White Star Capital Digital Asset Fund - newsletter #22
Announcing our fund launch and investment in Multis, plus a whole lot of news!
Announcing our fund launch and our investment in Multis
We are extremely excited to formally announce the launch of the White Star Capital Digital Asset fund. As many of our readers may know, this new fund will exclusively focus on investing in crypto-networks and blockchain-enabled businesses. With the broader blockchain market growing faster than ever, we are excited to partner with the next generation of startups building global networks and frictionless business models. If you are an entrepreneur building in the space, please reach out!
Another WSC Digital Asset announcement this week: our second portfolio Multis have announced their $2.2m seed round following their completion of Y Combinator. Investors in the round alongside WSC included Y Combinator, Coinbase Ventures, eFounders, Greenfield One, Digital Currency Group, Monday Capital and SGH Capital, and proceeds of the round will be leveraged to continue building out a next generation business bank where cryptoassets and fiat currencies can be managed and exchanged in one solution seamlessly. Congratulations to Thibaut and Theo as well as the whole Multis team!
Beyond our announcements, it’s been another busy couple of weeks in the digital asset space, with an increased acceptance of Bitcoin as an institutional asset, as evidenced by Bakkt’s all-time-high volumes and MicroStrategy’s additional $175m BTC investment. Meanwhile, a consortium of global banks led by HSBC has launched a blockchain-enabled trade finance platform, while industry giants like Ernst & Young, Goldman Sachs and Plaid (Visa) continue to further build out their digital asset product offering and teams.
On the government and institutional front, it has become abundantly clear that blockchain is a global paradigm shift. Beyond central bank digital currencies (CBDC) and tokenized bond issuances, the benefits of tokenized stocks / digital securities are being highlighted by the US SEC - another positive indication of the tides shifting in the favor of blockchain technology which offers regulators a better audit trail and encoded compliance functionality than ever before.
Beyond Multis, recent weeks were filled with a flurry of equity and token early-stage rounds, as well as an impressive $52m series A by BitPanda. We also observe that increasingly, as we hypothesized some weeks ago, exits are being driven by traditional enterprises (eg CB Insights’ acquisition of Blockdata) rather than solely intra-sector consolidation.
Elsewhere, we continue to be impressed by the traction and pace of innovation in Ethereum and in DeFi specifically, led by projects like Uniswap - the charts below from The Block notably show the kind of trajectory global investors can no longer ignore.
As Ethereum transitions to Ethereum 2.0 and the DeFi sector continues to mature, we are extremely excited to see more projects getting involved with the intersection of DeFi and non-fungible tokens (NFTs). Furthermore, the gamification of finance and new blockchain financial primitives such as streaming payments and onchain insurance are coming to market. Beyond decentralized finance we also observe that stablecoins, NFTs as in-game or art items, and social tokens are gaining traction rapidly both as narratives within the industry and as verticals with significant user and transaction activity.
I. Enterprises & Institutions
Bakkt (Intercontinental Exchange) Bitcoin future market hits all-time high
Following months of trailing rival CME, Bakkt (Intercontinental Exchange), clocked in $173m worth of notional trading volumes on Tuesday September 15th —an all-time-high. This equates to an all-time high 15,995 Bitcoin traded. By way of comparison, volumes for CME's bitcoin futures stood slightly above $383m on Monday September 14th. Bakkt is also set to launch a retail trading app in the coming weeks.
MicroStrategy CEO says the publicly traded firm has bought another $175m in Bitcoin
In our newsletter #20 (sent August 13th 2020), we reported that MicroStrategy bought $250m in Bitcoin, becoming the first publicly-traded company to buy the currency as part of its capital allocation strategy. In September 2020, the company indicated in a regulatory filing that it might expand its Bitcoin holdings, and as of Wednesday September 16th, its CEO confirmed it had done just that, with an additional $175m purchase. In its SEC filings, the firm stated that Bitcoin serves as the company's "primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets, including future potential share repurchase activity." The firm had previously positioned its bitcoin purchases as a hedge against inflation.
Ernst & Young launches Ethereum-based procurement solution for enterprises
Ernst & Young continues to innovate within the blockchain space, and has formally announced the launch of a new blockchain-based procurement solution for enterprises, dubbed EY OpsChain Network Procurement. The solution allows companies to run procurement activities on the Ethereum blockchain and converts procurement agreements into digital smart contracts. Additionally, the big four firm has also launched a new analytics product for the Bitcoin blockchain, allowing users to track and analyze on-chain data that could support the management of legal, compliance, and fraud risks.
Goldman Sachs is expanding its digital assets team
Goldman Sachs is seeking to expand its digital assets team with two new international hires. The firm is seeking to add a vice president position in the UK and a research and development software engineer in Singapore. The firm restructured its digital assets team earlier this year and has grown to about 10 people, with notable additions including Oli Harris, whom the firm brought on from JPMorgan, and Amar Amlani, who previously was an executive director in cross assets financing at Goldman.
Plaid integrates with Decentralized Finance protocols
Plaid, which connects traditional bank accounts to thousands of digital platforms, is working with two decentralized (DeFi) startups to bring blockchain applications into mainstream DeFi platform. It has confirmed integrations with Dharma, the Uniswap-integrated wallet with early backing from Coinbase and others as well as Teller Finance, a project looking to bring unsecured lending to the Ethereum blockchain.
Silvergate’s payments platform crosses $100bn in transfer volume
Silvergate Exchange Network (SEN) recently exceeded $100bn in total trading volume. SEN allows customers to instantly move dollars between different crypto exchanges and is available 24/7. For the full-year 2019, the bank saw around $33bn transacted on the network compared, which jumped to $76bn in the first nine months of this year. Silvergate has enhanced its offerings on the payments network over the recent quarters, enabling features including loan funding and repayment processing.
HSBC, BNP Paribas, ING, Standard Chartered, SEB, Citi, Bangkok Bank and CTBC launch blockchain trade finance platform
Contour, a blockchain trade finance platform owned by eight shareholder banks including HSBC, was recently launched commercially. Formally known as Voltron, Contour uses R3’s Corda blockchain platform to create a global network designed to digitise and modernise the $18tr trade finance market. The commercial launch comes after live pilots in 14 countries and a global trial with over 50 banks and corporates which demonstrated the platform's ability to reduce the time taken to execute the entire process of paper-based Letter of Credit from 5-10 days to under 24 hours. Other Contour shareholders include Bangkok Bank, BNP Paribas, CTBC, ING, Standard Chartered, SEB and Citi Bank.
Our overall takeaway
Finance is going digital and migrating onto both public and private blockchains, while Bitcoin continues to gain mainstream and institutional adoption.
II. Government & Regulation
All stocks could become tokenized, says SEC chairman Clayto
In a webinar jointly hosted by the Chamber of Digital Commerce and blockchain startup Securrency, Jay Clayton, the chairman of the US Securities and Exchange Commission (SEC), said that he thinks all stocks could become tokenized one day. He also said that the SEC’s door is “wide open”if someone can demonstrate a way to “tokenize the ETF product in a way that adds efficiency”.
CIA launches in-house R&D arm, highlights blockchain as research area
The US CIA announced the launch of CIA Labs, a new research and development unit. Among the areas of research are "distributed ledger/blockchain-enabled technologies," as well as virtual/augmented reality, robotics and quantum computing, among other areas.
OCC rules US banks can hold reserve funds for stablecoin issuers
According to new guidance from the Office of the Comptroller of the Currency (OCC), federally chartered banks can hold reserve funds for stablecoin issuers, provided that ” the issuer has sufficient assets backing the stablecoin in situations where there is a hosted wallet.” The SEC's FinHub staff put out a release alongside the OCC letter, saying: "[w]hether a particular digital asset, including a so-called 'stablecoin,' is a security under the federal securities laws is inherently a facts and circumstances determination."
European Commission officially proposes regulatory framework for cryptoassets and stablecoins
The European Commission officially unveiled a proposed regulatory framework for crypto-assets and stablecoins, following a leaked draft that made the rounds a week ago. The 168-page bill is called Regulation on “Markets in Crypto Assets" (MiCA) and offers guidance on what qualifies as a crypto asset and defines token subcategories. If passed, the rules would apply to the 27-member states of the EU, which would give crypto and blockchain startups confidence to operate in the eurozone without grey areas. EU officials are also exploring the concept of a regulatory sandbox for companies that are paving the way for crypto trading and settlements.
Estonia's central bank launches digital currency research project
Estonia’s central bank, Eesti Pank, recently launched a multi-year research project to assess viability of further launching a central bank digital currency (CBDC). The Estonian government has already deployed KSI Blockchain for its e-initiatives. Guardtime, one of the developers of KSI Blockchain, and the SW7 Group, a London-based tech startup, would both work with the central bank on the research project that is expected to last around 2 years.
Thailand's central bank issues $1.6bn worth of government bonds on IBM Blockchain
Thailand’s central bank, The Bank of Thailand, recently issued $1.6 billion worth of government savings bonds on IBM Blockchain. The central bank’s blockchain-based platform was launched only 2 weeks before the issuance, reducing the issuance process time from 15 days to 2 days. IBM, in its announcement, also highlighted that the process reduced costs for all parties — issuers, underwriters, and registrars — as blockchain reduces operating and reconciliation costs
South Korea’s central bank set to test digital currency transactions from next year
The Bank of Korea, South Korea’s central bank, will begin testing its digital currency for pilot transactions starting next year. The bank completed the design and technology review of its digital currency recently and would now focus on determining whether the digital Won operates normally in a “restricted environment”.
Our overall takeaway
While central bank digital currencies and government bond issuances have been use cases which have already been gaining traction in past months, the Chairman of the SEC highlighting the benefits of tokenized stocks / digital securities is a newer positive indication of the tides shifting in the favor of blockchain technology, which offers regulators a better audit trail and encoded compliance functionality than ever before.
III. Funding & Exits
Announcing our Digital Asset fund launch
Our team is extremely pleased to formally announce the first close and official launch of our new Digital Asset fund, which will focus on crypto-networks and blockchain-enabled businesses. With the broader blockchain market growing faster than ever, we are excited to partner with the next generation of startups building global networks and frictionless business models.
Announcing our investment in Multis’ $2.2m seed round
Another White Star Capital Digital announcement this week, as our second portfolio Multis, which is building a new-age, crypto-enabled business bank, announces their $2.2m seed round following their completion of Y Combinator. Investors in the round alongside ourselves included Y Combinator, Coinbase Ventures, eFounders, Greenfield One, Digital Currency Group, Monday Capital and SGH Capital.
Paraswap raises $2.7m seed round
Paris-based decentralized exchange aggregator Paraswap, has announced a $2.7m seed round, in the form of a SAFT (Simple Agreement for Future Token). The round included contributions from over 30 investors, including the likes CoinGecko, Blockchain Capital, and Stani Kulechov, the founder of DeFi protocol Aave.
Blockchain Capital joins the Libra Association
Blockchain Capital, an SF-based venture firm, joined the Libra Association as its twenty-seventh member. The Facebook-led venture had also added Singapore investment giant Temasek and venture firms Paradigm and Slow Ventures as its members three months ago. Libra is gearing up for the launch of its stablecoins, recently publishing an updated white paper and applying for the payment license from Switzerland's Financial Market Supervisory Authority (FINMA).
APYFinance raises $3.6m seed round
DeFi yield farming aggregator APYFinance raised a $3.6m financing round, with participation from Alameda Research, Arrington XRP Capital, Coingecko, and Parafi Capital partner Santiago Roel Santos, among others. APY will also launch its native governance token called APY and kick off a liquidity mining program in the coming weeks.
Covalent raises $3.1m round
Covalent, a data analytics startup focused on Ethereum, has raised $3.1m in a new funding round. The round was co-led by Woodstock Fund, 1kx Capital, and Mechanism Capital. Other participating investors included CoinGecko and Alameda Research. Covalent currently provides on-chain data and analytics for the Ethereum Network, and plans to use the new funding to support Ethereum sidechains and other layer-1 blockchains.
Sia Tech raises $3m in seed funding
Sia Tech, a blockchain startup building a decentralized cloud storage platform, has raised $3m in seed funding in a round led by Paradigm, with participation from Bain Capital Ventures and Dragonfly Capital Partners, among others.
Dune Analytics raises $2m seed round
Ethereum analytics project Dune Analytics has announced a $2m seed round, led by Dragonfly Capital, with participation from Coinbase Ventures, Coingecko and Multicoin Capital, among others.
PureStake raises $1.4m seed round
Blockchain startup PureStake has raised $m in seed funding to launch Moonbeam Network, an Ethereum-compatible smart contract platform built on the Polkadot blockchain. The seed round was led by Hypersphere Ventures, Polkadot co-founder Robert Habermeier’s venture firm, with participation from Arrington XRP Capital, HashKey, and Bitcoin.com Exchange, among others.
Liquity raises $2.4m seed round
Liquity, an ethereum-based lending protocol, has raised $2.4m in seed funding round led by cryptocurrency investment firm Polychain Capital. a_capital, Lemniscap and 1kx also participated in the round. The funds will be used to support further development of the protocol as well as to grow the company team.
DODO raises $5m token round
Decentralized exchange DODO has raised $5m via a private sale of its new DODO exchange token, valuing the company at $50m. The company had announced in August that it had raised $600,000 in seed funding at a valuation of $10m.
Bitpanda raises $52m series A
Bitpanda, a Vienna-based crypto assets platform, has raised $52m in Series A funding led by Valar Ventures, a venture capital firm backed by Peter Thiel. The company claims to have 1.3m users and will use the funding to expand internationally. It expanded to France, Spain and Turkey earlier in 2020.
Bitnomial raises $11.6m series B
Bitcoin derivatives marketplace Bitnomial has raised $11.6m in Series B round led by Electric Capital. The funds would support the company’s plans to create a bitcoin exchange in the U.S.
Bitnomial was among the select few U.S. businesses to gain approval from the Commodity Futures Trading Commission (CFTC) to manage a designated contracts market (DCM), which allows Bitmonial to offer bitcoin futures and options.
Equilibrium raises $5.5m token round
Equilibrium, a Polkadot-based cross-chain decentralized finance (DeFi) project, has raised $5.5m in a token round. The money was raised using a new "token swap" method, which allows investors to exchange their old tokens for new ones. Venture firms BKEX Capital, PNYX Ventures and Taureon participated in the token swap sale.
Braintrust raises $18m series A
Braintrust, the company creating a token-powered freelancer marketplace, raised $18m in Series A round led by ACME and Blockchange, with participation from Pantera, Multicoin, Omidyar Technology Ventures, Variant and Hashkey. The company had raised $6m in seed funding earlier this year.
Reef Finance raises $3.9m seed round
Polkadot-based Reef Finance announced that it has raised $3.9m in seed funding for its cross-chain suite of decentralized finance (DeFi) services. NGC Ventures, AU21 Capital, QCP Capital, Kenetic Capital and Woodstock Fund participated in the round.
SBI acquires Japanese crypto exchange TaoTao after partnership talks with Binance ended
Japanese financial service group SBI Holdings announced the acquisition of crypto exchange TaoTao just two days after TaoTao's partnership talks with Binance ended. SBI already operates its own licensed cryto exchange, SBI VC Trade. SBI said that the acquisition would help expand its customer base and service expertise further.
CB Insights acquires Blockdata for an undisclosed sum
Intelligence and data company CB Insights has acquired Blockdata, the Netherlands-based blockchain intelligence firm, for an undisclosed sum. Blockdata will remain a standalone product with its own team. Blockdata’s work will also be available to CB Insights clients, while NY-based CB Insights will also set up an office in Amsterdam. Anand Sanwal, co-founder and CEO of CB Insights, said client activity around blockchain has increased "dramatically" in the last eight months.
Our overall takeaway
Quality projects in the space continue to attract quality investors to their funding rounds, across both equity and tokens. Meanwhile, exits and M&A continue to accelerate, increasingly with participation from traditional enterprises and institutions as acquirers.
IV. Project Launches & Updates
Kraken is launching a crypto bank in Wyoming, paving the way for possible stock offerings
Kraken is launching a bank, Kraken Financial. The bank will be regulated under a new framework devised by the state of Wyoming while the move means the exchange could launch trading of non-crypto assets. "For Kraken, this represents a better banking infrastructure," Dave Kinitsky, CEO of Kraken Financial, said in a phone interview with crypto publication The Block. "This will require less reliance on third-party providers and offers more certainty from a regulatory perspective and will allow us to launch new products for new customer segments."
As Serenity Phase 0 proposal is submitted, Ethereum 2.0 transition is approaching
Danny Ryan, a core developer at the Ethereum Foundation, has today officially submitted a proposal on GitHub, for transitioning the Ethereum blockchain to a proof-of-stake (PoS) consensus mechanism from the current proof-of-work (PoW) algorithm. Once approved by core developers, the proposal will see the rollout of Serenity Phase 0 or the Beacon Chain that will mark the execution of PoS. It is expected to go live later this year or early next year. Phase 0 is just the first step in a multi-stage rollout of Ethereum 2.0, with the other phases expected to run until 2021
ConsenSys wins Hong Kong central bank digital currency study project
Ethereum development studio ConsenSys has been awarded a central bank digital currency (CBDC) study project by the Hong Kong Monetary Authority (HKMA). ConsenSys will work with PwC and fintech firm Forms HK on the project to develop technology for proof-of-concept of HKMA’s digital currency. The trio would work on implementation of CBDC for cross-border payments to test solutions that prioritize scalability, security, and interoperability.
SuperFluid announces protocol launch
Superfluid, a protocol for programmable cashflows that will allow users to move any assets on-chain in a stream, without the need for recurring transactions, has announced its recent launch.
Our overall takeaway
The pace of innovation in the Ethereum is extremely impressive, and with the transition to Ethereum 2.0 rapidly approaching, we are excited about mainstream user and enterprise / government adoption.
V. Other Bits We're Excited About
Decentralized exchange volumes hit $23.5bn in September, breaking all-time high of $11.6bn in August
Trade volume on decentralized exchanges hit $23.5bn in September, a 103% month-over-month increase compared to August’s trade volume of $11.6bn. Uniswap and Curve, the two leading decentralized exchanges, accounted for 65% and 22% of the September volume respectively. Uniswap’s volume grew 128% month-over-month, most likely fueled by the launch of its new governance token UNI.
Breaking down Uniswap’s UNI token launch
On Wednesday September 16th, Uniswap announced and launched its new governance token, UNI. While Uniswap is the leading decentralized exchange protocol on Ethereum and has begun to rival centralized exchanges on daily volumes ($3.02bn of volume in the week leading up to its token launch, vs $2.51bn for Coinbase in the same period), Uniswap has been facing increasing competition in the decentralized exchange space notably from forks of its projects which added a token incentive such as SushiSwap. This article by the Block (linked in title) provides a great overview of Uniswap, its history, traction, and its newly launched token, whose main function will be that of governing the Uniswap protocol. The token’s distribution was extremely interesting and a clear example of the “ownership economy” as users and liquidity providers are entitled to claim UNI tokens retroactively, and will continue to earn tokens in the future. he initial four-year allocation is as follows:
60% to Uniswap community members - 600,000,000 UNI
21.5% to team members and future employees with 4-year vesting - 215,101,000 UNI
17.8% to investors with 4-year vesting - 178,000,000 UNI
0.07% to advisors with 4-year vesting - 6,899,000 UNI
Uniswap becomes first DeFi protocol to hit $2bn in value locked
Uniswap, one of the top non-custodial exchanges, became the first decentralized finance (DeFi) protocol to cross $2bn in total value locked (TVL) on September 28. Ether (ETH), Tether (USDT), and Wrapped bitcoin (WBTC) are Uniswap's top three tokens by liquidity. Decentralized lending protocol MakerDAO is also close to hitting the $2bn TVL mark. Uniswap’s monthly trade volume also exceeded that of Coinbase for the first time this September. Uniswap saw approximately $15.4bn in volume, compared to $13.6bn on Coinbase, highlighted in the chart included in our introduction of this issue.
Introducing $RAC
RAC, a Grammy Award winning musician, recently launched $RAC, a community token by Zora. $RAC token is built on Ethereum and will enable access to various perks and exclusive contents. RAC is also distributing the token to his loyal customers as part of the launch. Earlier this year, RAC partnered with Zora to launch a limited edition music cassette $TAPE, with one token corresponding to one physical tape. $TAPE went on to become the most expensive cassette of all times. The launches of $RAC and $TAPE point to a shifting paradigm towards social tokens and creative ownership directly between artists and their communities.
Our overall takeaway
Decentralized exchanges are now credible competitors to their centralized counterparts, and Uniswap is leading the pack. Watch out Coinbase!