White Star Capital Digital Asset Fund - newsletter #28
Blackrock grants green light for bitcoin Futures, while Harvard and Yale are already buying crypto asset!
From Wall Street to the Ivy League
2021 is off to an exhilarating start for the digital asset space, with another busy two weeks in the sector since our last issue. Wall Street giants including Goldman Sachs are entering the crypto custody business, while Harvard and Yale’s endowment funds have reportedly been investing in cryptocurrencies over the past year. These developments point to the increasing trust major institutions are placing in the sector and are laying the groundwork for an exciting year ahead.
Ethereum trading volumes are at an all-time high as the world's second-largest cryptocurrency continues to surge, having almost doubled in value since the start of this year and surpassing its 2018 all-time high. With Galaxy Digital soon set to launch Ethereum focused funds for institutional investors, and the pace of innovation within DeFi and social tokens on the smart contract platform, 2021 might be remembered as the year of ETH.
In regulatory news, Anchorage became the first federally-chartered national crypto bank, with BitPay and Paxos next in line. As lawmakers across the globe continue to develop regulations and conduct pilots, it is becoming clear that blockchain is a global paradigm shift, and becoming a priority for many governments.
Funding continues to demonstrate healthy volumes. Leading projects from 2018-2019 have been graduating to later-stage rounds and publicly listed bitcoin miner Marathon and crypto exchange OSL raising funds through new stock offerings. Consolidation within the sector also continues to accelerate with exchanges leading the charge.
In other news, social tokens are seeing increased adoption as a driver of ownership as COVID-19 has forced creators, brands and artists to rethink their fan monetization and engagement strategies. 2020 saw social tokens make the leap from crypto circles to consumer audiences, with artists including Akon, Ja Rule and Lil Yachty launching their tokens. Grammy Award-winning band Portugal. The Man also recently joined the social token bandwagon with Rally as a coin partner.
All in all, another busy few weeks in the digital asset universe as the pace of developments in the space show no signs of slowing down!
I. Enterprises & Institutions
BlackRock grants two of its funds go-ahead to invest in bitcoin futures
BlackRock, the world’s largest asset manager with $7.81tr under management, has granted two of its funds the ability to invest in bitcoin futures according to recent documents filed with the SEC. The funds are expected to only invest through cash-settled bitcoin futures.
Harvard and Yale endowment funds reportedly have been buying crypto
Harvard, Yale, Brown and the University of Michigan endowment funds, as well as several other colleges, have been reportedly buying cryptocurrency directly on exchanges for over a year. The move by universities into cryptocurrencies shows a broadening marketplace.
Goldman Sachs looking to enter crypto custody market
Wall Street giant Goldman Sachs has reportedly issued a request for information (RFI) to explore digital asset custody as it plans to enter the business. JPMorgan and Citi are also said to be looking at crypto custody.
IHS Markit likely to join crypto indexes race on Wall Street
IHS Markit said in a recent earnings call that it is likely to join the cryptocurrency index game. President of Financial Services Adam Kansler mentioned that the company already has “tactical partnerships” with crypto firms like Lukka to source cryptocurrency pricing and reference data, which intend to form the bedrock of the index.
Marathon Patent Group buys $150m worth of bitcoin for company's treasury reserves
Nasdaq-listed Marathon Patent Group, which is involved in bitcoin mining, has purchased around 4,813 bitcoin for about $150m. This is the first time it has bought bitcoin from the market, and the investment is part of the company's treasury funds.
MicroStrategy buys additional $10m worth of bitcoins
Nasdaq-listed MicroStrategy has purchased an additional 314 bitcoin for $10m in cash, bringing MicroStrategy's total bitcoin holdings to 70,784 bitcoin, worth more than $2.28bn at current prices. MicroStrategy has acquired these bitcoins at an aggregate purchase price of around $1.2bn.
Coinbase now has over $90bn in assets on its platform
In a recent update on its website, Coinbase said that the exchange now has over $90bn in assets on platform and over 43m registered users. Coinbase’s asset surge is likely driven by the likes of MicroStrategy, Ruffer Investment and other institutions that have used its prime brokerage service to make large bitcoin buys in recent months.
Galaxy Digital to launch a suite of Ethereum-focused funds
Mike Novogratz' Galaxy Digital is launching a suite of ETH-focused funds that will be officially rolled out to investors in mid-February. The fund's pricing will be drawn from Bloomberg Galaxy Ethereum Index, with assets being held in custody by Gemini.
Rothschild Investment Corporation increases stake in GBTC
Rothschild Investment Corporation, a Chicago-based financial institution, has increased its stake in Grayscale’s Bitcoin Trust to 30,454 shares as of December 31, 2020, up from 24,500 shares in October, according to a filing with the US SEC.
Traditional lenders extended loans to crypto space via Genesis in Q4
Several institutions parked their idle cash on Genesis Capital’s balance sheet, the cryptocurrency lender and trading firm announced in its Q4 earnings report. Over the quarter, the total volume of Genesis’ active loans outstanding increased by 81% to $3.8bn, while loan originations increased by 46% to $7.6bn.
Ant Financial quietly conducted a digital yuan test in Shanghai
Alibaba’s payment affiliate Ant Financial has quietly conducted a small-scale test of digital yuan on its mobile app AliPay. The test, conducted in Shanghai, is the first known instance in which the digital yuan has been tested in a mobile wallet developed by a non-state-owned entity.
Russian bank Sberbank planning to launch stablecoin by spring 2021
Sberbank, the largest state-owned Russian bank, has reportedly filed an application with the Bank of Russia to launch a blockchain platform for its “Sbercoin” stablecoin. Sergey Popov, director of the transaction business at Sberbank, said that the bank has already “completed an internal testing to see that the solution works”.
Messaging app Signal reportedly exploring crypto payments features
Privacy-focused messaging app Signal is reportedly working to develop a crypto payments service for its users. Signal has reportedly run pilot tests for a token on the Binance-backed, Stellar-based privacy cryptocurrency platform MobileCoin.
Cloudfare unveils new direct gateway to support distributed web
Internet hosting giant Cloudflare has unveiled a new gateway to the distributed web that will enable it to connect to domains hosted on the Ethereum Name Service (ENS) and the Interplanetary File System (IPFS) by a new indexing service.
Microsoft and Tanla launch blockchain-based communications platform
Microsoft has teamed up with India-based cloud communications firm Tanla Platforms to launch a blockchain-based communications platform-as-a-service aimed at offering more private and secure messaging. The edge-to-edge encrypted platform has been built on Microsoft Azure and can be accessed by clients via an API.
BMW, Ford help advance standard to create ‘tamper-proof’ blockchain identities for vehicles
A working group formed under the Mobility Open Blockchain Initiative (MOBI), which is co-chaired by BMW and Ford, has released the Vehicle Identity Standard II. It is the second instalment of a standard aimed at recording the "true" identity of vehicles on a blockchain platform with the aim of tackling used car fraud.
MasterCard files patent for storing media rights on blockchain
Payments giant MasterCard has filed a patent for storing platform-agnostic digital media rights on blockchain. The solution will help ensure that royalties can be paid directly to the rights owner whenever a viewer buys a ticket.
Samsung mulling $10bn chipmaking facility in Texas
Samsung is considering investing over $10bn to set up a chip-making facility in Austin, Texas. A US-based chip foundry is expected to have positive effects on supply chain strains suffered by bitcoin mining machine manufacturers, who routinely struggle to obtain a steady and sufficient quantity of chips from foundries.
Our overall takeaway
A month into 2021, leading financial institutions are embracing the new crypto asset class, while publicly-listed companies are increasingly adding crypto assets to their balance sheets. With growing appeal reaching leading endowments, 2021 seems poised to be the year when crypto assets truly gains mainstream acceptance.
II. Government & Regulation
Cryptocurrency-related crime fell significantly in 2020, says Chainalysis
Blockchain investigation firm Chainalysis said in a recent report that cryptocurrency criminal activity fell to 0.34% or $10.0bn in transaction volume in 2020. Criminal activity had represented 2.1% of all transaction volume or roughly $21.4bn worth of transfers in 2019. These numbers are encouragingly low, debunking many myths around KYC/AML in the sector.
Janet Yellen say cryptocurrencies can improve the financial system
Janet Yellen, who was recently confirmed as the US Secretary of the Treasury, believes that the US should consider the benefits of cryptocurrencies, alongside the potential for misuse. She said that cryptocurrencies have the potential to “improve the efficiency of the financial system” in a written response to the Senate Finance Committee.
President Biden officially names Gary Gensler for SEC chairman position
President Biden named Gary Gensler as his pick for the post of SEC chairman on January 18, two days before his swearing-in ceremony. Gensler had served as chairman of the U.S. Commodity Futures Trading Commission (CFTC) from 2009 to 2014, and had led Biden's transition planning for financial industry oversight since November.
Miami mayor considering investing part of city's treasury into bitcoin
Miami mayor Francis Suarez is considering investing some of the city's treasury reserves into bitcoin (BTC). He also said that the city is looking to create a regulatory framework that makes it "the easiest place" in the US to do crypto business.
Anchorage becomes first federally-chartered national crypto bank
Crypto custodian Anchorage has become the first national “digital asset bank” in the US after securing conditional approval for a national trust charter from the US Office of the Comptroller of the Currency (OCC). Crypto firms BitPay and Paxos have also applied for federal charters through the OCC.
FinCEN further extends comment period for proposed crypto wallet rule
The Financial Crimes Enforcement Network (FinCEN) further extended the comment period for its controversial crypto wallet rule on January 26. It had previously extended the period by 15 days on January 14. The proposed rule requires crypto exchanges to gather and store counterparty information for transactions to unhosted wallets.
Lawmakers propose letting the only government-run bank in the US become a crypto custodian
A group of North Dakota state lawmakers have proposed to allow The Bank of North Dakota to become a crypto custodian. The bank is the only state-owned bank in the US. The bill, introduced on January 11, states that the bank “may provide custodian services for digital currency and may implement a digital currency exchange.".
Bank for International Settlements is building a CBDC settlement platform
CBDC research will be a top priority for the Bank for International Settlements’ Innovation Hub (BISIH) in 2021 as per the bank’s annual work program. The bank plans to “explore the feasibility of faster and cheaper cross-border payments” using central bank digital currencies.
Bank of Singapore says crypto could replace gold as a store of value
Bank of Singapore, a private banking arm of the OCBC Bank, has said in a research note that cryptocurrencies have the potential to partially replace gold as a store of value. However, cryptocurrencies need to overcome many hurdles including high volatility, regulatory acceptance and reputational risks before that, the note added.
Shenzhen's second $3m digital yuan test sees nearly 140k transactions
The city of Shenzhen started a second run of the digital yuan test on January 7 by giving away $3m worth of digital yuan to 100,000 local citizens via a lottery. Over 1.8m residents signed-up for the lottery. The winners have completed ~140,000 transactions during the first 10 days of the trial.
Bank of France processes $2.4m in central bank digital currency pilot
The Bank of France successfully piloted a central bank digital currency (CBDC) experiment in December, using it to settle monetary fund shares on a private blockchain platform. The pilot saw $2.4m worth of simulated shares purchased and sold by investors using a CBDC.
Dubai’s financial regulator plans to develop a regulatory framework for the crypto sector
The Dubai Financial Services Authority (DFSA) said that it will develop a regulatory regime for digital assets as it announced its business plan for 2021-2022. The regulator will reportedly publish two consultation papers seeking feedback on its proposed rules in the first and second quarters of this year.
Our overall takeaway
Central banks around the world are actively working towards developing regulatory frameworks and conducting pilots to support its widespread adoption. Anchorage has become the first federally-chartered national crypto bank in the US, a very encouraging sign as lawmakers create a clearer regulatory regime for the sector.
III. Funding & Exits
Saddle raises $4.3m in seed funding for slippage-free DeFi trading
Silicon Valley-based decentralized finance (DeFi) system Saddle has raised $4.3m in seed funding from Framework Ventures, Polychain Capital and Electric Capital. The new automated market maker (AMM) is focused on preventing slippage in value between different types of pegged-value assets like stablecoins and tokenized bitcoin.
Digital asset manager Arca raises $10m in Series A funding
Digital asset-focused investment firm Arca has raised $10m in Series A funding round led by RRE Ventures. Other participants included Alex Tisch, the president of Loews Hotels & Co., and a group of financiers led by Littlebanc Advisors.
Digital securities platform iSTOX closes $50m Series A funding round
iSTOX, a digital securities platform that wants to make private equity investment more accessible, has garnered $50m in Series A funding from investors including government-owned Development Bank of Japan and JIC Venture Growth Investments, the VC arm of Japan Investment Corporation, a state-backed investment fund.
Wyre raises $5m as part of Series B round from Stellar Development Foundation
Blockchain payment firm Wyre has raised $5m from Stellar Development Foundation as part of the Series B2 round, with Draper Associates and Great Oaks Venture Capital investing an additional $2.5m. By adding Wyre to its ecosystem, Stellar plans to expand its USDC on/off ramps with pairs for USD, EUR, GBP, CAD and AUS.
Decentralized derivatives exchange dYdX raises $10m in Series B round
Decentralized derivatives exchange dYdX has raised $10m in a Series B funding round led by Three Arrows Capital and DeFiance Capital. Andreessen Horowitz and Polychain Capital also participated in the round. The company plans to use the funds to increase its product offering and increase its presence in China.
Crypto market maker Wintermute raises $20m in Series B funding
London-based Wintermute, an algorithmic liquidity provider for digital assets, has raised $20m in Series B funding round led by Lightspeed Venture Partners. Pantera Capital, Sino Global Capital and Kenetic Capital also participated in the round, among others. Wintermute will use the funds to open its first international office in Singapore in the first quarter of this year, spearheading a general push into Asia.
Bitcoin exchange Mercado Bitcoin raises $38m in new funding round
Brazil’s largest Bitcoin exchange, Mercado Bitcoin, has raised nearly $38m from venture capital firms including Parallax Ventures, Evora Fund and Banco Plural. The company will use the funds to expand further into Latin America, with Chile, Mexico and Argentina among the first jurisdictions it will expand into.
Crypto exchange OSL operator raises $90m through stock top-up
Hong Kong-listed BC Group, that operates crypto exchange OSL, has raised $90m through the issuance of 45m new shares. The company plans to use the proceeds from the raise to maintain and expand OSL's trading platform and digital asset services.
Blockchain mortgage platform Figure closes $100m financing facility from JPMorgan
Blockchain mortgage platform Figure has closed a $100m financing facility from JPMorgan, its fifth such facility so far. The company has raised close to $1.5bn through the five credit facilities till date from funding partners that include a number of other Wall Street banks including Jefferies. Figure uses blockchain tech to issue mortgages and loans at greater speed and reduced cost by automating parts of the process.
Bitcoin miner Marathon to raise $250m through a direct stock offering
Las Vegas-based bitcoin mining company Marathon Patent Group is raising $250m through a direct offering of 12.5m shares of common stock at $20 per share. The CEO Merrick Okamoto said that he intends to use the funds to purchase more mining machine from Bitmain and expand the company's mining facilities.
Gemini acquires Blockrize, to launch credit card offering bitcoin rewards
Crypto exchange and custodian Gemini has acquired fintech startup Blockrize to launch a credit card in the US. The new card would offer up to 3% rewards in bitcoin and other cryptocurrencies. The deal was reportedly closed in Q3-2020, with all four employees of the startup joining Gemini.
Alameda-backed investment platform Stacked acquires Alertatron
Stacked, an Alameda-backed automated investing startup launched in early 2020, has acquired algorithmic trading and signals service Alertatron. The two automated cryptocurrency services have merged to further "demystify the investing experience" for novice cryptocurrency buyers.
Winklevoss twins considering taking Gemini Trust public
Bitcoin billionaires Cameron and Tyler Winklevoss have said that they’re considering taking Gemini Trust, the cryptocurrency exchange and custodian they founded, public amid the resurgence of interest in cryptocurrencies.
Coinbase to offer a secondary market for shares ahead of its public listing
Coinbase, the largest cryptocurrency exchange in the US, will launch a secondary market for its private stock on Nasdaq Private Market ahead of its much-anticipated public market debut. It is expected that Coinbase will pursue a direct public listing rather than a standard IPO.
Our overall takeaway
Consolidation in crypto-financial services looks to be gaining momentum as the space matures. Funding continues to exhibit healthy volumes and strong investor appetite, with a growing number of early projects graduating to Series B levels.
IV. Project Launches & Updates
Brave becomes the first internet browser to offer native IPFS integration
Brave has become the first desktop web browser to integrate InterPlanetary File System (IPFS), a decentralized peer-to-peer protocol. IPFS is designed to make the web less centralized and to avoid censorship. IPFS keeps what you browse so that it can be used while offline, which is key in places with expensive or spotty internet.
Kaiko to expand FIGI standard for crypto assets
Technology standards consortium, Object Management Group (OMG) has selected Kaiko as the certified provider of Financial Instruments Global Identifier (FIGI) with the aim to expand the open data standard to blockchain-based digital assets. FIGI is an open standard for the issuance of unique identifiers that can be assigned to financial instruments including common stock, options and binds, among others.
DeFi protocol Celo planning to launch a Euro-pegged stablecoin
The developers behind the decentralized digital payments protocol Celo are planning to launch a new stablecoin which will be pegged to the Euro. The Celo platform already underpins a US dollar-pegged stablecoin, which was launched in the summer of last year and can be used to make payments over mobile devices.
Singapore Exchange partners with Temasek to launch digital asset business for capital markets
Singapore Exchange (SGX) and state-owned investment firm Temasek Holdings are launching a digital assets business focusing on capital market products. SGX will use Temasek’s expertise to create a business catering for products such as bonds using smart contracts, ledger and tokenization technologies.
ConsenSys teams up with China’s Blockchain-based Service Network
ConsenSys, one of the world’s largest blockchain software companies, is partnering with the Blockchain-based Service Network (BSN), a Chinese government-backed blockchain project. As part of the partnership, ConsenSys’ Ethereum-based distributed ledger protocol, ConsenSys Quorum, will feature in the BSN ecosystem.
Circle API to now support ACH payments and payouts
Circle API will now support ACH payments and payouts, enabling customers to make and receive payments using ACH, with seamless conversions into and out of USDC.
Our overall takeaway
The expansion of FIGI standard for crypto assets and new partnerships like SGX-Temasek is set to broaden the base of blockchain-based financial market solutions.
V. Other Bits We're Excited About
Grammy-winner Portugal. The Man launches social token on Rally
2018 Grammys Award-winner Portugal. The Man has launched its social token on Rally’s “Creator Coin” platform. Such social tokens have seen increased adoption recently as artists who can’t tour due to COVID-19 restrictions are leveraging these tokens to evolve their fan monetization and engagement strategies.
20 Beeple NFT artworks worth $2.2m to be tokenized and sold in a virtual music festival
Metapurse, a crypto and NFT fund financed by renowned NFT collector Metakovan, is going to tokenize all 20 of the 1/1 NFT artworks it acquired for $2.2m in December’s “Beeple Everydays: The 2020 Collection” auction. Metapurse will tokenize and sell these as “B.20 bundle” at a free cultural quasi-festival - Metapalooza - on January 23.
Rick and Morty crypto art sells for $150,000
A crypto art piece by Justin Roiland, the co-creator of the famous animated series Rick and Morty, has sold for $150,000 on non-fungible token marketplace Nifty Gateway through a silent auction.
AC Milan leverages blockchain to reach 450m fans during COVID
European football giant AC Milan has become the latest major sporting institution to employ blockchain-based fan tokens as it tries to reach 450m fans amid lockdowns. The club will launch the $ACM fan token on the Chiliz (CHZ) blockchain, taking the number of sporting organizations on the Chiliz blockchain to 20. Other organizations include European football clubs FC Barcelona, Paris Saint-Germain, AS Roma and Atletico Madrid, and leading MMA organization, the UFC.
DCG's Foundry to colocate 14,000 bitcoin mining machines in U.S.
Digital Currency Group’s mining subsidiary Foundry is partnering with a U.S. mining farm to colocate 14,000 bitcoin ASIC miners to the country. The aim of the move is to make bitcoin mining more accessible to institutional investors in North America.
January monthly stablecoin volume at $237bn, breaks the prior record
January 2021 has already seen $237.2bn in on-chain stablecoin volume as of January 25, representing the highest monthly amount of its kind and surpassing December's total of $178.3bn by 33%.
Our overall takeaway
Mainstream crypto applications are continuing to grow as the pace of innovation in Web3 and DeFi applications show no sign of slowing down.