Welcome to Chain Letter! Great to have you. Here's what's new in the world of blockchains and cryptocurrencies. | | Coinbase to Wall Street: We’ve got your back. As much as $10 billion sitting in hedge funds, family offices, sovereign wealth funds, and other so-called institutional investors is “waiting on the sidelines” to be invested in digital currency, estimates Coinbase CEO Brian Armstrong. What’s holding Wall Street back, says Armstrong, is a lack of “custodians” qualified, in the eyes of financial regulators, to safeguard investors’ assets. Coinbase has an elaborate plan to fill that void and entice all that big money into the game.
According to the US Securities and Exchange Commission (SEC), a qualified custodian must be able to keep an investor’s funds and securities in a separate account for that investor, provide quarterly account statement reports, and submit to random third-party examinations of the account annually. But maintaining secure custody of crypto-assets is a whole other problem. Unlike conventional financial transactions, which for a period of time can be undone in cases of fraud or theft, blockchain transactions can’t be reversed. So if hackers get at them, the damage is permanent.
Coinbase’s solution is to help investment firms safely store the secret cryptographic keys that are needed for controlling crypto-assets. The extraordinarily intricate process is an “evolution of the bank vault,” according to Wired, which recently witnessed the “ceremony” first hand. Among other things, it involves a “pop-up Faraday tent,” a coin-flip, and custom software that creates new encryption keys before splitting them into “multiple encrypted pieces encoded into a series of QR codes,” which are then printed and stored in an undisclosed secure facility. | | Scammy ICOs are still a big problem. The SEC and state-level financial regulators have busted a number of crypto-token sales for alleged fraud, but sketchy initial coin offerings remain pervasive. So pervasive, apparently, that the North American Securities Administrators Association (NASAA)—a collective of 67 state, provincial, and territorial securities regulators in the US, Canada, and Mexico—is now investigating a cool 200 projects for fraud. The investigation, dubbed “Operation Cryptosweep,” was first revealed in May, and at the time there were 70 open cases. It has already led to 46 prosecutions.
Whether certain crypto-tokens should be regulated like stocks and bonds is the subject of debate, and a lack of clear guidance from the SEC has added to the confusion. But that doesn’t mean ICOs have free pass, according to NASAA president Joseph P. Borg. “State and provincial laws or regulations may apply, especially securities laws,” he said in a statement. | | Loose Change Fill your pockets with these newsy tidbits. | | | Finance ministers from the 28 member states of the EU will discuss how to regulate for the cryptocurrency industry next month. (Bloomberg) | | | | Four big cryptocurrency exchanges have teamed up to fund a new stablecoin project called Terra. ( Fortune) +”Stablecoins” are trending, but they may ignore basic economics (TR) | | | | The Associated Press has signed a deal with Civil, a startup trying to use blockchain technology to enforce journalism licensing rights. ( Digiday) | | | | DFINITY, which aims to be an “internet computer” that can compete with Ethereum, has raised $102 million from Andreessen Horowitz and other VC firms in its latest round. ( TechCrunch) | | | | Filecoin, the blockchain-based data storage network that raised more than $200 million in one of 2017’s most high-profile ICOs, plans to officially launch sometime next year. ( CoinDesk) | | | The Money Quote “DNA is the only thing that won't become obsolete. So the way I look at it, this is a trust or 401(k) that you can allocate some of your assets to and keep for a very, very long period of time.” — Vishaal Bhuyan, CEO of Carverr, a startup that has signed up 28 customers for a $1,000 service that stores their cryptocurrency private keys in synthetic DNA, on the theory that other storage methods may not last. (CNET) | | | |
