Institutions Definitely Here, Grayscale Reports Best Quarter Ever For Crypto Trusts

Grayscale crypto

The markets may indicate otherwise as day traders turn bearish and start to sell again. But institutional investment products such as the Grayscale crypto trusts are growing in popularity as its latest performance report proves.

Quarter of a Billion Into Crypto

Since their peak this year, crypto markets have lost $160 billion in terms of capitalization as the selloff continues. That figure is larger than the entire cap for Bitcoin at the moment, which also appears to be heading into another bear market if technical indicators ring true.

Not all is doom and gloom however and the smart money has been slowly accumulating in the form of crypto trusts. According to Grayscale Investments’ latest Q3 performance report inflows marked the strongest demand for the firm’s products since its inception.

The total investment into all of the company’s crypto trusts was $254.9 million, its highest ever quarter. The report added that inflows have tripled quarter-over-quarter, from $84.8 to current levels. This has occurred despite recent declines in Bitcoin and crypto asset prices.

The key take is that 84% of that capital inflow came from institutional investors dominated by hedge funds. A similar figure of 83% shows that institutions have dominated investment into crypto trusts so far in 2019.

The Breakdown

The impressive quarter billion figure accounts for all of the firm’s crypto products combined. Breaking it down shows that the BTC Trust was clearly the most popular by a huge margin.

“In 3Q19, we saw the heaviest quarterly inflows to Grayscale Bitcoin Trust in the product’s six-year history, including nearly $75 million in a single day.”

The total investment for the quarter was $171.7 million, or 67% of the total. December 2017 and July 2019 were also big months for BTC Trust inflow, and peak price months for Bitcoin.

Grayscale’s Ethereum Trust also performed well with over $100 million invested so far this year.

“We’ve now seen $104.4 million flow into Grayscale Products ex Bitcoin Trust this year, led by Grayscale Ethereum Trust ($77 million) and Grayscale Ethereum Classic Trust ($24.9 million).”

All eyes were on the Bakkt futures launch but this only provides a platform for traders to bet on a future price of a crypto asset. Its underwhelming launch did not do many favours for retail markets which have remained in decline since.

Grayscale enables investors to gain exposure to the price movement of Bitcoin through a traditional investment vehicle. It removes the technicalities of dealing with exchanges and wallets and is clearly a popular product.

Facebook’s Libra Charter Signed By 21 Organizations During Meeting in Geneva, Switzerland

Libra

The Libra charter has been signed by 21 organizations, just days after several high-profile payment processing and e-commerce companies withdrew from the controversial stablecoin project led Facebook.

The Libra Association named its board of directors and formed the consortium’s executive team during a conference held in Geneva, Switzerland.

Facebook is moving forward with Libra along with Calibra CEO and former Facebook blockchain head David Marcus, who’s now part of the project’s five-person board. Other Libra Association board members include Kathryn Haun, general partner at VC firm Andreessen Horowitz; Matthew Davie, chief strategy officer of Kiva; and Patrick Ellis, general counsel at PayU.

Former PayPal employees Bertrand Perez, Dante Disparte and Kurt Hemecker will also take senior management roles in Libra Association’s executive team. 

The association consists of San Francisco-based crypto exchange Coinbase, crypto cold storage solutions provider Xapo, Anchorage, Bison Trails, Creative Destruction Lab, Andreessen Horowitz, Thrive Capital, Ribbit Capital, Union Square Ventures, Breakthrough Initiatives, Illiad, Vodafone, Farfetch, Uber, Lyft, Kiva, Mercy Corps, Women’s World Banking, Spotify and PayU. 

Announced in June 2019, the Libra Association will be leading Facebook’s controversial stablecoin project. When first introduced, the Libra project was supported by 28 major companies. Since then, PayPal, Visa, Mastercard, Booking Holdings, eBay, Stripe and Mercado Pago have withdrawn from Libra initiative due to regulatory concerns.

Despite these major exits, the Libra Association noted on October 14 that over 1,500 organizations are interested in joining the initiative. Only 180 entities meet the association’s membership criteria. In order to join, a two-thirds vote by Libra’s 21 board members is needed.

Facebook’s management had previously said it was expecting a consortium of 100 organizations to back the crypto project at launch in 2020. No recent updates or confirmations have been provided regarding these plans or the initiative’s launch date.

In June 2019, Facebook revealed a bold and ambitious vision for a global cryptocurrency that would help provide financial services to the world’s unbanked population.

The Libra token’s governance would be overseen by the Association members, which would consist of a consortium of 100 organizations that will vote on technical matters related to the development of the project’s Libra Investment Token. The token would also serve as a security, allowing investors to earn interest from a basket of major fiat currencies pegged to the digital asset.

If it launches, the stablecoin will be supported by a basket of fiat currencies including the USD (50%), the euro (18%), the yen (14%), the British pound (11%) and the Singapore dollar (7%).

Regulators and lawmakers throughout the world have heavily scrutinized the project, warning that Libra might pose a threat to the existing financial system. France and Germany have said that they want to ban Facebook’s stablecoin initiative, meanwhile, Indian authorities stated that  the cryptocurrency might not be legal in the country. US Democratic Representative Maxine Waters said that the project should be put on hold until all regulatory requirements have been addressed.

Marcus has said that these fears or concerns are misplaced. He also testified before the US Congress in July 2019, attempting to address the issues raised by the Senate Banking Committee and the House Financial Services Committee. Facebook CEO Mark Zuckerberg will also be testifying next week.

Marcus published a letter stating that Libra project developers welcome regulatory feedback and oversight, and that the stablecoin would not serve as a replacement for the US dollar.

However, the CEOs of Visa, Mastercard and Stripe were asked by US Senators Brian Schatz and Sherrod Brown about whether the companies could face increased regulatory scrutiny if they continue to take part in the project.

It is Unclear when Libra Will Actually Launch.

Although Facebook initially planned an early to mid-2020 launch for Libra, statements recently made by Zuckerberg have suggested it could take longer. It now seems that any delay will be due to regulatory reasons.

In July 2019, Zuckerberg noted during a quarterly earnings call that the social media firm would take “however long” it’s required to address concerns raised by regulators. Last month,  he hinted at the possibility that Libra might take several years before it’s launched.

It remains unclear whether Libra will actually be able to launch and whether the team developing the cryptocurrency will consist only of Facebook subsidiary Calibra employees or other association members as well.

Facebook’s management has formed a team in Geneva, and previously revealed it was hiring for blockchain-related roles at Menlo Park, California and Tel Aviv, Israel.

Although some of Libra project’s codebase has been open-sourced, Facebook’s management has not shared many details regarding the initiative since announcing it in June.

Ripple Having a Swell Time as XRP Finally Pumps

XRP Ripple price

Some crypto assets have had a worse 2019 that others and XRP is one of them. At the moment the Ripple token is still down 15% this year but that could be about to change as XRP finally starts to move in the lead up to the company Swell event next month.

XRP Surges 20%

October has been revival month for Ripple as its XRP token has climbed 20%. From an 18 month low below $0.25 XRP has made it back to the psychological $0.30 barrier and the next challenge is to break this.

XRP

XRP price 7 days – Coinmarketcap.com

Since the weekend it is up almost 12% and the cross border transfer token topped $0.298 a couple of hours ago. Daily trading volume has reached $1.7 billion as XRP starts to face resistance.

The move comes as Bitcoin’s dominance continues to break down, according to Coinmarketcap.com it is now down to 66% as XRP and Ethereum slowly start to claw some back.

XRP has a long way to go however and is still down 90% from its peak in January 2018 when it topped $3. It is for that reason that crypto twitter and the ‘XRP Army’ has turned bullish on the token. Looking at the long term chart paints a very clear entry level here.

Traders are looking at the next move for XRP and past current prices the next resistance level appears to be around $0.32.

“Falling wedge closed as price gets past $0.28, caused a lot of bullish momentum. Next target @ R1 ($0.32) – we could reach $0.40 by end of next month!”

From there to $0.40 lies very little resistance so the next moves could come quickly. At the time of writing XRP had hit resistance and was trading just below it at $0.296.

Swell Time For Ripple

Momentum no doubt is being driven by the approaching Swell event in Singapore early next month. The annual conference is usually bullish for the fintech company and its token price, however a predictable dump often follows.

Traders have been looking into previous price fluctuations before and after Swell with one observing;

“Long 2 weeks before Swell, and short when the event is over.
Price increase before event (USD)
+115% (2017)
+220% (2018)

Price decrease after event (USD)
-43% (2017)
-51% (2018)

Time to see what this year brings.”

If three figure gains are to be the case in 2019, XRP has only just begun its big move. Doubling its 2019 low will only take the token to $0.46 which is still massively down from previous peaks. The test will be whether XRP can hold on to its gains, or will it simply dump again as short term traders cash out and continue bashing the cryptocurrency on social media.

G7 Group of Nations Warns that Global Stablecoins Threaten Existing Financial System

stablecoins

The G7 group of nations has prepared a draft report which notes that globally accessible stablecoins pose a significant threat to the existing financial system.

According to BBC, G7’s draft report detailed the different risks involved with digital currency transactions. For instance, even if Libra Association members address relevant regulatory requirements, the project might not receive regulatory clearance from authorities.

The report stated:

“The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed. Addressing such risks is not necessarily a guarantee of regulatory approval for a stablecoin arrangement.”

The G7 also mentions that globally accessible and scalable stablecoins could potentially stifle competition and challenge financial stability if users lose trust in the coin. 

The report will be presented to finance ministers at an upcoming meeting of the International Monetary Fund. 

The BBC noted that, although the report does not specifically discuss Facebook’s Libra stablecoin initiative, the controversial project could be subjected to even more regulatory scrutiny.

Regulators throughout the world have criticized the social media giant’s approach to launching its own cryptocurrency. The Bank of England has introduced provisions with which Libra’s founders must comply before the project can be launched in the UK.

Facebook CEO Mark Zuckerberg is expected to testify before the US House of Representatives Financial Services Committee regarding issues related to Libra. Democratic Representative Maxine Waters, the head of the committee, has been a vocal critic of Libra. 

Earlier this year, the committee released the “Keep Big Tech out of Finance Act,” which recommends that large tech firms should not be allowed to serve as financial institutions or issue their own cryptocurrency.

Several major Libra Association partners, which were part of the project’s governing consortium, have withdrawn from the initiative. On October 4, digital payments company PayPal left the organization. Visa, Mastercard, Stripe and eBay have also parted ways with the Facebook-led stablecoin project.

Finco Services of Delaware has filed a lawsuit against Facebook, claiming trademark infringement, unfair competition, and “false designation of origin” of Libra’s logo. The plaintiff is suing its former designer, who handled the logo work for Facebook, for using the same design.

‘No More FUD’: Charlie Lee to Crypto Community on Litecoin Birthday

Litecoin FUD

The world’s sixth largest crypto asset had a birthday over the weekend. On October 7 2011, Litecoin was released via an open-source client on GitHub, the LTC network went live a few days later on October 13. It is now eight years old and has outlasted countless other crypto assets yet still receives a disproportionate level of FUD.

Nevermind The FUD

Litecoin creator Charlie Lee took to twitter yesterday to celebrate his creation’s eighth birthday. However the reaction largely consisted of more FUD and hatred from crypto antagonists and maximalists which have infiltrated the space over the past couple of years.

“Litecoin network has been up and running continuously for the past 8 years with zero downtime. And in that span of time, over $500,000,000,000 worth of LTC have been transacted.”

The figure may not be representative of a true sum of fiat since most of the transactions are between various blockchains. Anyway, the bigger problem Lee and the Foundation are facing is the flurry of FUD sparked by reports that they are out of money and are about to go bankrupt.

Last week Trustnodes reported that the Litecoin Foundation was down from more than one million in income last year to $70,000 in minus this year. It went on to tout figures about t-shirt sales being the only source of revenue for the project.

An expensive looking Litecoin summit will be held at the end of October in an effort to revive interest in the project. It is hoped that some of the big named speakers including Ron Paul, Anthony Pompliano, Mati Greenspan, and of course Charlie Lee himself can clear up some of this FUD.

We Are Not Bankrupt

Responding to comments on twitter regarding bankruptcy, Lee added;

“It’s not near bankruptcy. Don’t listen to stupid fud and lies. We have enough money to last 2 years.”

Litecoin is one among a number of altcoin projects that are likely to be earning way less this year than in 2017 or 2018. The entire crypto market is still down over 70% from its peak and no altcoin has escaped the carnage.

The major beef with LTC appears to be Charlie Lee selling off his stash at the peak so in reality he could probably personally fund the Foundation out of the monumental profits he made from that.

The birthday message also had a poignant note, the silver to Bitcoin’s gold has been around for 8 years while countless other coins have come and gone. It is still the sixth largest crypto asset on the planet and is unlikely to be going anywhere for the next couple of years at least.

IRS Will Ask If You Own Cryptocurrency on its New Income Tax Form 1040

IRS

The US Internal Revenue Service (IRS), a bureau of the Department of Treasury, recently added a question regarding cryptocurrency ownership to its standard 1040 income tax form for the upcoming tax filing season.

A draft of the “Additional Income and Adjustments to Income” section of the latest 1040 form was released. It included a change made to the “Additional Income and Adjustments to Income” section. The additional question on the new 1040 form asks:

“At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

The question requires only a yes or no response, and does not ask for any additional information.

Tax professional Kelly Phillips Erb writes:

“Why does the location of the checkbox matter? Compliance. The checkbox is ostensibly on the form to remind taxpayers to report their cryptocurrency transactions. But those tax professionals like me who have seen the response to the checkbox on Schedule B know that this is also an easy way to hold those who don’t check the box – even by accident – accountable.”

She adds:

“The IRS can and has taken the position that willfully failing to check the box related to offshores interests can form the basis for criminal prosecution. Failing to check the box by accident can still result in headaches and penalties. I fully expect a similar result on the cryptocurrency side.”

The form’s main sections, “Additional Income” and “Adjustments to Income,”  appear below the question.

“Taxpayers who file Schedule 1 to report income or adjustments to income that can’t be entered directly on Form 1040 should check the appropriate box to answer the virtual currency question. Taxpayers do not need to file Schedule 1 if their answer to this question is NO and they do not have to file Schedule 1 for any other purpose,” the IRS noted.

The tax agency requested that its software partners send comments regarding the new form withing the next 30 days.

The IRS has also issued new guidelines for reporting taxes on crypto airdrops and hard forks. 

The tax authority’s guidance answers questions regarding crypto-related transmissions for investors who hold digital currencies as a capital asset and establishes general guidelines of tax law to determine whether cryptocurrency qualifies as property for federal tax filing purposes.

Last month, US-based accounting firm H&R Block began serving as an intermediary between crypto investors and the IRS. The agency had previously sent letters to digital asset traders who failed to report capital gains on their crypto holdings.

H&R Block can now help people who’ve conducted cryptocurrency-related transactions. The company provides consultations on how to properly file taxes on gains and losses made from digital currency investments.

Bitcoin Fractals May Indicate Next Move as Consolation Continues

Bitcoin BTC Price Tom Lee

Another day has passed with very little activity on Bitcoin markets. The king of crypto continues to consolidate as its trading channel tightens up in anticipation of another big move. Technical indicators may give us a clue as to which direction BTC will take next.

Another Week at Support For Bitcoin

Weekends are usually pretty quiet for crypto trading and this Sunday has been no different so far. With very little activity during the Asian session, Bitcoin has remained range bound in the low $8,300 region. A brief move up to $8,400 yesterday could not produce any more momentum as the 50 hour moving average proved to be too strong a resistance level.

According to Tradingview BTC has been flat since its Friday pump and dump and the overall down trend is still intact with a death cross approaching on the daily timeframe. Analyst and trader, Josh Rager, has been looking into fractals which could offer some clues as the next direction.

 “Aren’t exactly the same but quite similar price action after the previous capitulation before the market bottom. My guess is some more market sideways but not nearly as long.”

The market bottom following last November’s epic dump has also been analyzed by other traders who have noted remarkable similarities within the chart patterns. Late last week ‘CryptoHamster’ overlaid the two charts with striking similarity.

That capitulation came almost a year ago which is hard to believe as Rager noted. Since then BTC has surged 330% before correcting 40% to today’s levels.

‘CryptoHamster’ meanwhile observed the sideways channel on the 50% Fib retracement level which could also be a signal of a bigger breakout approaching.

“$BTC will either go above the previous trading zone and 23.6% Fibo, where a lot of shorts stops are concentrated, or BTC will go below the previous trading zone and 61.8% Fibo, where a lot of the longs stops are concentrated.”

Using those Fib levels, resistance lies at $8,600 while there is support at $8,200 and stronger levels below it at $8,000. When asked about next price levels, Rager added;

“Under $8k, of course that could happen, break below $8200 and it likely goes to $7700 to $7800 IMO”

Total crypto market capitalization has not moved much so far this weekend and is around $225 billion which is marginally higher than the same time last week. Altcoins still appear totally dependent on whatever Bitcoin does so there is still no sign of an altseason despite BTC dominance falling below 70% again.

SEC, CFTC, FinCEN Issue Warning to Crypto Industry to Adhere to Banking Laws

Regulation

The heads of three US financial regulators have issued a warning to the crypto asset industry to adhere to relevant banking laws.

In a joint statement released on October 11, signed by Commodity Futures Trading Commission (CFTC) chairman Heath Tarbet, Financial Crimes Enforcement Network (FinCEN) director Kenneth Blanco and Securities and Exchange Commission (SEC) chairman Jay Clayton, the regulators remind crypto industry participants that they must follow appropriate banking and financial services laws in the US. 

The regulatory authorities noted that companies are required to abide by financial laws regardless of what they may call their cryptocurrencies or digital tokens. 

The regulators referenced the Bank Secrecy Act (BSA), which specifies how financial services providers should register their business with regulatory agencies.

The agencies stated that the nature of the crypto asset-related activities a company is involved in will determine which regulatory guidelines apply, as well as other applicable laws that need to be followed.

A statement reads:

“For example, something referred to as an ‘exchange’ in a market for digital assets may or may not also qualify as an ‘exchange’ as that term is used under the federal securities laws.”

According to the joint statement:

“As such, regardless of the label or terminology that market participants may use, or the level or type of technology employed, it is the facts and circumstances underlying an asset, activity or service, including its economic reality and use (whether intended or organically developed or repurposed), that determines the general categorization of an asset, the specific regulatory treatment of the activity involving the asset, and whether the persons involved are ‘financial institutions’ for purposes of the BSA.”

Blanco, Tarbert and Clayton clarified the scope of their regulatory agencies when it comes to regulating cryptocurrencies and virtual asset service providers.

The joint statement referred to examples of how futures commission merchants, introducing brokers, exchanges, broker-dealers and mutual funds are regulated. 

The agency directors provided details regarding the types of companies overseen by their regulatory departments.

Blanco’s comments appeared to suggest that he applied the BSA to virtual currency service providers. He said that his agency released interpretive guidance in May of this year, in order to clarify what guidelines apply to “money transmission denominated in value that substitutes for currency,” including cryptocurrencies.

Blanco noted:

“As set forth in the 2019 CVC Guidance, a number of digital asset-related activities qualify a person as an MSB [money services business] that would be regulated by FinCEN. [The agency’s] BSA regulations also provide that any person ‘registered with, and functionally regulated or examined by, the SEC or the CFTC,’ would not be subject to the BSA obligations applicable to MSBs, but instead would be subject to the BSA obligations of such a type of regulated entity.”

Clayton confirmed that regulatory authorities are required to protect investors while ensuring fair markets. The must also help companies with capital formation.

Clayton stated:

“Broker-dealers and mutual funds are required to implement reasonably-designed AML Programs and report suspicious activity. These rules are not limited in their application to activities involving digital assets that are ‘securities’ under the federal securities laws.”

SEC Obtains Emergency Restraining Order Against Telegram’s $1.7 Billion Token Sale

Telegram

The US Securities and Exchange Commission (SEC) has obtained an emergency restraining order against the Telegram Group and its subsidiary TON Issuer.  The order has been secured in order to investigate the company’s $1.7 billion token sale.

 

The SEC revealed on October 11 that it had applied for and was granted an emergency action and restraining order suspending Telegram’s management from selling or distributing its Gram tokens in the US. The company’s network was expected to go live on October 31.

Telegram reportedly sold 2.9 billion Gram tokens “at discounted prices to 171 initial purchasers worldwide,” according to the release. The sale included over 1 billion Grams sold to US-based  investors. The complaint has alleged that the messaging giant did not obtain approval before conducting the sale.

SEC Division of Enforcement co-director Stephanie Avakian stated that the emergency action has been taken to prevent Telegram from targeting the US markets with crypto tokens that we believe were sold without regulatory clearance.

Telegram allegedly failed to provide its token sale investors with information regarding the offering and the company’s business operations, Avakian noted.

SEC enforcement division co-director Steven Peikin said:

“We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token. Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”

The Telegram Group had been working on its TON blockchain project for more than a year. Rumors of the company’s initial coin offering (ICO) began circulating in early 2018.

Sources familiar with the matter revealed that the encrypted messaging service provider was planning to raise around $600 million through a pre-sale and an additional $700 million via a public token offering.

Telegram’s management said it had raised $1.7 billion in a Form D disclosure submitted to the SEC in March 2018.

The company has not disclosed the details regarding its development work. Last month, however, Telegram released code for its new platform. Telegram had not publicly acknowledged that it was developing TON until earlier this month, after it informed its investors via an email that the platform would go live in late October. The company also made changes to its terms and conditions.

Although the Gram token has not yet gone live, a secondary market for the digital asset has emerged, with small exchanges and OTC trading desks promising to sell the tokens once they’re available.

San Francisco-based crypto asset exchange Coinbase confirmed it would offer custody support for Grams once they’re live.

The SEC’s emergency action on October 11 comes only days after the federal regulator made a settlement with Cayman Islands-registered open-source software firm Block.one, the company behind the development of EOS. Block.one raised a record-breaking $4 billion through its token sale, however, the SEC only asked the firm to pay a $24 million fine. The SEC has not asked Block.one to register EOS tokens as a security.

Monero Delisted from OKEx, Privacy Coins Zcash, Dash Under Review

OKEx

The South Korean division of Malta-based digital asset exchange OKEX has suspended the delisting of two privacy-oriented cryptocurrencies due to new regulatory guidelines released by the Financial Action Task Force (FATF). 

The planned suspension of Zcash (ZEC) and Dash (DASH) is currently being reviewed, according to a blog post on OKEx’s official website.

OKEX first revealed its plans to delist five privacy-focused digital currencies – also including Monero (XMR), Horizen (ZEN) and Super bitcoin (SBTC) – in September 2019. The exchange operator noted that FATF’s controversial “travel rule” for virtual asset service providers (VASPs) has outlined how financial regulators must monitor the crypto industry.

According to FATF’s travel rule, digital asset exchanges must collect and share relevant information related to transaction monitoring, including the real name and address of the sender and recipient of cryptocurrencies.

Monero, Horizen and Super Bitcoin will be delisted from OKEx’s platform by October 10, OKEx confirmed. A final decision regarding whether Zcash and Dash should also be delisted will be announced after the exchange completes its compliance review process.

In statements shared with CoinDesk, Josh Swihart, VP of marketing and business development at the Electric Coin Company, the firm behind the development of Zcash, stated that his company has been working cooperatively with OKEx’s management since September, when the delisting announcement was first made.

Swihart noted:

“Zcash is entirely compatible with all FATF recommendations including the travel rule. We’ve been working with OKEx and others in S. Korea and happy to hear that OKEx has decided to take additional time to further evaluate Zcash support based on newly available compliance information.”

Following FATF’s announcement, digital asset exchanges have been facing increased pressure to halt support for privacy-oriented cryptos.

San Francisco-based exchange Coinbase halted Zcash trading on its UK-based platform in August. A source familiar with the matter said that the move was part of a decision to establish a new banking relationship with ClearBank after Barclays decided to stop providing its services to the exchange.

South Korea-based crypto exchange Upbit has also delisted Zcash.

The Electric Coin Company has been lobbying regulatory authorities and lawmakers over its cryptocurrency, Swihart said.

According to a notice on regulation and compliance published in September 2019:

“Zcash was designed to protect consumers’ financial privacy while retaining compatibility with global AML / CFT standards, including the FATF Recommendations that were adopted in June 2019. Importantly, the privacy provided by Zcash does not prevent regulated entities from fulfilling their regulatory obligations.”