As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
DOJ SEIZES $1B IN BITCOIN TIED TO ‘SILK ROAD’: The United States filed a civil complaint on Thursday to forfeit thousands of bitcoins, valued at over $1B dollars, seized by law enforcement on November 3, 2020. The seizure represents the largest seizure of cryptocurrency in the history of the Department of Justice. The Department said, “According to the allegations of the civil complaint, from 2011 until October 2013 when it was seized by law enforcement, Silk Road was the most sophisticated and extensive criminal marketplace on the internet. The complaint alleges that while in operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs as well as other unlawful goods and services to well over 100,000 buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions. At the time it was taken down in 2013, Silk Road had nearly 13,000 listings for controlled substances and many more listings offering illegal services, such as computer hacking and murder for hire, which generated sales revenue totaling over 9.5M bitcoins and commissions from these sales totaling over 600,000 bitcoins. The complaint further alleges that Silk Road used a so-called ‘tumbler’ to process bitcoin transactions in a manner designed to frustrate the tracking of individual transactions through the cryptocurrency blockchain.”
BITCOIN SURGES AMID ELECTION VOLATILITY: Bitcoin’s price jumped to over $14,900 Thursday, its highest level since January 2018, as volatility due to the U.S. election and investor hopes that additional central bank stimulus will increase the value of digital assets, Reuters’ Anna Irrera reported Thursday. The cryptocurrency rose over 10% since the day of the presidential election as world tech stocks and bond markets also extended their rally. “Bitcoin is the big winner from the current macro environment,” said Anthony Pompliano, a co-founder and partner at cryptocurrency investment firm Morgan Creek Digital Assets. “As we saw coming out of the 2008 liquidity crisis, inflation hedge assets do very well when the Fed steps in with QE.”
HONG KONG WANTS REGULATION FOR CRYPTO TRADING PLATFORMS: In a Tuesday speech, Ashley Alder, chief executive of Hong Kong’s Securities and Future Commission said Hong Kong will regulate all cryptocurrency trading platforms operating in the region, marking a shift from the previous “opt in” approach. The SFC launched a regulatory framework for crypto trading platforms last year, but it was restricted to platforms that traded assets officially classed as a security of future. “This is a significant limitation, as under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security,” Alder said. Therefore, the government is proposing a new licensing regime under its anti-money laundering legislation, requiring all crypto trading platforms operating or targeting investors in the city to apply for an SFC license.
SQUARE REPORTS $1B IN BITCOIN REVENUE: Along with its Thursday earnings release, Square (SQ) reported that the Cash App generated $1.63B of bitcoin revenue and $32M of bitcoin gross profit during the third quarter, up approximately 11x and 15x year-over-year. The company said, “Bitcoin revenue and gross profit benefited from an increase in bitcoin actives and volume per customer.” Square added in the release, “In October 2020, we invested $50M in bitcoin as we believe cryptocurrencies are an instrument of economic empowerment and aligns with the company’s purpose. We expect to hold this investment for the long term.”
PBOC REPORTS 4M TRANSACTIONS IN DIGITAL YUAN: Yi Gang, governor of the People’s Bank of China, said the pilot program of China’s central bank digital currency in four cities has been smooth, Bloomberg reported Sunday. There have been over 4M transaction, totaling over Y2B, or $299M, in the digital yuan so far, Yi said. He added the digital currency is still as an early stage tand still needs a more comprehensive framework.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock (OSTK), Ideanomics (IDEX), Riot Blockchain (RIOT), Pareteum (TEUM) and Social Reality (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin rose roughly 15.7% this week at $15,430 in U.S. dollars, according to TradeBlock.
