Crypto Market Report: Google And Mailchimp Keep Crypto Down

Google Plans To Stop Miners, IBM Working With Central Banks, 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:

• Google Bans Crypto Browser Mining: First they banned cryptocurrency ads and now they have gone after miners. Google has announced they will begin removing crypto mining browser extensions in early July. The move continues the trend of major internet giants hindering the growth of crypto adoption via familiar end points like social networks and other ancillary related tools. Read more.
• AirAsia Planning Cryptocurrency Rewards Program: In its quest to go cashless, AirAsia is embracing the crypto economy. The Asian airline has announced plans to launch BigCoin. Initially, BigCoin will replace frequent flier miles but the long term plan is for BigCoin to be at the center of AirAsia’s business strategy. The coin would allow customers to purchase everything from seats to meals. The ICO could be within the next 6 months although no firm dates have been given. Read more.
• Japanese Broker Considers Purchasing Major Crypto Exchange: Consolidation in the cryptocurrency market continues. Just a few weeks ago Goldman Sachs affiliated Circle purchased major U.S. crypto exchange Poloniex. Now Monex, a large brokerage firm in Japan, is considering a buyout of Coincheck. The move would mark yet another traditional finance company entering into the world of cryptocurrency. Read more.
• Mailchimp Is The Latest To Block ICO Marketing: After Google, Facebook, and Twitter have all begun blocking many cryptocurrency related advertisements, Mailchimp, a leading service provider for online newsletter operations, is following the pack. The move brings into question ethics related to shutting out specific companies from a platform. It also raises concerns as to how crypto startups will market themselves and retain user engagement. Read more.
• Bitpay Raises $40M: Despite the current bear market one of Silicon Valley’s oldest VC’s, Menlo Ventures, has participated in cryptocurrency payment processing startup Bitpay’s latest round. Many VC’s have been shying away from payment related crypto startups as there is growing doubt that crypto assets will actually be used for payments. At Abacus we still believe there’s a market for cryptocurrency payments especially in developing economies. Read more.

Regulation And Government:

• State Owned Chilean Bank Cuts Ties With Exchanges: Chile’s state owned bank, largely considered one of the safest in South America, has shut down the accounts of all three Chilean cryptocurrency exchanges. Other banks in the region have already banned the entities from having accounts with them. Exchanges like Binance (that recently had to move to Malta) have struggled to find Fiat banking partners amidst growing regulatory concern, causing them to look worldwide for crypto friendly banking partners. Read more.
• China Still Considering Crypto Fiat Currency: The head of China Banknote Blockchain Research Center, a government backed agency, claims that the nation is continuing to research creating their own cryptocurrency, though a release date remains ambiguous. Read more.
• Russia Formalizes ICO Rules: The Russian Ministry of Telecom and Mass Communications have released sweeping regulations for ICOs in the country. Among the more poignant aspects of the legislation are requirements that companies will be required to guarantee that they can buy back any issued tokens for a nominal price, must have authorized capital of at least 100MM Rubles (~$1.7MM), can only sell tokens for Rubles, and restrictions on how funds can be spent. Read more.
• Seoul Considering Launching Its Own Coin: Seoul is planning on launching the “S-Coin” to be used for funding of social benefits programs, according to the Mayor Park Won-soon. Mr. Won-soon went on to suggest that the program’s success is dependent on legal and institutional support, but that he envisions Seoul becoming a major center for blockchain development, aided by the S-coin. Read more
• SEC Charges Centra Tech With Fraud: Centra Tech, famously backed by boxer Floyd Mayweather, has been charged by the SEC for claims that the company was based on fraudulent products and made up biographies. Claiming to offer E-wallets and debit cards that would allow users to transact with cryptocurrencies, the company raised $32MM from their ICO, which the SEC considers an unregistered security sale. Further fraud was uncovered when the SEC found no agreements made with Mastercard or Visa as the company had purported. Read more.

Concluding Thoughts

During this “bear market” it could be argued that there is more regulatory and technical progress than ever. Some of the hype continues around blockchain patents and overbought ICO’s, but mature regulation is forming in South Korea, Thailand and other nations. Beyond this, IBM has taken a leading role in pushing not just blockchain but the tokenization of assets at the governmental and private level. This week, we take a look at how the following trends will continue to impact the crypto economy.

1. Blockchain Overzealousness Still In Full Force

More and more mainstream, high market cap institutions are beginning to come out with patents, products, offerings, or initiatives visibly tying themselves to cryptocurrency/blockchain technologies — regardless of the actual merit behind the project. Telegram’s announcement to the SEC that they’ve already raised over $1.7B as part of their SAFT agreement shows an incredible accrual of capital, though the company aims to raise as much as $2.25B to develop its “Telegram Open Network.” It is hard to argue exactly why a startup would need over two billion dollars in funding to build out a product but this seems to the route Telegram is taking. It’s unlikely that this type of ICO fervency can go on unabated but in the meantime the private capital seems willing to flock into blockchain mania.

A patent filing from Ford outlines an economy that would use what it dubbs as CMMP Coin to create an economy over who can drive faster on a road network as well as facilitate vehicle-to-vehicle communications. Very theoretically, users would be able to pay other vehicles to move out of the way if they were running late for an appointment. Putting aside the technical legal ramifications that would involve the creation of a secondary market around speeding, the notion of human controlled vehicles conflating matters, the idea that all automakers would have to participate — otherwise Mercedes, for example, could sell their cars on the merit that they don’t make you pay to go faster — or the very core structure of vehicle-to-vehicle communications via blockchain technology necessitating extremely rapid (near instant) verification of transactions, patents like these from a company like Ford showcase a newfound willingness, if not eagerness, to be associated with blockchain technology, either as a way to appease shareholders or more optimistically as part of an outlook that increasingly sees the inevitability of the mass proliferation of blockchain technology.

2. Mature Regulation Forming

One of the biggest roadblocks to adoption has been the lack of transparent and clear regulation. Recently the tumult caused by nations considering regulations is believed to have caused prices to drop. In our opinion this was an overly emotional reaction to possible regulation at the G20 level, U.S. hearing on crypto assets, and an abrupt move on the side of South Korea to ban ICOs.

While earlier regulations were abrupt, or the potential regulations being applied were unclear, this week Russia, Thailand, South Korea, Australia and Taiwan all began to solidify the rules. In both Taiwan and Australia, clear AML and KYC guidelines are being put into effect. This will enable exchanges to move forward without fear of legal ramification and encourage mainstream investors that steps are being taken to legitimize the “wild west” atmosphere in crypto markets.

In South Korea and Thailand, tax policies are being put into effect so that mainstream and institutional investors alike have clear guidelines regarding how gains will be taxed. A transparent and agreed upon set of guidelines should encourage new entrants into the market and decrease much of the confusion associated with taxing cryptoassets in these respective countries. In Q3 and Q4 of 2017 South Korea was at the epicenter of cryptocurrency mania. Recent regulations have scared off new investors, but as legislation goes on the books and the industry normalizes, it is likely intrigued investors will return.

3. Central Banks Are Gearing Up For Crypto

According to a recent report, IBM has been working closely with state banks, many of whom are purportedly G20 members, on creating government backed cryptocurrencies. The market making opportunities and economic future proofing endemic to these state backed coins are becoming increasingly clear as governments grapple with the best way to approach cryptocurrencies. Elsewhere, IBM is working with companies on helping them tokenize specific aspects of their businesses, suggesting a future that Abacus has speculated on before of cryptocurrencies becoming the preferred way of raising capital. For certain, IBM’s involvement on projects like these lend an ignorable aura of legitimacy that bears merit.