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
The post Three unexpected risks from Wall Street’s foray into bitcoin appeared first on Hipther Alerts.
A recent warning from the FBI regarding a crypto money transmitter seems to be aimed at the Samourai Wallet. This development highlights the increasing scrutiny and regulatory challenges faced by privacy-focused cryptocurrency wallets and services.
The FBI warning raises concerns about the use of certain cryptocurrency wallets that prioritize user privacy and anonymity, potentially enabling illicit activities such as money laundering and terrorist financing. While the warning does not explicitly name any specific wallet or service, the language used suggests that the Samourai Wallet may be the target of the advisory.
Samourai Wallet is known for its focus on privacy and security features, including coin mixing and stealth addresses, which aim to enhance user privacy and protect against surveillance and tracking. However, these features have drawn the attention of law enforcement agencies and regulators, who are increasingly concerned about their potential misuse by criminals.
The FBI warning underscores the challenges faced by privacy-focused cryptocurrency wallets in navigating regulatory compliance and law enforcement scrutiny. While these wallets aim to empower users with greater control over their financial privacy, they must also address regulatory requirements and law enforcement concerns to avoid legal and reputational risks.
As the cryptocurrency industry continues to evolve, privacy-focused wallets like Samourai Wallet will need to strike a balance between privacy and compliance, ensuring that they can provide robust privacy features while also addressing regulatory concerns and maintaining transparency with authorities. This delicate balance is essential to foster trust and confidence among users and regulators alike, ultimately enabling the continued growth and adoption of privacy-enhancing technologies in the cryptocurrency space.
Source: cointelegraph.com
The post FBI warning against crypto money transmitters ‘appears’ to be aimed at mixers appeared first on HIPTHER Alerts.
Blockchain
Pantera Capital Plans to Raise $1 Billion for New Fund Offering Exposure to Crypto Assets
Pantera Capital is reportedly planning to raise $1 billion for a new fund that offers exposure to various crypto assets, as reported by Blockchain.News. This ambitious fundraising initiative underscores Pantera’s continued confidence in the potential of the cryptocurrency market and its commitment to providing investors with diversified investment opportunities in the digital asset space.
The new fund from Pantera Capital aims to capitalize on the growing demand for exposure to cryptocurrencies and blockchain-based assets among institutional and retail investors. By offering a comprehensive portfolio of crypto assets, the fund seeks to provide investors with access to a wide range of investment opportunities, spanning cryptocurrencies, tokens, and other digital assets.
Pantera’s decision to raise $1 billion for the new fund reflects its optimistic outlook on the long-term growth prospects of the cryptocurrency market. With increasing mainstream adoption and institutional interest in cryptocurrencies, Pantera sees significant potential for value creation and capital appreciation in the digital asset space.
As one of the leading blockchain-focused investment firms, Pantera Capital is well-positioned to attract capital from investors seeking exposure to the cryptocurrency market. The firm’s track record of successful investments and its experienced team of investment professionals are likely to bolster investor confidence and support for the new fund.
Pantera Capital’s plans to raise $1 billion for its new fund underscore its commitment to driving innovation and growth in the cryptocurrency market. As the fund attracts capital and deploys it into promising investment opportunities, it is poised to play a key role in shaping the future of the digital asset ecosystem.
Source: blockchain.news
The post Pantera Capital Plans to Raise $1 Billion for New Fund Offering Exposure to Crypto Assets appeared first on HIPTHER Alerts.
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