Kiffmeister’s #Fintech Daily Digest (12/10/2020)

Paxos and BitPay Become Latest Crypto Firms to File for Federal Bank Charters

Bitcoin payments company BitPay has filed paperwork with the U.S. Office of the Comptroller of the Currency (OCC) to establish BitPay National Trust Bank to be headquartered in Alpharetta, Georgia. A national trust bank is a limited purpose national bank that engages in trust activities. Also, Paxos filed an application with the OCC to create the Paxos National Trust that would operate out of New York. The company, which already has a New York trust charter and a slew of licenses, currently offers cash custody, gold custody, cryptocurrency services, digital asset issuance, securities clearing, commodities trading and other services.

JPMorgan just conducted a blockchain-based repo transaction using its eponymous JPMCoin

JPMorgan executed a blockchain-based repo transaction using its JPMCoin wholesale stablecoin and atomic trade settlement that links the two legs of the transaction to ensure that the transfer of one asset occurs if and only if the transfer of the other asset also occurs. “The repo market provides a widely used form of secured financing, however, current operational limitations prevent the meaningful use of such financing to meet intraday liquidity needs. Using blockchain enables borrowers and lenders to execute shorter-term, intraday repo transactions with real-time, simultaneous transaction settlement, creating new ways to access intraday liquidity.” 

The first live trades JPMorgan conducted were between the bank’s broker-dealer and banking units, using the Onyx blockchain platform. In a test environment, JPMorgan has also traded with Goldman using Bank of New York Mellon Corp. as the triparty agent. Goldman is expecting to join Onyx for intraday repo trading as soon as January. 

Euro stablecoin launched on Stellar by one of Europe’s oldest banks

Germany’s Bankhaus von der Heydt (BVDH) has issued a Euro stablecoin (EURB) on the Stellar network with the collaboration of Bitbond, a German tokenisation and digital asset custody technology provider. With the go-live on Stellar, Bitbond also integrates the stable coin into the securitization platform developed for BVDH, including the automatic mining and burning of tokens.  The Federal Financial Supervisory Authority (BaFin) has already provided their approval for Bitbond to issue tokenized bonds on Stellar. 

Bitwise Crypto Index Fund Provides New Way to Invest in Bitcoin

Trading in Bitwise Asset Management’s 10 Crypto Index Fund is live. It tracks the 10 largest crypto-assets and allows investors to buy shares that represent them. It is billed as the first publicly traded crypto index fund in the United States. The Fund debuted with $120 million in assets under management. 75% of the assets are Bitcoin, 13% in Ether and the remaining 12% split between XRP, Litecoin, Chainlink, Tezos, Bitcoin Cash, Stellar, and EOS. 

Illegal Bitcoin use is down, but privacy wallet laundering is up, says analytics firm

Blockchain analytic firm Elliptic has found that the proportion of Bitcoin (BTC) transactions linked to criminal activity is way down. However, as a result of heightened know your customer (KYC) requirements, exchanges have lost ground as a destination for illegal crypto and the use of privacy wallets has increased. At least 13% of Bitcoin crime proceeds are now laundered through privacy wallets, up from just 2% in 2019. Privacy wallets aim for greater anonymity on the blockchain, facilitating coin “mixing” processes that obscure transactions’ origins. 

Circle CEO joins appeal against US Treasury self-hosted crypto wallet ban

Circle CEO Jeremy Allaire sent a letter to the U.S. Department of the Treasury, appealing for regulators to collaborate with the industry in adopting crypto regulations. He took particular aim at rumored proposed regulations that would prohibit unhosted or self-hosted wallets, claiming that they would significantly harm industry and American competitiveness and yield economic and industry advantage to Chinese firms. Allaire said that industry and regulators need some time to sort out best practices in regulating emerging technology together. Four members of the Congressional Blockchain Caucus also sent a letter to Treasury Secretary Mnuchkin defending the technology behind self-hosting wallets.  

Bitcoin price ‘bearish alert’ as 140K BTC from Mt. Gox may move for the first time

After multiple delays, creditors of Mt. Gox who lost money in its implosion in 2014 are set to know when they will receive BTC on December 15 — and the temptation to sell for profit may prove to be too great to avert a mass run on exchanges. Mt. Gox was the best-known cryptocurrency exchange until it was hacked for funds that included 860,000 BTC. After years of legal tussles, a rehabilitation scheme will see roughly 140,000 BTC distributed to creditors. 

Standard Chartered offers crypto custody

The venture investments unit of Standard Chartered, will begin offing crypt-asset custody services to institutional clients. It has partnered with Northern Trust to launch Zodia Custody, an institutional-grade crypto custodian targeting institutional and wealthy clients. Zodia’s launch is expected next year, pending approval of the UK Financial Conduct Authority. In July, U.S. Comptroller of the Currency Brian Brooks announced that American banks are allowed to offer custody services for digital assets. 

DBS Bank’s Digital Exchange to Begin Trading Crypto ‘Next Week

DBS Digital Exchange, owned by DBS Bank of Singapore and the Singapore SGX stock exchange (10%) opened for digital asset trading. The DBS Digital Exchange will also provide tokenization of securities and other assets, as well as bank-grade custody for digital assets. The new exchange will facilitate spot exchanges from fiat currencies to cryptocurrencies and vice versa. The DBS exchange will only be open to institutional clients and accredited investors. 

Bridging the Governance Gap: Interoperability for blockchain and legacy systems

The World Economic Forum published a governance framework that proposes strategic pathways which can enable interoperability between legacy IT systems and distributed ledger systems. It proposes ways to integrate legacy IT systems with the capabilities of smart contracts without replacing them. This interoperability between these two disparate systems can spawn a new wave of experiments and pilots towards adoption of smart contracts in various applications. It recommends that businesses join open-source communities that build interoperability frameworks. 

Would the STABLE Act Make Running an Ethereum Node Illegal?

The plain text of the Stable Act presents the bizarre possibility, one which is apparently intended by the drafters, that node operation on any unlicensed chain that supported any stablecoin contracts would be unlawful and, pursuant to 12 U.S. Code § 1833a, would be subject to fines of up to $1,000,000. Criminal penalties might also be possible. This post deals with this point.