21th May 2018
SUMMARY
- Crypto market remained in side trend as investors attend New York crypto week.
- EOS token registration and freeze is approaching: 1 June’18
- CFTC official supports Gemini’s proposal on Self-Regulatory Organisation
- Japan’s Financial Service Agency (FSA) is urging domestic exchanges to delist all privacy coins
- Seminole County, Florida to accept crypto for tax payments
- Tether generates $250mn of new USDT tokens
- Polymath trying to buy a stake in real stock exchange
- Privacy-oriented Zcash to be listed on Gemini
- Circle closes $110mn fundraising
MARKET MOMENTUM
The crypto market stayed in a side trend during NY crypto week last week. There were only a few exceptions, with Zcash up 38%, Decred up 26% and TRON up 13% over the seven days. The key losers among the top-40 crypto assets in the week were Bycoin (-20%), Bitcoin cash (-9%) and Zilliqa (-11%). Bitcoin remained flat, and Ether added 1% over the week.
Figure 1. The performance and market capitalisation of top-40 cryptocurrencies (by MktCap)
Figure 2. Best performing digital assets* with Market Cap (7 days)
Figure 3. Worst perfoming digital assets* with Market Cap (7days)
Events that affected the market’s performance last week included:
- Over 8,000 participants attended New York crypto week, which kept trading flat.
- Major regulatory developments focused on increasing constructive cooperation with the crypto society, including CFTC’s support for Gemini’s SRO initiative.
- Fundraising activity looks optimistic for blockchain businesses, including closing $110mn Circle round and Polymath’s $58mn expansion.
REGULATORY NEWS
CFTC supports Gemini’s proposal for a self-regulatory organisation
The proposal from Gemini founders Cameron and Tyler Winklevoss to form a cryptocurrency self-regulatory organisation (SRO) was supported by CFTC Commissioner Brian Quintenz. In the statement, Quintenz noted that a virtual commodity SRO that is independent from its members, provides a diversity of views and has the ability to discover, reveal and punish wrongdoing, would add integrity to the markets. Gemini proposed the creation of the Virtual Commodity Association (VCA) — an industry-sponsored self-regulatory organisation for the US virtual currency industry, specifically virtual commodity exchanges and custodians. The VCA will be a non-profit independent regulatory organisation in compliance with global standards and best practices for SROs.
Seminole County, Florida to accept crypto for tax payments
Seminole County, Florida, in the US is to begin accepting cryptocurrency as a payment for various services this summer in order to eliminate heavy fees and improve payment accuracy. The Seminole County Tax Collector is to use BitPay, the largest global blockchain payments provider, to get funds to be credited to its bank account the following business day in US dollars. Users will send the exact amount of bitcoin cash needed to pay their bill while BitPay will charge 1% to approve the bitcoin cash transaction and settlement.
SEC launches a mock ICO website for education purposes
The US SEC has launched a mock ICO website Howeycoins to help educate investors to identify a fraudulent ICOs. The website is named after the Howey Test. Users who try to participate in the token sale will be redirected to the regulator’s education materials, which aim to highlight the signs of fraudulent token sales.
Japan’s Financial Services Agency (FSA) urges domestic exchanges to delist all privacy coins
The FSA in Japan is urging domestic exchanges to delist privacy coins, which are often associated with criminal activity including money laundering and drug dealing. Coincheck has been the first exchange to act, having already delisted four coins: Monero ($XMR), Cash ($ZEC), Dash ($DASH) and prediction market token Augur ($REP). Coincheck first gained market attention as the exchange that was hacked and lost almost $500 million worth of NEM. FSA is not in favour of anonymous currencies due to their lack of traceability. It will be interesting to see what other countries follow Japan’s lead.
CRYPTO MARKET NEWS
EOS token registration and freeze
The developer of EOS project Block.one issued a reminder to EOS token holders about the registration of tokens prior to the token freeze scheduled for 1 June 2018, as per the EOS Token contract. According to the agreement, EOS tokens will become non-transferrable within 23 hours after the end of the EOS distribution period, which ends on 1 June 2018. Thereafter, “a buyer of the token will no longer be able to map a public key to the buyer’s account and the buyer will not be able to transfer EOS tokens on the Ethereum blockchain.” Crypto exchanges may enable EOS tokens to continue trading; however, exchanges will be unable to accept new deposits or authorise withdrawals of EOS tokens. The EOS token distribution started on 26 June 2017 for a 341 day period, by the end of which one billion tokens are expected to have been distributed. Block.one has reserved 10% of the total tokens.
EOS ERC-20 tokens held on Ethereum blockchain are supposed to be transferred to any new chain that is created using the EOSIO software protocol. Those initial chains may be launched by developers to adopt and implement the open source EOSIO software. The developer of EOSIO software, Block.one is preparing to release version 1.0 EOSIO software. The software will provide example contracts and general documentation. Those developers who will be interested in building their own blockchain derived from EOSIO software are able to fork the repository and customise it, including configuring token supply, initial distribution, default seed nodes, token symbols, and other.
Key takeaways from Bitcoin miners conference
The Bitcoin conference in Las Vegas attracted crypto miners, including large equipment producers like Bitmain and Green Revolution Cooling. Bitcoin miners represent an essential part of the crypto market; however, a third of those polled during the event said that they do not sell any of Bitcoins they generate. Several mining projects were presented during the event. Project X is a new product that enables cross-coin mining without the need to purchase separate contracts. Ultracoin, unbreakablecoin, and the founder of Litecoin Charlie Lee (promotes a merged mining of Litecoin and Dogecoin) presented their projects.
Lifeboat Foundation advisor Hass McCook predicted that “95% of bitcoin startups will fail”, and that the crypto market 10 years from now will be characterised by greater consolidation, the creation of “super-services” and the proliferation of blockchain technology in a number of industries. He also forecast that further prices movements may be driven by inflation and hype cycles.
Tether generates $250mn of new USDT tokens
Tether, which is used as a stablecoin linked to the US dollar, generated $250mn of new USDT tokens on 18 May, according to Omni Explorer. The total supply of Tether tokens has now risen to $2.5bn. After announcing that it had ended its relationship with auditing company Friedman LLP before its regular audit, Tether was criticised for its lack of transparency. Other stablecoin developers include Circle, which has started to develop TrueUSD, and Basis. Other examples of stable tokens, backed by real assets, include Digix, which is backed by gold (every DGX is equal to 1 gram of 99.99% LBMA approved gold), and Petro, which is backed by oil in Venezuela. The analysis of stable coins is available here.
Amazon Web Services (AWS) partners with ConsenSys to make enterprise blockchains
Cloud computing service Amazon Web Services (AWS) has announced a partnership with Ethereum design studio ConsenSys to make enterprise blockchains easier to deploy. The new blockchain cloud service Kaleido aims to improve the onboarding experience for businesses, simplifying the operation of private blockchain networks. AWS is “protocol-agnostic”, supporting Hyperledger’s Sawtooth and R3’s Corda platform. AWS has started a new service to launch blockchain networks out-of-the-box for the Ethereum and Hyperledger Fabric protocols.
Polymath trying to buy a stake in real stock exchange
Crypto project Polymath announced about its acquisition of the domain Tokens.com as part of its aim to dominate the issuance of tokenised securities. Following the announcement, Polymath also revealed that it is in the process of closing a deal to acquire a large stake in the Barbados Stock Exchange and that it is working on a deal with the trading system tZero. Polymath will thereby have a good platform to create tokens that can trade and dominate the coming transition of traditional equity to crypto. Both deals are expected to close in June. Polymath has raised $58.7mn in private placements of tokens.
Polymath foresees a liquidity crisis for security tokens. The project has built a system that makes a whitelist of accounts that have gone through the know-your-customer, anti-money laundering and investor accreditation checks that make them viable to trade with. It is likely to have chosen the Barbados exchange due to Barbados having the most double tax treaty agreements in the world.
Circle closes $110mn fundraising
Circle has closed a $110mn Series E fundraising with the company now valued at c $3bn. The round was led by China-based mining company Bitmain and included Accel, Blockchain Capital, Breyer, Digital Currency Group, General Catalyst, IDG, Pantera, and Tusk Ventures as investors. The company announced its plans to launch a US dollar coin, which would be regulated and backed by the real government currency. Recently, Circle acquired one of the largest US crypto exchanges, Poloniex, and it aims to set-up fully-regulated crypto trading on the platform. Stablecoin would add an essential value to the Circle portfolio.
VideoCoin completes $50mn ICO
VideoCoin announced the completion of a $50mn ICO via private placement. Leading investors included Galaxy Investment Partners, Alphabit Fund, Akamai co-founder Randall Kaplan, Science Blockchain, and Ethereum co-founder Anthony Di Iorio. VideoCoin is a new decentralised project that aims to change a streaming TV business models, how do video processing and distributed services. The project aims to create a platform that allows broadcasters to send their video streams out to usused computer infrastruture, such as server farms that have capacity, for processing. The project is backed by CNET founder and CEO of Live Planet, Halsey Minor.
JP Morgan developing cryptocurrency strategy
Oliver Harris has been chosen as the head of JP Morgan’s crypto-asset strategy and as the lead on the Quorum project — the bank’s internal blockchain platform. Harris’ new role will include leading all new blockchain projects such as cryptocurrency custody services, identifying cryptocurrencies as investments, and investigating how JPM can leverage blockchain technology further for its payments business. Following JPM CEO Jamie Dimon’s negative comments about Bitcoin last year, this is a major shift in terms of the adoption of cryptocurrency and blockchain technology at the institutional level.
Coinbase aiming to obtain banking licence
The largest US crypto exchange has begun conversations with financial regulators regarding the acquisition of a banking licence. Coinbase already has a “virtual currency licence” from the Department of Financial Services, issued at the beginning of 2017, which allows it to engage in virtual currency businesses and process transactions through banks. The company is continuing to strengthen its market position rapidly by hiring new talent and acquiring promising start-ups in the crypto space.
Privacy-oriented Zcash to be listed on Gemini
Gemini — the US-based Bitcoin exchange founded by the Winklevoss twins — is to add privacy-oriented cryptocurrency, Zcash ($ZEC)from Tuesday, 22nd of May. With Bitcoin, transactions are open to the public whereas Zcash is protected from public exposure; according to Tyler Winklevoss, this privacy is a considerable advantage that Zcash has over Bitcoin. The price immediately spiked from $248 to over $380 within just two days of the announcement. Zcash’s performance has stood out against other coins, having recorded a 50% gain past week, while the total market has lost more than $40 billion in market cap.
Switzerland and Norway consider state-backed cryptocurrency
Following the Riksbank’s plans for an “e-krona”, the Swiss Federal Council has commissioned a report on the risks and opportunities associated with the creation of an “e-franc”, which would use similar technology to Bitcoin but would be backed by the state. Once the e-franc receives support from the Swiss parliament, the Swiss Finance Ministry will begin researching the idea. At the same time, news from Norway’s central bank, Norges Bank, emerged highlighting that Norway is also exploring the pros and cons of a state-backed cryptocurrency as a supplement to cash. According to Øystein Olsen, Governor of Norges Bank, “a decline in cash usage has prompted us to think about whether at some future date a number of new attributes that are important for ensuring an efficient and robust payment system and confidence in monetary system will be needed.”
Highly anticipated events are ahead in crypto space
Some of the most interesting projects in the crypto space will be releasing their Mainnets in the upcoming weeks. In particular, Oyster Pearls ($PRL), which has built IOTA’s Tangle and Ethereum’s smart contract framework, is launching its mainnet on 29 May. Tron ($TRX) — another controversial project which expects to be much larger than Ethereum in the long term — is launching two days later on 31 May. One of the most anticipated projects in the space is EOS ($EOS), which has raised more than $2 billion so far, and is planning to launch its Mainnet on 2 June. Founder Dan Larimer previously founded two established blockchain projects, Steemit and BitShares. The rebranded platform VeChainThor ($VET), which focuses on a new governance and economic model as well as on regulation and compliance capabilities, will be launching its Mainnet at the end of June. Lastly, Ontology ($ONT) has scheduled the launch of its Mainnet for Q2. Ontology is a Chinese public blockchain that uses identity infrastructure together with distributed data and aims to remove the barriers between blockchain and the business sector.
Market Data Source: Coindesk.com as of 17:00 CET 21/05/2018
This report is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. All market prices, data and other information contained in this document has been prepared from sources believed to be reliable, but we give no representation or warranty that the information is complete, accurate or current. Past performance is not a reliable indicator of future performance. Not for further distribution. Investments in cryptocurrencies associated with essential risks, including risk of losing 100% of value. Not for the distribution in countries where digital assets are recognized as illegal.
NKB Group
Offices: London, Vienna, Bratislava
https://www.linkedin.com/company/NKBGroup
https://twitter.com/theNKBGroup
The report is prepared by NKB Group in collaboration with Hypothesis Research Ltd (UK).
