Much of the news last week was dominated by regulatory developments as the cryptoasset ecosystem moved from chaos towards regulation and prominent exchanges primed their services for an inflow of institutional dollars.
There were two main strands to crypto news this past week.
The first one concerned Libra, Facebook’s cryptocurrency and blockchain. PayPal dropped out of the Libra Association – the governance council for the blockchain. The payments processor had signed a letter of intent to join the blockchain, when it launches next year.
It is reportedly displeased with Facebook’s handling of lawmaker concerns about Libra and apprehensive about the unwanted attention that its involvement with the association might bring on its core business.
(An example of the spotlight on Libra occurred this past week, when the EU Competition Commissioner Margrethe Vestager told journalists that she had already launched a probe into the cryptocurrency).
PayPal has left the door open for a future re-entry stating that it might consider joining the project at a later date. The Libra Association now has 27 members, including Facebook. The Menlo Park-based company has set a target of 100 members by launch next year.
David Marcus, Libra co-creator, seemed unperturbed by recent developments, however. He stated that his team was moving “calmly and confidently” towards their goal and that the first wave of Libra Association members will be finalized in the coming weeks.
SEC Unsettles Crypto Watchers with Settlements
The other important strand was the ever-persistent overhang of regulation on cryptocurrencies. The SEC settled with promoters of two high-profile initial coin offerings (ICOs) this past week. While the federal agency has made numerous settlements in the past, the ones made this week were notable for their amounts and terms.
The first one was with Block.one, promoter of the world’s biggest coin offering for EOS, an Ethereum competitor. The offering lasted a year and garnered slightly more than $4 billion from investors. In a settlement that left many in the crypto ecosystem scratching their hands in puzzlement, Block.one paid only $24 million (or, approximately 0.6% of the total raise) and obtained an SEC waiver to raise more funds from accredited and retail investors.
Boston-based Nebulous paid a fine of $250,000 (almost double the amount it raised) for its Siacoin offering conducted in 2014. But it raised $1.5 million from a subsequent security token offering conducted with the SEC’s blessings last year. The company has applied for a waiver similar to the one approved for Block.one.
Both settlements are a sign that the crypto wild west is now being tamed and regulation is slowly but surely making its way into an asset class that grew unshackled from it. The developments are also a sign of the decisive role that the SEC plays in the crypto ecosystem.
The federal agency decides classification status for tokens, the source of much confusion among crypto companies, used on blockchains. A number of leading firms in crypto, including Coinbase and custody solutions provider Anchorage, came together to bring clarity about this topic by launching a Crypto Ratings Council.
But the council’s ratings system is problematic and arbitrary. It relies on the SEC’s Howey test but fails to explain the reasoning behind its ratings. In other words, it seems arbitrary. No wonder it was dismissed by several members of the crypto ecosystem.
Coinbase Hikes Fees, Creates Market for Binance
Meanwhile, competition for institutional investor dollars is heating up within the crypto ecosystem. North America’s biggest cryptocurrency exchange Coinbase hiked fees for low volume traders on its platform to bring “liquidity and depth” into its trading platform. The increase penalizes low volume traders by raising their fees to as much as 150 percent of their monthly volume. On the other hand, high volume traders can expect to pay zero or as less as 0.04% as maker and taker fees respectively. The fee hike will probably result in a defection of low volume traders towards competitors, including Binance’s US operations which is already taking registrations.
News of Note
Ohio, which accepts Bitcoin as tax payments, is suspending the service because the service provider BitPay was not chosen through a “competitive selection process”.
CEO Tim Cook doesn’t think an Apple coin is a good idea.