CoinDesk Crypto

The band behind that “rebel just for kicks” song is doing a social token with Rally.

Portugal. The Man joins Christian vocal trio Selah on Rally’s “Creator Coin” platform. Competing platform Fyooz has also made headlines in recent weeks with the addition of tokens from rappers Lil Yachty and Lil Pump.

The Portland rock band’s ptm coin represents the latest effort to tokenize fan engagement. Bands who can’t tour due to COVID-19 restrictions are turning to a crop of crypto startups to offer exclusive perks to fans willing to fork over fiat in support of their favorite artists.

Related: COVID and Big Tech Burnout Are Pushing Social Tokens Mainstream

“We want some kind of special level for our really hardcore fans,” bass player Zach Carothers told CoinDesk in an interview. “Since about 2017 we’ve been looking into something like this and just toying with the idea. And I think this forced downtime that we’ve been having has kind of given us the time to explore other options.”

Benefits include the launch of an audio archive for token holders featuring unreleased music as well as the ability to tune into exclusive live-streams. The band has also spun up a Discord server with over 1,100 users where much of the token activity will occur. The token goes live today, starting around $1 and fluctuating “based on the bonding curve and market demand following launch,” Rally co-founder Mahesh Vellanki said in a message.

“By giving these tokens to all their fans … they now have a vested interest in making the community even more successful, because they have a little bit of skin in the game, right?” Vellanki said in an interview. “That is kind of the beauty of this whole thing.”

• Lil Pump Is Doing a Social Token Called PumpCoin
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Public cryptocurrency mining company Bitfarms (BITF) closed its second private placement of shares Wednesday worth CAD$20 million, or over US$15 million, a week after closing another $15 million placement.

• The sale consisted of 5,586,593 common shares, per a release, over 3 million fewer shares than its first placement.
• The proceeds will fund the acquisition of additional mining machines and the expansion of its mining facilities.
• Shares of the Quebec-based company are trading hands at $4.37 currently, up more than 45% from their price when Bitfarms closed its first placement.
• Bitfarms has a current market value of $374 million with over 85 million shares outstanding, per data from Ycharts.

• Bitcoin Miners, Developers Narrow Down How Taproot Will Be Activated
• Compute North, Foundry Team Up to Target North American Bitcoin Miners
• Bitcoin Miner Marathon to Raise $250M in Direct Stock Offering
• US-Listed Chinese Lottery Firm Plans $14.4M Move Into Bitcoin Mining

Twitter CEO Jack Dorsey took to (where else?) Twitter to ask the question “Was this correct?” regarding his company’s decision to ban U.S. President Donald Trump from the platform following last week’s attack on the Capitol.

After that opening expression of doubt, he proceeded to answer that yes, it was.

• Dorsey then, in a thoughtful multipartite thread, laid out his rationale for the action, trying to square his belief in open unfiltered communication with the act of silencing the president of the U.S.
• The Twitter CEO also seemed to reference the recent removal of Parler, a conservative social media platform, from both the Apple and Google app stores in the wake of the attack on the Capitol as well as Amazon’s decision not to host Parler on its servers for the same reason, hitting back at claims the action was coordinated by the tech giants.
• “I do not believe this was coordinated,” Dorsey said. “More likely: companies came to their own conclusions or were emboldened by the actions of others.”
• Despite the CEO’s defense of Twitter’s and other companies’ actions in the here and now, Dorsey warned they should not become the rule. “This moment in time might call for this dynamic, but over the long term it will be destructive to the noble purpose and ideals of the open internet.”
• Even while laying out his justifications Dorsey expressed misgivings, saying, “having to ban an account has real and significant ramifications.” It, Dorsey said, “sets a precedent I feel is dangerous: the power an individual or corporation has over a part of the global public conversation.”
• Even though there’s a difference between a private company banning someone and a government doing it, the effect can feel the same, he said.
• He also declared his “passion” for bitcoin in almost lyrical fashion.
• Bitcoin, he wrote, offers a model of “a foundational internet technology that is not controlled or influenced by any single individual or entity. This is what the internet wants to be, and over time, more of it will be.”

UPDATE (Jan. 14, 02:00 UTC): Adds more from Dorsey’s tweet thread and deplatforming context.

• Donald Trump Banned From Twitter in Final Days of Presidency
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• Square’s Jack Dorsey Hits Out at FinCEN’s ‘Burdensome’ Proposed Crypto Wallet Rules
• Dogecoin Jumps 20% After Musk’s Twitter Shout-Out; Bitcoin Joke Spurs Dialogue With Saylor

IHS Markit will likely join the cryptocurrency index game, the company’s President of Financial Services Adam Kansler said during the financial information giant’s Wednesday earnings call.

Kansler told analysts that IHS Markit already has “tactical partnerships” with crypto firms like Lukka to source cryptocurrency pricing and reference data. These data points could form the bedrock of a cryptocurrency index product although Kansler said IHS Markit currently uses them to help clients value portfolios.

“So it’s an area where we’ll continue to focus not just on the valuations side, but probably even moving into the index side in the near future as well,” he said, referring to cryptocurrencies.

Related: Cboe Plans to Launch Cryptocurrency Indexes in Q2 2021

IHS Markit executives acknowledged Wednesday that bitcoin has generational momentum behind it. Chairman and CEO Lance Uggla said the younger ranks of his firm are chomping for more products in the crypto space, even if the firm has “nothing big and significant” in the pipeline.

“Of course, we have every millennial that works for us thinks we should have a major pricing, data services, software and participation around a marketplace that is really legitimizing itself. So we’ve got to take it seriously,” he said.

IHS Markit is barreling toward a stronger stance in crypto on multiple fronts. In November, it partnered with crypto data firm Lukka to develop crypto data products for Wall Street. And a unit of S&P Global, which has agreed to buy IHS Markit for $44 billion, already has plans to build a crypto index product with Lukka.

Representatives for IHS Markit and Lukka did not immediately respond to request for comment.

• S&P, State Street Back $15M Investment in Crypto Data Startup Lukka
• Bitwise’s Crypto Index Fund Becomes Available to US Investors
• S&P Dow Jones Indices to Launch Crypto Indexes in 2021

Brian Brooks, who was named the temporary head of the Office of the Comptroller of the Currency (OCC) last summer, made the announcement official a day after he was rumored to be departing.

His departure will come a day after the federal banking regulator granted crypto custodian Anchorage a conditional trust charter, making it the first crypto-native national bank.

“It has been a great honor to serve the United States as Acting Comptroller of the Currency,” Brooks said in an emailed statement through a spokesperson. “The Office of the Comptroller of the Currency (OCC) is the most extraordinary of federal agencies filled with the most dedicated, professional, and gifted staff any executive can hope to have. I am extremely proud of what we have accomplished together through what have been extraordinary times by any measure.”

Related: Anchorage Becomes First OCC-Approved National Crypto Bank

Under Brooks, the OCC published a number of interpretative letters surrounding how national banks can interact with the cryptocurrency space, with particular attention paid to stablecoins and their issuers. However, he said during a public seminar hosted by analysis firm Elliptic that much of this work began prior to his arrival at the agency last March. 

The former chief legal officer at Coinbase has said multiple times that he believes digital assets and blockchain technology can form the basis for the future of the financial system, a view he reiterated during the seminar.

“Blockchains, fundamentally, are banking because what they’re doing is allowing the transaction of value across networks … they’re doing it in an orthogonally different way,” he said Wednesday in what may be his swan song in public office.

It is unclear who incoming president Joe Biden might tap to replace Brooks. The OCC announced that chief operating officer Blake Paulson will become the new acting comptroller in the interim. Law firm Davis Polk said in a public presentation Wednesday that it is unlikely Brooks’ efforts around digital asset custody will be overturned by his successor, though further efforts around digital currencies may be slowed.

• Financial Censorship After Capitol Riot ‘Truly Chilling,’ Says OCC Chief Brian Brooks
• How the OCC Is Building Crypto America (and Saving Banks From Extinction)
• Brian Brooks, Crypto-Friendly Bank Regulator, Expected to Step Down This Week: Report

Nasdaq-listed bitcoin miner Riot Blockchain (RIOT) has added Mason Jappa, CEO of mining hardware and hosting company Blockware, to its advisory board.

• The two companies have had a close working relationship, Jappa told CoinDesk, including sharing industry insights and Blockware helping Riot sell machines.
• Per a statement, Jappa will assist the billion-dollar company with “optimizing operations” and its “evaluation of growth opportunities,” among other responsibilities.
• Jappa is the latest in a series of changes to the Castle Rock, Colo.-based firm’s board of directors and board of advisors over the past two years.
• In July 2019, the company named Yan Pritzker and Cory Klippsten of bitcoin exchange service Swan Bitcoin and Pierre Rochard of Kraken to its advisory board.
• In November 2020, former Ontario legislator Remo Mancini resigned from the board of directors after being appointed in 2018. 
• Jappa brings strong knowledge of the mining industry to Riot’s board, with his company having placed over 45MW for hosted clients and sold over 200,000 ASIC miners since its founding in 2017.

• Bitcoin Mining Company Riot Blockchain Passes $1B in Market Cap
• Riot Purchases Additional 15,000 Mining Machines From Bitmain
• Bitcoin Mining Stocks Soar as BTC Blows Past $20K
• Riot to Test Immersion Cooling Bitcoin Mining Technology in Texas

Central banks like the Federal Reserve and European Central Bank risk losing the digital-currency race if private cryptocurrencies like bitcoin become too entrenched in electronic commerce, according to a new research note from the Australian investment bank Macquarie.

• “The central bank digital currency (CBDC) landscape in free markets is lagging the pace of crypto adoption – it is still unclear how entrenched private cryptos will become before CBDCs become a viable alternative for more efficient transactions,” the report reads.
• “We think the use cases for private crypto could come to fruition if commerce becomes too accustomed to private crypto use prior to a CBDC alternative launching as a stable, legitimate alternative. And fiat debasing could also in fact help demand stick.”
• “In the interim (1-2 years), absent structural regulatory changes that inhibit its potential utility, we expect private cryptos, particularly those with an upper limit like bitcoin, to continue rising in fiat-equivalent value.”
• “If central banks work expeditiously and deliberately with private partners as we outline above, delivering on reliability, security, and functionality, we think government-promoted CBDCs more likely than not could displace private cryptos (and conventional fiat for that matter) in legitimate commerce, reducing the aggregate demand for private coins, limiting the demand-side factors to ‘store-of-value’ speculation and illicit dealings.”
• China’s central bank could launch a digital currency as soon as this year, but the Fed and ECB aren’t likely to have their versions ready until at least 2022, according to the report.
• “Central banks face difficult tasks in not just deciding how CBDCs will operate, but also building the infrastructure to get them up and running.”
• “U.S. regulatory officials wield quite a bit of power over how cryptos function and how their ecosystems develop. This becomes less meaningful as the network effect of cryptos grows, utility and acceptance broaden, and fiat potentially loses some demand for commerce.”

Read More: ECB’s Christine Lagarde Says ‘Speculative’ Bitcoin Needs Global Regulation

• Bitcoin Miners, Developers Narrow Down How Taproot Will Be Activated
• Market Wrap: Bitcoin Claws Back to $36.4K While 25% of Ether Options Will Expire in March
• These DeFi Tokens Have Double-Digit Gains as Bitcoin’s Growth Tapers
• Blockchain Bites: Bitcoin Trades Sideways as US Inflation Is Muted

The top securities watchdog in Japan told The Block Wednesday that it does not consider XRP to be a security, siding against its U.S. counterpart in the debate roiling the token’s issuer, Ripple Labs.

• The Financial Services Agency said XRP does not meet the definition of a security under Japanese law., The Block said.
• While FSA’s opinion has no bearing on the U.S. Securities and Exchange Commission’s current litigation against Ripple Labs, it highlights the lack of consensus on XRP’s status among securities regulators.
• Japanese financial company SBI Holdings has previously asserted that XRP is a crypto-asset under Japanese law. SBI is a strong supporter of Ripple and the XRP ecosystem.

• Grayscale Investments Begins Dissolution of XRP Trust Citing Ripple SEC Suit
• First Mover: Cryptocurrency Euphoria Hits Breaking Point as Miners Lose Nerve
• Asia’s Retail FOMO Could Be Behind XRP’s Rally Despite SEC’s Lawsuit
• Ripple ‘Tried’ to Settle With SEC Ahead of XRP Suit, CEO Says

Bitcoin is making gains, though much of the day saw the cryptocurrency in a holding pattern. Meanwhile, a quarter of ether options are expiring in March, meaning traders are making some bets on the first fiscal quarter of 2021.

• Bitcoin (BTC) trading around $36,286 as of 21:00 UTC (4 p.m. ET). Gaining 5.5% over the previous 24 hours.
• Bitcoin’s 24-hour range: $32,463-$36,552 (CoinDesk 20)
• BTC above the 10-hour and 50-hour moving averages on the hourly chart, a bullish signal for market technicians.

Bitcoin was able to recover from a drop in price Wednesday. After going as low as $32,463 around 01:00 UTC (8 p.m. ET Tuesday), it was able to stay in a $34,500-$35,000 range before breaking out to $36,464 before settling at $36,286 as of press time.  

Read More: Analysts Are Gloomy About Bitcoin’s Short-Term Price Outlook Right Now

Related: Bitcoin in Race for Adoption Before Central Banks Launch Digital Currencies: Australia’s Macquarie

Despite the past few hours of price gains, analysts refer to a day of little price action as a “sideways” or “flat” market. It’s not clear after so much excitement for the world’s oldest cryptocurrency in the first few days of 2021 what might happen next for the price, according to Misha Alefirenko, founder of crypto market maker VelvetFormula. 

“I have no clear view at the moment,” Alefirenko told CoinDesk. “Looks like big guys stepped away to wait and see. The market has to find its own balance.”

Bitcoin spot volumes were clearly taking a breather after Monday’s record-high daily zenith of $13.5 billion for the eight exchanges tracked by the CoinDesk 20. For Wednesday, the tally was at $4 billion as of press time, closer to the past month’s $3.8 billion daily spot average.

However, Constantin Kogan, partner at crypto investment firm Wave Financial, has a bearish view of the bitcoin market. “We may go even lower to $23,000,” Kogan said. Because “buy the dip” is a strategy deployed in the crypto market if digital assets start dumping, prices may eventually find their near-term bottom. “There is a zone from which they (traders) will start to actively buy back,” Kogan added. 

Related: Bitcoin Miners, Developers Narrow Down How Taproot Will Be Activated

Read More: Ex-Ripple CTO Can’t Remember Password to Access $240M in Bitcoin

Another chart to note as bitcoin’s price has lifted over 23% so far this year is that of the dollar index (DXY), a measure of the greenback’s strength versus a basket of other fiat currencies. This time last year, the DXY index price was over 97. So far in 2021, it’s struggling to stay above 90.

Wave Financial’s Kogan also noted there has been a closer, albeit opposite, relationship between United States duckets and bitcoin of late. “The decline in bitcoin Monday occurred simultaneously with the strengthening of the dollar index,” he said. “As a result, the two largest currencies – digital and traditional – once again showed an inverse correlation.”

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Wednesday, trading around $1,110 and climbing 2.5% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

The amount of open interest in ether options is heavily favoring the March 21 expiration. That is where 25% of current options open interest are to be found, according to data from aggregator Skew.

“Mostly it’s rolling,” said Vishal Shah, founder of derivatives exchange Alpha5, referring to a strategy where traders “roll up” to a higher strike price. And while most strikes are favoring a sub-$800 spot price, the majority of the trades for Wednesday were calls (62%) versus puts (39%).

Shah told CoinDesk the March 21 expiration date pile-up correlates nicely with the end of the fiscal quarter and may explain why it’s taking the lion’s share of ether options open interest. “Quarterly expirations are typically larger than monthly, and March is now the nearest quarterly expiry,” he said.

Digital assets on the CoinDesk 20 are all green Wednesday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

• 0x (ZRX) + 20.5%
• chainlink (LINK) + 9.8%
• algorand (ALGO) + 8.6%

Read More: Multiple Tokens See Rally Amid Looming ‘Alt Season’

Equities:

• Asia’s Nikkei 225 closed climbing 1% as the semiconductor sector saw big gains in anticipation of strong demand for chips in 2021.
• In Europe the FTSE 100 ended the day in the red 0.13% as sentiment was mixed between coronavirus lockdowns and the deployment of vaccines.
• In the United States, the S&P 500 gained 0.40%, led higher by tech stocks and despite traders keeping a close eye on political turmoil in Washington and coronavirus woes.

Commodities:

• Oil was down 0.75%. Price per barrel of West Texas Intermediate crude: $52.86.
• Gold was in the red 0.35% and at $1,848 as of press time.

Treasurys:

• The 10-year U.S. Treasury bond yield fell Wednesday dipping to 1.090 and in the red 3.3%.

• These DeFi Tokens Have Double-Digit Gains as Bitcoin’s Growth Tapers
• Blockchain Bites: Bitcoin Trades Sideways as US Inflation Is Muted

Grayscale Investments, the world’s largest digital currency asset manager, announced it has begun dissolution of its Grayscale XRP Trust following the U.S. Securities and Exchange Commission’s lawsuit against Ripple Labs alleging the XRP token is a security under federal securities law.

• Cash proceeds from the trust’s liquidated XRP will be distributed to shareholders, Grayscale said, without providing estimates on the proceeds.
• Jan. 8. SEC filings indicate the XRP trust raised $19.2 million from 70 investors over its nearly three-year run. It was not clear how much the fund was worth at liquidation.
• Grayscale blamed the move on the SEC’s December 2020 suit against XRP’s issuer, Ripple Labs, which has banked $1.3 billion in token sales since 2013. That lawsuit has created a hostile market environment for XRP.
• “It is likely to be increasingly difficult for U.S. investors, including the Trust, to convert XRP into U.S. dollars, and therefore continue the Trust’s operations,” Grayscale said.
• Earlier January, Grayscale removed XRP from its large-cap crypto fund.

• Japan’s FSA Says XRP Not a Security: Report
• A New SEC Chair Who Actually Understands Bitcoin and Crypto?
• Ex-Ripple CTO Can’t Remember Password to Access $240M in Bitcoin
• Gensler Said to Be Named SEC Chairman: Reuters

Crypto custodian Anchorage has secured conditional approval for a national trust charter from the U.S. Office of the Comptroller of the Currency (OCC), making it the first national “digital asset bank” in the U.S.

The safekeeping, management and trading of digital assets have been regulatory stumbling blocks for large financial institutions – but those obstacles are gradually being removed. The OCC, a part of the Treasury Department charged with keeping banks safe but also competitive, has now issued three interpretative letters that lay the groundwork for banks to custody crypto, participate in blockchain networks and become payment providers using the tech.

“In granting this charter, the OCC applied the same rigorous review and standards applied to all charter applications,” the bank regulator said in a statement. “By bringing this applicant into the federal banking system, the bank and industry will benefit from the OCC’s extensive supervisory experience and expertise.”

Related: OCC Chief Brian Brooks Is Stepping Down Thursday

“We are a national bank. The only difference is our business line, that we’re doing crypto assets versus doing other assets,” Anchorage President Diogo Mónica said in an interview. “The benefit of having a federally chartered bank is that it preempts all the state laws. The clarity of being regulated by the oldest regulator for banks in the United States … sends a very clear message.”

Acting OCC chief Brian Brooks, speaking at a public event earlier Wednesday, expressed his belief that banks and financial services more broadly will transition to being blockchain-based.

“I think what’s necessary is the creation of crypto banks that are able to hold stablecoins that reflect value of a fiat currency, but that doesn’t change the native asset, and you need to have real cryptocurrencies over here where they interact directly with each other, with no need to ever off-ramp,” Brooks said. “Fiat will ultimately be a legacy thing of the past.”

Anchorage’s trust company unit first applied for a national charter from the OCC last November, and it joins Kraken and Avanti in being crypto-native banks, although the latter two are special-purpose depository institutions organized under Wyoming state law. Fellow crypto startups BitPay and Paxos have also applied for federal charters through the OCC.

Related: Financial Censorship After Capitol Riot ‘Truly Chilling,’ Says OCC Chief Brian Brooks

The new bank is being ushered in under the auspices of Acting Comptroller of the Currency Brian Brooks, who’s headed up the regulator since this past summer. It’s the capstone to a multi-month effort to bring the crypto industry closer to the traditional banking world.

“Blockchains, fundamentally, are banking because what they’re doing is allowing the transaction of value across networks,” Brooks said at Wednesday’s event. “They’re [just] doing it in an orthogonally different way.”

During his tenure, Brooks, the former general counsel of Coinbase, has expressed his view that crypto startups may be better regulated under a federal framework, rather than at the state level.

“We’ve had a dual banking system in this country for 150 years. There are many, many banks chartered by the states out there because it’s the right business model for what they’re focused on,” Brooks told CoinDesk in June. “If you’re focused on the local and regional business, it makes sense to have a state charter. If you’re focused on a national business, it probably makes more sense to have a national charter.”

Georgia Quinn, Anchorage’s general counsel, told CoinDesk the process of applying for a national charter was made easier by the fact that the startup was already operating as a registered trust company in South Dakota.

“We were already a state-chartered bank and so already had an operating history and a lot of the relevant procedures and policies in place so it wasn’t a de novo application, it was just the conversion of a state trust into a national trust,” she said. “I really can’t stress enough the advantage we had from already operating as a trust company.”

Granting crypto companies a bank charter has been a stated goal for Brooks since May, when the then–First Deputy Comptroller told an audience at CoinDesk’s Consensus: Distributed that in his view, “it looks a lot like crypto is banking for the 21st century.”

The advantages are clear: rather than require companies to apply for 49 state money transmitter licenses piecemeal, a national charter will allow businesses to operate throughout the country at once. 

It also lets Anchorage develop new services, Mónica and co-founder Nathan McCauley told CoinDesk.

“It means that there’s a crypto-native company that offers crypto services like lending, staking and now it’s allowed to actually be connected directly to the core of the financial system,” Mónica said. “We can go out and do all sorts of businesses, wrapped assets that financial institutions can do today, but backed by crypto assets.”

Anchorage stated in a blog post accompanying the announcement that its new federally chartered bank “unequivocally will meet the definition of Qualified Custodian.”

Qualified custodians are legal entities in the U.S. that maintain client funds and hold securities in specific, defined ways. Federal regulators like the Securities and Exchange Commission (SEC) can designate entities as qualified custodians, while state regulators cannot. 

Crypto companies have long had issues becoming qualified custodians, due to questions about how digital asset service providers can comply with aspects of the Securities Investor Protection Act of 1970 – specifically, how brokers can prove that no other entity has access to its own private keys. 

Mónica said any doubts around the management of cryptographic keys were now removed and this would pave the way for the largest, most risk-averse investors such as pension funds to enter the arena.

“Aside from crypto funds and hedge funds and VCs that are paid to take risk and to be on the bleeding edge, you have large institutions that are paid not to take risk,” Mónica said. “This means all of the doubts are now solved and in black and white.”

Kristin Smith, executive director of lobbying group the Blockchain Association, welcomed the news.

“Today’s announcement is a recognition that not only can banks engage with crypto, but that crypto companies can function as banks,” Smith said in a statement. “This is the most important step yet towards the full modernization of our financial services system.”

The news comes as Brooks is rumored to be planning his departure from the federal regulator later this week. While Brooks has been nominated to serve a full term heading up the agency by President Donald Trump, it is expected that incoming President Joe Biden will pull the nomination.

There is already legislator pushback against many of the letters Brooks has overseen, with Rep. Maxine Waters (D-Calif.), the chair of the House Financial Services Committee, asking Biden to ensure his nominees revoke many Trump-era rules and regulations, including all of the OCC’s recent crypto guidance. 

A federal charter is one issue that would be more difficult for Brooks’ successor to overturn. 

It’s unclear who Biden will tap to lead the OCC. The President-elect has announced he will nominate former Federal Reserve Chair Janet Yellen to be Treasury Secretary. The Senate Finance Committee will hold a confirmation hearing for her on Jan. 19, a day before Biden is sworn in.

Yellen or Biden could designate an acting comptroller to lead the agency until someone is nominated to fill a full five-year term. Brooks was initially appointed to the OCC by current Treasury Secretary Steven Mnuchin.

Biden has reportedly nominated former Commodity Futures Trading Commission Chair Gary Gensler to lead the SEC, perhaps indicating that he may look for someone with less of a deregulatory focus. 

• How the OCC Is Building Crypto America (and Saving Banks From Extinction)
• Brian Brooks, Crypto-Friendly Bank Regulator, Expected to Step Down This Week: Report

= [(Option’s current price of 0.1060 BTC x 16,000 contracts) x bitcoin’s current spot market price of $34,700] minus (-) cost of trade.

= [1,696 bitcoin x $34,700] – $638,400

= $58,851,200 – $638,400

Related: As Bitcoin Regains Lost Ground, Options Traders Bet on $52K Move by Late January

= $58,212,800

• European eToro Traders Call Foul Over Closure of Leveraged Crypto Contracts
• Traders Can Now Bet on ‘Bitcoin $300K’ as Options Keep Pace With Rising Price

Internet hosting giant Cloudflare has unveiled a direct gateway to support the distributed web.

According to a Wednesday blog post, Cloudflare will be able to connect to domains hosted on the Ethereum Name Service (ENS) and the Interplanetary File System (IPFS) by a new indexing service.

“At Cloudflare Research, we have been exploring alternative ways to resolve queries to responses that align with these attributes. We are proud to announce a new resolver for the Distributed Web, where IPFS content indexed by the Ethereum Name Service (ENS) can be accessed,” the blog states.

Related: How a Decentralized Randomness Beacon Could Boost Cryptographic Security

ENS has been working with Cloudflare since February 2020 on the project, the ENS director of operations, Brantly Millegan, told CoinDesk in a Telegram message. 

“The primary purpose of the eth.link service is pretty straightforward: users can append ‘.link’ to the end of a .eth name to access an IPFS website at the name like a normal website, no special browsers or extensions necessary,” ENS wrote in a blog post.

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As the recent price rally in bitcoin and ether cools down, investors and traders are taking a closer look at alternative tokens (“altcoins”), particularly those from the decentralized finance (DeFi) subsector.

Multiple DeFi tokens this week saw double-digit gains, including 0x (ZRX), aave (AAVE), and maker (MKR). Prices for 0x were at $0.52 at the time of writing, up 20.42% in the past 24 hours, according to CoinDesk 20. Maker’s price, at the same time, saw near-160% growth year to date.

“I think the biggest thing is bitcoin’s momentum finally cooling and giving DeFi tokens some room to breathe,” Ryan Watkins, research analyst at Messari, told CoinDesk. “On top of that there are a lot of exciting new releases coming out in DeFi these next one to two weeks which is creating momentum as well.”

Related: Blockchain Bites: Bitcoin Trades Sideways as US Inflation Is Muted

0x, an Ethereum-based decentralized exchange, announced its version 4 upgrade plan on Jan. 7, which caused a sudden rally in the protocol’s ZRX token. The upgrade will include new customizable modules that are able to execute trades without interruption and gas efficiency optimization. The vote for the upgrade is scheduled for Jan. 16.

Trading volumes on major decentralized exchanges also saw rapid growth in the past month, up 95% to approximately $37.58 billion, according to data from Dune Analytics. On derivatives exchange FTX, perpetual futures for their DeFi index were also trading near their all-time high again as of press time.

However, this time is unlike the last “alt season” that appeared temporarily after bitcoin’s bull run in 2017 or the “DeFi summer” boom, which was caused by “hype” on high yields from liquidity mining, according to Peter Chan, lead trader for crypto trading firm OneBit Quant. He told CoinDesk he does not see any new exciting projects that are attracting particular liquidity to altcoins. 

Rather, the current renewed growth in DeFi has some wondering whether DeFi will become something that is much bigger than just the potential high returns from so-called “yield farming.”

Related: La carrera de Colombia por convertirse en un mercado líder de criptomonedas en la región

Read More: What Is Yield Farming? The Rocket Fuel of DeFi, Explained

In a Financial Times op-ed written by Brian Brooks and published Tuesday, the outgoing acting head of the U.S. Office of the Comptroller of the Currency (OCC) wrote on the  future “self-driving” banks, raising the possibility that the DeFi sector is here to stay if regulations are able to catch up with the fast-growing technology and ensure compliance and safety.

“Although these ‘self-driving banks’ are new, they are not small,” Brooks wrote. “They are likely to be mainstream before self-driving cars start to fly.”

Watkins said that “continued growth and maturation of DeFi infrastructure” is the next move for the DeFi sector, which involves increased layer 2 adoptions, more protocol-to-protocol corporations and cross-chain DeFi projects.

Improved fundamentals are usually good news for DeFi tokens, which could see continuous price growth in the long term, according to Watkins.

• ‘No Middle Ground’: Inside Colombia’s Race to Become A Major Regional Crypto Market
• Ledger Adds Bitcoin Bounty and New Data Security After Hack

Hello. Analysts are reporting gloomy short-term projections for bitcoin as the U.S. Labor Department reports muted inflation over 2020. Here’s the story:

Institutional products
A new, physically backed bitcoin exchange-traded product (ETP) has hit the SIX stock exchange in Switzerland. Developed by ETC Group, this is the 34th bitcoin ETP on SIX. Meanwhile, the Winklevoss-owned Gemini Trust company is backing the latest bitcoin exchange-traded fund (ETF) application filed in Canada. Arxnovum Investments’ bitcoin ETF could conceivably trade on the Chicago Mercantile Exchange, if approved. U.S. regulators have long been skeptical of these “high risk” investment vehicles, which many point to as hampering institutional interest (by the way, check out Blockwork’s new editorial site).

Stopping bitcoin ‘funny business’…
European Central Bank (ECB) President Christine Lagarde has called for bitcoin to be regulated at the international level, during a Reuters event. The “highly speculative asset” has led to “some reprehensible activity,” including money laundering, and any loopholes need to be closed, according to a report from Reuters. Meanwhile, crypto’s favorite regulator, Brian Brooks, the acting head of the U.S.’ top bank regulatory agency, is reportedly ending his term this week, while crypto-knowledgeable Wall Street and Commodity Futures Trading Commission vet Gary Gensler is rumored to be named chairman of the Securities and Exchange Commision.

Related: These DeFi Tokens Have Double-Digit Gains as Bitcoin’s Growth Tapers

Gloomy projections?
Analysts are gloomy about bitcoin’s short-term price outlook, with several pointing to increased flows onto exchanges and cooling institutional demand. Some 57,000 BTC moved onto exchanges Tuesday, the biggest-single day change since the markets crash on March 12, 2020. A Goldman Sachs exec said institutional investors are “key” to curbing bitcoin’s volatility. Neither bitcoin’s 20% drop on Monday, nor its volatility, have stopped “whales” from buying the dip.

• DREAM DEFERRED? Marker takes a critical look at bitcoin, arguing that it’ll never be used to buy a coffee or pizza. (Medium)
• CEX, LIES & VIDEOTAPE: Binance is hitting back at rival exchanges OKEx and Huobi after a supposedly “bogus” video surfaced claiming Binance played a role in bitcoin’s recent rout. (CoinDesk)
• DIRECT OFFERING: Bitcoin miner Marathon seeks to raise $250 million in a stock offering. (CoinDesk)
• GONE DARK: German authorities have arrested an Australian man thought to be tied to the world’s largest darknet marketplace, DarkMarket. (CoinDesk)
• GOV-BACKED: A provincial government in Pakistan is mining bitcoin. (Decrypt)
• BILLIONAIRE INVESTOR: Howard Marks’ son owns “a meaningful amount” of bitcoin. (The Block)
• TEA LEAVES: Traders watch bitcoin for clues about high-flying stock market (CNBC)

Alt season?
Bitcoin and ether prices are about 87% and 78%, respectively, of their all-time highs, though the majority of altcoins (smaller market cap cryptocurrencies) are languishing. While some altcoins have spiked during the recent market run-up, retail investors have largely ignored these cheaper, and riskier, cryptos. That said, Messari found tokens embedded in the decentralized finance (DeFi) market – like maker (MKR), compound (COMP), aave (AAVE) and uniswap (UNI) – are seeing robust growth. 

Inflation projections
Much of bitcoin’s growth in 2020 was driven by institutional investors turning to the hard-capped, deflationary asset as an inflation hedge. Hedge fund legend Paul Tudor Jones, MicroStrategy’s Michael Saylor and Guggenheim Partners Chief Investment Officer Scott Minerd, among others, have all spoken on bitcoin’s prospect as “digital gold.”

Fiscal stimulus and looser monetary policy in response to the coronavirus pandemic drove up inflation projections. Indeed, rates for U.S. Treasury bonds have been ticking up higher in recent days, crossing 1% last week, on calls for additional government spending – such as President-elect Joe Biden’s plan to inject “trillions of dollars” through an economic recovery package.

Related: La carrera de Colombia por convertirse en un mercado líder de criptomonedas en la región

But the line of sight on inflation is anything but clear. The U.S. Labor Department reported today that a key measure of inflation, the Consumer Price Index (CPI), only increased 1.4% in 2020, the smallest yearly gain since 2015. For reference, 2019’s CPI rose 2.3%, while the 10-year average is estimated at 1.7%.

This is far below the Federal Reserve’s 2% inflation target. Last year, Fed Chair Jerome Powell signaled it would reverse course and allow the economy to run hot – above 2% – for periods, acknowledging the economy has missed this target for the last decade. Some investors and analysts are skeptical of any forthcoming change. Kathy Bostjancic of Oxford Economics, for one, is quoted in Barron’s casting doubt on the prospect of a rate increase before 2024.

Bloomberg urged readers to “Get Ready for the Great U.S. Inflation Mirage of 2021,” with economists Carl Riccadonna and Yelena Shulyatyeva quoted as saying, “2021 will be a year plagued by numerous unwarranted inflation scares. Consumer inflation will remain weak over the medium term — until the economy fully absorbs the slack resulting from the pandemic.”

Still, St. Louis Federal Reserve President James Bullard said Wednesday that inflation is likely to rise. Speaking at a Reuters conference, Bullard said the “money supply has ‘exploded,’ fiscal deficits are ‘off the charts’ and a hot economy may either already be here or ‘just around the corner,’” according to a Reuters report.

Ian Shepherdson, chief economist of Pantheon Macroeconomics, told CoinDesk over email he projects “a clear uplift to 2.5%-plus in Q2.” Though, “the key question of what happens when the economy reopens fully remains unanswerable at this point.”

So what does this mean for bitcoin and the rest of the crypto market table?

Well, unlike highly liquid and tradable assets like U.S. Treasury bonds that reflect any minute change in inflation projections, bitcoin often does its own thing.

Correlated with stocks and other traditional assets, bitcoin has largely followed the herd in price swings, although in a bull market, with the highest volatility in three years, anything is possible. On Monday, bitcoin shed 20% only to bounce back. And while analysts have grim short-term outlooks, many are convinced there’s still money sitting on the sidelines.

“Recent institutional investors have long horizons and will absorb near-term price shocks,” while retail investors would buy at discounted price levels for fear of missing out, Jehan Chu, managing partner at Hong Kong-based Kenetic Capital, told CoinDesk’s Omkar Godbole. “Expect temporary volatility and then a jump back to the $40,000 level, followed by $50,000 as the bitcoin percentage land grab continues.”

• ‘No Middle Ground’: Inside Colombia’s Race to Become A Major Regional Crypto Market
• Ledger Adds Bitcoin Bounty and New Data Security After Hack

En marzo de 2020 un colombiano de 23 años, conocido bajo el seudónimo de Atlas, comenzó a adquirir bitcoin. 

Por ese entonces, bitcoin estaba valuado en aproximadamente USD 4500, todavía en los estadios  tempranos de lo que sería una histórica alza en su precio. 

Read this article in English.

Related: These DeFi Tokens Have Double-Digit Gains as Bitcoin’s Growth Tapers

“Realmente no sabía cómo afrontar esa situación. Una persona como yo, que nunca había tenido más de USD 2000 en mi vida”, dijo a CoinDesk Atlas, quien prefiere mantener su anonimato por el momento. 

Mientras el precio continuaba subiendo, explicó Atlas, su padre, quien no salía de su asombro, lo instó a vender. Atlas esperó y dijo que se las ingenió para convencer a por lo menos ocho de sus amigos para que también invirtieran en bitcoin. Después de que la criptomoneda superó los USD 30.000, Atlas comenzó el proceso para obtener una hipoteca de la casa familiar con el objetivo de comprar más bitcoin. 

“Para ser honesto, he estado recibiendo mensajes de texto de gente joven casi a diario. Y estos jóvenes hablan con otros jóvenes”, dijo Atlas. (CoinDesk no pudo verificar independientemente esta información). 

Durante el año 2020, Colombia experimentó un gran incremento del uso de criptomonedas como reserva de valor y con fines transaccionales, con crecimientos récord en las plataformas de préstamos de persona a persona (P2P) y plataformas de intercambio (exchanges). LocalBitcoins reportó que ese país representó el 11.3% de su volumen global en 2020, convirtiéndolo en uno de sus mercados principales junto con Rusia y Venezuela. En Buda.com, uno de los más grandes exchanges de América Latina, los volúmenes de transacciones en Colombia crecieron un 350% entre 2019 y 2020, mientras que los usuarios activos en la plataforma aumentaron un 125% llegando a los 16.092, de acuerdo con la información provista por ese exchange. 

Related: Blockchain Bites: Bitcoin Trades Sideways as US Inflation Is Muted

Los primeros meses de 2020 no fueron buenos para Atlas. Cuando comenzó el año tenía un puesto laboral en el cual obtenía el salario mínimo, cobrando menos de USD 300 al mes. Nos contó que, a raíz de su participación en una pelea en la vía pública de la ciudad en la que vive, terminó en la cárcel por algunas semanas. Cuando fue liberado, la pandemia provocada por el COVID-19 azotó a toda la región, dejando a su familia en la indigencia. 

“No teníamos absolutamente nada de dinero, ni energía ni gas. Hacíamos sándwiches con un quemador de alcohol”, contó Atlas.  

La pandemia golpeó fuertemente a América Latina. Solo en Colombia se registraron cerca de 1.4 millones de casos, ubicando al país cuarto en el ranking de cantidad de muertes dentro de la región, solo por debajo de Brasil, México y Argentina. Muchas monedas locales dentro de América Latina se devaluaron frente al dólar estadounidense como consecuencia del deterioro de sus economías. 

Leer Más al Respecto: Los argentinos están cambiando su obsesión histórica con el dólar por DAI

Mientras tanto, las criptomonedas tuvieron  un año exitoso en América Latina. Los argentinos incrementaron la demanda de ellas en 2020 en su esfuerzo por encontrar monedas más fuertes como reserva de valor a fin de proteger sus patrimonios frente a la devaluación del peso. México y Venezuela las utilizan cada vez más a fin de procesar remesas transfronterizas. 

Si bien la pandemia provocada por el coronavirus parecería haber impulsado bitcoin en Colombia, se advierte que los colombianos ya mostraban interés por las criptomonedas mucho antes del comienzo del coronavirus. 

“No atribuiría el boom de las criptomonedas en el país solamente al declive económico temporal provocado por la pandemia”, expresó Magdiela Rivas, manager de Paxful en América Latina, mediante un correo electrónico enviado a CoinDesk. 

De acuerdo con los dichos de Rivas, antes de la crisis económica global de 2020, el interés de Colombia por las criptomonedas ya crecía fuertemente en medio de un alza en su economía interna. Según un reporte del Banco Mundial, luego de que su crecimiento se desplomara al 1.1% en 2017, Colombia se recuperó rápidamente y registró una tasa acelerada de crecimiento del 3.3% en 2019. Aunque la economía se vio gravemente afectada durante la pandemia, el mismo informe reporta que el país “respondió rápidamente a la crisis y tomó medidas decisivas para proteger las vidas y las fuentes de sustento, así como también para  apoyar la economía”.

“Continuó siendo uno de los países más estables de la región a pesar de la pandemia”, dijo Rivas. 

Según Coin ATM Radar, Colombia también cuenta con la mayor cantidad de cajeros automáticos de bitcoin en América Latina. El país tiene 59 en total, 33 de los cuales se encuentran en Bogotá, su capital. En contraposición, Panamá solo posee 17 cajeros automáticos de bitcoin, número que lo ubica como el segundo país con mayor cantidad en la región. 

Colombia ya se encontraba incorporando ampliamente la tecnología fintech desde antes de la pandemia. Medios locales reportaron que en 2019 el país contaba con 180 compañías en ese sector, un 45% más que el año anterior. 

En septiembre de 2020, la Superintendencia Financiera de Colombia (SFC), autoridad encargada de supervisar la integridad y transparencia de los mercados de valores, anunció un sandbox regulatorio (NdT: el término, que en español significa “arenero” o “banco de pruebas”, describe al campo de pruebas de nuevos modelos de negocio que aún no están protegidos por una regulación vigente) a fin de que los emprendimientos dedicados a criptomonedas pudieran testear transacciones. Las compañías que aspiraran a participar en dicho programa de sandbox podían aplicar a este hasta el 31 de diciembre. El programa fue diseñado para “promover un espacio conjunto de experimentación entre el ecosistema digital y el Gobierno Nacional con relación a cripto activos”. 

Al día de la fecha, el marco regulatorio aplicable al segmento de monedas digitales en Colombia continúa indefinido. En 2014, la SFC emitió una circular estableciendo  que bitcoin no es un activo que tenga equivalencia a la moneda de curso legal en Colombia. En esa misma circular, la SFC prohibió a las entidades que vigila —incluidos los bancos—  custodiar, invertir o intermediar con monedas digitales. En 2017 la misma autoridad lanzó otra advertencia: “Las operaciones que involucren ‘monedas virtuales’ no se encuentran amparadas por ningún tipo de garantía privada o estatal”. 

Tras las advertencias publicadas por las autoridades, en 2018 medios locales reportaron que ciertas instituciones bancarias habían cerrado cuentas pertenecientes a la plataforma de intercambio Buda.com. Alejandro Beltrán, country manager de Buda.com, le confirmó a CoinDesk que en enero el exchange colaboró con las asociaciones locales de fintech y blockchain para pedirle al presidente de Colombia, Iván Duque Márquez, que permitiera la reapertura de cuentas y de operaciones de ese exchange. 

“Pero el presidente no pudo ayudarnos de manera directa y en cambio nos derivó con el Ministerio de Economía”, dijo Beltrán. 

De acuerdo con Beltrán, Buda.com luego intentó tomar acciones legales contra la autoridad financiera, con el objetivo de clarificar si los bancos estaban habilitados para operar cuentas asociadas con compañías pertenecientes al sector de las criptomonedas. Finalmente, obtuvieron una respuesta de parte de las autoridades financieras afirmando que la ley no les impide a los bancos proveer servicios a compañías pertenecientes al sector cripto. 

“La respuesta del supervisor financiero fue que ellos no prohíben la relación entre bancos y exchanges que operan con criptomonedas, pero que existen restricciones respecto del uso interno de criptomonedas en los bancos”, dijo Beltrán. 

En Colombia las monedas digitales son catalogadas como propiedad personal y no están sujetas al cobro del Impuesto al Valor Agregado (IVA). 

Más allá de eso, y salvo contadas excepciones, no hay suficiente claridad respecto de la política normativa aplicable vigente. 

Por ejemplo, en diciembre del 2020 la Superintendencia de Sociedades declaró que las compañías que operen en el país tienen permitido convertir capital a bitcoin siempre y cuando lo hagan en cumplimiento de las regulaciones locales aplicables a las criptomonedas. 

Beltrán sugirió que la falta de claridad normativa puede haber dado lugar a la creación de un gran mercado informal para la compra y venta de criptomonedas. 

De acuerdo a Rivas, de Paxful, los colombianos tienen la posibilidad de adquirir bitcoin localmente a precios relativamente competitivos, generando así un mercado interno extremadamente activo y una gran demanda de criptomonedas. 

“Básicamente, tienen la oportunidad de adquirir bitcoin a un precio menor y venderlo en cualquier otro lugar al valor de mercado o a uno mayor, lo cual les permite a los colombianos percibir un gran beneficio económico a través de las ganancias generadas en el arbitraje”, dijo Rivas. 

Beltrán confirmó que bitcoin efectivamente puede ser adquirido localmente a un precio menor a través del mercado informal, lo cual es posible que se origine porque el dólar estadounidense se vende en mercados paralelos a un precio entre 6% y 8% menor que el de las cotizaciones oficiales. 

Atlas también confirmó que, a pesar de que algunos exchanges importantes como Buda.com operan en el país, algunas personas eligen transaccionar por fuera de las plataformas a través de las redes sociales. 

“La gente tiene grupos de chats en Telegram, Whatsapp, Facebook, más del tipo de persona a persona (P2P)”, sostuvo Atlas. 

Beltrán confirmó lo anterior, agregando que Colombia procesa un considerable volumen de remesas cada año —la mayoría  destinadas a su país vecino Venezuela— y que los precios competitivos de bitcoin también puede ser que provengan de dichos mercados de remesas. 

La Organización de las Naciones Unidas (ONU) informó que hasta el 30 de junio de 2019 había 1.4 millones de inmigrantes venezolanos residiendo en Colombia tras dejar su país por la inestabilidad económica y política. 

De acuerdo con Beltrán, enviar dinero fuera de Colombia puede ser engorroso. Las dificultades surgen principalmente por las estrictas medidas tomadas contra el lavado de dinero que buscan controlar los movimientos de los carteles de droga desde y hacia Colombia. En un informe del 2020, el Departamento de Estado de los Estados Unidos nombró a Colombia como una de las principales jurisdicciones del mundo en materia de blanqueo de dinero. 

“Tus operaciones son 100% offline, tu dinero tarda entre dos y cinco días en llegar a destino. Y, bueno, cuando ves las limitaciones que tenemos aquí, debido a las restricciones financieras impuestas por los bancos, te das cuenta de que bitcoin está funcionando no sólo para las remesas sino también para el comercio electrónico”, afirmó Beltrán. 

Leer Más al Respecto: Las criptomonedas crecen en la problemática economía de Argentina

En 2018, un usuario bajo el nombre de Joshua Nix escribió en un foro público acerca de las dificultades existentes para las transacciones transfronterizas en Colombia. 

“[Yo] solía comprar bitcoin a un vendedor en Colombia hasta a un 10% más barato que el precio de mercado. De esta forma, en vez de pagar cerca del 10% a Western Union en concepto de honorarios y obtener un pésimo tipo de cambio, lograba generar yo mismo una ganancia de cerca del 10%”, dijo Nix. 

Por su parte, Atlas ve a bitcoin como una inversión a largo plazo y un posible camino hacia una vida mejor. Dijo que ha mantenido sus ahorros iniciales en bitcoin, y explicó que su decisión de hacerlo se debió parcialmente a lo que en Twitter se conoce como la “cultura americana del hodl”. Hodl se refiere a una jerga entre inversores de activos digitales orientada a mantenerlos a largo plazo en lugar de revenderlos. 

“Todavía trabajo. Todavía uso harapos. Aún no tengo una chica. Básicamente, todavía soy un perdedor. Y estoy bien con eso. Simplemente quiero lograr alcanzar un mejor nivel de vida. Deseo poder sacar a mi familia de aquí”, dijo. 

Atlas, quien ha perdido a algunos de sus amigos en hechos de violencia, dijo que se libró fácilmente de su corta estadía en la cárcel. Pero cree que su decisión de invertir en bitcoin y su éxito hasta el momento lo han cambiado, le han brindado confianza necesaria para mejorar su vida. Está aprendiendo a programar y tiene planes de comprar una laptop para poder seguir haciéndolo. Su fe en el futuro de bitcoin es tan grande que le ha dicho a su familia que, dado que ya son pobres, un año más de espera no hará la diferencia si bitcoin tiene el potencial de alcanzar los $100,000. 

“Es así: o la hacemos en grande o nos quedamos donde estamos. No hay término medio”, dijo Atlas.

Traducido por Andrés Engler.

• ‘No Middle Ground’: Inside Colombia’s Race to Become A Major Regional Crypto Market
• Ledger Adds Bitcoin Bounty and New Data Security After Hack

In March 2020, a 23-year-old Colombian going by Atlas started buying bitcoin. 

At the time, bitcoin was valued at around $4,500, still in the nascent stages of what would become a historic price run. 

Lea este artículo en español.

Related: These DeFi Tokens Have Double-Digit Gains as Bitcoin’s Growth Tapers

“I really didn’t know how to approach the situation. A person like me, I never had more than $2,000 in my life,” Atlas, who spoke on condition of pseudonymity, told CoinDesk.

As the price kept going up, Atlas said, his surprised father urged him to sell. Atlas held on and said he has managed to convince at least eight friends to invest in bitcoin as well. After the currency began trading above $30,000, Atlas started the process of taking out a mortgage on his family home to buy more. 

“I’ve been getting texts almost daily from young people, to be honest. And those young people talk to other young people,” Atlas said. (CoinDesk was not able to independently verify these details.)

Colombia saw a major boost in crypto use as a store of wealth as well as for transactional purposes in 2020, with peer-to-peer lending platforms and exchanges recording historic growth. LocalBitcoins reported that Colombia accounted for 11.3% of its global volume in 2020, making it one of the firm’s “main markets” alongside Russia and Venezuela. Transaction volumes on Buda.com, one of Latin America’s largest crypto exchanges, grew by 350% between 2019 and 2020 in Colombia, with active users on the platform increasing by 125% to 16,092 according to data provided by the exchange. 

Related: Blockchain Bites: Bitcoin Trades Sideways as US Inflation Is Muted

The first months of 2020 did not go well for Atlas. When the year started, he was working a minimum wage job, making less than $300 a month. He said that after getting into a fight in a public space in his hometown, he ended up in jail for a few weeks. Around the time he was released, the COVID-19 pandemic swept through the region, leaving his family destitute. 

“We had absolutely no money, no power and no gas. We were making sandwiches with an alcohol burner,” Atlas said. 

The pandemic hit Latin America hard, with Colombia alone recording over 1.4 million cases and placing it fourth highest in deaths behind Brazil, Mexico and Argentina. Many local currencies in the region fell against the U.S. dollar as economies suffered. 

Read more: Why Argentines Are Turning From Dollars to Stablecoins Like Dai

Meanwhile, crypto had a successful year in Latin America. Argentinians drove up the demand for cryptocurrencies in 2020 as they struggled to find stronger currencies to store their wealth due to the devaluation of the peso. Mexico and Venezuela increasingly used crypto to process cross-border remittances. 

While the coronavirus pandemic may have boosted bitcoin in Colombia, it seems Colombians were showing interest in crypto long before the outbreak. 

“I wouldn’t attribute the crypto boom in the country just to the pandemic causing a temporary economic decline,” Magdiela Rivas, Paxful’s Latin America manager, told CoinDesk via email. 

According to Rivas, before the 2020 global economic crisis Colombia’s interest in crypto was growing fast while the country’s economy was also on the rise, Rivas said. After growth slumped to 1.1% in 2017, Colombia recovered quickly and recorded an accelerated growth rate of 3.3% in 2019, according to a World Bank report. Although the economy was hit badly during the pandemic, the same report said the country “responded promptly to the crisis and took decisive actions to protect lives and livelihood, and to support the economy.”

“It remained one of the most stable countries in the region despite the pandemic,” Rivas said. 

Colombia also boasts the highest number of bitcoin ATMs in a Latin American country, according to Coin ATM Radar. The country has 59 bitcoin ATMs and tellers, with 33 in Bogota, the capital, alone. In contrast, Panama has only 17 bitcoin ATMs, the second-largest number in the region. 

Colombia was embracing fintech more broadly before the pandemic. Local media reported that in 2019 Colombia had 180 fintech companies, up 45% from the previous year. 

In September 2020, the country’s financial watchdog, SFC, announced a regulatory sandbox for crypto startups to test transactions. Firms could apply to participate in the sandbox through Dec. 31. The program was designed to “promote a joint test space between the digital ecosystem and the National Government in terms of crypto assets.” 

Today, how Colombia regulates crypto remains unclear. In 2014, the SFC published guidance declaring bitcoin was not recognized as a currency and was not legal tender in Colombia. In the same statement, the SFC barred banks from dealing in virtual currencies. In 2017, the organization published another statement warning, “Operations with ‘virtual currencies’ are NOT covered by any type of private or state guarantee.”

Following the warnings published by the authorities local media reported in 2018 that a number of banks shut down accounts held by Buda.com. Alejandro Beltrán, country manager for Buda.com, told CoinDesk in January the exchange collaborated with the local blockchain and fintech associations to appeal to President Iván Duque Márquez to allow the reopening of accounts and Buda.com operations. 

“But he could not help us directly and instead, sent us to the Ministry of Economy,” Beltrán said. 

According to Beltrán, Buda.com then tried to take legal action against the financial authority. The goal was to clarify if banks were allowed to host accounts associated with crypto entities. Finally, they received a response from the financial authorities stating the law did not prevent banks from providing services to crypto firms.  

Read more: Crypto Is Booming in Economically Challenged Argentina

“The response of the financial supervisor was that they did not forbid the relationship between banks and exchanges that operate with cryptocurrencies, but there are restrictions in terms of using cryptocurrencies inside the banks,” Beltrán said. 

In Colombia, virtual currencies are treated as personal property and are not subject to value-added tax.

Beyond that, there is not much clarity in crypto policy, with a few specific exceptions. 

For instance, in December 2020 the Superintendency of Corporations declared that companies operating in the country are allowed to convert capital to bitcoin while making sure they are complying with local crypto regulations. 

Beltrán suggested that a lack of regulatory clarity may have led to the creation of the large informal market for crypto trading. 

According to Rivas of Paxful, Colombians can buy bitcoin locally at relatively competitive prices, therefore creating an extremely active internal market and high demand for the crypto. 

“They basically have an opportunity to buy bitcoin cheaper and sell at a market price or above elsewhere, which lets Colombians take advantage of arbitrage earnings big time,” Rivas said. 

Beltrán confirmed that bitcoin can indeed be purchased at a cheaper price locally through the informal markets, perhaps because the U.S. dollar is sold in the black markets at least 6%-8% cheaper than the official rates. 

Atlas also said that although large exchanges like Buda.com operate in the country, some people choose to trade outside platforms via social media.  

“People have group chats on Telegram, Whatsapp, Facebook, more peer-to-peer kind of thing,” Atlas said. 

Beltrán confirmed this, adding that Colombia has to process a considerable amount of remittances each year, much of it headed towards its neighbor Venezuela, and that competitive bitcoin prices may arise from the remittance markets as well. 

As of June 30, 2019, the United Nations declared there were 1.4 million Venezuelan immigrants residing in Colombia, having fled the country due to political and economical instability. 

According to Beltrán, sending money out of Colombia can be cumbersome. The difficulties mostly arise from the strict anti-money laundering measures taken to control money moving in and out of Colombia through drug cartels. In a 2020 report, the U.S. Department of State named Colombia as one of the major money-laundering jurisdictions in the world. 

“Your procedures are 100% offline, your money takes two to five days to arrive at the destination. And, well, when you see the limitations that we have right here, because of the financial restrictions of the banks, you see that bitcoin is working for not only remittances but e-commerce as well,” Beltrán said. 

Read More: Crypto Remittances Prove Their Worth in Latin America

In 2018, a user by the name of Joshua Nix posted on a public forum about the difficulties of cross border transactions in Colombia. 

“I [used] to buy bitcoin from a seller in Bogotá at up to 10% less than market price … Instead of paying about 10% to Western Union for fees and a s***** exchange rate I actually made about 10%,” Nix said. 

Meanwhile, Atlas views bitcoin as a long-term investment and possible ticket to a better life. He said he has maintained his initial bitcoin savings. He explained that his choice to hang on to his bitcoin was partially inspired by what he called the “American hodl culture” on Twitter. Hodl is slang for investors holding crypto assets instead of selling them. 

“I’m still working. I’m still wearing rags. I still have no girl. I’m still basically a loser. That’s fine by me. I just really want to reach a new level in my life. I really want to take my family out of here,” Atlas said. 

Atlas, who has lost friends to violence, said he got off easy with his short stint in jail. But he believes his decision to invest in bitcoin and its success so far has changed him by giving him the confidence to improve his life. He has started to learn coding and has plans to purchase a laptop to pursue it further. His faith in bitcoin’s future is so great he told his family that since they are already poor, one more year would not make much of a difference if bitcoin has the potential to hit $100,000.

“So it’s like, either we hit a home run or we stay where we are. There’s no middle ground,” Atlas said. 

• La carrera de Colombia por convertirse en un mercado líder de criptomonedas en la región
• Ledger Adds Bitcoin Bounty and New Data Security After Hack

“Everything is at risk” if financial technology is politicized, said Acting Comptroller of the Currency Brian Brooks. 

Speaking at a public event hosted by blockchain analysis firm Elliptic on Wednesday, Brooks said the world needs to stop politicizing tech, pointing to the reaction after an attempted insurrection in Washington, D.C., last week that saw supporters of President Donald Trump break into the Capitol building in an effort to halt the formal certification of the Electoral College votes by the Congress.

“We had a really, really awful event in the United States last week, as everybody knows, I mean we saw things that were not worthy of a mature democracy in the 21st century, not worthy of the eras of Thomas Jefferson and James Madison,” Brooks said. “What has followed from that, however, is truly chilling. Now you’ve got payments companies saying that they will not process the payments of people who are of a certain political party who voted one way on a contested political issue.”

Related: Anchorage Becomes First OCC-Approved National Crypto Bank

Payments platforms Shopify and Stripe deplatformed Trump’s campaign after the violence, which saw five deaths, including that of a Capitol Police officer.

Brooks said this is an extension of the existing pressure payment companies have exerted on businesses in the past, such as Mastercard and Visa announcing they wouldn’t process transactions for pornography. 

He also pointed to the firearms and tobacco industries as areas financial institutions do not want to service. The OCC under Brooks is looking into creating a rule that would prohibit institutions from not providing services to certain industries, including the energy and crypto sectors. While a public comment period on the proposal has closed, the rule itself has not yet been finalized.

“We live in a world where not only information, but also money might be controlled by a handful of elites who might not like the way that any one of us thinks [about an issue],” Brooks said in the livestreamed interview with Elliptic CEO Simone Maini. “This is what decentralization is about. In the world of crypto, there is no CEO. Crypto is about freedom and if you didn’t believe that freedom mattered last week, you should think about it again.”

• How the OCC Is Building Crypto America (and Saving Banks From Extinction)
• Brian Brooks, Crypto-Friendly Bank Regulator, Expected to Step Down This Week: Report
• Crypto Long & Short: Traditional and Crypto Markets Are Starting to Converge

Asset management firm Arca has announced Wednesday the closure of a $10 million Series A round of funding led by RRE Ventures.

• In an announcement, the company said it will use the funding to continue to prioritize creating the infrastructure and navigate the legal and regulatory footing needed to offer better products.
• Funding was led by RRE Ventures with Alex Tisch, the president of Loews Hotels & Co, and a group of financiers led by Littlebanc Advisors also participating.
• Going forward, James Robinson, founder of RRE Ventures will join Arca’s advisory board and will contribute to Arca’s product development and distribution efforts.

Read more: Arca Labs Launches Ethereum-Based SEC-Registered Fund

• HashKey Capital Co-Invests $5M in Decentralized Storage Project Filestar
• Biconomy Raises $1.5M in Seed Funding for Bid to Simplify Blockchain Transactions
• Lending Platform Vauld Raises $2M to Grow Into a Full Crypto Bank
• Swiss Crypto Bank SEBA Raises $22.5M to Fuel Growth