Circle research

Weekly Crypto Recap 1/18-1/24

Know & go

  • Top story of the week: This week, tZero launched it's security token trading platform. Read on for some security token 101 and check out our first annual report for more details on security tokens.
  • Three things to know: (1) The CBOE withdrew the VanEck/SolidX Bitcoin ETF proposal (2) Wyoming introduced a new bill on cryptoassets (3) The UK Financial Conduct Authority (FCA) released "Guidelines on cryptoassets".
  • Chart of the week: We take a look at the Gini coefficient and amount of tokens held by top 20 accounts on Ethereum and other top ERC-20 tokens (custom underlying data provided by Mosaic.io).
  • Market snapshot: Total crypto market capitalization is around $120 billion at press time, down 1.3% w/w. BTC is trading at $3560 (down 1.6% w/w), ETH is at $116 (down 4.3% w/w). BVOL (the rolling 30-day annualized Bitcoin volatility as calculated by BitMEX) is 49%, the lowest so far this year, vs. 64% last week.
    (As of 1/25 12PM ET)

Weekly market snapshot

diagram diagram diagram diagram diagram diagram diagram diagram

This week, Mosaic provided us with data allowing us to analyze what portion of ETH and other top ERC-20 tokens were held by top 20 accounts and their Gini coefficient. The Gini coefficient is a measure of income inequality and falls between 0, where everyone is equal, and 1, where all of the wealth is held by a single account. The Gini coefficient for the tokens analyzed is above 0.95, indicating high inequality in token distribution.

Chart sources: coinmarketcap.com, coinmetrics.io, mvis-indices.com/indices/digital-assets

Top Story

tZero launches

Coindesk reported that tZero took its security token trading platform live on Thursday, January 24, after announcing the platform in 2015. It's subsidiary, Pro Securities LLC, provides the alternative trading system. tZero said it has been talking to 60 different companies about potentially listing their tokens on its platform.

In light of this announcement, we want to provide an overview of the security token ecosystem. Last year, as commentary from regulators globally increased around the risks of ICOs, the focus shifted to raising funds via compliant security token offerings. Security tokens are regulated tokens that represent tangible or intangible assets or securities and provide similar rights and ownership benefits as traditional securities.

By removing middlemen and automating certain functions, security tokens could offer advantages over traditional markets such as reduced fees, faster issuance, greater transparency in the asset lifecycle and the opportunity to increase liquidity.

However, they face their fair share of challenges, that present barriers to adoption. For example, regulation is uncertain and could vary by region, which would limit the extent of market expansion. Additionally, while the removal of middlemen has its benefits, it also places an increased burden on the issuer, who now has to assume the responsibilities of underwriting, understanding regulatory and compliance requirements, and marketing to and attracting investors.

In 2018, we saw providers launch solutions that target some of these barriers. Notable call outs include Polymath, an issuance and compliance platform, Harbor, an end to end compliance solution, and licensed exchange platforms like Open Finance Network and tZero. We also saw the issuance of the first security tokens, including BCAP and SCI (tokenized funds) and Aspencoin (tokenized real estate).

Providers will likely continue addressing these challenges in 2019 and regulators could start providing more concrete guidance (similar to the FCA's recent guidelines around cryptoassets in the UK) around what constitutes a security and who can participate in investing in and trading security tokens.

In other news

  • The CBOE has withdrawn the application for the Van Eck/SolidX ETF. In an interview with CNBC, Van Eck said the decision was driven by the government shutdown. They have said it will be re-submitted at a later date. Source.
  • Templum and IPwe are looking to launch a "patent finance market" to tokenize IP. The tokenized patents will be traded on Templum's ATS platform if regulatory approval is received and will be available to accredited investors. Source.
  • Andreessen Horowitz backed Anchorage has emerged from stealth mode to launch a new crypto custody solution. Anchorage says it's custody solution will not consist of placing assets in cold storage, which they believe adds friction by making assets inaccessible. Source.
  • Zilliqa and MaiCoin are partnering to build a "member-driven" security token exchange (Hg Exchange) that aims to provide access to tokenized shares of private companies like Uber, Airbnb, and SpaceX. Source.
  • A startup called Kadena is launching a new private blockchain built on AWS. Source.
  • Binance launched a crypto OTC desk this week. Source.

Crypto funding

  • Symbiont, enterprise blockchain startup raised $20 million in a Series B funding round led by Nasdaq Ventures and including Galaxy, Citi, Raptor Group, among others. Nasdaq Financial Framework will also integrate Symbiont's Assembly smart contracts platform to explore tokenization. Source.
  • Galaxy Digital is raising $250 million for a credit fund, to offer USD denominated loans to crypto companies, who could provide crypto assets, buildings and mining rigs as collateral. Source.
  • MyCrypto acquired crypto mobile app, Ambo, focusing on “wallet functionality, DEX integrations, and simple interfaces for some of the most popular #DeFi protocols like Augur and Compound.” Source.

Global regulatory roundup

  • The FCA in the UK published a consultation paper, Guidance on cryptoassets, where they provide guidance around how crypto assets could be subject to FCA regulation. They divide crypto assets into three categories (exchange tokens, security tokens, and utility tokens) and highlight that tokens issued through ICOs can vary in their classification. Source.
  • Wyoming introduced a new bill that could allow banks to custody digital assets so that they can operate in all 50 states. It also establishes three categories for crypto assets, "digital securities", "digital consumer tokens", and "virtual currencies". Source.
  • The MAS shut down a security token offering that failed to comply with the advertising ban outlined in the SFA by promoting the offering on LinkedIn. Source.
  • The NYDFS granted a BitLicense to LibertyX (ATM provider) and Robinhood Crypto (trading app). Source.

What we’re reading

What we’re listening to

Circle in the news

  • Circle CEO, Jeremy Allaire, spoke at the 2019 World Economic Forum in Davos, Switzerland, highlighting the importance of crypto in the digital age.
  • We released our first Crypto Retrospective report, reviewing last year's top stories, market performance, and critical blockchain and token data insights.

Where we’ll be in January

  • World Economic Forum Annual Meeting, 1/22-1/25, Davos, Switzerland

If you have any thoughts or questions, please reach out at [email protected].

Disclosures

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