| Market Reports

The Weekly Hash – September 30 – October 4

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. WSJ: Group of Major Crypto Exchanges to Rate Digital Assets
    • Major crypto exchanges, such as Kraken, Circle, Coinbase and Bittrex, have jointly developed a system to rate which cryptos are and are not securities, although the SEC hasn’t endorsed the approach and could question any decisions to list tokens
    • The group, dubbed the Crypto Ratings Council, will publish online ratings of assets on a scale of 1-5, with the highest value signifying that the token is a security that unregulated crypto firms can’t issue, sell or trade
    • Issuers won’t have upfront input in the ratings, but can provide info to dispute a score their token received
    • Other participants in the council include trading and custody firms such as Anchor Labs, DRW’s Cumberland unit, Genesis Global Trading and Grayscale Investments, and the group says it continues to recruit members
    • The system draws from court decisions and regulatory statements describing which assets are securities as well as factors that are particular to each asset’s blockchain
    • While the group will agree on the score for a particular token, the exchanges could make different decisions about which ones to list
    • Mary Beth Buchanan, Kraken’s General Counsel, commented, “It’s our hope the SEC will view this as a positive step … [It] does show the SEC what each exchange is doing to come to a decision”
    • For example, XRP has a score of 4, while EOS, Stellar and Tezos scored 3.75. Bitcoin, Litecoin, Monero and Dai scored a perfect 1
    • Link to twitter thread by The Block’s Larry Cermak
  2. Crypto Briefing: New Balance To Use Cardano In Global Supply Chain
    • IOHK partnered with New Balance to pilot the Cardano blockchain as a consumer-level verification solution for the secondary market, allowing purchasers to confirm the authenticity of the footwear using Cardano’s distributed ledger
    • Notably, there are no plans to use ADA for this specific solution
    • A source familiar with the matter said the pilot that it is expected to go live in October, with eventual plans for global launch
  3. Ripple: Ripple Continues Acquisition Streak, Expands European Operations to Iceland
    • Ripple acqui-hired Icelandic crypto trading firm Algrim along with its team of engineers to expand its operations into Iceland, marking its second engineering talent acquisition in one week after acquiring Logos for its Xpring subsidiary on Sept. 27th
    • The new team will play an integral role in the ongoing development of Ripple’s On-Demand Liquidity (ODL) product which utilizes XRP for production cross-border payments, and Iceland will serve as one of Ripple’s engineering hubs with plans to bring on more technical talent in the region
    • Ripple’s SVP of Engineering Christopher Kanaan said, “With built-in expertise in trading and exchanges, the addition of Algrim’s engineering talent to our team will be instrumental in continuing the momentum we’re already experiencing with On-Demand Liquidity […] We’ve been committed to sourcing expert crypto and trading talent in key global markets since day one, and the acquisition of the Algrim engineering team is a successful example of doing just that”
  4. Ligamedia: Ukraine Wants to Legalize Cryptocurrency
    • Incoming Digital Transformation Deputy Minister Alexander Bornyakov announced that Minster Mikhail Fedorov will authorize the legalization of crypto in the Ukraine
    • Bornyakov stressed that cryptos aren’t currently illegal in Ukraine, but taking the step to explicitly legalize it will benefit Ukraine and it’s gov’t via taxation
    • In the future, he sees Ukraine being able to “earn from cryptocurrency traders” as well
    • As part of the plan, the Ukraine will also transfer public registries and documents to a public distributed ledger managed by the gov’t
    • Link to The Block’s report
  5. The Investor: BK’s Bithumb Deal on Verge of Collapse
    • According to “industry sources,” BK Group’s acquisition of 50% stake in Bithumb from its parent company, BTC Korea Holdings, for $333M is at risk of falling apart after BK Group has failed to pay the remaining balance due 
    • The deal was expected to close in February of this year and the deadline to pay the remaining balance has been extended twice, but BK Global has only paid a down payment of $100M and now “the down payment might become a subject of a legal battle”
    • A Bithumb official added, “Bithumb has stable management, so there won’t be any impact should the deal collapse”
  6. SEC: SEC Orders Blockchain Company to Pay $24 Million Penalty for Unregistered ICO
    • The SEC settled charges against EOS issuer Block.one for conducting an unregistered security offering in 2017/2018; the firm agreed to pay $24M to resolve all matters with the SEC, notably just 0.6% of the total funds raised in the alleged $4.1B ICO
    • Block.one said the settlement relates specifically to the ERC-20 tokens sold during the ICO, which haven’t been in circulation since EOS transitioned to its own chain in June 2018
    • Many believe this sets a bad precedent for other companies thinking of issuing a token, considering Blockstack, which tried to do things the right way, would be in a much better position if they did the same as Block.one, i.e., Blockstack recently completed the first SEC-approved token offering, raising $23M between its Reg A+ offering for the general public as well as its Reg S offering for institutional investors in Asia, but spent 10 months and ~$2M getting SEC approval — that’s 8.7% of the total raise compared to 0.6% that Block.one had to pay to the SEC
    • Additionally, EOS has more liquidity than Blockstack since it can trade on unregulated crypto exchanges and Blockstack must trade on U.S. regulated securities exchanges with virtually no liquidity
    • Link to coverage by CoinDesk & The Block
  7. Primitive Crypto’s Dovey Wan: Innosilicon’s $10M Mining Farm Takes Fire
    • Mining firm Innosilicon’s giant data center caught fire on Monday, destroying $10M worth of mining rigs in the process
    • Some commentators allege that the blaze is to blame for the recent drop in BTC’s hash rate from 86M TH/s on the day it occurred to ~82M TH/s at present; however, this is unlikely considering that this drop isn’t too far outside the volatile movements that Bitcoin’s hash rate regularly experiences, and just last week hash rate dropped by -40% before fully recovering and reaching a new all-time high less than two days later
  8. Cointelegraph: Early Arrival of Ethereum’s Istanbul Hard Fork Causes Testnet Split
    • Due to unusually fast block confirmation times, Ethereum’s system-wide activation of the Istanbul hard fork arrived two days early on Sept. 30th and caused a split of the Ropsten testnet
    • Most of the miners on Ropsten were unaware that Istanbul had arrived, which resulted in a split of the testnet between those mining on the newly upgraded chain and those continuing to mine on the old chain
    • Team lead at the Ethereum Foundation Péter Szilágyi wrote that “the Ropsten Ethereum testnet Istanbul forking is a bit unstable due to a huge miner pushing the non-forked chain”
    • The Ethereum Foundation’s Community Manager Hudson Jameson added, “This is what testnets are for! Be aware that Ropsten will be unstable until this all plays out”
    • It’s unclear if this “hiccup” will have any effect on the Istanbul hard fork activation
  9. Bloomberg: Maduro Says Venezuela to Activate Crypto Payment Method ‘Soon’
    • Venezuela President Nicolas Maduro stated that the country’s gov’t will soon activate a crypto payment method for citizens that will enable new instruments for “free national and international payments,” thus allowing everyone to conduct banking txs
    • Maduro stated, “The finance minister and Venezuela’s central bank have new instruments which we will activate very soon so that everyone can do banking transactions, as well as national and international payments through the central bank’s accounts. Venezuela is working within the cryptocurrency world […] Donald Trump and his sanctions are blocking Venezuela from carrying out transaction in any of the world’s banks […] There’s other formulas to pay, and it’s what we’re using, because our payment system works perfectly in China and Russia”
  10. Monex: Nomura, Rakuten, SBI form STO Association in Japan (PDF)
    • Major Japanese brokerage firms – Nomura, Rakuten, SBI, Monex, Daiwa and Kabu.com – formed the STO Association in Tokyo to boost STOs as a fund-raising model in the country and to ensure investor protection by bringing in regulations in place to prevent illegal activities, including money laundering
    • Monex said the association will work as a self-regulatory organization for STOs as these offerings have been gaining popularity globally, “Japan is also following the trend and is ensuring that sufficient conditions are in place for STOs to become widely used”
    • The group also plans to get a certification as an Authorized Financial Instruments Firms Association based on the country’s Financial Instruments and Exchange Act to fully leverage its capabilities as a self-regulatory organization, “The Japan STO Association is committed to the development of STOs in Japan which it believes will contribute to a more active capital market and development of the real economy”
    • Link to The Block’s report
  11. The Block: From $8M to $0 in Three Days—Ethereum’s FairWin Smart Contract Has Been Emptied
    • According to Etherscan, the smart contract wallet of FairWin, a gambling game built on Ethereum, has been accused of being a Ponzi scheme after multiple ETH addresses containing ~$8M in ETH were emptied and distributed elsewhere
    • It’s unclear whether these withdrawals were from an attacker or FairWin users desperately withdrawing funds
    • The Block previously reported that three critical vulnerability were found in the game: “one allowing the owner/admin of the contracts to totally drain [the smart contract containing $8M in ETH], one where the admin can prevent users from withdrawing forever and one where anyone, not just the owner, can steal new deposits”
  12. Bloomberg: Facebook Libra Payments Partners Waver on Cryptocurrency
    • Visa, Mastercard, PayPal and Stripe are allegedly undecided about formally signing onto the Libra Association due to concerns about maintaining positive relationships with regulators who have expressed serious reservations about the project
    • The firms believe Facebook oversold the extent to which regulators were comfortable with the project and are concerned about the perception the social network hasn’t behaved responsibly in other areas, such as how it has handled user data and privacy
    • The Libra Association will ask the 28 founding members to officially affirm their commitment to the project as soon as Oct. 14th, although companies that officially join won’t be obligated to immediately contribute the initial $10M required to invest in the project
    • Technology development of Libra is moving along faster than expected as Facebook’s Calibra wallet and four other association members are already running a testnet of nodes and sending test txs
  13. SIA: Nebulous Settles With SEC Regarding 2014 Offering of Sianotes and 2015 Conversion Into Siafunds
    • Sia’s parent firm Nebulous paid ~$225,000 in penalties to settle with the SEC regarding two unregistered token sales in 2014 and 2015 worth a total of $120,000
    • The SEC claims that Nebulous violated the Securities Act “by offering and selling these securities without a registration statement filed or in effect with the Commission and without qualifying for exemption from registration”
    • The securities in question were Nebulous’ 2014 “Siastock” offering which entitled owners to “a percentage of future revenue generated from transactions on the Sia network and user application Nebulous represented it was then developing” and the “SiaNotes” which represented a ‘promise of future payments’ 
    • According to Nebulous, “As reflected in the settled order, the SEC did not take any enforcement action with respect to the Siacoin token or any current activity on the Sia network, and the order does not require Nebulous to register the Siacoin token as a security with the SEC”
    • Nebulous’ COO Zach Herbert said, “While disappointed that the SEC chose to pursue a steep penalty of almost double what we raised in our 2014 offering of Siafunds, especially compared to their lax handling of EOS, we view this settlement as highly positive for Sia. By choosing not to take action against Siacoins, we believe the SEC has validated Sia’s two-token model. We will continue to build and improve the Sia network at a rapid pace”
  14. The Block: BitPay to Add Support for XRP Later This Year
    • BitPay partnered with Ripple’s Xpring unit to add native XRP support on its platform by EOY, and to integrate Bitpay’s wallet with Xpring
    • With the partnership, BitPay’s wallet users, as well as its prepaid cardholders, will be able to store and spend XRP via its merchants and businesses
    • Link to Xpring’s press release
  15. Ohio Treasurer: Treasurer Sprague Announces Suspension of OhioCrypto.com
    • Ohio Treasurer Robert Sprague suspended the OhioCrypto.com, a payment portal for Ohio businesses to pay taxes in BTC, “It is vital that Ohio explores innovative, new technologies and processes that continue to drive Ohio into the future. However, we must make sure any new processes that are implemented, such as OhioCrypto.com, are established in accordance with Ohio law”
    • The Treasurer’s office believes BitPay, the third-party payment processor, is functioning as a “financial transaction device” and, therefore, should have been selected through a competitive selection process and authorized by the State Board of Deposit, “As Ohio Treasurer, it’s my job to provide trusted stewardship and protection of Ohio’s tax dollars, and to follow the laws of this state. Until a formal opinion is issued by the Attorney General, I feel it is prudent to suspend the website”
    • In the 10 months since the website was launched, less than 10 businesses have paid taxes using BTC
  16. Bloomberg: Vanguard to Challenge Banks’ Grip on $6 Trillion Currency Market
    • According to a person familiar with the matter, over the past couple of months mutual fund giant Vanguard and blockchain tech provider Symbiont have been jointly testing a blockchain-based, P2P FX trading platform for assets managers that avoids the need for investment banks – the platform has already “handled some trades”
    • Vanguard PR Specialist Carolyn Wegemann said, “Vanguard is currently piloting a project focused on improving the efficiency and reducing risk of FX hedging,” adding that the firm’s goal is to “lower the cost of investing for all investors”
    • Link to The Block’s report
  17. The Block: BitGo Enters Into Staking Space, Offering Up to 13% Annual Returns
    • Crypto custodian BitGo launched a staking platform with support for DASH & ALGO, clients can now stake both tokens to earn 7-13% in passive income
    • BitGo acquired staking infrastructure startup Hedge to integrate its automated secure deployments, HSMs and secure cryptographic enclaves, to its staking platform
    • BitGo CTO Ben Chan said, “Staking provides our clients with returns on their investments without ever moving their assets out of custody,” adding that the acquisition will help BitGo deliver “an automated, end-to-end” staking service
  18. U.S. Congress: US Lawmakers Ask Federal Reserve About National Digital Currency
    • The U.S. House of Reps FSC asked the Fed whether there are any plans of launching a U.S. central bank digital currency (CBDC)
    • U.S. Reps French Hill and Bill Foster expressed concerns that the importance of USD could be jeopardized “from wide adoption of digital fiat currencies […] Internationally, the Bank for International Settlements conducted a study that found that over 40 countries around the world have currently developed or are looking into developing a digital currency”
    • The lawmakers stated that, due to the potential of digital currencies to take on the characteristics and utility of paper money, it may be increasingly urgent for the Fed to “take up the project of developing a U.S. dollar digital currency”
    • Link to Cointelegraph’s report
  19. TON: Telegram Messenger to Officially Launch TON Network in Late October
    • Following a successful trial, Telegram will launch its Telegram Open Network (TON) in late October
    • Investors are provided with TON key generation software and will be required to provide Telegram with a public key to receive the platform’s native GRM tokens by Oct. 16th
    • The entire source code for TON is now available on Github
  20. The Block: A New BTC Futures Fund Has Been Filed With SEC
    • Asset management firm Stone Ridge filed a prospectus with the SEC for a new BTC futures fund, dubbed “NYDIG Bitcoin Strategy Fund”; the fund will invest in cash-settled BTC futures traded on CFTC-registered exchanges, will have “significant” holdings of cash and U.S. gov’t securities, and corporate cash & fixed-income investments
    • The fund’s shares will initially be offered at $10/share, with no minimum purchases, and the fund will initially cap its net assets at $25M
    • Stone Ridge warned that BTC and BTC futures are “highly volatile” and that investors should be prepared to lose their “entire investment” when investing in the fund
  21. Libra Association: September Libra Developer Update – Roadmap #1
    • The Libra Association published its first roadmap detailing the four milestones the Calibra team plans to meet prior to the mainnet launch of Libra network: onboard five partners deploying full nodes on the network for the first milestone, 25 for the second, 75 for the third, and 100 by the launch of the Libra mainnet at milestone four, ”One method we use for tracking the project’s success is how many of the deployed nodes are managed by different partners”
    • The Association notes that each Libra node will “run on a mixture of on-premises and cloud hosted infrastructure” adding that “wider diversity of infrastructure will provide more resiliency to the Libra network”
    • To prepare for mainnet, the Association created a “Pre-Mainnnet” test environment that’s only available for a handful of Libra partners who have already deployed full Libra nodes, which will enable partner nodes to communicate with one another and test the stability of the Libra network
  22. Financial Times: PayPal on the Verge of Quitting Facebook’s Libra Project
    • PayPal is allegedly considering leaving Facebook’s Libra Association due in part to the regulatory backlash it’s received
    • Libra Association Head of Policy and Communications Dante Disparte said building a project like Libra “is not an easy path. We recognise that change is hard, and that each organisation that started this journey will have to make its own assessment of risks and rewards of being committed to seeing through the change that Libra promises”
    • Responding to the rumors, Calibra CEO David Marcus wrote that he had “no knowledge of specific organizations’ plans to not step up […] The tone of some of this reporting suggests angst, etc… I can tell you that we’re very calmly, and confidently working through the legitimate concerns that Libra has raised by bringing conversations about the value of digital currencies to the forefront”
    • Link to CoinDesk’s report
  23. Reuters: Fed’s Harker—Digital Central Bank Currency ‘Inevitable’
    • Philadelphia Federal Reserve bank president Patrick Harker said it’s “inevitable” that central banks including the Fed will start issuing digital currency (CBDC), while cautioning that the U.S. shouldn’t lead such a move, “Frankly I don’t think we should be the first mover as a nation to do this. It is inevitable … I think it is better for us to start getting our hands around it”
    • Harker said with the “FedNow” service in the works, “I am looking at the next five years after that. What comes next? I do think it is something around digital currency”
    • Other Fed officials said the benefits of a CBDC were “not obvious”, Harker acknowledged that his view is “in the minority” at the Fed right now
    • Harker’s staff has begun research on the issue and is organizing a small research conference for academics to be held early next year
  24. Economist: Betting on BTC Prices May Soon Be Deemed Illegal Gambling in the U.K.
    • Due to the highly volatile nature of crypto and the massive liquidations its swings has caused on derivative exchanges,  the UK’s FCA is considering a blanket-ban on selling crypto-derivative products to retail investors
    • A consultation ended on Oct. 3rd, and its decision is expected in early 2020
    • The FCA says peddlers of crypto-derivatives can’t claim their wares are needed for hedging purposes such as traditional derivative products that are typically used as a defense against slumps in their domestic currency
    • The FCA estimates that investors in Britain made lost £371M ($492M) from crypto-derivatives from mid-2017 to the end of 2018 (net profit was £25.5M, or $31.45M, but was mostly captured by the largest investors), and believes its ban could reduce consumer losses by up to £234M ($288M) a year


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