Day: August 1, 2018

Crypto markets have seen their second day of losses, with Bitcoin dipping below $7,500 and virtually all major cryptocurrencies in the red

The crypto mining business has become a multi-billion dollar industry, and one company has had the lion’s share. Bitmain Technologies has dominated the mining hardware manufacturing industry, and according to a new report, the firm is now valued at over $14 billion. The report further revealed that the Beijing-based firm had made $1 billion in net profits during the first quarter of the year and that it intends to file for an IPO very soon.

The Hottest Crypto Firm? Probably

Founded in 2013 by two young and enthusiastic entrepreneurs, Jihan Wu and Micree Zhan, Bitmain has become the undisputed ASIC manufacturing king. The firm also operates Antpool, which is one of the largest Bitcoin mining pools. Business has been booming for Bitmain, as according to a report by Fortune, the firm made a net profit of $1.1 billion in Q1 of this year. Citing an email obtained from a source close to the company, the report states that Bitmain is expected to hit $3 billion in net profits for the year.

An audit by ‘big four’ firm KPMG puts the net profits for the firm in 2017 at $1.2 billion. This gives the company a decent chance of tripling its already impressive tally from last year, contradicting recent reports indicating there’s been a huge decline in demand for crypto mining equipment.

The report also noted that the company is raising more cash, barely two months after it raised $400 million. The funding round which was led by Sequoia Capital China in June had placed the company at a $12 billion valuation. The new funding round will value the company at $14 billion, the report claims. This represents an increase of more than 16 percentage points in just two months.

Bitmain also plans to file for an IPO very soon, the report claims. This is not entirely surprising, as the company has been reported to be weighing the option for quite some time now. Wu, the 32-year-old co-CEO, plans on listing the company in an overseas market with US dollar-denominated shares to make it easier for global investors to invest in the company. Hong Kong is at the top of his list. If successful, it would give early investors the chance to cash out their investments, most of which have multiplied more than ten times.

Bitmain controls over 80 percent of the ASIC manufacturing industry, a clear monopoly in an industry that is based on decentralization. This has made it the target of criticism by many crypto enthusiasts who believe that it goes against the ethos of the decentralized nature of cryptos. Bitmain’s critics cite its dominance as detrimental to the industry in the long run. The criticism has done little to deter the ambitions of Wu, who intends to continue dominating the industry and to spread his wings to other industries as well.

The rapidly growing artificial intelligence industry is the first target for Wu. He plans on branching out into designing and manufacturing chips for the AI industry in the near future. Bitmain also invests in other crypto-focused ventures, with the latest being an investment in Circle. The diversification is crucial for the company as the crypto mining industry is still young and could take a wild turn. Moreover, being a Chinese company, Bitmain has to be prepared for the Chinese government to make a radical ruling outlawing mining in the country, Wu stated in an interview with Bloomberg in May.

Its closest competitor is Canaan Creative, with a mere 15 percent of the market. The Beijing-based company is also reported to be weighing an IPO on the Hong Kong Stock Exchange, with its sights set on raising $1 billion.

Japanese financial services giant SBI Holdings plans to develop a crypto derivatives platform following new investment in an American trading platform developer

A blockchain project birthed at a Mexican hackathon in April 2018 has, in turn, led to the Mexican government to begin conducting a public procurement procedure via a blockchain network.

The project

This will be Mexico’s first use of the technology for this purpose and is a bid to bring transparency to a public tender; the organizers will be publicly releasing the white paper and object of tender in late August.

According to Mexican business news outlet El Economista, the governance model of the network is a collaboration between several government entities, notably the Coordination of the National Strategy and the Digital Government Unit as well as the consultancy of Mexico’s blockchain industry and international experts.

Additionally, public institutions, universities and civil societies will be part of the model’s horizontal structure; these parties will supervise and validate the transactions within the blockchain.

The project is to utilize Ethereum to create several smart contracts that operate at each level of the procedure. Firstly, the “Buyer Unit” is a registration contract for the government agency purchasing services or goods, while the second is the registration of suppliers and it stores the data of companies looking to take part in one or several bidding processes.

Within the second contract, another then verifies the reputation of a participant based on the data of their previous bidding actions. After this, a fourth smart contract stores the important data, beginning from registration to the tenders results, and a fifth contract executes to evaluate the registered proposals requirements and awards the project to the winner.

Promoting trust

The project began at the Talent Land 2018 hackathon. Coordinator of the National Digital Strategy, Yolanda Martinez Mancilla, said, “The objective is to continue strengthening the prototype that was presented in April of this year, within the framework of Talent Land 2018, and to launch in August the model of governance of the public network.”

She added, “It is a joint action aimed at developing an open governance network where it does not cost users the development of applications and continue as a pioneer government in the inclusion of emerging technologies to improve public services.”

The project to increase transparency in public contracts has been in a matter of discussion since December of 2017 after a high-profile scandal involving a South American construction firm and the then-president Enrique Pena Nieto.

The Mexican government appears to have a reinvigorated interest in blockchain solutions and is beginning to ramp up efforts to improve its poorly-rated global blockchain ratings.

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This article originally appeared on Bitcoin Magazine.

The U.S. Treasury Department released its highly anticipated report that examines the current monetary system, discusses cryptocurrency, and proposes sweeping changes that would cut regulatory inefficiency and incubate new technologies.

The report, which is titled “A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation” was drafted under Treasury Secretary Steve Mnuchin and addressed to President Donald Trump.  The report does not directly provide any recommendations or conclusions on cryptocurrencies, but the technologies are mentioned.

Cryptocurrency-Related Issues

The report covers a broad range of issues, many of which are highly relevant to the cryptocurrency industry. The Treasury Department acknowledges the escalation of cryptocurrency and blockchain technologies, noting the rapidly progressing nature of the economy.

In a section titled “Digitization of Finance and the Economy,” they note that parallel to the rise of mobile and digital banking, complimenting technologies like cryptocurrencies and distributed ledger technologies are “poised to impact innovations in financial services.” They elaborate on this, saying:

“Technology developments that are poised to impact innovation in financial services include advances in cryptography and distributed ledger technologies, giving rise to blockchain-based networks.”

The Treasury also notes that blockchain and distributed ledger technologies are being examined by the Financial Stability Oversight Council, which was founded after the 2008 financial crises with the goal of guiding federal regulators on important issues.

Importantly, the Treasury makes it clear that the government wants to support new innovations, and to develop regulations that incubate growth within emerging industries, saying:

“Support of innovation is critical across the regulatory system — both at the federal and state levels…Treasury supports encouraging the launch of new business models … to pursue innovative technologies to lower costs, improve customer outcomes, and improve access to credit and other services.”

A do no harm approach by the government is critical for cryptocurrencies and will ultimately lead to greater success and adoption. The report acknowledges that current regulatory frameworks may be outdated and updates to it are necessary in order to allow solutions that offer benefits to consumers, saying:

“The financial regulatory framework is not always optimally suited to address new business models and products that continue to evolve in financial services … Financial regulation should be modernized to more appropriately address the evolving characteristics of financial services of today and in the future.”

Regulatory Efficiency

The U.S. Treasury discusses technologies that could streamline payment systems, and importantly mentions the development of regulatory sandboxes that allow for innovation in order for the U.S. to stay competitive with places like the U.K., Singapore, and Hong Kong.

The sandbox method, which entails the government keeping a watchful eye on emerging industries, but not harming them with regulation, is popular in many countries, and most people see it as the best way to regulate the cryptocurrency industry.

Arizona has been on the forefront of cryptocurrency adoption and was the first state in the United States to offer a sandbox environment for fintech companies, which will allow companies to test their products and services for up to two years with as many as 10,000 customers before needing to apply for licensing.

This allows cryptocurrency and blockchain companies to actively develop and test products without working around regulatory requirements.

The report recommends creating a sandbox regulatory environment in the U.S., stating:

“Internationally, many countries have established ‘innovation facilitators’ and various regulatory ‘sandboxes’ — testing grounds for innovation…While replicating this approach in the United States is complicated by the fragmentation of our financial regulatory system, Treasury is committed to working with federal and state financial regulators to establish a unified solution that accomplishes these objectives — in essence, a regulatory sandbox.”

The Treasury report concludes that the United States must “stay abreast of developments in technology and to properly tailor regulations in a manner that does not constrain innovation.” And that U.S. regulators “must be more agile than in the past in order to fulfill their statutory responsibilities without creating unnecessary barriers to innovation.”

Featured image by Shutterstock.

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Mike Novogratz is making a big bet on the role of cryptocurrencies in the near future. The billionaire investor has been one of the most fervent and bullish crypto believers despite the market’s unpredictability, especially in the last few months. And now, after patiently waiting for months, his crypto merchant bank, Galaxy Digital LP, is only days away from trading on Toronto’s TSX Venture Exchange. The bank recently announced that it had incurred a $134 million loss in the first quarter, but Novogratz remains convinced that cryptos will take over the mainstream financial industry in a few years.

Forging a New Path For Crypto

Galaxy Digital LP will be the first of its kind and will usher in a new era of mainstream avenues for crypto investors. After eight months of waiting, Novogratz will finally see his firm trade on the TSX Venture Exchange on August 1. While he is immensely proud of this achievement, he recently revealed that he wished he had waited at least one more year before going public. In an interview with Bloomberg, Novogratz detailed how tedious the listing has been, especially as regulators are suspicious of crypto companies.

If I knew what I know now, and I knew that the crypto markets were going to swoon as much and it was going to take as long, I might have stayed private for another year or so and then gone public. But I don’t think it was a mistake.

The market has hit its bottom in the last few months and won’t go any lower, Novogratz believes. However, the approval of a Bitcoin ETF would push the king of cryptos towards the $10,000 mark. Rising above this mark will, however, be a bit more difficult, and will require custody solutions to be announced and implemented by trusted institutions. But it’s only a matter of time before this happens, he added.

So, all the stuff that institutions need to participate in this market is getting built, and it’s getting built fast. And so, it’s not there yet, but it’s really close.

Once the firm lists on the exchange, its investors will have the option to sell all their holdings and exit the unpredictable crypto market. However, Novogratz believes this would be a bad idea. In two years’ time, cryptos will be much more significant than they are today, and any investor in a crypto-focused venture will reap big rewards, he stated.

Galaxy Digital shared its first financial statements on July 25, which showed that it had posted a $134 million loss in the first three months of the year. The firm posted $85.5 million in unrealized losses on digital assets, with its investing business incurring a $22.9 million loss. The New York-based company had $281 million worth of assets by the end of the first quarter, according to the statement. Despite the huge loss, Novogratz believes that he has assembled the most able team possible, and he is immensely proud of the work it has done since the year began.

Galaxy Digital has four areas of interest: asset management, trading, advisory services, and principal investing. It has made 11 new investments this year worth over $86 million which include BlockFi, a lending platform that uses a client’s crypto assets as collateral, and Alphapoint, a digital assets creation and management platform. Other investments include traditional banking services provider Silvergate Capital Corp and BotChain, an AI-focused identity and audit ledger.

American retail giant Overstock.com’s blockchain subsidiary is partnering with the Zambian government to build a blockchain land title registry.

With some experts predicting that Bitcoin will go to $67,500 in 2019, and others saying that a “total collapse” of cryptocurrencies is a real possibility, we prefer to study the charts and form our own opinions

A study released by the financial research company TABB Group has found that over the counter (OTC) cryptocurrency markets facilitate on average USD 12 billion of trades per day. If accurate and, depending on the study’s parameters, this means that OTC markets account for a significant fraction of global cryptocurrency trading volume.

In recent months, global aggregated cryptocurrency exchange volume has been USD 10-20 billion per day, often higher than the USD 12 billion average daily trading estimate for OTC markets. During the rally in May 2018, cryptocurrency trading volume exceeded USD 30 billion per day at times. And, back during the biggest cryptocurrency rally in history which peaked in January, daily trading volume hit all-time highs near USD 70 billion. It is unknown what time frame this TABB study is using for the USD 12 billion figure, so it’s hard to make a comparison between the OTC and exchange markets with this data.

A senior analyst at TABB Group, Monica Summerville, says, “Our reports are based on interviews and with participants in markets, cover more than BTC and keep in mind that not all transactions show up on public blockchains as many venues omnibus accounts so only net changes to their positions will be written to public blockchain.”

One thing it is safe to conclude with this data is that OTC markets are a major player in the global cryptocurrency trade. OTC is ideal for institutional investors versus using a normal exchange, since OTC pairs big buyers with big sellers, allowing for more efficient trades that cost less. If institutional investors make a large buy or sell on a normal crypto exchange they are subject to slippage, since the order book of most exchanges isn’t well-equipped for institutional trades that are often USD 100 million to USD 1 billion, or even more.

Slippage causes loss of money, which is an unnecessary loss considering that there are OTC markets which can handle big trades without any slippage.

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The Securities and Exchange Commission has been grappling with the crypto industry as it strives to formulate rules for an industry that evolves faster than any other. While it’s yet to come up with a comprehensive set of rules, the commission is taking steps in that direction, and it’s appointed the first-ever senior adviser for digital assets and innovation. Valerie Szczepanik understands the industry, having been the head of the regulator’s working group on crypto for the last five years, and according to a recent report, she may be the missing piece in the SEC-versus-cryptos jigsaw puzzle.

Working Together for the Greater Good

The crypto industry and the SEC have been in a confrontational relationship for long, with each party not trusting that the other has its best interests at heart. Crypto companies have long viewed the regulator as biased against them, and for good reason. On the other hand, the SEC has been understandably stringent with crypto companies after a few unscrupulous parties made away with millions of dollars. This hostility needs to end and both parties have to work together, Szczepanik stated recently in an interview with Bloomberg.

“We want people to come talk to us,” the soft-spoken Szczepanik stated. This has been the regulator’s call for the past year as it’s sought to work together with crypto companies from the moment they are set up so that it can provide guidance on the acceptable procedures. Crypto companies have failed to heed the call, however.

Szczepanik was appointed in June by the commission, becoming the first ever senior adviser for digital assets and innovation at the SEC. In her role, she is expected to spearhead the decision-making process where cryptos are concerned, and this she has done. The recent denial of a Bitcoin ETF applied for by the Winklevoss twins is just one example of many decision-making moments she has spearheaded.

Szczepanik revealed that currently, there are three issues that she is giving priority, one of which is the ever-growing ICO segment. Despite some of the ICO projects having clear red flags, the market has continued bringing in billions of dollars. The classification of digital assets is yet another issue that has divided the crypto community into two. While Ether and Bitcoin have met the bar according to the SEC, no other crypto has been cleared. It’s especially worse for the controversial crypto projects such as Ripple’s XRP and Stellar. The approval – or not – of a Bitcoin ETF is also a priority for the SEC, Szczepanik noted. The crypto community is, however, unfazed and confident that an ETF will be accepted soon enough. With many viewing the approval of an ETF as the announcement that will catapult cryptos back to their record highs, the significance of this decision can’t be overstated.

In her time with the SEC, Szczepanik became interested in cryptos and began participating in meetups. She has seen crypto undergo a metamorphosis from a criminal coin to the mainstream. And while her job is to regulate the industry and maintain order, Szczepanik concluded by calling on crypto projects to work together with the commission to bring forth one gigantic yet cohesive industry.

Crypto data tracker CoinMarketCap has launched a “professional” API aimed at developers and funds

Blockchain economics startup Prysm Group has added Nobel Laureate Oliver Hart and former Microsoft chief economist Preston McAfee as senior advisors.