This week’s edition of 5 Tales from the Crypto features a pair of stories from cryptocurrency exchange Binance, concerns over crypto-crime and innovations in tokenization from JP Morgan Chase, and a look at a new product, a new partnership, and a new payments license.

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Cryptocurrency exchange Binance announced that e-wallet service provider and payment gateway, SticPay will partner with Binance’s payment solution, BinancePay. BinancePay is a contactless, borderless, secure, cryptocurrency payment technology. SticPay will leverage the solution to enhance and streamline its users’ access to a range of leading cryptocurrencies.

SticPay has more than one million users and 5,000 corporate customers in 200+ countries. Courtesy of the new partnership, SticPay users will be able to fund their accounts directly via BinancePay. This will enable them to buy, sell, and send more than 70 leading cryptocurrencies faster and cheaper, which SticPay CEO Sean Park called the company’s mission. “Our users will be able to handle more cryptocurrencies, more efficiently than ever before,” Park said.

The BinancePay news comes just a few weeks after Binance announced that it would sell its Russian business to CommEx. The off-boarding process is expected to take up to a year. Binance said in a statement that the assets of Russian accountholders are safe.

Binance Chief Compliance Officer Noah Perlman noted that the company remained positive on the long-term growth of the cryptocurrency industry worldwide. Nevertheless, he added, “operating in Russia is not compatible with Binance’s compliance strategy.”

The parting of ways between Binance and Russia is total. The company noted that it will have no ongoing revenue split from the sale of its Russia business to CommEx. Binance also did not maintain any option to buy back shares in the business as part of the sale.

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Sometimes the gods of cryptocurrency giveth and sometimes they taketh away. In recent weeks, JP Morgan has represented both tendencies with regards to its openness to crypto and digital assets.

A few weeks ago, we learned that JP Morgan Chase UK will ban its customers from making crypto transactions, beginning on October 16. The bank blamed a high number of fraud and scam incidents for its decision. Specifically, according to a bank spokesperson, Chase customers will be unable to buy crypto assets using a Chase debit card. They will also be unable to transfer money to a cryptocurrency account from a Chase account.

Chase is hardly the only financial institution to place limits on its customer’s ability to transact in cryptocurrencies. NatWest limited the amount of money customers can send to crypto exchanges back in March, citing concerns over “crypto criminals.” Santander Bank has also moved to prevent its customers in the U.K. from sending real-time payments to crypto exchanges.

At the same time, JP Morgan Chase has become increasingly interested in blockchain technology and the opportunities in tokenization. This week, JP Morgan unveiled its Tokenized Collateral Network (TCN). The new platform leverages blockchain technology to enable investors to use digital assets as collateral and, further, to transfer collateral ownership without having to transfer assets in the underlying ledgers.

The first public transaction using TCN involved JPMorgan and BlackRock. JP Morgan leveraged its Onyx Digital Assets tokenization platform to convert shares of a money market fund into digital tokens. Those tokens were then transferred to Barclays bank via TCN to be used as a security for an OTC derivatives exchange between JPMorgan and BlackRock.

“The tokenization of money market fund shares as collateral in clearing and margining transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures,” BlackRock deputy global COO of cash management Tom McGrath said.

The hope for TCN is that the technology will reduce the number of settlement fails and provide near-instant real-time changes in ownership. TCN is live and a number of clients and transactions are reportedly on deck.

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Cryptocurrency exchange Birake Exchange has turned to IDVerse to provide identity verification. The platform specializes in Masternode coins and will leverage its new relationship with IDVerse (formerly known as OCR Labs) to provide KYC and secure digital identity verification (IDV) during the onboarding process.

In a statement, the Romania-based Birake Exchange team underscored its belief in the future of cryptocurrencies and the importance of decentralization. “To mitigate fraud risks while fostering public confidence, judicious customer due diligence through identity verification has become a priority for us,” the team said.

Founded in 2018, the Birake Exchange refers to itself as a “white label crypto exchange” because it offers trading technology that enables its customers to build and brand their own crypto exchanges. The Birake Network has its own blockchain, which is powered by the Birake Coin (BIR).

As OCR Labs, IDVerse demoed its technology at FinovateAsia 2017, winning Best of Show. The company rebranded as IDVerse earlier this year.

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Blockchain company Quant has introduced a new solution designed to make blockchain-based transactions more secure for financial institutions. The new offering, Overledger Authorise, helps FIs manage and integrate digital asset private keys with their own current enterprise key management systems. The technology covers the incompatibility gap between existing systems and blockchain private keys by managing the signing of blockchain transactions and key generation.

Quant founder and CEO Gilbert Verdian noted that the success of blockchain technology in banking will depend on innovations in other technologies. “We cannot unlock (blockchain technology’s) true potential without robust and future-proof solutions for cryptographic key management and transaction authorization,” Verdian said.

Overledger Authorise has been stress-tested successfully in Project Rosalind. Project Rosalind is a central bank digital currency project conducted by the Bank of England and the Bank for International Settlements.

Headquartered in London, Quant was founded in 2015.

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Ripple’s Singapore-based subsidiary, Ripple Markets APAC, secured its Major Payments Institution (MPI) license from the Monetary Authority of Singapore (MAS). The MAS gave Ripple Markets in-principal approval earlier this year. The license paves the way for Ripple Markets APAC to issue digital payment tokens (DPTs).

Ripple CEO Brad Garlinghouse called Singapore “pivotal” to the company’s global business. Ripple established Singapore as its Asia Pacific headquarters in 2017. Garlinghouse referred to Singapore as “one of the leading fintech and digital asset hubs striking the balance between innovation, consumer protection and responsible growth.”

A Finovate alum since debuting as OpenCoin in 2013, Ripple has grown into a major enterprise blockchain solution provider for the financial services industry. Earlier this year, Ripple won a court ruling that its native cryptocurrency, XRP, was a digital token and “not in and of itself a ‘contract,’. As such, the court rules that Ripple was not guilty of selling unregistered securities – as accused by the U.S. Securities and Exchange Commission in 2020.

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Photo by Pok Rie

Coinbase’s Crypto Futures

Courtesy of a just-secured regulatory approval from the National Futures Association, Coinbase’s U.S. customers will soon get the opportunity to trade futures contracts on cryptocurrencies. Coinbase’s Coinbase Financial Markets has been granted authority to operate as a Futures Commission Merchant (FCM) and offer eligible customers in the U.S. access to crypto futures trading on the Coinbase platform.

In a blog post at the Coinbase website, company Head of Institutional Product, Greg Tusar called the approval a “watershed moment” in the project to bring regulated cryptocurrency products to U.S. customers. The ruling comes as Coinbase is at odds with other regulatory bodies – such as the SEC – over its operating practices.

The ruling also comes at a time when the crypto derivatives market around the world has climbed to 75% of all crypto trading volume. Tusar called this market “a critical trader access point.” This is because crypto derivatives enable traders to participate with more leverage and less upfront capital, as well as give cryptocurrency holders the ability to express long and short positions, and hedge risk.

“Where regulations are clear and sensible, we will work with regulators to receive the authorizations needed to offer products that align with our purpose of using crypto to update the financial system to advance economic freedom and opportunity,” Tusar wrote.

Coinbase made its Finovate debut in 2014. The San Francisco, California-based fintech was founded in 2012.

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eToro’s Crypto Trends

Social trading and investment platform eToro announced a new partnership to help its customers stay on top of the latest information about cryptocurrencies. The firm has teamed up with analysis company Reflexivity Research in a content partnership called “BTC etc.” that will provide a weekly overview of the cryptocurrency market as well as a monthly podcast. The weekly overview will focus on key trends. The podcast will feature experts from eToro, Reflexivity Research, and the broader cryptocurrency industry.

“As a crypto pioneer, we see it as our responsibility to provide accessible, timely, and relevant content for our users,” eToro Editor in Chief Mati Alon said. “As the market matures, cryptoassets deserve the same level of attention and coverage as other financial assets. We are excited to collaborate with Reflexivity to increase understanding of crypto.”

A Finovate alum since 2011, eToro has won Best of Show at each of its six Finovate appearances. The company offers trading and investing in stocks, options, and exchange-traded funds (ETFs), as well as cryptocurrencies. eToro offers 0% commissions, the ability to trade fractional shares, and a social network to enable traders and investors to benefit from the wisdom of the platform’s top performers.

EToro has become increasingly bullish on the prospects for cryptocurrencies. The company’s Global Markets Strategist Ben Laidler was quoted earlier this week highlighting three key developments that could put cryptocurrencies back on track by making it easier for institutions to participate in the market.

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CBDCs Gain Ground in Brazil, Raise Doubts in Canada

The arguments for and against central bank digital currencies (CBDCs) got an international airing of sorts in recent days.

In Brazil, the country’s central bank has given its CBDC an official name – and logo. Commonly referred to as the “digital real,” the Brazilian Central Bank has decided to call its new digital currency, the Drex. The name refers to both the assets colloquial name, “Real Digital,” with an “e” for “electronic” and an “x” to represent a variety of notions including the concept of “modernity and connection.”

“Drex arrives to make life easier for Brazilians” a press release from the country’s central bank pronounced. “It will provide a secure and regulated environment for developing new businesses and more democratic access to the benefits of the economy’s digitization, both for individuals and entrepreneurs.”

Among the projected use cases for the digital currency are government benefit payouts, which would use a tokenized version of the currency. The bank also believes that the Drex will help accelerate digitalization in the financial sector and ultimately promote financial inclusion.

Meanwhile, some five thousand miles north, the concept of central bank digital currencies is getting a much cooler reception. A new report from the Bank of Canada cast a dim light on the prospect of mass CBDC adoption by Canadians. The blame was placed on the wide number of payment options Canadian consumers and businesses already have.

The staff discussion paper, “Unmet Payment Needs and a Central Bank Digital Currency,” envisions a hypothetical cashless environment, and then considers how a CBDC would solve unmet payment needs in such a society.

The report concludes that for a CBDC to benefit those who have unmet payment needs, the digital currency would first have to secure widespread adoption among the majority of the population. This would be necessary to ensure sufficient digital currency adoption by merchants. The challenge is that insofar as the majority of consumers “already have access to a range of payment options,” it would be unlikely for a significant enough number of these consumers to both widely adopt the digital currency as well as use the CBDC at scale.

The insights from the paper should prove valuable to those who support digital currencies, especially to the degree that digital currencies allegedly support financial inclusion. “The minority of consumers with unmet payment needs will be able to benefit from a CBDC,” the report writers conclude, “if the majority of consumers experience material benefits and therefore drive its use.”

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The road to recovery for crypto may be long. And making meaningful headway may require more than a few instances of taking one step back in order to take two steps forward.

Case in point is the latest hurdle faced by BlackRock as the company seeks to launch a spot bitcoin ETF. On Monday, we learned that the Nasdaq refiled the ETF application with the U.S. Securities and Exchange Commission (SEC) after the regulator highlighted a number of concerns with regard to the original petition. Among the chief concerns was the fact that the Nasdaq did not indicate which crypto trading platforms would participate in “surveillance-sharing” to help combat fraud in the underlying bitcoin markets.

BlackRock was not the only asset manager to hit this regulatory snag en route to the launch of its bitcoin ETF. The SEC also criticized filings from the Chicago Board Options Exchange (CBOE) with regards to a handful of bitcoin ETF petitions from the likes of Fidelity, WisdomTree, VanEck, and a joint project from Invesco and Galaxy – based on similar grounds.

The beneficiary of this hiccup, ironically, appears to be Coinbase, the SEC’s crypto bête noire. In response to the regulator’s concerns, both the Nasdaq and the CBOE indicated in their refilings that they would rely on Coinbase to serve as their “surveillance-sharing” partner. This move both answers one of the primary regulatory concerns vis-a-vis bitcoin ETFs and puts the cryptocurrency innovator back at the center of crypto’s comeback – all this despite the SEC’s antagonistic attitude toward the fintech it filed a lawsuit against in June.

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Revolut announced this week that its customers in the U.S. will no longer be able to trade three tokens – Solana (SOL), Cardano (ADA), and Polygon (MATIC). The decision stems from the SEC’s categorization of the three tokens as unregistered securities and the subsequent move by Revolut’s provider, digital asset platform Bakkt, to delist the assets. The delisting will be effective as of September 18th.

Revolut is not the only platform to announced an end to the availability of these tokens for U.S. crypto traders and investors. Both Robinhood and eToro also have either delisted or restricted access to SOL, ADA, and MATIC for U.S. customers. In the case of eToro, tokens such as Algorand (ALGO), Decentraland (MANA), Filecoin (FIL), and Sandbox (SAND) have also been made off-limits for U.S. customers.

Holders of SOL, ADA, and/or MATIC outside the jurisdiction of the SEC will continue to have access to the tokens.

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Speaking of “outside the jurisdiction of the SEC,” the Monetary Authority of Singapore (MAS) announced a new set of guidelines designed to help cryptocurrency companies separate customer crypto assets from their own. The new rules insist that digital asset companies that are licensed in Singapore separate customer crypto assets from their own, as well as maintain a separate set of blockchain addresses for customer assets. Companies in the digital payment token business additionally will be required to do daily reconciliation of customers’ digital assets, and maintain accurate records of those assets, as well as access and operational control of customer’s DPTs in Singapore.

The move comes as regulators have become increasingly concerned that cryptocurrency firms have not done enough to “ring-fence” customer crypto assets and keep them segregated from company assets. This problem can be especially acute in the event that a cryptocurrency firm becomes insolvent, making it harder to recover customer funds. The new regulations require cryptocurrency firms to hold customer crypto in trust – though the relative lack of independent, third-party custodians has forced the MAS to offer crypto firms some leniency when it comes to relying on independent custodians at this time. To this end, firms are only required to ensure that crypto custody functions are independent from the firms’ other business operations and divisions.

The new regulations are expected to come online later this year.

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A study from Juniper Research from earlier this year indicated that the value of all payment transactions made via stablecoins will top $187 billion by 2028. This represents nearly a 3x gain from 2023 levels. The report, titled CBDCs & Stablecoins: Key Opportunities, Regional Analysis & Market Forecasts 2023-2030, notes the growing use of stablecoins in cross-border transactions, the benefits in terms of speed and traceability that stablecoins offer relative to existing, cross-border rails, and the nature of the competition between stablecoins and central bank digital currencies (CBDCs).

Stablecoins are cryptocurrencies that derive their value from a given fiat currency or commodity. CBDCs are actual digital currencies issued by central banks.

What will it take for stablecoins to reach the transaction levels suggested in the Juniper Research study? Report author Nick Maynard underscored the role of payment platforms and money transfer operators in supporting broader adoption of these digital assets.

“Stablecoins have vast potential to unlock the flow of money across borders, but payment platforms need to roll out acceptance strategies for this to progress,” Maynard observed. “MTOs (Money Transfer Operators) can leverage stablecoins in a wholesale manner, but this will need networks to be built across wide geographic footprints.”

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Our last 5 Tales from the Crypto column looked at reasons why the so-called “crypto winter” could see a thaw sooner than many observers think. In a recent column, fintech thought leader and author Chris Skinner shared his thoughts on the resurgent mainstream interest in digital assets.

“Something has changed,” Skinner wrote this week at The Finanser, “and maybe the biggest change is that treasury managers want to use cryptocurrencies. If the customer wants it, then the big banks have to service it and there’s the rub. The big banks have stirred and incorporated digital assets, and specifically cryptocurrencies, into their remit.”

Skinner cited an article at Decrypt.co – Wall Street is coming for crypto, whether early believers like it or not – as well as a June report from S&P Global Ratings titled How DeFi’s Operational Risks Could Influence Credit Quality, that have contributed to his thinking on the topic of late.

“You know that cryptocurrencies are going mainstream when Standard and Poor’s (S&P) start to rate them,” Skinner noted. “They don’t do that today, but they are moving that way.”

Check out the full conversation – as well as the Decrypt.co article and S&P Global Ratings report.

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Photo by Alesia Kozik

Financial advisor, author, and CNBC commentator Josh Brown raised a few eyebrows this week when he told viewers that he thought that cryptocurrencies were entering a new phase, a phase that could spell the end of the crypto winter.

“This week, I think, with all of these new developments, really forces you to look back and say, ‘What’s really going on here? Why are these people running into a burning building” Brown asked. He referred to the passion for cryptocurrencies as “unkillable.”

Is Brown right? Let’s take a look at the latest round of reasons why the so-called crypto winter could turn out to deliver a milder season than many suspect.

Bitcoin breaks $30k

Prices for the leading cryptocurrency have been in a bear market since at least the fall of 2021 – though cryptoholders have been experiencing more than a little investment indigestion since the spring of that year. And while BTC has much more to go before it nears its old highs north of $60,000, the cryptocurrency has been on a tear since putting in a low in November 2022 just under $18,000. As of June 21st – the longest day of the year – BTC is up more than 90% from its November low. Ethereum, the other most-widely traded cryptocurrency has also performed well in 2023: ETC is up more than 56% year to date.

Many observers are pointing out that much of the velocity of the moves in these leading cryptocurrencies is due to traders who are now covering their earlier – profitable – bets against the assets. Nevertheless, market turnarounds are often initiated not by new participants coming off the sidelines, but by those already in the game deciding to change direction. And sometimes that’s all a new bull market needs to get going.

BlackRock, Invesco, WisdomTree pursue bitcoin ETFs

The news that some of the heaviest hitters in the exchange-traded fund business have expressed interest in bringing BTC to the ETF party is as strong an indication as any that crypto’s fortunes in the near-term may be brightening.

Last week we learned that BlackRock, a major, $9 trillion asset manager, is seeking to launch a spot bitcoin ETF – the iShares Bitcoin Trust – and has filed paperwork with the Securities and Exchange Commission (SEC) to do so. Investment management firm Invesco – which previously sought to launch a bitcoin futures ETF in 2021 but was beat to the market by ProShares – is back for a second bite of the apple. The company has teamed up with Galaxy Digital to apply for a spot bitcoin ETF – the Invesco Galaxy Bitcoin ETF. And lastly, WisdomTree has applied for approval to launch its WisdomTree Bitcoin Trust on the CBOE BZX Exchange.

The stated objectives for the funds vary. WisdomTree highlighted the value of providing investors with exposure to the price of Bitcoin in traditional investment accounts. Invesco and BlackRock both noted that a Bitcoin ETF would serve as a safer alternative for would-be investors leery of cryptocurrency brokerages and exchanges in the wake of the FTX and related crypto-scandals.

New crypto exchange EDX launches

The launch of a new crypto exchange may not seem like big news. But given the pessimism surrounding the industry (“crypto winter” anyone?), it is especially noteworthy that entrepreneurs in the crypto space continue to forge ahead.

New Jersey-based EDX Markets launched its digital asset market this week. The digital asset marketplace provides investors with a trusted, efficient, and liquidy cryptocurrency trading environment. EDX offers competitive quotes and a non-custodial model designed to manage potential conflicts of interest. The company also provides a retail-only quote for crypto, enabling investors and traders to take advantage of better pricing for retail-originated orders. Participants can trade Bitcoin, Ethereum, Litecoin, and Bitcoin Cash on the platform.

The launch of EDX comes as the company secures new funding and additional strategic investors. The amount of the funding was not disclosed. The company did say that the capital will help EDX further develop its trading platform.

“We are committed to bringing the best of traditional finance to cryptocurrency markets, with an infrastructure built by market experts to embed key institutional best practices,” EDX CEO Jamil Nazarali said.

Deustche Bank applies for digital asset custody license in Germany

It’s no secret that cryptocurrencies are feeling more love outside the United States than they are inside the country. Another example of this comes from Germany as we learn this week that Deutsche Bank is seeking a digital asset license. The goal of the country’s largest bank is to leverage digital assets to expand its revenue streams, according to reporting in Bloomberg.

Apparently, Deutsche Bank’s announcement is the latest in a series of slow, cautious steps toward embracing digital assets. The firm’s corporate banking division has been considering digital asset-related services as an option for the past few years. But no firm timeline had ever been offered. This week, we have a destination, if not an itinerary. The head of the bank’s commercial banking unit David Lynne confirmed that the financial institution is building a “digital assets and custody business” and has applied to Germany’s Federal Financial Supervisory Authority (BaFin) in order to receive license to do so.

American crackdown: darkest before dawn?

It may be overly contrarian to suggest that some of the worst news for crypto’s present in recent weeks and months might also be some of the best news from crypto’s future. Many crypto backers lament the SEC’s aggressive policing of Coinbase and the growing share of crypto that is just Bitcoin. But it is possible that this is just the long, arduous process toward eventual regulation. This may mean, at least initially, a time for better, fewer digital assets and better, fewer crypto-related businesses. And while other regions than the U.S. are presently showing more enthusiasm and support for crypto, as with other financial innovations like open banking and instant payments, I’m convinced that once crypto does finally get moving again, the U.S., in its own way, will not hesitate to climb on board.

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