) and its variable required liquid capital, as well as to have sufficient resources for the proper performance of duties, risk management, compliance, and AML/CFT policies
    • Managers must appoint a functional independent custodian and ensure fund assets are segregated from its own assets, as well as assets of other clients, unless fund assets are held in an omnibus client account; bank accounts must be established and maintained with an authorized financial institution in HK or a bank in a jurisdiction agreed to by the SFC
    • The fund manager must evaluate the features of diverse custodial arrangement, including hardware and software infrastructure, security controls over key generation, storage, management and transaction, as well as the process of handling blockchain forks
  2. CNBC: PayPal Withdraws From Facebook’s Libra Cryptocurrency
    • Confirming rumors from last week, PayPal announced it is backing out of Facebook’s Libra Association ostensibly due to unfavorable scrutiny the project has received from int’l regulators, “PayPal has made the decision to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations”
    • PayPal, which was one of 28 corporate backers of the project, said it’s still “supportive of Libra’s aspirations” and that it will continue to partner with Facebook in the future
  3. CoinDesk: Algo Capital Loses Crypto Funds After CTO’s Phone is Hacked
    • Algo Capital, an investment firm focused on the Algorand blockchain, lost $1M – $2M after the firm’s CTO Pablo Yabo had his cellphone compromised, allowing attackers to seize control of an Algo hot wallet he administered
    • Algo Captial CEO David Garcia said the firm is taking full responsibility and will reimburse the full amount within 20 months, “We are engaging with certain key organizations and security services to collaborate and address this issue which has become a common industry problem”
    • Yabo pledged to shoulder most of the reimbursement cost and announced his resignation from Algo Capital, “I take responsibility for this and thus will be personally covering most of the stolen funds and the rest will be covered by Algo Capital General Partners […] I have decided to focus entirely on Randlabs.io to do what I love most: build tools and software that increases the adoption of blockchain technology”
  4. CoinDesk: NBA’s Sacramento Kings to Reward Loyal Fans With Crypto Tokens
    • The NBA’s Sacramento Kings and blockchain-based ticketing platform Blockparty jointly developed an ERC-20 token, called “Kings Token,” which will pair with a predictive gaming platform the team developed in anticipation of the legalization of sports betting in California
    • Blockparty is conducting a case study on the project in hopes that it will be shared with other NBA teams if the project is successful
    • Kings Tokens, which will exist within a wallet within the Golden 1 Center app that tracks the engagement and accumulated points, can be earned through the platform and redeemed for access to unique events, signed merch or courtside tickets, among others
    • Fans can’t trade the token for another currency or even have a private key, but they will be able to show a QR code to redeem points and see the confirmation of txs through a block explorer
    • The token is expected to launch by opening night on Oct. 25th, but remains in testing
    • Vladislav Ginzburg, Blockparty’s Chief Development Officer, said users may eventually be able to transfer tokens P2P and earn rewards by eating at nearby restaurants or making it to the game before tip-off, “This is a mass adoption story. Forty-one games of 20,000 people – I’m going to go ahead and say that many of those people don’t own any crypto whatsoever. Suddenly by downloading the Golden 1 Center app, they are going to have an ERC-20 wallet with an ERC-20 token”
  5. Financial Times: Sharp Rise in Watchdog Scrutiny of UK Cryptocurrency Groups
    • The UK’s FCA regulator is now investigating 87 crypto firms either as part of initial scrutiny or full enforcement investigations, a +74% increase over the same period in 2018 
    • The data was provided by David Heffron, partner at law firm Pinsent Masons, who said that the spike in numbers “reflects the FCA’s increasingly hands-on and no-nonsense approach” to the crypto space
    • Link to coverage by CoinDesk & Cointelegraph
  6. The Block: Abu Dhabi to Put Land Records on Blockchain
    • The Dept. of Urban Planning and Municipalities, a gov’t agency responsible for Abu Dhabi’s development strategy, partnered with Indian IT firm Tech Mahindra to provide Abu Dhabi citizens with a blockchain-based solution called “SmartHub,” which will help trace land records and reduce the processing time it takes to do real estate txs
    • All property-related documents issued by municipalities will be stored on a blockchain and help track records via nodes extended to different entities
    • Ahmad Abdolsamad AlHammadi, CIO of Abu Dhabi Municipality, added, ”This is a beginning of many more services that we plan to roll out during the course of the year,” without providing specific details
  7. WirtschaftsWoche: Finance Minister Scholz for Digital Euro – Rejection of the Cryptocurrency Libra
    • Germany’s Finance Minister and Vice-Chancellor Olaf Scholz said he is in favor of national digital euro because “such a payment system would be good for financial center Europe and its integration into the world financial system”
    • Scholz added that he is “very, very critical” of Facebook’s Libra, “We should not leave the field to China, Russia, the US or any private providers”
  8. Reuters: Internal Affairs Minister Says Crypto Donations to Politicians Are Legal in Japan
    • Japan’s Internal Affairs and Communications Minister Sanae Takaichi announced that crypto donations to political parties are legal and don’t have to be disclosed under the Political Funds Control Law, unlike cash and securities, “Cryptographic assets do not fall under any of the above [regulations], and don’t limit donations”
    • Takaichi added that as crypto donations go mainstream Japan’s political parties must address taxonomy and rules themselves, “Because it will limit the political activities of politicians, it will be a problem to be discussed by each party and each group”
  9. CNBC: ‘We’re Closer Than We’ve Ever Been’ to BTC ETF Approval, Says Bitwise Head of Research
    • Bitwise Managing Director and Global Head of Research Matt Hougan said a BTC ETF is “closer than ever” to getting approved by the SEC,  “We’re closer than we’ve ever been before to getting a bitcoin ETF approved. Sometime before Monday [Oct. 13], the SEC has to give its decision: yes or no. They have no more ways to postpone it at this point. We will hear clearly between now and Monday what they think, and then, depending on what we hear, we’ll go forward from there. But it should be a very exciting week”
    • Hougan argued that significantly improved market conditions over the past two years have improved Bitwise’s chances of approval, “The evolution of the bitcoin market over the last two years is from night to day. Two years ago, there were no regulated, insured custodians in the bitcoin market. Today, … there are big names like Fidelity and CoinBase [with] hundreds of millions of dollars of insurance from firms like Lloyd’s of London. Two years ago, there were no regulated crypto exchanges. Now, six of the 10 big crypto exchanges are regulated by the New York Department of State with market surveillance technologies in place. And, most importantly, two years ago, it was a one-sided, inefficient market. Today, we have $200-plus million in volume and regulated futures every day”
    • Hougan added that BTC is now “among the most efficient institutional markets in the world” because of its narrow spreads and the involvement of major market makers like Jane Street Capital and Susquehanna
    • He concluded, “The problem is while big institutions have safe, secure ways to buy bitcoin today in private funds that are available only to the ultra-high-net-worth people, regular investors don’t have a safe way. What the bitcoin ETF would allow everyday investors to do is have safe, simple, secure access to the wealth generation taking place in bitcoin and crypto. It would let financial advisors give it to their clients easily instead of them going rogue. It’s just trying to solve that problem of simple, secure access to what is emerging as a very important technology and a very important asset class in the market”
  10. CoinDesk: Bitcoin Is 2019’s Best-Performing Asset, Even After Recent Price Downturn
    • BTC’s price finished 3Q2019 at ~$8,300, up +114% YTD to take the current lead as the best-performing asset of 2019
    • Since Dec. 31, Gold is up +17%, S&P500 returned +21% through Sept. 30, and the 10-year U.S. Treasury bond has yielded +1.6%, close to historic lows
    • Goldman Sachs analysts ranked IT stocks as the best-performing sector YTD with a +31% return, however BTC wasn’t mentioned in the report
    • BTC price has declined around -59% since its price peak of ~$20k, but is still up more than 10x from its ~$800 level at the start of 2017’s rally 
    • The network’s hash rate also more than doubled from 40 EH/s at the start of the year to ~90 EH/s at present
  11. The Block: Grayscale Sees Investment Double in Q2, Says Institutions ‘Invest With Us All The Time’
    • Grayscale’s Director of Sales and BD, Rayhaneh Sharif-Askary, stated that investment in the firm’s trust products has doubled in 2Q to ~$85M — 84% of which came from institutional investors
    • Sharif-Askary considers it a myth to think that institutional investors haven’t entered the space yet, “I get asked this a lot; there is this rhetoric in media of when institutional investors are going to get involved, when they are going to start investing. It’s ironic because we see institutional investors investing with us all the time and that’s been the case for a long time now”
    • In 2Q, Grayscale saw ~25% of the investment flow into altcoin trusts
  12. CoinDesk: Facebook CEO Mark Zuckerberg to Testify Before Congress Over Libra Crypto
    • Facebook Founder & CEO Mark Zuckerberg will testify (as the only witness) before the House FSC on Oct. 23 for the “Examination of Facebook and Its Impact on the Financial Services and Housing Sectors” hearing
    • Committee Chairwoman Maxine Waters drafted the “Keep Big Tech Out of Finance Act” in July, which “prohibits large platform utilities, like Facebook, from becoming chartered, licensed or registered as a U.S. financial institution. The bill also prohibits large platform utilities from establishing, maintaining, or operating a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function as defined by the Federal Reserve”
  13. TokenAnalyst: Around $10B in BTC Is Held in Wallets of Eight Crypto Exchanges
    • According to the TokenAnalyst, ~1.2B BTC (~$9.8B), or ~6.7% of BTC’s 18M circulating supply, is currently held on the wallets of eight exchanges and the figure continues to grow
    • Coinshares CSO Meltem Demirors stated that ~17% of circulating BTC “is in third party custody (although the number is likely higher)”
  14. UNICEF: UNICEF Launches Cryptocurrency Fund
    • UNICEF launched the UNICEF Cryptocurrency Fund to receive, hold and disburse donations in ETH & BTC
    • Contributions will be used to fund open source tech benefiting children and young people worldwide and will be held in their crypto of contribution and granted in the same crypto
    • UNICEF Executive Director Henrietta Fore said, “This is a new and exciting venture for UNICEF. If digital economies and currencies have the potential to shape the lives of coming generations, it is important that we explore the opportunities they offer. That’s why the creation of our Cryptocurrency Fund is a significant and welcome step forward in humanitarian and development work”
    • The first contributions will be received from the Ethereum Foundation and will benefit three grantees of the UNICEF Innovation Fund
  15. IRS: IRS Issues Guidance on Tax Implications of Crypto Hard Forks
    • The IRS issued guidance on the tax implications for owners of “hard forked” cryptoassets
    • Taxpayers will have to report gross income under the Internal Revenue Code for cryptoassets received via a hard fork only if they personally received the asset
    • This guidance raises several questions, such as “what it actually means to ‘receive’ crypto?” and “will this create a risk of tax liability for ‘phantom income’ on crypto neither actually received nor easily liquidated?”
    • Link to The Block’s report
  16. SIX: SIX and the SNB Explore Technological Approaches for the Use of Digital Central Bank Money in the Settlement of Tokenized Assets
    • The Swiss National Bank (SNB) partnered with the country’s stock exchange SIX on a Proof-of-Concept (PoC) to “explore how digital central bank money could be used in the settlement of tokenized assets between market participants”
    • The PoC could involve connecting the Swiss’ payments clearing system with the proposed digital exchange or the issuance of an electronic Swiss franc from the SNB
  17. Ripple: Ripple to Bring Blockchain Technology to Finastra’s Banking Customers
    • Ripple partnered with fintech giant Finastra to integrate Ripple’s DLT into Finastra’s payments solutions, thereby allowing for Finastra to support fast cross-border payments and allow Finastra’s customers to connect & transact with RippleNet partners (and vice-versa)
    • Finastra’s clients will have the option to access Ripple’s new XRP-based product, On-Demand Liquidity; users will also be able to send int’l payments with end-to-end tracking and have visibility into fees, delivery time and status
  18. SEC: SEC Rejects Bitwise/NYSE Arca BTC ETF Proposal
    • The SEC rejected Bitwise’s BTC ETF proposal on Oct. 9 because “NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and, in particular, the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices’”
    • The regulator placed the burden on NYSE Arca, rather than Bitwise’s proposal
    • Bitwise responded, “We deeply appreciate the SEC’s careful review. The detailed feedback they have provided in the Order provides critical context and a clear pathway for ETF applicants to continue moving forward on efforts to list a bitcoin ETF. […] We look forward to continuing to productively engage with the SEC to resolve their remaining concerns, and intend to re-file as soon as appropriate”
    • Link to coverage by Coindesk, The Block, and Cointelegraph
  19. Yahoo Finance: CFTC Says Cryptocurrency Ether is a Commodity, and Ether Futures Are Next
    • CFTC Chair Heath Tarbert said he believes ETH is a commodity, “We’ve been very clear on bitcoin: bitcoin is a commodity. We haven’t said anything about ether – until now. It is my view as chairman of the CFTC that ether is a commodity”
    • Tarbert announced that the CFTC and the SEC are working together on the two cryptoassets and have both agreed that neither BTC nor ETH are securities, adding that the CFTC may allow ETH futures to trade on U.S. markets
    • Regarding cryptoassets created by hard forks, Tarbert argued the CFTC’s treatment of each new coin should depend on its creation, “It stands to reason that similar assets should be treated similarly. If the underlying asset, the original digital asset, hasn’t been determined to be a security and is therefore a commodity, most likely the forked asset will be the same. Unless the fork itself raises some securities law issues under that classic Howey Test”
    • He noted that major federal regulators are looking into Facebook’s Libra but haven’t yet decided whether it’s a security
  20. Trust Nodes: Litecoin Foundation Running Out of Money
    • Litecoin Founder Charlie Lee said the Litecoin Foundation (LF) is running out of money, “I have the numbers. We just haven’t put them together to be published. We have about $200k today, which is about 2 years of runway”
    • The LF’s income is down from +$1M ($830k from a donation + $200k merch sales) last year to <$70,000 this year
    • The actual figures show they’re spending $137k on staff, $36k on marketing, $24.5k on legal fees, $4.5k on advertising, and $1.5k on software and cloud services, drawing uncertainty around Lee’s two year runway estimate
    • Additionally, the LF has a non-public deal with WEG Bank and TokenPay which ostensibly cost them $2.8M (LF bought 10% of WEG Bank last year with an option to acquire another 80%; some speculate this $2.8M expense is the cost of the option)
  21. BFM TV: 5,200 Tobacco Shops in France Now Selling BTC
    • After being suspended < 2 months after launching in January, French crypto startup Keplerk has relaunched its service to begin accepting BTC payments at +5,200 tobacco shops in France
    • Kerplerk’s customers will be able to make purchases in coupons of 50, 100 or 250 EUR, and BTC payments in all locations thanks to Keplerk’s partner Bimedia, a payment terminal provider
    • Link to Cointelegraph’s report
  22. CoinDesk: Bank of America Is Now Hiring in Blockchain, Not Just Filing Patents
    • Bank of America (BofA) is hiring for six positions that mention blockchain: a treasury product manager, three enterprise payment tech senior architects and two banking regulatory domain architects
    • Each job description either calls for experience with blockchain or the ability to apply it in a banking context
    • BofA recently closed an ad on LinkedIn for a treasury product manager to lead “the product management team for the Ripple Project,” which suggests that the bank plans to use Ripple’s DLT in some capacity
    • The new hire would be responsible for “driving product strategy and growth, overseeing daily product management routines, and overseeing the development of new initiatives that result in an innovative and highly-competitive product offering”
  23. The Block: In First, Crypto Market Maker B2C2 Launches a Gold Derivative, Settled in Bitcoin
    • Crypto liquidity provider B2C2 launched an institutional-focused, gold derivative that is priced and settled in BTC
    • As defined by the FCA, B2C2’s regulated OTC desk, B2C2 OTC Ltd, will trade the derivative amongst “eligible counterparties” and “professional clients” and the minimum trade size will be equal to one ounce of gold
    • B2C2 said the derivative is a result of client demand, “The clients we are seeing demand from are those who have their own user base of traders and macro hedge funds” 
    • CEO & Founder Max Boonen said, “We are agnostic as to which of the major tokens our clients choose to use to settle their trades with us, be it Paxos Gold or another. These tokens will give them access to the underlying metal since they correspond to ownership of physical gold in vaults”
  24. InfiniGold: InfiniGold to Launch The Perth Mint Gold Token
    • Precious metals digitization firm InfiniGold plans to launch the Perth Mint Gold Token (PMGT), an ERC20 token backed 1:1 by GoldPass certificates issued by The Perth Mint, the largest refiner of newly mined gold and guaranteed by the gov’t of Western Australia (also the sole owner of the 120-year-old mint), “PMGT is digitized gold that allows users to conveniently acquire and have entitlement over government guaranteed physical gold stored at The Perth Mint in a trusted and cost-effective way” 
    • The token, which is jointly designed with Big Four accounting firm EY, aims to offer an alternative to traditional gold investment products such as ETFs, while using blockchain to allow real-time trading and settlement
    •  InfiniGold’s CEO Andreas Ruf added, “The Perth Mint consistently delivers in excess of US$16bn worth of precious metal bars and coins per annum, providing us with plenty of supply for PMGT”
    • Link to CoinDesk’s report


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