3iQ Research Group consolidates the top five cryptoasset stories of interest
to investment advisors and our investors.
Quarterly Report to Unitholders: 3iQ Global Cryptoasset Fund (Q4 2018)
January 20 – To say the least, 2018 was a challenging year for dedicated digital asset investors. The year was dominated by headlines about the significant price collapse following the latest speculative bubble. Although this has been a disaster for those late to the party in 2017, last year saw a significant number of initiatives and developments that are certainly required for the cryptoasset space to progress to mainstream.
3iQ Corp. (the “Manager”) has worked hard to achieve its goal of providing retail investors access to this exciting space. We have collaborated with the regulators to be in a position to create such a product. Last year we created what we believe to be is the safest, most efficient, and cost-effective solution for accredited investors and to this end we launched the 3iQ Global Cryptoasset Fund. We launched in April when we felt that a significant portion of the speculative bubble had been removed and we were witnessing some stability in the prices of our assets. We clearly missed the mark as the markets specifically for Ether and Litecoin took significant hits and bitcoin fell an additional 50%. We appreciate and understand the short-term distress of our unit holders. We steadfastly believe that all investors looking for growth should have some exposure to this asset class, given the long-term potential and disruptive characteristics of digital assets. We firmly believe systematic entry into this asset class over time will continue to be the best strategy and the next few years should offer extraordinary investment return potential.
Although the enthusiasm and speculation regarding bitcoin and other cryptoassets subsided significantly in 2018, there were certainly encouraging developments from both the user and the industry participant levels…
Read the full Quarterly Report here.
Circle’s (USDC) Stablecoin Fully-Backed by US Dollar, Says Auditor Grant Thornton
January 17 – According to the auditing firm Grant Thornton, the institutionally-backed crypto firm Circle’s USDC stablecoin was accurately backed with US dollar fiat reserves for each of its tokens at the end of 2018. Grant Thornton published the attestation report last Wednesday, noting that Circle had reserves of $251,211,209 USD held in their custody accounts. At that time, they had 251,211,148 USDC tokens in circulation. Another attestation report noted that Circle had just under $127.5 million USD as of October 31, 2018, which was enough to redeem its USDC tokens circulating at the time.
When analyzing USDC pairings with other stablecoins backed with the US dollar, such as Tether or Paxos Standard, it is interesting to note that there is often a premium or discount associated with either stablecoin, despite both having 1:1 backing with USD reserves. Arbitrage opportunities could be found on stablecoin/stablecoin pairings offered on some crypto exchanges such as Binance. Back in October 2018, Tether dropped to almost .80 USD following concerning reports over its legitimacy and an uncertain relationship with their banking provider. Stablecoin issuers Paxos and Gemini have also published attestations from their auditing firms, which came from BPM and Withum respectively. Gemini had approximately $91 million USD in reserves to back their stablecoin Gemini dollar (GUSD) circulation at December 31, 2018, and Paxos had about $142 million USD to back its PAX supply.
Read the full article here.
Security Token Successfully Trades on a Regulated Platform
January 10 – In an industry first, the private equity marketplace company SharesPost has successfully completed a secondary trade of security tokens on a regulated alternative trading system (ATS). SharesPost, a registered broker-dealer, ATS and registered investment advisor, unveiled on January 9 that it had successfully conducted a secondary trade of its (BCAP) tokens, which were issued by Blockchain Capital. These tokens give ownership of securities, which are units in the Blockchain Capital III Digital Liquid Venture Fund running on the Ethereum blockchain.
SharesPost is not the first registered firm to conduct a secondary transaction of a securities token, but it is the first to also provide custody of the crypto asset itself. SharesPost CEO John Wu explained that it was essentially a proof-of-concept transaction. “This was a small trade, it’s like a pilot program, we’re running the water through the pipes to make sure,” said Wu. “To our knowledge, this was the first trade of digital securities by an Alternative Trading System and broker dealer in which the ATS custodied the digital securities. This clears the path for companies to do compliant STO’s in the U.S. and provide their investors with secondary liquidity.”
Read the full article here.
European Banking Regulators Call for Uniformity in Cryptoasset Regulations
January 15 – Two of the largest banking regulators within the European Union (EU) have each released reports which call for uniformity in the regulations surrounding cryptoassets and Initial Coin Offerings (ICOs) across Europe. On January 9, the European Banking Authority (EBA) published an assessment of crypto laws. The assessment report, which examined the applicability of EU laws to cryptocurrencies, also outlined the use of digital assets within the EU as well as several EU laws that govern them. In the report, the EBA also noted the lack of uniformity in current crypto laws. It stated that there was a lack of equilibrium and fairness in the crypto market, with some jurisdictions offering more lenient laws than others. This lack of equilibrium means that companies can move their operations to “crypto havens” which offer less-stringent regulations, such as Malta and Gibraltar. The EBA has stated that they are looking to achieve more uniformity across Europe to ensure a fair and competitive market.
On the same day, the Europe Securities and Markets Authority (ESMA), also published advice to European banking institutions on cryptoassets and ICOs. The regulator noted that the crypto industry, while still in its infancy, presently offers little threat to financial stability of the EU. The ESMA recommended that trading and investing in digital assets should be subject to anti-money laundering legislations. “Wider regulation of crypto-assets and related activities may have trade-offs, such as risking legitimizing cryptoassets and encouraging wider adoption,” said the ESMA.
Read the full article here.
Bitmex is Reportedly Shutting Down Trading Accounts in Quebec
January 15 – BitMex, which is currently the most active bitcoin trading platform in the world with a total turnover of $928 billion USD to date, is reportedly shutting down the use of their platform for users based in the United States and in the province of Quebec due to regulatory restrictions and other uncertainties. BitMex is most popularly known for their bitcoin derivatives contracts, where traders can use upwards of 100-times leverage. BitMex also has a cryptocurrency exchange where traders can deposit bitcoin to buy and sell other cryptocurrencies. The exchange is based out of Hong Kong, and is currently unregulated by any jurisdiction. Despite being unregulated and offering little KYC procedures, since users can create an account using only an email address, the platform has managed to operate legally in many countries around the world.
The Canadian regulatory body Autorité des marchés financiers (AMF) has come forth to say that BitMex is operating illegally in Canada. “BitMEX is not registered with the AMF and is therefore not authorized to have activities in the province of Quebec. We informed this company that its activities were illegal,” said the AMF. BitMex has not confirmed that traders based out of Quebec or the US will have their accounts pulled. Some traders in the US have reportedly bypassed the inability to trade using a virtual private network (VPN) to mask their location.
Read the full article here.
3iQ Global Cryptoasset Fund: Price as at January 18, 2019
3iQ is the first regulator approved multi-cryptoasset portfolio manager in Canada, providing accredited investors with exposure to bitcoin, ether, and litecoin through its 3iQ Global Cryptoasset Fund.