Welcome to the first edition of “Off the Chain.” No frills. No bullshit. Just what you need to know in crypto in less than 3 minutes.
This is Pomp - I’ll be writing here a few times a week. On days that I don’t write, you’ll be receiving exclusive interviews, insider analysis, and other compelling content. Let me know what topics or questions you would like covered and we’ll do our best to fit everything in. Enough with the housekeeping, below is what I’m thinking about today.
There is a lot of talk about regulator’s current scrutiny of Ethereum. The big questions are (a) was the original Ethereum ICO an illegal security offering and (b) is Ethereum a security today?
While I don’t have a crystal ball, my guess is Ethereum’s ICO will be deemed an illegal security sale. Although this wouldn’t be a great look for crypto, it won’t necessarily be a huge deal as long as regulators decide not to retroactively enforce on any organizations or individuals involved.
With that said, I think it is unlikely that Ethereum is deemed a current security. It doesn’t possess many of the qualities that securities historically require. The fact that an asset will have successfully transitioned from a security to a utility will put regulators in unchartered territory -- no current regulation addresses this scenario.
What does this mean for the crypto community? We’re in a “wait & see” period. Regulators will first have to come to the conclusions above. If and when they do, they’ll have their work cut out for them to outline new regulations that address this new security-turned-utility asset.
The correct regulatory answers are above my pay grade so let's cross our fingers that the regulators continue to take their time, encourage innovation, and only actively enforce on the obvious frauds & scammers.
— J.P. Morgan dives into blockchain: J.P. Morgan Chase has applied for a patent to facilitate payments between banks using the blockchain. This is the second time that J.P. Morgan has filed for a blockchain-style payment system. Although its last patent was rejected, it’s fascinating to see the bank lay out some of the problems with the existing payment structure. Read more.
— Kenya plans to legitimize land ownership with blockchain: Kenya has assembled a team to use blockchain technology to put an end to land grabbing. "We missed the Internet wave, caught up with mobile technology ... blockchain is the next wave — and we must be part of it," said the team's chairman Bitange Ndemo. Read more.
— A startup raises $3M to put diplomas on the blockchain: Learning Machine, a blockchain startup, has co-developed a system for putting digital diplomas on the blockchain along with MIT. The investors in the seed round were PTB Ventures, Omidyar Network and Learn Capital. The startup hopes to allow clients to use any blockchain they want — public or private. Read more.
— Goldman Sachs sets up Bitcoin trading desk: Goldman Sachs is moving forward with plans to set up the first Bitcoin trading operation at a Wall Street bank. Goldman will begin using its own money to trade with clients in a variety of contracts linked to the price of Bitcoin. Other banks are likely to follow in Goldman’s footsteps. Read more.
— Elon Musk trolls Warren Buffett with cryptocandy: During the annual Berkshire Hathaway meeting, Warren Buffett said Tesla’s Elon Musk should stay away from See’s Candies. Musk used it as an opportunity to troll Buffett (who is not a fan of Bitcoin) and say he’s launching his own “cryptocandy” company. Read more.
— Switzerland’s largest bank says “no” to crypto: Switzerland’s largest bank will not offer its customers trading in Bitcoin and other cryptocurrencies. UBS chairman Axel Weber said virtual currencies are at best "highly speculative investment vehicles," and at worst they “facilitate the financing of terror, money laundering, and other criminal activities.” Read more.
— Square’s Bitcoin business is struggling to make money: Square pulled in $34 million of Bitcoin-related revenue last quarter. The bad news is that it spent nearly as much to acquire Bitcoin in the first place. The Bitcoin trading service accounts for nearly 5% of Square’s overall revenue, but the results suggest the company may be struggling to make it profitable. Read more.
— Investor sues Ripple claiming XRP is a security: An investor who claims he lost money buying and selling the cryptocurrency XRP has filed a class action lawsuit against Ripple, alleging that the company violated state and federal securities laws. Read more.
— Japan sets new crypto exchange requirements: The Financial Services Agency, Japan’s financial watchdog, says exchanges will now be required to monitor customers accounts multiple times a day for suspicious fluctuations, manage client assets separately from those of the exchange, and store crypto holdings on offline systems only. Read more.
— Reddit’s Alexis Ohanian predicts $20K BTC in 2018: Reddit’s Alexis Ohanian said he thinks Bitcoin will reach $20,000 while Ethereum’s price would go as high as $1,500 by the end of the year. He also offers his opinions on the success of CryptoKitties. Read more.
— Telegram scraps its public-sale ICO plans: Messaging app Telegram has brought in so much money from a small group of private investors that it is calling off a planned ICO to the wider investing public. Telegram has pulled in $1.7 billion by selling newly created cryptocurrency to fewer than 200 private investors, so it will use the money for a new digital payment platform, Telegram Open Network. Read more.