CoinDesk Crypto

Market Wrap: Bitcoin Jumps to $13.7K, Nearing 2019’s High; Ether Volatility Reverses Course

5 years 11 months ago

Bitcoin made gains Tuesday toward its 2019 high while ether’s volatility rose after an October in decline.

Bitcoin (BTC) trading around $13,668 as of 20:00 UTC (4 p.m. ET). Gaining 5% over the previous 24 hours.
Bitcoin’s 24-hour range: $13,008-$13,756
BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin’s price was on a steady run upward Tuesday, hitting as high as $13,756.33 before settling down to $13,668, according to CoinDesk 20 data. It is now within reach of its 2019 high of $13,879.24; any point above that puts bitcoin prices where they were during the late 2017-early 2018 bull run and subsequent collapse. Increased spot bitcoin volume, at $840 million, helped lead the price higher Tuesday. That figure has averaged $432 million daily over the past month.

Micah Erstling, trader at crypto liquidity provider GSR, said bitcoin has broken away from stocks, at least temporarily, not long after the world’s oldest cryptocurrency took a short dip Monday when stocks also fell. “Bitcoin quickly broke the correlation to stocks after yesterday’s plunge, rallying back even as stocks remained tepid,” he said. Indeed, major equity indexes were flat or down Tuesday.

The Nikkei 225 in Asia ended the day flat, in the red 0.04%, as the index recovered from early losses but coronavirus concerns outweighed positive sentiment.
The FTSE 100 closed in the red 1.1% as record-high coronavirus cases and uncertainty regarding Brexit talks led the index lower.
In the United States the S&P 500 was flat, down 0.10% as lawmakers struggled to push coronavirus-related fiscal stimulus forward ahead of the Nov. 3 election.

“Most risk-on assets were impacted by news of a stimulus stalemate and rising virus numbers,” Erstling noted. “Traders are shaking off that sentiment today and returning to the long-term fundamentals that have propelled bitcoin to an over-85% gain” for the year to date.

“We’ve seen increased buying activity over the last two weeks,” said Michael Rabkin, head of Institutional Sales at crypto market maker DV Chain. “On top of that, the U.S. is close to approving a record $1.8 trillion stimulus plan. People are looking at alternatives like bitcoin to protect their wealth.”

Judging by the bitcoin options market’s open interest, positive sentiment seems to be picking up. Monday saw bitcoin options open interest crack $2.5 billion for the second time in October, with the first time being last Thursday, Oct. 22.

“Based on the bitcoin options data, a lot of traders are hedging and locking-in profits and current price levels,” Daniel Koehler, liquidity manager at San Francisco-based cryptocurrency exchange OKCoin, told CoinDesk. “Volumes are up across the board along with the price, so it is a sign of increased near-term bullish bias.”

Ether volatility up

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Tuesday, trading around $406 and climbing 3.7% in 24 hours as of 20:00 UTC (4:00 p.m. ET).

Ether’s volatility, measured by the standard deviation of daily log returns on an annualized basis, has been much higher than bitcoin’s volatility in 2020. While ether’s volatility had been dropping in October, it crept back up again, going from 49.99% Sunday to 51.75% Monday.

Ether itself is up over 210% in 2020, while bitcoin has risen over 88% this year so far. Quant trading firm QCP Capital on Tuesday noted ether’s market risks and its potential to underperform over the balance of 2020 due to exploitation of decentralized finance, or DeFi.

“ETH has been hit yet again by DeFi worries after another smart contract platform exploitation/hack – this time Harvest,” QCP wrote in its weekly investor note. “This will weigh further on ETH and could cause it to underperform BTC in the near term.”

Other markets

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

chainlink (LINK) + 3.5%
bitcoin cash (BCH) + 2.5%
litecoin (LTC) + 2.3%

Notable losers:

orchid (OXT) – 0.82%
tezos (XTZ) – 0.30%

Commodities:

Oil was up 2.1%. Price per barrel of West Texas Intermediate crude: $39.41.
Gold was in the green 0.32% and at $1,907 as of press time.

Treasurys:

U.S. Treasury bond yields all fell Tuesday. Yields, which move in the opposite direction as price, were down most on the 10-year, dipping to 0.774 and in the red 3.3%.

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CoinDesk

‘Convincing’ Phishing Attack Targets Ledger Hardware Wallet Users

CoinDesk Crypto

5 years 11 months ago

Customers of Ledger, the hardware cryptocurrency wallet, are being targeted by a phishing attack posing as an email from Ledger support.

On Sunday a Reddit user posted in the r/ethfinance subreddit, alerting the group to the existence of the attack.

The fake email ostensibly informs users their Ledger assets may be compromised. It states, “Our forensics team has found several of the Ledger Live administrative servers to be infected with malware.” This claim is false; while the email form looks professional, it is a phishing attempt to steal customers data.

The email is so convincing that even wary users might be fooled. Ledger confirmed that, for the last week, a phishing attack has been targeting Ledger cryptocurrency wallet customers.

“I received the same email and for once I got really confused. Everything checks out,” said one Reddit user in reply to the original post. “However, there you can see that the url is incorrect (notice the dot on the second ‘e’ => ledgėr). What triggered my doubt was that I received the email twice within a couple of minutes. … It’s probably related to the previous hack where a hacker managed to get our email addresses.”

Another user replied, “Wow this looked really legit, so much so I used Contact Us form to ask Ledger if it was real. I am normally pretty good at sniffing things like this out – this was by far the most convincing attempt I have ever seen.”

Roots of a phishing attack

In July, the Ledger team discovered an API key related to their e-commerce and marketing database was exploited, and the database accessed by an unauthorized third party. The database details (mostly email addresses) were used to send order confirmations and promotional emails.

In a blog post revealing the hack, the Ledger team emphasized that users’ payment information and crypto funds are safe.

CoinDesk independently reviewed one of these phishing emails, which was sent from “support@legder.com.” A key clue in any phishing email is a slight misspelling of a real address or URL; in this instance, “ledger.com” is misspelled.

Pro tip: Bookmark verified sites where you normally would input sensitive information and only access them through that bookmarked link.

Phishing attacks are common and attackers are increasingly sophisticated, creating emails that resemble official company correspondence. They rely on a person making a mistake and clicking on a link that could compromise his or her security.

In a statement, a Ledger spokesperson said an internal task force has been deployed to investigate the latest phishing attack.

“The investigation is ongoing and at this time we cannot give any additional information but one thing is for certain: Ledger will never ask you for your 24-word recovery phrase, which is a blatant sign of a phishing scam,” said the spokesperson. “Ledger encourages customers to exercise caution as phishing attacks become more sophisticated and to alert Ledger’s customer support team and consult Ledger.com for more information on the detection of scams.”

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BlockFi Takes 5% Stake in Grayscale’s $4.8B Bitcoin Trust

CoinDesk Crypto

5 years 11 months ago

Crypto lender BlockFi has become one of Grayscale Bitcoin Trust’s (GBTC) biggest whales.

BlockFi holds 5.07% of Grayscale’s $4.8 billion bitcoin trust, or 24,235,578 GBTC shares, according to Tuesday Securities and Exchange Commission (SEC) filings. Grayscale is owned by CoinDesk’s parent firm Digital Currency Group.
CEO Zac Prince said in a press statement BlockFi’s “significant” GBTC position will “add value” to the “marketplace for liquid and illiquid” shares. “There are lending markets related to GBTC,” he told CoinDesk in an email.
Crypto fund manager Three Arrows Capital is the only other entity with comparable GBTC holdings, having amassed over 21 million shares by June. That represented a 6.26% stake in GBTC at the time.
Entities are required to publicly disclose ownership positions over the 5% threshold. GBTC became an SEC reporting company in January.

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CoinDesk

First SEC Official to Say Ether Is Not a Security Is Leaving the Agency Later This Year

CoinDesk Crypto

5 years 11 months ago

The U.S. Securities and Exchange Commission (SEC) announced Tuesday that William Hinman, the director of the SEC’s division of corporation finance, is planning to conclude his tenure later this year.

Notably, Hinman was the first official at the agency to say that, in his view, the native currency of the Ethereum blockchain, ether (ETH), was not a security. Speaking at an event in 2018, Hinman said that since there is no central figure or group responsible for ETH, it “may not represent an investment contract.”

Hinman has worked for the SEC for over three years, playing a key role in the SEC’s efforts to regulate the cryptocurrency industry. Hinman helped provide a framework that market participants could use to evaluate whether digital assets are offered and sold as securities.

Tuesday’s announcement also said Hinman led the SEC’s work on revising the criteria for accredited investors. While the SEC’s announcement did not indicate a specific reason for his departure, it noted Hinman’s contributions to multiple areas such as improving disclosures to investors and leading the creation of the Strategic Hub for Innovation and Financial Technology (FinHub).

Following Hinman’s departure, the deputy director of the division, Shelley Parratt, will serve as the acting director for the division of corporation finance, the SEC said Tuesday.

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CoinDesk

This Paradigm-Backed Startup Is Offering DeFi’s First ‘T-Bill’

CoinDesk Crypto

5 years 11 months ago

“What is the time value of money?”

That’s the age-old question Allan Niemerg, former head of research and investments at Cumberland DRW and founder of newly launched Paradigm-incubated Yield Protocol, is trying to answer with his new programmatic money market.

Released publicly Oct. 19, Yield is jostling to join a $2.6 billion decentralized lending industry dominated by established players such as Compound by providing a benchmark product others have not: a DeFi yield curve.

And while money markets aren’t always a head-turning topic, they do perform a useful function by allowing investors to plan for the future. In that sense, Yield as an abstract product can be seen as a cornerstone to long-term, blockchain-based money markets.

Stable versus variable

DeFi predominantly offers variable rates. Those that offer fixed rates such as Aave charge a premium due to the young market’s volatility. Yield, on the other hand, provides stable long-term borrowing and lending options. Version one has six different contracts extending through December 2021.

It’s all made possible by mashing together multiple existing projects plus some novel mathematics, Niemerg said in a phone interview.

“We took the example of Uniswap and a few others that exist,” Niemerg said. “We generalize how you actually construct markets like this. What you’re doing is starting from some principle. This market should maintain some property and if it maintains that property we can put boundaries on how much it could lose.”

Niemerg said his product is akin to a Treasury bill (T-bill). The project’s white paper describes Yield loans as a “zero-coupon bond” (a financial instrument that trades at a discount if interest rates are positive until it pays off at face value at expiry).

To do this, Yield employs the automated market maker (AMM) scheme that came into vogue with Uniswap this summer. Prices in Uniswap and other similar markets are parameterized, meaning prices are a function of asset reserves (a bonding curve in DeFi speak, also known as your run-of-the-mill algebraic equation). For example, Uniswap’s curve is X * Y = K, where X and Y are pooled asset reserves and K is the price.

“The key thing is to identify properties then code them in the math so the markets reflect these properties and can trade at reasonable prices,” Niemerg said.

Yield space

But instead of the Yield AMM creating a price only through the balancing of reserves, it creates an interest rate by including a new variable: time.

“We want to build a liquidity provision formula that works in ‘yield space’ rather than ‘price’ space. Specifically, we want the interest rate – not the price – to be a pure function of reserves,” the Yield white paper states.

In practice, this looks like many other DeFi lending schemes: You deposit ether (ETH) as collateral in exchange for the protocol’s token, fixed-yield dai (fyDai). (Deposits are placed in a MakerDAO vault.) That token can then be swapped for dai into one of the six borrowing contracts with different expiry dates and stable rates. Each contract has its own specific token.

Much like how a traditional T-bill trades, the difference between dai and fyDai during that period is an implicit interest rate. The math behind fyDai should make the token trade at a discount to dai until the borrowing period closes and the two tokens reach parity.

If you buy a typical T-bill before expiry, you can expect a set return when the contract comes due. Likewise, if you buy fyTokens with dai (lending), you can expect a set return when the contract expires. The larger difference here being, of course, is the risk profile: government bonds are backed ultimately by the full faith and credit of the federal government, while fyDai is backed by software.

Is DeFi ready for a yield curve?

The product market fit for stable interest rates in DeFi is an unexplored question, DeFi market UMA co-founder and former Goldman Sachs bond trader Hart Lambur told CoinDesk in a phone interview. (Lambur maintains relationships with both Paradigm and Yield, but does have a competing project, the Yield Dollar, he said).

Lambur said Yield is “really elegant in theory” but he’s unsure if DeFi investors are asking for a stable interest rate product right now. Yield may be looking for a future market event for it to make sense, he said (though he noted that any project has traction if investors are willing to buy and sell on Yield at given prices).

Yet, stable interest rates are in demand in some places. The contract has a nudge over $750,000 in total value locked (TLV) as of Oct. 22, Niemerg said, and Yield may cut into the lending market by offering more attractive rates.

For example, Aave founder Stani Kulechov told CoinDesk in an email that “most of the borrowings from Aave Protocol are in variable interest rates.” He said Aave has seen an uptick in the utilization of stable borrowing rates to over 13%.

“This is a clear sign that borrowers are increasingly interested in having certainty in their interest rates,” he said.

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CoinDesk

Blockchain Bites: JPM Coin Goes Live, Bitcoin Rallies, Stocks Falter

CoinDesk Crypto

5 years 11 months ago

JPM Coin will see its first commercial use, banking executives said. Southeast Asia’s largest bank by assets, DBS, is eyeing a digital assets exchange. And bitcoin’s recent rise shows a decoupling from traditional markets, like the S&P 500.

Top shelf

JPM Coin
JPM Coin, the enterprise-minded digital asset stewarded by the titular global bank, will see its first transaction this week, a JPMorgan executive said. Designed for wholesale payments and faster transactions, the system is predicted to save the banking industry hundreds of millions of dollars a year. First revealed in February 2019, JPM Coin will run on Quorum, a private version of Ethereum developed by the bank but acquired by development firm ConsenSys in August. Further, the executive told CNBC the bank has created a business unit with around 100 employees called Onyx to house related projects. “We believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business,” the executive said.

Bank’s exchange
Southeast Asia’s largest bank by assets, DBS, is apparently in the works to build a digital assets trading platform. The Singapore-based bank and financial services corporation posted – and quickly removed – a webpage detailing the DBS Digital Exchange that will offer access to “an integrated ecosystem of solutions to tap the vast potential of private markets and digital currencies.” In addition to bitcoin, bitcoin cash, ether and XRP trading services, the exchange will also offer tokenization services, offering business the opportunity to raise funds by issuing digital forms of securities and assets, per the page. The exchange will be regulated by the Monetary Authority of Singapore, the city-state’s de facto central bank.

BTC funds bail
A growing number of donors are giving crypto to bail funds, CoinDesk’s Ben Powers reports. Bail fund projects have taken in thousands of dollars in crypto donations – including major assets like BTC and ETH, as well as smaller market cap coins like BAT – since the summer, according to The Giving Block. Potential benefits include helping bail funds diversify payments streams, attract younger tech-savvy and international donors as well as tax benefits. “We expect that more people will embrace crypto as their preferred method of making donations – especially as people understand the tax benefits of giving via crypto, which are similar to those of donating conventional securities,” The Bail Project’s Chief Financial Officer Zach Herz-Roiphe said.

Volume surge
Automated market makers Curve and Uniswap traded combined volumes above $4 billion on Monday, perhaps in reaction to a recent exploit of popular DeFi protocol Harvest Finance. Daily trading volume on Uniswap leapt 1,200% to a record $2.04 billion, surpassing the previous record high notched shy of $1 billion, while decentralized exchange Curve Finance saw volumes above $2 billion. This weekend, an attacker used a flash loan – a technique that allows a trader to take on massive leverage without any downside – draining some $24 million from Harvest and triggering a bank run. “Volume on Uniswap surged, as the Harvest Finance exploiter likely ran money through the automated market maker,” Denis Vinokourov, head of the research at the London-based prime brokerage Bequant, told CoinDesk in a Telegram chat.

Powell pontificates
Jesse Powell, crypto OG and Kraken CEO, has criticized the decentralized finance (DeFi) space, in light of several recent multimillion-dollar exploits, not the least of which affected Harvest Finance yesterday. In a tweet on Tuesday, Powell said he would “not accept” DeFi projects’ attempts at “externalizing the cost” of “hasty reckless” rollouts. In an expletive-laden tweet he admonished these breakneck coders for rushing out unaudited and uninsured projects. Despite this, CoinDesk’s Sebastian Sinclair notes, the DeFi sector is continuing to grow, having surpassed $12.45 billion in total value locked up in smart contracts on Oct. 25. (That figure dropped by about $1.15 billion after Monday’s exploit of Harvest, and now stands at $11.3 billion, according to DeFi Pulse.)

Quick bites

Why Wyoming’s Governor Supports the State’s Crypto Banking Law (CoinDesk)
Toyota’s IT arm launches digital currency pilot (The Block)
Audius Distributes Crypto to RAC, Deadmau5 Listeners (Decrypt)
There are already counterfeit wallets of China’s digital yuan (Quartz – paywall)
Alibaba’s Jack Ma says switch to a digital currency (Modern Consensus)

At stake

The indicators
Bitcoin is rallying, and on-chain and off-chain indicators point to a continuing trend. CoinDesk markets reporter Omkar Godbole placed bitcoin’s new yearly watermark in the context of declining daily deposits to cryptocurrency exchanges as well as a movement of coins off exchanges.

According to Glassnode, the number of daily deposits to exchanges fell to a nine-month low of 26,889 on Monday as the total number of bitcoins held on exchanges slipped to a two-year low of 2,478,799 BTC.

These statistics, while imperfect, have traditionally pointed to a market sentiment where traders and investors are prepared to “hodl” into a rally, Godbole noted.

A similar sentiment can be gauged by looking at futures markets, where contracts give the option for buyers to strike a buy at a predetermined price by a predetermined date. According to Godbole’s analysis, one-, three- and six-month put-call skews, which measure the cost of bearing to bullish bets are hovering near zero, an indication that some traders expect for bitcoin’s price to continue rising.

Last week, Bloomberg analysts put out a quarterly report on predictive crypto performance, targeting a $100,000 BTC price level for 2025 and a high of $14,000 as early as this year.

“Still in hangover mode from the 2017 rally, we don’t know what specific catalyst might launch Bitcoin to new highs, but demand vs. supply metrics remain price-positive,” the analysts write in “Bitcoin Trend, Adding Zeros.”

Among the macro factors they point to is bitcoin’s decreasing volatility compared to the Nasdaq composite, a growing correlation with gold and a likely growing market cap, in part spurred by corporate investment (like MicroStrategy and Square’s) in the cryptocurrency.

“In an unparalleled macroeconomic backdrop of rapidly increasing fiscal and monetary stimulus, limited supply stores of value such as gold and Bitcoin stand to prevail, in our view. This should be true when traditional asset classes – stocks and bonds – are overextended,” the report reads.

A separate report by CoinDesk’s sister company Grayscale has found that more than half (55%) of U.S. investors who responded are interested in buying bitcoin in 2020. That’s up from 19% from survey responses last year.

For the short term? “The next resistance to take out is $13,800 (June 2019 high),” Patrick Heusser, a senior cryptocurrency trader at Zurich-based Crypto Broker AG told Godbole.

Market intel

Decoupling?
Bitcoin is riding at 16-month highs, trading around $13,420 at press time. The cryptocurrency is now up 25% for the month and 87% on a year-to-date basis, CoinDesk’s Omkar Godbole reports. This comes as coronavirus scares and intermittent U.S. stimulus talks have spooked traditional markets, seen by the S&P 500’s 2% drop yesterday. “In effect, we appear to be seeing a weakening of the positive correlation between bitcoin and the S&P 500 seen since the March crash,” Godbole said. Matthew Dibb, COO of Stack Funds, agreed: “The decline in transfers to exchanges despite risk-off in equity markets is a bullish sign.”

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India Will Soon Have Crypto ‘Banking’ at 22 Physical Locations

CoinDesk Crypto

5 years 11 months ago

India’s digital assets space continues to see rapid development, with the latest news from the subcontinent being cryptocurrency financial services offered at physical branches.

According to a blog post from digital finance firm Cashaa on Tuesday, a new joint venture with the United Multi State Credit Cooperative Society will provide users with cryptocurrency services alongside traditional banking at 22 locations in the northern part of the country.

A launch is slated for December of this year, with Cashaa saying the plan is to expand the service to over 100 branches by 2022.

Cashaa, which calls itself a “crypto-friendly neo-bank,” said it was planning a move into India when it raised $5 million from a Dubai investment firm in early September.

The joint venture, called UNICAS, will offer crypto savings accounts; lending with gold, cryptocurrency and property as collateral; and crypto buying and investment.

At launch, UNICAS will list six major cryptocurrencies for purchase with Indian rupees: bitcoin (BTC), ether (ETH), bitcoin cash (BCH), EOS, litecoin (LTC) and XRP. Binance coin (BNB) and Cashaa (CAS) will also be offered.

The credit cooperative society already has regulatory licenses in India, which will bring Cashaa access to the local market, the post said.

“This will allow us to build, scale and offer customized financial and crypto products for the local Indian markets,” said Dinesh Kukreja, managing director of United Multistate Credit Cooperative Society and CEO of UNICAS.

India has been seeing something of a crypto renaissance since the central bank’s ban on banking services for digital assets companies was overturned by the Supreme Court in March.

Also read: Amid Confusion About Rules, Indian Crypto Community Pushes for Regulatory Sandbox

Since then, crypto exchanges have reported surging trading interest and volumes, while investors have been flocking to invest in the startups rising in the underserved market.

Hanging over all of this like a dark cloud is the fact that the country’s government still hasn’t produced long-rumored regulations around cryptocurrency, with some reports suggesting a possible crypto trading ban may be in the cards.

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China’s Coronavirus Outbreak Prompts Blockchain Adoption for Charity

CoinDesk Crypto

5 years 11 months ago

Tens of millions of dollars have been reportedly raised to help Wuhan, a city in central China with 11 million people, to recover from its coronavirus outbreak earlier this year. However, charities in China are not widely trusted.

Now, China’s digital payment and banking giants have been building blockchain-based platforms to tackle miscommunication between charities and the affected communities, as well as a lack of transparency in the current donation distribution system, CoinDesk Japan reported Monday.

Alibaba, parent of AliPay, released the technical framework and industry standards for blockchain platforms for charities in September. It plans to increase transparency by tracking donations on the company’s enterprise blockchain and make it easier for people to make donations via its authentication function.

Tencent also made an effort to record donations to a nationwide charity campaign on its enterprise blockchain TUSI. The annual campaign, held on Sept. 9 every year, raised over $3 billion from more than 43 million individuals and 14,000 companies in 2019, CoinDesk Japan reported.

The Industrial and Commercial Bank of China (ICBC), one of the major four state-owned commercial banks in China, included blockchain use cases for charities in a 2020 white paper on the technology’s adoption in the financial services industry.

“During recovery from the coronavirus outbreak, ICBC has launched and promoted blockchain platforms to track donations,” the bank said in the white paper. “The Red Cross Guangxi branch and Zhuhai Charity Headquarter are currently on our platform and we will gradually invite more organizations across the country.”

Trust crisis

These moves echo the State Council’s call to use emerging technologies, including blockchain, to improve the charity system in China and restore the general public’s trust in Chinese charities.

China’s Red Cross, one of the largest charities in the country, was criticized for not getting supplies to hospitals that were fighting the coronavirus in February. A state media outlet livestreamed a suited man loading a box of face masks into a truck with the characters on it saying “Vehicles for Government Officials” next to a Red Cross warehouse.

Another scandal caused more long-lasting damage to the Red Cross’ reputation. A woman named Guo Meimei claimed she worked for the Red Cross and angered Chinese netizens by showing off her lavish lifestyle on social media in 2011. Unsubstantiated rumors said she had connections with a high-ranking Chinese official in the Red Cross and misused some funds in the charity. The organization had received tens of millions of dollars in donations on the heels of the 2008 Wenchuan earthquake.

In its proposed policy in 2016, the Chinese Red Cross Foundation said it would set up an independent third-party institution to audit and supervise the management of its supplies and donations, according to a document on the State Council’s official website.

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Publicly Traded INX Crypto Exchange to Acquire Broker-Dealer Openfinance

CoinDesk Crypto

5 years 11 months ago

INX Limited, a cryptocurrency exchange that went public on Ethereum last month, has agreed to buy U.S. broker-dealer Openfinance Securities, the company announced in a press release Tuesday.

INX will also acquire Chicago-based Openfinance’s alternative trading system, digital asset listings, client base and licenses.
INX aims to bolster its status as a provider of novel trading and capital-raising instruments through the acquisition.
The terms of the deal were not disclosed.

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CoinDesk

First Mover: Bitcoin Surges to New 2020 High as Harvest Debacle Provides Costly DeFi Lesson

CoinDesk Crypto

5 years 11 months ago

Bitcoin reached a new 2020 high of around $13,420 after rising on nine of the past 11 days.

The cryptocurrency’s recent rally despite a stalling of U.S. stocks has rekindled speculation that prices for the two asset classes are starting to diverge after a recent stretch in which they appeared highly correlated.

“We have discussed the potential for a decoupling from traditional financial markets,” analysts for the blockchain data firm Glassnode wrote Monday. “It is too early to tell.”

Matt Blom, head of sales and trading for Diginex, said bitcoin bulls might try to push prices by the end of October above $13,863, the current record for an end of month price. After that, the next price target would be the 2019 high of $13,868.

In traditional markets, U.S. stock futures pointed to a higher open, even as lawmakers departed Washington to campaign, an apparent death knell for last-ditch efforts to pass an economic stimulus package prior to the Nov. 3 election.

Market moves

The fast-evolving realm of decentralized finance, or DeFi, has attracted large sums of money this year from venture capitalists and traders alike. At last count, some $11 billion of bitcoin and other cryptocurrencies had been socked into the semi-automated, blockchain-based trading and lending platforms as collateral, a 16-fold increase since the start of the year.

But every month or so, the fledgling industry produces a debacle so suddenly and bizarrely that sane observers have no choice but to step back and remember that the whole exercise is really just a giant game, played with real money. Or a laboratory. Or both.

Such was the case with the latest exploit to hit DeFi: the siphoning off of the equivalent of $24 million in digital tokens from a protocol called Harvest Finance.

As reported by CoinDesk’s Will Foxley, an attacker used a complex and sophisticated strategy involving “flash loans” and a series of arbitrage trades involving the DeFi protocols Uniswap, Curve and Harvest. Massive amounts of the dollar-linked stablecoins tether (USDT) and USD coin (USDC) were swapped back and forth, causing their prices to swing wildly and allowing the attacker to profit from the resulting distortions.

Prices for Harvest’s tokens, FARM, tumbled by 65%, and total collateral in the project plunged to $430 million from about $1 billion. The attacker eventually swapped the proceeds into bitcoin.

There wasn’t really any hacking involved, just an exploitation of the Harvest system, which is really just a bunch of computer programming. It wasn’t illegal, apparently, so a debate ensued on Twitter over the ethics and optics. Harvest officials called it an “engineering error” in a blog post on Medium. They pledged to explore “remediation methods,” but that’s yet to be determined.

Later Monday, Jesse Powell, CEO of the Kraken cryptocurrency exchange, unleashed an F-bomb-laced Twitter tirade against “DeFi scams,” concluding with the gracious and sagacious dictum that “taking your losses is the only way to enlightenment,” as reported by CoinDesk’s Sebastian Sinclair.

The lesson is that high profits from DeFi come with the risk not just of bad directional bets but also the chance that some savvier user is playing by different rules. In a market built entirely on a set of codes, what’s allowed and what’s possible are really one and the same.

One reason innovation occurs so rapidly in DeFi is there’s no investor-protection regulator. That’s the trade-off: Wallet casualties are written off in the name of development.

– Bradley Keoun

Bitcoin watch

Bitcoin has jumped to 16-month highs despite renewed coronavirus-induced risk aversion in global stock markets.

The top cryptocurrency clocked a high of $13,450 a few minutes before press time, a level last seen in July 2019, surpassing the previous 15-month high of $13,300 reached last week.

The move higher looks impressive, given that European stock markets are trading in the red on coronavirus concerns. The price divergence comes amid new signs of increasing institutional interest in bitcoin, with several public companies disclosing investments in the cryptocurrency over the past few weeks.

The rally looks set to continue as on-chain data shows no signs of investor trepidation due to the risk-off sentiment in stocks. The number of daily on-chain deposits to cryptocurrency exchanges fell to a nine-month low of 26,889 on Monday, and the total number of bitcoins held on exchanges slipped to a fresh two-year low of 2,478,799 BTC, according to data source Glassnode.

Investors typically move coins from their wallets to exchanges to liquidate holdings when expecting a price slide and take direct custody of their coins when the cryptocurrency is expected to rally.

“The decline in transfers to exchanges despite risk-off in equity markets is a bullish sign,” Matthew Dibb, co-founder, and COO of Stack Funds, told CoinDesk in a WhatsApp chat while adding that the cryptocurrency is likely to see further strength in the coming weeks.

– Omkar Godbole

What’s hot

JPMorgan’s wholesale payments token, JPM Coin, to see usage from major tech firm starting next week, exec tells CNBC (CoinDesk)

Singapore bank DBS looks to be planning digital asset exchange, cashed web page shows (CoinDesk)

Huobi exchange allows customers to use credit or debit cards to buy cryptocurrencies without redirect to third-party payments portal (CoinDesk)

U.S. government pursues civil forfeiture claim on more than 300,000 tether after they were reported stolen in hack earlier this year (CoinDesk)

Wyoming governor says state has opportunity to capitalize on crypto and blockchain tech before some other major blue chip company or university does it (CoinDesk)

PayPal’s new crypto service could create tax headaches for users, even if they’re just buyjng a cup of coffee (CoinDesk)

DeFi protocol Notional lets users lend and borrow cryptocurrencies at fixed rates instead of the more typical variable rates (CoinDesk)

Analogs The latest on the economy and traditional finance

There’s a new “big short” trade forming on Wall Street – betting against U.S. Treasury bonds (Bloomberg)

Wall Street’s “fear gauge” jumped to its highest point in almost two months as a result of the uncertainty surrounding the upcoming U.S. presidential election slated for Nov. 3 (Reuters)

Volkswagen CEO says auto industry doesn’t need another round of stimulus (FT)

Ant Financial IPO subscriptions exceeded allotted shares for institutional investors within first hour (Nikkei Asia)

A few pennies on the dollar is as good as it gets for bondholders of J.C. Penney, Neiman Marcus (Bloomberg):

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More Than Half of US Investors Interested in Bitcoin, Grayscale Survey Finds

CoinDesk Crypto

5 years 11 months ago

A survey conducted by digital asset manager Grayscale Investments suggests investor interest in bitcoin is on the rise and the top cryptocurrency by market cap is well on its way toward mainstream adoption.

Released Tuesday, Grayscale’s “Bitcoin Investor Study” revealed more than half (55%) of U.S. investors who responded are interested in buying bitcoin (BTC) in 2020.
Compared to the previous year, the results mark a “significant increase,” the company said, with a rise of 19%.
The data also showed the majority of bitcoin investors made allocations within the last 12 months, with 38% investing in the last four months, 26% five to six months prior, and 19% seven to 12 months ago.
The strongest stated driver for bitcoin investments was the coronavirus pandemic, which spurred 63% of respondents into investing, the research showed.

The total number of bitcoin investors in the U.S. also rose to 32 million, up 11 million from the previous year’s 21 million.
Almost half of respondents said they believe digital currencies would become mainstream by the end of the decade.
Among other interesting finding, the survey indicated if you’d gone to college or university and got a degree you were more likely to invest; the demographic was split, with twice as many males as females.
Investors were drawn to bitcoin for its low cost to entry and potential as a growth asset, cited as a motivating factor by 59% (up from 51% in 2019).

The study was not without its negative insights, however, finding that, of people aged 55-64, only 40% were familiar with bitcoin and just 30% would consider investing.
Common concerns among survey respondents who were not interested in investing in bitcoin tended to reflect the views of older investors generally, the study showed.
Among the older age bracket, 81% thought bitcoin was too volatile, while 84% said it was too risky for their investment appetite and profile.
Grayscale is owned by CoinDesk’s parent firm, Digital Currency Group.

See the study in full below:

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JPMorgan’s ‘JPM Coin’ Is Live, Execs Say

CoinDesk Crypto

5 years 11 months ago

Investment banking giant JPMorgan is about to see the first commercial transactions with its own cryptocurrency, JPM Coin.

According to a report from CNBC Tuesday, Takis Georgakopoulos, JPMorgan global head of wholesale payments, said a major tech firm will use the token to make global payments starting this week.
As the bank sees blockchain technology becoming commercially viable, it has also created a business unit with around 100 employees, Onyx to house related projects, Georgakopoulos told CNBC.
“We are launching Onyx because we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business,” the executive said in the report.
Christine Moy, blockchain lead at JPM, confirmed the reporting on Twitter:

JPMorgan is focusing on the wholesale payments business, where removing inefficiencies can save the banking industry hundreds of millions of dollars a year, Georgakopoulos added.
First revealed in February 2019, JPM started trials of JPM Coin last summer.
The token was designed to speed transactions, such as payments between firms or bond transactions.
It was built on Quorum, a private version of Ethereum developed by the bank but acquired by development firm ConsenSys this August.
CNBC also reported JPM’s blockchain-based Interbank Information Network is rebranding as Liink and will soon launch as a way to validate payments before they are sent.
Umar Farooq, the CEO of Onyx, said the bank is also eyeing using blockchain to send digital versions of paper checks and save banks 75% of the costs currently needed to send and process these payments.

Also read: ConsenSys Acquires JPMorgan’s Quorum Blockchain

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CoinDesk

Bitcoin Hits 16-Month High Despite Sell-Off in Global Stocks

CoinDesk Crypto

5 years 11 months ago

Bitcoin’s (BTC) price continues to rise even as coronavirus-induced instability rocks the stock markets.

Bitcoin is trading near $13,420 at time of writing, a 2.77% gain on the day.
That marks a fresh 16-month high for the cryptocurrency, which is now up 25% for the month and 87% on a year-to-date basis.
Bitcoin’s on-chain data, too, is showing no signs of investor trepidation.
The number of daily deposits to cryptocurrency exchanges fell to a nine-month low of 26,889 on Monday.
Further, the total number of bitcoins held on exchanges slipped to a two-year low of 2,478,799 BTC, according to data source Glassnode.
So the bullish mood continues for bitcoin, even though the global stock markets suffered losses and Wall Street’s benchmark equity index, the S&P 500, fell nearly by 2% on coronavirus concerns Monday.

The decline in exchange deposits suggests investors are unperturbed by the risk aversion in traditional markets and see low odds of bitcoin suffering an equity market-induced sell-off.
Investors typically move coins from their wallets to exchanges to liquidate holdings when expecting a price slide, and take direct custody of their assets when the cryptocurrency is expected to rally.
In effect, we appear to be seeing a weakening of the positive correlation between bitcoin and the S&P 500 seen since the March crash.
“The decline in transfers to exchanges despite risk-off in equity markets is a bullish sign,” Matthew Dibb, co-founder, and COO of Stack Funds, told CoinDesk over WhatsApp.
The cryptocurrency is likely to stay strong in the coming weeks, he added.
Bitcoin’s options market is also retaining bullish bias.
The one-, three- and six-month put-call skews, which measure the cost of puts relative to calls, continue to hover below zero, a sign of calls – bullish bets – drawing higher prices (or demand) than puts – bearish bets.

The cryptocurrency suffered a minor drop to $12,700 during Monday’s U.S. trading hours only to chart a quick recovery to levels above $13,000.
“The next resistance to take out is $13,800 (June 2019 high).
“If bitcoin breaks below $12,700, we will take action and decrease our exposure further,” Patrick Heusser, a senior cryptocurrency trader at Zurich-based Crypto Broker AG told CoinDesk in a Twitter chat.
Disclosure: The author holds small positions in bitcoin and litecoin.

Also read: Number of Bitcoin ‘Whale’ Addresses at Highest Since Autumn 2016

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DBS Bank Is Planning to Launch a Digital Asset Exchange

CoinDesk Crypto

5 years 11 months ago

[UPDATED] DBS, the Singapore-based bank and financial services corporation, is building a digital assets trading platform.

According to a cached web page, apparently posted in error and then taken down, DBS Digital Exchange will offer access to “an integrated ecosystem of solutions to tap the vast potential of private markets and digital currencies.”
On offer for trading against the Singapore dollar, the Hong Kong dollar, Japanese yen and U.S. dollar will be four top cryptocurrencies: bitcoin, bitcoin cash, ether and XRP.
“DBS’ plans for a digital exchange are still work in process, and have not received regulatory approvals,” a DBS spokesperson confirmed to CoinDesk after publication of this article.
Until such approvals are confirmed, the bank will make no further announcements, they added.
The exchange will also offer tokenization services, offering business the opportunity to raise funds by issuing digital forms of securities and assets, per the cached page.
Assets will not be held by the exchange but by a dedicated, “institutional grade” custodian set up by DBS, dubbed DBS Digital Custody.
The exchange will be regulated by the Monetary Authority of Singapore, the city-state’s de facto central bank.
DBS is Southeast Asia’s largest bank by assets, according to online sources.
EDIT (14:10 UTC, Oct. 27 2020): Added confirmation from DBS Bank.

Also read: Pandemic Will Speed Bitcoin Adoption, Says DBS Bank Economist

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DBS Bank Looks to Be Launching a Digital Asset Exchange

CoinDesk Crypto

5 years 11 months ago

DBS, the Singapore-based bank and financial services corporation, appears to be planning to launch a digital assets trading platform.

According to a cached web page, apparently posted in error and then taken down, DBS Digital Exchange will offer access to “an integrated ecosystem of solutions to tap the vast potential of private markets and digital currencies.”
On offer for trading against the Singapore dollar, the Hong Kong dollar, Japanese yen and U.S. dollar will be four top cryptocurrencies: bitcoin, bitcoin cash, ether and XRP.
The exchange will also offer tokenization services, offering business the opportunity to raise funds by issuing digital forms of securities and assets, per the page.
Assets will not be held by the exchange but by a dedicated, “institutional grade” custodian set up by DBS, dubbed DBS Digital Custody.
The exchange is regulated by the Monetary Authority of Singapore, the city-state’s de facto central bank.
CoinDesk has reached out to DBS for confirmation and further information on the launch, but had not received a reply by press time.
DBS is Southeast Asia’s largest bank by assets, according to online sources.

Also read: Pandemic Will Speed Bitcoin Adoption, Says DBS Bank Economist

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Kraken CEO Jesse Powell Issues Tough Critique of ‘Reckless’ DeFi Launches

CoinDesk Crypto

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Jesse Powell, chief executive of the U.S.-based cryptocurrency exchange Kraken, has lashed out at the decentralized finance (DeFi) sector in the aftermath of Monday’s $24 million arbitrage exploit of Harvest Finance.

In a tweet on Tuesday, Powell said he would “not accept” DeFi projects’ attempts at “externalizing the cost” of “hasty reckless” rollouts.

“Stop f**king up your bullshit DeFi scams and expecting exchanges to bail you out,” Powell said. “Invest in audits, insurance and please [do your own research].”

The comments come after several DeFi projects have suffered some form of an exploit or major management failure, while some have opened to investors with faulty or negligible audits of their code.

At the end of September, gaming protocol Eminence Finance suffered an exploit that saw $15 million-worth of DAI drained while still in testing.

The same month, DeFi project SushiSwap suffered a major blow when its pseudonymous creator “Chef Nomi” made off with the development fund, prompting a 73% crash in its SUSHI token. Chef Nomi did eventually hand back the $14 million worth of ether (ETH) and apologized to affected investors.

Still, the incident highlighted the danger of placing trust, and money, in projects run by unknown individuals.

Also in September, DeFi lending protocol bZx fell victim to its third exploit of the year after a flaw in its code allowed someone to make off with $8 million in crypto.

Despite all this, the DeFi sector is still drawing investors seeking yield, reaching a new milestone of $12.45 billion in total value locked up in smart contracts on Oct. 25.

That figure dropped by about $1.15 billion after Monday’s exploit of Harvest, and now stands at $11.3 billion, according to DeFi Pulse.

It’s not clear why Powell suggested exchanges are having to “bail out” DeFi failures. CoinDesk reached out to clarify but did not receive a reply by press time.

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Crypto Exchange Huobi Adds Direct Visa, Mastercard Payments

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5 years 11 months ago

Huobi, a Seychelles-based cryptocurrency exchange, is making it simpler to pay for cryptocurrency with Visa and Mastercard.

Announced Tuesday in a press release, customers are now able to use their credit or debit cards to make purchases directly on the exchange platform without being redirected to a third-party payments portal.
The company said the service is being provided by Huobi Technology, a blockchain subsidiary of Huobi Global regulated in Gibraltar.
Previously, users of the platform could make purchases using Mastercard and Visa cards but had to go through a separate interface as a result of “know your customer” verification processes.
“By removing an extra step in the user journey, we’re creating a frictionless experience,” Ciara Sun, vice president of Global Business at Huobi Group, said in the announcement.
Visa cardholders in most European countries and Australia can now use the integrated payment service to buy most of the major cryptocurrencies.
Mastercard cardholders in the U.K., Gibraltar, France, Poland, Czech Republic, Netherlands, and Australia are also eligible.
Earlier in October, the exchange teamed up with Banxa, enabling fiat deposits via Faster Payments in the U.K., the Single Euro Payments Area (SEPA) scheme in the EU and payments platform POLi for Australian users.

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Ocean v3 Brings Wave of Data Monetization Tools to Ethereum

CoinDesk Crypto

5 years 11 months ago

A third and all-encompassing version of Ocean Protocol has been released, fleshing out its vision for “datatokens” and decentralized data marketplaces.

Announced Tuesday, Ocean v3 brings the Ocean data market proposal to life with Ethereum-based datatokens, as well as a range of other features like initial data offerings (IDOs), staking, automated market making (AMM) functionality and the potential to share and monetize machine learning models.

The goal of the project is to democratize the value from data and artificial intelligence (AI), which tends to accumulate in the hands of a few internet giants. In order to monetize data created by individuals, businesses or even cities, you need efficient ways to price individual datasets. To solve this problem, Ocean uses elements of decentralized finance (DeFi), combining AMM price discovery tools with decentralized exchange (DEX) technology.

To explain how datatokens work, Ocean founder Trent McConaghy uses the analogy of “wrapping,” the way cryptocurrencies are represented on Ethereum so they can be composed into yield-returning DeFi assets.

“I think a cool way of framing this is that the datatokens are ERC-20 wrappers for access control,” said McConaghy. “So just like you have BTC being brought into the Ethereum ecosystem by wrapping bitcoin, Ocean is wrapping data to bring data services as assets into the Ethereum ecosystem as well.”

Data monetization made real?

McConaghy points to several major obstacles that have held back people’s ability to monetize data: lack of control, lack of privacy, hard to price the data, fake curation signals and poor interoperability.

Leveraging a combination of blockchains and “compute to data” (compute comes to the dataset itself which means data never leaves the premises), Ocean had addressed the first two issues; adding DeFi elements and staking with v3 helps solve the rest, he said.

A data marketplace can be thought of as simply a DEX front end, said McConaghy, one that’s tuned for data, and which makes it really easy to publish data and consume it, as well as trade it, stake it and so on.

Each data service on the market gets its own ERC-20 Ocean datatoken to provide access. To access the dataset, send one datatoken to the data provider. To give access to someone else, send them one datatoken.

Inauthentic signals are a common nuisance on the internet, from fake reviews on Amazon to Twitter bots that follow accounts with little following. Staking in Ocean tackles this problem because, in effect, it’s a kind of curation: The more that’s staked on a particular datatoken pool, the more likely it’s a quality dataset (each pool contains OCEAN tokens and the datatokens corresponding to that dataset).

“When people are buying and selling data there needs to be some baseline credibility around this,” said McConaghy, adding:

“What better way than to have skin in the game. The proxy for the quality of the data is simply the amount of stake in that datatoken pool. Sure, people could still fake things by putting a bunch of OCEAN someplace. But it’s costing them to do so, when they could simply stake on actual valuable datasets that have real volume and get trading fees from that.”

Another interesting side to Ocean’s token model is how staking operates in the context of AMMs. “Staking is adding liquidity; adding liquidity is staking,” said McConaghy. “Rather than those tokens kind of being locked up and not being able to use them, they add value to that pool.”

Assembling these component parts (DeFi uses the term “composability” for the Lego-brick way things can be clicked together on Ethereum) gives people a fighting chance to monetize their data in this new “shadow industry,” currently dominated by firms like Facebook and Google, said McConaghy.

AMMs offer an easy way to launch so-called initial data offerings, or IDOs, to create a market in some dataset or other. These datatokens can then find their way onto order-book DEXs like 0x, Binance DEX and Kyber, McConaghy said, while centralized exchanges like Binance or Coinbase could readily create their own datatoken-based marketplaces and also think about selling datasets that they’ve generated internally.

Ocean collaborations

With its v3 launch, Ocean announced partnerships with CivicTechHub, the largest database of projects dedicated to fighting the COVID-19 pandemic, as well as Swash, Human Protocol, Thalus.ai and Transport Genie.

“To incentivize better data flowing into our COVID-projects database, and to facilitate cross-collaboration, the ability of the Ocean Protocol Market’s liquidity to double as a curation and investment mechanism is a logical step,” Vincent Verheyen, CEO and founder of CivicTechHub, said in a statement.

CivicTechHub aims to provide Ocean functionality to each of the projects on its COVID-19 platform individually, said Verheyen, adding:

“The possibility to share either full data access or compute only means the crisis projects and solution teams will have the choice to provide access to their data according to their preference.”

Ocean was primed from the get-go to complement AI platforms or web apps like Azure ML Studio or Anaconda Cloud, and AI-oriented data marketplaces can easily be deployed within Ocean’s Python library.

“I’m very excited about data scientists going nuts with this,” McConaghy said, “It lets you deploy data marketplaces in 10 lines of code.”

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Ocean V3 Brings Wave of Data Monetization Tools to Ethereum

CoinDesk Crypto

5 years 11 months ago

A third and all-encompassing version of Ocean Protocol has been released, fleshing out its vision for “datatokens” and decentralized data marketplaces.

Data monetization made real?

Inauthentic signals are a common nuisance on the internet, from fake reviews on Amazon to Twitter bots that follow accounts with little following. Staking in Ocean tackles this problem because, in effect, it’s a kind of curation: the more that’s staked on a particular datatoken pool, the more likely it’s a quality dataset (each pool contains OCEAN tokens and the datatokens corresponding to that dataset).

“When people are buying and selling data there needs to be some baseline credibility around this,” said McConaghy, adding:

AMMs offer an easy way to launch so-called “initial data offerings” or IDOs, to create a market in some dataset or other. These datatokens can then find their way onto order-book DEXs like 0x, Binance DEX and Kyber, McConaghy said, while centralized exchanges like Binance or Coinbase could readily create their own datatoken-based marketplaces and also think about selling datasets that they’ve generated internally, he added.

Ocean collaborations

With its v3 launch, Ocean announces partnerships with CivicTechHub, the largest database of projects dedicated to fighting the COVID-19 pandemic, as well as Swash, Human Protocol, Thalus.ai and Transport Genie.

CivicTechHub aims to provide Ocean functionality to each of the projects on its COVID-19 platform individually, said Verheyen, adding:

“The possibility to share either full data access or compute only means the crisis projects and solution teams will have the choice to provide access to their data according to their preference.”

“I’m very excited about data scientists going nuts with this,” McConaghy said, “It lets you deploy data marketplaces in 10 lines of code.”

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Why Wyoming’s Governor Supports the State’s Crypto Banking Law

CoinDesk Crypto

5 years 11 months ago

It took two years of infrastructure building but on Sept. 16 the Wyoming Division of Banking finally landed a prominent pioneer.

That’s when Kraken Financial became the first entity to receive a special purpose depository institution (SPDI) charter in the Cowboy State, giving the cryptocurrency industry insight into roughly how long it takes to become a bank. It’s also the first newly chartered (de novo) bank the state has approved since 2006.

While Kraken Financial still has some hoops to jump through before it has a certificate of authority to operate, Wyoming is running to keep its lead in the digital asset space. And it’s a priority shared by the state’s top elected official, Wyoming Gov. Mark Gordon.

The biggest challenge going forward for the state’s lead in the blockchain space will be seeing how the federal government responds to the regulatory scheme the state is creating, Gordon told CoinDesk.

Wyoming’s SPDI charter could still be affected by the U.S. Office of the Comptroller of the Currency’s (OCC) future decisions on national banks safeguarding crypto, and by other decisions Congress makes in response to large projects like Facebook’s Libra.

“We don’t want to wait until an MIT or a Facebook does something,” Gordon told CoinDesk in an interview. “We really have the opportunity here.”

“I’m really thankful that Kraken looked past Los Angeles and really understood that a small state, business-friendly, great tax environment, that was the place to bring new innovation,” Gordon said.

The state and prominent Washington, D.C.-based consulting firm Promontory Financial are leveraging current Federal Financial Institutions Examination Council manuals such as the Bank Secrecy Act. That includes guidance for bank examiners on how to question banks that handle digital assets.

“While we knew early on that we had supervisory manuals available from federal agencies and our in-house procedures, no one had really blended the two together,” said Wyoming Banking Commissioner Albert Forkner. “It could push a 500-page document.”

After the first round of exams, the manual will be revised to ensure consumer protections without stifling innovation, Forkner added.

Wyoming’s approach

Forkner said the Wyoming Division of Banking will work to ensure state law is not too dissimilar from what the federal government does in the future so that Wyoming doesn’t cause confusion for banks.

The level of exposure the SPDI charter is giving Wyoming is significant, Forkner said. The state has no foreign bank presence and not many branches from other state banks. Of the roughly 30 state-chartered banks in Wyoming, most of them are holding under $1 billion in assets.

“If you think about traditional banks, unless you’re a niche bank they all have similar activities,” Forkner said. “These companies have different markets and targets.”

Among traditional bankers, there’s not a lot of attention to the SPDI charter because it’s a special purpose institution, said Silvergate CEO Alan Lane. (Kraken has been a longtime customer of Silvergate.)

“It doesn’t get a lot of headlines because there’s no FDIC insurance behind it,” Forkner said of SPDIs. “Everyone who is interested in digital assets recognizes Kraken’s name, and Kraken has various licenses around the world.”

Having more banking options in the space will mean crypto investors and firms won’t have to worry about being de-risked in the future, Lane said.

“Access to the Federal Reserve wire system is one of the differentiators for banks and one of the reasons that fintechs and cryptocurrency exchanges need banking partners,” Lane said. “Most players in this ecosystem, especially if you’ve been in it for a while, they want to have diversity, they want to have redundancy in their banking partnerships.”

Limited reach

SPDIs won’t compete on every level with Silvergate because of their inability to lend, Lane added. While the crypto industry will have fully reserved banks to turn to, Kraken and new entrants like Avanti won’t be able to offer products like SEN Leverage, a bitcoin-backed lending program that Silvergate just finished piloting.

As SPDIs wait for the Federal Reserve Bank in Kansas City to determine if it will provide the newly chartered banks with Fed master accounts, Silvergate is willing to work with the de novo banks on payments.

“A year or so ago we started a correspondent banking effort to work with other banks that are providing cryptocurrency-related banking services in other countries,” Lane said. “It’s certainly possible that we could help them get started.

Broader aims

Wyoming’s SPDI charter could play a role in new financial innovation in the state at a time when the state has been economically depressed.

Gordon said he believes digital assets could play a role in financing environmental sustainability efforts. For instance, blockchain could offer a better venue for trading carbon credits, which are tokens that give companies the right to emit a certain amount of carbon.

“One of the challenges we saw on the West Coast this year is that energy markets started to break down a little bit as people got very possessive,” Gordon said. “There’s opportunity for [blockchain] innovation in a renewable world where you can start to sell energy and get energy back.”

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