Bitcoin Fund Completes Offering, Ether Futures Launch, Crypto Funds Report Published
By: Teresa Goody Guillén
We previously reported that a Toronto-based investment manager was launching a Bitcoin Fund, and it has now completed a $48 million offering in that fund, trading on the Toronto Stock Exchange. Notwithstanding the funds’ being denominated in U.S. dollars on the Canadian exchange, the statement announcing the investment opportunity makes clear that it is not available in the U.S. Specifically, the statement conspicuously reads “NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES” and “This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act.”
This week, ErisX launched the first U.S.-based exchange-traded ether futures contracts. The new products will enable individual and institutional investors to access physically delivered futures contracts based on ETH-USD with monthly and quarterly expirations. According to the press release, the ErisX ether futures market is regulated under the jurisdiction of the Commodity Futures Trading Commission (CFTC), the spot market is licensed in accordance with state and federal licensing requirements, and ErisX voluntarily applies CFTC core principles to the spot market.
A “Big Four” multinational professional services firm has published the “2020 Crypto Hedge Fund Report,” in which it provides a global overview of crypto hedge funds as well as insights into both quantitative and qualitative aspects of the funds. Notably, the report excludes data from crypto index/tracking/passive funds and crypto venture capital funds. Some key takeaways include:
- Estimated total assets under management of crypto hedge funds globally increased to more than US$2 billion in 2019 from US$1 billion in 2018.
- The median crypto hedge fund returned +30% in 2019 (compared with -46% in 2018).
- 90% of investors in crypto hedge funds are either family offices or high-net-worth individuals.
- Most crypto hedge funds trade Bitcoin (97%), followed by Ethereum (67%), XRP (38%), Litecoin (38%), Bitcoin Cash (31%) and EOS (25%).
- Crypto hedge funds using an independent custodian increased to 81% in 2019 from 52% in 2018.
- Crypto hedge funds with at least one independent director on their boards increased to 43% in 2019 from 25% in 2018.
For more information, please refer to the following links:
Major US Bank Opens Accounts for Crypto Exchanges, Trade Finance Solution Expands
By: Robert A. Musiala Jr.
According to reports this week, the sixth-largest bank in the world and largest bank in the U.S. is now providing banking services to two of the largest and most well-known cryptocurrency exchanges in the U.S. – Coinbase and Gemini. The bank accounts were reportedly approved in April and transactions are now being processed. According to reports, the bank will “process wire transfers, and deposits and withdrawals through the Automated Clearing House network” for the exchanges.
A major Vietnamese bank recently announced that it has joined Contour, a blockchain-based trade finance network. The Contour network is built on the R3 Corda blockchain protocol and is focused on streamlining letter of credit processes. According to a press release, the Vietnamese bank will leverage Contour to provide “an opportunity for Vietnamese corporates to take advantage of the online negotiation and streamlined management of letters of credit with counterparties in Asia, Europe, the Middle East, and the US.”
On April 28, 2020, the U.S. Congressional Research Service published a report titled “Fintech: Overview of Innovative Financial Technology and Selected Policy Issues.” The report includes sections on cryptocurrency and initial coin offerings (ICOs). Among other things, the report addresses issues such as whether cryptocurrencies are properly regulated and how they could affect monetary policy. With respect to ICOs, the report discusses application of the securities laws and notes fraud and consumer protection concerns.
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Seafood Value Chains and DOD Data Integrity: Blockchain Enterprise Developments
By: Jordan R. Silversmith
The United Nations Food and Agriculture Organization (FAO) recently released a report on developments in applying blockchain-based technologies in seafood value chains. The report establishes chain traceability as the foundation for building a blockchain-based ecosystem in the seafood industry and examines possible applications of blockchain to the industry’s supply chain.
The U.S. Department of Defense (DOD), which accounts for almost 40% of all federal R&D appropriations, has awarded a Small Business Innovation Research (SBIR) Phase I contract to Simba Chain, an Indiana-based blockchain company, to create a proof-of-concept blockchain-based system. The proposed system is part of DOD’s project, dubbed ALAMEDA (Authenticity Ledger for Auditable Military Enclaved Data Access), to create a single system for the efficient sharing of R&D documents and scientific data sets by augmenting existing systems using distributed ledger technologies to protect integrity and authenticity, while also creating a control layer for adding groups, users and permissions to shared documents. ALAMEDA will begin June 1, 2020 and will run through Sept 30, 2020.
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Telegram Cancels TON Blockchain, IRS Enlists Contractors to Evaluate Crypto Taxes
By: Joanna F. Wasick
In a Tuesday blog post, messaging app Telegram said it would abandon work on building its digital ledger, TON. In March, a New York federal court granted an injunction sought by the Securities and Exchange Commission (SEC), preventing Telegram from distributing its digital tokens, Grams, to 175 purchasers around the globe who spent $1.7 billion for rights to receive the tokens once TON was launched. The SEC had argued that the distribution would constitute an unregistered securities offering that violated federal securities laws. Distribution of Grams had already been on pause since October, after the SEC obtained a temporary restraining order. In Tuesday’s blog post, Telegram’s CEO stated: “We are leaving it to the next generation of entrepreneurs and developers to pick up the banner and learn from our mistakes. . . . We hope that you succeed where we have failed.”
This week, the Internal Revenue Service (IRS) demonstrated its continued interest in taxing cryptocurrency transactions. The government agency announced it is soliciting third-party staffing to aggregate cryptocurrency transactions from on-chain data, off-chain data, application programming interface (a type of computing interface) and tax submissions. Afterward, the assets must be valued, and gains and losses must be determined. The announcement comes after the agency, in 2019, sent out thousands of letters to cryptocurrency holders who allegedly failed to report earnings. Notably, this year’s 1040 form includes, for the first time, a question on taxpayers’ cryptocurrency activities.
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