The Weekly Wrap - 23 July 2021

1. The B Word Panel

The Facts:

• On July 21, Tesla and SpaceX’s Elon Musk, Twitter and Square founder Jack Dorsey and ARK Invest’s Cathie Wood discussed the merits of Bitcoin in an online conference.
• Musk disclosed that SpaceX also holds Bitcoin and that he personally owns Bitcoin, Ether and Dogecoin.
• Tesla might further engage in the space through its connection to the renewables and solar energy industry.

Why it’s important:

• As the founders of some of the few non-crypto companies that hold Bitcoin on their balance sheet, both Musk and Dorsey have been a factor in shaping public opinion about the space.
• Prices responded with short-term volatility during the event and after Musk’s disclosure of his personal holdings.

2. Stablecoin backing: USDC and EURT

The Facts:

• Circle, the issuer of USDC, has revealed the composition of its reserves backing the stablecoin.
• 61% is held in cash and cash equivalents, followed by roughly equal allocations to Yankee CDs (13%) and U.S. treasuries (12%).
• Bitstamp has also announced that it is looking to support EURT, the euro-pegged version of Tether’s stablecoin.

Why it’s important:

• Proper backing of stablecoins has been a long-standing concern in the crypto industry, mainly coming from Tether’s USDT and opaque reserve disclosure policies before 2021.
• The introduction of additional currencies beyond dollar-pegged stablecoin could bring about more liquid and active forex markets in DeFi and simplify arbitrage between exchanges (which increases market efficiency).

3. Chinese mining dominance declines

The Facts:

• The market share of Chinese miners of the overall Bitcoin mining hash rate has been declining from April 2020 to April 2021, according to the Cambridge Centre for Alternative Finance.
• In April, Chinese mining pools had about 46% of the overall hash rate, versus 65% one year earlier.
• The Chinese crackdown on mining in the past three months likely led to further declines.

Why it’s important:

• China has long been a major factor in Bitcoin mining, but its relevance is declining and competitors in other countries are catching up.
• A better distribution of the hash rate is also desirable to improve decentralization.

4. Mastercard simplifies card offering

The Facts:

• Mastercard has announced that it will enhance its offering for crypto exchanges and wallets to simplify crypto to fiat conversions.
• The firm is working together with Paxos and Circle for the new service.
• Just recently, competitor Visa disclosed that its crypto-linked card usage exceeded $1 billion in the first half of 2021.

Why it’s important:

• Infrastructure around cryptocurrencies continues to be built, which is a crucial part to achieve more widespread adoption.
• Data from Visa shows that the demand to spend crypto using credit cards is growing – as such, it was unlikely its competitors would ignore this trend.

5. EU plans to regulate crypto transfers

The Facts:

• In a proposal on Tuesday, European lawmakers suggested that companies involved in the transfer of cryptocurrencies must collect information on sender and recipients.
• It would apply the travel rule as recommended by the FATF to crypto transfers.
• Anonymous crypto wallet would also be prohibited.

Why it’s important:

• The trend towards clearer regulation in the space has already been ongoing for some time. The new proposal by the EU aims to enable full tracking of digital assets.
• How much privacy there remains, or should remain, is an important point of debate – some proposals for a digital euro, for example, contain privacy features for transactions below a certain threshold.

In other news

• FTX closes $900 million round at $18 billion valuation (via The Block)
• Silvergate bank took $4.3 billion in deposits from crypto customers in Q2 (via CoinDesk)
• NFT marketplace OpenSea reaches $1.5 billion valuation (via TechCrunch)