Square Crypto will change its name to Spiral, according to the announcement
Square Inc. (SQ), the financial-services company co-founded by Jack Dorsey, announced that it will be changing its corporate name to Block Inc.
“We built the Square brand for our Seller business, which is where it belongs,” Dorsey said in a statement. “Block is a new name, but our purpose of economic empowerment remains the same. No matter how we grow or change, we will continue to build tools to help increase access to the economy.”
The payment giant detailed its rebranding, which will go into effect on Dec. 10, in a series of tweets on Wednesday.
“Block references the neighborhood blocks where we find our sellers, a blockchain, block parties full of music, obstacles to overcome, a section of code, building blocks, and of course, tungsten cubes,” San Francisco-based Square said.
As a part of its rebranding, Square Crypto will change its name to Spiral. The company holds roughly $220 million of bitcoin in its treasury, according to The Wall Street Journal.
The news comes just two days after Dorsey resigned as CEO of Twitter.
Shares of the company, whose ticker symbol will not change, are down 6.66% on the news.
DeFi provides anyone in the world with an internet connection and smartphone low-cost, high-speed, and instantaneously settled financial markets.
Borrowing and lending protocols, as well as decentralized exchanges (DEXs), currently make up a vast majority of DeFi activity, as regulation around the space remains largely uncertain.
Coinbase Cloud aims to be the Amazon Web Services of crypto by supporting digital asset infrastructure through its subsidiary, Bison Trails.
Ethereum NFTs are officially live on FTX US, according to the company’s president, Brett Harrison.
Latest in Macro:
S&P 500: 4,513, -1.18%
NASDAQ: 15,254, -1.83%
Gold: $1,784, +0.46%
WTI Crude Oil: $65.48, -1.06%
10-Year Treasury: 1.405%, -0.036%
Latest in Crypto:
BTC: $56,666, -.63%
ETH: $4,546, -1.54%
ETH/BTC: 0.0800, -1.51%
BTC.D: 41.73%, +0.28%
DeFi versus TradFi
Bitwise released a report titled ‘Decentralized Finance (DeFi): A Primer for Professional Investors’, which notes that though many industries have been reshaped by digital technologies, finance has not. Though there have been improvements to the user experience through apps like Venmo or Cash App, it adds, the underlying infrastructure behind payments has remained stagnant for decades.
“DeFi replaces traditional financial intermediaries with software: self-executing ‘smart contracts,’ secured by blockchain technology, allow innovators to reimagine everything from lending to trading, asset management, and more,” the executive summary of the report states.
Lower cost and speed
DeFi services are able to cut out the costs of middlemen (employees, offices, transaction fees, etc.) because they utilize public infrastructure (blockchains) that execute smart contracts on behalf of the users.
Innovation occurs much faster in DeFi because problems solved for one protocol may be applied to a different set of problems.
Just as Uber aligns the supply of willing drivers to the demand of potential passengers needing to get from point A to point B, DeFi connects liquidity providers looking for yield to traders willing to pay swap fees on an automated market maker, such as Uniswap.
There are nearly 4 million users and more than $200 billion of assets in DeFi protocols today. The main difference between most applications consumers use today and DeFi is the lack of a centralized authority behind them. This ensures that anyone with an internet connection is free to use any application they desire.
Primary applications today
Of the roughly $280 billion of total value locked in DeFi protocols, a vast majority of the liquidity revolves around two product markets: borrowing and lending protocols, and decentralized exchanges, according to DeFi Llama data.
Borrowing and Lending
Aave, which boasts more than $16 billion of liquidity, enables participants to lend out their assets in exchange for passive income. Borrowers can lock up collateral to take out loans at various annualized rates.
Network participants are able to provide liquidity via asset pairs to a DEX in exchange for rewards that come in the form of swap fees generated and liquidity provider incentives. DEXs are similar to a brokerage account or the New York Stock Exchange, except they are run by self-executing smart contracts.
Today Uniswap, one of the largest DEXs built on top of Ethereum, has trading volumes that rival those seen by centralized crypto exchanges such as FTX and Coinbase.
“JPMorgan, the world’s largest bank, boasts a market cap of [about] $508 billion, more than 3x the combined value of all DeFi apps combined,” Bitwise Research Analyst Ryan Rassmusan said in a Nov. 18 Twitter post. “DeFi is tiny compared to the size of the industry that it aims to disrupt: [less than] 1% of the $24 [trillion] legacy finance market.”
The President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency recently released a report on stablecoins and the need to regulate them. Lyn Alden, founder of Lyn Alden Investment Strategy, recently pointed out that the fate of DeFi is in large part decided by centralized stablecoin issuers such as Tether and Circle, which are subject to the US’s jurisdiction.
The Fed stated earlier this week that it would issue guidance for crypto regulation in the first half of 2022, which could prove to have a negative effect on the digital asset space during a time that coincides with tighter monetary policy.
SEC Chairman Gary Gensler said today that further enforcement against DeFi protocols is coming sooner rather than later.
“We’ve deployed 60,000 nodes that run your favourite crypto applications without interruptions and support over $30 [billion] assets staked to secure the world’s leading blockchain networks,” wrote Mara Schmiedt, business and corporate development manager at Coinbase.
Coinbase is aiming to become the Amazon Web Services of crypto, Coinbase Chief Product Officer Surojit Chatterjee told Forbes, making decentralized applications easier to launch through their product line at Bison Trails. While there are other competitors in the infrastructure space, no other exchange in the US boasts more than 73 million verified users to leverage.
Ali Yahya, a general partner at a16z, compared Coinbase’s full suite of offerings to “just read/write infrastructure, which is what Alchemy does,” according to the Forbes article.
“All of the other products and services that Coinbase uniquely can bring to developers such as trading, fiat on-ramps, we offer a single place for people to build the full end-to-end experience that really doesn’t exist today,” he added.
Non-Fungible Tokens (NFTs)
Ethereum NFTs are officially live on FTX US, according to Brett Harrison, the company’s president. Industry participants are unsure how the increased competition in secondary marketplaces for NFTs will affect OpenSea’s historically dominant marketshare.
Trading data from OpenSea and Solanalysis of some of the top Solana and Ethereum projects can be found below:
If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.
Former CFTC Chairman Giancarlo thinks that regulators need to let markets determine value on their own
Two former US regulators agree that the way we are thinking about crypto regulation today may be misguided
It is not up to regulators to determine which asset classes or securities are legitimate, according to Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CTFC) and senior counsel at Willkie Farr & Gallagher.
Giancarlo was joined by Brian Brooks, CEO of Bitfury Group and Former US Acting Comptroller Of The Currency for a keynote discussion at the Digital Asset Compliance & Market Integrity Summit in New York Wednesday. Both former regulators believe there are issues with the current approach to digital asset industry oversight.
Giancarlo was leading the CFTC, the regulatory body that oversees derivatives markets in the US, during the bitcoin rally of 2017. The Commission was approached by two main operators, the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) about launching bitcoin futures that year.
“It was remarkable how much pressure the commission faced to stall or stop those self-certifications of bitcoin futures, and it wasn’t just regulators, although there was a healthy dose of regulators in the US and abroad that were calling us saying ‘do not let this go forward because you are legitimizing bitcoin,’” Giancarlo said. “But it was the industry itself, a lot of legacy providers in the industry.”
Various banks and traditional financial institutions were against the approval of bitcoin futures trading at the time, Giancarlo said. The argument that bitcoin should not be validated was troubling to the former chairman.
“It was that notion of ‘if you do this, you’re legitimizing bitcoin’ that kept coming into my mind,” Giancarlo said. “It’s not for me as an unelected bureaucrat to legitimize a legal activity, it is for the market to determine what is legitimate. And the only way the market could do that is if we let this go forward.”
Brooks echoed Giancarlo’s sentiment. It is not up to any regulatory body to pick the winners and losers of Web3, he said.
“We don’t ask the SEC to make a judgement about whether Teslas or Buicks are better vehicles,” Brooks said. “We let the market decide that.”
Not long after bitcoin futures trading was approved, Giancarlo was summoned to appear before the Senate Banking Committee to testify about bitcoin. In his prepared opening statement, Giancarlo discussed how younger generations were becoming excited about this new, emerging asset class.
“I think we owe it to this generation to respect their interest in crypto, not with disdain and dismissiveness but with a real ‘let’s get it right’ approach,” he said. “Let’s spend the time, let’s dig into this.”
A key point of resistance both regulators have been met with when it comes to digital assets is the argument that cryptocurrencies have no use case. Brooks argues that it is not up to officials to judge how a technology might be used.
“There was this idea that we can’t allow [crypto] to happen until somebody can show us a use case. That is the problem I was trying to solve,” Brook said. “We don’t actually have to know a use case, that’s not the role of government in a market economy. The role of the government is to create a set of risk protection guardrails and allow markets to decide what’s valuable.”
Fidelity Advantage Bitcoin ETF will join several other spot offerings in Canada, such as Purpose Investments’ fund that hit the market in February
Growing number of spot bitcoin ETFs in Canada likely won’t change US regulators’ stance on such products, ETF Trends Managing Editor Lara Crigger says
Fidelity Investments’ Canadian subsidiary is getting set to launch an ETF that would invest directly in bitcoin.
The Fidelity Advantage Bitcoin ETF (FBTC), which carries a management fee of 40 basis points, will invest primarily in bitcoin directly, according to a prospectus published on Nov. 22. It may also purchase derivatives that provide economic exposure to bitcoin, but any use of derivatives will be “incidental” to the ETF’s primary investment strategy, the document adds.
The fund is expected to launch “on or around” Thursday, a Fidelity spokesperson told Blockworks and will be listed on the Toronto Stock Exchange.
“We believe that cryptocurrency is a valid asset class that we would like to provide as an investment option for retail investors in Canada by including this in our product offering,” the spokesperson said. “As to why now, we wanted to offer a front-to-back Fidelity solution with solid regulatory grounding.”
The ETF’s custodian, Fidelity Clearing Canada, recently got approved as the first digital assets custodian regulated by the Investment Industry Regulatory Organization of Canada (IIROC). The fund’s bitcoin sub-custodian will be Fidelity Digital Assets, which is the custodian of Fidelity’s Wise Origin Bitcoin Index Fund, a limited partnership launched last year that is available to qualified investors in the US.
Bloomberg Intelligence ETF Analysts Eric Balchunas and James Seyffart highlighted the upcoming ETF launch in Twitter posts this week.
Balchunas noted that Fidelity “will easily be the biggest asset manager to date with a bitcoin ETF,” while Seyffart called the impending launch “sneaky big news.”
Fidelity’s total discretionary assets totaled nearly $4.3 trillion as of the end of September, while its assets under administration were $11.1 trillion. The parent company of the Fidelity Advantage Bitcoin ETF issuer reported having about 31 million retail accounts at the end of the third quarter.
Purpose Investments launched Canada’s first bitcoin ETF — the Purpose Bitcoin ETF (BTCC) — in February, and the offering crossed $1 billion (CAD) in assets under management within its first month of trading.
“While I think that some institutional money will undoubtedly come off the sidelines due to the strength of Fidelity’s heavyweight brand, I’m not so sure it will actually pull away much in the way of assets from the existing ETFs,” said Lara Crigger, managing editor of ETF Trends. “History has shown us time and again that first-mover status is profoundly powerful marketing.”
Purpose’s BTCC now has $1.8 billion (CAD) assets under management. The Evolve Bitcoin ETF (EBIT), which launched a day later, has about $200 million (CAD) in assets.
Fidelity’s new physically backed bitcoin ETF is the latest to launch around the world while the US Securities and Exchange Commission (SEC) have not yet approved such a product.
The growing number of bitcoin ETFs in Canada likely won’t catalyze US regulators to change its stance or quicken its timeline, Crigger told Blockworks.
“I know hope springs eternal, but the SEC’s been pretty firm that futures-based ETFs — and bitcoin futures, specifically — are the first and only crypto instrument that they’re comfortable with,” she said. “I can’t foresee that changing any time soon.”
Canada crypto ETF landscape broadens
Purpose expanded its crypto offerings after the launch of BTCC, adding the Purpose Ether ETF (ETHH) in April. It added three more products this week: the Purpose Bitcoin Yield ETF, the Purpose Ether Yield ETF, and the Purpose Crypto Opportunities ETF.
The Crypto Opportunities ETF, subadvised by the Canadian business of Neuberger Berman, a firm with $437 billion of assets under management as of the end of Q3, invests primarily in digital assets and securities that provide exposure to the space.
The yield ETFs invest indirectly in long-term holdings of bitcoin and ether mainly through units of the Purpose Bitcoin ETF and the Purpose Ether ETF. In order to generate additional returns and enhance the portfolio’s income, the managers may write covered call options and cash-covered put options in respect of the securities held by the funds, according to the funds’ prospectuses.
The Purpose Bitcoin Yield ETF and the Purpose Ether Yield ETF seek to provide unitholders with monthly distributions.
“With these ETFs, we aim to expand the ways investors can access crypto markets and generate the unique returns available in this emerging asset class,” Som Seif, Purpose Investments founder and CEO, said in a statement.
As bond yields remain low and income gets harder to source, income-generating covered call ETFs have blossomed in the US this year, Crigger told Blockworks.
The Nationwide Risk-Managed ETF (NUSI) has brought in $666 million in assets year-to-date, she noted, while Global X’s NASDAQ 100 Covered Call ETF (QYLD) has seen inflows of $3.8 billion so far in 2021.
“Purpose’s covered call ETFs could serve the same yield-hungry investor, while also serving investors who want a chance to participate in crypto’s price action,” Crigger explained. “Now, is there much overlap in the Venn Diagram of those two investors? I’m not sure there is.”
The metaverse could generate a $1 trillion annual revenue opportunity, according to a recent report from Grayscale
Virtual property is a kind of NFT that represents ownership of a piece of land in the metaverse
A plot of land in the popular play-to-earn video game, Axie Infinity, recently sold for $2.3 million. The following week, virtual real estate developer, Republic Realm, said it had purchased a piece of property in The Sandbox for $4.3 million.
Digital property sales are notching never-before-seen highs as investors pile millions of dollars into real estate in the metaverse.
Axie Infinity co-founder Jeffrey Zirlin told Blockworks in an email that the recent sale of the plot of land, which was worth 550 ETH, makes perfect sense as people’s “digital lives are starting to take more importance in relation to [their] physical lives.”
“In the future the majority of people will be found mingling in virtual environments which will still need to mirror the physical world in some aspects,” Zirlin said.
For the uninitiated, Axie Infinity is a blockchain-based world where users can earn crypto rewards that can later be sold on exchanges. But the Axie homeland, called Lunacia, is divided into tokenized plots of land which act as homes or bases of operation for players, according to Zirlin. Therefore, virtual property can represent a non-fungible token (NFT) that represents ownership of a certain piece of land in the metaverse.
One buyer, who previously purchased a plot of land for $1.5 million, described their investment as “the Hamptons of digital real estate.”
“The transition and blend from real life to digital events has increasingly accelerated, leading to the formation of digitally native nations. I believe having ownership in such nations has an addressable market that is far greater than the real world,” the virtual landowner, who goes by “Flying Falcon” online, told Blockworks.
In a rapidly evolving, growing — and at times volatile — space, virtual land could also be considered a high-risk investment choice, Zach Aarons, a general partner at real-estate tech VC firm MetaProp, told the Wall Street Journal.
“If I buy a building for 40 ETH, and then ethereum goes from $4,000 to $100, that’s a fundamental risk that I’m not really taking when I’m buying a piece of physical real estate,” he said to the Journal, who first reported Republic Realm’s $4.3 million investment.
But the metaverse could still generate a $1 trillion annual revenue opportunity, according to a report from crypto asset management firm Grayscale in November.
There’s even a “Zillow for the metaverse” now, a New York-based startup called Parcel. The niche marketplace allows users to connect their digital wallet such as MetaMask and bid on properties in virtual worlds like Decentraland, Cryptovoxels and others.
“Blockchain is the first time where it’s a fully global market,” co-founder Noah Gaynor told Blockworks in an interview. “I actually think things in the metaverse and crypto in general have this premium because you have liquidity from all over the world.”
“Not every single person in the world can buy Apple stock, but practically everyone with an internet connection can buy a piece of virtual land. There’s a lot more players chasing the same assets,” he said.
Gaynor added that the future of real estate investment has a huge growth opportunity in the metaverse, citing the potential for digital landowners to put up billboards on their property to make passive income.
“We believe these virtual worlds will have thriving economies just like the physical world,” he said.
When asked how to respond to skeptics who question how a virtual piece of property could be worth millions, Gaynor responded: “At the end of the day, it’s just supply and demand, right? Someone’s willing to pay that much for it, then that’s what it’s worth. [It’s the] same as bitcoin or any other asset.”
Ohio-based self-mining company plans to have 734 megawatts of operational power by 2023
Merged businesses expected to be listed on the New York Stock Exchange under the ticker GRDI
Adit EdTech Acquisition Corp, a special purpose acquisition company (SPAC), is set to acquire bitcoin self-miner Griid Holdco, the companies revealed Tuesday.
The planned transaction values the combined company, including debt. The mining company will receive $246 million in cash from Adit EdTech’s trust account after the deal is finalized and anticipates its fiscal year 2023 revenue to hit $1.6 billion, it said.
Griid Holdco is the parent company of Cincinnati, Ohio-based Griid Infrastructure (GRIID), a bitcoin-focused self-mining company. Adit EdTech is a publicly listed SPAC focused on mergers, asset acquisition and reorganization. It is sponsored by its affiliate Adit Ventures, an investment adviser firm.
GRIID and Adit EdTech did not immediately return Blockworks’ request for comment.
“GRIID’s focus on utilizing next-generation computing power for more efficient clean power utilization and grid management demonstrates the broader economic potential of green infrastructure,” Eric Munson, Adit’s founder and managing partner, said in a statement.
GRIID owns and operates carbon-free energy infrastructure and bitcoin mining facilities across the US. It has about 1,300 megawatts (MW) of power, the company reported, and plans to have 734 MW of that power operational by 2023.
“There are a couple other SPACs that have announced deals with bitcoin miners and the deals haven’t closed yet, so this will be like a third one, which may be more than people really want,” Blockworks’ Market Strategist Byron Gilliam said. “But I think it’s good to have as many listed options as possible because lots of asset managers can’t buy crypto directly, so the more listed options you have the better.”
Crypto mining platform Bitdeer went public earlier this month through a $4 billion SPAC merger with blank-check firm Blue Safari Group Acquisition Corp. That deal came after crypto mining company Core Scientific announced its merger with a SPAC backed by BlackRock in July.
Upon closing the proposed acquisition, GRIID and Adit EdTech are expected to operate as Griid Infrastructure Inc. and be listed on the New York Stock Exchange under the ticker GRDI.
BTC and ETH momentum stalls on hawkish remarks from Fed Chair Jerome Powell
Janet Yellen provides clarity over the definition of a ‘broker’ as it relates to digital asset regulation
US Secretary of the Treasury Janet Yellen clarified that the definition of a “broker” does not include hardware wallet manufacturers, software developers, miners or providers of un-hosted wallets that do not take custody of funds.
Grayscale sent the US Securities and Exchange Commission (SEC) a letter arguing that the rejection of a spot-based BTC ETF is in violation of the Administrative Procedure Act (APA).
US Federal Reserve Chairman Jerome Powell agrees to retire the word “transitory” as it relates to inflation, citing supply-chain bottlenecks as a key driver.
BTC and ETH saw their momentum stall after Powell’s remarks, as risk-off sentiment took hold on expectations of tighter monetary policy to combat inflation.
NFT volumes have fallen drastically over the past 24 hours, namely Bored Ape Yacht Club.
Latest in Macro:
S&P 500: 4,567, -1.90%
NASDAQ: 15,537, -1.55%
Gold: $1,773, -.66%
WTI Crude Oil: $66.70, -4.65%
10-Year Treasury: 1.439%, -.09%
Latest in Crypto:
BTC: $57,721, -.91%
ETH: $4,670, +5.32%
ETH/BTC: 0.0808, +5.12%
BTC.D: 41.72%, -1.51%
Yellen provides regulatory clarity
The $1 trillion bipartisan infrastructure bill that contained vague wording around cryptocurrency was signed into law on November 15, 2021. Although provisions will not go into effect until January of 2024, many experts in the digital asset industry have been worried it could lead to devastating repercussions for the emerging asset class.
The main cause for concern to this point has been the requirement for every broker to report their cryptocurrency gains in a type of 1099 form. Brokers would be expected to disclose the names and addresses of their customers.
The ambiguity around the definition of “broker” is significant because it could be interpreted to include hardware wallet manufacturers, software developers, miners or providers of un-hosted wallets. The reason that is such a problem is that the aforementioned parties do not have all of the information required to submit 1099’s, which would theoretically put them out of compliance with the law.
Today Yellen provided some much-needed clarity. She said that the guidance from the Financial Action Task Force (FATF) is consistent with the standing guidance from the Financial Crimes Enforcement Network (FinCEN) with regard to digital assets.
This means that the definition of “broker” does not include hardware wallet manufacturers, software developers, miners, or providers of un-hosted wallets who do not take custody of funds. Yellen went further to say that the guidance is not binding on jurisdictions and is in fact just guidance, according to a document laying out questions from Senator Pat Toomey (R-PA):
Grayscale’s letter to the SEC
Craig Salm, a member of the legal team at Grayscale, took to Twitter to announce that the firm has sent the SEC a letter arguing that the rejection of a spot-based BTC ETF is in violation of the APA. Grayscale released a formal announcement on their website.
BTC and ETH stall on Powell’s remarks
Powell appeared alongside Yellen before the Senate Banking, Housing and Urban Affairs Committee about the Coronavirus Aid, Relief and Economic Security (CARES) Act Tuesday for the first of two days of testimony, Blockworks reported earlier today.
The Federal Reserve has a different definition of the term “transitory inflation” than most Americans, Powell said, suggesting that the word be retired. With CPI prints coming in at the highest rates in the past 30 years, it is safe to say inflation is no longer transitory due to ongoing supply-chain bottlenecks.
“We didn’t predict the supply side problems, and those are really [non-]linear and hard to predict,” Powell said. “That’s really what we missed, and that’s why professional forecasters had much lower expectations for inflation.”
Vice President, Kamala Harris, took to Twitter to say that President Joe Biden has taken action to get the largest US ports operating 24/7 to reduce port congestion which is contributing to the supply-chain problems and therefore higher inflation. (See image below.)
If inflation pressures persist, Powell said, it may be appropriate to hasten the pace of asset purchase tapering, which the Fed announced would begin this month.
Powell’s remarks sent both traditional financial markets and the digital asset market lower due to fears of tighter monetary policy. Prior to the testimony, ETH was within spitting distance of all-time highs while BTC topped $59,000 for a brief moment before they both corrected.
The Fed and the market
“The rates market quickly unpriced some of the Fed’s expected normalization path. This chart shows the Fed Funds curve as of Friday (dark blue) and a week before (light blue). In my view, Friday’s action wasn’t enough to slow down the Fed’s taper or projected rate hike path.” wrote Jurrien Timmer, director of global macro at Fidelity.
Today’s remarks from Powell reaffirmed Jurrien’s expectations that the Fed plans to stick to the plan in terms of tapering and rate hikes in order to combat hot inflation.
“That means to get back to the kind of great labor market we had before the pandemic, we’re going to need a long expansion. To get that, we’re going to need price stability and the risk of persistent high inflation is also a major risk to getting back to such a labor market,” added Powell during the testimony.
The Fed’s acknowledgment of inflation and the dangers it brings to the economy makes it more likely that the Fed will lean towards tightening monetary policy over the near-to-medium term, hence the risk-off sentiment in markets after his remarks.
“The Fed chairman said the central bank will start discussing tapering faster than expected at its December meeting as the inflation pressures are higher than expected. Yellen also mentioned the uncertainty on the government funding situation after December 15, as well as Moderna’s CEO saying he expected the vaccines to be less effective against the new Omicron variant,” Kevin Kang, founding principal at BKCoin Capital, told Blockworks.
He continued by adding, “With the uncertainty in macro outlook, I don’t believe we’ll see the new all-time high in ETH in November. The dollar has rallied significantly this month, putting pressure on Bitcoin’s upside as well. However, we can certainly hope for the Santa Clause rally in December.”
Non-Fungible Tokens (NFTs)
Trading volume for many NFT projects has dropped significantly over the past day. Bored Ape Yacht Club has cooled down considerably after a hot week last week.
Trading data from OpenSea and Solanalysis of some of the top Solana and Ethereum projects can be found below:
If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.
The layer-1 protocol is “the best blockchain technology and software available in the market,” Borderless Capital’s founding managing partner says
The Miami-based venture capital firm’s first Alogorand-focused fund initially raised $200 million and invested in more than100 companies
Venture capital firm Borderless Capital has launched a $500 million fund investing in digital assets powering the next generation of decentralized applications on top of Algorand (ALGO).
Founded by cryptographer Silvio Micali, Algorand developed a blockchain infrastructure that offers the interoperability and capacity to handle high volumes of transactions necessary for financial institutions and governments to transition to decentralized finance, the firm said in its announcement.
Along with other layer-1 protocols, such as Solana, Cardano and Avalanche, Algorand has emerged as a competitor to Ethereum this year amid higher demand for transaction prices and throughput that are lower and faster than what the Ethereum network provides.
“Algorand is the best blockchain technology and software available in the market and the momentum in the ecosystem validates that this is just the beginning,” David Garcia, Borderless Capital’s founding managing partner, told Blockworks in an email. “There is a huge room to grow from here.”
The Borderless ALGO Fund II comes after the Miami-based company started its first Alogorand-focused fund in June 2019. The Borderless ALGO Fund I initially raised $200 million and invested in more than 100 companies, including BlockDaemon, Six Clovers and Osprey Funds.
“Besides investing in Algorand-native projects and apps, we will bootstrap what we call the GDP of the Algorand Borderless economy by participating in DeFi liquidity mining, yield farming, lending, borrowing and trading,” Garcia added.
The firm will be announcing specific investments of the new fund in the coming months, a spokesperson said.
“The Borderless Capital team has been a longtime supporter of many entrepreneurs, founders, and developers who have built the foundational Algorand ecosystem we have today,” Algorand CEO Steve Kokinos said in a statement. “As accelerated adoption of Algorand’s technology continues, we are excited to see [this] Borderless fund coming to fruition to support the next wave of DeFi on Algorand.”
Algorand Virtual Machine was released in June in an effort to improve smart contract development and allow developers to create powerful digital apps while making blockchain application development more accessible.
SkyBridge Capital and NAX revealed a partnership in September to offer decentralized applications and institutional investment opportunities as part of an initiative using Algorand.
SkyBridge CEO Anthony Scaramucci said in a statement at the time that he was impressed by Algorand’s technology and that his firm planned to bring Algorand to the forefront of regulated products, digital securities, currencies and payments.
Garcia said Borderless would look to offer funds for specific initiatives within the Algorand ecosystem in the future. The firm last week announced the closing of a $10 million fund that will invest in the ecosystem surrounding PlanetWatch, the world’s first decentralized indoor and outdoor air quality monitoring network built on Algorand.
Grayscale’s letter to the SEC comes months after the firm filed to convert its Grayscale Bitcoin Trust (GBTC), the investment group’s grantor trust, into an ETF, again, under the ticker BTC
Grayscale first filed to convert GBTC in 2017
Attorneys that represent Grayscale Investments have submitted a letter to the US Securities and Exchange Commission (SEC) arguing that failure to approve a spot bitcoin ETF is in violation of federal law.
The SEC’s decision to approve a futures-based fund and not a spot ETF is “arbitrary and capricious,” and therefore in violation of the Administrative Procedure Act (APA), attorneys from Davis Polk argue in the letter, which was sent Monday and released publically by Grayscale on Tuesday.
The letter comes months after Grayscale filed to convert its Grayscale Bitcoin Trust (GBTC), the investment group’s grantor trust, into an ETF, again, under the ticker BTC. Grayscale first filed to convert GBTC in 2017. GBTC currently represents roughly 3.4% of outstanding bitcoin, according to the Davis Polk & Wardwell letter.
Grayscale elected to voluntarily withdraw previous bitcoin ETF filings in 2017 because the SEC cited concerns over fraud and manipulation in the bitcoin market, making both a futures-based and a spot bitcoin ETF unlikely to be granted approval.
“If you believe that there is fraud or manipulation in the bitcoin market, it makes complete sense to deny both types of ETF filings, they’re both based on the same bitcoin pricing,” Craig Salm, head of legal at Grayscale, told Blockwroks. “Grayscale has had a very strong, active engagement with all of our regulators, we’ve talked about the pricing index, the developments in the bitcoin market, and so on to continue to make the case that we thought the markets were ready, and then fast forward to 2021 and we saw the first futures based filing.”
The approval of the futures product but not a spot product is inconsistent, Salm said.
“This year, when we saw the futures-based ETFs start trading, but then yet another spot ETF was denied, we had a situation where now there’s two like situations that are not being treated similarly,” he said.
The APA provides an opportunity to challenge cases where agencies are not being consistent in rulings, Salm said.
“The commission has no basis for the position that investing in the derivatives market for an asset is acceptable for investors while investing in the asset itself is not,” the letter states. “But having permitted the listing of multiple Bitcoin futures ETPs in the last several weeks, that is the policy decision the commission would announce were it to deny NYSE Arca’s application to list BTC.”
The APA, enacted in 1946, oversees how administrative agencies of the federal government, such as the SEC, may propose and issue regulations.
“The APA requires the SEC to treat *like* situations *alike* absent a reasonable basis for different treatment,” Salm said in a statement. “This means the SEC must treat similarly situated investment products similarly.”
The argument that an agency is taking actions that are “arbitrary and capricious” is broad, Gillian Metzger, professor at Columbia Law School, wrote in a briefing for the Poverty & Race Research Action Council. If an agency fails to respond to comments, or if agency actions are not supported by evidence, the arbitrary and capricious argument can be evoked.
“One factor that matters significantly in determining whether a court is more rigorous in review or weaker is the agency’s credibility and care,” Metzger wrote. “If a court thinks an agency is cutting corners, ignoring relevant factors and evidence, poor analysis pushing an ideological agenda without regard to facts, it can get more searching.”
It’s not the first time an argument like this has been made in favor of a spot bitcoin fund. Earlier this month, VanEck contended that approval of a futures-based product without spot approval is “inconsistent.” The SEC responded to the comment, which it is required to do, with another denial.
“The Commission has consistently required that the listing exchange have a comprehensive surveillance-sharing agreement with a regulated market of significant size related to Bitcoin, or demonstrate that other means to prevent fraudulent and manipulative acts and practices are sufficient,” the SEC’s response said.
In terms of next steps for Grayscale, the SEC will have to respond to the comment letter.
“We think the arguments that our attorneys at David Polk made are persuasive and we are looking forward to seeing what the response is,” Salm said.
The Singapore-based blockchain venture capital firm also runs a digital asset focused investment management fund that invests in blockchain-related projects
In the past, Pluto Capital has invested in a handful of early-stage companies that have grown successfully into crypto giants including Binance, Bybit, Bitmain, Polkadot and DeHorizon, to name a few
Pluto Capital has closed a $30 million crypto fund to provide seed capital to early-stage blockchain projects.
The new crypto fund aims to bring new opportunities for investors through an “institutional-quality” portfolio of digital assets. “The fund will be extremely sensitive to changes in trends by continually monitoring and analyzing the global macro market’s economic drivers in the blockchain sector,” the company said in a statement on Tuesday.
The firm was not available for immediate comment when requested by Blockworks on Tuesday.
The Singapore-based blockchain venture capital firm includes professionals who left jobs from traditional financial institutions, including Goldman Sachs, SoftBank and PIMCO, it said. The firm also runs a digital asset-focused investment management fund that invests in blockchain-related projects.
In the past, Pluto Capital said it has invested in a handful of early-stage companies that have grown successful into crypto giants including Binance, Bybit, Bitmain, Polkadot and DeHorizon.
In the future it plans to capitalize on disruptive technologies and focus on seed-based opportunities with selective growth-stage investments.
While crypto-native firms are investing in the space heavily, the money flowing in is also coming from traditional venture capital groups as investors are clamoring for more exposure.
In general, funding in the crypto industry has grown astronomically in the past year. During the month of November, over $3 billion was invested in the space, Blockworks previously reported. Earlier this month, Paradigm launched the largest crypto venture fund ever at $2.5 billion.
“Over the past decade, crypto has come a long way. But cryptocurrencies are still owned by less than ten percent of the global population,” Paradigm’s Co-founders Matt Huang and Fred Ehrsamwrote in a blog post at the time. “The journey is just beginning, and the potential of crypto has never been more clear,” they added.