CoinDesk Crypto

A cryptocurrency hedge fund helmed by three Brazilian bankers has lost half of its money even though it returned positively over the past 16 months.

The value of São Paulo-based BLP Asset Management’s crypto-asset hedge fund, Genesis Block Fund, is down 56.3% from its inception to date. That is because despite gains of 34.9% in 2019 and 46.6% from January to May 2020, it suffered a 77.9% plunge in 2018, its first year.

BLP Asset Management’s returns are a reminder cryptocurrency funds that took a hit in 2018 — when prices of digital currencies crashed — have a harder time getting back to sea level than those buoyed by 2017’s cresting market gains.

Related: Defying Coronavirus Crash, BlockTower Crypto Fund Stretches 30% Total Return to 73%

“We launched the fund on Jan. 1, 2018, right as [the] market went into crypto winter,” said BLP Asset Management partner Axel Blikstad, who used to head Banco Santander Brazil’s fixed-income sales desk for institutional clients. Blikstad launched the fund with Glauco Bronz Cavalcanti, a chief investment officer for the firm and formerly with Credit Suisse Asset Management Brazil, and Alexandre Vasarhelyi, a BLP partner who was Banco Pine’s treasury manager and a former trader at Credit Suisse, Boston Deutsche Bank, ING Bank and Indosuez Bank.

Even though 2018 was a losing year, the BLP Genesis Block Fund’s 2018 and 2019 returns exceeded those of the Bloomberg Galaxy Crypto Index, the investing benchmark the fund tries to beat. The Bloomberg Galaxy Crypto Index is a Galaxy Digital index fund tracking top cryptocurrencies weighted by market capitalization. “Our clients are used to various Bloomberg indexes and this was the best index we found on the crypto space with monthly rebalancing,” said Blikstad.

To get into BLP, investors need to put in a minimum of $100,000 but can pull some or all of their money out during a window of time that opens once per month. The Genesis Block Fund’s value decreased the most in April 2018 by 37.4% and increased the most in May 2019 by 58.6%, and saw 17 months on the downswing and 12 months on the upswing, according to BLP Asset Management reports.

For high-net-worth individuals and institutional clients, the BLP Genesis Block Fund now manages approximately $5 million and an additional $2 million from “local feeder funds for Brazilian domestic clients,” Blikstad said.

Related: Pantera Capital Crypto Hedge Funds Are Losing Double Digits, but Bitcoin Fund Is Up 10,000% to Date

It is possible complicated hedging instruments could have staved off the tricky market conditions back in 2018, but BLP Asset Management is a “long-only” crypto fund, said Blikstad, and that has been the case since it launched. “We may go overweight or underweight any asset we want, but never outright short,” he said. “We do not use any derivative nor do we lend our assets out for extra yield. In one specific case we do stake a token but never lend them out.”

According to monthly BLP investment letters, the fund shied from trading ethereum classic, bitcoin gold and bitcoin SV. Rather, the fund varied its holdings between dozens of coins: bitcoin, bitcoin cash, litecoin, zcash, monero, tezos, zcoin, eos, Stellar lumens, XRP, ADA, IOTA, NEO and numerous crypto-linked platforms. Those platforms include the Funfair online casino, Worldwide Asset eXchange, Polymath security token network, Brave web browser, Chainlink SmartContract processor, Decred network, MakerDAO stablecoin basket and Ethereum blockchain privacy layer Keep. BLP Asset Management invested in Keep through a coin offering with Polychain Capital and Andreessen Horowitz’s cryptocurrency fund.

• Bequant Launches Crypto Prime Brokerage to Compete for Institutional Money
• The Great Monetary Inflation: Paul Tudor Jones’ Complete Case for Bitcoin

The liquidity mining boom may be upon us.

Balancer Labs, the maker of an automated portfolio management tool, has confirmed with CoinDesk it has begun distribution of its BAL token. Following the persistent mania around last week’s debut of Compound’s COMP token, BAL will be the second governance token earned by a decentralized finance (DeFi) app’s most valuable users.

Since June 1, liquidity providers for Balancer’s token pools have been earning BAL, but none of those tokens have been distributed. Balancer’s total value locked (TVL) has gone from $15.9 million on May 31 to $43.6 million as of this writing, according to DeFi Pulse. Going forward, earnings will be minted and distributed on a weekly basis, Balancer Labs CEO Fernando Martinelli told CoinDesk.

Related: DeFi Protocols Should Be Fiduciaries, Not Structured Product Dealers

“By far the most important factor or reason why we are doing that is because we want this thing to be decentralized. We believe in a decentralized, trustless future, and we want Balancer to do that. We need the distribution to be in a healthy way,” Martinelli said.

Read more: First Mover: Compound’s COMP Token More Than Doubles in Price Amid DeFi Mania

Giving out governance tokens for putting assets onto a protocol has come to be known as “liquidity mining.” The technique, which amounts to giving users a seat at the table in deciding how to run decentralized applications, has been discussed throughout 2020. In April, IDEO CoLab Ventures, a venture capital fund backed by the design firm IDEO, spelled it out in a Medium post about translating participation into equity.

But it all got real when collateralized lending startup Compound became the first major DeFi app to distribute some of its governance tokens. Liquidity providers and borrowers started earning COMP on June 15. Since then, Compound became the largest app in DeFi, increasing its available liquidity by 6x.

Related: Market Wrap: Bitcoin Hits $9.6K as Bullish Crypto Sentiment Returns

“I think Balancer is an amazing project in that it creates an AMM [automated market maker] primitive that is extremely flexible for different asset management use cases (exchange, balanced portfolios, certain strategies),” CoinFund founder Jake Brukhman told CoinDesk.

With BAL’s debut in Ethereum wallets the world over, we enter the second chapter of this story. 

Of note, the two projects are at very different stages in their life cycles. Compound was announced in September 2018 and was running for well over a year before unleashing the token. At the first disbursement of COMP, Compound users had already committed nearly $100 million in crypto collateral. 

Meanwhile, Balancer only went live this spring and has roughly $40 million locked into it. If Balancer were to grow by the same proportion as Compound, it could jump from the sixth position in DeFi to the third, but obviously no one knows what will happen – nor how it ends.

Read more: DeFi Protocols Should Be Fiduciaries, Not Structured Product Dealers

Balancer Labs previously ran a $3 million seed round, where Accomplice and Placeholder led alongside CoinFund and Inflection. The investors earned equity that was convertible to tokens. The seed round price was $0.60 per token.

Balancer’s core function is it allows users to make pools of tokens that automatically rebalance, and to tokenize those pools. So if a pool was built so that the value was 50% WBTC, 25% WETH and 25% BAT, for example, it would sell some of its WBTC for WETH and BAT if WBTC shot up in value, so that the proportion of value went back in line. 

In short, it automates crypto indices.

The smart contract governing BAL provides for 100 million tokens with no inflation, but “those 100 million won’t be minted from the beginning,” Martinelli explained.

So far, 35 million have been minted. Of those, 25 million are designated for the team, advisers and investors, and 75% of that vests gradually over three years, and unvested tokens can’t trade or vote.

The team has control of 5 million tokens for an ecosystem fund, to promote growth in various ways and 5 million tokens for future fundraising rounds, according to Martinelli.

Read more: DeFi Startups Built on Compound Weigh What to Do With $200 COMP Tokens

Balancer is currently a team of four and it expects to grow to a team of 10 by the end of the year, Martinelli said, with the ultimate goal of decentralizing the platform.

The remaining 65 million tokens mint at a rate of 145,000 BAL every week, which means it would take about nine years to fully distribute, but because BAL is a governance token the holders could always vote to speed up distribution.

Three full weeks have been completed so a bit over 400,000 BAL are being distributed now to over 1,000 wallet addresses that have accrued balances, Martinelli said (with a few edge cases for BAL earned by external smart contracts that will receive distributions later).

One facet of Balancer’s distribution worth noting is that so much of it exists off-chain. 

This allows the team to iterate early on, in collaboration with users, so the team can look for ways in which users are gaming the system and write new rules to undermine those strategies.

For example, on Compound, users are staking assets to borrow assets to stake more and borrow more. There is debate about how valuable is a lot of this activity. Similarly, in 2018 the Fcoin exchange rewarded users with a new token just for making trades, which sent wash trading through the roof.

The Balancer community wants to favor the most valuable behaviors. By tracking earnings in an off-chain fashion and iterating on the rules, Balancer’s community can refine incentives as it goes. 

So, when BAL earnings started it was simple: Users earned BAL for supplying liquidity. Depending on what happens next, that may change.

“[The rules] kind of prevent useless liquidity from getting BAL,” Martinelli said. “It’s going to be a very interesting living thing that will evolve.”

These rules are designed to drive volume without directly rewarding volume. One example: Pools that appear to hold two tokens but really don’t – like if one had, say, 50% DAI (the stablecoin generated by deposits on Maker) and 50% cDAI (the token representation of DAI deposited on Compound) – accrue very low BAL rewards.

Read more: Compound Tops MakerDAO, Now Has the Most Value Staked in DeFi

Building off-chain also allows Balancer to work on a case-by-case basis with startups built to integrate with Balancer that didn’t plan for a token distribution, which is something that has come up with Compound. These are the edge cases mentioned above.

One could imagine a world where these rules become so complex they result in other unintended consequences, but that’s why it’s useful to run them off-chain for now. Balancer’s hope is it finds a solid enough niche in the market so the continuous refinement will no longer be necessary and that a simple set of rules can move on-chain.

If this isn’t obvious already, a visit to Balancer site makes it very clear: The dapp can offer the same DEX functionality as Uniswap, because any single Uniswap token-for-token pool is the same as Balancer pool with two tokens set to 50/50, or 1:1, value.

The big question for BAL: Can it catapult Balancer into Uniswap’s place as the AMM of choice on Ethereum? 

Balancer currently has $18 million more in TVL than Uniswap, according to DeFi Pulse, but the question is whether this new form of yield will make it more appealing to liquidity providers for that simple DEX use case.

For now, there’s no incentive to trade on Balancer versus Uniswap, but if BAL accrues value quickly enough the idea of earning trading fees as well as BAL could lead to providers moving funds out of the most prominent AMM and into Balancer.

“I think that token distributions, not tech, will play a key role in how these DeFi protocols compete,” said CoinFund’s Brukhman, who noted Uniswap still has not announced any intention to reward liquidity providers with a stake. “Brand does play an important role, but I think we will see that Balancer builds a very successful brand quickly.”

• DeFi Hedging Startup Opyn Raises $2.16M Seed Round Led by Dragonfly Capital
• Compound Tops MakerDAO, Now Has the Most Value Staked in DeFi

A federal judge ordered Eran Eyal, the founder of the Shopin cryptocurrency, to pay $450,000 in fines last week as a result of allegations he committed fraud. 

The U.S. Securities and Exchange Commission (SEC) alleged in December 2019 that Eyal, an Israeli national, committed a $42 million initial coin offering fraud, claiming he misappropriated at least $500,000 in investor funds. The SEC’s suit came within days of another filed by the New York Attorney General’s office. 

He pleaded guilty to three securities fraud schemes alleged by the NYAG’s office at the time and agreed to turn over $450,000 in an undisclosed cryptocurrency. The SEC was satisfied by this arrangement, according to its press release.

Related: SEC Claims Brothers Lied About Digital Asset Fund Performance, Used Profits for Personal Use

As part of the June 19 judgment, Eyal did not admit or deny the SEC’s allegations. He paid the $450,000 fine in 3,105 ether, according to an SEC press release. He is barred from running public companies and enjoined from participating in any future digital asset securities offerings.

The move brings a close to the SEC’s seven-month case against Eyal. The SEC voluntarily dropped its claim against Eyal’s Shopin through the judgment. 

Immigration and Customs Enforcement deported Eyal to Israel in May, according to Ventureburn.

• Centra Tech Co-Founder Pleads Guilty to Fraud After $25M Token Sale
• Crypto Exchange Owner Admits Laundering $1.8M in Online Auctions Fraud
• Crypto Criminals Have Already Stolen $1.4B in 2020, Says CipherTrace

U.S. tech giant Microsoft and universities in Germany and Denmark have released a paper outlining the potential benefits of blockchain technology in building an international carbon credit market.

The paper, published Monday and titled “Blockchain Application for the Paris Agreement Carbon Market Mechanism – A Decision Framework and Architecture,” specifically looks at the suitability of blockchain and distributed ledger technology for a carbon market mechanism as per Article 6.2 of the Paris Agreement.

The Paris Agreement has the overall aim of bringing a global response to the threat of climate change by keeping global temperatures below a two degrees (35.6°F) rise above pre-industrial levels. Article 6.2 is designed to provide an accounting framework for international emissions-trading schemes, a type of market incentive to reduce the volume of carbon dioxide released into the atmosphere, in a less-centralized, cooperative format.

Related: BlockFi Taps Defense Department, Microsoft Alum as Security Chief

See also: Hyperledger Conference Shows Where Blockchain Can Fight Global Warming

Legacy infrastructure solutions for such a market, such as the mechanisms laid out in the Kyoto protocol of 2005, has limitations due to being based on manual processes within a “centralized and fragmented databank structure,” the paper says. “When only considering legacy database architectures, there is the risk of designing a ‘new’ post‐2020 market mechanism that is already outdated at the date of inception.”

However, the paper’s co-authors, which include Microsoft’s data, AI, blockchain and Azure specialist, Laura Franke, as well as the Technical Universities of Berlin and Denmark, agreed blockchain’s ability to offer information transparency and immutability – meaning data can’t be changed once secured on a ledger – could offer a viable alternative.

“We found that for the bottom‐up and decentralized governance system envisioned in the Paris Agreement, a blockchain application is promising and can yield benefits in enhanced transparency and increased automation,” the paper reads.

Related: Microsoft Releases Bitcoin-Based ID Tool as COVID-19 ‘Passports’ Draw Criticism

Still, blockchain and distributed ledger systems are described as “nascent” technologies that do not have the power to solve all the carbon market problems.

“This new technology is not a panacea for all problems, and the trade‐offs of applying blockchain technology need to be assessed case by case,” the team suggests.

As such, the team further provides a framework for deciding if blockchain would be suitable for a proposed purpose.

See also: Can Bitcoin Survive the Climate Change Revolution?

Still, the use of a blockchain platform “offers clear benefits in terms of interoperability with other emerging technologies, automating the process through smart contracts, enhancing transparency, traceability and auditability, and enhancing system security and trust between Parties,” the authors say.

• PegaSys Ethereum Suite Now Available on Microsoft’s Azure Marketplace
• Tradeshift Proposes Plan to Protect Denmark’s Supply Chains From COVID-19 Crisis

Amid roiling protests over the police killing of George Floyd, activist-coders have launched a decentralized protocol to document police misconduct reports, which are usually difficult to obtain. 

The Police Accountability Now (PAN) Protocol is designed and built on the InterPlanetary File System (IPFS) and the Ethereum blockchain, so it can’t be shut down by any central entity. The aim is for civilians and police officers to file misconduct reports in an anonymous and searchable way. By giving people anonymity, the organizers hope to give officers a way to break the “blue wall of silence,” or police culture that discourages officers from reporting each other. 

“This protocol is meant to enable anyone to create a gateway/front end and let anyone log complaints. If a police officer wishes to report misconduct anonymously, that is better for everyone because, as I understand it, police are supposed to serve their communities and reporting the misdeeds of their colleagues is part of that service,” said the creator of the PAN protocol, who preferred not to give his real name but identified himself by the pseudonym Fred Hampton. (Fred Hamptonwas a Black Panther activist who was killed by law enforcement in 1969.)

Related: ‘Social Money’ Startup Inks Deal With Rapper Ja Rule, Releases Song With Lil B

See also: Monero-for-Bail Project Sees Increased Demand During Protests

Hampton said the idea for the protocol came about because, as a Black man in America, he’d personally had to deal with police misconduct from a very early age and had an intimate relationship with the problem.

Last Tuesday, the protocol launched on the Kovan testnet, a public Ethereum blockchain, covering police departments in the 50 most populous U.S. cities. It includes links to policies and procedures as well as department logos, with more information to come. The project asks users to file Freedom of Information Law requests to get officers’ names, badge numbers and other details to help populate the database. 

Police misconduct reports are hard to obtain for journalists, much less members of the public. Reports are rarely seen by people outside of the police department, and police unions have actively worked to put in place protections that make records hard to access. Some are even destroyed after a certain amount of time has lapsed.

USA Today, in a recent expose, found 85,000 cops who had been investigated for misconduct in the last decade. 

Related: Status Keycard Now Works With Android Mobile Devices

A project from WNYC, a New York City public radio station, found records are confidential in 23 states; another 15 provide limited accessibility. Only 12 states make the records public.

Hampton said projects like the Chicago Reporter’s tracking of misconduct settlements are an after-the-fact documentation of the misconduct. And initiatives like the ACLU’s apps to record police misconduct are not comprehensive.

“The goal with PAN protocol is to have an unstoppable database that is fully transparent and searchable. Anyone, such as police departments that wish to follow the latest executive order or local press, can monitor the chain for reports against their local department and act accordingly,” said Hampton in an email. 

See also: Law Enforcement Data Requests Rose by Almost 50 Percent in 2019, Says Kraken

While some may question the need for a decentralized approach, a previous example of monitoring police misconduct demonstrates why it may well be a necessity. A website launched in 2008 called RateMyCop acted as a review board for thousands of cops across the U.S. When it launched, it contained the names of over 140,000 police officers from more than 500 police departments across the United States. Akin to Yelp, it let users rate and leave reviews on cops. 

“Having a website like that puts a lot of law enforcement, in my eyes, in danger because it exposes us out there,” an officer told ABC at the time. The website did not list the identity of any undercover officers, nor did it contain information like home addresses. 

The goal with PAN protocol is to have an unstoppable database that is fully transparent and searchable.

A few weeks later, the website’s hosting company, GoDaddy, shut it down for “suspicious activity.” The project bounced between other hosting companies, but eventually shut down in 2015. A decentralized protocol would’ve stopped GoDaddy from being able to unilaterally take the website down. 

“Essentially what you’re doing with a website like this is you’re providing an additional disincentive for officers to engage in this conduct,” said Paul Hirschfield, a sociology professor at Rutgers University who is studying the social, political, and legal dynamics that explain why on-duty police violence rarely leads to criminal charges. 

“This is potentially more organized than something like YouTube. It’s saying we could put a whole sort of dossier together on you and if there is a pattern of behavior it would be exposed.”

See also: EU’s Europol: Bitcoin Privacy Wallet ‘Not Looking Good’ For Law Enforcement

But he is concerned about the anonymity of people filing the reports though and the potential for people to make false reports . As it stands today, there is no mechanism to verify or verify reports posted. 

“We leave vetting and verifying as an exercise to the reader,” said Hampton. “We highly encourage someone to build a follow on adjudication process/protocol that verifies/vets any claim put into the database.”

Such are the benefits and pitfalls of a decentralized protocol. 

There are also technical barriers to use that users would need to be overcome. The protocol lays out step by step instructions on how to access and post to the protocol on it’s website. Doing so involves getting a privacy protecting email address such as Protonmail, signing up for a free github account, claiming some free kETH, and if possible, use a VPN, or virtual private network. 

Hampton said he hopes that other people build on this protocol, making it easier for anyone to log complaints. 

“I’d recommend that they read the instructions carefully and do their best to educate themselves on the associated technologies before proceeding,” said Hampton. “Luckily no real money is at stake for them to report.”

• Money Reimagined: Ethereum’s Renaissance Creates an Opportunity – And a Major Test
• OpenZeppelin Discloses ‘High Severity Vulnerability’ in DeFi Wallet Argent

For the fifth straight week, bitcoin is locked in a low-volatility squeeze similar to one seen ahead of a sudden $2,350 rally in October 2019.

While the cryptocurrency has leapt over 4% in the past 24 hours, prices still remain trapped between $9,000 and $10,000. In fact, the top cryptocurrency by market value has spent the better part of the last two months trading in that narrow range, according to CoinDesk’s Bitcoin Price Index. 

Due to the persistent lack of clear directional bias, the Bollinger bandwidth, a price volatility gauge, has declined to 0.08, the lowest level since mid-October 2019.

Related: First Mover: The Logic Behind Three Arrows’ $200M Grayscale Bet

Bollinger bands are placed two standard deviations above and below the 20-day moving average (MA) of price. Meanwhile, the Bollinger band width is calculated by dividing the spread between the volatility bands by the 20-day MA. 

Bitcoin witnessed a bull-bear tug of war in the range of $7,700–$8,600 for over three weeks, starting from Sept. 26, 2019 (above right). As volatility fell, the Bollinger bandwidth declined to 0.08 on Oct. 17. 

A prolonged period of low-volatility consolidation often paves the way for a big move in either direction, according to technical analysis theory. That’s what happened in four days after Oct. 17. The cryptocurrency suffered a minor drop from $8,000 to $7,300 on Oct 22-23 only to rise sharply to $10,350 by Oct. 26. Essentially, prices rallied by $2,350 in the nine days following the volatility gauge’s drop to 0.08.

Over the past two years, there have been a number of instances where a below-0.10 reading on the bandwidth indicator marked a sudden explosion in volatility. 

Related: Market Wrap: Bitcoin Hits $9.6K as Bullish Crypto Sentiment Returns

The sudden upswings in prices seen in early January 2020 and April 2019 were both preceded by a drop in bandwidth to below 0.10.

It’s important to note, of course, that prolonged consolidation only promises big moves, and does imply anything about the ultimate direction of prices. In the past, bouts of low-volatility trading have ended with big price slides, too. 

So, if history is a guide, bitcoin may well break out of its restricted trading range over the next few days. 

In traditional markets, options traders often take “straddles” in a bid to profit from an impending strong directional move following a dull trading environment. The non-directional strategy comprises buying both calls (bullish bets) and puts (bearish bets). Goldman Sachs, for example, likes straddling when stock volatility is low. 

While the future direction of prices is uncertain, with central banks taking unprecedented steps to counter the coronavirus recession with massive stimulus packages, the fundamentals may be aligned in favor of a big bullish move.

Further, investors look to be adding bets to position for a rally in the cryptocurrency, according to options market data. 

“The Chicago Mercantile Exchange appears to be stepping up its options presence as we’re seeing some larger orders come into the market with mainly call buying from 11k-13k 1-3 months forward,” said Chris Thomas, head of digital assets at Swissquote Bank. 

Disclosure: The author holds no cryptocurrency assets at the time of writing.

• Liquidity on Bitcoin Perpetuals Exchange FTX Catches Up to Industry Leader BitMEX
• Bitcoin News Roundup for June 22, 2020

The cryptocurrency investment fund Three Arrows disclosed earlier this month that it had become the biggest investor in the Grayscale Bitcoin Trust, after buying about $200 million of shares in the publicly traded bitcoin fund for a stake of about 6.5%.

“Grayscale is one of the most professional and beneficial companies in the crypto ecosystem,” Three Arrows CEO Su Zhu told CoinDesk at the time.

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Related: The Last Time Volatility Was This Low Bitcoin Went On to Rally by $2K

But a deeper look at the trade’s details reveals what appears to be a clever way of scooping up extra profit from what otherwise might be a straight bet on bitcoin – by exploiting differences in what institutional and retail investors pay for the fund’s shares.  

The strategy of the trade comes from the dual ownership structure of the Grayscale trust, which is essentially a single-asset fund focused on bitcoin, and often referred to by its stock-trading ticker, GBTC. 

Big institutional investors can either create new GBTC shares or buy them at a “net asset value” that’s marked daily, based on the value of the underlying bitcoin. They’re required to hold the shares for at least six months, a waiting period that was reduced from 12 months earlier this year.

Retail buyers, on the other hand, can only buy at the market price for publicly traded GBTC shares. And that price is typically about 20% higher than the value of the assets in the fund: the current 52-week average being about 23.5%, according to Bloomberg.

Related: Market Wrap: Bitcoin Hits $9.6K as Bullish Crypto Sentiment Returns

Grayscale is controlled by Digital Currency Group (DCG), the cryptocurrency-focused investment firm that also owns CoinDesk. 

It’s unlikely that savvy or institutional investors are buying the shares at the elevated public-market price, according to 21Shares, a European rival to GBTC in the business of providing exchange-traded products, including some linked to bitcoin.

“The institutional and accredited investors that create GBTC are able to resell at large markups,” 21Shares wrote in a newsletter earlier this month. 

So for institutional traders like Three Arrows, there’s an opportunity to buy GBTC shares, hold them for six months, and then exit with a nice and easy profit by flipping them to retail buyers at the public-market price. It’s essentially like buying bitcoin, with a high probability of capturing a 20% profit when the trade is unwound. 

Such back-of-the-envelope projections assume that the premium holds steady. But it does fluctuate: Just this year, the premium has ranged from 41.3% on February 18 to as little as 7.9% on April 20. 

But in May 2017, the premium reached 133% – meaning the public-market price represented roughly double the value of the underlying bitcoin. The premium had briefly gone into negative territory not two months before.

Su Zhu didn’t respond to First Mover’s requests for additional comment.

The trade isn’t riskless. GBTC shareholders remain exposed to bitcoin’s occasionally wild volatility. But the GBTC premium, assuming it holds up, gives the institutional investors a cushion of downside protection. 

Even if, after six months, the bitcoin price were 15% below the purchase price, an institutional investor could still theoretically sell the shares on the open market at a profit, assuming the premium held constant.

Of course, there’s no obligation for institutional investors to sell immediately after the six-month holding period ends, but with a 2% annual fee for GBTC, institutional investors could save money by just holding bitcoin. 

The biggest risk of the trade might actually come from the possibility that the premium itself narrows or disappears altogether. Competition might cause that to happen, since retail buyers would ostensibly shop around for the bitcoin fund or exchange-traded product that comes with the lowest premium. 

There are at least four European companies already offering retail investors similar bitcoin-focused products. Earlier this month, the U.S. asset manager Wilshire Phoenix filed to launch a new “Bitcoin Commodity Trust,” which would run along the same lines and compete with GBTC.

“It’s exciting to see additional proposals for financial products to come to market,” Rayhaneh Sharif-Askary, Grayscale’s director of investor relations and business development, told CoinDesk.

More products coming to market gives retail investors more choice: The buyers would be theoretically less willing to overpay for bitcoin via GBTC shares if they had alternatives. That could cause the premium to shrivel, foiling the ability of institutional investors holding GBTC shares to sell at an easy mark-up. 

It might be a question of timing. With more than $3.5 billion in assets under management, the Grayscale Bitcoin Trust is unlikely to lose its target market overnight – especially since U.S. regulators have thus far been loath to approve an application for a bitcoin exchange-traded fund. 

The big bet by Three Arrows could be one of two things: either the fund is assuming the GBTC premium has a longer shelf life, or this bet is a final go at the “Grayscale Flip” before premiums decline in the face of growing competition.

BTC: Price: $9,590 (BPI) | 24-Hr High: $9,775 | 24-Hr Low: $9,424

Trend: Bitcoin is resting near $9,600 at press time, having activated twin bullish cues with a 4% jump on Monday. 

The rise meant the leading cryptocurrency by market value printed a UTC close above the 50-day moving average (MA). That has revived the short-term bullish bias and opened the doors to a re-test of $10,400, according to Adrian Zdunczyk, a chartered market technician and CEO of trading community The BIRB Nest.

Supporting the case for stronger gains is a falling wedge breakout on the 4-hour chart. The pattern indicates the pullback from the June 1 high of $10,429 has ended and the broader uptrend has resumed.

“Breakout target on the upside is located around the $10,700s,” said Zdunczyk. 

Further, “hash ribbons,” an indicator used to gauge the health of the miners powering bitcoin’s network, is now moving towards a buy signal. A confirmation is likely over the coming weekend, tweeted Charles Edwards, Digital Asset Manager at Capriole Investments.

“May be this is the last hash rate accumulation zone for a long time,” wrote Edwards. Hash rate refers to the amount of mining power dedicated to mining blocks on the blockchain.

Many analysts believe that prices follow hash rate. In the past, the hash ribbons indicator has marked major trend reversals. For instance, the indicator flashed a buy signal at the end of 2018 and the ensuing bullish move in bitcoin’s price topped out near $14,000 at the end of June 2019. 

Overall, both technical indicators and fundamentals suggest the path of least resistance for bitcoin is to the higher side. However, stronger evidence of the bullish breakout would be a convincing move above $10,000. The bulls have failed multiple times in the last two months to keep gains above that psychological hurdle.

 

• Liquidity on Bitcoin Perpetuals Exchange FTX Catches Up to Industry Leader BitMEX
• Bitcoin News Roundup for June 22, 2020

A Financial Action Task Force (FATF) meeting this week is proving to be a popular time for industry players to launch compliance-minded tech solutions.

One such startup, Notabene, announced Tuesday a “trust framework” for crypto exchanges, or, in FATF parlance, virtual asset service providers (VASPs). The firm’s know-your-customer (KYC) infrastructure stack is also designed to reach beyond the readily identifiable world into jurisdictions where there is little or no regulation of financial services.

There has been a race to develop anti-money laundering solutions that will bring crypto in line with the rest of the financial system while still sticking to the pseudonymous spirit of crypto as much as possible. Since the FATF first extended its remit to include crypto back in October 2018, this hotbed of innovation has spawned a number of technical solutions and a messaging standard.

Related: In Banking First, ING Develops FATF-Friendly Protocol for Tracking Crypto Transfers

Read more: Crypto Firms Establish Messaging Standard to Deal With FATF Travel Rule

Like the other players in the space, Notabene is focused on the so-called “Travel Rule,” which requires financial institutions participating in a transaction to exchange relevant beneficiary and originator KYC information.

Notabene was built by a group of co-founders and technical leads from the ConsenSys-backed uPort digital identity project. The solution uses elements of decentralized identity management to link blockchain addresses to verified profiles, as well as maintaining a useful directory of VASPs.

Notabene is really tackling two aspects of the travel rule, CEO Pelle Braendgaard explained. 

Related: Tezos and Algorand Latest to Integrate Tech for Anti-Money Laundering Compliance

“Notabene is a hosted Travel Rule solution so you don’t have to go and spin up your own node and do your own integration. We handle that with a simple API and dashboard to help businesses comply easily,” Braendgaard said.

Notabene is “protocol-agnostic,” and gives businesses the option to support one or more protocols, he said. The team has been working in tandem with Switzerland’s OpenVASP consortium and the product will be compatible with consortia efforts like the recently launched PayID backed by Ripple, and other group-led solutions in the pipeline.

Read more: Inside the Standards Race for Implementing FATF’s Travel Rule

The second part encompasses a broader sweep of crypto due diligence, or “know your VASP,” that Notabene is solving for by leveraging the team’s experience with decentralized identifiers (DIDs) and the VASPs.id directory – which will follow soon after this week’s product launch, said Braendgaard.

“This will help figure out which VASP is using which provider and what their regulatory status is,” Braendgaard said. “Say you get a request coming in, then immediately you can see it came from Bitcoin Suisse, for example, and they’re regulated by FINMA so I can trust them and start setting up compliance rules for that.”

Indeed, the enthusiastic response from the industry in terms of Travel Rule solutions actually creates a fundamental complexity problem, said Malcolm Wright, head of the AML working group at Global Digital Finance.

A growing crowd of Travel Rule solution providers is proposing to issue VASP codes or something like an IBAN (International Bank Account Number) for VASPs. An originator VASP, particularly if it’s a smaller firm, may use three or four providers, said Wright, then the receiver may also use more than one solution. This then leads to friction because nobody knows what anyone else is using.

Wright suggests something like a Legal Entity Identifier (LEI), which is used in conjunction with market regulation like MiFID II, whereby a VASP code would be issued to all, abstracting this complexity away from the solution providers.

“Going down that road of a global list of VASPs is great, but it has to be industry-wide,” said Wright. “So, regardless of whether it’s OpenVASP or any other protocol, it will need to be separate, and then you have to convince all of the other protocols and all of the VASPs to get on board and get themselves issued with one of those codes to actually make it a viable thing. In my opinion, the only way to solve it is with a tiny fraction of centralization.” 

The creators of Notabene have the first-hand experience of being shut out of the financial system because of a lack of regulation. 

Back in 2013, a bitcoin app Braendgaard had built in Kenya was clamped down. This was because M-Pesa, the burgeoning mobile money run by Vodafone/Safaricom and overseen by the Central Bank of Kenya, complained that crypto was too obscure to be allowed in the country (some readers may recall M-Pesa tried the same thing with BitPesa a couple of years later).

Read more: Kenyan Court Upholds Bid to Keep Bitcoin Startup Off M-Pesa

“We know what it feels like to be shut down because of not being able to prove the source of funds,” said Braendgaard. “Where there isn’t a regulated framework and regulators don’t know what to do with you, the easiest thing is just to say no.”

That said, the FATF guidance last year understood there has to be non-custodial, or “un-hosted” wallets, but that any VASP that performs transactions with one of these non-custodial wallets need to know who that wallet is.  

“This is where our ultimate beneficial ownership analysis of blockchain accounts comes in,” said Braendgaard. “It’s a simple ownership proof of an account and that is actually what the Singaporian and Swiss regulators already expect people to do.”

The vast majority of VASPs located in places without any established regulations are actually trying their best to be compliant, said Braendgaard.

“VASPs I’ve spoken to in Latin America and Africa, where there aren’t really e-regulatory rules yet, are all doing KYC and using blockchain analytics for AML and doing their best to be compliant with the Travel Rule.”

• LocalBitcoins’ Volume Holds Steady Despite Stricter Compliance Procedures
• Crypto ‘Gray’ Markets Could Be Unintended Consequence of FATF Travel Rule

ING Bank, the Netherlands-based lender with a penchant for blockchain, has developed a protocol to assist with the Financial Action Task Force’s Travel Rule requirement for crypto exchanges and firms dealing in digital assets.

The solution initiated by ING – currently dubbed the Travel Rule Protocol or TRP – has also been backed by Standard Chartered Bank, Fidelity Digital Assets and BitGo, plus a gaggle of other familiar firms from the crypto space.

The FATF’s recommendation in October 2018 to include virtual asset service providers (VASPs) within the scope of its anti-money laundering mandate has spawned a raft of technical solutions and a messaging standard. 

Related: Identity Startup Notabene Launches Exchange Tool for FATF Travel Rule Compliance

However, this is the first time any bank has been involved in a crypto Travel Rule solution.

“ING, as an innovation leader on blockchain/DLT, sees increasing opportunities with regard to Digital Assets on both asset-backed and native security tokens,” Hervé Francois, Blockchain Initiative Lead on Digital Assets at ING, told CoinDesk in an email. “With a regulatory first approach, we are actively involved in different working groups to support standardization of this emerging ecosystem and ultimately pioneer mass adoption.”

Read more: Inside the Standards Race for Implementing FATF’s Travel Rule

The institutional focused TRP was also partly backed by the InterVASP working group which released the IVMS-101 standard, a way VASPs can agree on the format of the message payloads their solutions will transfer.

Related: Tezos and Algorand Latest to Integrate Tech for Anti-Money Laundering Compliance

According to a TRP document seen by CoinDesk:

“We are proposing a collaboratively-managed infrastructure that offers VASP members a way to query for the existence of address entries. An address entry is defined by, among others, an LEI [Legal Entity Identifier] and public key information.”

Standard Chartered and Fidelity did not return a request for comment by press time.

A source close to ING said the bank started looking at solutions to the FATF’s “Recommendation 16” for digital assets last year. 

The plan was to “get an understanding of where the industry is going and see what the opportunities would be for banks when they can play in that space,” said the source.

“To be clear, ING is not looking at doing anything with crypto assets and payment tokens like bitcoin,” said the source. “The focus, for now, is more on security tokens and things like that.”

The protocol features a RESTful (Representational State Transfer) API, which is basically a way of transferring data from one place to another on the internet. Participating VASPs must be able to publish address entries; by doing so they associate an identity and data linked with that address entry, the paper says.

“You could compare it more to SWIFT,” said the banking source, referring to the interbank messaging system that’s been in place since the 1970s. “It could be used for private purposes or be open-sourced code and be adopted by people as a way to exchange that transaction information.”

ING is known to be highly innovative when it comes to blockchain, getting deeply involved in privacy-enhancing tech like zero-knowledge proofs. But this has always been on the enterprise side of things. 

Read more: ING Bank Is Bringing Bitcoin ‘Bulletproofs’ to Private Blockchains

The takeaway from this Travel Rule “experiment” is that banks like ING and U.K.-based Standard Chartered Bank are quietly edging closer towards the world of crypto and regulated virtual asset service providers (VASPs). 

BitGo CTO Ben Chan said via email:

“BitGo said his company is committed to providing clients with a single solution for travel rule compliance and will be integrating multiple protocols in order to achieve this solution. We support the TRP solution because it is open, transparent and simple, allowing us to provide a solution to clients quickly and satisfy the FinCEN Travel Rule requirements.”

Other participants in the TRP working group include Crypto Broker AG, Metaco, 21 Analytics and OSL / BC Group, according to the paper.

Pelle Braendgaard, CEO of recently launched FATF Travel Rule solution Notabene, said his team would be supporting ING’s TRP solution.

“Judging by the members, the protocol will probably become important,” said Braendgaard.

• Custody Battle Pits Institutional Boomers Against Crypto Upstarts
• Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

UnionBank of the Philippines has built out a network it says will make it easier for people without access to financial services to receive money from abroad.

The bank – the country’s tenth largest by assets – announced on Tuesday that it’s launching 11,000 cash-out remittance counters across the archipelago, including in rural or remote areas where citizens may have access to banking services. The counters provide points of contact with the bank’s financial services ranging from smartphone app to full remittance hubs.

For the effort, UnionBank said it was extending an existing partnership with Coins.ph, a regulated Philippines-based company using a blockchain platform to provide remittances and other payments services, as well as a cryptocurrency exchange. Coins.ph also has relationship with Ripple and uses the XRP cryptocurrency as a payments rail enabling Filipinos to quickly send and receive funds.

Related: Singapore Ride-Sharing App Lets Customers Pay With Bitcoin

Dragonpay and other local remittance firms, Cebuana Lhuillier, LBC, PeraHub and Palawan Express, are also providing services for UnionBank’s new counter network.

“With the onset of this pandemic, it has become crucial that our products and services quickly adapt to the challenges presented in this new digital normal,” UnionBank president and CEO Edwin Bautista said. “This cash-out service is just one way for UnionBank to demonstrate its commitment to financial inclusion as we continue venturing forth in tech-ing up the Philippines.”

See also: Philippines Banks to Use Visa’s Blockchain Payments Platform

Both Coins.ph and UnionBank are regulated by the Bangko Sentral ng Pilipinas (BSP) – the Philippines’ central bank.

Related: BitPay Launches Prepaid Crypto Mastercard for US Customers

• National Science Foundation Funds Research Into Crypto Dollars
• Coca-Cola Distributor Offers Bitcoin Payment Options for Aussie Vending Machines

The suicide of a 20-year-old Robinhood trader should be a wake-up call for cryptocurrency exchanges that put revenue above customer protection, said a U.S. exec at one of the world’s largest such venues.

Many exchanges were designed to encourage users to trade as frequently as possible, often with money they don’t have, and resembled casinos more than responsible trading platforms, said Joel Edgerton, chief operating officer at bitFlyer U.S.

“There are too many exchanges that are run like casinos and exploit their customers,” he said.

Related: Liquidity on Bitcoin Perpetuals Exchange FTX Catches Up to Industry Leader BitMEX

Edgerton spoke to CoinDesk just over a week after a 20-year-old student, Alexander Kearns, killed himself after falsely believing he had got himself into more than $700,000-worth of debt by trading complex options contracts on Robinhood – an app-based trading platform with a young, retail-oriented following.

It later came to light that the negative balance was a temporary phase in between contract execution – i.e. Kearns wasn’t actually in the red. But Robinhood has come under heavy criticism for allowing amateur traders to access such complex instruments without safeguards to avoid confusion and, in this case, tragedy.

Late last week, Robinhood announced a $250,000 donation to the American Foundation for Suicide Prevention and vowed to add safeguards to its platform, such as tightening eligibility requirements for complex options trades.

See also: The Chad Index Versus Doomer Internet Money: The Breakdown Weekly Recap

Related: PayPal, Venmo to Roll Out Crypto Buying and Selling: Sources

While Binance’s CEO Changpeng “CZ” Zhao said in response last week that his exchange already implemented a “Responsible Trading” feature, Edgerton, a former head of operations at the insurance arm of French bank BNP Paribas, said the exchange was trying to shield itself from further criticism.

“I would say CZ’s response was mercenary. He is using a kid’s death to pitch his company and Binance is actually part of the problem,” he explained. The platform gets users hooked and their anti-addiction policy “highlights the fact that they built the product to be addictive,” he said.

Any crypto exchange that offered 125x leverage indiscriminately – which Binance began offering in October – isn’t serious about customer protection, Edgerton continued. BitFlyer, which opened a U.S. office in 2017, says it already restricts access to leverage and can flag or even ban users that display troubling trading patterns. The Tokyo-based exchange ranks ninth globally, according to CoinGecko, and is the market leader in Japan.

It was reported last summer a Chinese bitcoin trader killed himself after a 100x position on derivatives exchange BitMEX was liquidated, a loss of about $16.4 million in a single trade. Around the same time, an anonymous student trader said he was having suicidal thoughts after losing thousands of dollars on several leveraged trades on the same platform.

Arthur Hayes, BitMEX’s CEO, has previously defended his business, arguing that in a free market, customers can always move onto other platforms if they worry about being exploited or defrauded.

When contacted by CoinDesk, Binance declined to comment. BitMEX hadn’t responded to a similar request by press time.

See also: BitMEX Sees Biggest Short Squeeze in 8 Months After Bitcoin Surge

Cryptocurrency exchanges have more of a role to play in customer protection, Edgerton said. Regulators worldwide cap leverage for retail investors, both in crypto and in traditional assets, such as equities. Japan’s Financial Services Agency (FSA) halved maximum leverage down to two times the value of the deposit this year.

As such, there’s no reason an exchange should offer 100x leverage on top of highly volatile assets without first checking whether the investor knows what they are doing and that they have the income to cover that level of exposure, argued Edgerton.

“We have a responsibility to provide products that are suitable to our clients,” he added. The Robinhood suicide “is what happens when companies focus on tech and profits rather than doing the right thing for their customers.”

• Bitcoin SV President Hits Out at Binance as Former Critic Becomes Top Miner
• Delta Exchange Launches Crypto Interest Rate Swaps

KPMG has built a suite of tools designed to help both traditional financial companies and fintech startups provide tightly managed crypto-asset services.

Targeting institutional clients, the new KPMG Chain Fusion product lets customers manage their data in compliance with regulations around financial reporting, security and processing needs. The suite allows these customers to collect and organize data from both traditional systems as well as blockchain databases, the company announced Monday.

Sam Wyner, director and co-lead of the Big 4 auditor’s Cryptoasset Services team, told CoinDesk that his team had been working on the project for about a year, building the actual suite of tools since February.

Related: Polychain Capital, Square Crypto’s Steve Lee Invest in Bitcoin Broker’s $5.7M Seed Round

“It’s not unusual for a bank to have tens of systems … and crypto companies have a similar problem where for their blockchain-based systems, they’re fundamentally different, the infrastructure behind them is fundamentally different from what’s happening in traditional systems,” he said. “The same problem that happens is ‘how do you connect all your blockchain based systems to traditional ones, and do that in a way that the organization is trying to operate in?’”

Chain Fusion’s core service essentially creates a standardized data model for all transactions that an organization conducts, he said, regardless of whether they’re an on-chain/off-chain blockchain transaction or a traditional fiat one.

This allows these entities to run “advanced analytics” on the data. To demonstrate this capability, KPMG built multiple use case modules based around actual feedback from companies in the industry, he said.

One example is ensuring that the data on a blockchain matches the information recorded on an entities books, he said.

Related: IBM, Merck Declare FDA-Backed Drug Tracing Blockchain a Success

“If you know you control an address and you think you have one bitcoin on it and you look at the address on the public blockchain, do you have one bitcoin or are you running a fractional reserve?” he said.

Other challenges included finding ways of being able to pull data from databases, including blockchain information, and still be able to run queries.

“We developed it all in a way that we were able to incorporate different types of technology providers and market data and infrastructure providers,” Wyner said.

Wyner declined to say how many companies have already begun using Chain Fusion, saying only that KPMG was discussing the product with “multiple clients or potential clients.”

While he wouldn’t say that KPMG’s name or reputation by themselves necessarily help companies become more comfortable dipping their toes into crypto-asset management, he did note that risk is not new in the financial services industry, and process risk and control are two areas KPMG is comfortable with.

“At least in my career this is one of the first times I’ve really thought of something and carried it all the way to this point with the help of a lot of people on this team, it would never have been possible without the support of our team,” Wyner said. “It’s an exciting time, I’m excited to continue to speak about chain fusion with all of the companies.”

• Global Accounting Firm KPMG Partners with Microsoft, R3 on Telecoms Blockchain
• Retail Giant Walmart Enters Second Drug-Tracking Blockchain Trial

The full life of a digital asset-backed security (ABS) on a blockchain can be settled in 40 minutes versus the 10 to 14 days it would take in a paper-based setting.

That was the outcome of a pilot first revealed June 11 by mutual fund giant Vanguard in partnership with blockchain startup Symbiont, Citi, BNY Mellon, State Street and an unnamed ABS issuer.

The goal of the project: to see if the decades-old Wall Street practice of repackaging contractual debt – be it car loans, mortgages or credit card debt – into bonds sold to investors, known as securitization, can be simplified.

Related: Novogratz: Galaxy Digital Will ‘Suck’ if Bitcoin Fails to Become an Institutional Asset

“The overall goal is to make the car more affordable to more people,” Warren Pennington, the head of Vanguard’s Investment Management FinTech Strategies Group, told CoinDesk in an interview. “Give ABS issuers more liquidity so they can reinvest in their business, in new car loans, and help make the market for cars more efficient.”

Read more: Mutual Fund Giant Vanguard Wraps Phase 1 of Digital Asset-Backed Securities Pilot

While the pilot didn’t involve a real-world transaction, Vanguard oversaw a process that included several moving parts: packaging car loans into a special purpose entity that houses them, pricing through multiple different parties and an investment bank, working with a trustee to take care of the entity and the custodian to hold the asset and providing information to investors who want to buy or sell based on that information.

In a real-world transaction, the ABS issuer would figure out how to package loans based on loan level detail, and to work with investment banks on temporary and permanent financing. Lawyers would also have to oversee the creation of the entity.

Related: Binance Launching Crypto Exchange in the UK

“Every step of the way it’s very manual, it’s very disjointed,” Pennington said. “There’s a loss of information along the way. Investors would like to be able to see as much of the detail as they can behind the ABS.” 

Smith said Citibank acted as the investment bank, taking the issuance and distributed it directly to the investor, which was Vanguard. The custodians in the pilot, BNY Mellon and State Street, allowed smart contracts to execute autonomously and used a multi-signature approach to confirm the transfer of the instrument. Each of the financial institutions also operated a node on Symbiont’s Assembly blockchain to ensure consensus. 

Overall, phase one of the pilot included creating a new digital ABS issuance and recording the entire lifecycle of the security. Symbiont doesn’t tokenize securities; rather, it focuses on issuing securities that are native to blockchain. 

When the next ABS issuer that Symbiont is integrated with is ready to issue a security, the company plans to go into production with the product, said Symbiont CEO Mark Smith.

Read more: Vanguard Developing Blockchain Platform for $6 Trillion Forex Market

“The limiting factor at the moment is the cadence of the issuer,” he said. “This particular issuer may not have another issuance this year. We have other issuers in the pipeline and the speed in which we can get them onboarded and to be able to do a live transaction will be dependent on their ability.”

While Vanguard is one of the major asset managers working with Symbiont, Smith couldn’t comment on whether the mutual fund giant or another financial institution would be leading the live transaction.

Starting with ABS issuance allows Vanguard to target over-the-counter (OTC) markets and also eventually work towards a future of digital loans, Pennington said.

“There’s an opportunity to extend this out to the origination of the actual loan,” he said. “Then it’s a matter of collecting the digital loans and wrapping them into an entity.”

Vanguard has been working with Symbiont since 2016 and first put the startup’s Assembly blockchain into production in February 2019 in a data distribution project for passive index rebalancing, Smith said. (Assembly is powered by the BFT-SMART consensus algorithm, a solution the company says is more private and has faster transactions times than the Bitcoin blockchain.) The project allows index data to move instantly between index providers and market participants. 

Symbiont is also developing a trading platform with Vanguard to lower transaction costs for the $6 trillion currency market. (The digital ABS pilot was the first time Symbiont had worked with State Street, a custodian bank that’s currently researching digital asset custody but has pivoted from re-plumbing the back office with distributed ledger technology.)

In the digital ABS pilot, the participants did a “shadow issuance” of a real asset-backed security, Smith said. 

In past efforts prior to this month’s announced pilot, Vanguard had already created a digital ABS on blockchain and moved cash between participants on-chain.

• Mutual Fund Giant Vanguard Wraps Phase 1 of Digital Asset-Backed Securities Pilot
• Custody Battle Pits Institutional Boomers Against Crypto Upstarts

Decentralized lending platform Cred has welcomed former National Security Agency computer scientist Bethany De Lude and Western Union executive Daniel Goldstein as chief information security officer (CISO) and chief technology officer (CTO) respectively, the firm announced Monday.

Dan Schatt, Cred’s chief executive, told CoinDesk the crypto community stands to benefit a great deal from a financial infrastructure that supports the banking of tokens. That the new executives were willing to come in from the traditional financial sector is indicative of an overall maturing of the blockchain community, and a growing consensus that the technology is here to stay, he claimed. 

“You really feel like the tides are turning with people feeling like they don’t have to take such a huge career risk to come into this space,” Schatt said. 

Related: Bitcoin Mining Pool Poolin Partners With BlockFi to Expand Crypto Lending Service

Prior to joining Cred, De Lude served as the first CISO of the Federal Judicial Center, the research arm of the U.S. judiciary, and held security leadership roles at the NSA and multinational accounting firm PWC. Most recently, she was the CISO at the Public Company Accounting Oversight Board (PCAOB), a non-profit tasked with supervising auditors for publicly traded companies. In a statement, De Lude said she was eager to bring her knowledge of information security “to help Cred build a world-class security organization” as it continues to grow.

“Cred was really built as an infrastructure to bridge the divide between the crypto community and mainstream finance. And that’s what we’ve done. I think that’s what’s so attractive to people like Bethany, because we’re helping to bridge understanding across and on multiple fronts,” Schatt said. 

See also: Crypto Lender Cred Is Offering Investors 10% Interest With Spencer Dinwiddie Partnership

According to Schatt, Cred wanted Daniel Goldstein in the role of CTO with specific technical innovations in mind. In Schatt’s view, increasingly, people will be holding their crypto assets in noncustodial wallets. 

Related: BlockFi Hires Credit Suisse, Prudential Execs to Drive Global Expansion

“That’s one area that we’re putting a tremendous emphasis on and it’s one area that [Goldstein] knows very well having spent a lot of time building microservices and also building his own crypto assets,” Schatt said. 

Before joining Cred, Goldstein served as vice president of digital engineering at Western Union. He also held senior management roles at cybersecurity firm Symantec and Emergent Technology Holdings, a company that facilitates global commerce in emerging markets through innovative technologies. According to a press statement by Cred, Goldstein led the development of Emergent Technology’s Responsible Gold supply chain solution, a blockchain application that tracks gold from mining to vault and its G-Coin digital token. 

“I’m thrilled to support Cred’s mission of providing more equitable and inclusive financial and services utilizing the best of blockchain and traditional fintech,” Goldstein said in the press statement. 

Cred is a global financial services platform with customers in 190 countries. Last year, Cred partnered with a number of crypto exchanges including Binance in a bid to open up its operations to more markets and users. According to Schatt, Cred’s core philosophy is to create equitable and inclusive financial services surrounding credit.

“You can’t build a company like that and believe in that unless you believe in doing it internally as well,” Schatt said. 

• Genesis CEO Details ‘Black Thursday’ Chaos in Q1 Lending Report
• Crypto Lender Cred Is Offering Investors 10% Interest With Spencer Dinwiddie Partnership

Bitcoin’s price is rallying and traders also increasingly see investment opportunities on the Ethereum network. 

Bitcoin (BTC) was trading around $9,563 as of 20:00 UTC (4 p.m. ET), gaining 2.5% over the previous 24 hours. 

At 00:00 UTC on Monday (8:00 p.m. Sunday ET), bitcoin was changing hands around $9,298 on spot exchanges such as Coinbase. It began making gains around that time, appreciating 3% to over $9,600. The price is now well above its 10-day and 50-day moving averages, a bullish signal for market technicians.  

Related: Liquidity on Bitcoin Perpetuals Exchange FTX Catches Up to Industry Leader BitMEX

A jump in the bitcoin market Monday after days in the doldrums mirrors the longer-term outlook of Fairlead Strategies’ Katie Stockton, who sees an upward trend for the world’s largest cryptocurrency by market capitalization. “Bitcoin remains wound up in its consolidation phase, a reminder why it’s a good idea to await breakouts [and] breakdowns,” Stockton told CoinDesk. “A breakout continues to appear more likely than a breakdown from an intermediate-term momentum perspective and would occur above $10,055 in our work.”

A “consolidation phase” is a term used by technical analysts to mark a period of indecision by traders overall. In fact, according to data from aggregator Kaiko, volatility of the top free-floating cryptocurrencies bitcoin, ether and XRP has trended down since June 7. 

“Volume has been muted and volatility is getting coiled,” said Neil Van Huis, director of institutional trading at liquidity provider Blockfills. 

Read More: Bitcoin Spot Volumes Are Weak While Options and DeFi Strengthen

Related: Bitcoin News Roundup for June 22, 2020

Despite the pop Monday, Van Huis continues to expect selling pressure to affect the bitcoin market due to competition in the mining sector. “If we start to make a move up, it could really be interesting as the race for mining equipment comes into focus. This will play into access to financing or sale of bitcoin to cover new costs,” he said.  

“This also could bring some altcoins into focus if bitcoin is battling mining woes,”  Van Huis added. 

Interestingly enough, bitcoin dominance is down from its 70.5% high in January 2020 and has flattened during June. This suggests Van Huis’ thesis that alternatives, such as assets on the Ethereum network, might be of greater interest to traders in June. 

Ether, the second-largest cryptocurrency by market capitalization and which powers the Ethereum network, is also jumping today. Ether was trading around $242 and climbed 5.7% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Decentralized lender Compound and the appreciation of its COMP token is fueling speculative interest, and may be stretching the Ethereum network to its limits and increasing gas prices. On Jan. 1 of this year, the average Ethereum network gas price for running smart contract code was 11.6 gwei [each gwei is worth 0.000000001 ETH). By June 22 that number jumped 157% to 29.9 gwei, with decentralized finance (DeFi) attracting the interest of many traders. 

Read More: The Zcash Privacy Tech Underlying Ethereum’s Transition to Eth 2.0

“The Compound coin hype lately is pushing the on-chain gas price,” said Peter Chen, a trader at Hong Kong-based OneBit Quant.

Chan says the demographics of traders on DeFi is shifting and the increase in tether stablecoin usage is a big factor pointing to the change. “We’ve seen a significant increase of USDT trading volume,” he told CoinDesk. “It’s suggesting Asian traders are now pouring into the DeFi market; the majority was U.S. and Europe before.”

Read More: Tether’s Supply on Compound Jumps to Over $224M in a Week

Digital assets on CoinDesk’s big board are all in the green Monday. The cryptocurrency winners on the day include iota (IOTA) up 4.1%, bitcoin sv (BSV) climbing 3.8% and qtum (QTUM) jumping 3.6%. All price changes were as of 20:00 UTC (4:00 p.m. ET).

Read More: XRP Just Isn’t Exciting Crypto Traders This Year

In commodities, oil is jumping Monday, up 3.1% with a barrel of crude priced at $40.60 at press time.

Gold is trading positively, up 0.71% at around $1,755 for the day. 

Read More: Bitcoin Sees Small Gain as Gold Rallies to One-Month High

In Asia, the Nikkei 225 of publicly traded companies in Japan slipped 0.18%. Transportation and real estate stocks left the index in the red. 

In Europe the FTSE 100 index slipped 0.76%. Increases in coronavirus cases led to shares in travel stocks lower Monday. 

The U.S. S&P 500 index gained 0.60%. Shares in tech and retail were higher while travel stocks fell.

U.S. Treasury bonds climbed Monday. Yields, which move in the opposite direction as price, were up most on the two-year bond, in the green 2.2%.

• DeFi Hedging Startup Opyn Raises $2.16M Seed Round Led by Dragonfly Capital
• Bitcoin Sees Small Gain as Gold Rallies to One-Month High

Citing regulatory concerns, Berlin-based security token startup Neufund has announced plans to freeze its fundraising campaigns and sideline future tokenized equity offerings.

“Many European countries had aspirations to become a blockchain-friendly hub … [T]he authorities have stifled this plan, blocking the innovation in its tracks,” the firm wrote in a blog post Monday.

Launched in 2016, Nefund helped allocate some $19 million in capital through novel equity and security token offerings (STOs), including a blockchain-based initial public offering in 2019. The firm claims to have some 11,000 investors across 123 countries.

Related: Stellar Proposes Changes Allowing Exchanges to Better Enforce Regulations

Read more: Neufund Gets Nod From Liechtenstein Regulator for Token Offerings

In a statement, Neufund CEO and co-founder Zoe Adamovicz said the security token project could not continue to operate in a regulatory grey area. No legal action was ever taken against the startup, yet requests for guidance were not answered due to “fear of new technologies,” she said.

“The problem is that nobody wants to take the responsibility for neither letting innovation happen, nor for banning it,” Adamovicz added in an email to CoinDesk, placing the blame squarely at the feet of Germany’s Federal Financial Supervisory Authority (BaFin). “We were neither allowed, nor not allowed. BaFin’s default answer is to shy away from risk and responsibility.”

BaFin did not respond to CoinDesk’s questions by press time.

Related: Mauritius Releases Guidance for Regulated Security Token Offerings

Read more: Openfinance Warns It Will Delist All Security Tokens Without New Funds

Adamovicz said the firm will transition to a yet-unannounced project. The current Neufund platform will be maintained including all equity tokens, wallets and post-investment activities, a blog states.

Kyle Sonlin, founder of Security Token Market, told CoinDesk that allocating capital with a token offering requires “different financial players to act in sync.” His firm has seen an upsurge in requests due to compliance requests, he said.

“To get an issuer to the finish line, it takes more cooperation than just providing one piece of the puzzle,” Sonlin said.

• Tokensoft Teams With Signature Bank to Launch Real Estate Security Token Platform
• EU Supercomputers Hijacked From COVID-19 Research to Mine Cryptocurrency

For a second month in a row, the bitcoin market lacks a clear directional bias, with prices largely restricted to a narrow range of $9,000 to $10,000. However, the cryptocurrency’s liquidity on derivative exchanges continues to heat up, a sign of a sustained rise in investor interest. 

On a relatively new exchange like the Antigua-based FTX, the order book depth, as represented by the number of buy and sell orders at each price, now matches the depth seen on industry leader BitMEX. 

One derivative seeing growth is bitcoin perpetuals, a form of futures contract, but without an expiry date and thus without a settlement. Perpetuals have a funding rate that occurs every eight hours and traders holding a position at the funding timestamp receive or pay funding.

Related: Bitcoin News Roundup for June 22, 2020

As of Monday 13:10 UTC (9:10 a.m. ET), the daily average bid/offer spread for bitcoin perpetual swaps for $10 million quote size on FTX is 0.32% compared to 0.28% on BitMEX, according to data provided by the crypto derivatives research firm Skew. BitMEX was founded in 2014 and is one of the largest bitcoin perpetuals exchanges by trading volumes while FTX launched in May 2018. 

The bid–offer spread is the difference between the prices quoted for an immediate sale and an immediate purchase for an asset. The larger the gap, the greater the spread. A small spread implies a highly liquid market and vice versa. 

See also: Bitcoin Price Drop May Be a Bear Trap, Options Market Suggests

As such, one may conclude FTX is less liquid than BitMEX. While that is true, the liquidity gap between the two has reduced substantially over the past two months. “Liquidity for bitcoin perpetual swaps on FTX has caught up with BitMEX,” Skew tweeted Friday. 

Related: Bitcoin Sees Small Gain as Gold Rallies to One-Month High

The bid/offer spread on perpetuals listed on BitMEX and FTX rose sharply after bitcoin collapsed by 40% on March 12. The spread tends to widen dramatically during a price crash when traders offload large quantities of assets within a short period of time. 

The market depth was decimated following the March 12 bitcoin price crash of 40%. However, even then, BitMEX was reporting a lower spread than other exchanges.

FTX consistently reported a higher spread before the March crash and for nearly 2.5 months following the price slide. Notably, FTX registered a spread of 2.75% on May 11, when the cryptocurrency underwent its third mining reward halving. On that day, the spread on BitMEX was 0.63%. 

The situation, however, changed earlier this month, with the spread on FTX converging with that on BitMEX. 

“Over time we’ve seen increasing volume and a growing user base on FTX as more of the crypto ecosystem onboards,” an FTX spokesperson told CoinDesk, adding, “We’ve particularly put an emphasis on growing the liquidity base over the past six months, and this quarter it’s started paying off.”

Trading volumes on FTX surged from $44 million on Jan. 1 to $2.4 billion on March 13. However, volumes have since tapered off to levels seen in January this quarter, although the decline is not just limited to FTX and is seen across major exchanges.

However, FTX and Binance have suffered more than 80% decline in daily trading volume over the past three months, while BitMEX has seen nearly 40% decline, according to Skew data. That explains why BitMEX is still more liquid than FTX. 

Binance’s order book depth, too, has improved over the past three months. At press time, the daily average bid/offer spread on Binance for a $10 million quote is 0.29% – nearly indistinguishable from the 0.28% seen on BitMEX.

Also, Binance’s spread narrowed to BitMEX levels in April, that is, nearly two months before FTX registered a similar decline. 

See also: Bitcoin SV President Hits Out at Binance as Former Critic Becomes Top Miner

Meanwhile, derivative exchanges Deribit and bitFlyer are still relatively less liquid, with bid/offer spreads at 3.12% and 4.86%, respectively. One possible explanation for the relatively low liquidity on these platforms could be the fact that they account for negligible amount of global futures/perpetuals volume. Notably, Deribit, which is the largest options exchange by volume, contributed just 1.3% of total volume traded on Sunday, as per data source Skew.  

Looking forward, both Deribit and bitFlyer and other exchanges are likely to see higher liquidity because institutional participation is expected to increase over the long run. The coronavirus crisis has established bitcoin as a macro asset, according to Messari analysts. Further, legendary macro traders like Paul Tudor Jones II have recently thrown their weight behind bitcoin as a inflation-hedge asset. 

• New Zealand Police Seize $90M Linked to Alleged BTC-e Exchange Operator
• Blackballed by PayPal, Scientific-Paper Pirate Takes Bitcoin Donations

Fintech giant PayPal plans to roll out direct sales of cryptocurrency to its 325 million users, according to three people familiar with the matter.

Currently, PayPal can be used as an alternative means for withdrawing funds from exchanges such as Coinbase, but this would be a first in terms of offering direct sales of crypto.

“My understanding is that they are going to allow buys and sells of crypto directly from PayPal and Venmo,” a well-placed industry source told CoinDesk. “They are going to have some sort of a built-in wallet functionality so you can store it there.” 

Related: Market Wrap: Bitcoin Spot Volumes Are Weak While Options and DeFi Strengthen

It is unclear which or how many cryptocurrencies would be available. The industry source said they expected PayPal “would be working with multiple exchanges to source liquidity.”

A second source confirmed that PayPal is looking to offer buying and selling of crypto and said the service could be expected “in the next three months, maybe sooner.”

PayPal declined to comment on the plans.

San Francisco-based crypto exchange Coinbase and Luxembourg-based Bitstamp were mentioned as likely contenders by the sources. Both Coinbase and Bitstamp declined to comment. 

Related: Coinbase Open Sources Technical Standard to Streamline Token Listings

It’s worth noting that PayPal has a longstanding relationship with Coinbase, going back as early as 2016. In 2018, Coinbase made instant fiat withdrawals to PayPal available for U.S. customers. Last year, European Coinbase users could withdraw to their PayPal accounts, followed by users in Canada. 

Meanwhile, fintech apps that offer crypto are making money. Square, the payments unicorn launched by Twitter CEO Jack Dorsey, rolled out bitcoin purchases in its Cash App in mid-2018. Cash App reported $306 million in bitcoin revenue in its most recent earnings report.

London-based Revolut, which began offering crypto to users following a 2017 partnership with Bitstamp, raised $500 million in February, valuing the platform at $5.5 billion. Robinhood, the fintech app thought to be fueling the recent retail boom in equities day trading, first offered crypto in February 2018. 

Crypto is increasingly seen as an obvious way to bolster user numbers on fintech apps and create new revenue streams. Indeed, PayPal CEO Dan Schulman has made it clear his plan this year is to aggressively monetize Venmo, which has over 52 million accounts.

Around the start of 2020, PayPal posted job openings to ramp up its new Blockchain Research Group. PayPal posted eight engineering positions: four in San Jose and four in Singapore.

Following PayPal’s short-lived dalliance with the Facebook-led Libra project last year, the focus now is expanding its own payments expertise, one of the sources added.

In an interview with CoinDesk earlier this year, PayPal Chief Technology Officer Sri Shivananda said the company wanted its own “perspective and view on [blockchain] technology itself to see how it can help us contribute to the concept of creating an open digital payments platform that can serve everyone.” 

Shivananda said he was unable to comment on any of PayPal’s specific plans.

“We are a strong believer in the potential of blockchain. The digitization of currency is only a matter of when not if,” Shivananda said.

• Market Wrap: Stocks Rally on Possible Stimulus but Bitcoin Is Flat at $9.5K
• From Moral Hazard to Business as Usual, Feat. Jesse Felder

Bitcoin is one of the only sources of funding available for the “pirate” science site, Sci-Hub, which is quietly engaged in war against copyrights.

Despite Bitcoin’s ability to disintermediate money from politics, a new quantum computer may eventually crack its code. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Related: Blockchain Bites: COMP x2, Reddit Scales and Factom Goes Bankrupt

A Quiet Revolution
Alexandra Elbakyan, the founder of Sci-Hub, a database of over 80 million articles from academic journals usually locked behind subscription services, is fomenting a quiet rebellion against copyright funded by bitcoin. The website has been sued by two science publishing houses and reportedly investigated by the U.S. Department of Justice, effectively cutting Elbakyan off the mainstream financial services in the West. Elsewhere, Honeywell unveiled the most powerful quantum computer to date, again opening questions over Bitcoin and most cryptocurrencies’ security models. “According to a June 2017 paper, a quantum computer would need to have around 2,500 qubits of processing power in order to break the 256-bit encryption used by Bitcoin,” Decrypt’s Liam Frost reports. 

Confusion at the Top
Zhan Ketuan, the once-ousted Bitmain co-founder who returned to power this month, offered to buy back shares held by his rival co-founder Wu Jihan in an attempt to end the firm’s internal war. Zhan’s offer values the company at $4 billion, significantly down from a market high. Meanwhile, after significant push and pull, U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton may be the next U.S. Attorney for the Southern District of New York. Clayton was nominated by U.S. President Donald Trump to replace Geoffrey Berman, who initially refused to step down. Finally, the Financial Conduct Authority (FCA) told crypto businesses they must submit their completed anti-money laundering applications by June 30, although the hard deadline for applications is Jan. 10, 2021.

Crime and Punishment
New Zealand police have seized NZ$140 million (US$90 million) in bank funds linked to Alexander Vinnik, a Russian alleged to have been the controller of the now-defunct BTC-e cryptocurrency exchange. The seizure is said to be the largest in the country’s history by federal police. Meanwhile, a wallet allegedly linked to PlusToken, which has been accused of being a $3 billion Ponzi scheme, has withdrawn 26 million EOS tokens (more than $67 million). (Decrypt)

Pilots, Tests & White Papers
The National Bank of Cambodia has revealed new details about its upcoming blockchain-based payments system dubbed “Project Bakong.” The quasi-digital currency project is a revamp of the Khmer Riel secured by a Hyperledger Iroha blockchain. Meanwhile, a solar energy trading trial, partly funded by the Australia government, run by blockchain startup Power Ledger found the initiative to be “technically feasible” for real world use. Finally, the Italian Banking Association (ABI) said its 700 banking institutions are willing to pilot a digital euro.

Related: First Mover: Compound’s COMP Token More Than Doubles in Price Amid DeFi Mania

Crypto for Social Good
Racial diversity and financial inclusion are good for cryptocurrency and blockchain – and the industry has work to do. At a virtual Juneteenth event put together by the founder of the National Policy Network of Women of Color in Blockchain, panelists said crypto has the potential to allow citizens to opt out of what they described as a racist financial system, though people of color must be part of the development of the technology. Independently, Ron Kim, a member of the New York State Assembly, has become a fierce advocate for progressive politics as well as a surprising voice for crypto advocacy. Kim has put forward bills to create local cryptocurrencies and a decentralized standard for contact tracing in a bid to give his constituents self-sovereignty. 

Funding & Finance
Crypto trading platform CrossTower has raised $6 million in a seed funding round led by European tech investor Gerard Lopez. The platform supports highly active order books and tight spreads for crypto-to-crypto trading. Elsewhere, OMG Network’s parent company SYNQA has raised a $80 million Series C fund led by SCB10X, the venture arm of Thailand’s Siam Commercial Bank, and Mirai Creation Fund II of Japanese asset manager SPARX Group, and including participation from Toyota Financial Services Corporation, among others. (The Block) Finally, a record $1 billion of Bitcoin and Ethereum options will expire on the Deribit exchange on June 26. (The Block)

Bitcoin & Gold
Bitcoin is reporting moderate gains on Monday as gold, a safe haven asset, rallies amid renewed coronavirus concerns. The cryptocurrency is priced around $9,430 – up 1.5% on the day – having put in lows near $9,260 during the Asian hours, according to CoinDesk’s Bitcoin Price Index. Gold, however, printed a one-month high of $1,759 per ounce early on Monday and was last seen trading near $1,750. 

Looking Through the Water
XRP, the fourth-biggest digital asset by market value, has been left out of 2020’s crypto rally, marking the second straight year of underperformance. The token is down 2% in 2020, while bitcoin is up 30% and ether has gained 76%. Analysts told CoinDesk’s First Mover XRP is likely underperforming because of regulatory pressure, slow growth as a payments solution and a lack of classic proof-of-work mining that generates fresh supply for the trading market. Such negatives have outweighed bullish factors like a reduced pace of sales by the XRP software developer Ripple and signs of progress in a partnership with the payments transmitter MoneyGram (NASDAQ: MGI).  

Start With Gold
Gunnar Jaerv, COO of First Digital Trust, said the tokenization revolution, which could reach more than $544 trillion worth of assets, will be kicked off by tokenizing precious metals by paving the way for regulatory clarity and proving the effectiveness. “Gold has long been a trusted store of value for investors, especially when fiat currencies experience volatility. By tokenizing assets like gold on the blockchain, you are guaranteed the digital rights to your investment,” Jaerv said. 

What Changed My Mind About Bitcoin Narratives
CoinDesk’s Head of Research Noelle Acheson thinks one of crypto’s virtues is its level of debate. Last week, Bloomberg editor Joe Weisenthal and several JPMorgan analysts gave differing views of Bitcoin’s value and performance throughout 2020. Both are centered around the idea that Bitcoin has a central narrative it either hits or misses. “I have always regarded bitcoin’s lack of a clear narrative as a strength. I was wrong – it is both a strength and a weakness,” Acheson writes. “Bitcoin’s main use case is yet to be determined… [and] the demand growth from any one of its many narratives could be enough to push up its value.”

• Blockchain Bites: Trump on Bitcoin, Powell on Digital Dollars and the Truth About Terrorist Financing
• First Mover: As US Stocks Defy Economic Gravity, Bitcoiners Shudder at March Memory

Economists at the Federal Reserve said an earlier version of Libra, the Facebook-linked stablecoin frequently targeted by lawmakers and central bankers as an economic wrecking ball, was unlikely to have lived up to its sovereign currency-killer hype.

Calling “fears of a so-called global stablecoin” “overstated” in a new report published Monday, economists Garth Baughman and Jean Flemming say policymakers may have focused perhaps too acutely on the likely downside of the previous Libra iteration’s multiple currencies backing a new stablecoin. The pair modeled a so-called basket-backed stablecoin in a hypothetical scenario, evaluating the likely impact that stablecoin would have on the economy as well as the likelihood of it being adopted.

Critics argued Libra’s original plan to maintain its stablecoin’s value from multiple currency reserves could destabilize or even displace those underlying fiat currencies. U.S lawmakers tried to freeze the project, Australia’s central bank said no one would use it and France’s finance minister threatened to block Libra over fears it could oust sovereign currencies.

Related: Market Wrap: Bitcoin Flat at $9.4K but Investors Are Holding On

The Fed economists wrote that their own modeling discounts that possibility.

“Our model shows that although the basket may have the potential to become important and globally demanded, [the regular ebb and flow of fiat value and trade] make it such that the basket never dominates either of the component currencies,” they wrote. 

See also: Libra Is Ready for the Digital Money ‘Space Race’: Dante Disparte

Their point is in some ways moot. Libra’s project leaders abandoned plans for a single basket-backed stablecoin in April 2020 in a major concession to regulators. Now, Libra’s “global stablecoin” will be a basket of other stablecoins themselves backed by fiat reserves.

Related: US Fed Chair Says Private Entities Should Not Help Design Central Bank Digital Currencies

But the Fed’s paper, written in February and apparently updated a month after Libra’s change, nonetheless raises questions about whether policymakers moved too aggressively against the tech project they blasted for months.

“A simpler question arises: Does a basket currency actually provide substantial value relative to the current system?” they asked. They found that may well be the case in certain circumstances. 

“Although the basket currency will never dominate the sovereign currencies it comprises, we find that there can be substantial gains in world welfare if many sellers accept the basket as payment,” they wrote.

• First Mover: Negative Rates or More Money Printing – Bitcoin May Benefit Either Way
• Market Wrap: Stocks’ Carnage Drags Bitcoin Down to $9K