In an unfolding legal battle against two major cryptocurrency exchanges, Coinbase and Binance, the United States Securities and Exchange Commission (SEC) has declared various tokens as securities. These tokens include SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO in the case against Coinbase. For Binance, the list features SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI.
This declaration by the SEC highlights its ongoing effort to regulate the cryptocurrency market and could have substantial implications for these tokens and their holders. If the SEC succeeds in classifying these tokens as securities, it would subject them to more stringent regulatory rules and obligations.
Barry Silbert, the founder of Digital Currency Group (DCG), commented on the situation via Twitter, noting, “No Proof of Work tokens in any of the lawsuits, I believe (BTC, LTC, XMR, ETC, ZEC, etc.).” Silbert’s tweet refers to the SEC’s decision to not include tokens that use Proof of Work (PoW) consensus mechanism in their lawsuits. This includes Bitcoin (BTC), Litecoin (LTC), Monero (XMR), Ethereum Classic (ETC), and Zcash (ZEC), among others.
The implication of Silbert’s statement suggests that the SEC might be differentiating between PoW tokens and other tokens. This differentiation could lead to different regulatory standards and implications for tokens depending on their underlying consensus mechanism.
This ongoing case and the SEC’s decisions could set a precedent for future regulations and classifications in the crypto market. As such, all eyes within the crypto community are keenly focused on the developments. It is yet to be seen how these decisions will shape the regulatory landscape of digital assets.
In an effort to maintain its existing level of liquidity, the venture capital company Digital Currency Group (DCG) has informed its shareholders that it would temporarily suspend the payment of its quarterly dividends until further notice.
In the letter that was sent to shareholders on January 17, the primary objective of the company is to improve the quality of our balance sheet by lowering operational expenditures and maintaining a sufficient level of liquidity.
DCG said that it was also mulling over the possibility of selling some of the assets included within its portfolio.
The company’s financial problems stem from the difficulties experienced by one of its subsidiaries, a cryptocurrency broker known as Genesis Global Trading. According to reports, Genesis Global Trading owes its creditors more than $3 billion.
Due to the fact that Genesis has disabled its customers’ ability to withdraw funds since November 16, Cameron Winklevoss, on behalf of his exchange Gemini and its users who have funds on Genesis, has written an open letter to the board of directors of DCG requesting that Barry Silbert be removed from his position as CEO of the company. The letter was published on January 10.
Winklevoss claims that Gemini is owed a total of $900 million by Genesis for money that were leased to Genesis as part of Gemini’s Earn program. This program gives clients the opportunity to earn an annual return of up to 7.4% on their investments. Winklevoss also said that DCG owed Genesis a total of $1.675 billion, although Silbert refuted this assertion.
Both companies were charged on January 12 by the United States Securities and Exchange Commission (SEC) for marketing unregistered securities via the Earn program. Winklevoss’s letter had only just been sent when the SEC threw gasoline on the flames by adding the charges.
The difficulties with Genesis were not discovered until after the withdrawal stop on November 16, which the company blamed on the extreme market instability that followed the collapse of FTX and was the cause of abnormally high amounts of withdrawals.
On November 10, less than a week earlier, Genesis disclosed that it had around $175 million stranded on FTX. As a direct consequence of this revelation, DCG sent Genesis an emergency equity injection of $140 million in an effort to remedy the company’s liquidity concerns.
Recent reports say that Genesis Global Capital has hired a restructuring counsel to look into all of the possible outcomes, including but not limited to the possibility of filing for bankruptcy.
According to a report that was published by the New York Times on November 22, it is known that the company has recruited the investment banking firm Moelis & Company to investigate potential courses of action. However, people who are familiar with the situation have emphasized that no financial decisions have been made and that it is still possible for the company to avoid filing for bankruptcy. It’s interesting to note that Moelis & Company was also one of the companies hired by Voyager Digital after the company temporarily halted withdrawals and deposits on July 1 in order to investigate “alternatives in terms of strategy.” A few days later, Voyager Digital filed for bankruptcy under Chapter 11 with the Southern District of New York. This was part of a plan to restructure the company so that clients would get their money back. But a Genesis spokeswoman said not too long ago that the company had no “imminent” plans to file for bankruptcy, even though a November 21 story from Bloomberg said otherwise.
“Genesis maintains a positive and productive dialogue with its creditors,” the representative said. People say that Genesis is trying to get anywhere from $500 million to $1 billion from investors to fill a gap caused by “unprecedented market turmoil” and the failure of the cryptocurrency exchange FTX. According to a report that was published by Bloomberg on November 22, the financially troubled lending company has outstanding loans totaling $2.8 billion on its balance sheet. Approximately thirty percent of the company’s lending has been done to “related parties,” which includes both its parent company, Digital Currency Group, and its affiliate and lending unit, Genesis Global Trading. In a letter that has been going around lately, the CEO of Digital Currency Group, Barry Silbert, claims that the company owes Genesis Global Capital $575 million, and that payment is due in May 2023. Since FTX’s exchange was shut down on November 11, all attention has been focused on Genesis, Grayscale Investments, and their parent business, Digital Currency Group. People are afraid that these companies could be the next exchanges to fail because of the spread. Over the last week, all three corporations have made efforts to allay the concerns of their investors. In a tweet sent out on November 17, Grayscale Investments aimed to reassure investors by stating that “the safety and security of the holdings underlying Grayscale digital asset products are unaffected.” The tweet was in reference to the withdrawal halt implemented by Genesis Global Trading, and it added that the company’s products are still functioning normally. In the meantime, Digital Currency Group CEO Barry Silbert’s most recent letter to investors eased investors’ worries by telling them that the company is on track to make $800 million in sales in 2022.
Grayscale Investments, a company that sells cryptocurrency investment products, has declined to provide on-chain proof of reserves or wallet addresses in order to demonstrate the digital currency products’ underlying assets, citing “security concerns.” Grayscale Investments is a cryptocurrency investment product provider. Grayscale laid out information regarding the security and storage of its cryptocurrency holdings in a Twitter thread on November 18 that was dedicated to addressing investor concerns. The company stated that all of the cryptocurrencies that underpin its investment products are stored with Coinbase’s custody service, but it refrained from disclosing the wallet addresses.
Grayscale continued by saying, “We are aware that the previous point, in particular, will be a letdown to some,” but “fear created by others is not a good enough justification to violate intricate security mechanisms that have kept our clients’ funds secure for years.”
In the aftermath of FTX’s ongoing liquidity troubles and ultimately bankruptcy, Grayscale has decided to take this step in response to the mounting pressure being placed on the crypto industry to implement proof of reserves.
Some people on Twitter disagreed with Grayscale’s view that security concerns were behind its decision to withhold its wallet addresses. One user commented that although the addresses of Satoshi Nakamoto, the inventor of Bitcoin, are widely known and are of greater value to attackers, “Satoshi’s Bitcoin remains secure.”
Grayscale distributed a letter that was co-signed by Alesia Haas, the CFO of Coinbase, and Aaron Schnarch, the CEO of Coinbase Custody. The letter detailed Grayscale’s holdings according to its investment products and reaffirmed that the assets “are secure.” Additionally, the letter stated that each product has its “own on-chain addresses,” and that the crypto always belongs “to the applicable Grayscale product.”
Grayscale further said that every one of their products is structured as its own independent legal company, and that “rules, regulations, and contracts […] forbid the digital assets underpinning the goods from being leased, borrowed, or otherwise encumbered.”
Although Grayscale is best known for its Grayscale Bitcoin Trust (GBTC), a security that follows the price of Bitcoin, the company also offers products that follow the price of other cryptocurrencies, like Ether and Solana. Genesis Global, which serves as the liquidity provider for GBTC, announced on November 16 that it had halted withdrawals, citing “unprecedented market turmoil” as the reason. This “unprecedented market turmoil” had led to significant withdrawals from its platform, which exceeded its current liquidity. This has caused investor concerns.
Grayscale is also owned by the cryptocurrency-focused venture capital firm known as Digital Currency Group (DCG), which is also the parent company of Genesis.
Investors are speculating on GBTC’s exposure to Genesis, which may be one reason why the company’s stock is selling at a discount of over 43 percent compared to its net asset value.
Decentralized database solutions Kwil has received a $9.6 million fundraise from crypto venture capital firms FTX Ventures and Digital Currency Group (DCG) according to a filing lodged with the United States Securities and Exchange Commission (SEC).
FTX gives support to most of the cryptocurrencies that are popularly traded. FTX trading supports over 300 projects in the crypto world. The unique products of FTX include stake, leverage tokens, Fiat, Futures, and spot markets. At the same time, Digital Currency Group (DCG) builds and supports bitcoin and blockchain businesses by leveraging knowledge, network, and access to capital.
Kwil is the first distributed decentralized SQL database solution for building advanced dApps and protocols. It ensures large amounts of blockchain data are stored and processed in a short amount of time. This process allows dApp access to its data when plugged into other applications. KwilDB has unique features and allows customers to build products that make its customers superior to their competitors.
The decentralized SQL database for Kwil’s users is referred to as KwilDB. Based on a distributed SQL database, KwilDB developers can enjoy the luxury of easily accessing other data sets. Developers can easily choose which data they want to build their app on. KwilDB Web3.0 offers an unprecedented developer experience with comprehensive data aggregation, unlike the traditional Web2.0 database.
Crypto exchange companies FTX Ventures and DCG will both benefit from investing in Kwil by getting returns from their investments while Kwil uses the funds to build structures for its users and developers.
Kwil currently partners with companies such as Blockchain, Amplify, Arweave, NGC Ventures, FJ LABS, and DCG for funding and insights into the blockchain industry.
Digital Currency Group announced a $600 million credit facility today.
This comes in the same month as its earlier $700 million equity raise.
Digital assets may be volatile, but institutional money continues to flow into the space.
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Money continues to flow into the cryptocurrency industry, this time at a particularly deep institutional level.
DCG Raises $600 Million Credit Facility
Digital Currency Group (DCG), the behemoth digital asset conglomerate behind CoinDesk, Grayscale ($50 billion in assets under management), and Foundry (a bitcoinmining leader), announced today that ithas raiseda new $600 million credit facility.
This should lend some flexibility to DCG, as a credit facility allows firms to generate capital over an extended period of time without having to repeatedly reapply for a loan each time it needs money to fund its various ventures or to execute on its strategy.
On the announcement, DCG Founder and CEO Barry Silbert said,
“The financing strengthens our ability to respond dynamically to opportunities in the market. We’re very pleased to partner with this cohort of high-quality institutional lenders and, as a profitable and rapidly growing company, we are fortunate to be able to access this growth financing with an attractive cost of capital.”
This is the first time DCG has entered into debt capital markets, andit followsa $700 million equity raise at the beginning of November that valued it at $10 billion. That raise was led by SoftBank and included funding from Alphabet Inc. (Google); it represented the second-largest raise in the crypto industry, trailing only FTX’s$900 million raisefrom July.
DCG was founded in 2015 and now hasbackedover 200 blockchain-related companies in more than 35 countries, in addition to the prominent companies over which it is the parent company. It is also involved in funding lobbying groups on Capitol Hill for the cryptocurrency industry.
Disclosure: At the time of writing, the author of this piece held BTC, ETH, and several other cryptocurrencies.
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The Digital Currency Group (DCG) has announced its latest secondary share sale, in which it pulled about $700 million in funding.
The funding round was sparked by a wave of existing investors who sold their shares to the new investors. However, DCG Founder and CEO Barry Silbert confirmed he did not sell any of his shares in the latest round.
Prominent investors include Softbank Group Corp’s Vision 2 Fund, Ribbit Capital, GIC Capital, and Latin American Funds. The secondary share sale was also embraced by Alphabet Inc’s CapitalG, marking a grand first-time investment into the company with a plethora of investment portfolios.
Digital Currency Group operates the Grayscale Investments who administers the Grayscale Bitcoin Trust (GBTC), a $50 billion that the company said it wants to turn into a full-fledged Exchange Traded Fund (ETF) product, subject to regulatory approval. DCG group is known for its investment in more than 200 blockchain and crypto-related firms, putting it at the forefront of fueling innovation in the digital currency ecosystem.
“We’re the best proxy for investing in this industry,” Silbert told CNBC in an interview. “We were looking for the type of backers that could be, and hopefully will be with, with us on this journey for the next couple of decades.”
The latest funding round places the Digital Currency Group at a $10 billion valuation. The company now ranks alongside blockchain payments firm Ripple Labs Inc, Kraken Exchange, and Circle as one of the most profitable private crypto companies in the United States and the world at large.
Investments in cryptocurrency-focused outfits are no longer an uncommon event today. Huge cash from mainstream institutional investors is flowing into the industry as hedge funds and venture capitals seek to gain exposure to the growing crypto ecosystem in the most legal and risk-free manner. Outfits like DCG and FTX remain trusted channels to meet most investors’ goals for venturing into the crypto industry.
Since 2013 the Grayscale Bitcoin Trust Fund (GBTC) has offered its investors exposure to Bitcoin (BTC) through a publicly quoted private instrument. However, the trust’s convertibility and liquidity vastly differ from an Exchange Traded Fund (ETF).
Trusts are structured as companies, at least in regulatory form, and are ‘closed-end funds’ which can initially only be sold to accredited investors. This means the number of available shares is limited, and retail traders can only access them via secondary markets. Furthermore, a GBTC share cannot be redeemed for the underlying BTC position.
Historically, GBTC used to trade above the equivalent BTC held by the fund, which was caused by the retail crowd’s excess demand. The common practice for institutional clients was to buy shares directly from Grayscale at par and sell at a profit after the six-month lock-up period.
During most of 2020, GBTC shares traded at a premium to its Net Asset Value (NAV), which varied from 5% to 40%. However, this situation drastically changed in March 2021. The approval of two Bitcoin ETFs in Canada heavily contributed to extinguishing the GBTC premium.
ETF funds are less risky and cheaper compared to trusts. Moreover, there is no lock-up period, and retail investors can attain direct access to buy shares at par. Therefore, the emergence of a better Bitcoin investment vehicle seized much of allure that GBTC once possessed.
Can DCG save GBTC?
In late February, the GBTC premium entered adverse terrain, and holders began desperately flipping their positions to avoid getting stuck in an expensive and non-redeemable instrument. The situation deteriorated up to an 18% discount despite BTC price reaching an all-time high in mid-March.
On March 10, Digital Currency Group (DCG), Grayscale Investments’ parent company, announced a plan to purchase up to $250 million of the outstanding GBTC shares. Although the conglomerate did not specify the reason behind the move, the excessive discount certainly would have pressured their reputation.
As the situation deteriorated, DCG announced a roadmap for turning its trust funds into a U.S. ETF, although no specific guarantees or deadlines have been informed.
On May 3, the firm announced that it had purchased $193.5 million worth of GBTC shares by April. Moreover, DCG increased its GBTC shares repurchase potential to $750 million.
Considering the $36.3 billion in assets under management for the GBTC trust, there’s reason to believe that buying $500 million worth of shares might not be enough to ease the price discount.
Because of this, some important questions arise. For example, can DCG lose money by making such a trade? Who’s desperately selling, and is a conversion to an ETF being analyzed?
As the controller of the fund administrator, DCG can buy the trust fund’s shares at market prices and withdraw the equivalent Bitcoin for redemption. Therefore, buying GBTC at a discount and selling the BTC at market prices will consistently produce a profit and there’s no risk by doing this.
Apart from a few funds that regularly report their holdings, there’s no way to know who has been selling GBTC below net asset value. The only investors with 5% or more holdings are BlockFi and Three Arrows Capital, but none have reported reducing their position.
Therefore, it could be potentially multiple retail sellers exiting the product at any cost, but it is impossible to know right now.
While buying GBTC at a 10% or larger discount might seem a bargain at first, investors must remember that as of now, there’s no way of getting out of those shares apart from selling it at the market.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
With the effects of the COVID-19 pandemic economic meltdown further fueling the rise of Bitcoin and cryptocurrency as an investible asset class, three giants of the crypto industry have announced plans to go public in 2021 and take Wall Street by storm.
The crypto industry is finally making the leap to mainstream investment on Wall Street. In 2020, major financial service and payments companies like JPMorgan, PayPal and Mastercard have been creating new avenues for public exposure to Bitcoin and crypto.
Major institutional investors and enterprises such as Microstrategy and MassMutual Insurance have also been allocating serious amounts of capital to Bitcoin and crypto, mainly as a hedge against the weakening dollar and impending inflation due to stimulus payments and unprecedented relief spending of governments around the world.
As cryptocurrency and Bitcoin surge into public and institutional consciousness, three large companies in the crypto space have announced or hinted that they are planning to launch an initial public offerings (IPO) to raise money on public markets.
As the United States Federal Reserve and central banks like the ECB continue to hold interest rates at record lows, the inflation narrative is gaining strength and going public in 2021 could be the tipping point for these crypto firms seeking public listing.
In January this year, Ripple CEO Brad Garlinghouse predicted that initial public offerings (IPOs) will become more prevalent in the cryptocurrency and blockchain space in 2020.
While speaking at the World Economic Forum in Davos on, Jan. 23, Garlinghouse went as far as to hint that Ripple would itself be one of those firms to seek a public flotation. Garlinghouse said at the time:
“In the next 12 months, you’ll see IPOs in the crypto/blockchain space. We’re not going to be the first and we’re not going to be the last, but I expect us to be on the leading side… it’s a natural evolution for our company.”
Unless you have been living under a rock in the crypto-sphere, it goes without saying that Ripple’s plans are currently up in the air with the ongoing Securities and Exchange Commission (SEC) lawsuit against the sale of XRP tokens as unregistered securities.
Unclear regulation towards altcoins like XRP along with its current regulation battle would make it incredibly difficult at this point to gain public confidence for investment into a Ripple IPO.
The most well-publicized and likely planned IPO for 2021 comes from major United States crypto exchange Coinbase.
The long-anticipated Coinbase Initial Public Offering (IPO) was finally filed on Dec.18 and now awaits the review and approval of the Securities and Exchange Commission (SEC) before the filing will be made public.
Coinbase is looking to go public in the coming months and submitted a draft registration (S1) form to the Securities and Exchange Commission (SEC), which read:
“Coinbase Global, Inc. today announced that it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”).
The Coinbase public offering is causing a stir in the markets and Coinbase (CBSE) pre-IPO contracts for the leading United States cryptocurrency exchange is currently trading at a projected valuation of nearly $70 billion dollars on FTX trading—a figure that is equal to three times the total value of the booming decentralized finance (DeFi) market and eclipses the entire marketcap of Ethereum.
Digital Currency Group
Digital Currency Group (DCG)—a conglomerate that owns Grayscale Investments, over-the-counter desk and lender Genesis Global and leading crypto news site Coindesk—is projected to launch its own IPO in 2021.
According to a report from Messari in November this year, a third party that might also soon throw their hat into the crypto firm IPO mix is Digital Currency Group.
While discussions over an IPO have not been raised publicly from DCG’s end, the report crunched down some numbers, which indicated that DCG would present a strong case for a successful IPO.
Owning firms like Grayscale Investments and Genesis Global, Digital Currency Group has built up not only an extremely profitable business but also a good reputation amongst institutional players. This reputation could make an easy sell to raise capital for an IPO in the public markets—but DCG is already a giant and may not even need public funding to succeed.
Messari projects that DCG could be worth over $4 billion should they go public in 2021.