The week in review: MicroStrategy’s $550m bet on Bitcoin
It was another week of institutional investment for bitcoin, with MicroStrategy coming back for more and insurance giant Mass Mutual joining the party. Elsewhere, Circle’s CEO has sent the US Treasury a warning that it could lose out to China if the government doesn’t take the right regulatory action.
Here’s what happened this week in crypto.
Mass Mutual joins the party and MicroStrategy goes wild
Massachusetts Mutual Life Insurance Co. has purchased $100 million in Bitcoin for its general investment fund, representing 0.04% of its general investment account of nearly $235 billion as of 30 September.
Spokeswoman Chelsea Haraty explained in an email that: “We see this initial investment as a first step, and like any investment, may explore future opportunities.”
MassMutual, which has been around since 1851, is just the latest company to invest in crypto. MicroStrategy arguably kickstarted the trend earlier this year, but took it to the next level earlier this week. On Monday, the business intelligence firm revealed plans to raise $400m through a convertible senior notes offering to fund more bitcoin allocations. On Wednesday it announced it would be boosting the notes offering to $550m, a significant increase from the original $400m. This would be funded through the sale of $550m of the debt instruments.
In a press release, it said it would “invest the net proceeds from the sale in bitcoin in according with its Treasury Reserve”. It explained that only “qualified institutional buyers” would be able to purchase the interest-bearing notes that are set to mature in December 2025.
MicroStrategy now holds around 40,824 BTC in total.
DBS bank’s digital exchange set to start trading crypto
DBS Bank of Singapore has officially announced the arrival of its digital asset exchange and said trading could start as early as next week. Singapore’s SGX stock exchange owns 10% of the exchange and is set to provide the tokenisation of securities and other assets, as well as bank-grade custody for digital assets.
DBS Group CEO Piyush Gupta said the new exchange will enable spot exchanges from fiat to crypto, and vice versa. Four fiat currencies – SGD, USD, HKD and JPY – will be tradable against BTC, ETH, BCH and XRP. He also mentioned the exchange would only be open to institutional clients and accredited investors.
The security token offering will be made up of a regulated platform the issuance and trading of digital tokens backed by financial assets, like shares in unlisted companies, bonds and private equity funds. While the custody part will be managed by cold storage leveraging all existing cybersecurity tech at the bank.
France implements strict KYC requirements for crypto
The French Ministry of Finance has revealed its rigorous know-your-customer (KYC) requirements for crypto transactions. Minister Bruno Le Maire this week released a new document indicating virtual asset providers (VASPs) in France will now have to prohibit anonymous crypto accounts.
These stricter KYC standards are part of a broader plan to rid the space of anonymity, meaning even crypto-to-crypto transactions would need to adhere by them. The announcement referenced recommendations from the Financial Action Task Force (FATF), the G7 and the G29 to substantiate the decision.
The new rules could be related to recent terrorist attacks in France, some have argued. In September this year, French authorities arrested almost 30 people on allegations they used crypto to fund Islamist extremism in Syria.
Paxos applies for national bank charter
Stablecoin provider and digital asset company Paxos has applied for a US national trust bank charter with the Office of the Comptroller of the Currency (OCC).
If all goes to plan, it would be “the first custodian of digital assets to be regulated at both the state and federal levels”, according to Paxos’ General Counsel Dan Burstein. He also noted the firm is regulated as a trust company in New York.
In its OCC filing, Paxos said it will initially “conduct only certain activities that are currently conducted by Paxos’s New York state-chartered trust company and supervised by the [New York Department of Financial Services].”
Interestingly, the filing doesn’t mention its ties to PayPal. In October, PayPal commissioned Paxos Crypto Brokerage to provide crypto trading and custody services for BTC, BCH, ETH and LTC within the PayPal app.
Looking to join Avanti Financial and Kraken Financial, BitPay and Anchorage also recently applied for federal banking charters. Acting Comptroller of the Currency Brian Brooks, a former Coinbase exec, said: “If we have crypto banks, which I think we will very shortly, I think it is in their interest they will have to comply with one set of rules nationwide, that’s the way markets grow.”
Circle CEO warns against a stifling regulatory approach
Circle CEO Jeremy Allaire sent a letter to senior staff at the US Treasury Department yesterday, calling for expedited regulation of cryptocurrencies and blockchain protocols in the country and predicting that a slow response could stifle growth and innovation.
1/2 Earlier today I sent this letter to the Senior Staff of the US Treasury Department. This is a critical moment for the crypto and digital currency industry. The US govt may be putting a massive transformation at risk. @stevenmnuchin1 @USTreasury https://t.co/fGdv0kgvw2
— Jeremy Allaire (@jerallaire) December 10, 2020
He said the current crypto market reminded him of his experience in the internet space in the early ‘90s. He wrote: “It’s 1996 all over again, and this time we are on the brink of dramatic breakthroughs on how value exchange and economic activity can be organized and executed around the world, built upon the fundamental innovation of the public blockchain network.”
Allaire also mentioned that USDC’s rise was a testament to the fact an open financial system was possible and could transform global markets with the right regulations. Referencing the rumours of self-hosted crypto wallets, he said such regulations could have an adverse effect on the market’s growth and the ability to remain relevant against superpowers like China.
Last week we heard rumors that the U.S. Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I’m concerned that this would have unintended side effects, and wanted to share those concerns.
— Brian Armstrong (@brian_armstrong) November 25, 2020
He instead suggested the use of blockchain-based identity protocols that he claimed provides more accountability than traditional banks. He also recommended the implementation of strict KYC checks to ensure compliance.