CryptoAM: Bitlicenses, Moral Hazards & Ethics

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Happy Tuesday fellow nodes, we’re seeing (some) green on our screen! There isn’t a ton of news, but if you think we’re wrong and want to let us know, join our Telegram! If you’re bored today, consider giving us some feedback…

3 things you need to know:

One: New York is on a roll issuing Bitlicenses. You all may have seen the headlines a while back saying that Square now allows Bitcoin buys on their iOS app. This was true…for 49/50 states. New York has incredibly stringent laws when it comes to cryptocurrencies, and require companies to get something called a “Bitlicense” if they want to offer trading/purchasing of cryptocurrencies. Last week, a company called Xapo got the eighth Bitlicense ever issue. 22% of licenses have ben issued in the last two weeks!

  • Nine: There are only nine companies in NYC that were able to get this fabled license. Kraken actually left NY in response to the introduction of the Bitlicense, refusing to comply.

  • Some thoughts: New York has always been on the forefront of fintech regulation, and this time is no different. Regulators are adamant about getting in front of trends before they take off. If there is one thing they don’t like, it’s loss of control.

  • Read more…

Two: Bank of Korea says cryptocurrencies pose a moral hazard. The Korean central bank said that they will not issue a cryptocurrency due to the fact that it causes instability and does not function like money. This comes from a study on the feasibility of using digital currencies as currency.

  • My thoughts: I’m not sure how exactly a centrally issued cryptocurrency causes a “moral hazard,” but I can see how the technology isn’t ready yet for a mainstream cryptocurrency.

  • Read more…

Three: The United States Office of Government Ethics now requires members of the executive branch to disclose cryptocurrency holdings. In a legal advisory released this morning, the OGE said they considered cryptocurrencies to be, “property held . . . for investment or the production of income,” adding that, “OGE does not consider virtual currency a “real” currency or legal tender.” Because of this classification as property, members of the executive branch now must fully disclose any cryptocurrency holdings if they are valued at over $1000.

  • My thoughts: It will be interesting to see who owns what cryptocurrencies in the executive branch. I suspect that at this current moment, few own cryptocurrencies, but with the rise of crypto hedge funds and index funds, within the next few years I would expect to see the number of disclosures increase substantially.

  • Read more…

Also in the news:

What I’m reading today:

Crypto custody solutions may pave the way for institutional money.

Holding crypto assets and keeping them safe is a pain in the a**, to say the least. Especially if you are an institutional investor with millions of assets under management. This is a huge barrier to entry for anyone wanting to invest in coins that aren’t Bitcoin, Litecoin, and Ethereum. At least with those three, you can have some semblance of peace by leaving them in a service like Coinbase’s vault. However, if you want to venture further into the wild west of crypto your only options are to leave your assets on an exchange, or deal with hardware wallets/cold storage solutions. This requires you to be at least somewhat technically adept and many (dare I say most) people simply cannot be bothered to go through the extra effort. Even the crypto hedge funds that have technical skill and are obligated to go through the effort, wish there were an easier way.

Coinbase and BitGo are two companies which are currently racing to provide SEC backed custodial services. As Coinbase already has all the licenses that it needs, it will likely be the first to receive approval from the SEC. How many assets will be provided is unclear, but I would expect any ERC-20 token to be supported which already makes up a large portion of the market.

Around the corner:

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Market Outlook:

First off, an apology that we don’t host this real time. At 8pm yesterday we saw that people were getting greedy, but for some reason the speculation index remained low. We knew this couldn’t stay true…so the obvious move was to move into alts. If you’ve been checking the markets this morning, you would know thats the right move. Moving forward, a lot of coins have bottomed out from their April highs. It’s not a bad idea to start scooping some of your favorite alts at these levels.

Here’s a reminder on what these criteria mean

BTC got rejected again at exactly 6849. Not a lot has changed since yesterday, we’re still looking to the 6.6k and 6.8k levels to give us more clarity on where we are going. The two swing highs hitting the same price target indicate we will likely be testing 6.7k again. and may break down to 6.6k. I’m short term bearish, long term bullish right now.

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