Blockchain Confidential - 29 April 2022

Snowden's Zcash role revealed, CAR makes Bitcoin legal tender, and Fidelity announces Bitcoin 401(k) plans

The Week

DEX volumes are down 50% since last fall, although the trading drop is not limited to DeFi exchanges. The DeFi protocol Portal is aiming to tokenize pre-IPO stocks. Teller facilitated the first-ever uncollateralized mortgage deal on DeFi. Hashflow released an alpha version of cross-chain swaps without a bridge. It came to light this week that Edward Snowden took part in the ceremony initializing the Zcash privacy coin. The Bybit exchange is going to start offering crypto options, competing with Deribit, while two former Jeffries executives are launching a new institutional crypto exchange.

Goldman Sachs is exploring tokenization of real-world assets (RWA) via NFT’s. 21Shares is launching a hybrid gold and Bitcoin ETP for the inflation-obsessed. Fidelity wants to offer Bitcoin 401(k) investments and MicroStrategy signed on, but the Department of Labor was not amused by this development. Finally, in the tech sector Telegram users can now send crypto via chat.

Regulator Radar

Grayscale continues its push to convert its Bitcoin Trust to a spot ETF, taking a detail from the most recent SEC futures-based ETF approval as a positive signal that the agency might be more receptive going forward. There are some interesting bills waiting in the wings in the U.S. Congress, including new provisions for optional stablecoin registration with the SEC and a push to grant the CFTC formal oversight over crypto spot markets, although for what it deems “digital commodities” only — leaving space for the SEC. Note this has potential implications for spot ETF approval given past concerns about lack of spot exchange oversight. The acting director of FinCEN highlighted gaps in current KYC/AML rules for digital assets, and indicated that the rules needs updating. Finally at the U.S. state level the New York Assembly passed a two year crypto mining moratorium; the NYDFS called on firms under its remit to leverage blockchain analytics tools to uncover bad actors; and NYC mayor Eric Adams expressed support for smart crypto regulation.

Abu Dhabi granted Kraken an operating license as the Middle East continues to be a focus for exchange expansion. The Central African Republic became the second country in the world to make Bitcoin legal tender. Panama passed its own digital asset bill. On the CBDC front Hong Kong’s HKMA invited comment on a retail CBDC, while the Philippines announced its own wholesale CBDC pilot, following on an exploratory study released last year.

From the Research Desk

This week Head of Research Ilya Kulyatin and senior quant Boris Skorodumov published Data-driven crypto risk factors; they apply PCA to digital asset returns as part of a longer exploration of applications of factor investing techniques here.

At the Office

As featured above, Boris is diving deep into factor investing as applied to digital assets, working in collaboration with Ilya. Makas and Chloe teamed up to connect our core risk model to our data pipelines in the cloud for the very first time, and exposed it all through a development-grade REST API. While there is still a ton of work ahead of us, having data flowing through Serenity and exposing it as an API is a key milestone for getting the system running. Barry retired yet another piece of Azure-specific infrastructure and moved the front-end’s supporting infrastructure to a generic Kubernetes deployment, while Tanya continued running ahead on UX designs for future screens working together with Barry and Bob. Jia Yng worked on setting up processes for both our quarterly milestone reporting and contractor onboarding, while Kyle worked through contracts for our first two design partners and continued outreach with potential future clients.