Monthly Archives: May 2021

With international focus on sustainability sharpening, the energy consumption of the worlds first ever popular virtual currency, bitcoin, is being put under the microscope. Its most vehement detractors argue bitcoin uses an unjustifiable amount of energy, and represents a thorn in the side of the wider green transition. Bitcoins advocates, on the other hand, claim this is an oversimplification, and measures can be taken to ensure the blockchain network becomes sustainable long-term.

Due to climate concerns, Elon Musk today announced that Tesla will no longer accept Bitcoin. But how much energy does bitcoin actually use? And can anything be done to ensure cryptocurrencies-at-large scale sustainably?

Bitcoin is the worlds oldest and best-known cryptocurrency, invented in 2008 by an unknown entity under the alias, Satoshi Nakamoto. The virtual coin started to be used in 2009, once it was released via open-source software. As a decentralised form of currency, bitcoin is not tied to any central bank or administrator, meaning transactions must be verified by a network of nodes, or machines, distributed across a public ledger otherwise known as a blockchain.

As a reward for validating bitcoin transactions and therefore maintaining the integrity of the system the peer-to-peer network gives the node that completes the job first, 6.25 bitcoins (correct as of May 2020). This process, also known as bitcoin mining, requires miners to run a time-consuming Proof of Work (PoW) procedure, whereby a new block or transaction is added to the chain once an anti-fraud, cryptographic hash puzzle is solved, via bitcoins Secure Hash Algorithm 256 (SHA256) function.

Naturally, PoW involves a considerable amount of mathematical calculations, computational power, and therefore energy. When they first emerged in late 2014, the machines used to mine bitcoin application-specific integrated circuits (ASICs) had an efficiency of around 0.77 Joules per Gigahash (J/Gh), according to the Cambridge Centre for Alternative Finance (CCAF)s Cambridge Bitcoin Electricity Consumption Index (CBECI), although this figure has since dropped considerably. Together, this network of machines is estimated to consume 146.38 terawatt hours (TWh) per annum (correct as of May 2021) more energy than Sweden uses in a year.

Against a backdrop of the sharpening focus on sustainability, and initiatives such as the Net-Zero emissions agreement, this has led some to criticise bitcoin, and call for tighter regulations around the virtual currency, in order to mitigate its environmental impact. Others, however, argue the issue of bitcoins energy consumption is not as black and white as it may appear, and can be resolved in time.

So, how brown is bitcoin? And what can be done to decarbonise this controversial cryptocurrency?

Making cents of the issue

Arguably, since miners are rewarded for completing PoW processes first, the bitcoin network naturally selects computers that are bigger, faster, and more powerful than others on the system.

In an interview with Finextra, Michel Rauchs, research affiliate, CCAF responsible for helping to develop the CBECI noted: In 2009, you could mine bitcoin on a central processing unit using your desktop. A year later, miners already needed a graphics card. After 2013, specialised chips started to be manufactured exclusively for bitcoin mining, known as ASICs. During these early days, hardware replacement cycles tended to be between 2 and 6 months. If miners did not upgrade their inventory, theyd be put out of business.

Today, the Dalian Mining Farm currently one of the largest bitcoin mining centres in China boasts a computational power of 360,000 TWh, and makes up3% of the entire bitcoin network.

In this tragedy of the commons model, ever-increasing energy consumption seems built into bitcoins evolution. According to aForbes article, Chinese researchers revealed that by 2024, bitcoin mining could be responsible for 130 million tons of carbon emissions annually about the same as the Czech Republic.

The potential environmental impact of this upward trend is deeply concerning. In aTed Talk on the future of cryptocurrencies, Tara Shirvani noted that if energy-intensive technologies such as bitcoin continue to expand at their current rate, we could reach 2 degrees of global warming as soon as 2033. This is 0.5 degrees above what the UN says will engender irreversible climate catastrophes.

The wallet is half full

Bitcoins proponents, however, would argue there are more nuanced ways to look at this issue.

Projections that show bitcoins energy consumption increasing ad infinitum seem to be erroneously extrapolating on the current footprint of mining activity. This approach can be misleading, as it fails to consider bitcoins halving model, whereby every four years or every 210,000 blocks mined the reward given to miners for validating a transaction is reduced by 50%. This form of synthetic inflation serves to gradually reduce the amount of bitcoin in circulation.

As such, all available 21 million bitcoins will eventually be mined. According to Nic Carter, founding partner at Castle Island Ventures, we are currently around 88% of the way through that process meaning miners revenue will soon be sourced from fees, as opposed to the more energy-intensive PoW process.

In the long-term, this essentially means the energy consumption of the bitcoin network is likely to drop or at least plateau.

Milking the cash cow: increasing efficiencies

What is more, bitcoin mining seems to have been getting increasingly energy efficient and at a faster pace when compared to any other method of value transfer in the world, notes Carter. This observation is borne out in the CCAFs figures, which reveal that the efficiency of equipment used to mine bitcoin has gone from 0.77 J/Gh in July 2014, to 0.04 J/Gh in February 2021.

However, the most notable efficiency improvements may be behind us, argued Rauchs: In the first two to three years after the first ASICs came out, there were big equipment efficiency improvements often by two or three orders of magnitude. Computer chip sizes were being slashed from around 100 nanometers (nm) to 10 nm. The efficiency of mining machines continued to increase in this way until around 2018. Since, improvements have been marginal we are reaching the limits of physics.

When it comes to discussions of bitcoins efficiency, it is also important to be aware of the pitfalls of comparing bitcoins energy consumption to nation states, argues Lawrence Wintermeyer, executive co-chair, Global Digital Finance in aForbes article. Indeed, while bitcoin uses more energy per year than Sweden, the cryptographic network considerably more efficient: It is logical to ask whether the energy required by bitcoin should rival that of an entire nation, but doing so must take into account value. The GDP of Ukraine, for example, is around $150 billion. The value of all mined bitcoin is $940 billion greater than the combined GDP of Ukraine and the next biggest energy consumer, Sweden, with a GDP of $530 billion.

We must also acknowledge the lack of a true benchmark for bitcoin, in any comparison to a countrys energy consumption, noted Rauchs. There is nothing you can directly compare bitcoin to. It is a synthetic digital commodity that is at the moment, held mainly for investment purposes a unique thing in and of itself.

So, while comparisons to the energy consumption of nation states, for instance, are in a sense arbitrary, they are a necessary evil, in order to put this debate into perspective. Either way, bitcoin is clearly greener in terms of value than its critics let on.

Change in the weather: scaling sustainably

If we are worried about the environmental impact of bitcoin, which is the crux of this debate, it would be remiss to not examine bitcoins energy mix, as opposed to just its energy consumption. Indeed, consumption can go up, but bitcoin can, in theory, decarbonise. Promisingly, a recent Global Cryptoasset Benchmarking Study revealed that 39% of PoW mining is already powered by renewables.

According to what we observe, said Rauchs, although bitcoins energy consumption has been increasing, the actual carbon emissions may have not increased proportionately. This is because miners are seeking out the cheapest form of energies, which is often renewables. This source of stranded energy asset is in high demand among bitcoin miners.

In China, for example one of the most prolific bitcoin miners in the world provinces such as Sichuan and Unan have adopted seasonal practices, whereby hydropower is utilised more during wetter periods of the year, due to the overabundance of green energy.

This is a promising trend. And, aside from the obvious environmental benefits, the strategy serves to use surplus renewable energy that would otherwise go to waste. This is particularly convenient in Sichuan and Unan, added Rauchs, where hydropower plants have only been built in the last decade, and the necessary battery storage capacity and transmission lines needed to distribute the green energy to distant demand centres, is lacking.

The anonymised founder of a large mining operation in the United States, Pylon Finance,points out: Companies often rely on miners to utilise unused electricity especially during the pandemicHydro companies in Washington and Canada, for example, practically give away electricity due to excess production and low utilisation, in addition to not being in a favourable location for retail; miners, however, set up in front of power plants, saving transmission costs.

This energy arbitrage could be leveraged by regulators, argues a paper, published on 6th April 2021, byNature journal: Miners should be encouraged to shift their operations to regions that provide abundant low-carbon electricity. Under this site regulation model, Natures study found only 20% of bitcoin miners remained in coal-intensive energy regions resulting in lower carbon emissions per dollar earned, compared to the alternative higher taxation scenario.

Interestingly, the CBECI demonstrates that there is, in fact, already enough renewable energy to power the entire bitcoin network. For instance, the globes current stock of hydro stores which produce 4,164 TWh could power the entire bitcoin network28 times over.

So, it seems the path of decarbonisation for bitcoin is clear, albeit logistically challenging.

Note-worthy improvements

Until the infrastructural challenges of distributing this energy are met, the worlds most popular cryptocurrency will have to find ways to considerably reduce its energy consumption, in order to limit its environmental impact in the short-term.

Possibly the most widely discussed of these methods is shifting bitcoin from the PoW model, to a Proof of Stake model (PoS). Instead of rewarding the first miner that solves a cryptographic hash puzzle with new coins, the PoS model maintains the integrity of the blockchain by selecting one person to mine according to how many coins they hold, and penalises them if an infringement against the laws of the system takes place. By eliminating the competitive element, the energy demand of the network is limited, and the tragedy of the commons principle is circumvented. Thus, in theory, what is good for the environment is good for miners, under a PoS model.

There are promising movements to this end. Altcoins such as Ethereum have announced their intention to move to the greener PoS model, while others, like Nxt, are already there.

Proof of Harvest

Although PoS is far less resource intensive than PoW, it has some concerning flaws.

Not only does PoS incentivise miners to hoard tokens, it comes with a greater chance of a 51% attack particularly for smaller altcoins. Indeed, Ethereum-based apps that use PoS in their backend have fallen victim to numeroussecurity hacks and coin thefts.

Another consensus mechanism contender is the Proof of Harvest (PoH) model, invented byRubiX, which is cryptographically 1,000,000 times more secure than the ECDSA 256 system used by Bitcoin, and represents an enterprise-level, zero carbon blockchain alternative.

XRP Ledger Consensus Protocol

The altcoin XRP, meanwhile, which is issued and managed by Ripple, uses a proprietary XRP Ledger Consensus Protocol (XLCP), whereby only validators on Ripples centralised unique node list (UNL) are trusted by the network.

While XRP sacrifices the security of bitcoin for the speed that comes with centralisation, the kicker is thatRipples altcoin is not mined. Ripple minted the entire supply when the network was launched, and intermittently releases portions of the supply from an escrow, and sells them on the open market.

This model means ultimately XRP consumes less energy than the bitcoin network. In a FinextraTV episode, Monica Long, general manager of RippleX, said the energy use of this method, versus mining, is 120k times more energy efficient. The energy used is the same as running an email server. Ripple uses XRP ledger in its product offering for that reason it is sustainable at scale and green by design.

Despite the promising alternative models out there, there is always a trade-off involved be it in terms of security, network speed, or energy efficiency.

Either way, co-ordinating bitcoins shift to an alternative consensus mechanism will be very challenging for several political reasons let alone the fact it is decentralised and represents hundreds of billions of dollars, said Rauchs. Any fundamental change to the bitcoin model would take years, if it was ever actioned, and past attempts have shown that a general resistance to change is structurally engrained in the community.

Dimes are changing: Industry decarbonisation initiatives

Clearly, the environmental impact of bitcoin and altcoins is being addressed through decarbonisation and increasing renewables usage. These efforts are receiving strong backing, but more needs to be done, argues Long: What is holding back wider assent to the decarbonisation of cryptocurrencies is an industry-wide, concerted push. Key industry players need to commit to work toward a carbon neutral future.

With this in mind, RippleX recently partnered with non-profit organisation, Energy Web Foundation, and co-developed a tool calledEWZero. It is completely open source, meaning any blockchain can use it to evaluate its carbon footprint, and either identify greener energy sources, or adopt offsetting tactics. It is free for anyone to use, and we hope others in the industry will take it up, said Long.

Since Finextras interview with Long, further steps have been taken, on an industry-level, to mitigate the environmental impact of cryptocurrencies-at-large. According toForbes, an alliance of research groups and private firms announced [in February 2021] they are pooling resources with the intention of completely decarbonising all cryptocurrencies by 2040. The bodies that formulated the proposal, known as the Crypto Climate Accord, say the transparency that is by definition built into cryptocurrencies makes them ideal tools to bring trust to decarbonisation efforts.

Wherever you sit in this debate, the Crypto Climate Accord spells good news for the ability of bitcoin and altcoins to scale up sustainably.

My two cents

The discourse surrounding bitcoins energy consumption has been heated and muddy since the get-go. With each commentator owning a horse in the race, a plethora of contradictory perspectives on the issue seem to surface daily. The invaluable role of organisations such as the CCAF is to cut through the noise, and present the raw data with which stakeholders can respond to.

While bitcoin does indeed appear to be consuming a large amount of energy, those who campaign for its elimination are falling victim to a stagnation fallacy, by failing to recognise that the peer-to-peer network will improve in both efficiency and sustainability in the long-term.

In practice, bitcoin miners are increasingly committing to carbon neutrality because the cryptocurrencys footprint is becoming an existential threat to the industry. The negative press bitcoin is receiving in this area is causing some institutional investors to reconsider their capital allocation plans, and remove bitcoin from their balance sheets. This impacts bitcoins price, which spells bad news for miners. Thus, it is in the long-term interest of the bitcoin network to decarbonise.

Ultimately, bitcoin is not going anywhere the virtual goldrush is far from over. Today, the job of the financial services industry is to be informed by the data, and steer the development of digital currencies down a path aligned with the all-important Net-Zero target.

Link:
The real price of the bitcoin gold rush - Finextra - Finextra - Finextra - Finextra

Theres no question that Bitcoin often gets sold as an inflation hedge. So much of the story is about the Fed printing all this money and how theres only 21 million bitcoin, and so something something something, the number will go up due to inflation. Youve heard it a million times.

Well, today we got one of the hottest inflation prints in years. By one measure, the consumer price index had its fastest gain since 2009. So hows Bitcoin doing? Not great. Heres the intraday chart, with the time of the CPI print marked bythe vertical line

Chart: Bloomberg

Now you might say, well sure, but the hot inflation was well-known, it was priced in, in some way. And that the number we got today helps explains the extraordinary gains over the last year. But thats pretty weak. Its clear that the CPI reading did, in fact, surprise other assets. Five-year yields are up substantially on the day, showingtraders did not anticipatesuch a big increase in inflation.

Look, to be fair, this is just one day and you cant make big sweeping conclusions about the role an asset plays in global portfolios from fourhours of trading. Nonetheless, we do have a few more clues out there. In addition to Bitcoin selling off, were seeing tech get hammered (down 2%) and the real speculative stuff like the ARKK exchange-traded fund down over 3%. So from that perspective it looks like Bitcoin is simply behaving as a risky,speculative asset, which both explains its action today and also over the last year. Gold is also down on the day (speaking of assets mis-sold as an inflation hedge).

Of course, gold, highly speculative tech, and Bitcoin all have something in common, which is that they dont generate cash flow in the here and now. When economic growth is sluggish, thats not really a big deal, of course, cause nobodys making much money in the first place. But when the economy is red hot, and you can make good money with lumber or gasoline or chips or labor, then why put your money in such future-oriented assets that arent paying anything today?

Before it's here, it's on the Bloomberg Terminal.

Read the original post:
Bitcoin Isn't Behaving as an Inflation Hedge. Its Move Still Makes Sense - Bloomberg

Hello, again: Thanks for all the feedback from last weeks ETF Wrap. Please, keep it coming.

The Holy Grail for crypto enthusiasts has been a pure-play exchange-traded fund investing in crypto. It doesnt seem that were any closer to getting one, at least before the end of 2021. Gary Gensler,as the new chairman of the Securities and Exchange Commission, seems intent on ensuring that investor protections are in place for moving forward, and rightfully so.

But MarketWatch caught up with Matt Hougan, chief investment officer of Bitwise Asset Management, formerly the chief executive officer of ETF.com, whose new fund may hold some appeal for those pining for a bitcoin ETF. One selling point, is that the fund may retain its attraction even if a bitcoin ETF eventually emerges.

Send tips, or feedback, and find me on Twitter at @mdecambre to tell me what we need to be jumping on.

Sign up herefor ETF Wrap.

Weekly performance across the board for ETFs was lackluster as investors have been wrestling with the rising threat of inflation and have gravitated to themes and strategies they that they think will perform better in that environment.

Read: What does inflation mean for the stock market? Its supposed to be a positive but investors are spooked now

See: The biggest inflation scare in 40 years is comingwhat stock-market investors need to know

VanEcks oil-services CL.1, +0.80% fund registered a 2.4% return among the best performers over the week. And evidence of inflation bubbling up appears to be helping boost commodity-focused funds, more broadly, including those for copper HG00, -1.01% as the COVID-19 pandemic loosens its grip on parts of the world, amid a rollout of coronavirus vaccines and treatments.

A recent research report from FlexShares indicates that factors likevalue, size, and dividend yield, tend to post strong gains during economic recoveries like the one the U.S. is experiencing presently.

Given the historic relative outperformance of the size and value factors during an economic recoverywith an average excess return of 15% and 6.5% respectively during this type of environmentinvestors may want to considerETFs with a tilt towards value stocks and a smaller market capitalization, the folks at FlexShares write.

Bitwise Asset Management launched the Bitwise Crypto Industry Innovators ETF BITQ, -7.53% earlier this week.

There are plenty of funds that attempt to leverage from the growth in the crypto and blockchain market, but Hougan makes the argument that this fund is different primarily because its allowed to carry crypto in the title. That may sound like just window dressing but regulators compel a company/sponsor using a specific word in a funds name to put their money where their mouth is.

It is the first ETF that has cryptoin the name and the reason it is able to do that is that it is more than 80% is pure-play, companies, Hougan said.

The ETF pro thought that people are excited about the idea of a bitcoin BTCUSD, +2.52% fund because they are interested in the idea of the worlds No. 1 digital asset but may not want to hold it directly.

Bitcoin is inherently volatile and hard to value, which may be one reason why the SEC has thus far been hesitant to push forward with a ETF-wrapped crypto fund.

On Tuesday, the SEC in a statement said that investors should consider the volatility of bitcoin as well as the lack of regulation and potential for fraud or manipulation in the underlying Bitcoin market. The statement was a reference to the growing bitcoin futures market and mutual funds but the message implies that the SEC is moving gingerly in the sector.

On Thursday bitcoin prices on CoinDesk were down 10% at around $50,170, and had hit a 24-hour low of $46,294.12, a month after an all-time high around $64,000. Bitcoins slide accelerated on Wednesday after Musk said that he would no longer accept the crypto at Tesla stores. That has taken the broader digital-asset complex along for the ride lower, with assets tied to Ethereum ETHUSD, +6.56%, the second largest crypto in the world, also in the red. That includes meme asset dogecoin DOGEUSD, +34.33%.

BITQ consists of 30 companies and is market-cap weighted but capped at 10%. It has crypto platform Coinbase Global COIN, -6.53% as its biggest holding. Michael Saylors MicroStrategy Inc. MSTR, -9.93% is another significant component, as well as Mike Novogratzs Galaxy Digital Holdings GLXY, -11.74% and bitcoin miners Riot Blockchain RIOT, -16.18% and Marathon Digital Holdings MARA, -13.96%.

This isnt quite a bitcoin ETF, there are a bunch on file with the SEC, but for many investors who are able to stomach the wild moves of crypto, this could be a an alternative.

This is not a bitcoin ETF but it does hold the companies that are building out the [crypto] infrastructure, Hougan said.

It is worth noting that there is at least one notable entrant in the digital-asset world with a similar fund composition to BITQ.

VanEck Vectors Digital Transformation ETF DAPP, -7.23%, which made its debut last month, aims to give owners exposure to the digital transformation of the economy, and holds a number of the same companies as Bitwise but comes sans the crypto title and with a lower expense ratio at 0.65%, versus 0.85% for Bitwise.

DAPP is down early 16% so far this week.

Tech stocks have been punished in the recent selloff that saw the Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite Index all get clobbered on Wednesday. But Cathie Woods Ark Innovation fund has seen the worst of the downturn in equities, reports The Wall Street Journal.

Continue reading here:
ETF Wrap: Is a new 'crypto' fund the long-awaited bitcoin ETF in disguise - MarketWatch

Financial technology outfit Square (NYSE:SQ) got 2021 started on the right foot. More than a year removed from the start of the pandemic, revenue from its seller ecosystem (primarily digital payments and related services for merchants) rallied 19% year over year as in-person business transactions slowly started to normalize again. Cash App also had a good first three months of the new year with revenue up a whopping 139% from a year ago as consumers flocked to the digital wallet.

But revenue overall at Square was $5.06 billion in Q1 2021, up an incredible 266% year over year. The reason? Bitcoin (CRYPTO:BTC) transacted through Cash App. Nevertheless, Square is by no means reliant on the cryptocurrency price boom. On the contrary, it's barely a money-making affair -- but one generating lots of buzz and helping its more profitable digital money management and payments business continue its expansion.

Image source: Getty Images.

Much like how things played out last year, Bitcoin's skyrocketing price driven by consumer interest in owning a piece of the digital currency was a boon for Square's headline numbers. Of the $5.06 billion in revenue generated in the first quarter, $3.51 billion was attributable to Bitcoin -- a more than 1,000% increase from Q1 2020 when Bitcoin revenue was just $306 million. Cash App users buying and selling the digital currency was only part of the story. As of this writing, the value of Bitcoin itself is up 720% since the start of 2020.

And yet in spite of the epic rise, Bitcoin isn't what's paying the bills at Square (total net income was $39 million, and free cash flow was actually negative $132 million this last quarter). Rather, it's the Square seller ecosystem and Cash App (excluding Bitcoin) that's really moving the needle and generating progress for Square's bottom line. In fact, when factoring for the $19.9 million in Bitcoin impairment costs realized, the cryptocurrency results were hardly meaningful in the last quarter.

Metric

Q1 2021

Q1 2020

YOY Change

Seller ecosystem revenue

$1.02 billion

$853 million

19%

Seller ecosystem gross profit

$468 million

$356 million

32%

Cash App (ex-Bitcoin) revenue

$529 million

$222 million

201%

Cash App (ex-Bitcoin) gross profit

$420 million

$176 million

139%

Bitcoin revenue

$3.51 billion

$306 million

1,047%

Bitcoin gross profit

$75 million

$6.67 million

1,024%

Data source: Square. YOY = year over year.

Stated another way, Square's revenue was up 44% in Q1 to $1.55 billion when excluding the $3.51 billion in Bitcoin revenue. Besides generating massive buzz in its top-line financial metric, why bother with Bitcoin at all?

It's all about the bigger picture for Square, which is generating lots of new user accounts by offering crypto trading through Cash App. Once in the ecosystem, Cash App (and the closely integrated merchant ecosystem through Square) can monetize some of those users with its much more profitable digital payments and digital wallet services. Thus, cheap marketing with quick payoff is one way to think of Bitcoin at Square.

Longer term, if Bitcoin acceptance as a form of payment among businesses does continue to increase, Square will have the infrastructure and user base already built out to make it a top ecosystem from which merchants and consumers can interact using the digital asset. Bitcoin thus gives Square another arrow in its quiver as it rapidly grows its network of users.

When backing out Bitcoin results, Square sales tally up to $10.7 billion over the last trailing-12-month stretch -- valuing the stock at just over nine times trailing-12-month sales. By comparison, larger peer PayPal and digital wallet competitor Venmo currently trade for about 12.5 times trailing-12-month revenue. Bitcoin or not, Square stock looks like a long-term value right now.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View original post here:
Here's How Much Square Is Relying on Bitcoin - Motley Fool

Henrique Dubugras, co-CEO and founder of Brex

Fresh off last months massive $425M fundraise at a $7.4 billion valuation, Brex, an all-in-one financial services provider for small and medium-sized businesses, is launching one of the first crypto rewards programs for corporates.

With the new offering, Brexs customers, most notably Airbnb, Classpass, a subscription service that provides access to numerous fitness studios, and startup accelerator Y Combinator, will be able to exchange Brex reward points for bitcoin and ether the same way theyd redeem them for miles, gift cards, cash, or travel.

Brexs rewards partner, TravelBank, will power the zero-fee rewards redemption program, allowing users to input the amount of points they want to redeem for crypto that can then be transferred to a cryptocurrency wallet like Coinbases.

Weve always believed in crypto personally says Henrique Dubugras, co-CEO and founder at Brex. But the watershed moment for us was when Square, Tesla and a few other companies started buying crypto [and putting it] on their balance sheets, signaling that crypto is getting mainstream and we need to do something.

Launched in 2017 as a corporate card provider for venture backed businesses, Brex has since expanded to offer small and medium-sized businesses (SMBs) as well as larger organizations an all-in-one finance management platform. Without disclosing the exact number of clients, the company says it onboards thousands of new customers every month. To date, Brex has raised over $940 million in venture capital from Tiger Global, Y Combinator Continuity and DST Global, among others.

A crypto offering could give Brex a notable element of differentiation from competitors that have also been growing at a staggering pace. Last month, Ramp received $115 million in funding at a $1.6 billion valuation. Another competitor, expense reporting startup for small businesses, Divvy, is in the process of being acquired by Bill.com, a cloud software-based platform for SMBs, for approximately $2.5 billion.

But crypto-native companies are already targeting this use case. BlockFi, Crypto.com and Gemini recently announced debit or credit cards with crypto rewards. Bakkt, a crypto venture of New York Stock Exchange-owner ICE, has been actively trying to advertise its all-in-one digital wallet, also supporting loyalty and rewards programs. In March, bitcoin rewards provider Lolli, whose notable partners include Nike, eBay and Sephora, raised a $5 million pre-Series funding from Alexis Ohanian and Serena Williams, among other notable investors. Though these products are retail consumer-oriented, the ever-innovating crypto companies may expand their offerings to businesses and find support among crypto-first clientele in the future.

But Dubugras believes Brexs position as not a purely crypto platform is going to attract enterprises. We support the needs of businesses across the board. We can serve as their primary cash management accountant, primary credit card or primary expense management software versus being a crypto-only provider.

Editors note: Previous version of the story names Coinbase as Brexs partner. Coinbase is not partnering with Brex on the offering. Clients can deposit rewards into crypto wallets like those offered by Coinbase.

Here is the original post:
Brex Partners With TravelBank To Launch Bitcoin And Ether Rewards Program For Businesses - Forbes

An Australian computer scientist who claims he created bitcoin has launched a London high court lawsuit against 16 software developers in an effort to secure bitcoin worth around 4bn pounds (A$5.7bn) he says he owns.

In a case that was promptly labelled bogus by one defendant, Craig Wright is demanding that developers allow him to retrieve about 111,000 bitcoins held at two digital addresses that he does not have private keys for.

In his second London lawsuit in three weeks, Wright alleges he lost the encrypted keys when his home computer network was hacked in February 2020. Police are investigating.

Wright, who is bringing the case through his Seychelles-based Tulip Trading firm, concedes he is a controversial figure since alleging in 2016 that he wrote the bitcoin white paper which first outlined the technology behind the digital assets under the pseudonym Satoshi Nakamoto in 2008. The claim is hotly disputed.

The Australian, who lives in Britain with his wife and two of his three children, alleges in his latest lawsuit that developers have breached their duties to act in the best interests of the rightful owner of globally-traded assets.

Our client has always maintained that he created bitcoin to operate within existing laws and that in the event of loss or theft, where legitimate ownership can be proven, the developers have a duty to ensure recovery, said Paul Ferguson, a partner at law firm Ontier, which is representing Wright.

The case is being brought against the developers of four networks Bitcoin Satoshi Vision (BSV), Bitcoin Core (BTC), Bitcoin Cash (BCH) and Bitcoin Cash ABC (ABC) at addresses in continental Europe, the US, New Zealand, Australia and Japan, a court filing seen by Reuters showed.

One of the defendants, Peter Todd, said he and others were not involved in day-to-day network development, that Wright had not proven his ownership and that bitcoin should not be subject to arbitrary seizure.

As this very case shows, if we allow people to get coins seized and reassigned by court order, that puts your coins at risk of being stolen by abuses of those fallible processes, he said by email. Other defendants were not immediately available.

Bitcoin, which surged to hit a record of almost $65,000 in April, was trading at $56,749 on Wednesday afternoon.

More:
Australian man Craig Wright who says he created bitcoin takes 4bn claim to London high court - The Guardian

The U.S. Securities and Exchange Commission has a blunt message for investors in mutual funds that have holdings in Bitcoin futures: Beware of the risks.

While the derivatives have become increasingly popular, theyre still based on an asset thats highly speculative and volatile, and which trades in a lightly regulated market, the SECs division of investment management said Tuesday in a statement. Investors should weigh their appetite for risk and examine the funds disclosures, the agency said.

Investor protection and assessing the ongoing compliance of these funds is a top priority for the staff, the SEC said.

The warning comes just weeks after Gary Gensler, who taught classes on digital assets at the Massachusetts Institute of Technology, took over as SEC chairman. His early comments have thrown cold water on speculation that the SEC would quickly approve a Bitcoin exchange-traded fund. Last week, he told lawmakers that the cryptocurrency market could benefit from greater investor protection.

Read more: Bitcoin ETF Approval Odds Grow Longer After Gensler Critique

On Tuesday, the SEC said it would consider whether, in light of the experience of mutual funds investing in the Bitcoin futures market, the Bitcoin futures market could accommodate ETFs. The agency also said staff would:

Before it's here, it's on the Bloomberg Terminal.

Originally posted here:
SEC Warns of Bitcoin Futures Risks in Mutual Fund Investments - Bloomberg

For years the Bitcoin industry has been hoping the U.S. Securities and Exchange Commissionwould approve an ETF, which would theoretically allow an easy onramp for a lot more money to flow into the coin. So far though, applicants have been disappointed, despite approvals for similar products in other countries. But with institutional adoption on the rise, could 2021 finally be the year? Bloomberg IntelligenceETF Analyst Eric Balchunas says hes more optimistic than hes ever been. In this Q&A he explains why, and breaks down the landscape.

Joe Weisenthal:So Eric. A Bitcoin ETF is something the community has hoped to see for a long time now. And nobody knows ETFs as well as you. It really feels like the entire industry has been monitoring your work for clues or signs about whether its coming. How has that focus been from your perspective?

Eric Balchunas:It is one of those things that no one really knows, unless you are inside the SEC. But we have been pretty obsessed with this story since the Winklevoss Twins filed for the first one in 2013, so we have been trying to give our takes in real-time and track every little stage. And I will say it does feel like theres been a shift this year. We are more optimistic of an approval than weve ever been.

Joe:Whats changed your thinking? Why does it feel like 2021 is different than, say, 2017 or 2018, the last time there was a lot of hype?

Eric:First is the institutional adoption of crypto is much greater, the money centers are getting involved. Second, you have the intense growth of defaultcrypto products like GBTC which are not ideal for retail investors and the SEC knows this. Finally, theres been a torrent of launches up in Canada which have worked fine and seen a lot of action. Canada has a history of being like six months to a year ahead of the U.S. Last but not least, [Gary] Gensler coming in as chair. He gets crypto, taught classes at MIT on it, albeit he does have some concerns.

Joe:Speaking of Canada, youve posted a lot about what a smashing success those initial launches have been. Can you give some perspective on how much demand there is for those products?

Eric:Some of the stats are insane. First off, Canada crypto ETFs already have $2.3 billion in assets in threemonths. And Canadas market is 1/27th the size of the U.S.so that would be like $60 billionhere! Also, they have taken over the most traded leaderboard up in Canada. There are typically three to four crypto ETFs in the Top 20. Finally, the Ether ETFs that were launched recently have actually seen volume grow (rare for new ETF launch) indicating wide interest. All that action and they have very moderate premiums to NAV too (which is the problem with the OTC trusts like GBTC)

Joe: In the U.S. obviously theres been a bunch of other stuff for regulators to think about. We had the whole GameStop/Robinhood story. There's concern over SPACs and the accounting treatment of them. The talk about Bitcoin's energy impact is growing. And now we have this ransomware attack on the gasoline pipeline. Could regulators decide there's just too much other stuff to deal with right now?

Eric: Totally. Bigger fish to fry for an incoming chair is a huge variable and could delay approval. Gensler also noted that: We dont have a Federal regime overseeing the crypto exchanges and seems to not be totally comfortable with the exchanges yet. All that said, I do think time is now of the essence on this issue due to the increased flows going to these defaultETFs like GBTC and stocks that put Bitcoin on-balance sheet. The more they wait the more it will get messy when they approve given all the cash in these other vehicles. Also the longer they delay the more they will effectively play kingmaker as whoever is out first is instantly wealthy. So I think there's a risk of waiting too long and I think they understand that.

Joe: Interesting. So you mentioned that Gensler gets crypto. What does that mean exactly? Whats his backstory with it for people who are unfamiliar?

Eric: He taught a Blockchain Technologies & Cryptocurrencies class at MIT. We pored over the transcript of the class and he knows his stuff, arguably more than most Bitcoin investors. He even went Full Crypto a few times, calling fiat a social constructbut on the flipside, he was also pretty clear that he thought the crypto markets were ripe with scams and frauds.The transcript was a good insight into his brain on this topic. Here's a link in case anyone interested.

Joe: So presumably theres a huge pot of money to be made for whichever applicant becomes the GLD of Bitcoin (if that analogy makes sense). There are numerous players who want in. Presuming the SEC is eventually open to approving a Bitcoin ETF, how will it judge the various contenders? Or will they all be allowed to go, if and when, the green light is turned on?

Eric: This is the most fascinating part of the story right now. Because whoever gets out first is set for life. In Canada, one issuer had just a one-day head start and ended up getting almost all the volume going forward. We think what they will do is let two to three launch on day one likely an established ETF issuer like VanEck or WisdomTree or maybe Fidelity versus say a newbie. Then theyll line the rest of up like airplanes on a runway and let them launch over the next few weeks. Again, thats just our guess. That is what would make sense for us rather than letting one lucky issuer go first or on letting more than 10 launch on same day, which could create chaos.

Joe: But are there differences in the applications that the SEC would consider?Or are they all kind of the same?

Eric: There are some slight difference but largely they are all the same (which is to say like GLD but for Bitcoin) and the SEC will likely work with them ahead of time to iron out any deal breaker type differences or missing details. That said, VanEck filed for an Ether ETF too and we think that would likely go after the Bitcoin ones.

Joe: Got it. Just two more questions, and then Ill let you go. This isnt an ETF question per se, but you mentioned crypto exchange regulation as something Gensler expressed some dissatisfaction about. It still feels like that space operates in a looser manner than the traditional finance realm with, say, their promotion of specific coins in their advertising. Do you have any sense what the SEC might like to see on the exchange front?

Eric: Weve seen quotes from Gensler recently that he sees some of these tokens and cryptocurrencies as securities and hes interested in cleaning that up since securities fall under the SECs purview. He will likely also look for any fraud or potential for fraud. In terms of the promotion stuff we havent seenanything directly on that but the way the SEC responds to Robinhood could give us some insight into that aspect. All that said, Canada and Europe crypto ETPs are all using these same exchanges for years and there havent been any major issues and premiums/discounts to NAV have been minimal, indicating market makers are able to adequately arbitrage the ETFs and the underlying cryptos. Weve also spoken to market makers and they aren't that worried about it. But Genslers view is the one that matters.

Joe: Got it. Appreciate your taking the time here. Last question, not crypto-related per se, but what else in the ETF world should people be watching right now?

Eric: One thing that is new and developing and is likely going to be bigger than many think is active mutual funds converting into ETFs. We saw the first one ever happen a month ago and therevebeen a couple since and some bigger fish like DFA have some in the works. This will be fascinating to watch since mutual funds have about $18 trillion in assets in the U.S. Some of that will convert. Some wont. How much of it does is the question though.

Joe: Awesome! This was great. Really appreciate your taking the time

For more on this topic, you can check out our Odd Lots episode Inside the Multi-Year Quest to Create a Bitcoin ETF with Greg King, CEO of Rex Shares,from 2018. You can also follow Eric Balchunas on Twitter here.

Before it's here, it's on the Bloomberg Terminal.

More:
Will We Have a Bitcoin ETF This Year - Bloomberg