Category: Institutions

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Institutions Payments Stablecoins

PayPal Confirms it is ‘Exploring a Stablecoin’ After Dev Discovers it in Code

PayPal Coin is the new soon-to-be-released stablecoin from Paypal Holdings Inc, as revealed to Bloomberg News by Jose Fernandez da Ponte, PayPal’s senior vice-president of crypto and digital currencies.

Stablecoin Development Code Found Inside the PayPal App

In an interview with Bloomberg, Fernandez da Ponte said: “We are exploring a stablecoin; if and when we seek to move forward, we will, of course, work closely with relevant regulators.”

As per the report, it was PayPal developer Steve Moser who found the hidden code of a stablecoin already in development inside the PayPal app. Moser also found a logo image that read: “PayPal Coin”.

Discovered logo of PayPal’s stablecoin. Source: Bloomberg

However, the code and the image were the products of a recent PayPal internal hackathon – a type of internal gathering frequent in tech companies where employees such as software developers engage and collaborate to promote new products and projects. This means that the final product could change.

Stablecoins Facilitating Payment Systems

PayPal’s effort to engage with the crypto market was one of the main drivers behind the Bitcoin price rally that started in mid-2020 – a year that saw the emergence of the institutional interest in cryptocurrencies.

While most financial institutions were hoarding high market-cap currencies such as bitcoin and ethereum in 2021, the interest in stablecoins quickly took over as they facilitate USD transactions for businesses. On December 13 it became apparent that Novi, Meta’s digital wallet, was on the move to start a stablecoin payments trial by simply sending a text message on the WhatsApp chat app, instantly and with no fees.

However, the stablecoin market has its downside – there is no deposit insurance for holders, for one. But as Crypto News Australia reported last October, the US Government has been studying the possibility of a US$250,000 coverage for holders of these tokens.

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Bitcoin Bitcoin Mining Crypto News Institutions

$900 Million Worth of New Bitcoin Mining Equipment Heading from China to USA in 2022

Nearly US$900 million worth of Bitcoin mining equipment is heading towards Las Vegas-based Marathon Digital Holdings. The firm announced the purchase last week, but the purchase price was only disclosed on December 30.

Last week, Marathon announced a deal with Bitmain for 199,000 S19 XP models to be delivered through the latter half of 2022. The mining rigs will be shipped from Bitmain between July and December, according to the delivery schedules.

The S19 XP rigs produce approximately 23.3 EH/s (Exa hashes per second), a 600 percent increase on the firm’s current hash rate, and a 75 percent increase from its prior objective of 13.3 EH/s by mid-2022, according to Marathon CEO Fred Thiel. All the rigs are expected to be operational by early 2023.

US Now Aims to Lead in BTC Mining

On the strength of this recent purchase, Marathon has made the largest single order Bitmain has ever received for the S19 XP models, with its ultimate ambition to become not only the largest mining company in the US but worldwide.

With 23.3 EH/s of total capacity expected to be online in early 2023 and ample access to renewable power behind the meter with one of the largest renewable energy providers in North America, we believe we have established Marathon as one of the leading bitcoin miners in North America and potentially the largest known miner in the world. We would like to thank the team at Bitmain for helping us realise this objective.

Marathon press release

Now that China is no longer the concentration point for bitcoin miners following the its government crackdown on crypto, the US has overtaken the People’s Republic by becoming the number one country with the biggest BTC hashrate.

Green Issues Addressed

Discussions regarding the environmental impact of BTC mining have been assessed by several experts who have explained why and how mining can support renewable energy.

Bitcoin mining has even proven to be useful for insulating cities from the winter chill. As Crypto News Australia reported in October, the City of North Vancouver has announced a partnership with its local energy provider to use BTC mining to heat the city.

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Bitcoin Crypto News Cryptocurrencies Gold Institutions

Institutional Crypto Custodians Raised $3 Billion in 2021

Investments into institutional-focused crypto custody firms have skyrocketed in 2021 – over US$3 billion has been raised this year, a rate three times higher than 2020.

The amount of capital flowing to institutional-focused crypto custody companies is now worth a total of almost US$3.5 billion, 4.8 times the amount raised in 2018.

NYDIG Leads the Chart

In mid-December, bitcoin holding company NYDIG announced the closing of US$1 billion in investment funding, giving the company an estimated value of more than $7 billion.

A day later, Anchorage, a San Francisco-based crypto custody company for institutional investors, announced a US$350 million funding round.

The top companies leading investment rounds so far are:

  • NYDIG: $1 billion raised;
  • Ledger: $380 million raised;
  • Anchorage: $350 million;
  • Fireblock: $310 million; and
  • Copper: $50 million

More Institutions Replace Gold with Bitcoin

Institutions have been heavily hoarding some of the top cryptocurrencies in the market, and institutional interest in the crypto market has surged to the point that 84 percent of institutions are interested in a crypto ETF.

So far, the idea remains the same: institutions want to escape inflation, and gold was the preferred option by most industries. However, with the rise of Bitcoin and other decentralised currencies, more institutions – including investment firms and banks – are replacing gold with bitcoin.

Crypto News Australia has kept track of the latest Bitcoin purchases made by institutional players in the crypto market this year. You can check our list here.

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Crypto News Institutions Investing

Report: One-Third of Hedge Fund Managers Plan to Add Crypto to Their Portfolios

A report released by Ernst & Young (EY) detailing the views of hedge funds and other investors on alternative funds like crypto shows there has been strong growth in the sector, with 31 per cent of hedge fund managers planning to add crypto to their portfolios.

EY has released its yearly publication, the EY Global Alternative Fund Survey, which offers a comprehensive overview of the perspectives of alternative fund managers and the institutional investors who allocate to alternative asset classes, basically anything that’s not a stock, bond or cash.

Increase in Alternative Investment Opportunities

According to the study, only 7 percent of alternative fund managers and investors interviewed for the EY study said they or their firms already have “crypto-related assets” in their portfolios. However, there is a steady rise in the onboarding of various investment vehicles of the new asset class.

2021 Global Alternative Fund Survey

In 2021 alternative funds increase the successful momentum they built in 2020 by delivering strong returns resulting in increased investor confidence.

EY Global Alternative Fund Survey

The report also states that “cryptocurrencies and the digital asset ecosystem perhaps garnered the most mainstream public interest during 2021”. However, institutions are viewed considerably more cautiously, with regulatory uncertainty cited as the second-largest risk for investors behind crypto not aligning with their investment strategy.

Increase in Hedge Fund Participation

More alternative fund managers have become active participants, drawn by uncorrelated return profiles and continued investment in institutional-grade infrastructure to support the evolving asset class.

When looking at current and future exposure to crypto-related assets, 31 per cent of hedge fund managers, 24 per cent of alternative investors, and 13 per cent of private equity managers said they planned to add crypto to their portfolios or maintain their current exposure in the next one to two years.

2021 Global Alternative Fund Survey

According to the study, the largest managers were most likely to increase their exposure, with 36 per cent of hedge fund managers with over US$10 billion in Assets Under Management (AUM), and 32 per cent of managers with US$2–10 billion in AUM reporting that they expected to increase their crypto portfolios.

Retail Investors Join the Party

As such, allocations to hedge funds (28 percent) and private equity (27 percent) are now on par – a stark contrast to 2018 when hedge fund allocations (40 percent) outpaced private equity (18 percent) by a two to one margin.

The study also shows that 42 per cent of investment managers, seeking new growth opportunities, are turning to “retail” channels to grow as institutional allocations are slowly increasing.

Alternative fund managers have realised they need crypto, not only address but advance current and future investor priorities, which now extend to retail investors, regarding environmental and societal imperatives, while taking the necessary steps to attract, support and retain a diverse and decentralised workforce.

Also in a recent report, it showed more than one in four financial advisers say they will recommend cryptocurrencies to their clients in the next year.

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Crypto News Crypto Wallets DeFi Institutions

Crypto Adoption Rate is Mirroring Internet Adoption of the Late 1990s

Crypto adoption from 2014 to 2020 is resembling that of the internet from 1990 to 2000, the same years when the online boom was considered a scam and a bubble that would eventually burst.

The speed at which cryptocurrencies have taken off has been surprising. On one hand, detractors had to sit back and watch how crypto assets reached the mainstream mostly driven by institutions and renowned wealthy investors such as Paul Tudor Jones and Mark Cuban, collectively highlighting the benefits of crypto and blockchain technology. 

But the crypto community could not have predicted the speed and extent of crypto adoption this year. In August, Crypto News Australia reported that global adoption had surged an incredible 880 percent over the past year, and the number of active addresses reached its peak on November 10 – the highest level since May.

At the beginning of November, the number of active bitcoin addresses stayed above 1 million for five days in a row. This, according to analytics firm Santiment, signals that prices will flirt with further all-time highs (ATHs) in the future.

Cryptocurrency adoption in Australia has advanced markedly. Earlier this month, the Commonwealth Bank of Australia (CBA) allowed users to buy, sell and hold crypto on its CommBank mobile app. However, Australia still has many challenges ahead with crypto adoption in terms of education and regulation.

Number of Users Engaging With Crypto Products Skyrockets

The number of users and institutions engaging with crypto and DeFi-related products has risen as well. According to Coinbase’s Q3 2021 Shareholder Letter, the number of users on the exchange earning yields on their crypto assets increased to a total of 2.8 million.

Meanwhile, crypto-native institutions have been keener to explore the DeFi space as the sector has experienced a boom. More institutions are using Ethereum to borrow and lend across several DeFi apps, as per a report from digital assets broker Genesis.

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Australia Bitcoin Ethereum Institutions Regulation

ASIC Gives Green Light to BTC and ETH Spot ETFs, First Expected Next Week

The Australian Securities and Investments Commission (ASIC) has finally given the green light to Bitcoin and Ethereum exchange-traded funds (ETF), allowing investment funds to launch their crypto ETFs by next week.

After a long period of industry consultation, ASIC released a set of guidelines for institutions keen to launch crypto exchange-traded products (ETPs). The paper also published guidelines that allow fund managers to launch ETFs under certain regulatory requirements.

Australian fund manager BetaShares will be the first to list an ETF on the Australian Securities Exchange on November 4. The fund will have the ticker “CRYP” and will allow investors to access a mixed set of crypto ventures, most of them focused on companies whose revenue is derived mainly from the cryptocurrency market.

We know there are millions of people around the world [invested in crypto], and close to 2 million Australians that have actually invested in cryptocurrency directly.

Alex Vynokur , CEO and co-founder, BetaShares

Among the regulatory requirements are that fund managers must appoint a custodian with expertise on cryptocurrencies and blockchain technology, and hold at least A$10 million in net tangible assets. They are also responsible and must compensate for any custodial assets lost.

As Crypto News Australia reported in August, one of the reasons crypto ETFs in Australia have been delayed so long is that ASIC was trying to solve how arrangements with custodians would work.

ASIC Recognises Institutional Interest in Australia But Leaves Altcoins Out

ASIC has signalled its intention to “recognise the interest in, and demand for, ETPs and other investment products that hold crypto-assets in Australia”. The new fund is expected to give the Australian crypto space a big boost as institutional adoption expands rapidly across the globe. The first US Bitcoin ETF debuted in mid-October, breaking record trading volumes of US$1 billion in just 24 hours, turning it into the country’s second-largest traded ETF fund.

However, altcoins were left out, with only Bitcoin and Ethereum ETFs permitted. These funds will allow investors to purchase contracts that track the price of both currencies without having direct exposure to either asset.

Talking about the benefits and risks of cryptocurrencies, ASIC commissioner Cathie Armour said:

Crypto-assets have unique characteristics and risks that must be considered by product issuers and market operators in meeting their existing regulatory obligations. The good practices we published provide practical examples of how these obligations may be met, in a way that maintains investor protections and Australia’s fair, orderly and transparent markets.

Cathie Armour, commissioner, ASIC
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Crypto News Institutions Payments

Mastercard Inks Deal Enabling Consumers to ‘Buy, Sell and Hold Digital Assets’

Credit card giant Mastercard will allow its customers to integrate crypto solutions and services to their consumers in the US.

As first reported by CNBC, Mastercard announced a partnership with crypto firm Bakkt to enable its 1000+ banks and merchants in the US to buy, sell and hold digital assets through Bakkt’s crypto custody services.

This partnership will bring a myriad of crypto services to the Mastercard payment network, such as the ability to earn crypto rewards on crypto-enabled credit or debit cards, digital wallets with custody services, and loyalty programs where users can convert airline or hotel points to bitcoin.

We want to offer all of our partners the ability to more easily add crypto services to whatever it is they’re doing. Our partners, be they banks, fintechs or merchants, can offer their customers the ability to buy, sell and hold cryptocurrency through an integration with the Bakkt platform.

Sherri Haymond, executive vice-president of digital partnerships, Mastercard

Mastercard has been partnering with industry leaders, including USDC issuer Circle, to bring the stablecoin to its crypto card offering.

A month ago, Crypto News Australia reported that Mastercard had acquired the blockchain forensic firm CipherTrace to provide security and technology services for its operations in the crypto industry.

Bakkt Shares Soar 270% on the News

Bakkt shares have soared over 270 percent following the announcement of its partnership with Mastercard. However, it’s worth noting that the crypto firm has teamed up with several other companies, including entering a partnership with Google to allow crypto payments for its Google Pay platform.

Shortly after the Mastercard announcement, Bakkt foreshadowed another partnership, this time with Fortune 500 company Fiserv, a multinational provider of payments and financial services.

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Bitcoin Blockchain Crypto News Cryptocurrencies Ethereum Gold Institutions

$2.2 Trillion Bond Giant Embraces Crypto as ‘Inflation Hedge and Store of Value’

Pimco, a US$2.2 trillion global fixed-income giant, will continue to explore crypto assets that have the “potential to disrupt the financial industry”, according to a report from CNBC.

Exploring Cryptocurrencies as an Inflation Hedge

During an interview with CNBC, chief investment officer Daniel Ivascyn revealed that Pimco had already invested in “crypto-linked securities” through several hedge fund portfolios, and plans to increment crypto assets exposure in the near future.

The move was announced on October 20 after Bitcoin and other high-market cap cryptocurrencies such as Ethereum surpassed record price levels, with BTC breaking above US$67,000 and ETH reclaiming the $4,000 mark, falling just short of its May ATH of $4,300.

Most cryptocurrencies saw a boost in price after the first Bitcoin futures-linked ETF, which saw a massive trading volume on its first days of approximately US$1 billion.

According to Ivascyn:

Now we’re looking at potentially trading certain cryptocurrencies as part of our trend-following strategies or quant-oriented strategies, then doing more work on the fundamental side. This will be a gradual process where we spend a lot of time on the internal diligence side speaking to investors. And we’ll take baby steps in an area that’s rapidly growing.

Daniel Ivascyn, CIO, Pimco

Ivascyn went on to say that cryptocurrencies like bitcoin offer an inflation hedge and a store of value against fiat hyperinflation and declining purchasing power. His comments resemble those of JPMorgan, whereby analysts at the investment bank revealed earlier this month that investors were replacing gold with bitcoin as a better inflation hedge.

Competitive Environment Keeps Pace with Innovation

Cryptocurrencies and the DeFi sector have become highly valuable financial instruments not only for crypto enthusiasts but for artists, content creators, institutional investors and more.

As crypto and blockchain technology advances continue to accelerate, traditional institutions are keener than ever to explore a space that’s innovating at such a pace. To that matter, Ivascyn said:

Pimco is thinking about scenarios where this could take us to ensure we are competitively prepared to deal with what’s a rapidly changing environment that offers a pretty significant value proposition.

Daniel Ivascyn, CIO, Pimco
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Banking CBDCs Crypto News Industries Institutions

French CBDC Trial Incorporating Smart Contracts Heralded a Success

Banque de France, the French central bank, has successfully completed its 10-month trial using Central Bank Digital Currencies (CBDC) in the country’s debt market.

The trial was led by Euroclear, a Belgium-based financial services company that specialises in the settlement of securities transactions. The trial also included many of France’s largest banks, as well as the French public debt office and the central bank, which used a permissioned blockchain-based system developed by IBM on Hyperledger Fabric.

We have together successfully been able to measure the inherent benefits of this technology, concluding that the CBDC can settle central bank money safely and securely.

Isabelle Delorme, Euroclear executive

According to the report released by Euroclear, the pilot was launched in March 2020 by Banque de France to explore the uses of a digital currency issued by the central bank. The continued research and development of a CBDC for the settlement of government bonds and securities has been adjudged a success, according to Euroclear:

It showed that CBDC can be effectively used to support the settlement of securities in central bank money and that it is possible to run post-trade operations for an activity as critical for the capital markets as the management of OATs [order audit trail system].

Euroclear report

Enhancing the Traditional System

Typically, deals are reconciled between parties, recorded and assets transferred to a single centralised authority such as a central bank or securities depository. This process usually pushes out the time settlement takes and increases costs due to intermediaries.

This experiment made it possible to demonstrate the possibilities of interaction between conventional and distributed infrastructures. It also paves the way for other alliances in order to benefit from the opportunities offered by financial assets in a blockchain environment.

Nathalie Aufauvre, general director of financial stability and operations, Banque de France

The project tested use cases of a CBDC in a range of everyday activities, such as issuing new bonds, using them in repurchase agreements, as well as paying coupons and redeeming deals.

Dedicated smart contracts were developed to test the handling of coupon payments based on the holdings of securities tokens. Payments were automatically prepared at defined dates and automatically settled in CBDC at defined payment dates on the blockchain platform.

Smart contracts have the ability to provide more autonomy to capital market participants while maintaining the control imposed by regulators on a blockchain platform.

Landmark for CBDCs

According to Soren Mortensen, global director of financial markets at IBM, the project “went well beyond previous blockchain initiatives” because it successfully trialled “most central securities depository and central bank processes” while eliminating existing interim steps such as reconciliation between market intermediaries. Blockchain could therefore facilitate a reduction of the settlement cycle, leading to capital and margin cost reductions.

Veteran policymaker Benoît Cœuré warned central banks last month to act more quickly to develop official digital assets because new technologies such as decentralised finance posed a threat to banks and other depository institutions.

Due to the nature of Distributed Ledger Technology (DLT), it is possible to process transactions without the need for an intermediary, reducing fees and increasing speed, while transactions remain completely traceable and transparent. Policymakers are worried that private sector initiatives around payments and cryptocurrency issuance could lead to central banks losing control of monetary policy, therefore spurring the uptake of CBDCs.

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Bitcoin Institutions Investing

Europe’s First Bitcoin ETF Launches, Bullish News for Institutional Investors

Jacobi Asset Management, a London-based multi-asset investment manager, recently announced it had received approval from the Guernsey Financial Services Commission (GFSC) to launch Europe’s first Bitcoin ETF (exchange-traded fund).

Bullish News For Institutional Investors

Jacobi announced on October 15 that it had the go-ahead to launch what it calls a “first tier one” Bitcoin ETF, thus termed to reflect the high-profile partners supporting it:

As per the press release, Jacobi plans to list the fund on Cboe Europe, one of the largest pan-European equity exchanges, while it’s pending for approval by the Financial Conduct Authority (FCA).

The fund will be open only to institutional investors once it goes live, with a 1.5 percent management fee. Fidelity Digital Assets will be the custodian of the fund, giving investors enterprise-grade custody to safely invest in digital assets.

Bitcoin ETFs Are Now a Reality

Bitcoin Exchange-Traded Funds were thought of as something impossible in the infancy of the crypto industry, but now we have several countries hosting them. The first countries to do so were Canada (which now has three BTC ETFs) and Brazil.

Jacobi was launched in May 2021 and is directed by CEO Jamie Khurshid, a former Goldman Sachs investment banker. Talking about the fund, Khurshid said:

We are excited to be launching a new secure, transparent and accessible product to track the performance of Bitcoin. This is an exciting moment for Europe as regulatory approval comes ahead of those waiting for a decision from the US Securities and Exchange Commission.

Jamie Khurshid, CEO, Jacobi Asset Management