Maitland/AMO ICO Monitor – 9 May 2019
The Big Read
Despite ICO issuance taking off in 2017 and companies raising around $19.7bn in 2018, regulatory hurdles have since seen overall sentiment wane. The Financial Times reports that companies and lawyers are increasingly looking to make ICO issuances compliant with regulations, rather than structuring them to avoid securities laws. Security token offerings, or STOs, are now in vogue, but most current regulatory frameworks are only marketable to institutional investors. Etelka Bogardi, Partner at Norton Rose Fulbright, suggests that the market is moving towards “hedge funds and investors who are in the know, and moving away from the democratisation of investing.”
WeChat, the Chinese social media and payment service provider, has this week banned cryptocurrency transactions in its new payments policy. With the new rules coming into effect on 31 May 2019, the policy bans merchants from engaging in “illegal transactions such as virtual currency,” and from issuing tokens. Cointelegraph reports that Changpeng Zhao, founder and CEO of crypto exchange Binance, is critical yet optimistic: “It is inconvenient for people short term, and they take a hit. But long term, it is precisely this type of restriction of freedom that will push people to use crypto. Not a bad thing.”
Japanese Content Token, a lesser-known Singapore-based blockchain firm, gained more than 700% in two hours on Tuesday, adding $93m to its total valuation. CCN writes that the firm had never previously witnessed such an explosion in its price, but has over the past few years gradually increased recognition for its profile, listing on five crypto exchanges in that period. The token itself, however, is expected to slump at the end of the week.
New Kid on the Block – The Technologies, Funds and ICOs you should know about
Only weeks after Bitfinex was accused by the New York attorney general of hiding around $850m in losses by commingling corporate and client funds, the exchange is reportedly planning to raise up to $1bn in an initial exchange offering. Bloomberg reports that the new token to be issued will be called LEO, and notes market optimism ahead of the sale. Jeff Dorman, CIO at Arca Funds, said, “If Bitfinex successfully raises this capital, and all signs thus far point to them succeeding, investors in these new LEO tokens will likely be rewarded.”
After rolling out a Bitcoin custody service earlier this year, Fidelity is set to offer crypto trading within the next few weeks. Although the firm will only target institutional customers, it joins brokerage E*Trade Financial Group and Robinhood who recently took trading to the market. With the price of Bitcoin jumping more than 50% this year, the entry of one of the largest asset managers in the world onto the OTC trading space is a positive move and as Bloomberg reports, “a bet that Wall Street’s nascent appetite for trading and safeguarding digital currencies will grow.”
Scams, Sanctions and Suspicious Activity
Cryptocurrency exchange Binance has been hit by a major security breach, with hackers withdrawing $40,705,000 in bitcoin from one of the company’s exchange wallets, reports CoinTelegraph. Although the CEO Changpeng Zhao has reassured investors that the wallet accessed holds only 2% of Binance’s total bitcoin holdings, shares in Binance have since fallen by over 8%. Several exchanges are now attempting to implement measures that will block future deposits from hacked addresses.
The NYPD has reported that Bitcoin related fraud committed by individuals impersonating Social Security Administration Officials. Attempts to convince members of the public that their Social Security Numbers have been found in relation to illegal activities have resulted in over $2m in scams since the start of the year, as individuals send payments to avoid further negative repercussions. Blockonomi reports that the NYPD has made it clear that legitimate officers would not request information or money from individuals over the phone.
CNN writes that a Jersey islander has been ‘swindled out of $1.6m in an online scam’. The resident, who was said to be experienced with cryptocurrencies and investing, was engaged over an 18-month period during which the scammers were able to get the islander to send increasing amounts of money. The Jersey Financial Services Commission says that scammers’ mention of reputable U.K. companies added to their perceived trustworthiness in the eyes of the victim.
Bulls & Bears of the week
“Bottom line: use recent weakness to accumulate.” – Robert Sluymer, technical strategist at Fundstrat
“It’s a gambling device… there’s been a lot of frauds connected with it. There’s been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything.” – Warren Buffet, CEO of Berkshire Hathaway