Crypto Global
By Hannah MillerWelcome Back!
The price of bitcoin passed $57,000 for the first time since May, lifting it closer to its record high above $65,000 reached in April. Over the last week, prices have rallied on buzz that the Securities and Exchange Commission was getting closer to approving an exchange-traded fund holding bitcoin futures and comments from the heads of the Securities Exchange Commission and Federal Reserve that they won’t ban crypto.
Bitcoin’s rise could attract new retail investors, a potential boon for startups like MoonPay, which allows people to use credit cards to directly buy cryptocurrencies and non-fungible tokens (NFTs) from marketplaces such as Bitcoin.com and OpenSea. The company is raising $500 million, its first round of venture capital, at a $3.4 billion valuation, from investors co-led by Tiger Global Management and Coatue Management, my colleague Kate Clark reported Monday.
The service tries to smooth a bottleneck for retail customers: In order to trade bitcoin or buy a cool art NFT, people often need to convert U.S. dollars into crypto first. While exchanges such as Coinbase and Robinhood can swap cash for crypto, these connect to debit card or bank accounts. MoonPay lets people pay with credit.
Given the ubiquity of credit cards, services like MoonPay could draw in more buyers of digital currencies and related assets like NFTs. But buying crypto on credit amps up the risk for consumers. In fact, some credit card issuers—including Chase, Capital One, American Express and Citi—consider a crypto purchase to be a cash advance, which can mean additional fees and higher interest rates on the purchase, such as a 25% APR.
The ability to buy crypto on credit could also contribute to this market’s already speculative nature. That’s something regulators are sure to notice.
DORSEY TAKES AIM AT DIMON
The CEOs of Twitter and Coinbase had a few choice words for JPMorgan Chase CEO Jamie Dimon, a long-time crypto skeptic, after he called bitcoin “worthless” and questioned whether the algorithms behind the cryptocurrency would actually keep the supply capped at 21 million.
“I personally think that Jaime [sic] Dimon is worth more to Bitcoin…” Twitter CEO and bitcoin cheerleader Jack Dorsey tweeted Monday.
Coinbase CEO Brian Armstrong went further, implying Dimon just didn’t get it how bitcoin worked. “CEOs without a science/engineering background are going to be at a disadvantage in the coming decades I think,” tweeted Armstrong. He said he read and understood the code behind bitcoin.
For his part, Dimon noted these views weren’t necessarily shared by JPMorgan’s customers, who have access to the bank’s crypto products.
“Our clients are adults, they disagree, that’s what makes markets,” he said at a meeting of the Institute of International Finance, according to Yahoo Finance reporter Brian Cheung.
ROBINHOOD’S RISK ASSESSMENT
While bitcoin prices might be booming, Robinhood’s view of the crypto market is looking a little glum. The trading platform cited crypto volatility and market uncertainty as being risks to the success of its business, according to a regulatory filing from Friday. Some 41% of its total revenue in the second quarter was from transaction-based revenues on crypto, showing just how integral digital currencies are to the company’s business.
The filing also cited as risks regulatory uncertainty for both crypto and payment for order flow. The latter is its business receiving payment from third-party market makers for directing clients’ orders to their trading desks, which then execute the transaction.
Advocates for retail traders and some lawmakers have criticized the practice, claiming it prevents consumers from getting the best trading prices and for its lack of transparency. SEC Chairman Gary Gensler said in August that a full ban of payment for order flow was “on the table.” Such regulatory action would be a major blow to Robinhood—payment for order flow made up half of Robinhood’s total revenue between January and June this year.
FACEBOOK LOSES TALENT TO A16Z
Andreessen Horowitz made its crypto team even larger after poaching two top blockchain engineers who helped create Facebook’s Novi crypto wallet. The VC firm named Nassim Eddequiouaq as chief information security officer and Riyaz Faizullabhoy as chief technology officer for its crypto team. The announcement comes as Andreessen Horowitz continues to stack its crypto team with talent from both the regulatory and tech worlds.
The two engineers made the switch ahead of the official launch of Novi, which could happen as soon as this year and even come ahead of the launch of diem, the cryptocurrency Facebook is helping to develop.
SPY GAMES
A high-profile, not to mention crazy, criminal case involving the attempted sale of top secret military information has a crypto twist. Jonathan Toebbe, a nuclear engineer for the U.S. Navy, and his wife Diana allegedly tried to sell details about the design of U.S. nuclear submarines to a foreign government in exchange for monero, a cryptocurrency, according to a criminal complaint filed Friday by the Federal Bureau of Investigation.
The couple did receive $100,000 in monero during the sting operation as they turned over information saved to computer SD cards. In a clumsy subterfuge worthy of Inspector Clouseau, they hid the cards in objects like half a peanut butter sandwich and a gum packet. Quel dommage—the “foreign government” turned out to be an undercover FBI agent.
While these details might be unusual, crypto’s connection with crime is not. In fact, the U.S. Department of Justice announced the establishment of a National Cryptocurrency Enforcement Team last week.
DEALS
- Crypto analytics and compliance firm Elliptic raised $60 million from investors that include SoftBank and Wells Fargo Strategic Capital.
- ConsenSys, a blockchain software startup, is reportedly looking to raise $250 million at a $3 billion valuation, according to CoinDesk. The Information previously reported that the company was in the process of raising additional funding.
- Crypto exchange FTX.US launched an NFT marketplace based on the Solana blockchain.
- Arca, a digital asset management firm, raised $30 million for its first venture fund.
- The private office of the Crown Prince of Dubai launched a $100 million Blockchain Investment Fund.
- NFL player Rob Gronkowski became the latest athlete to sign onto Autograph, his teammate Tom Brady’s NFT platform.
WHAT WE’RE READING
- “Crypto Investor Who Bet on DeFi Says China Crackdown May Help It” (Bloomberg)
- “Can Crypto Go Green?” (NYT)
Thank you for reading the Crypto Global newsletter. I’d love your feedback, ideas and tips: hannah@theinformation.com.
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We unpack the fast-changing world of cryptocurrency and blockchain and delve into how digital money is reshaping tech and finance from Silicon Valley to Wall Street to Asia.
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