Blockchain Confidential - 15 April 2022
BlackRock goes big into supporting USDC, Metaverse Fashion Week, and Ethereum 2.0 is delayed again
The Week
In CeFi the rich got richer, with the major centralized exchanges growing their market shares as the market consolidates, though the report acknowledged counter-movements toward DeFi and self-custody at work as well. Further delay in the Ethereum 2.0 and its move to Proof of Stake surely disappointed both those concerned about Ethereum’s environmental footprint and high gas costs. At Bitcoin 2022 in Miami you could use Lightning to pay for recharging your Tesla; Arcane Research also published a report showing growing Lightning transaction volumes, propelled in large part by integration with the Cash app.
Another Wall Street crypto skeptic reversed course this week, with David Rubenstein of the Carlyle Group acknowledging that the “genie is out of the bottle” and the industry is not going away. Larry Fink indicated BlackRock is studying stablecoins and digital asset products more generally; the investing giant is partnering with Circle as a strategic advisor and helping them manage their cash reserves. What’s the common thread here? Client interest. In a Nasdaq survey 72% of financial advisors indicated they would increase allocations to digital assets if they had access to a crypto spot ETF, though they also acknowledged (as we have done here) that the prospect of the SEC approving one in 2022 is quite dim.
The payments processor FIS hooked up with Fireblocks to offer a spectrum of digital asset services from issuance to custody. DTCC, a major part of financial plumbing for clearing, is looking at CBDC applications for real-time settlement. Amazon is hanging back; CEO Andy Jassy does not expect payment integration anytime soon, but speculated that NFT sales might be in the pipeline.
It’s fashion week in the metaverse, with the first one hosted in Decentraland. Dolce & Gabbana used cat images for their models, so it seems even in Web 3.0 we will all still be looking at pictures of cats, sadly. Mastercard’s 15 metaverse and NFT trademark applications likely represent the leading edge of their interest in the space. Meta is trying to create a creator economy in its Horizon Worlds metaverse. Finally, Coinbase is launching a film trilogy in collaboration with Bored Apes Yacht Club (BAYC). Interestingly, they are offering to license BAYC apes after a “casting” process. While the nature of NFT’s provides a clear definition of ownership, there is a big debate about usage rights. For an exploration of this, read Zeneca’s Letter 26: On cc0, Intellectual Property, and NFTs.
From The Research Desk
Our Research intern Sonakshi Rohra published a paper together with Head of Research Ilya Kulyatin this week. Read Stylized Facts for Cryptocurrency.
The Good Read
Our two Good Reads this week span DeFi risk management and the foundations of blockchain cryptography. Read about a new Cornell paper that offers a way to prove the existence of one-way functions under certain conditions, and then head on over to read about how MakerDAO models risks, with a particular focus on solvency risks.
Regulator Radar
Uniswap Labs, developer of the Uniswap protocol, is the subject of a class action lawsuit accusing them of enabling fraud on their platform by their failure to comply with securities laws and thus protect investors. Celsius is turning off its high-yield accounts for non-accredited U.S. customers in another walk-back in DeFi. And at the state level, New York doubled down on its BitLicense with the Senate authorizing additional funds for the NYDFS to extend its oversight of crypto companies. The roll-out of the original BitLicense drove out many exchanges and other crypto companies, so this likely means those remaining will face even greater scrutiny.
The Central Bank of Portugal issued its first-ever crypto license to a bank; Bison Bank will be offering crypto trading and custody, while in Brazil the Senate announced that approval of its cryptocurrency regulatory framework is on the way. A report from BIS on CBDC adoption illustrated the ongoing tension between worries about systemic risk and sanctions evasions and the promise of greater financial inclusion. Coinbase turned on UPI payments in India and then backed off almost immediately after the regulator raised concerns. The Middle East continued to be a focus on regulatory action, with Binance receiving in-principle approval to operate in Abu Dhabi as a digital broker/dealer.
In our favorite piece of regulatory news, the Bank of Canada is using a quantum computer to help simulate crypto adoption in the economy. All we need is a Bored Ape wearing a pair of AR glasses, and we have the tech hype equivalent of a CDO^3.
At the Office
We are now fully settled into Rise Barclays in NYC and from Monday will start doing our weekly team meetings here; we are still looking for a similar arrangement in Singapore as the team is growing there as well. Kyle and Jia Yng are working on some of the block & tackle of company operations in two locations like getting a bookkeeping service lined up that can handle our dual company structure. We are working out the details of our first design partner engagement for the launch of the Serenity EAP (Early Access Program) in July. Makas worked with the technical team at Kong and managed to get a fully secure API flow working on Azure through their API gateway and we started making arrangements to integrate Veverica’s commercial implementation of Apache Flink for our real-time stream processing.