Genesis Trading Acquires Quant Investment Firm Qu Capital

Digital currency trader and lender Genesis expanded its trading and research capabilities Thursday by acquiring New York-based quantitative investment firm Qu Capital.

In an interview with CoinDesk, Genesis CEO Michael Moro said Qu Capital initially approached his company to use its trading and lending services early this year. Genesis then decided to acquire Qu Capital to integrate its in-house team and expand its trading and lending businesses.

Moro declined to disclose financial terms of the deal.

Some of the technologies in use by Qu Capital are needed by Genesis to build its internal team, according to Moro. For example, one of the patented products acquired is a smart order routing system to facilitate transactions between cryptocurrency exchanges and investors.

Upon the acquisition, Genesis has hired two of the three founders Lucas Schuermann, Edward Yu and one junior staff member out of the six-person team at Qu Capital.

“We have been very impressed with the Qu Capital team and believe they will provide key technology enhancements that will benefit our trading and lending clients,” Moro said.

Genesis struck its first acquisition deal as its crypto-related lending business saw $746 million in loans in the second quarter, increasing its total originations to $2.3 billion since its launch in March 2018. The company provides high-net-worth individuals and institutional investors with over-the-counter digital currency trading and leading services,.

Investment startup Qu Capital, founded in 2017, develop trading technology, including exchange connectivity, order routing, and execution tools.

“We are excited to add the Qu Capital tools, which incorporate machine learning and other advanced methodologies, into our existing technology stack and new product offerings,” Pat DeFrancesco, CTO of Genesis, said in a statement announcing the acquisition.

Genesis CEO Michael Moro via Flickr

SEC Chair, Commissioners to Talk Crypto at US Congress Hearing Next Week

The U.S. House Financial Services Committee plans to question the Securities and Exchange Commission (SEC) about cryptocurrencies and Facebook’s Libra project next week, among a host of other topics.

According to a calendar notice on the House of Representatives’ website, the committee will hold a one-panel hearing with SEC Chairman Jay Clayton, as well as Commissioners Robert Jackson, Elad Roisman, Allison Lee and “Crypto Mom” Hester Pierce on Sept. 24 in the Rayburn House Office Building.

The hearing will cover the SEC‘s actions around the cryptocurrency space, as well as private markets vs. public markets; public company disclosures; enforcement; and fiduciary responsibilities.

While the notice does not specify which areas the committee might focus on, it does note that the SEC published its analysis of whether a token is an investment contract using the three prongs of the Howey test, and it includes a general definition of exchange-traded funds (ETFs).

“Exchange-Traded Funds (ETFs) are a type of investment company, which can be redeemed by the fund like mutual funds, but also allow investors to trade throughout the day on an exchange at market prices,” the notice reads, adding:

“If an asset is an investment company and not exempt from registration, it must comply with regulations designed to minimize conflicts of interest, including regular disclosure of their financial condition and investment policies to investors.”

The SEC is currently reviewing two bitcoin ETF proposals, filed by Bitwise Asset Management and Wilshire Phoenix (a third ETF proposal by VanEck and SolidX was withdrawn earlier this week).

Libra concerns

The notice also addresses Facebook‘s Libra crypto project, which was first announced in June 2019. Libra, as envisioned, would act as a stablecoin backed by a basket of global currencies, which currently includes the U.S. dollar, euro, Japanese yen, British pound and Singapore dollar.

The cryptocurrency will be overseen by a governing council of 100 members, of which 28 have already signed tentative agreements to join (it is worth noting that Facebook and its subsidiary Calibra are two of the members). The Libra Association will be based in Geneva, Switzerland, though Financial Services Committee Chair Maxine Waters (D-Calif.) has expressed unease with this plan.

Thursday’s notice hints at possible securities implications for Libra’s companion token, which would be distributed to members of the association, writing:

“The Libra Investment Token could amount to a security since it is intended to be sold to investors to fund startup costs and would provide them with dividends. The Libra token itself may also be a security, but Facebook does not intend to pay dividends and it is unclear if investors would have a ‘reasonable expectation of profits.’ However, the offer of Libra could be integrated into the offering of the Libra Investment Token, thereby deeming both securities.”

“Like ETFs, Libra would be redeemable by certain authorized resellers and bought and sold in the open market,” the notice concluded.

The House Financial Services Committee held a hearing specifically about Libra in July, a day after the Senate Banking Committee held its own. At the time, lawmakers questioned Facebook blockchain lead and Calibra CEO David Marcus about how the project would operate and whether it would impact the U.S. or global economies, among other areas of concern.

Maxine Waters image via House Financial Services Committee hearing

Game Maker Electronic Arts Trolls Crypto Twitter

A brand account bested crypto Twitter at its own game today, trolling the space with a misleading instructions to go all-in on cryptocurrency.

Earlier this afternoon, the Electronic Arts twitter account tweeted out “invest in Crypto,” seemingly unprompted. The tweet had over 10,000 favorites and 4,000 retweets and many Twitter users suggested the account had been hacked.

Known for sports action games like Madden and FIFA, the tweet was actually a marketing stunt aimed at introducing a new character in its game, Apex Legends Season 3: Meltdown! coming out this October. The new character is named ‘Crypto,’ in this case referring to traditional cryptography and not Satoshi white papers.

In an apparent conversation with itself, the @EAAccess account asked back “Brother, why do you do this? You will disappoint father” to which it @EA answered “He’s used to it.”

Sadly, cryptocurrency fans–not “father”–ended up being the ones disappointed.

Crypto image via EA.com

Coinbase Considering Listing Telegram and Polkadot Cryptocurrencies Among Others

Coinbase has announced the possible addition of 17 new cryptocurrencies to its current line up.

According to a blog post from the exchange, Coinbase is exploring the addition of avalanche, celo, chia, coda, dfinity, filecoin, handshake, kadena, mobilecoin, NEAR, nervos, oasis, orchid, polkadot, solana, spacemesh, and telegram.

Some of those coins, including telegram, are not yet live.

As of now, Coinbase’s non-pro exchange lists bitcoin, bitcoin cash, ethereum, ethereum classic, USD coin, XRP, stellar, zcash, 0x, litecoin, and the basic attention token.

Earlier this week, cryptocurrency dash was added to Coinbase Pro following an investigative period.

Coinbase revised its listing criteria a year ago, stating “listing announcements will become more frequent.” The 17 new cryptos follow up on eight considerations from last month. Of the eight, only two—algorand and dash—were added to Coinbase Pro.

Even if added, cryptocurrency listings are dependent on jurisdictional compliance.

Coinbase image via Shutterstock

Loom Network Is Bringing DeFi to Tron, Binance Chains

MakerDAO’s Dai stablecoin will be implemented on the tron and binance chains in the near future through Loom Network, a Layer 2 scaling solution for the ethereum blockchain, according to a company blog posting today.

As an ERC-20 token, Dai is part of the ethereum blockchain. As the largest DeFi token with over $337 million locked away in contracts according to DeFi Pulse, Loom believes moving Dai onto other chains will help grow the token.

Speaking with CoinDesk, Loom Network CEO and co-founder Matthew Campbell said interoperability with other chains has been a key vision for the Network.

“With interchain asset transfers, we open up some completely new possibilities for things like multichain DeFi,” Campbell said. “As Maker is the clear leader in the space, it made perfect sense to team up and make multichain Dai a reality. This will be a massive step forward in bringing Dai to even more users and developers, and proving out what’s possible with cross-chain assets,” he continued.

Dai will first join the tron blockchain following a testing period. The token will join stablecoin tether on the tron network, which is also hosted on the bitcoin and ethereum blockchains. Loom believes the addition of Dai to tron could spur the development of other DeFi protocols on that protocol.

Binance Chain will also have Dai ported over through Loom, although the timing was not disclosed. Other blockchains Loom plans to build Dai into have not been disclosed either.

Describing the tech, Loom says their network will operate as a Layer 1 ‘transit hub,’ shuffling funds between different protocols such as etherum, tron, or binance. Transfers between chains will be secured through multi-signature validations on the Loom Network which require three-quarters plus one of all Loom validators before transactions can be signed off.

“The idea is that one day soon, a user can pay for a product using Dai regardless of what app, wallet, or chain they are using,” the company finished.

Dai image via CoinDesk archives

Iranian Government Proposes Annual License for Bitcoin and Crypto Miners

CoinDesk has acquired documents detailing a draft proposal for new cryptocurrency mining regulations in Iran, which sources in Tehran say is well on its way toward official approval.

Based on the translated proposal from the Cabinet of Iran, licensed and registered cryptocurrency miners will be required to submit information such as their list of business activities, the predicted value of their investments, current employment status, rental agreements for the space itself, the value of their mining equipment and the duration of the mining project. The license will need to be renewed every year.

Stepping back, the Iranian mining industry has grown dramatically over the past two years, thanks in part to state-subsidized electricity. For example, just one Persian Telegram group for local miners has 3,424 members. Based on a survey of more than 1,600 Iranian crypto users by the market analytics firm Gate Trade, 35 percent of respondents earned income through mining and 70 percent were interested in learning more about local mining businesses. One anonymous source in Tehran told CoinDesk that most miners he knows are “under the radar” and import equipment through the black market, without paying taxes.

As such, the Central Bank of Iran finally recognized the grassroots industry and promised a lawful licensing procedure in July 2019. This pending proposal was approved by Reza Rahmani, Iran’s Minister of Industry, Mine and Trade. The Iranian mining licenses would only apply to miners with equipment that requires 30 kilowatts, which might exclude homemade mining equipment or small operations.

However, another source in Tehran, an avid bitcoiner, told CoinDesk he supports this move because it could create the foundations for a sustainable mining industry in the country. For example, if too many miners in a single district apply, the authorities could encourage miners to distribute their operations across the region.

“It’s obvious that the power industry here in Iran, it’s not a private business, it’s from the government,” the second anonymous source said. “They need to figure out how to balance mining [operations] so that they wouldn’t harm the power grid. If there’s a constant, a continuous consumption of electricity you can also make new power plants or assign power plants to this.”

On the other hand, he still doesn’t believe this legislation will completely curtail the flood of hobbyist miners joining the bitcoin community.

“There will be a lot of underground mining operations,” he said. “I predict that this will happen, that the power grid will take a hit from the abundance of people who will do mining in their homes.”

A third source in Tehran told CoinDesk he expects Iran to become one of the world’s biggest players in the bitcoin mining sector over the next year.

Bitcoin miner image via Shutterstock

Chinese Crypto Czar: Facebook-Led Libra ‘Might Be Unstoppable’

China’s cryptocurrency czar believes that while the world powers do not welcome Facebook’s Libra, the stablecoin’s advance might now be unstoppable.

A few days before Changchuan Mu, the new director of China’s Research Institute on Digital Currency, officially assumed his role on Sept. 6, an online education platform released six lectures by the crypto chief.

In the series, Mu answers a range of crypto questions, from Libra’s technical features, to its potential integration with the international currency system, while touting the advantages of China’s own digital currency compared to Libra.

“No one would say welcome to Libra, but it might be unstoppable anyways,” Mu said in the third lecture of the series. “It is very unlikely that one can totally stop people from buying Libra despite rigorous regulations.”

Mu explained that the most a central bank could do to prevent Libra from entering a country would be to ask all their payment institutions and commercial banks not to process any transactions related to Libra.

However, there are still a few back channels through which users could circumvent the ban to purchase Libra, he said, citing underground Bitcoin trading in China as an example of how it could work.

Although China’s exchanges have blocked bitcoin transactions and payment institutions and commercial banks are prohibited from processing any bitcoin transactions, there are still some agencies that use virtual private networks (VPNs) to buy bitcoin from foreign exchanges, according to Mu.

The situation applies to Libra as well. “Even if Facebook is blocked in China, people will use indirect ways to purchase it from abroad once Libra comes out,” Mu said.

But he thought that there was only one possibility to stop Libra: “If the U.S. bans Libra legally, then Libra will certainly be stopped.”

As long as the U.S. does not put a legal ban on Libra, and other central banks loosen regulations over time, it is highly likely that Libra will become a dominant international currency, Mu said.

There are a few extreme cases where a country fully embraces Libra, Mu said, noting Zimbabwe — with rampant inflation — announced last year that it welcomes any alternative currencies.

A Fight Over Monetary Sovereignty

If one of the foundations for monetary policy is that the central bank is able to control supply and demand of its local currency by adjusting the interest rate, Libra would be a destabilizing force, Mu argued.

If an effective monetary policy is crucial for a country’s economy from fighting a trade war to enforcing recession rescue plan, Libra would chip away that power, he said.

“If we allow Libra come to the market, we would open the underground economic channels,” Mu said. “It will be hard for China to manage foreign currencies and the $50,000 capital outflow cap would be less effective,” Mu said.

Controlling capital flows and preventing money laundering were the “deeper reasons” behind the Chinese crackdown on initial coin offerings in 2017, he said. Mu said about 15% of international payments last year were encrypted assets, citing a survey from blockchain company Clovr, although CoinDesk was unable to locate that report.

Mu said Thailand and Vietnam would lose control over their monetary and interest rate policies because of their weak currencies, while Libra could also inflate local currency as people tend to buy cryptocurrency with local fiat, resulting in inflation and the devaluation of assets denominated by local currencies.

Repair The Roof Before A Rainy Day

Earlier this year, China announced plans to launch the DCEP — the Digital Currency Electronic Payment — as a domestic stablecoin rival in the Libra model.

While Mu pointed out that DCEP will not be a copy of Libra, the central bank has compared DCEP with Libra in its statements and in how the coin would be used by consumers.

China’s national digital currency plan would be fully-backed by the central government and pegged one-to-one to the Chinese renminbi.

“One of the goals for DCEP is to replace cash,” Mu said. Since the DCEP is not tied to a bank account, the currency can enable users to have anonymous transactions, which would give the same advantage as Libra in terms of digital payment.

While there is a possibility that Facebook could track you down if you use Libra, the same would be true for the DCEP, according to Mu.

“The new digital currency will spot certain behavioral patterns using big data and identify the users,” Mu said, noting the technology can “help the government crackdown on money laundering, tax evasion and financing terrorist groups.”

“We need to defend our monetary sovereignty and currency, repair the roof before a rainy day,” Mu said.

Square Crypto Hires Lightning, Libra Developers for ‘Bitcoin Dream Team’

Square Crypto, the division of the publicly traded payments company that focuses exclusively on bitcoin, just announced three new hires to work on open source projects.

Among them is Facebook and BitGo alum Arik Sosman, most recently a member of the social media giant’s Calibra subsidiary. He told CoinDesk:

“My personal areas of interest are privacy and [Layer 2] scalability, though we’ll see what the team ultimately ends up working on. … I’m extremely excited and grateful for the opportunity to join this amazing team, and to focus on contributing to the most important cryptocurrency and ecosystem.”

The other two notable hires, Lightning Labs alum Valentine Wallace and Google alum Jeffrey Czyz, are joining to help “grow the FOSS [free and open software] developer base,” according to company tweets.

Square Crypto is still hiring as well, looking for a designer to join the team led by former Google product director Steve Lee.

“Software engineering is far from the only realm people can make contributions to open-source projects in,” Sosman said. “Steve himself being a product manager is but one example.”

According to another company tweet Thursday, Square Crypto is still “deciding what our first project will be,” adding:

“There’s no project we won’t consider, as long as it improves or proliferates bitcoin.”

Jack Dorsey image via CoinDesk archives

SEC Chair Clayton: Bitcoin Needs ‘Better Regulation’ Before Major Exchange Listing

Better regulation is needed around bitcoin markets before they can be traded on major exchanges, the head of the U.S. Securities and Exchange Commission said on Thursday.

Speaking at CNBC’s Delivering Alpha conference, SEC Chairman Jay Clayton said investors are “sorely mistaken” if they think bitcoin and other cryptocurrencies undergo the same price discovery practices as products on top exchanges like the Nasdaq or New York Stock Exchange.

“We have to get to a place, in my view — just speaking for myself — we have to get to a place that we can be confident that trading is better regulated.”

Clayton said price reports do not indicate thorough price discovery, as he claims major exchanges perform for other financial products. Investor protections built into major exchanges, he continued, are needed in crypto markets before they can be added.

Clayton’s crypto message follows remarks made earlier this month concerning a bitcoin exchange-traded fund (ETF). Clayton claimed there is “work left to be done,” although “progress is being made.”

The financial regulator is nearing deadlines for approving or rejecting bitcoin ETFs from Wilshire Pheonix and Bitwise Asset Management.

A third bitcoin ETF applications, Cboe BZX Exchange VanEck/SolidX bitcoin ETC, was withdrawn earlier this week as an October 18 deadline loomed and approval seemed unlikely.

Jay Clayton image via CoinDesk archives

Lightning Wallet Zap Launches in-App OTC Desk for Bitcoin Buyers

Wallet developer Jack Mallers, the founder of Zap Solutions, wants to improve the Lightning Network’s user experience.

To achieve that goal, Zap is launching a dollar-denominated bitcoin buying feature inside its lightning-friendly mobile and desktop wallet. Zap is kicking off the feature with an invitation-only beta release in late September.

“We’ve architected the [wallet] codebase so that we can release a version that doesn’t include know-your-customer information,” Mallers told CoinDesk. “The KYC stuff is only pulled in when you want to buy or sell bitcoin. You download [Zap], link it to your debit card. KYC is just email, name and address. Then buy bitcoin, sent to you via lightning, that’s almost instantly spendable.”

To be clear, this feature isn’t mandatory and anonymous users will still be able to connect the wallet to their own remote nodes via Tor. But for prospective buyers, Mallers managed to make this option without becoming an exchange by operating a backend over-the-counter desk that buys the bitcoin from exchanges on wallet users’ behalf and then places it directly to the users’ personal custody.

“Zap acts as a gateway, it can absorb the order and execute on any of the exchanges,” Mallers said, referring to both the system and open-source code. “If anyone comes up with a cooler wallet they should be able to follow this regulatory framework. … It should be trivial to copy and paste what I did into their own wallet.”

Mallers said he is currently applying for a money services business license in each state and planning to go global in 2020.

“Our licensing allows us to serve any user group between small consumer orders to large institutional orders,” he added.

Beyond the American market, a Palestinian bitcoin user in Ramallah, who asked to remain anonymous, told CoinDesk that he is currently translating Arabic tutorials for the wallet.

“The banking system is trash over here. You can’t open a bank account unless you already have a job,” the Palestinian Zap user said. “Also, if you deposit or receive more than $4,000, you get a call from the authorities asking you to explain why. I have a sister over in the U.S. and I want to send her $100 for the holidays but it costs $20 with MoneyGram.”

Like most Palestinian users, this Zap contributor can’t use traditional exchanges because such platforms don’t work with Palestinian banks. He said it’s hard to use decentralized exchanges, or DEXs, and grassroots networks because the West Bank’s bitcoin market liquidity is so limited that traders can charge high premiums.

“Zap and lightning will help us save on bitcoin fees,” he added, speaking about the wallet’s “huge” utility for Palestinians

Future growth

Future initiatives for Zap include efforts to expand functionality even further.

Mallers said that Zap is working with the payment processor BTCPay Server to eventually allow merchants indirectly to convert bitcoin payments to other currencies if they choose.

“One of the biggest issues with Lightning is there is nowhere to use it,” Mallers said. “Zap has many merchant partnerships in the pipeline that will be announced as we roll out.”

The anonymous Ramallah-based Zap user said that any online merchants could be a boon for Palestinian users.

“Every day I see people line up for someone with a credit card from Israeli banks to shop because most sites don’t accept Palestinian cards,” he said. “[With bitcoin] they don’t have to deal with Palestinian banks with bad customer service, and also can avoid censorship by the Israelis.”

Going global with merchant support will take time. Since the hassle of opening lightning channels is often a hurdle for bitcoin newcomers, the Zap support team will manage channels for now.

To accommodate that ambitious plan, Mallers is expanding his self-funded startup from a staff of five to roughly a dozen people by the end of 2019. Plus, Zap is partnering with industry incumbents like the financial services firm CMT Digital, in order to tackle both legal and technical hurdles.

CMT Digital CEO Colleen Sullivan told CoinDesk:

“CMT Digital and Zap are cooperating to determine the fiat on-ramps for the Zap wallet. We believe that making the purchase of bitcoin easily and instantly accessible directly through the Zap wallet will help accelerate growth of the Lightning Network. This will, in turn, help with scalability of the Bitcoin protocol by allowing for additional capabilities and use cases.”

Zap is hardly the only company that allows users to purchase bitcoin using the lighting network. For example, the lightning-centric exchange startup Sparkswap facilitates such purchases with self-custody via its desktop app.

Zap, however, does have a unique business model that doesn’t rely on transaction fees for retail users. In part, this is made possible by support from Mallers’ parents, Bill and Brooke, the legendary “Bitcoin Mom” who runs a bitcoin-friendly cannabis dispensary in Colorado. As such, Zap won’t need to prioritize transaction fees for retail users, or other standard monetization ploys, any time soon.

“As a family, we are extremely proud to bring the first regulated fiat-to-lightning ramps to bitcoin,” Mallers said.

Brady Dale contributed reporting.

Image: Jack Mallers speaks at Bitcoin 2019 in San Francisco, via Jack Mallers