Crypto Market Report: Decentralization Meets Centralization

JP Morgan Tests Blockchain For Debt Issuance, Iran Bans Crypto And More…

The Abacus Crypto Market Report focuses on two on two polar yet symbiotic elements of cryptocurrency markets — adoption and regulation. By analyzing these countervailing forces we can best identify macro-trends.

Adoption And Free Enterprise

• Allianz Tests Internal Token Movement: Allianz, a major European insurance company, has been testing the use of an internal token to move currency through its many global branches, citing expediency and transparency as the main objectives of the effort. Notably, the project uses a proprietary blockchain. Read more.
• JPMorgan Test Blockchain For Debt Issuance: JP Morgan has run a trial debt issuance platform built upon their Quorum blockchain technology. The test was based on a $150M one year floating rate certificate of deposit and saw massive firms like Goldman Sachs and Pfizer participating in the experiment. This technology has the ability to eliminate a significant amount of overhead involved in financial issuances, with JP Morgan reportedly considering creating a whole new entity around Quorum. Read more.
• Major Chinese Company Huawei Adds Blockchain Service Platform: Huawei has announced a new platform to easily allow companies to create and manage their own hyperledger based smart contracts and launch them on their cloud service. They claim the entire process can take only a few minutes. The project was specifically designed with supply chain, digital asset, and crowdfunding management in mind. Read more.
• Ethereum’s Casper Proposal Published: Ethereum Improvement Protocol #1011 portends some extremely significant changes, outlining the process of creating a hybrid consensus system that would allow for both proof-of-work and proof-of-stake as a bridge to a fully proof-of-stake powered Ethereum, known by the Casper moniker. The upgrade would see the block reward for POS reduced from 3 ETH to 0.6 ETH. This marks the beginning of an extremely significant shift in the inherent structure of the network. Read more.
• USD To Bolivar Market Reaches $1 Million: As the nation of Venezuela continues to experience a currency crisis, Tuesday saw a new record broken for Bolivar to Bitcoin markets, conveying a clear message about the nations appetite for alternatives to the struggling Bolivar. Many local businesses have been demanding alternative currencies, with the market conditions in Venezuela demonstrating one of the most stark real world use cases for a payment focused decentralized cryptocurrency. Read more.

Regulation And Government

• Iran Bans Crypto: Iran has officially banned all financial institutions in the country from having any dealings with cryptocurrency, citing the often remarked fears of money laundering and terrorism as justification for the new rule. Iran has recently faced a number of sanctions making it extremely difficult to move funds in and out of the country. While cryptocurrency could have helped in this regard, the government in the past said it would prefer to make its own digital currency, though progress on that front remains unclear. Read more.
• New York Launches Crypto Exchange Inquiry: The New York Attorney General has launched an inquiry analyzing the activities of 13 cryptocurrency exchanges. Questionnaires were sent out to the exchanges asking them to clarify various aspects of their business happenings. The Attorney General’s Office has stated a desire to bring transparency to the exchanges. For their part, representatives from several large entities including Gemini and Bittrex issued statements welcoming the inquiry, and stating their full intentions to comply. Read more.
• Former CFDC Head Suggests ETH And XRP Could Be Securities: Gary Gensler, who held roles including advising on financial regulation under the Obama administration and leding the CFTC after his time as a partner at Goldman Sachs, has stated that Ethereum and Ripple may be in violation of U.S. Securities law. This proclamation is significant as there is a notion that it could lead the SEC to preclude American investors from using ETH, XRP, and thousands of tokens. The issue seems to revolve heavily around ICOs and their relation to regulated capital raises. While ETH may remain free from regulation due to its decentralized nature, XRP is more likely to face scrutiny due to its centralized management structure. Read more.
• EU Parliament Votes For More Crypto Regs: The EU parliament has voted to back a measure aimed at curbing money laundering and terrorism. The legislation would implement rules for exchanges, platforms, and wallets requiring them to adhere to particular due diligence processes, which would include customer verification. The legislation also included a bevy of penalties for violating the new provisions. Read more.
• Taiwan to introduce AML Regs by Nov: By November, Taiwan will create a legal framework that will regulate Bitcoin use. The effort seems to be focused on user verification, with the nation looking to bring more transparency to holders of virtual currencies. Banks in Taiwan have already been required to adhere to certain restrictions, including flagging cryptocurrency transactions that exceed an imposed threshold. Read more.

Concluding Thoughts

For months, we’ve been writing about the effect impending regulations could have on the future of cryptoassets and blockchain technology. We’re now entering a new era of regulatory initiatives moving from the theoretical realm into reality as countries all over the world and their many regulatory agencies begin to pass laws and publish clear guidelines.

The natural perspective of the crypto anarchist may be to chide such regulation — especially given that the brunt of such proposals focus around customer identification under the guise of consumer protection, money laundering, and terrorism concerns — but in reality, we’re seeing clarity breed ever more activity. Larger institutions are beginning to experiment in the blockchain space in droves as notions around legal classification and structure gain clarity.

This new era, however, hardly spells the end of crypto’s heyday. In fact, the market’s foray into institutionalization portends a new period that is likely to see institutional activity that could dwarf anything we’ve witnesses thus far. The potential for blockchain technology to curb waste in financial systems is a paradigm shift that could very well redefine the way that value is transferred the world over. Protocols like Ox project are being reimagined to comply with the brave new world of security tokens, demonstrating the market’s incredible ability to adapt while maintaining a focus on decentralization.

When Karl Benz invented the horseless carriage he hardly could have predicted the automobile’s modern use case. In fact, were he to witness my traffic strangled 3 MPH drive to the office this morning, he quite possibly would have developed a tram or moving walkway instead, much in the way a drive on the autobahn would have no doubt left him in awe. This is to say, what blockchain technology has provided us is the rudiments of new way of thinking about resource allocation, value transference, the notion of borders, and the centralization of traditional finance. While a totally anonymous world of completely decentralized monetary systems may become more difficult in the face of stricter regulations, the pace of innovation will hardly slow. Inevitably, the whatever this technology evolves into going forward will be but a facsimile of what we might have thought it to be in 2009 when Bitcoin came along. Whether that’s a good or bad thing is a matter of personal ethos, but for certain, regardless of what the SEC or their contemporaries may decree about classifications or regulations, this technology inherently ensures the market will adapt — where there’s opportunity, innovation finds a way.