Author: Dale Warburton

Dale is a former attorney turned passionate Bitcoiner with an interest in investments, macro, geopolitics, innovation, tech, nature, wildlife, MMA and Bitcoin (of course).

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Australia Banking Crypto News Stablecoins

ANZ Becomes First Bank to Mint Aussie Dollar Stablecoin A$DC

Australia and New Zealand Banking Group Limited (ANZ) has concluded a historic transaction in which its newly created stablecoin pegged to the Aussie dollar has been used in a real world transaction:

A First for Australia

According to a press release, ANZ minted 30 million of A$DC using an ANZ-built Ethereum Virtual Machine (EVM)-compatible smart contract deployed through the Fireblocks platform. These coins were then transferred between the parties and later redeemed back into fiat.

ANZ worked closely with leading providers in the digital asset domain including Fireblocks, Chainalysis and OpenZeppelin to create an in-house purpose-built stablecoin smart contract.

The historic transaction was concluded between one of Australia’s best-known investment companies, the Victor Smorgon Group (VMG), and a digital asset fund manger, Zerocap. VMG wanted to invest A$30 million into Zerocap’s digital asset fund and turned to ANZ to streamline the process and reduce costs.

By using ANZ’s stablecoin, VMG managed to avoid the costly conversion of Aussie dollars into US dollars, before then buying USDC, which Zerocap uses to access cryptocurrency markets. Instead, using ANZ’s stablecoin (A$DC), it was able to buy digital assets directly, avoiding a host of friction costs in the process. In addition, the transaction took just over 10 minutes, compared to several days had the legacy financial system been used.

ANZ services lead Nigel Dobson commented that “an ANZ-issued Australian dollar stablecoin is a first and important step in enabling our customers to find a safe and secure gateway to the digital economy”.

We’re excited to continue to trial our capability and explore how this use case can be applied in other industries and customers in the future.

Nigel Dobson, ANZ services lead

Recognising the role that stablecoins play in creating efficiencies, Dobson commented further on the transaction:

Stablecoins are a new way for customers to transact and in this case was an efficient and direct way for Victor Smorgon Group to access Zerocap’s digital asset exchange and move funds across a decentralised network.

Nigel Dobson, ANZ

Zerocap co-founder and CEO Ryan McCall remarked on how his company had taken a different approach by focusing on serving institutional clients:

Most of the crypto industry has been focused on directly servicing the retail market, whereas we’ve invested from the outset in establishing the product, technology, compliance and team to properly service private and institutional clients.

Ryan McCall, Zerocap co-founder and CEO

He concluded on a bullish note, saying: “Digital assets are going mainstream; we’re thrilled to be at the forefront of driving adoption and bringing that vision to life.”

ANZ Making Bold Moves

One of the oft-repeated phrases in crypto is how Ernest Hemingway spoke of going bankrupt: “gradually, then suddenly”.

ANZ’s “gradually” moment was late last year, when it indicated that there was a “weight of money behind crypto that you can’t ignore“. No doubt this was in response to rival Commonwealth Bank’s move to become the first local bank to offer crypto trading services to its clients.

Arguably, ANZ’s “suddenly” moment came earlier this week at the Australian Blockchain Week 2022 when it announced its entrance into the world of DeFi (decentralised finance).

Coupled with its move creating its own stablecoin, it seems reasonable to conclude that ANZ has determined that in order to remain relevant in the rapidly evolving financial industry, embracing crypto is no longer optional, it’s a prerequisite.

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Bitcoin Crypto News

Malaysian Minister Calls for Bitcoin and Crypto to be Made Legal Tender

To the surprise of many, Malaysia’s Deputy Minister of Communications and Multimedia has broken ranks and called for bitcoin and other cryptocurrencies to be adopted as legal tender in the South-East Asian nation.

Mixed Messages?

A few short weeks ago, Malaysia’s Deputy Finance Minister indicated that digital assets “do not exhibit characteristics of money” and were therefore not suitable as a method of payment.

Now, the country’s Communications and Multimedia Ministry, which oversees the digital and technology sectors, has called for the government to allow cryptocurrencies as legal tender:

We hope the government can allow this.

Zahidi Zainul Abidin, Deputy Minister, Communications and Multimedia

While financial regulation falls under the Finance Ministry, the Ministry of Housing and Local Government also has jurisdiction over “digital financial activities”, according to Zahidi. 

Interestingly, an opposition party known for its progressive politics has backed the Ministry’s call to declare cryptocurrencies as legal tender:

Statement of support by Parti Bangsa. Source: Unthink

An ‘El Salvador Moment’ Unlikely

Despite positive signs, there are no clear indications that the government will shift its conservative stance towards digital assets.

Last September, the country joined forces with the Bank for International Settlements, Australia, Singapore and South Africa to test the use of central bank digital currencies (CBDCs) for international settlements via a shared platform in a project dubbed Project Dunbar.  Then, in January, the central bank confirmed it was exploring CBDCs but has not yet adopted a formal position on the status of digital assets.

It’s been more than six months since El Salvador adopted bitcoin as legal tender and rumours abound that Honduras might be next, with a possible announcement expected within the week.

If there is going to be a nation declaring bitcoin as legal tender, it is likely to be an over-indebted developing nation with little to lose. As a conservative nation in a comparatively strong fiscal position, the incentives for Malaysia to adopt bitcoin at this juncture are probably limited. However, with that said, if we’ve learnt anything over the past two years, anything is possible.

Categories
Crypto News Scams Tokens

New York State Attorney Convicts ‘Saint Clair’ for Promoting ‘IGObit’ Crypto Scam

In the world of cryptocurrency, we’ve come to expect a fair degree of chicanery, ranging from modernised romance scams to blatant social media celebrity pump-n-dump schemes. The ‘IGObit’ scam, however, stands alone for sheer creativity and audaciousness.

IGObit promotional material. Source: Innercitypress

‘Guaranteed Returns’

According to a US Department of Justice report, the president of a fictitious United Nations (UN) affiliate has been convicted of defrauding investors in a cryptocurrency public offering.

After a week-long trial, Asa Saint Clair, a resident of Washington, DC, was convicted of wire fraud for devising an investment scheme that scammed more than 60 victims into providing loans to a fictitious organisation known as the “World Sports Alliance”.

Saint Clair claimed he was an affiliate of the UN and sought to “promote the values of sport” through its digital coin, IGObit, which provided a “guaranteed return on investment”.

The scheme was said to run from late 2017 until September 2019, after which Saint Clair’s yarns starting unravelling. It then became obvious that “World Sports Alliance” had absolutely no affiliation with the UN, despite him posing with the former UN secretary general, Khofi Annan.

Asa Saint Clair (left) with former UN secretary general Khofi Annan. Source: Presswire

According to the Attorney for the Southern District of New York, Saint Clair was “in reality promoting only the balance of his bank accounts”. It turns that Saint Clair managed to defraud more than 60 victims of “hundreds of thousands of dollars”. Wire fraud carries a maximum sentence of 20 years in prison and the sentencing hearing is scheduled for July 19.

At face value, one might be tempted to suggest that prospective investors were naïve for failing to conduct a basic due diligence. However, it seems as if Saint Clair was quite the promoter, given that his press release is still available online:

Screenshot of WSA press release. Source: PR Newswire

Lessons Learnt

Before investing in any cryptocurrency project, it may be prudent for any prospective investor to consider the following:

  • Who is behind it?
  • Is the person or group credible?
  • Can you verify any associations with credible third parties?
  • Does it promise “guaranteed returns”?
  • Do you have to “act now to avoid missing out”?

Remember that in the world of crypto, it is wise not to be blinded by buzzwords and, of course, it is vital to DYOR (do your own research) to avoid getting REKT (no need to explain that one).

Categories
Bitcoin Coinbase Crypto News Cryptocurrencies Cryptocurrency Law Tokens

Coinbase Dragged into a Class Action Lawsuit for Selling 79 ‘Unregistered Securities’

One of the world’s leading digital asset exchanges has once again landed itself in hot water. This time it has been hit with a class action lawsuit which, among other things, claims that it sold 79 different digital assets that constituted “unregistered securities”:

‘Howey Test’ is Back

Legal proceedings have been launched by three users who accuse Coinbase of selling unlicensed securities and are seeking damages amounting to at least US$5 million on behalf of themselves, in addition to others who have purchased Dogecoin, Solana, Cardano, and more than 70 other tokens listed in the claim.

The suit argues that although some digital assets such as Bitcoin closely resemble commodities, in that they are decentralised, others are more akin to traditional securities (or shares).

The plaintiffs argue that the manner in which some tokens were offered to the public was in fact modelled on an IPO (initial public offering), which necessarily requires a significant amount of disclosures. In the case of the tokens in question, it was argued that disclosures were extremely limited, typically in the form of a “whitepaper” supplemented with adverts and social media posts.

In short, the argument is that the tokens constitute “securities” as defined by the “Howey test”, which requires that all four elements be met on the following criteria:

  1. It involves an investment of money;
  2. It has a common enterprise;
  3. It was made with a reasonable expectation of profits; and
  4. It is derived from the entrepreneurial or managerial efforts of others.

This test, originating from a 1946 Supreme Court decision, is all too familiar for the Securities and Exchange Commission (SEC), which recently began looking into the question as to whether some NFT drops pass this test.

Case ‘Not Much of a Surprise’

Philip Moustakis, counsel at Seward & Kissel for Coinbase, suggested that “the case is not much of a surprise. After all, the SEC has signalled that it intends to pursue investigations or actions against crypto-exchanges.”

He added that the court would need to do the painstaking one-by-one examination of each of the tokens, highlighting the need for greater regulatory clarity:

Unless and until the SEC provides further guidance and a path to compliance for token issuers, crypto lending products, exchanges, and other market participants, the question of whether any particular crypto-asset or transaction is a security will be litigated one at a time.

Philip Moustakis, senior counsel, Seward & Kissel

Having felt the heat of regulatory scrutiny over its lending product, this latest lawsuit comes as another blow to Coinbase. The lawsuit may well have far-reaching consequences given that it aims to cover all persons and entities who transacted in any of the 79 tokens between October 8, 2019, and the present.

From an outsider’s perspective, this case may just be what is needed to finally put the question to rest as to whether some tokens are “unregistered securities”. Michael Saylor, the unofficial King of Bitcoin, clearly believes that most will:

Categories
Bitcoin Crypto News Economics

El Salvador’s Bitcoin-Backed Bonds Set to Roll Out Despite Geopolitical Turmoil

Late last year, El Salvador announced plans to raise US$1 billion using bitcoin-backed bonds. Half of the proceeds would go towards building “Bitcoin City”, with the other half going towards acquiring more bitcoin to add to the country’s balance sheet.

The launch was scheduled for this week, but geopolitics had other plans:

Rollout Happening, but Timing Unclear

According to a Reuters report, El Salvador is looking for the right timing to launch its controversial bitcoin-backed bonds, which apparently could happen sometime between now and March 20, although delays are expected.

We believe that between March 15 and 20 is the right timing; we have the tools almost finished. But the international context will tell us … I didn’t expect the war in Ukraine.


Alejandro Zelaya, finance minister, El Salvador

Finance minister Alejandro Zelaya added further that “we’re still finishing some details, [but] almost everything is ready”:

Uncertainty Prevails

Analysts have had a difficult time predicting the likely demand for the bitcoin-backed bonds, given that sparse details have been provided. It also seems that since the initial announcement, the goalposts have been somewhat shifted:

These bonds started as a sovereign bond; now, it is a securitised corporate bond, which raises the question of success.

Nathalie Marshik, head of emerging markets sovereign research, Stifel Financial

Rather than being issued by the state, reports indicate that the bonds will instead be issued by a state-owned energy company, LaGeo:

It has been argued elsewhere that El Salvador’s radical moves are in large part motivated by a desire for the nation to regain its financial independence from creditors, including global organisations such as the International Monetary Fund (IMF):

Despite El Salvador recording 10 percent GDP growth in 2021 and an increase of 30 percent in tourism over the same period, persistent fiscal deficits and high debt service are leading to large and increasing financing needs.

Republic on an ‘Unsustainable Path’

El Salvador’s adoption of bitcoin as legal tender has always been viewed as controversial and in fact led to a credit rating downgrade of the nation’s sovereign debt. In a January statement, the IMF called on El Salvador to limit the scope of the bitcoin legal tender law, describing the country as being on an “unsustainable path”.

Whatever your view of El Salvador’s embrace of bitcoin, it’s self-evident that President Nayib Bukele is making bold moves, which could end up disturbing the legacy financial system as we know it.

Categories
Bitcoin CBDCs Crypto News

Deloitte Claims Bitcoin Could Help Governments Create Cheaper CBDCs

A new report from financial services giant Deloitte has highlighted the potential of Bitcoin to form the base of a cheaper, faster and more secure ecosystem for digital fiat and central bank digital currencies (CBDCs).

Comparison between state-sponsored crypto and Bitcoin. Source: Deloitte

Existing Problems Recognised

Deloitte’s report acknowledged the need for a total revamp of the current fiat financial system, suggesting it was “slow, error-prone and expensive relative to performance in other high-tech industries”.

At its core, the report highlights five areas where leveraging the qualities of Bitcoin may be able to improve the current system. In fact, in 2015 the US Federal Reserve released a paper outlining its goal to “improve the speed and efficiency of the payment system from end-to-end over the next decade”. Its key outcomes included:

  1. speed – ubiquitous, safe, faster electronic solution(s);
  2. security – very strong security and high levels of public confidence;
  3. efficiency – reduce the average end-to-end (societal) cost of payment;
  4. cross-border payments – affordable international transfers; and
  5. collaboration with other payment participants – widespread participation with all payment participants.

Deloitte Offers Hybrid Solution

Having identified the problems, Deloitte continues to offer its solution – a blend of the best attributes of Bitcoin and newly established CBDCs and digital fiat.

This, Deloitte argues, would cut costs, reduce errors, increase speed, and simultaneously maintain the privacy and anonymity of user transactions.

Comparison of CBDC and BTC. Source: Deloitte

Throughout the report, much of the emphasis rested on one of Bitcoin’s most widely acknowledged value propositions – genuine decentralisation:

With the capacity to do so without relying on a centralised entity for day-to-day operations, whether commercial or federal, the effect might be really transformative.

Deloitte report

The report argued that Bitcoin was not a substitute for CBDCs and vice versa – instead, they would co-exist and provide greater consumer choice:

Bitcoin could ultimately spawn a series of new opportunities that would transform the current payments system into one that is faster, more secure, and less expensive to run.

Deloitte report

While this isn’t Deloitte’s first venture in the crypto ecosystem, the report has caused some controversy. How do you integrate the best qualities of a decentralised, uncensorable fixed supply digital asset such as Bitcoin with a centralised, unlimited supply CBDC?

Arguably this is impossible given that in many respects, they represent the antithesis of each other. Well, that seems to be what Bitcoiners think:

Categories
Bitcoin Bitcoin Mining Digital Asset Mining Europe Mining

BTC Holders Breathe Sighs of Relief as EU Parliament Votes Against Proof-of-Work Ban

In yet another unexpected twist in the ongoing European cryptocurrency regulation saga, the EU Parliament has officially removed all language banning proof-of-work (POW) cryptocurrencies from the newly passed Markets in Crypto Assets (MiCA) directive. 

EU Goes Back and Forth on POW

The crypto industry was initially concerned about a draft of the MiCA bill that included provisions banning POW cryptocurrencies such as Bitcoin. It then reversed course following a strong backlash, claiming it “wasn’t their intention to create a de facto Bitcoin ban”.  But then things changed, again.

In a classic last-minute insertion of dangerous far-reaching language, reminiscent of last year’s US$1.2 trillion infrastructure bill, provisions banning POW cryptocurrencies were once again inserted into draft bill.

Even though research shows that Bitcoin mining emissions are at “inconsequential levels”, policymakers nonetheless felt it necessary to highlight so-called “unsustainable” crypto mining practices, a clear attempt if ever there was one at appeasing ESG stakeholders.

Crypto lawyer Jake Chervinsky had his doubts about the true intentions of lawmakers and didn’t mince his words:

Nathaniel Whittemore, host of The Breakdown podcast, suggested in his latest episode that environmental concerns are likely more about Bitcoin using energy at all:

My point is that fundamentally, the key thing that any environmental consideration of Bitcoin or proof-of-work is going to rest on, is not whether other things consume more energy, it’s whether the energy that Bitcoin does consume in the first place, is worth it.

Nathaniel Whittemore, host of The Breakdown podcast

POW Provisions Rejected … For Now

After the surprise inclusion of the POW provisions, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) rejected versions of the legislative package that contained a “de facto” ban on POW cryptocurrency mining by a count of 32 to 23 – with six individuals abstaining.

While commentators breathed a sigh of relief, Patrick Hansen of Unstoppable DeFi was quick to pour cold water on the notion that the battle was over:

Any chances left for the POW-ban? The groups that lost the vote have one last option. They could veto a fast-track procedure of MiCA through the trilogues and bring the discussion to the plenary of the Parliament. They need 1/10 of the votes of the EP to do so, which they have. That would bring the discussion around POW into the high-level policy arena. As we can’t predict how that would play out, it should be prevented. Even if it doesn’t change the vote on POW, it would unnecessarily delay the regulation for at least a couple of months. And even outside of this MiCA regulation, the discussion around POW-regulation is far from over. It will come back in the context of the sustainability taxonomy or in the upcoming data centre regulation.

Patrick Hansen, head of strategy & business development, Unstoppable DeFi

Hansen concluded by saying there is still “loads of work left in the month and years ahead, but today is a big political success for crypto in the EU”.

Bitcoin holders, miners and other POW cryptocurrencies might have won the battle, but clearly the war is far from over.

Categories
Bored Ape Yacht Club Crypto News CryptoPunks NFTs

Bored Ape Creators Buy IP and Commercial Rights to NFT Rival CryptoPunks

Yuga Labs, the creator behind popular non-fungible token (NFT) project Bored Ape Yacht Club (BAYC), has just acquired commercial rights to two of the most popular collections on the market, CryptoPunks and Meebits.

Rivals No Longer

After rumours spread like wildfire, Yuga Labs confirmed on the weekend that it had acquired the intellectual property rights, as well as all commercial rights, to CryptoPunks and Meebits.

This means that we now own the brands, copyright in the art, and other IP rights for both collections, along with 423 CryptoPunks and 1711 Meebits.

Yuga Labs announcement

The deal was said to have originated “organically” in conversations between one Yuga Labs partner and the Larva Labs founders. Apparently “one call led to another and here we are at this historic moment”.

The Larva Labs co-founders highlighted their view that Yuga Labs would be the ideal custodian of their creation, saying:

Yuga Labs are the innovators of the modern profile picture project, and the best in the world at operating these projects. They are the ideal stewards of the CryptoPunks and Meebits. In their hands, we are confident that they will continue to be vital, thriving projects in the emerging decentralised web.

Matt Hall and John Watkinson, co-founders of Larva Labs, CryptoPunks and Meebits

Two Different Approaches

In tracing the stories of the two most valuable NFT projects, it’s clear that BAYC and CryptoPunks chose very different paths. Whereas CryptoPunks took a more hands-off approach, the BAYC has come to resemble an exclusive membership club with an ever-increasing array of perks.

Aside from exclusivity of holding the NFT itself, BAYC holders seem to believe that part of its value lies in its ability to commercialise the Bored Ape image. This has translated into real-world events, partnerships, and even a play-to-earn game. And despite the proliferation of copycat projects, high-profile associations with the likes of Adidas have seen the BAYC take some of the shine away from the NFT OGs, the CryptoPunks.

Last month, CryptoPunk #5822 sold for US$24 million. Source: OpenSea

While some holders of CryptoPunks will no doubt be concerned about the direction of the project post-acquisition, others may well be looking at it as an opportunity to not only commercialise, but increase the exposure and publicity of the NFT OG. One prospect that appeared to gain support on Twitter was @Gee_Gazza’s take:

Categories
Bitcoin Crypto News Economics Markets

US Inflation Hits Four Decade High of 7.9%

US inflation has hit a new 40-year high of 7.9 percent, driven by a surge in gas, food and housing costs, all of which are expected to increase further as geopolitical conflict intensifies in Ukraine.

From Bad to Worse

For the 12 months ending December 2021, US consumer price inflation (CPI) hit 7 percent, which at the time was the highest in four decades.

While Bitcoiners and other hard money advocates warned that more pain was potentially on the horizon, many mainstream commentators remained committed to the “inflation is transitory” narrative, citing Covid-related supply chain bottlenecks. They also referred to so-called “base effects”, a distortion in monthly inflation figures resulting from abnormally high or low levels of inflation in the year-ago month.

Turns out that inflation is stickier than anticipated, as the latest figures represent the highest CPI print since July 1981:

Latest CPI figures. Source: US Bureau of Labor Statistics

Costs are up across the board, but some segments are clearly increasing at a faster clip than others. Energy, fuel, transport and housing have experienced the most dramatic increases, as illustrated below:

Image
Illustration of CPI increase line by line. Source: Yahoo Finance

All of this assumes that you take the official CPI statistics at face value, which those in the Bitcoin world don’t:

Bitcoin Offers No Short-Term Relief, More Pain on the Horizon?

Bitcoin held steady on the news at US$39,300, confirming what most market participants believe – namely that in the short-run, it remains a risk-on asset. Interestingly, this trend was recently reversed amid the Russian invasion of Ukraine, but the point remains.

All of this is happening at a time when commentators are signalling that the US stock market is due for a serious correction:

The US markets have been in a bull market since 2010 and some have been screaming for a market correction for months, if not years. It’s entirely inevitable that the party will end. The timing, of course, remains unknown.

In the interim, ordinary consumers will continue to feel the pain as inflation, regarded by some as “tax without legislation”, continues to far outpace domestic wage increases.

Categories
CBDCs Crypto News Cryptocurrency Law Regulation

Key Takeaways From President Biden’s Long-Awaited Crypto Executive Order

US President Joe Biden has signed an executive order calling government agencies to examine the risks and benefits of cryptocurrencies. What are the key insights and reactions from industry players?

Addressing Risks and Benefits of Digital Assets

Contrary to the fears of some market participants, no direct action will be taken from the order, at least for now. Instead, it lays out a process and series of deadlines for the alphabet soup of government agencies to work together and deliver a report to the president.

Specifically, the executive order covers seven main areas and calls for measures to:

  1. protect consumers, investors and business;
  2. protect US financial stability and mitigate systematic risk;
  3. mitigate the financial and national security risks posed by the illicit use of digital assets;
  4. promote US leadership in technology and economic competitiveness within the global financial system;
  5. promote equitable access to safe and affordable financial services;
  6. support technological advances and ensure responsible development and use of digital assets; and
  7. explore a US central bank digital currency (CBDC).

Although lacking in detail, the White House noted the order would work “across agencies and with Congress to establish policies that guard against risks and guide responsible innovation”.

Put differently, the administration appears to be making an attempt at striking a regulatory balance between consumer protection and embracing innovation. Or at least appearing to do so.

Mixed Responses to EO

Despite the order lacking any real substance, most seemed to share the sentiments of Jerry Brito, director of Coin Center:

The message I take from this EO is that the federal government sees cryptocurrency as a legitimate, serious, and important part of the economy and society, and I think it’s a good signal to serious people who’ve been holding back from getting involved. The EO also presents another striking contrast with alarmist politicians and media in that it is ultimately a call for further study and deliberate planning, not a reactive rush to legislate or regulate.

Jerry Brito, director, Coin Center

Dave Grimaldi, head of government relations at the American Blockchain Association, agreed with these sentiments:

However, crypto libertarians such as Erik Voorhees regarded the announcement as a series of meaningless platitudes. Or, in his words, “a perfectly political communication”:

Bitcoin-friendly Senator Cynthia Lummis was equally uninspired, and issued a statement questioning the need for a CBDC:

Image
Senator Cynthia Lummis’ statement. Source: Twitter

Conclusions to be Drawn

On a close inspection of the executive order, it’s difficult not to be somewhat cynical, given that it is devoid of any real substance. While it may appease some market participants, it would seem prudent to reserve judgement pending the release of concrete information.

However unpopular, regulation appears to be an inevitable feature of any market on the path towards widespread global adoption. The hope, of course, is that regulators are not too heavy-handed, to the point where innovation flees to friendlier jurisdictions.

Australia appears to be on the right path with the Senate Committee recently publishing a 12-point reform plan designed to strike a balance between consumer protection and ensuring Australia remains competitive in the global digital asset arena. Recently, the former head of payments policy at the RBA suggested that regulation would threaten the crypto market, however money sitting on the sidelines awaiting regulatory clarity would argue otherwise.