Gluwa News Digest Vol. 5

05/04/2021 - 19/04/2021

The Biggest Stories...

Coinbase listing marks a crypto milestone...

Described as a “coming-of-age” moment for crypto, Coinbase became the first listing of a major cryptocurrency exchange on the New York Stock Exchange - a clear benchmark for the industries rapid growth, increasing maturity and continued institutionalization.

At the end of its first day of trading, the company boasted a market capitalization of $65.4bn, rivaling that of the New York Stock Exchange itself, valued at $67bn, and for a short moment, even the oil giant BP. Coinbase serves over 56m retail customers, with revenues of $1.8bn in the first quarter of 2021 alone, in large part thanks to the ongoing bullish market cycle.

Above all, it marks the first time that the clear demarcation between crypto finance and traditional finance began to blur, hinting at a future in which ownership of the digital economy of the future is becoming just as, if not more important, than ownership of traditional corporations such as BP or the NYSE.

Is further crypto regulation looming on the horizon?

For most crypto enthusiasts, the prospect of government regulation has never been an appealing one. Whether concerned that clumsy regulators might stifle innovation, curtail economic freedoms, or worst of all, tax our profits, the dirty word ‘regulation’ (whisper it quietly) is often viewed as anathema to the very idea of crypto.

But perhaps it’s a topic we can’t avoid. With the increasing institutionalization of cryptocurrencies, and especially Bitcoin, JP Morgan have described regulation as a “serious emerging issue”, whilst Goldman Sachs have spoken of an imminent “big evolution” in regulation. Even the CEO of Binance, ‘CZ’, said he would look to bring traditional financial regulations into crypto if he was a regulator.

And the muddled approach taken by the SEC, exposed in its recent lawsuit against Ripple, has only strengthened the need for further regulatory clarification. Gary Gensler, the new head of the SEC, has stated that “crypto is here to stay”, but also noted that there “will probably be more regulations” in future. What exactly that might look like? We don’t know yet. How effective will regulations be? That will depend. For example, regulating decentralized platforms might prove much more challenging than regulating centralized exchanges.

Whilst the word ‘regulation’ might set alarm bells ringing in your head, there is one key point we should bear in mind – if cryptocurrencies (and more widely, distributed ledger technologies) are to realize their full potential and integrate into the global economy of tomorrow, then further regulation is simply inevitable. Be that as it may.

Policy and Regulation

• Turkey has barred the use of cryptocurrencies to purchase good and services, the Financial Times reported. Cryptocurrencies have boomed in Turkey, largely in response to the country’s significant inflation rate, with the Lira having dropped 34% in value since 2019.

Technology

• The Berlin Hardfork, featuring several minor improvements, is now live on Ethereum, reported Coindesk. However, the update is relatively minor in comparison with the upcoming London hard fork incorporating the key EIP 1559 as we reported here. The update was not without hiccups either, with a consensus error bug negatively affecting some nodes temporarily.
• Chainlink, the decentralized oracle provider, has published its new 2.0 Whitepaper detailing the platforms technical expansion plans designed to improve scalability and functionality. According to Coindesk, Chainlink 2.0 will feature “decentralised oracle networks”, an L2 solution where data is stored and aggregated off-chain, before being shared with smart-contracts only when needed.

Institutions

• The European Investment Bank are moving to use a blockchain to issue digital euro bonds, Bloomberg reported. The EU bank has hired Goldman Sachs and several other major banks to explore technical solutions for a digital euro bond registered and settled using blockchain
• Credit Suisse is testing a blockchain service by Paxos to settle its stock trades, Decrypt reported. The move is designed to reduce settlement times, which can currently take up to three days.

Markets

• Dogecoin enjoyed a remarkable surge in value reaching a market cap of more than $54bn, decrypt reported. This represents an increase in value of 5,000% in 2021, making it temporarily the 7th largest cryptocurrency by total market capitalization at the time of writing.
• Sunday’s sudden BTC pullback saw a record $10 billion in liquidations, nearly doubling the previous record, reported Coindesk.
• 9% of U.S. teenagers, say they have traded in cryptocurrencies according to a poll by Piper Sandler, reported Decrypt. Questions have been raised about teenagers were able to access such services given age restrictions. One possible explanation could be the rise of decentralised exchanges, which have no end-user restrictions.