BitGo: Crypto Water Cooler — Nov 20
GM. It’s Wednesday, November 20.?
Newsmakers
?Buoyed by U.S. election results returning a pro-crypto Republican President, Senate and, likely, House, the crypto industry is now busy revising its wish lists for the incoming government. Here’s what it will take for those wishes to come true.
?Replacing SEC chair Gary Gensler is at the top of the list, and likely to happen soon along with appointments of crypto-friendly leaders in a range of governmental roles, including a new crypto advisory council. The industry was also pushing for waivers to exempt crypto firms from certain SEC requirements they deemed inapplicable. However, waivers must be crafted carefully. Now, many want no-action letters that would be faster and let them to operate with broader freedom from government reprisal.?
?Trump also promised not to “choke” crypto firms out of the banking system. Law firm Davis Polk lists seven areas where bank regulators should revisit previous decisions with an eye to allowing more participation in crypto if risks can be effectively mitigated. Others in the industry want faster action and are pushing for an executive order that will require banks to give crypto firms access to services.?
?As for legislation, the hope is that, if Republicans secure the House, some of it could be accomplished through the reconciliation process, requiring a simple majority vote. Cristiano Ventricelli, vice president for digital assets at Moody's Ratings, cautions otherwise: “While Republicans may eventually control both the House and Senate, digital assets legislation will require bipartisan support, cannot be achieved through budget reconciliation."
?The good news is that legislators aren’t starting from scratch. Many bills have already been discussed, and could be reintroduced to the new Congress relatively quickly. They include three different stablecoin bills; a market structure bill; and the Bitcoin Act of 2024 , which could deliver the wished for strategic Bitcoin reserve.?
?One wish that may be harder to grant: the dismissal of all ongoing enforcement actions against crypto firms. On the one hand, new rules could render many cases moot. On the other hand, there’s no telling when those will take effect and what they’ll be. Lawyers at Davis Wright Tremaine suggest case by case stays of action pending the outcome of legislative efforts. While they admit it’s a long shot, it’s worth wishing for.
?Read more →Reuters ($) ?
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Polymarket Raid Highlights VPN Use in Crypto
?Last week, the FBI raided the home of Polymarket founder and CEO Shayne Coplan. No reason for the raid was given, and no charges have been filed. However, according to various sources the Department of Justice is investigating whether Polymarket violated terms of its 2022 settlement with the CTFC requiring it to ban U.S. users.?
?Polymarket’s terms of service state that U.S. bettors may not use virtual private networks (VPNs) to circumvent the ban, but there are plenty of step-by-step guides explaining how to do exactly that. As one such guide explains, Polymarket is “not as restrictive as other online gambling apps like DraftKings and FanDuel, which run extensive KYC and location checks to make sure you’re in a legal betting state. A simple VPN will get you around the geo-restriction on Polymarket.”?
?It appears at least some people have followed the advice; Bloomberg ($) in July interviewed a number of U.S. bettors who shared details of their interactions with the platform. If true, this could complicate Polymarket’s effort to re-enter the U.S. market.?
?On a larger scale, the raid highlights the challenges of complying with such regulations in a global environment. First, there’s what Attorney David Ackerman calls the “common misconception” that “you need to domicile in the country in order for their laws to apply.” Then there’s the difficulty of thwarting VPN workarounds, which requires platforms to implement know-your-customer best practices and take extra steps to verify users’ locations. That increases costs and adds friction to the customer experience.?
?For these reasons, looking the other way about VPN use is not uncommon in some corners of the industry. For example, earlier this year, The Wall Street Journal ($) reported that, despite being officially banned in China since 2021, crypto trading remains widespread in large part due to VPN use. But if regulators have their way, visitors to Polymarket and other sites may see a message like this one on DraftKings: “If you have a proxy, virtual private network (VPN), or remote desktop program (RDP) running on your device, you won’t pass the geolocation checks necessary to use DraftKings,” which is followed by instructions for disabling them.
?Read more →CoinDesk?
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Tokenized Treasurys Garner Interest From Institutions, U.S. Treasury?
?Tokenized financial assets have grown and matured in 2024. That includes tokenized U.S. Treasury bills where recent developments include BlackRock expanding its USD Institutional Digital Liquidity Fund (BUIDL) from Ethereum to Aptos, Arbitrum, Avalanche, Optimism, and Polygon and the U.S. Treasury’s Borrowing Advisory Committee (TBAC) discussing uses for tokenized Treasurys at a recent meeting .?
?With approximately $2B of tokenized Treasurys currently on public blockchains, the market is still nascent. But the benefits from improved clearing, settlement, and collateral management have attracted interest from Mastercard, Visa, Citigroup and J.P. Morgan, all of which are experimenting with settlement via tokenization. For institutions constantly moving millions and billions of dollars in and out of Treasurys, even small improvements in those areas can greatly increase capital efficiency.
?BlackRock is one of the furthest along. Initially launched in March 2024 and regulated by the SEC, BUIDL currently has a market capitalization of ~$518MM. Shares are pegged to the dollar and pay daily tokenized dividends to investors’ wallets. The minimum investment is $5MM. (Full disclosure: BitGo is one of several firms that secures BUIDL assets).?
?TBAC, meanwhile, sees potential for tokenization to transform intraday-repos, ultra short term loans—sometimes just an hour or two—that institutions use to smooth out liquidity gaps. Since traditional financial infrastructure relies on batch processing, settlement of these transactions currently occurs once a day, making them unfeasible for many players. Blockchain technology can facilitate transactions within minutes, providing 24/7 liquidity at a lower cost than overnight funding. Financial services firm Broadridge has already processed well over $1T of such transactions for banks such as UBS and Societe Generale.?
?Read more →Ledger Insights
News In Brief
Business of Crypto
Regulation and Security
DeFi and Web3?
Midweek Market Pulse
Total Market Cap: $3.10T – 7-day change as of Tuesday 11/19/24 12 PM EST: +6.5%
The crypto market continued its torrid November performance, climbing 6.5% over the past week to $3.1T—a remarkable run considering that the total crypto market cap dipped below $2T as recently as September.?
?Bitcoin (BTC, +6.3%) led the charge, smashing previous all-time highs and holding above the $90K level. It is now the world’s seventh-largest asset , surpassing silver and Saudi Aramco, Saudi Arabia’s state-owned oil company. MicroStrategy made its largest Bitcoin purchase ever , buying 51,780 BTC for $4.6B, helping to offset two days of significant outflows from Bitcoin ETFs at the end of last week.?
?Ethereum (ETH, -4.4%) dropped off the pace as the Ethereum Foundation sold 100 ETH to fund projects in the Ethereum ecosystem, bringing its total sales for the year to 4,266+ ETH—about $13.3MM at current prices. While this isn't a large sum, the sales have become a bone of contention with some investors.?
Solana (SOL, +14.2%) continued rising, reapproaching its all-time high of $260 from November 2021. Solana is now listed on Robinhood , making it available to the popular brokerage’s 24.4MM funded customers . Robinhood also added XRP (XRP, +60.3%) and Cardano (ADA, +28.1%) to the platform, bringing the total number of cryptocurrencies available for trading to nineteen.?
The Last Word
Repos
?: Industry parlance for repurchase agreements, a form of short-term borrowing for dealers in government securities
/ Repos are contracts to sell securities and buy them back at a slightly higher price, within a short window.
About BitGo
BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.
Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.
Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.
BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.
Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 700 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.
For more information, please visit www.bitgo.com .
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