Current State of The Crypto Market (December 29th, 2019)

Hackers:  Last week, the New Orleans government fell victim to a cyberattack that apparently involved Ryuk, a type of ransomware used to lock up computer data until a ransom is paid (usually in bitcoin) to unlock it. A state of emergency was declared last Friday, and more than 4,000 government computers and servers were shut down. Although some online services remained affected early this week, the government said it expected the data loss was expected to be minimal. This is the fourth attack against a U.S. city this December; others occurred in Pensacola, Florida; St. Lucie, Florida; and Galt, California.

Key Players:  As one of five commissioners of the United States Securities Exchange Commission, Hester Peirce is at the forefront of securities regulation in the country today.  On December 18, the SEC announced a series of proposed changes to their classification of “accredited investor,” a designation based on certain income and/or knowledge requirements. The basic concept of an accredited investor is a person who can fend for themselves when it comes to the risk associated with early-stage investment — which can involve sifting through murkier business practices but also higher potential rewards.  Accredited investors are allowed to participate in securities offerings exempt from SEC registration requirements under Regulation D. Any change to accredited investor status potentially opens the field of early, private investment to a new segment of people.  In the case of crypto, this is particularly meaningful given the ongoing controversy surrounding whether to treat initial coin offerings as securities offerings or not. In famous cases like block.one’s EOS or ongoing proceedings against Telegram’s stalled $1.7 billion sale of TON tokens, the SEC has pursued offerings that the parent firms argued were exempt from registration requirements. The proposed changes to these requirements are critical to future ICO offerings.

Banks & Institutions:  The list of central banks developing sovereign digital currencies or Central Bank Digital Currencies, as they are more commonly known, continues to grow.  According to research from The Block (image below from The Block), of the 60+ central banks analyzed, 18 have publicly acknowledged the development and or launch of their own CBDC. The most popular platform used by these central banks appears to be R3’s Corda enterprise ledger. From our list, at least four countries/central banks have issued and launched their own digital currencies. The remaining 14 are either developing these currencies or launching pilot programs with third-party blockchain software providers.

Adoption: Bitcoin and cryptocurrency has struggled to catch up to the traditional financial system’s digital ease of use.  Online banking, mobile apps and new digital international transfer systems have pushed traditional banking services into the 21st century—with bitcoin’s clunky wallets and technical exchanges leaving all but the most advanced internet users confused.  Now, the chief executive of San Francisco-based bitcoin and cryptocurrency exchange Coinbase has won a U.S. patent for an invention that allows bitcoin to be sent via email, something that could help bitcoin and crypto achieve wider adoption.  The patent, granted earlier this month after being filed back in March 2015, outlines a system that allows users to make bitcoin payments using an email address linked to a cryptocurrency wallet.  “Bitcoin can be sent to an email address,” the patent filing read, detailing the advantages of the technology. “No miner’s fee is paid by a host computer system. Instant exchange allows for merchants and customers to lock in a local currency price. A tip button rewards content creators for their efforts. A bitcoin exchange allows for users to set prices that they are willing to sell or buy bitcoin and execute such trades.”  However, the system takes 48-hours for the transaction to clear once the receiver has confirmed the payment and there doesn’t appear to be support for other major cryptocurrencies.