March 1, 2021
Welcome to the Bitcoin Age | Banks, Meet Blockchain | Crypto Mom and the Future of DeFi | A New Job for Labor | USDT Shakedown | The Phishing-Crypto Connection
- Experts Debate Bitcoin’s Bubble Status as it Reaches 10% of Gold’s Market Cap
- JP Morgan Releases Report on the Rise of Digital Finance and Fintech
- SEC Commissioner Expresses Need for DeFi Regulatory Clarity that Allows for Innovation
- Quick Reads: OSHA Protections for AML Whistleblowers, Tether Stands Up to Would-Be Ransomers
Our latest report is now available in Chinese! Read it here: https://mp.weixin.qq.com/s/QaV_ituKgkutBHhUSO9kLA
Digital Gold or BTC Bubble? Experts Debate as Bitcoin Reaches All-Time Highs
Bitcoin’s skyrocketing price has renewed speculation that it’s a bubble. The Bank of America Securities Chief Investment Strategist Michael Hartnett called it the “mother of all bubbles,” and an investment firm known as The Man Group observed, “Every time a bitcoin bubble bursts, another grows back to replace it … This very frequency makes the bitcoin narrative somewhat atypical relative to the great bubbles of the past.”
If a bubble is defined as an extreme mismatch between an asset’s valuation and its true value, deeming bitcoin as such is a mischaracterization, argued Noelle Acheson and Daminick Dantes in Coindesk. Many blockchain experts are pushing back against the bubble narrative, stating that because blockchain technology is still in its infancy and new ways to leverage it continue to be discovered, it is, in fact, of yet-to-be-determined value.
Notably, bitcoin’s total market capitalization recently reached around $1.1 trillion—10% of gold’s total market cap—leading long-time gold investors like Jeffrey Gundlach to say that bitcoin could be better than its precious metal counterpart.
JP Morgan Releases Digital Finance 2021 Report
Investment bank JP Morgan released a report on the state of digital finance and fintech for 2021 summarizing the overall growth of digital financial services such as cryptocurrency, the impact of corporate interest, and CBDC implementation.
The increase in the popularity of digital financial services is partially thanks to the influx of investment and adoption by companies like Tesla, Mastercard, and MicroStrategy. The report states that the $1.5 billion investment from Tesla gave bitcoin a boost, and notes that bitcoin now shows promise in maintaining its place in the global economy. The report notes that “[i]n the long term, we estimate that theoretically Bitcoin prices would need to rise to $146k for the market cap to match the total private sector investment in gold via ETFs or bars and coins.”
Another major development in the wake of the coronavirus has been the rising global interest in CBDC testing and implementation spearheaded by China and other countries throughout Asia. Innovations in digital currency like CBDCs have, for the most part, outpaced regulations. The report predicts that central banks representing 20% of the global population are likely to adopt CBDCs in the next three years, but there remains a lack of clarity when it comes to usage laws within and between jurisdictions. The report warns that uncertainty around the impact of globally-issued stablecoins could lead to reimplementation of antitrust policies.
Why it Matters:
The coronavirus pandemic sped up the process of digitization that was already underway in the global economy. As part of this mass digital migration, the role of bitcoin and digital asset technology won validation from major corporations like Tesla and Mastercard as well as governments around the globe. As regulators catch up to innovation, expect to see increasing enforcement of AML and CTF laws.
Read the full report:
SEC Commissioner Hester Peirce Calls for DeFi Regulations that Allow for Experimentation
On February 22nd, Hester Peirce, the Commissioner for the Securities and Exchange Commission (SEC)—dubbed “Crypto Mom” for her blockchain-friendly ideas—gave a speech at George Washington University Law School in which she expressed a need for more clear DeFi regulations while also allowing for enough experimentation for viable competition with centralized finance.
Pierce recognized the positives of DeFi, stating, “We should welcome the new technology’s potential to improve the way markets work and to make them work for more people.” She referenced the testimony given by Robinhood’s CEO before Congress in respect to the GameStop situation, agreeing with the advantages of real-time settlement enabled by blockchain technology.
Why it Matters:
DeFi poses certain regulatory challenges for the SEC, and using a traditional financial services lens to identify how to regulate the sector will not be enough. Most of the way the SEC regulates is through intermediaries, however, in the case of DeFi there’s often no intermediary to impose regulations or enforcement actions. Pierce cautioned developers to speak with the SEC if their project “looks like the traditional security.”
Read more in The Block:
Expansion of Whistleblower Protections Mean a New Job for Labor
The U.S. Department of Labor’s Occupational Safety and Health Department (OSHA) saw its whistleblower protection and investigative role expanded with recently-signed legislation that expands the program to cover individuals facing retaliation for reporting antitrust- or money-laundering-related violations while incentivizing individuals to report violations of the Bank Secrecy Act. OSHA received nearly 3500 whistleblower reports in FY20.
Tether Ransomed for 500 BTC
Tether revealed on Sunday that hackers have hit the company with a demand for the equivalent of over $23 million in bitcoin or face the release of documents that would “harm the Bitcoin ecosystem.” The deadline has since passed; Tether representatives declined to pay, stating the documents were fake and calling the entire episode a “pretty sad shakedown attempt.”