Blockchain
Three unexpected risks from Wall Street’s foray into bitcoin
Bitcoin has officially gone mainstream in the U.S. after the approval of 11 spot bitcoin ETFs. Products by issuers such as BlackRock, Fidelity and Bitwise debuted on Thursday and exceeded $7 billion in cumulative trading volume over the first two days of trading.
For years, the crypto industry has been waiting for this approval to bring a huge inflow of fresh funds into the market, which is now open to the largest legacy finance firms and crypto-curious retail investors who are not ready for the technicalities of crypto.
However, bitcoin meeting Wall Street has its risks, too. Some long-time bitcoiners point at potentially increasing concentration of bitcoin ownership in the hands of a small group of institutions, potential rehypothecation and changes in the way the bitcoin community governs itself.
A single point of failure
The most obvious concern noticed by many prominent crypto individuals is that all the bitcoins backing the ETF shares will be held by only a handful of assigned custodians. Most of the issuers listed Coinbase as their custodian, with exceptions of VanEck, who chose Gemini, and Fidelity with its own custody product.
Jameson Lopp, co-founder and CTO of a bitcoin custody firm Casa, points out that in such situation, the custodian becomes a single point of failure and there are “relatively few ‘doors’ that would need to be knocked upon by government agencies,” if they wanted to seize the bitcoin locked in the ETFs, he told The Block.
Jeffrey Ross, the founder and managing director of an asset management firm Vailshire Capital, believes this concern is “overblown.” Theoretically, there is a risk of a custodian to make a mistake and lose large amounts of clients’ bitcoin, but large finance firms like the current ETF issuers have measures in place to prevent such accidents from happening, he told The Block.
As for a potential government seizure, people draw analogies with the Roosevelt-era ban on gold ownership. However, back then, the U.S. dollar was backed by gold, making it an essential component of monetary policy, and bitcoin is not in the same position, Ross said. “There is no reason for the government to seize bitcoin from Americans,” he added.
A new type of double-spending attack
Another potential concern can be the so-called financialization of bitcoin, or the transfer of practices from traditional finance into the bitcoin economy, which until now has been functioning more or less by its own standards.
“The ETFs are a double-edged sword for the bitcoin ecosystem,” says Caitlin Long, founder and CEO of Custodia. “The big drawback is that new forms of leverage-based financialization of bitcoin will happen. The SEC did the right thing by prohibiting custodians from lending the bitcoin that backs the ETF units, but there will be commingling, collateral substitution and leverage on the layer above that,” Long told The Block.
Bitcoin-based securities will essentially create bitcoin IOUs (“I owe you”), says Casa’s Lopp. This means that with ETFs, instead of actual bitcoins stored in hardware and software wallets, people will own something that represents the value of bitcoin but has none of its essential properties like decentralization, permissionless nature and visibility on a public ledger.
“Since you can’t verify a company’s balance sheet, you can’t be sure that your IOU is redeemable for the asset it represents,” Lopp said in a blog post last year.
Source: theblock.co
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Blockchain
Blocks & Headlines: Today in Blockchain (BlackRock, Plume, SEALSQ, Hedera, Deutsche Bank, KuCoin)
Blockchain technology continues to drive innovation across industries, reshaping finance, infrastructure, and philanthropy. Today’s news roundup explores exciting developments in blockchain ETFs, tokenization funding, quantum-resistant chips, public blockchain initiatives, and impactful social projects. Here’s a deep dive into the latest blockchain headlines:
BlackRock ETF Embraces Blockchain with First Muni Bond Purchase
BlackRock’s blockchain-focused ETF has made its first foray into municipal bonds, signaling increased confidence in integrating blockchain technology with traditional finance. The ETF’s strategic investment demonstrates how blockchain can enhance transparency and efficiency in bond markets.
By tokenizing municipal bonds, BlackRock aims to simplify trading and settlement processes while reducing associated costs. This development underscores the growing role of blockchain in transforming financial instruments and fostering greater market accessibility.
Source: Yahoo Finance
Plume Secures Funding for Tokenization Platform
Blockchain fintech company Plume has raised significant funding to advance its tokenization platform. The company’s innovative approach enables businesses to convert real-world assets into digital tokens, streamlining asset management and unlocking liquidity.
Tokenization is rapidly gaining traction as a game-changer in sectors such as real estate, art, and commodities. Plume’s success reflects a broader trend of investment in blockchain solutions that bridge the gap between traditional assets and decentralized technologies.
Source: Fortune
SEALSQ and Hedera Partner for Quantum-Resistant Blockchain Chips
SEALSQ and Hedera have announced a groundbreaking collaboration to develop quantum-resistant chips designed to secure blockchain infrastructure. These advanced chips will provide robust protection against future quantum computing threats, ensuring the integrity of blockchain networks.
As quantum computing capabilities evolve, safeguarding blockchain ecosystems becomes increasingly critical. This partnership highlights the importance of proactive measures in maintaining the resilience and trustworthiness of decentralized systems.
Source: The Quantum Insider
Deutsche Bank’s Public, Permissioned Blockchain Initiative
Deutsche Bank’s Layer 2 blockchain solution is set to go public and operate as a permissioned network, according to its tech partner. This initiative aims to strike a balance between accessibility and security, leveraging blockchain to streamline financial services and enhance operational efficiency.
The decision to adopt a public, permissioned model reflects a growing trend among enterprises seeking to harness the benefits of decentralization while maintaining control over sensitive data. Deutsche Bank’s approach could serve as a blueprint for other financial institutions exploring blockchain adoption.
Source: CoinDesk
KuCoin’s “Light Up Africa” Initiative Brings Hope to Thousands
Cryptocurrency exchange KuCoin has made a significant impact through its “Light Up Africa” donation ceremony in Ghana, benefiting 36,000 children across the continent. The initiative combines blockchain technology with philanthropy to address energy poverty and support education.
By leveraging blockchain for transparency in charitable contributions, KuCoin sets an example of how the crypto industry can drive meaningful social change. The project demonstrates the potential of blockchain to empower communities and foster sustainable development.
Source: PR Newswire
Industry Implications and Key Takeaways
Today’s developments highlight the transformative potential of blockchain across multiple domains:
- Integration with Traditional Finance: BlackRock’s ETF underscores the synergy between blockchain and established financial systems.
- Tokenization Trends: Plume’s funding success reflects the growing demand for digital asset solutions.
- Quantum-Resistant Technologies: SEALSQ and Hedera’s partnership addresses emerging cybersecurity challenges.
- Enterprise Blockchain Adoption: Deutsche Bank’s public, permissioned network showcases the adaptability of blockchain in financial services.
- Social Impact: KuCoin’s philanthropic efforts illustrate blockchain’s capacity to drive positive societal outcomes.
The post Blocks & Headlines: Today in Blockchain (BlackRock, Plume, SEALSQ, Hedera, Deutsche Bank, KuCoin) appeared first on News, Events, Advertising Options.
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