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Its employees have been forced to choose sides but now Bitmain’s customers are also in the middle of the escalating power struggle at the world’s largest bitcoin miner manufacturer.

Chinese crypto media BlockBeats reported on Wednesday that since his return in early June, once-exiled co-founder Micree Zhan has halted a Shenzhen subsidiary of the Beijing-based Bitmain from shipping bitcoin miners to its clients.

A China-based mining customer of Bitmain and a Bitmain staffer close to the matter confirmed to CoinDesk the temporary delivery halt at Bitmain’s Shenzhen warehouse.

Related: Bitcoin News Roundup for June 10, 2020

According to its 2018 initial public offering prospectus, Beijing Bitmain owns a subsidiary called Shenzhen Century Cloud Core Technology, which is responsible for manufacturing and packaging its bitcoin miners at a warehouse for delivery and pick-ups. Despite his ouster from the parent company in October, Zhan remains a director at the Shenzhen subsidiary. 

While it remains to be seen how this internal struggle will affect customers in the long term, some have raised concerns, casting doubts on the business outlook of the bitcoin mining giant.

See also: Internal Struggle at Bitcoin Mining Giant Bitmain Escalates to Physical Confrontation

Igor Runets, CEO of BitRiver, one of the largest mining co-location sites in Russia, said many of his clients have switched to Bitmain’s main rival MicroBT with little lead time.

Related: What the Stock Market’s ‘Robinhood Rally’ Means for Bitcoin

“But we have many clients who are waiting for [AntMiner] S19 devices from Bitmain,” he said. “Customers were not satisfied with the long wait time and this I believe was partly caused by internal issues [at Bitmain].”

“We really hope the situation will get to normal by September and won’t affect production time. Otherwise there will be a massive erosion of trust to the company,” Runets added.

Matt D’Souza, co-founder and CEO of Blockware Solutions, a U.S.-based miner distributor that also owns mining facilities, said his firm became aware of the shipment issue weeks ago, which caused him to pause orders from Bitmain for the time being. Apart from self-mining, the firm also offers hosting services for clients and has regular demand for mining equipment in thousands of units, D’Souza said.

“[The] counterparty risk is out there but we have significant demand,” he said. “It makes you fear being long Bitmain (buying coupons on the secondary, buying machines that ship several months away) etc.”

Choose a side

After being ousted by his rival co-founder Wu Jihan last October, Zhan regained status as the legal representative in China of Beijing Bitmain in early May, which caused some physical confrontation. But his return to Bitmain’s Beijing office earlier this month has fractured the company.

In China, a company’s legal representative has broad powers to act on a firm’s behalf. A legal representative usually holds the company’s official seal, a crucial element for signing a company’s decision into effect.

The Bitmain staffer also said customers who have wired payments to a Bitmain subsidiary called Chongqing Guiyuan could see the shipment of their orders being halted. 

Chongqing Guiyuan is a new entity registered in March, whose legal representative is Ge Yuesheng, the CEO of Bitmain’s financial services spin-off Matrixport, who sides with Wu. It is fully owned by Bitmaintech Pte, which is incorporated in Singapore and fully controlled by BitMain Technologies Holding.

On April 28, Beijing Bitmain notified customers it had changed the payment recipient account for ordering miners on its official website from Fujian Zhanhua to Chongqing Guiyuan because the Fujian sales center has been involved in a legal proceeding against Zhan.

Soon after Zhan regained his legal representative status in early May he signed off on a document to fire Bitmain’s long-time CFO, Liu Luyao, who was also present at the physical confrontation against Zhan.

At that time, that document didn’t have the company’s official seal and Wu’s side was still in control of Bitmain’s main official communication channels. 

But on Wednesday, Bitmain’s official WeChat account published a notice, saying the firm now has a new effective official seal and the old one is void. 

See also: Bitmain’s Feuding Co-Founders Are Fracturing the Firm and Staff Are Caught in the Middle

That notice suggests Zhan may have taken the administrative access to Bitmain’s official WeChat account since he is in possession of the new company seal while Wu’s side has the old seal.

In a response, Bitmain’s official website published a notice on Thursday morning China time saying there have been irregular log-ins to the firm’s WeChat channel since Thursday and that the posts made since then are all fake.

Then, on Thursday afternoon, the official WeChat account published yet another notice with the new seal, ordering all Bitmain employees to return to the Beijing office to work. Otherwise, they may jeopardize their salaries, it warned. 

“The Beijing office will enforce attendance checks for June. All employees at the Beijing office will only receive full salaries if they have checked in in the office for 13 days,” the notice reads. 

Neither Zhan nor Wu could be reached for comment.

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Mutual fund giant Vanguard has completed the first phase of a blockchain pilot to issue digital asset-backed securities (ABS).  

The Valley Forge, Pa.-based investment manager worked in close collaboration with blockchain startup Symbiont, an unnamed U.S. ABS issuer, BNY Mellon, Citi and State Street. Vanguard modeled the full lifecycle of an ABS settlement on blockchain in the pilot. 

Vanguard’s end goal for the pilot is to improve the process of securitization with blockchain. The decades-old Wall Street practice of repackaging loans into bonds sold to investors is one that many firms are trying to reimagine with blockchain technology. In March of this year, mortgage equity startup Figure securitized $150 million in home equity loans. 

Related: Ex-State Street Blockchain Team Drops DLT From New Data-Privacy Startup

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

Vanguard and Symbiont have been working together to use blockchain technology in capital markets since December 2017. Vanguard hopes to see faster, more transparent and more automated markets because of the technology. 

“Vanguard is dedicated to providing innovative, world-class solutions that help advance the financial services industry,” Warren Pennington, principal and head of Vanguard’s Investment Management FinTech Strategies Group, said in a press release, adding:

“By digitizing and streamlining the ABS issuance process, we will be able to increase the speed and transparency of transactions while reducing costs and minimizing exposure to risk, which ultimately leads to a more efficient business model for future generations of capital market activity.”

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Three Arrows Capital, a crypto fund management firm based in Singapore, has acquired a significant stake in the Grayscale Bitcoin Trust (GBTC), according to a new filing with the U.S. Securities and Exchange Commission (SEC).

The firm filed a schedule 13D disclosure to the SEC on Thursday after accumulating 21,057,237 shares, or 6.26%, of the trust for an amount valued over 20,000 bitcoin (BTC) or around $192 million, according to a filing dated June 10. (Grayscale is a subsidiary of Digital Currency Group, CoinDesk’s parent firm.)

A Schedule 13D form or beneficial ownership report is required when a person or group (firm) acquires more than 5% of any class of a company’s shares. The information must be disclosed to the SEC within a 10-day period from the date of the transaction under current regulations.

Related: Bitcoin News Roundup for June 11, 2020

Grayscale Investments is the world’s largest digital currency asset manager with its flagship product, the Grayscale Bitcoin Trust that was set up in 2013. As of June 11, the trust holds approximately 365,000 bitcoin worth $3.6 billion, according to Grayscale’s website.

See also: Shares in Grayscale’s Bitcoin Trust Up By 14% After Crypto’s Price Rallies

“Grayscale is one of the most professional and beneficial companies in the crypto ecosystem. We enjoy working with their team and are proud to be the first investor to file a Schedule 13D/G with the SEC for over 5% ownership,” said Su Zhu, CEO and co-founder at Three Arrows Capital.

On January 21, GBTC became an SEC-compliant reporting company after filing a Form 10 with the SEC. Also known as the General Form for Registration of Securities it is used to register a class of securities for trading on U.S.-based exchanges. A company with over $10 million in total assets under management is required to file a Form 10 with the SEC.

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Decentralized blogging is coming to a URL near you thanks to a partnership between Unstoppable Domains and Protocol Labs.

Launched Thursday, San Francisco blockchain firm Unstoppable Domains has released its decentralized blog (dBlog) service hosted on Protocol Lab’s InterPlanetary File System (IPFS), complete with the .crypto domain.

“No one can take it down,” Unstoppable Domains co-founder Brad Kam said in a phone interview. “We expect over time all sorts of content that is currently controversial or maybe even not permissible in certain parts of the world popping up because the censorship-resistant internet is usable now.”

Related: Crypto News Outlet BlockTV Shuts Down, Citing Impact of COVID-19

dBlogs come complete with tools similar to Medium, with functionality such as plain text, images, audio and video, according to the company. Notable crypto investors and enthusiasts such as CoinShares CSO Meltem Demirors, venture investor William Mougayar and Ethereum developer Alex Masmej have launched personal blogs on the network.

Read more: The Domain Startups Building an Uncensorable Internet on Top of Ethereum

In an email, Demirors told CoinDesk her experience watching the Turkish government censor Wikipedia from 2017 until earlier this year and subsequent actions by IPFS to preserve the domain made her “really interested in the application of IPFS in defending civil liberties and freedom of information.” 

Masmej, on the other hand, said he is less interested in the censorship-resistant properties of dBlog than having a permanent nook on the internet for his own thoughts. “It’s like writing for the future,” he said in a private message.

Related: Why War Reporting Is the Right Mental Model for Today’s Media, Feat. Jake Hanrahan

Data is stored using 3Box, which leverages the peer-to-peer (P2P) architecture of IPFS for secure and decentralized storage. 

Kam of Unstoppable Domains noted the recent rise in censorship among tech platforms, not to mention nation-states with less lenient free speech guarantees than the U.S. He pointed to a report from think tank Freedom House that claimed some 2 billion people “experience a partially or fully censored internet.”

“The numbers are pretty alarming and I think the trend is towards more,” Kam said. “As the world digitizes, the stakes become higher.”

dBlog comes on the heels of Unstoppable Domains integration with web browser Opera on its Android product. Kam said Unstoppable Domains has over 200,000 registered domains to date placing it in the conversation with a handful of decentralized domain registry projects.

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Bitcoin remains stuck below $10,000 amid jitters in traditional markets over the pace of economic recovery.

As of 11:45 UTC, the leading cryptocurrency is changing hands at around $9,780, according to CoinDesk’s Bitcoin Price Index. 

While bitcoin’s price is down 1% on the day, the major equity market indices in Europe are reporting a drop of over 2% drop. The futures tied to the Dow Jones Industrial Average, Wall Street’s equity index, are down over 600 points and reporting a 1.8% decline on the day. Asian equities also suffered losses early Wednesday, according to data source Investing.

Related: Bitcoin News Roundup for June 11, 2020

The Federal Reserve’s dour economic outlook seems to have spooked investors, forcing them to shun risk and take shelter in traditional safe havens like the Japanese yen, which has hit a one-month high against the dollar. 

The Fed, which held interest rates near zero on Wednesday, said borrowing costs would remain low until 2022. “We are strongly committed to using our tools to do whatever we can for as long as it takes,” Powell said, adding that the job market may not recover for years.

See also: First Mover: Fed Sees No Inflation Through 2021, but Bitcoiners Are Betting on It Anyway

Powell’s comments have damped hopes of a V-shaped economic recovery, with U.S stocks sliding 0.5% soon after. They had been given a boost last Friday by a surprisingly positive nonfarm payrolls report, which showed the economy added over 2 million jobs in May.

Related: Three Arrows Capital Now Holds More Than 6% of Grayscale’s $3.6B Bitcoin Trust

Bitcoin is widely perceived as a hedge against the Fed’s inflation-boosting policies, such as near-zero interest rates and massive asset purchases. As such, one may expect it to climb high on the Fed’s commitment to hold rates at record lows for a prolonged period. 

However, the bullish move may remain elusive in the short run if the stock market sell-off gathers pace. “While the correlation between bitcoin and equities has been slowly drifting apart in recent weeks, a switch to ‘risk-off’ in global markets could lead to further downside pressure for major cryptocurrencies,” said Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds.

Indeed, the cryptocurrency followed the equity markets in March and April, plummetting from $10,000 to $3,867, as global equities cratered on fears of a coronavirus-induced recession, and investors scrambled to accumulate cash, primarily U.S. dollars. 

See also: Crypto Long & Short: Is Bitcoin More Like Gold or Equities?

Now with the halving done, a correlation between bitcoin and stocks may begin to strengthen. Especially as increased mainstream participation from institutions and macro traders appears to make the cryptocurrency, somewhat ironically, more sensitive to global factors. 

“The 2020 recession officially marks the beginning of bitcoin as a macro asset class. For retail investors and institutional investors, crypto isn’t the only asset class in their portfolio. Therefore, it’s crucial to look at crypto from a portfolio allocation perspective,” Messari analysts noted in their newsletter last month.

But some analysts still expect bitcoin to continue taking up the mantel as a new safe-haven asset. “While bitcoin may meander on its march to $20,000, future shocks may actually hasten the flight from public markets and accelerate bitcoin’s rise,” said Jehan Chu, co-founder and managing partner at blockchain investment and trading firm, Kenetic Capital.

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There’s no end in sight to loose monetary policy at the Federal Reserve, and that’s just fine with bitcoin bulls.  

Officials with the U.S. central bank, led by Fed Chair Jerome Powell, said Wednesday the economy is encountering such a drastic toll from the coronavirus that joblessness is expected to remain elevated for at least three years. 

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: Bitcoin Stuck Below $10K as Stocks Drop

That means Fed officials expect to keep interest rates close to zero through 2022, while pumping at least $120 billion a month of freshly created money into the financial system for the foreseeable future. 

The officials said they see little chance of runaway inflation in the near future because the economic downturn has harshly crimped consumer demand and high unemployment is eliminating any upward pressure on wages.

Prices for bitcoin, seen by many investors as a hedge against inflation, rose on the news, as cryptocurrency analysts said the longer the central bank sticks to its loose-money stance, the higher the chances of inflation down the road. 

“We can be quite assured that the printing presses aren’t getting any rest tonight, nor any night for quite a while to come,” Mati Greenspan, founder of the foreign-exchange and cryptocurrency research firm Quantum Economics, told subscribers in an email.

Related: Market Wrap: Bitcoin Briefly Pops Past $10K as Fed Says Rates May Stay Near 0% Until 2022

Just this year, the Federal Reserve has already expanded its balance sheet by about $3 trillion to a total of $7.2 trillion. 

And Kevin Kelly, co-founder at the analysis firm Delphi Digital, told First Mover in a Telegram message the dismal economic outlook means governments may have to pump in more fiscal stimulus to jumpstart growth. The U.S. Congressional Budget Office forecasts the federal government’s budget deficit will hit $3.7 trillion this year, more than double the previous record shortfall of $1.4 trillion in 2009. 

“Such a backdrop is clearly conducive for hedges against currency debasement,” Kelly said.  

Scott Bambacigno, a vice president at crypto exchange software provider AlphaPoint, told CoinDesk’s Daniel Cawrey that “the Fed can print money but they cannot print jobs.”

“Assets like gold and bitcoin should do well if the economy continues in this direction,” he said. 

Bitcoin prices have surged 36% this year, partly on expectations the largest cryptocurrency by market value might serve as a hedge against inflation. Economists including Steve Hanke of Johns Hopkins University have written that hyperinflation episodes in Zimbabwe, revolutionary France, and elsewhere, have historically occurred when “when the supply of money had no natural constraints.” 

So far, inflation has remained muted. Rising unemployment damps wage growth and consumer demand, reducing upward pressure on prices for goods and services.

“We’re not even thinking about thinking about raising rates,” Powell said Wednesday, in a televised conference.

A summary of economic projections released Wednesday by the Fed show that top officials at the central bank expect U.S. inflation to stay below the 2% target for the next three years. 

Prices for personal consumption expenditures are expected to climb just 1% this year, down from a December projection of 1.9%, according to the document. Inflation will average 1.5% next year and 1.7% in 2022, the officials projected. 

As reported earlier this week in First Mover, bond traders also see little threat of inflation anytime soon. And data released Wednesday reinforced the reality that, for the moment, inflation is nowhere to be found. 

The U.S. Labor Department said Wednesday that another closely followed inflation gauge, the consumer price index, or CPI, climbed just 0.1% over the past 12 months, partly due to this year’s collapse in oil and other energy-related costs.

Excluding food and energy items, the so-called core CPI climbed 1.2% over the past year, less than half the rate of just a few months ago. It was the weakest core inflation readings since 2011, according to Scott Anderson, chief economist at the French bank BNP Paribas’ Bank of the West unit.

“Our forecast is for core consumer price inflation to continue to moderate year-on-year into early 2021 before turning the corner on reviving growth,” he said in an email Wednesday.

But David Hendler, principal with the bank-analysis firm Viola Risk Advisors, says it’s just a matter of time. 

“There’s huge inflation ahead,” Hendler said in a phone interview. “It’s only offset because there’s so many people not working. As people go back to work, there will be all this money sloshing around.” 

Greg Cipolaro, co-founder of the analysis firm Digital Asset Research, says bitcoin’s allure as a potential hedge against inflation dovetails with increasing interest in cryptocurrencies among institutional investors.

The money-management giant Fidelity Investments said Tuesday that, in a survey of almost 800 financial advisors, pension funds, family wealth-management offices and other institutional investors, a majority responded that digital assets “have a place in their investment portfolio.”

And on Wednesday, the bitcoin-futures exchange Bakkt and cryptocurrency trading firm Galaxy Digital said they were collaborating to provide a trading and custody solution for big investors.   

If inflation is coming, now might be the time to hedge against it. 

“Predicting the timing of inflation is very difficult,” Cipolaro said in a phone interview. “That’s still a wild card.” 

Tweet of the day Bitcoin watch

BTC: Price: $9,805 (BPI) | 24-Hr High: $9,980 | 24-Hr Low: $9,724

Trend: Bitcoin is flashing red, having failed to overcome key resistance at $10,000 on Wednesday, despite the U.S. Federal Reserve pledge to keep interest rates at record lows through 2022.

Right now, the top cryptocurrency by market value is trading just under $9,800, representing a 1% decline on the day. 

Prices rose 1.2% on Wednesday but, again, failed to close above the $10,000 mark.

Over the last five months, the cryptocurrency has faced multiple rejections in the $10,000 to $10,500 range. Analysts are citing the February high of $10,500 as the level bulls need to beat. 

Once that level has been crossed, the focus could shift to resistances lined up at $10,950 (the September 2019 high) and $12,325 (the August 2019 high). 

Indeed, the relentless slide in the number of bitcoins held on exchanges indicates investors remain confident about the prospects of a continued movement upward. 

The macro environment also supports bullish price action. The combination of increased monetary and fiscal stimulus is widely expected to boost inflation and hedging demand for bitcoin.

Just last month, high-profile trader Paul Tudor Jones II said he held 1%-2% of his assets in bitcoin, citing it as a new hedge against inflation.

However, resistance at $10,000 has remained intact for far too long – quick progress will be needed else traders might start to sell.

If that happens, the market could test dip demand with a notable drop to $9,000. If that’s breached, the higher low – the next support level – at $8,630, which was only created on May 27, will likely be tested again. 

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London-based crypto custodian Copper has joined the Digital Monetary Institute (DMI) as a founding member to inform a range of discussions on the adoption of digital currencies by central banks.

The DMI is run by the Official Monetary and Financial Institution Forum (OMFIF), an independent think tank concerned with central banking, economic policy and public investment. According to Copper, the move marks a major milestone in realizing the custodian’s ambitions to bridge the gap between the world of traditional finance and the emerging potential of blockchain and crypto-related technologies. 

“We are delighted to be joining OMFIF’s Digital Money Institute. The forum it provides to create open and productive discussions between public and private organisations is already proving crucial to advancing the foundational structures of global finance and we are excited to have the opportunity to support in realizing this endeavour,” said Dmitry Tokarev CEO at Copper Technologies.

Related: Custody Battle Pits Institutional Boomers Against Crypto Upstarts

See also: Copper Claims New Tool Removes Credit Risk From Crypto Trading

The DMI is a group comprised of policy-makers, technologists and regulators looking to explore the opportunities presented by digital finance and has found support from the Bank of England, the World Bank and the International Monetary Fund.

Copper joins big-name financial institutions including the multinational bank ING Group, decentralized smart contract platform Cypherium and Giesecke+Devrient Currency Technology GmbH to research the adoption of digital currencies by central banks.

“As more and more institutions are beginning to see beyond the 2017 retail-driven image of the space, the real and long-term value of crypto, and blockchain more generally, becomes apparent. OMFIF has the potential to advance this cause, and move the needle on how the entire financial system views Crypto,” Torkarev said.

Related: Saudi Monetary Authority Pumped Some of $13B Bank Infusion Using Blockchain

Together with its founding members, OMFIF has previously published research on the potential benefits adopting digital currencies for central banks can be and the impact distributed ledger technologies could have on future monetary policy.

See also: London-Based Crypto Custodian Copper Raises $8M for Expansion Overseas

“Central Bank Digital Currency has become a more pressing priority for central banks, first with the unveiling of Libra by Facebook and more recently with the challenges of distributing financial help to citizens during the COVID-19 crisis,” OMFIF chairman and co-founder David Marsh said.

“I am pleased to welcome Copper as a founding member of our Digital Monetary Institute to help shape the digital currency discussion,” Marsh added.

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Crypto custodians are in a race to build the next State Street or BNY Mellon. 

There are only a handful of these types of large custody banks and most of them have been around for hundreds of years. But crypto is such a striking example of old world meeting new that it offers firms a rare opportunity to break into a market that would simply be impossible under normal circumstances.

“In the traditional world you can’t really build a custodian, it’s not something you can just break into,” said Diogo Monica, co-founder of Anchorage, a Silicon Valley-based custody platform specializing in crypto. “BNY Mellon has been around for 300 years and now, in crypto, we have a chance to actually build a foundational company that is potentially going to last for that long,” added Monica.

Related: Custody Provider Copper Joins Think Tank to Bridge Gap Between Traditional Finance and Crypto

It’s an inspirational long view for sure, but how will things evolve over the short term?

Recent acquisitions in the crypto space have seen a bundling together of services such as custody, settlement, lending and trade execution. The latest push along the prime broker route came Wednesday with bitcoin futures platform Bakkt teaming up with Galaxy Digital to combine custodial and trading capabilities.

Read more: Behind ‘Prime Broker’ Buzzword Lies a Complex Strategy Game for Crypto Firms

If crypto is entering a period of accelerated consolidation and following similar lines to the traditional world, firms specializing in standalone custody or trade execution may need to pivot to offer additional services or risk being swallowed up.

Related: Bakkt, Galaxy Digital to Offer Bitcoin Trading, Custody Solution for Institutions

An evolution towards something like traditional finance is definitely how regulated crypto custodian BitGo sees it playing out. 

“This space is going to consolidate very quickly around big strong reputable brands, much like what happened with State Street, JPMorgan, BNY Mellon,” said BitGo CEO Mike Belshe.

The recent unveiling of BitGo Prime allows the platform’s customers to trade directly from cold storage (where cryptographic keys are held deep inside BitGo’s offline, insured vaults) across a choice of two exchanges and two large over-the-counter (OTC) desks. 

This saves firms the rigmarole of opening and funding accounts at various exchanges and moving assets around, said Belshe, declining to name the venues currently connected to BitGo’s incipient trading offering.

“All four are tier-one, top-ranked, regulated businesses you’d recognize. We will start naming them in due course. The plan is to grow that by the end of the year to more than a dozen,” Belshe said.

‘White glove’ treatment

Although a one-stop-shop prime broker platform seems to be what many crypto firms now aspire to, it could be about the buzzword rather than a full understanding of the services being provided.  

Prime brokerage is more of a financial services function than a tech function, a fact that may be lost on the new breed of crypto pioneers, said Michael Moro, CEO, Genesis Trading, which recently acquired standalone custodian Vo1t. (Disclosure: Genesis is owned by CoinDesk parent company Digital Currency Group.)

Read more: Genesis Trading Buys Crypto Custodian Vo1t in Bid to Become Prime Broker

“As well as having a large balance sheet, attention to client services is an essential aspect when it comes to choosing a prime broker platform,” said Moro. “I think everyone wants the white glove, high touch service, which is how prime brokerage works in traditional finance. But that’s very different from a tech software model.”

The latter approach is to try and scale the business through technology as much as possible, rather than hiring customer service representatives or business development staff, Moro said.  

“In institutional finance, the ability to pick up the phone and speak to your coverage person is so important,” he said. “Being able to speak to a human being, as opposed to clicking a few buttons on a platform, I think will be a differentiator among what prime broker platforms are around in a year or two.”

OK boomer

It’s tempting to write this off as an overly cautious crypto boomer approach, pandering to traditional legacy systems. But to do so could be a strategic error.

A focus on gently transitioning traditional capital markets over to crypto is gaining traction for London-based Koine, which is offering a post-trade solution for digital assets combining custody, settlement and cash management. Koine’s solution has so far been rubber-stamped by regulators in the U.K. and the United Arab Emirates. 

“The path we envisage involves the ability to transition from existing infrastructure, rather than a new model everyone must switch to,” said Phil Mochan, Koine’s co-founder and head of strategy.

Read more: Coinbase Buys Tagomi as ‘Foundation’ of Institutional Trading Arm

Building bridges between existing market infrastructure and crypto native exchanges is something Koine is tackling in stages, said Mochan. Bitfinex was the first exchange to publicly announce an integration with Koine, and there are currently 12 other workflow models at different stages depending on the trading venue or OTC desk, he said. 

“It’s not going to happen overnight,” said Mochan, framing the technological challenge specifically in terms of old-meets-new. “We find there are operational issues around API work almost everywhere, and that’s because 21-year-olds have built these platforms.”

Table stakes

Over the past couple of years, custody platforms have sought to differentiate themselves by offering new and innovative services such as earning yields on proof-of-stake (PoS) tokens by verifying transactions on a network or participating in governance decisions.  

However, Moro of Genesis said that while this might have looked like a product differentiator at one stage, it no longer really counts – since many custodians now offer staking and even exchanges such as Binance have gotten in on the act.  

“If you’ll pardon the pun, staking has become like table stakes for holding onto customers’ funds,” said Moro. “I think it’s really hard to differentiate yourself because the barrier to mimicking is not that high.”

But not all staking services are the same, just as not all custody is the same, said Monica of Anchorage, which uses a complex blend of hardware security modules (HSMs), threshold signing and multiple signatures to lock down crypto assets. 

Read more: Beyond Storage: How Custody Is Evolving to Meet Institutional Needs

“The space is rife with people using manual operations from 10 years ago, where they have to actually go to a vault,” Monica said, adding that cold storage solutions of this type became unworkable under COVID-19 lockdown and social distancing.

On the subject of providing staking services, Monica said: “This stuff is hard to build. It may be table stakes in the sense that nobody wants to store an asset with you unless you can generate yield for it. Nobody wants to drop dividends on the floor in the traditional market so why would that be different in crypto?”

Anchorage’s strategy from day one has been to build everything in-house, said Monica, pointing to the Frankenstein-like assemblage of crypto’s recent crop of aspiring prime brokers. 

“This can’t just be bolted on. Everything that touches a cryptographic private key is deserving of the ultimate security and attention,” he said. “The path to prime [brokerage] is not by bolting on different solutions built by different individuals and companies with different backgrounds and philosophies.”

The DeFi difference

An unavoidable consequence of crypto prime brokerage is further centralization in a sector built on the premise of decentralization. While the prime broker model may bring a concentration of risk plus added costs, asking traditional players to try out new variants like DeFi (decentralized finance) is a big ask.

Nevertheless, the fast-growing world of DeFi is attracting lots of attention since it eschews traditional finance rather than simply trying to replicate it. With that, comes alternative approaches to trading, settlement and also custody. 

Read more: Crypto Long & Short: The Emergence of Prime Brokers Adds Resilience but Also Risk

“We have exactly the same goals but we always try to be slightly less centralized, as much as we possibly can,” said Alex Batlin, CEO of Trustology, a custody platform backed by ConsenSys and Two Sigma Ventures. 

“The question is,” Batlin said, “do you wrap it all up like in the old days into a single prime broker with all the risks associated with that, or do you try achieve the same goals but with the lower prices and lower risk associated with decentralization?”

The DeFi custody hypothesis also does away with cold storage: Trustology uses HSMs for near real-time access to assets that cannot be commingled in omnibus accounts. 

While the DeFi space is definitely tech-first, Trustology recognizes self-custody without controls is not fit for business or institutional contexts.

“There’s an emerging white space which we are trying to fill,” said Batlin, “We can sign any ethereum transaction or any DeFi protocol fast and segregated, and apply controls.”

Trustology sees decentralized clearing as a viable alternative option, with custodians acting as settlement agents, trying up with protocols like AirSwap. Brokers are also eyeing the billion or so dollars of liquidity locked up in DeFi, said Batlin.  

“Brokers are looking to access liquidity and margin on those protocols; asset managers are looking at it the same,” he said. “There are possibly some really interesting plays around committing funds to staking, to collateralized lending, so you get the ability to do a long while being at yield that’s relatively safe.”

While Trustology is focused on Ethereum, Fidelity-backed KNØX is applying its energy towards Bitcoin. 

Read more: In Rare Deal, Crypto Custodian Wins Insurance on Full Value of Client Assets

The Canada-based custodian, which holds insurance from mega-broker Marsh, is “philosophically aligned” with Bitcoin and the technologies being built on top, according to KNØX co-founder and CEO Alex Daskalov.

“We have yet to see a custodian that has a tight integration with the Lightning Network, for example,” Daskalov said, referring to the bitcoin scaling solution built for faster payments. “We would love to be there in lockstep with a lot of the tech riding on Bitcoin and layers above it such as Lightning and Liquid.”

Cooperation and competition

Growth in the traditional trading space is not all about competition, there’s co-operation too, which benefits the whole market. There’s also evidence of this among some crypto custodians and brokers 

For example, recently launched prime broker BeQuant, which has its own custody solution, says it is open to working with other custodians in the space, as clients want to spread risk just as they do in traditional finance.

“I think you need those standalone guys,” said Richard Shade, BeQuant’s head of custody. “We are open to working and collaborating with a number of these guys and we are talking to all of them, because we realize our customers may already be using them.”

Read more: Bequant Launches Crypto Prime Brokerage to Compete for Institutional Money

London-based custodian Copper, which raised an $8 million Series A in February, says it is also happy to collaborate, as well as compete.

“We are happy to work with people on financing and with people on clearing,” said Copper founder and CEO Dmitry Tokarev, who added that the recent funding affords the firm a further 18 months of runway.

Copper’s ClearLoop settlement solution differs from something like BitGo’s, which is geared towards everyone having a BitGo account, Tokarev said. 

“We have already asked other custodians to join the network because that is the best solution for clients at the end of the day. The more exchanges and custodians that join the network, the more efficient (and secure) the entire trading ecosystem becomes. It’s better for everyone, not just Copper,” Tokarev said.

Custody kumbaya

It’s not all kumbaya around the crypto-custody campfire, however. When it comes to the crypto prime broker race, BitGo likes to take a jab at arch-rival Coinbase.

Last year, when Coinbase acquired the institutional business of crypto wallet and custody provider Xapo, that brought the San Francisco exchange’s assets under custody to over $7 billion. At that time, BitGo publicly courted former Xapo clients, which were said to have expressed concern over the new arrangement.

Read more: Crypto Exchange Coinbase Acquires Xapo’s Institutional Custody Business

Following this train of thought, BitGo’s Belshe said the recent acquisition of Vo1t by Genesis was probably a strategy to take back custody of about $2.7 billion worth of Grayscale Bitcoin Trust assets and bring these under common ownership. (Like Genesis, Grayscale is also a subsidiary of Digital Currency Group.)

“Grayscale was with Xapo and was sold over to Coinbase, for a pretty high premium by the way,” said Belshe. “I’m guessing that DCG, the Genesis team and the Grayscale team want to pull that custody back.”

But Michael Moro of Genesis scotched Belshe’s theory. 

“As I evaluated Vo1t, that was not a consideration at all,” said Moro. “I’m actually not even privy to the contract that Grayscale and Coinbase have so I don’t know the terms or how long it lasts. My understanding is it’s longer-term so that wouldn’t be a near-term event, regardless.”

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Arweave, a blockchain network meant for the permanent storage of data, has released a completely new approach to smart contracts.

In short, smart contracts on Arweave, much like must of the code on websites today, will be run by users’ computers rather than the blockchain itself. Released Thursday, SmartWeave is an approach to smart contracts that allows the blockchain to dispense with gas fees and only requires a smart contract’s code to be run as often as it’s needed and not by every node on the network.

“SmartWeave is a new smart contract language environment built on top of the Arweave network,” Arweave’s Sam Williams told CoinDesk. “It uses this novel type of evaluation called ‘lazy evaluation’ to move the computational burden of smart-contract execution from the nodes in the network to the users of the smart contract.”

Related: Algorand and Blockstack Are Building a Multi-Chain Smart Contract Language

It’s like the bake-at-home pizza versus Pizza Hut. Arweave keeps the data ready, available and accurate (in the freezer); users’ machines only need to make sense of that data (bake it) when, and only when, it is needed.

Lazy evaluation verifies the data and, in particular, when each piece of data came into the system. 

“The key thing Arweave is offering you is the ability to say every single thing that came through the system has a time ordering,” Williams said. 

Read more: Arweave 2.0 Gets File Storage Project One Step Closer to Its ‘Library of Alexandria’ Dreams

Related: Bug in ‘Timelocked’ Bitcoin Contracts Could Spur Miners to Steal From Each Other

As Ethereum’s perpetual problem with front-running on decentralized exchanges (DEXs) illustrates, establishing the order of events reliably is one of the more important pieces of work decentralized systems need to do.

That said, it’s not important that each node on a network verify precisely how each digital document renders. Much as each computer that opens a website interprets its HTML and JavaScript locally, Arweave requires users’ computers to do the processing of information, not the network itself. This logic makes sense because Arweave is fundamentally built to be a new kind of internet.

“Arweave as a base protocol is very focused on decentralized, autonomous web services,” Williams said.

Entering a space similar to that of Blockstack, Arweave offers a kind of internet that users log into directly. Once a wallet has logged into Arweave, it can move around all kinds of apps without needing to log into them individually. Williams expects this will create interesting new experiences that we can only partially imagine now.

Arweave’s chief value add is creating a system in which data loaded onto the network can be stored there affordably, forever.

What it can do

Many apps have already been built for Arweave but SmartWeave will open up a new level of functionality, both because of what it enables and the language it runs on.

“If you know JavaScript you can write this immediately,” Williams said. “I would expect we see DAOs within a few weeks.”

Williams gave a simple example of a potential DAO. Imagine an Arweave based blogging platform, like Medium, that anyone could use but whose prized front page was controlled by a committee (that’s the DAO).

Read more: OpenLaw Launches First ‘Legal DAO’ for Distributed VC Investments

Each committee member would have some kind of governance token that allowed them to vote posts to the front page. Whenever each of them opened Arweave and cast their votes for posts, that would get logged as data on the chain.

Each terminal that opened the blog would simply look at the votes and use that to construct the front page that each user sees when they first visit the blog’s homepage.

Arweave has a few sample applications ready to go, such as a basic ERC-20-like and non-fungible token (NFT) modules that will be easy for developers to adopt.

High voltage

The limitations really come off of smart contracts when the processing moves off-chain. 

“What that means in practice is the smart contracts can involve exceptionally large amounts of work,” Williams said. “That wouldn’t really be possible in a normal smart-contract system like Ethereum.”

After that, as developers start to realize further potential for Arweave, Williams expects people will begin to plug machine learning and artificial intelligence into SmartWeave smart contracts. By taking the processing off the network, considerably more powerful kinds of computing can be brought to bear without driving up costs or clogging up the blockchain.

There’s another benefit here: safety. 

As a plethora of new base layer smart contracts have proliferated, there has also been a bevy of new smart-contract languages built to be safer for everyone to use. Starting with Solidity, there’s since been Pact from Kadena, Clarity from Blockstack and Cadence from Dapper Labs, among others. 

Read more: Algorand and Blockstack Are Building a Multi-Chain Smart Contract Language

Said Williams:

“It essentially allows you to run arbitrary code so there doesn’t need to be so many safety checks and safety harnesses. Because the problem you have on a normal smart contract system is that I, as a smart contract developer, can get every single node on the network to execute my code, and that means that code absolutely cannot be allowed to be malicious. But with something on SmartWeave you don’t need those safety rings.”

The nodes aren’t doing all that work. Like on the web, the user needs to trust the code that’s going to be executed but the entire blockchain doesn’t need to protect itself against every smart contract.

“I think there will be a later wave that when people start to realize that the additional computational power that SmartWeave allows you access to unlocks a huge number of things you just couldn’t have built previously,” Williams said.

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Decentralised storage network provider Filecoin announced the launch of the ‘Incentivized Testnet’, the final phase of testing for its decentralized storage network, on Wednesday. 

In a press statement emailed to CoinDesk, the firm said that this precedes its expected main network launch this summer. Developed by Protocol Labs, Filecoin’s storage network aims to provide a safeguard against the risk of a single point of failure for data storage by using a decentralised network. Filecoin was also behind one of the major ICOs in 2017 when it raised more than $257 million. 

According to the firm, the top 100 miners globally as well as the top 50 miners in each continent are promised filecoin tokens, depending on how much storage they contribute and the overall size the storage network is able to achieve. Beyond growing its network, the incentive is designed to determine how robust its infrastructure really is.

Related: Filecoin

“The incentive competition will stress test the Filecoin protocol’s ability to onboard massive amounts of storage in a very short timeframe,” said Ian Daarow, head of operations at Filecoin, in an emailed statement. 

Read More: Filecoin Is Mailing Out Hard Drives of Climate Data to Kick-Start Its File-Storage Network

Regarding security concerns that may arise around storing data on a decentralized network, Darrow said that although the network was targeted towards distributing publicly accessible data, such as image or video sharing, users who wish to store data privately could encrypt it prior to storing it on the network.

“When it comes to consumer adoption, we expect this data security layer to be handled by application developers building on top of Filecoin,” added Darrow. 

Related: Filecoin Is Mailing Out Hard Drives of Climate Data to Kick-Start Its File-Storage Network

According to a recent blog post on its website, Filecoin is expected to launch its main network between July 20 and August 21. The firm expects the final phase of testing to last about three weeks, and expects that it would help prepare the network to store large amounts of user data.

Filecoin kick-started the process of onboarding miners last month, when it emailed hard drives containing climate data, literature or human genome information out to future network participants.

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Coinbase is looking at opening its doors to a range of new digital assets and the speculation is having an effect on their value.

It would appear investors are valuing Coinbase’ Digital Asset Framework when looking at potential listings for the exchange as most assets are up between 8-25% with an average of around 17%, according to data from Messari. KEEP Network’s KEEP token saw the greatest spike, with its price rising to around $0.44.

The 19-strong list includes names like Aragon, Aave, Bancor, Siacoin, Origin Protocol, Ren and VeChain.

Related: Coinbase’s Ex-Lead Lawyer Sold $4.6M in Stock to Head US Banking Watchdog

Other names on the U.S. exchange’s list include Arweave, COMP, DigiByte, Horizen, Livepeer, NuCypher, Numeraire, Render Network, SKALE Network and Synthetix.

“Our decision to support any asset requires significant technical and compliance review and may be subject to regulatory approval in some jurisdictions,” the Coinbase blog post reads.

As part of the process customers can expect to see public-facing application programming interfaces (APIs) and other such signs while the exchange conducts “engineering work to potentially support these assets.”

The “Coinbase effect” or the announcement of a potential listing of digital assets to the U.S. exchange has proved cumbersome to some projects in the past, with assets often rising in value before dumping shortly after their listing has been confirmed.

Related: Crypto Payroll Startup Bitwage Lets Earners Sidestep Volatility With Stablecoin Payments

See also: Coinbase Custody Deleted Tweet That Could Explain Surge in Tether Addresses

“Over time we expect our customers around the world will have access through Coinbase platforms to at least 90% of the aggregate market cap of all digital assets in circulation,” the blog post added.

Coinbase recently suffered a temporary outage on April 29 after as the price of bitcoin rallied to just below $9,000.

It’s not the first time Coinbase has gone down during volatile trading days. In June 2019, the exchange’s site and API went down during a nearly $2,000 fall over a 15-minute period, an issue that Coinbase Pro users appear to have experienced again in November 2019.

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Crypto retirement savings firm Bitcoin IRA is ready to take on smaller accounts with the launch of its new IRA product, Saver IRA.

Around four years ago, Bitcoin IRA launched its first self-directed individual retirement account that required balance minimums of $20,000. Now the firm has dropped that minimum to $3,000 for a standard account. With the addition of Saver IRA, the company has a no-balance-minimum account that instead requires a monthly deposit minimum of $100.

“When it’s time to make the decision of when to buy, you’ll find that folks who want to get their toes wet will freeze,” said Chris Kline, Bitcoin IRA’s chief operating officer. “This gives them a dollar-cost average mechanism without having to think about it every month.”

Related: ‘Focus on Retirement’: Crypto Custodian Rolls Out Hybrid IRA Offering

Read more: ‘Focus on Retirement’: Crypto Custodian Rolls Out Hybrid IRA Offering

As COVID-19 lockdowns continue to dampen the global economy, Kline said he believes more consumers will look for alternative retirement funds.

“I think you’re going to see a lot of tightening of belts, a lot less 401(k)s being offered by providers out there possibly, or not matching,” Kline said. 

Although Kline has been speaking to his staff about the Saver IRA account since November 2018, this is the first time Bitcoin IRA has had enough resources in its compliance department and automation to handle thousands of smaller accounts. 

Related: All-Crypto Retirement Accounts Will Be Fined: Australian Tax Office

The firm also had to build an application programming interface (API) that would allow users to implement direct deposit.

Around 80% of Bitcoin IRA’s existing clients have signed up for the account but Saver IRA is primarily geared for new crypto IRA adopters, Kline added. This coming November Bitcoin IRA plans to further diversify its offering by allowing users to earn interest on their crypto, he said.

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More than 2,000 vending machines in Australia and New Zealand will let customers buy a Coke with bitcoin.

Coca-Cola Amatil, the Asia-Pacific bottling giant, has partnered with digital assets platform Centrapay to integrate bitcoin as a payment option from its vending machines across Australia and New Zealand.

This means over 2,000 smart vending machines now accept cryptocurrency.

Related: Japan’s Biggest Banks Are Talking About Building a Digital Payments System

The machines running the bitcoin transactions are owned by Coca-Cola Amatil, a regional bottler and distributor of Coca-Cola products. While the Atlanta-based soft drink producer is a major shareholder in the distributor, the two are separate companies.

Transactions are conducted via New Zealand-based Centrapay and Sylo Smart Wallet, which currently has about 250,000 users. Newcomers can download the Sylo app on their smartphones, add bitcoin to their wallets and scan a QR code to purchase Amatil products.

Sylo co-founder and business manager Dorian Johannink said the digital wallet can typically store, send and receive cryptocurrencies including bitcoin and ERC20-compatible tokens like its own SYLO listed on Hong Kong exchange KuCoin.

“But for the Coke scenario, it’s just supported for bitcoin initially for the trial run, but we may extend the functionality,” Johannink said.

Related: IOV Labs Takes on Lightning Network With New Light Client

Buying a Coke with bitcoin sounds catchy, but the cryptocurrency has notoriously limited scalability, processing an average of 1 megabyte worth of transactions every 10 minutes, after which bitcoin miners prioritize transactions with higher fees. 

But Sylo’s main focus is not on bitcoin as a payment form, but on the vision of connecting crypto to the real world and using the architecture of this trial to roll out digital assets as payment tools more broadly. Centrapay announced the partnership on Twitter Monday, echoing Sylo in claiming it was the “first step toward mainstream digital transactions.” The future, as Sylo envisions it, will allow customers to purchase a digital asset in the real world, perhaps a Coke token, and use it to purchase products. 

Sylo has moved quickly in the last few months, going from adding bitcoin to its wallet back in March and listing its token on KuCoin, to a real-world trial run in crypto transactions. According to Centrapay CEO Jerome Faury, the initiative has already demonstrated it can work in Australia and New Zealand, and will be “targeting the U.S. market next with some world-first innovations.”

Johannink said Faury has already established connections in the United States and there are plans to move things quickly, but the regional partnership is still in its nascent stages.

Sylo is determined.   

“Let’s see how this initial run goes,” Johannink said. “People are testing it out now. If it goes smoothly, we can roll it out pretty quickly.” 

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For the first time since the U.S. went on lockdown three months ago, lawmakers will convene Thursday to discuss digital currencies and other novel technologies.

The House Financial Services Committee (FSC) Task Force on Financial Technology will be evaluating how FedAccounts and other digital tools might help the federal government distribute stimulus payments to help Americans suffering the economic fallout of COVID-19. The virtual hearing kicks off at noon Eastern (16:00 UTC). 

The concept of using FedAccounts to manage digital currencies has gained traction during the pandemic: bills introduced to the committee have suggested using bank accounts managed by the Federal Reserve to issue stimulus payments. The U.S. government has issued one round of payments by check, but only individuals who have filed taxes within the last two years received them. The idea behind FedAccounts is that any U.S. resident could receive these funds in a snap, rather than wait for a piece of paper mailed across several weeks by the Internal Revenue Service (IRS).

Related: Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

“What we discovered is that large segments of the population were not included in the financial system in that they didn’t have either bank account information with the IRS or were otherwise reachable,” said J. Christopher Giancarlo, one of the witnesses for Thursday’s hearing, in a phone interview. “The government had to resort to good old trusty paper checks with the delay in time and the imprecision and the challenges that presented to populations that didn’t have bank accounts.”

Giancarlo will advocate for a slightly different version of this vision, and plans to call for a token-based system rather than an account-based one.

“We think that this both addresses the concern that this particular hearing is there to address but goes way further by also future-proofing the dollar for the coming digital 21st century when things of value will be increasingly tokenized, decentralized and programmable, and we think that the United States needs to recognize the direction that the world is going,” he said. 

Read More: Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

Related: US Lawmaker Proposes Legislative Groundwork for National Blockchain Strategy

The witnesses will include Giancarlo in his capacity as former Commodity Futures Trading Commission (CFTC) chair and now Digital Dollar Project director; University of California Irvine School of Law Professor Mehrsa Baradaran; Vanderbilt University School of Law Professor Morgan Ricks (who co-created the concept of a FedAccount); and Electronics Transaction Association Jodie Kelley.

The hearing will be chaired by Rep. Stephen Lynch (D-Mass.), who heads the task force and has previously commented on the potential role distributed ledgers and cryptocurrencies could play in the U.S.

Earlier this year, Lynch proposed recording the Strategic National Stockpile on a blockchain database, to ensure the government has a more accurate picture of the medical supplies it has available.

“We are looking at ways that we can adopt this new technology and address some of the challenges that we have in government,” he told CoinDesk in April about using blockchain and distributed ledger technology. “That attitude and that desire has been out there and so we have been looking for ways to utilize that technology to help government function better.”

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For the first time since the U.S. went on lockdown three months ago, lawmakers will convene Thursday to discuss digital currencies and other novel technologies.

The House Financial Services Committee (FSC) Task Force on Financial Technology will be evaluating how FedAccounts and other digital tools might help the federal government distribute stimulus payments to help Americans suffering the economic fallout of COVID-19. The virtual hearing kicks off at noon Eastern (16:00 UTC). 

The concept of using FedAccounts to manage digital currencies has gained traction during the pandemic: bills introduced to the committee have suggested using bank accounts managed by the Federal Reserve to issue stimulus payments. The U.S. government has issued one round of payments by check, but only individuals who have filed taxes within the last two years received them. The idea behind FedAccounts is that any U.S. resident could receive these funds in a snap, rather than wait for a piece of paper mailed across several weeks by the Internal Revenue Service (IRS).

Related: Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

“What we discovered is that large segments of the population were not included in the financial system in that they didn’t have either bank account information with the IRS or were otherwise reachable,” said J. Christopher Giancarlo, one of the witnesses for Thursday’s hearing, in a phone interview. “The government had to resort to good old trusty paper checks with the delay in time and the imprecision and the challenges that presented to populations that didn’t have bank accounts.”

Giancarlo will advocate for a slightly different version of this vision, and plans to call for a token-based system rather than an account-based one.

“We think that this both addresses the concern that this particular hearing is there to address but goes way further by also future-proofing the dollar for the coming digital 21st century when things of value will be increasingly tokenized, decentralized and programmable, and we think that the United States needs to recognize the direction that the world is going,” he said. 

Read More: Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

Related: US Lawmaker Proposes Legislative Groundwork for National Blockchain Strategy

The witnesses will include Giancarlo in his capacity as former Commodity Futures Trading Commission (CFTC) chair and now Digital Dollar Project director; University of California Irvine School of Law Professor Mehrsa Baradaran; Vanderbilt University School of Law Professor Morgan Ricks (who co-created the concept of a FedAccount); and Electronics Transaction Association Jodie Kelley.

The hearing will be chaired by Rep. Stephen Lynch (D-Mass.), who heads the task force and has previously commented on the potential role distributed ledgers and cryptocurrencies could play in the U.S.

Earlier this year, Lynch proposed recording the Strategic National Stockpile on a blockchain database, to ensure the government has a more accurate picture of the medical supplies it has available.

“We are looking at ways that we can adopt this new technology and address some of the challenges that we have in government,” he told CoinDesk in April about using blockchain and distributed ledger technology. “That attitude and that desire has been out there and so we have been looking for ways to utilize that technology to help government function better.”

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For the first time since the U.S. went on lockdown three months ago, lawmakers will convene Thursday to discuss digital currencies and other novel technologies.

The House Financial Services Committee (FSC) Task Force on Financial Technology will be evaluating how FedAccounts and other digital tools might help the federal government distribute stimulus payments to help Americans suffering the economic fallout of COVID-19. The virtual hearing kicks off at noon Eastern (16:00 UTC). 

The concept of using FedAccounts to manage digital currencies has gained traction during the pandemic: bills introduced to the committee have suggested using bank accounts managed by the Federal Reserve to issue stimulus payments. The U.S. government has issued one round of payments by check, but only individuals who have filed taxes within the last two years received them. The idea behind FedAccounts is that any U.S. resident could receive these funds in a snap, rather than wait for a piece of paper mailed across several weeks by the Internal Revenue Service (IRS).

Related: Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

“What we discovered is that large segments of the population were not included in the financial system in that they didn’t have either bank account information with the IRS or were otherwise reachable,” said J. Christopher Giancarlo, one of the witnesses for Thursday’s hearing, in a phone interview. “The government had to resort to good old trusty paper checks with the delay in time and the imprecision and the challenges that presented to populations that didn’t have bank accounts.”

Giancarlo will advocate for a slightly different version of this vision, and plans to call for a token-based system rather than an account-based one.

“We think that this both addresses the concern that this particular hearing is there to address but goes way further by also future-proofing the dollar for the coming digital 21st century when things of value will be increasingly tokenized, decentralized and programmable, and we think that the United States needs to recognize the direction that the world is going,” he said. 

Read More: Digital Dollar Project Calls for 2-Tiered Distribution System in First White Paper for US CBDC

Related: US Lawmaker Proposes Legislative Groundwork for National Blockchain Strategy

The witnesses will include Giancarlo in his capacity as former Commodity Futures Trading Commission (CFTC) chair and now Digital Dollar Project director; University of California Irvine School of Law Professor Mehrsa Baradaran; Vanderbilt University School of Law Professor Morgan Ricks (who co-created the concept of a FedAccount); and Electronics Transaction Association Jodie Kelley.

The hearing will be chaired by Rep. Stephen Lynch (D-Mass.), who heads up the task force and has previously commented on the potential role distributed ledgers and cryptocurrencies could play in the U.S.

Earlier this year, Lynch proposed recording the Strategic National Stockpile on a blockchain database, to ensure the government has a more accurate picture of the medical supplies it has available.

“We are looking at ways that we can adopt this new technology and address some of the challenges that we have in government,” he told CoinDesk in April about using blockchain and distributed ledger technology. “That attitude and that desire has been out there and so we have been looking for ways to utilize that technology to help government function better.”

You can watch the hearing here:

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Hut 8 Mining is looking to raise at least $7.5 million to upgrade its fleet of BlockBox bitcoin miners. 

The firm, the biggest cryptocurrency miner in Canada and one of the largest publicly traded miners in the world, seeks to raise the funds through an overnight marketed public offering on the Toronto Stock Exchange. It’s eyeing a common share asking price of $1.45, substantially above the stock’s $1.20 valuation at market close Wednesday.

Hut 8 wants to use the sale proceeds to buy “the most competitive and efficient chips available on the market” for its fleet of BlockBox miners, said interim Chief Executive Jimmy Vaiopoulos in a press statement.

Related: Why Miner Maker Ebang’s US IPO Raises More Questions Than Answers

“The modular and interoperable nature of our BlockBox mining fleet, combined with extensive testing undertaken to ensure compatibility with these new chips, makes Hut 8 well prepared for this upgrade,” he said. 

TSX still needs to approve the offering. The common share sale would run through June 25. Hut 8, which is backed by chip manufacturer Bitfury, was first listed on TSX in 2018.

If approved, the common share will allow the struggling Hut 8 – buffeted of late by declining revenues, fears of the halving, which cut the reward for bitcoin miners such as it by half, as well as COVID-19 supply chain concerns – to buy new chips for a portion of its mining fleet.

Hut 8’s revenue has declined in three consecutive quarters.

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Bitcoin saw a quick, short-lived run past $10,000 after the head of the U.S. Federal Reserve said Wednesday that interest rates will remain near 0% until the end of 2022 and its bond buying program would continue.

Bitcoin (BTC) was trading around $9,894 as of 20:00 UTC (4 p.m. ET), gaining 1.6% over the previous 24 hours. 

At 00:00 UTC on Wednesday (8:00 p.m. Monday ET), bitcoin was changing hands around $9,783 on exchanges like Coinbase. Its price dipped to as low as $9,709 at 09:00 UTC (5 a.m. ET) before buying volume picked up, pushing the price above its 50-day and 10-day moving averages, a bullish technical indicator. 

Related: Fed Officials See Anemic Inflation Despite Trillion-Dollar Money Injections

Read More: Another Data Point Suggests Bitcoin Close to Prolonged Bull Market

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Speaking after the Federal Open Market Committee’s two-day June meeting, Chairman Jerome Powell said the central bank will likely keep interest rates near 0% until 2022. That sent bitcoin briefly to $10,000 before it dropped back. 

“There is great uncertainty about the future,” Powell said. “At the Federal Reserve, we are strongly committed to use our tools to do whatever we can for as long as it takes to provide some relief and stability to ensure that the recovery will be as strong as possible.”

Related: First Mover: Bitcoin Bulls Might Get Negative Rates From Central Banks, Just Not the Fed

Cryptocurrency stakeholders see the Fed’s announcement of no changes as reason to buy bitcoin. “Liquidity can’t paper over insolvency,” said Scott Bambacigno, a vice prescient at crypto exchange software provider AlphaPoint, “When you are deep in debt, more debt isn’t going to help. The Fed can ‘print money’ but they cannot ‘print jobs’. Assets like gold and bitcoin should do well if the economy continues in this direction.”

While the price did briefly pop, bitcoin’s brief run to $10,000 quickly lost steam. ”A lot of analysts may be looking for the Fed decision to move BTC, but It’s important to bear in mind that over a long time horizon bitcoin remains uncorrelated to traditional markets,” said Aaron Suduiko, a research analyst for crypto liquidity provider SFOX. 

Indeed, the upward trajectories of bitcoin seem totally unhinged from stock indexes like the S&P 500.

Read More: Bitcoin Bulls Might Get Negative Rates From Central Banks, Just Not the Fed

As a result of the Fed news, or perhaps the lack of much new information, the S&P 500 index was flat, slipping less than a percent. U.S. Treasury bonds all slipped. Yields, which move in the opposite direction as price, were down most on the two-year bond, in the red 14%.

Stocks in the U.S. are basically back to where they started the year. Meanwhile, many in the cryptocurrency world are pondering if investors will pour more money into blockchain-based digital assets. “Eventually the $3 trillion freshly printed dollars are going to find their way into places other than stocks and urban real estate,” said George Clayton, managing partner of New York-based fund Cryptanalysis Capital. “I’m wondering what the Fed will do when inflation starts accelerating.”

Other markets

Digital assets on CoinDesk’s big board are mixed, though mostly higher Wednesday. The second-largest cryptocurrency by market capitalization, ether (ETH), is trading around $247 and climbed 1.9% in 24 hours as of 20:00 UTC (4:00 p.m. ET). Ether’s 2020 price performance is trouncing bitcoin, led by the surge in interest of decentralized finance applications like stablecoins.

Read More: Bitwage Lets Earners Sidestep Volatility With Stablecoin Payments

The biggest cryptocurrency winners on the day include zcash (ZEC) up 4.9%, nem (XEM) climbing 3.3% and neo (NEO) in the green 2.5%. One lone loser Wednesday is cardano (ADA) in the red 2.4%. All price changes were as of 20:00 UTC (4:00 p.m. ET).

In commodities, oil is in the green, up 1.4% as a barrel of crude was priced at $38 at press time. 

The rest of the global equities market was flat on the day, a less-than-exciting week after huge run-ups the past week erased most of the losses incurred during the coronavirus-induced crash. “The market is going sideways. It’s not a good time to invest in anything right now stock-wise,” said Alessandro Andreotti, an Italy-based over-the-counter crypto broker.

Read More: Coinbase’s Ex-Lead Lawyer Sold $4.6M in Stock to US Banking Watchdog

The FTSE 100 index of top companies in Europe fell 2.1% Tuesday on forecasts the global economy will contract in 2020. 

Japan’s Nikkei 225 of large market capitalization companies ended the day flat, up less than a percent, in the green due to rising stocks in paper, transportation and real estate.

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When Patrick Nelson first ran for public office he was 25, had already founded two nanobiotechnology startups and had a deep appreciation for bitcoin. 

It’s that last point that gained him any media notoriety in what otherwise would have been a tame contest for a local seat of power in upstate New York.

“Bitcoin is well in line with the principles of federalism and checks and balances that underlie the American system of government. The blockchain and bitcoin are poised to do for the transfer of value what the internet did for the transfer of information,” he said in a 2016 Reddit AMA.

Related: Human Rights Foundation Funds Bitcoin Privacy Tools Despite ‘Coin Mixing’ Legal Stigma

While he’s not – yet – accepting bitcoin for campaign contributions as part of his election run, as a Democrat, to the New York Senate in the 43rd District (which extends from Kingston past Albany) against incumbent Sen. Daphne Jordan, a Republican, crypto is still a core political and personal interest. 

See also: Meet the US Senate Candidate Who’s Invested in Bitcoin Since 2013

“Every time I try to get out, they pull me back in. I’m kidding of course but it feels like that sometimes,” Nelson said. 

Last month, when the New York State Democratic primary was cancelled due to the coronavirus, Nelson spoke with party leaders to consider using a blockchain voting system to enable citizens to have a say in what delegates would be nominated. 

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

CoinDesk spoke with Nelson, who currently serves as Trustee in the Village of Stillwater and a New York State Democratic Committee member, about his attempts to convince state party leadership to use blockchain infrastructure for internal voting as well as the inconveniences of accepting crypto for political donations. 

The following conversation has been condensed and edited for clarity. 

You’ve been pretty vocal about crypto as a political candidate. How do you think the industry has changed since your first run for office in 2015?

Well, I accepted bitcoin in my previous two campaigns – until BitPay stopped supporting that service – as a way to demonstrate that I was running a forward-thinking campaign and embracing new technologies. I was an investor, still am. I like the idea of a decentralized payment system for people to control their own money without necessarily having to use banks as intermediaries if people don’t want to. That’s my connection to the space. 

I haven’t been too involved in it in recent years, but I have seen some interesting applications for blockchain technology in voting. For a second there, I actually thought there could be an application at the state level and the Board of Elections had, for a time, cancelled the Democratic primary in the state. One of the solutions I was bringing to leadership was an encrypted, remote voting system that could ensure “one person, one vote” using a blockchain system. 

There was a lawsuit that put the Democratic primary in the State of New York back on the ballot for June 23, but there was a time when we still had to elect delegates for the party without a primary. I was looking to see if there was an appetite for using those systems to involve voters in the process. 

Where did those conversations lead?

It probably wouldn’t have been the solution we would have used. We just voted by electronic device in the N.Y. Democratic party election – with the keypad thing that a lot of other organizations have used – and it took awhile for people to get comfortable with that. 

There was an opportunity for something like blockchain, and I was intent on pursuing it even if it was an unlikely solution. But before that conversation could proceed, the court stepped in and set the primary back on the calendar. To be fair, I’m glad we’re voting the traditional way and won’t have to throw together some ad hoc system. But if we did have to throw something together, having a blockchain voting solution would have enabled a mass election that could have involved the voters, rather than having just the state committee members, to elect the delegates. 

It probably would have fallen on deaf ears, but it would have started a conversation that could be useful down the line. The Democratic party apparatus is in a constant state of reform. I could see a blockchain voting system for the election of DNC (Democratic National Committee) members. These are quasi public/private offices that have large influence within the party organization, not the government, but still play a representative role in representing the State of New York in rulemaking, platform development for the national party. Blockchain could provide more transparency to that process.

One of the solutions I was bringing to leadership was an encrypted, remote voting system that could ensure ‘one person, one vote’ using a blockchain system.

Looking at the Iowa caucus debacle, which could be attributed to the use of new technologies, how would you address the security and training concerns of blockchain voting? It’s an application that even people in the blockchain industry are skeptical about. 

I’d love to hear some of the skepticism. That’s not something I’ve heard. 

Okay, well, perhaps the largest startup working on a voting solution – Voatz – was reviewed by the Department of Homeland Security and MIT and found to have major security flaws. 

Well, that would be concerning. The thing that I’m interested in is being able to use a public/private key issued to every voter to track if a person voted and only voted once, like solving the double-spend problem, and also encrypting the vote itself to ensure that a ballot is recorded without being assigned to an individual. I want to create a digital private ballot, but if it doesn’t work, it doesn’t work. 

Instead of going through a startup, would you support the state itself developing this sort of technology?

Longer term, for public elections I’m still a fan of paper ballots, headcount backups, and machines that cannot be hacked. I think digitization of governmental elections has been an area of extreme concern among voters. There’s an opportunity for use of this technology for non-governmental elections, as a means of doing something like an election on a lower budget, working within a party structure. 

Even the solution I mentioned before to elect delegates: It’s not something that would necessarily have been determinative by the vote, but it would have been good to have some sort of secure metric measuring the will of the state’s Democrats in that deciding process. 

Bitcoin played a more prominent role in your previous campaigns for Town Board and even Congress. Is this something that you’re underplaying?

Let’s put it this way, when you’re running for Town Board, it was basically the only interesting thing to differentiate the candidates. During the congressional campaign, yes, we accepted it and talked about it. Actually, it was a flash point in a lot of debates. Not that you’re going to watch this, but I had got into a pretty heated debate about bitcoin mining in the City of Plattsburgh, because it was driving up the community’s power rates. 

One of my competitors referred to bitcoin miners as parasites, and I was, like, “You should be careful about using that kind of language when talking about an emerging technology.” 

That being said, there was a legitimate problem there because Plattsburgh had a power purchasing agreement, up to a certain level, at reduced cost. That reduced cost was what brought the miners there in the first place, but then the mining operations were eating through the purchase agreement, which was supposed to be enough for the city for months, and pushing the entire city into a higher tier billing bracket. Everyone having to pay a higher rate because of bitcoin mining is a legitimate concern. I just don’t think they should be called parasites. 

Are you supportive of developing a crypto mining industry in New York State? 

Yeah, but you want to avoid the Plattsburgh situation. There would need to be a mechanism for miners to generate their own electricity or strike their own purchasing agreements with the grid. Then again, Plattsburgh was a special situation with that purchasing agreement. That’s local politics.

What were the compliance constraints around crypto donations?

I experienced the compliance of funding through bitcoin at both the state and federal level, and I have to say the federal government doesn’t seem to understand the process. They were trying to treat it like cash, so the contribution was subject to the same $100 cash limit. 

I was, like, “No, no, no treat it like PayPal, or like Act Blue credit processing.” To remain in compliance, I had to book it as an in-kind contribution and then separately book the sale into fiat. For every contribution it was adding two entries of compliance instead of one. 

It’s just a means of transferring value, but the [Federal Election Commission] got their heads tilted the wrong way. That goes to people generally misunderstanding what crypto is and what it isn’t.

On the state side, we always treated it like a payment processor and never ran into compliance issues. Last I checked, there was nothing in the state laws on the subject.

Is that why you’re not accepting bitcoin this time around? 

My attitude, with the experience of the last two races, is, if we get folks who want to support the campaign in bitcoin, if there is demand for the service, we’ll look into providing that avenue. If there’s sufficient volume, we’ll facilitate it. Otherwise I’m not looking into right now. I put myself out there twice to support it, and it wasn’t a significant piece of what we were doing to justify the work we had to do on the compliance side. 

You’ve mentioned in the past you would like to see New York’s BitLicense reformed. 

I would like it to be as hands-off as possible, while still preventing fraud and mishandling. I don’t like unnecessary bureaucracy or compliance costs on the part of new businesses, or situations where people need to make friends with people in politics in order to build a business. 

See also: Ex-Yang Aide Is Running for Congress with Bitcoin and UBI on His Mind

Why don’t we let people decide how they want to do it and just ensure products are safe and people aren’t ripped off – you know, the basic regulatory oversight that a government is supposed to provide. 

I would appreciate your readers reaching out to provide me with better information and provide perspective on this. I’m looking to represent  my constituents. So any bitcoin miners or crypto enthusiasts in the 43rd district should definitely reach out and I’ll take that information under advisement. 

To underscore my philosophy. It’s like the [Securities and Exchange Commission’s] regulations show they clearly do not understand what they are dealing with in the way in which they choose to regulate it. When you have the situation of having regulators that don’t know how to regulate, and are putting crypto in categorical boxes, it can shut out innovation of technologies that don’t exist in those boxes. 

What’s it like running a campaign during a pandemic?

Sometimes it feels like you’re not. So much of running for office is jumping around to events, knocking on doors and meeting people. A lot of the traditional signifiers that my brain would see and say, “Yes, I’m being a candidate now” aren’t present. We’re doing Zoom conferences with committees and activist groups and it has some of the same flavor, but it’s really just you sitting at a desk at home speaking into a microphone. 

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In a now-deleted tweet, Coinbase Custody International announced it was adding support for withdrawals and deposits in the stablecoin tether. 

While that May 30 tweet is now gone, it’s hard to hide its effects given a recent surge in the stablecoin’s count of active addresses. The number of unique addresses active in the network, either as a sender or receiver, nearly doubled to 203,776 last week, having risen by 26% in May, according to data provided by the blockchain analytics firm Glassnode. However, as of Tuesday, the number of active addresses was back down sharply to 122,809.

Coinbase Custody’s original tweet was shared on the cryptocurrency exchange Bitfinex’s social platform and also acknowledged by Paolo Ardoino, chief technology officer at Bitfinex and Tether Ltd (creator of tether).

Related: Crypto Payroll Startup Bitwage Lets Earners Sidestep Volatility With Stablecoin Payments

It is unclear when the tweet was removed. Also, there is no mention of USDT in the list of supported assets on its official website. CoinDesk reached out to Coinbase Custody on Tuesday for information on whether it are supporting tether. As of press time, we have yet to receive any reply. 

While that mystery remains, the on-chain data shows the original announcement was followed by a spike in the number of active addresses. 

“Coinbase Custody International’s announcement may have contributed to the recent jump in addresses,” said Wilson Withiam, research analyst at data provider Messari.

The custodian mainly serves wealthy institutional investors, such as family offices and trading firms. As such, one may conclude that its decision to add support for tether is reflective of the increased institutional interest in the stablecoin.

Related: Bittrex, Poloniex Added to Lawsuit Claiming Tether Manipulated Bitcoin Market

See also: As Tether Supply Hits Record Highs, It Moves Away From Original Home

Demand for tether and other dollar-backed stablecoins has been on the rise this year in the wake of the U.S. dollar shortage in the global economy and extremely low interest rates in fiat markets as a result of the coronavirus pandemic. While commercial banks across the advanced world are offering near zero interest rates on deposits, cryptocurrency lending platforms including Nexo and Celsius Network are paying 8% interest rate on tether deposits.

Hence, it’s no surprise the number of active addresses has risen by over 600% so far this year. Meanwhile, Tether Ltd., the company behind the stablecoin, has issued over $5 billion worth of tether since January and its market capitalization has increased from $4 billion to $9.3 billion, according to Glassnode.

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