Digital Asset Insights #07
Coinbase Hits $100bn and Nigeria to incentivise payments
The week began with Tetragon Financial Group, one of the largest financial backers of the digital asset company Ripple Lab losing its effort to make a reclaim of the $175 million investment it made in the company. Indications from the results of proceedings at a court in Delaware show that despite the battle between the U.S. Securities and Exchange Commission (SEC), the asset managing company will not be redeeming its lost investments. In January, Tetragon filed a suit to reclaim $175 million out of the $200 million Series C financing it had made for the Ripple blockchain company in 2019. As part of the suit, Tetragon also sought to freeze Ripple's liquid assets until they were paid. Their case was, however, was rejected on Thursday by a Delaware Chancery Court Judge. The judge's decision was based on the terms of the initial investment under which Tetragon could reclaim its Ripple equity only if the XRP was determined as security. As of the lawsuit's time, the SEC was yet to determine XRP to be a security. According to Ripple, the Tetragon lawsuit was, and I quote, "an opportunistic move to take advantage of the SEC's allegations." As the case between the SEC and Ripple continues, many desperately anticipate the outcome.
PayPal to Acquire Curv
Meanwhile, the popular payment facilitating platform PayPal had on Monday disclosed that it would be acquiring Curv, the cloud-based digital asset security infrastructure based in Israel. Although no financial terms were disclosed, PayPal announced that the acquisition was to "accelerate and expand its initiative to support [digital currencies and assets]." Report on the purchase's progress was first announced on March 2 and given their status as one of the top e-payment giants, and it is no surprise how the whole acquisition process was able to kick off within two weeks. According to PayPal's vice president and general manager of blockchain, the acquisition is part of the company's effort to invest in blockchain technology and prospects to help them realize their vision of an inclusive financial system. On the other hand, Curv seems to be ecstatic about the acquisition, and according to the co-founder and CEO Itay Malinger, "…there is no better home than PayPal to continue [their] journey of innovation. PayPal, which expects the acquisition deal to be finalized within the first quarter of the year, had partnered with Paxos to enable the sales of digital currencies by October and on the lookout for digital custody acquisition. Even though the $750 million deal to buy BitGo fell through, it is challenging to find multi-party computation (MPC) shops like Curv around the digital asset community.
Coinbase Hits $100bn
As PayPal begins its journey in the digital currency world, Coinbase was valued at approximately $100 billion last month ahead of a public listing. Even as the most prominent digital currency exchange platform in the U.S., some believe that regardless of the digital currency market's growth to over $1.5 trillion, it is still "not worth it" even though they manage to strike while the iron is hot. Many investors are being asked to be cautious and thoroughly analyze its true worth despite the movement's celebrations. Some maintain that a proper risk analysis is needed, and investors are advised not to be carried away by the "successful year" that the move is likely to bring. Some of the red flags include the trading fees, the threat of decentralized finance (Defi), and competition from other investment and exchange platforms. According to the company's S-1 form that was published by the U.S. SEC, its total revenue is generated from transaction fees on their platform. According to their business model, 96% of their net income for 2020 originated from transaction revenue. The company, which had in 2019 reported a net loss of $30.4 million on a $533.7 million revenue recovered last year with a net profit of $322.3 million on a $1.3 billion revenue. However, by dividing the $100 billion valuations by its 2020 revenue, a valuation multiple of 76x is achieved. Given the pressure from the various threats around them, many speculate if Coinbase can keep up its justification of $100 billion valuations.
Twitter CEO Jack Dorsey, whose genesis tweet sits at $2.5 million since March 6 had, on Tuesday, announced that bidding on his genesis tweet will be ending on March 21, and its proceeds will be donated to the charity @GiveDirectly. The non-profit that usually transfers cash directly to low-income earners without condition is under $5 million short of its goal for the "Africa Response" campaign. With this donation, they are very likely to close the gap. The non-profit has been receiving donations in digital currencies for some time, and according to them, the pace of digital asset donations has only accelerated more recently. As of February, they had received digital coin donations worth over $20 million. However, Dorsey had indicated that he would be donating after converting the proceeds to bitcoin. Even though he is one of the strong supporters of BTC development in Africa, his decision remains unexplained as GiveDirectly says they accept donations in various digital currencies. The bidding will be closed in Ether.
Nigerian Central Bank Incentives
Still, in Africa, the Central Bank of Nigeria has taken the initiative to include incentives every time citizens receive or send money using licensed international money transfer operators (IMTOs). In a letter signed on March 5 by A.S. Jibrin, the Associate Director of the CBN, they announced the launch of the "Naira 4 Dollar Scheme," which they said aims to foster the use of official channels for international payment transfers. This announcement comes after the Central Bank had in the month before placed a ban on any digital-asset-related transactions through a five-page statement and even urged banks to close any of such accounts as digital currencies are not legal forms of tender. The CBN incentive program, which commenced on Monday the 8th, will end on May 8. The incentive is an additional ₦5 for every $1 received by an individual through diaspora remittances. Although, many still prefer the use of digital currencies in Western Africa, and a majority of them are from Nigeria, which leads to peer-to-peer BTC trading volume.
BlockFi Under Attack
With an unusual assault on digital asset lending platform BlockFi on Sunday, the platform signified that Saturday was bombarded with fake sign-ups and spams of abusive language. The attack, which involved racist and vulgar language in the first and last name fields of the account registration page, quickly discovered employees after they began. The fake account registration was done using over a thousand emails, half of which were valid and belonged to real users. This is not Blockfi's first time to suffer an attack of this nature, as in May of 2020, user data was retrieved through a compromised employee. Luckily, no funds were lost to the attack. Some refer to both attacks as "just shooting lasers at the onion" however, though the damage this time may be minimal, some believe the attackers may be testing their prowess and are likely to make another attempt. But whether they do or not, BlockFi will have to keep vigilance if they are to secure their reputation.
NZD Stable Coin
In the week, a firm based in New Zealand announced its creation of the first compliant, stable coin backed by the New Zealand dollar (NZD). Sources indicate that the New Zealand dollar stable coin ($NZDs) will be issued by the regulated company Techemynt. Its initial launch sees the new digital currency at a dollar per coin. The digital currency operates on the Ethereum blockchain network, and its code uses a framework created by Coinbase and Circle-founded Centre group. According to the company, the stable coin ($NZDs) would combine the digital currency's intrinsic nature with the stability and value of the NZD to allow not just digital payments but also remittance and arbitrage. The company also believes that this will, and I quote, "position the New Zealand dollar as a prominent participant in the global digital assets economy." Although several attempts in the country have created a dollar-backed stable coin, some attempts had to be ceased due to regulatory concerns. For this reason, the company had spent up to nine months ensuring that the stable coin was up to regulations. For transparency, the New Zealand dollar reserves that back the stable coin are confirmed by an accounting firm with quarterly reports being delivered regularly.
Komodo Launches DogeDEX
On another Dogecoin news this week, open-source digital assets and blockchain solutions providers Komodo announced on Wednesday that it had launched its dogecoin-focused platform for peer-to-peer exchanges of the digital currency. The platform, DogeDEX, which went live on March 1 has had more than 3000 downloads already. Powered by the AtomicDEX engine, the service is available on both desktop and mobile applications. The service that includes atomic swaps will enable the direct exchange of digital currencies between users without third parties like the centralized exchanges would. Acting also as a wallet, users can store their digital assets on the platform. With its popularity level lately, it is hardly surprising that the meme-based digital asset has finally gained some notoriety as many look forward to its days ahead.