Bitmain is tumbling from grace. It used to be a crypto-industry icon, a symbol of the meteoric crypto rise of 2017 and early 2018. But the current crypto bear market takes no prisoners. Now Bitmain, the Chinese maker of specialized cryptocurrency mining chips, is feeling the cold wind of the crypto winter, laying off employees and closing facilities all over the world. Late last week, the South China Morning Post reported that co-CEO Jihan Wu and Bitmain's other co-CEO, Micree Zhan, are about to replaced. It feels like the end of an era (albeit a very short one) in which Bitmain seemed destined for crypto world dominance.
Bitmain has had a lot of bad news recently: In early December, it closed a research and development facility in Israel, laying off all 23 employees there. Just a few months prior (when the price of Bitcoin was more than $8,000, compared with around $3,600 today), it had been planning to hire more than 40 people to work there. Later that month, it was reported that Hong Kong financial regulators were reluctant to approve Bitmain's proposed initial public offering due to the lack of cryptocurrency-specific regulations. Last week, Bitmain confirmed that it had suspended operations at a mining facility in Rockdale, Texas, where the company had pledged just in August to invest $500 million over the next seven years and employ 400 people. Yesterday, CoinDesk reported that Bitmain has also closed its Amsterdam office.
But the biggest news is the CEO change, particularly the exit of Wu. His outspoken online persona made him the very public face of Bitmain and he liked to give talks in which he described how Bitmain could help create "private central banks" that run on blockchains. It's not clear exactly why Wu and Zhan are stepping down, but according to the South China Morning Post, the duo "disagreed on certain issues." The report states that Wu and Zhan will "move away from the company's day-to-day business activities but will still make final calls on big decisions." Wu's abrupt exit from the spotlight mirrors that of the whole crypto world, much of which didn't seem to plan for the extreme downturn in coin prices that we are seeing now.
The government shutdown might be making crypto winter even worse. Bakkt, the forthcoming digital asset exchange from the owner of the New York Stock Exchange, can't launch until the government reopens so that regulators can open a 30-day public comment period. That's according to CoinDesk, which has posted a detailed look at how the shutdown is "halting crypto progress on Wall Street." Regulators are not available approve (or disapprove) of much-anticipated crypto-related investment products, like Ethereum futures and Bitcoin ETFs. Vince Molinari, co-founder of the trading platform Templum, told CoinDesk that the US Securities Exchange Commission is likely to delay initiatives seen as important for Wall Street's continued adoption of the technology. These include a much-anticipated guidance on custody and the secure storage of crypto-assets. "I think the entire space gets pushed back," he said.
Can crypto buck historical currency trends? In a new working paper from the National Bureau of Economics, economic historian Barry Eichengreen writes that throughout history there has been "a tendency for political jurisdictions and residence to converge on a single currency." Besides a monopoly over the mint being a source of political power, it can also facilitate economic activity, he says, since there is no need to expend resources keeping track of the creditworthiness of every currency issuer. But he asks: "Will digital currencies now reverse this trend toward uniformity, given the apparent ease with which they can be created?" Eichengreen is doubtful; he says most are too volatile to serve the "core functions of money," and he doubts that so-called stablecoins, which are supposed to bridge the gap, can both scale and maintain their stability.
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Loose Change
Fill your pockets with these newsy tidbits.
- China's main internet regulator has approved strict new regulations on "blockchain information service providers." Among other things, the rules require entities to collect users' real names and national ID numbers or telephone numbers and allow government officials to access that data. (TR)
- More than half of South Korean crypto exchanges have failed a government security audit. (CoinDesk)
- A new startup called Veil aims to build build a more intuitive and easy-to-master user experience for the Ethereum-based prediction market Augur. (The Block)
- HSBC, one of the largest banks in the world, says it settled $250 billion worth of foreign exchange trades using distributed ledger technology in 2018. (Reuters)
- Japanese crypto exchange Coincheck, which lost $534 million worth of cryptocurrency to hackers last January, has finally been approved by regulators to operate as a licensed exchange. (Finance Magnates)
- Note: In the last issue of Chain Letter, I mistakenly said that Gemini, the exchange owned by the Winklevoss twins, attained a BitLicence in 2015 to operate as a cryptocurrency company in New York. In fact, that year it attained a Trust License, a broader approval in New York state that is not crypto-specific.
