JP MORGAN COIN: DIMON DOLLARS: JP Morgan Creates Stable Coin To Process Blockchain Payments, Per CNBC

In a scoop snatched by CNBC earlier this morning, JP Morgan has created a stable coin to process payments at hyper speed and scale. The ‘JP Morgan coin’ has been under development for months and has been widely tested internally at one of the worlds largest banks.

As word spreads across financial media and crypto media alike, the term ‘Dimon Dollars’ has been used. Jamie Dimon, a noted Bitcoin and crypto skeptic, is now the first major global investment bank to use/issue an in-house and native token.

Per CNBC:

The lender moves more than $6 trillion around the world every day for corporations in its massive wholesale payments business. In trials set to start in a few months, a tiny fraction of that will happen over something called ‘JPM Coin,’ the digital token created by engineers at the New York-based bank to instantly settle payments between clients.”

“J.P. Morgan is preparing for a future in which parts of the essential underpinning of global capitalism, from cross-border payments to corporate debt issuance, moves to the blockchain. That’s the database technology made famous by its first application, bitcoin. But in order for that future to happen, the bank needed a way to transfer money at the same dizzying speed that those smart contracts closed, rather than relying on old technology like wire transfers.”

We’ve maintained, even amongst skepticism and some disbelief, that JP Morgan was actively engaging in both blockchain and crypto technology. They have designs on using Bakkt as a resource for client involvement in crypto, and you can bet that sooner rather than later, their JP Morgan coin will be marketed to clients.

How that plays out is anyone’s guess at the moment. But if JP Morgan is good at anything it is marketing it’s in-house products to HNW and UHNW clients.

What does this mean for some of JP Morgan’s competitors? Is it that far fetched to foresee a Goldman Coin in the works? And other coins connected to global investment banks?

You can ‘bank’ on it.

RELEASE: SEC ICO GUIDANCE: Securities And Exchange Commission Issues New Guidance For Investors, Bullet Points On Coin Offerings For Public Consumption

On a sleepy Sunday morning the SEC decided to issue a grab bag of commentary on ‘coin offerings’. The timing is interesting, but it certainly didn’t get past the peering eyes of crypto twitter. The initial paragraph of the release, which looks and feels almost like a carefully coordinated press release (colorful, easy to digest snippets, drop down menus, etc), was an introduction to the guidance positioned for retail investor public consumption:

“Companies and individuals are increasingly considering initial coin offerings (ICOs) as a way to raise capital or participate in investment opportunities. While these digital assets and the technology behind them may present a new and efficient means for carrying out financial transactions, they also bring increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets.”

The crypto ecosystem continues to wait with breathless anticipation as regulatory agencies craft the constructive architecture that will either move the industry quickly forward or dramatically slow it down.

To view the entire release:

https://www.sec.gov/ICO

MT. GOX DRAMA: PIERCE VERSUS KARPELES: Argument Over Purchase And Revival Plan Of Infamous Exchange Plays Out In Twitter ‘Slap-Fight”

Brock Pierce and Mark Karpeles won’t be breaking bread any time soon. That much become increasingly evident throughout the late evening last night as they engaged in a back and forth as to Brock Pierce’s stated intentions to revive Mt. Gox.

As many media outlets have reported over the past 72 hours, Pierce has designs on acquiring the remaining assets and accompanying intellectual property of the defunct exchange and turning it back into a functioning entity again. He’s even detailed his purchase plan, intimating that it was all but a done deal.

It seems that the ‘done’ part of the deal may have been premature.

In a Twitter mentions back and forth, that quickly became very public (how very ‘crypto twitter’ of the two of you) both men stuck to specific positions. Pierce stating that he had an agreement in place and that the transaction was essentially done/imminent. Karpeles vehemently denying any such agreement, defaulting back to bankruptcy statutes and court appointed trustees. Both men staking out diametrically opposed positions.

It left many wondering where each was getting their best information. Accusations flew back and forth throughout the Twitter conversation. Here are a few highlights:

  1. Brock Pierce claiming that a purchase agreement was in place.
  2. Karpeles responding by denying any purchase agreement was even drafted.
  3. Karpeles claiming that Pierce had threatened to take their argument public, which occurred.
  4. Pierce stating that Karpeles had sold his 88% stake and was now backpedaling.
  5. Pierce claiming that Karpeles was attempting to pocket the $700-800 million surplus.
  6. Pierce claiming that Karpeles has a partner who had ‘secretly’ been doing the negotiating.
  7. Pierce finished the Twitter argument by asking Karpeles “aren’t you about to go back to prison?”

The back and forth held the attention of much of crypto twitter. All sorts of interested parties began searching for information to either back up claims that were made or discredit them.

This document showed up in that search that seemed to be of interest, although it doesn’t have any labeling or signatures that would identify it as being some sort of definitive barometer:

The document does reference several different elements of the Mt. Gox debacle at the time (2014) and the interest from ‘Sunlot Holdings Limited’. But those interests were never consummated and ownership of the entities remains in the hands of bankruptcy court trustees.

A bizaare argument and conversation, publicly displayed, doesn’t move the idea of Mt. Gox being revived forward in any meaningful way. Instead, it will only prove to push the possiblity back.

While we understand the idea behind the revival (name recognition alone denotes value) the complexity presented by bankruptcy court laws, the claims of creditors, and the mountain of BTC involved was never going to allow a transaction to be as simple as the headlines claiming, “Brock Pierce to Buy Mt. Gox”.

The twitter slap fight between these two guys is also an embarrassment in and of itself. These sorts of discussions mean absolutely nothing outside of any sort of legal agreement, courtroom, arbitration or any other such legal entity that would have to pass along approval to allow Mt. Gox to be privately held and operated once again as an exchange. Why media reports didn’t think that through is a mystery.

Neither Karpeles or Pierce are well-served by the back and forth, and did nothing more than waste their time and key strokes in an effort to one up the other.

Beyond that, there are some legitimate questions left to be answered. Is there a real purchase agreement out there somewhere? What would any purchase price look like? What sort of assets would be acquired? Specifically, whither the BTC currently managed by the court appointed trustee?

This story isn’t over.

FACEBOOK STABLE COIN: BLOCKCHAIN BUILD OUT: As Facebook Continues To Build It’s Blockchain Team, Rumors Swirl Regarding A Potential Token

Facebook continues to stalk the crypto and blockchain space. If you stop and pay attention you can almost feel their eyes staring at the cracks in the ecosystem. And those cracks are feeding rumors regarding Facebook’s intentions when it comes to crypto and a potential native platform payment token.

Whether like or dislike Facebook it is hard to deny that a Facebook token of some sort would be a potential eye opener for adoption within crypto. Billions upon billions of users across Facebook, WhatsApp, and Instagram would have access to digital cash fostered by social media’s ultimate ‘elephant in the room’.

As we’ve discussed the potential for a Facebook token this week with several thought leaders in the space one particular theme kept coming up. A Facebook token would make the most sense as a dollar backed stable coin. It would provide incredible buying power for ‘unbanked’ individuals that find themselves part of all three platforms. The WhatsApp platform in particular, with it’s adoption across locations such as India (a notoriously un-banked country), would create enormous demand for a stable coin.

As Facebook staffs up across it’s blockchain initiatives (whatever those happen to be, nobody really knows) the next incredibly used and profitable product could be a Facebook token used across billions of daily active users across the globe.

One rumor we heard coming out of Silicon Valley is that Facebook considered several types of banking initiatives to integrate into WhatsApp over the past two years, but simply wasn’t satisfied with the potential solutions. With the advent of Bitcoin and other cryptocurrencies becoming a larger part of the financial discussion, as stable coin would seem to meet the needs that a potential banking operation may have had it been rolled out.

One source, who left Facebook two months ago, added:

“Facebook has flirted with acquisitions in the crypto space and has yet to pull the trigger. That is telling if you ask me. They could easily swallow up Coinbase tomorrow, but they’ve chosen not to up to this point. Just keep track of the size, scale, and names associated with their ever-growing blockchain team. As it grows you can bet they are getting closer and closer to pulling the trigger on a token of some sort. And my guess, to satisfy regulators, it would be tied to the dollar in the way stable coins have been. They (Facebook) could easily back a token with the cash hoard they have on tap.”

Whatever truth exists in these rumors a Facebook ecosystem token would be enormous. With access to platforms carrying billions of users on a daily basis, adoption would quickly dwarf and other coin in existence. The specter of ‘Facebook Coin’ becoming a competitor to Bitcoin would be a remarkable evolution to witness in real time. And it isn’t as far-fetched as you may think.

A reminder…Facebook matured in the depths of Silicon Valley and the best minds in the valley are constantly looking for the next big thing. And need we mention the headlines Facebook has dealt with overt the past 12 months?

A Facebook stable coin could be the next innovation from a company in need of something new and shiny to feed Wall Street. If one of techs ‘glitterati’ (Jack Dorsey) finds comfort basking in the glow of the crypto world, who’s to say others like him aren’t aware of the opportunity that lies in this fast growing industry. Nobody should be surprised if we eventually see a coin with Facebook’s fingerprints all over it.

EXCLUSIVE: BITCOIN ETF ‘EVENTUAL APPROVAL’: Another SEC Commissioner Predicts Eventual Bitcoin ETF Approval/s (hedges on risk profiles)

In a yet to be released post in Congressional Quarterly, the lone Democrat commissioner left at the SEC, makes several interesting claims in favor of an eventual Bitcoin ETF approval, and potentially multiple approvals.

Robert J. Jackson Jr., in a long form interview, set to be released on February 11th, believes that he expects an eventual applicant to meet the necessary standards for an approval.

A leak of the document can be found below:

As is pointed out in the first page of the article above, the last vote taken on a Bitcoin ETF (the Winklevoss ETF) was defeated by a vote of 3-1. A quick check via simple math says that a turn by Jackson into the potential ‘aye’ column would put the vote at an even 2-2. That is a profound step forward.

As reported last week, VanEck and Solid X resubmitted their Bitcoin ETF for consideration after pulling it just two weeks prior. This effectively restarted the shot clock for approval, thus taking advantage of market maturity and changing attitudes like Mr. Jackson’s.

VanEck Solid X has gone to get lengths to communicate with the SEC and its commissioners on a regular basis, hunting for the secret sauce that leads to an approval. It sounds like, based on the above rhetoric in the interview, they are having a positive impact on the SEC’s commissioners.

Ultimately the proof will be in the proverbial pudding – and that pudding is votes cast for an approval or disapproval of a Bitcoin ETF. As legal experts have pointed out, the VanEck Solid X pull and subsequent resubmission pushes the shot clock on an eventual decision into the second half of 2019. Given that regulatory agency watchers believe that the likes of Bakkt, Fidelity, Nasdaq, ErisX, and other larger crypto futures initiatives will have been in operation by that time, the specter of manipulation may have dissipated.

Again, time will tell.

BAKKT EXPECTATIONS: APPROVAL TIMELINE: Sources Expect BAKKT To Win CFTC Approval In March (pending US govt shutdown)

For those of you closely watching the Bakkt narrative, in the hopes that the launch of the Intercontinental Exchange initiative will bust the bear market – we’ve got some good news for you. Sources in and around both the CFTC and Bakkt have been whispering about a potential approval and firm launch date.

It looks increasingly likely, pending any disruption via another US government shutdown, that Bakkt will win its CFTC approval and begin trading physically deliverable Bitcoin futures in March. The sources we spoke to refused to go on record, but were eager to share the potential timeline with us. They walked us through the ‘meat grinder’ that is the regulatory process and what to expect from Bakkt once an approval is passed on.

A source familiar with the Bakkt CFTC approval process said the following:

“You have to understand that the regulatory process is different than any reasonable business practice that most of you would recognize. It is ridiculous if you ask me. But it is the reality that we are faced with and are operating in. And understand this as well, the current administration is incredibly pro-business and pro-innovation; yet this process is still a meat grinder. I am sure that Jeff (Sprecher) and Kelly (Loeffler) are frustrated. Most believed that an approval would have come late last year. Either way, here we are, and an approval looks imminent.”

A source close to Bakkt (an early institutional investor in the project) gave us this piece of information late last night:

In a way the delays have helped gather clients who will provide liquidity and volume at launch. The Bakkt team has used the time wisely and spent endless hours courting some of the biggest banks and names on the street to be trusted trade partners from the word ‘go’. All signs look to be headed toward mid-March for a final CFTC sign off. And for those out there that have talked about Bakkt delaying for an extended period of time – that is ridiculous. Take a close look at the resume of Jeff (Sprecher) and Kelly (Loeffler), they aren’t in the business of losing. The launch will occur days after approval is finalized. Short of an elongated government shutdown, expect that to happen in March.”

Bakkt remains the most closely watched institutional development in the crypto space. Why? The vast network of potential clients already committed to Intercontinental Exchange operations (essentially ALL of Wall Street and any financial institution that trades commodities with any meaningful volume) could be the type of Bitcoin volume that could break the back of the bear market and send Bitcoin higher.

Beyond simply a well-heeled potential client list, should Bakkt be successful their announced joint venture partners, Microsoft and Starbucks (Boston Consulting Group – BCG is also an announced joint venture partner, but we will cover that connection in a separate article), represent that kind of adoption and real world ‘use-case’ network that could potentially bring Bitcoin to the masses. Retail, tech, software, devices, and on and on. This is the Bitcoin dream that has brought some of the worlds most well known venture capital firms to the Bakkt table.

The chatter regarding an imminent (albeit 30-45 days) approval from the CFTC should create a buzz and keep the team at Bakkt on alert. If you’ve been keeping score their staff has more than tripled and the list of job openings continues to grow.

They are preparing for the biggest Bitcoin push the crypto ecosystem has ever seen. That isn’t hyperbole. Google search the daily trading volume of gold futures and prepare to have your mind blown. The only way Bitcoin can be added to the Starbucks app and used to pay for your next ‘coffee milkshake’ is the promise of serious liquidity and price transparency. Bakkt is set to provide that in spades.

BEYOND RESEARCH: MORGAN STANLEY CRYPTO: Morgan Stanley Is Discussing Several Different Institutional Bitcoin And Ethereum Products

Morgan Stanley released a report late last year that described their take on Bitcoin and made passive mention of the crypto ecosystem in general. The report was widely reported on and it seems that the headline of choice was Morgan Stanley proclaiming that Bitcoin isn’t as much a store of value as it is an institutional asset class set to take on trading, and presumably, volatility needs at big banks and family offices across the globe.

While this language is and should be offensive to Bitcoin maximalists and anyone who believes in the original mission of Bitcoin – it certainly isn’t a surprise. If institutional (and a plurality of retail) clients ask enough times for something these institutions are going to give it to them, pure and simple. There is serious money to be made by creating expensive structured products wrapped around the guise of crypto volatility. The key words there are expensive and volatility. Expensive and volatility.

Morgan Stanley doesn’t have any interest in building out a warehouse facility or cold storage vault to house private keys and racks of hard wallets. There isn’t any money in it. At least not the kind of money that Tier 1 institutions have an interest in earning on that type of investment.

Instead, they are focused on several structured product initiatives that we’ve been made aware of that should be of interest to anyone attempting to get an understanding about how a powerhouse global investment bank is attempting to meet client demands.

Based on extensive discussions yesterday afternoon and again this morning we’ve heard three specific initiatives that are being *discussed* at Morgan Stanley (FYI – much like Goldman Sachs is in *internal discussions* regarding an Ethereum product to satisfy demand) and could come to market in 2019:

  1. A dedicated institutional trade desk that handles futures, OTC transactions, NDF like products that clients traffic across other Tier 1 institutions (Goldman, Citi).
  2. Internal discussions are ongoing as to whether Morgan Stanley uses Bakkt infrastructure *exclusively* with respect to Bitcoin futures transactions or using every resource that exists by 2019 (Bakkt, ErisX, CME, CBOE).
  3. Leadership in Morgan Stanley’s trading divisions are discussing whether or not to go all in on a Bitcoin NDF as well as an Ethereum product that has yet to be given a trading classification.

**Not included in the above list was a less prominently mentioned discussion point that included where does Morgan Stanley fall once a Bitcoin ETF product is created, as well as other SEC approved products throughout 2019. Discussions remain active as to whether or not Morgan Stanley creates their own branded products that are functionally identical to competitor products, or simply offer competitive products and whatever premium fee structures are inherent in the products themselves.

The discussions moving through trading rooms and in strategy sessions at the firm is not whether or not crypto is sustainable or a ‘flash in the pan’ bubble that will eventually fade. The discussion is focused on regulatory approvals and guidance, strategies to benefit from those new rules, and how to best position Morgan Stanley’s crypto products (should they choose to create native structured products) and services to its largest clients.

Which leads us to the dialogue in the Morgan Stanley research report making the rounds today. It adds context to the discussions internally as the firm positions itself for 2019; a year that those we spoke to believe will produce massive adoption, new (and relatively tame) regulations in the US, and trading volumes set to skyrocket.

The ‘money quote’ in the report, as it was told to us (to pay particular attention to) is this:

The net dollar amount in crypto hedge funds in 2016 was $380MM. Today it stands at over $6B.

You don’t need any other explanation for Institutional ‘fomo’ than those hard numbers. Those are funds that are eschewing fiat based products and diving into crypto, even in the midst of a bear market.

Morgan Stanley wants to be a real player in this market. They are working overtime to figure out just how to do it. Regulatory and legal hurdles need to be appropriately approached and handled, but when that happens they are planning to be at the forefront of what they believe will be a highly profitable new ‘super asset class’.

BITCOIN ETF: RESUBMITTED: Van Eck Hits Reset, Bitcoin ETF Shot Clock Restarts

After the VanEck Solid X Bitcoin ETF was pulled from consideration during the US government shutdown speculation regarding why ran its way through crypto circles around the world.

Was it headed for an obvious denial based on the US government shutdown? Was it headed for a denial simply on the merits?

Neither question was answered, but VanEck wasted little time in resubmitting the ‘rule change’ connected to its Solid X partnership Bitcoin ETF.

As shown below, the resubmission occurred yesterday: http://cdn.cboe.com/resources/regulation/rule_filings/pending/2019/SR-CboeBZX-2019-004.pdf 

The newly minted submission was announced by VanEck’s Digital Asset Director/Strategist Gabor Gurbacs, a fierce defender of the product and the crypto ecosystem itself.

The resubmission now brings about new questions. Does the regulatory clock go back to step one, or pick up somewhere else in the process? How likely is an approval, given there’d be no reason for a resubmission if a denial was in the offing?

Whatever the process looks like going forward this adds to the pent up bullish news set to grace the institutional space over the following months.

Those of you waiting/hoping that a Bitcoin ETF could serve as a bull run precursor, hope springs eternal it seems.

FIDELITY AND PHILAKONE: Crypto Twitter Spends The Day On Institutional News And Interpersonal Dumpster Fires

One of these things is not like the other. Isn’t that how the song goes? In a 24 hour period on crypto twitter, a known scammer seemed to out ‘ratio’ important institutional crypto news from one of the largest asset managers in the world.

Just in case you happened to miss it, Fidelity sources claimed that the firm has well laid out plans to launch its crypto ‘Digital Assets’ initiative in March. The timing seems to be well calculated, as well as some what correlated to Bakkt; as the two firms continue to compete for the blessing of institutional assets across the global investment banking spectrum.

Custody, a commonplace practice in conventional financial markets like stocks, involves a third party holding onto securities to reduce the risk they’ll be lost or stolen. But while a number of startups have sought to offer the safekeeping service, many Wall Street professionals have longed to work with a large financial services firm, a role Fidelity may fill. Others including Bank of New York Mellon Corp., JPMorgan Chase & Co. and Northern Trust Corp. have explored entering the field. Meanwhile, digital coins are constantly stolen, underscoring the need for better safeguards.”

The news connected to Fidelity made its way quickly around crypto twitter. Even though the crypto markets were unimpressed and didn’t seem to react in the way some would have hoped (bullish), the news still made an impact.

More of an impact than another issue that dominated the ‘CT’ debate throughout the day.

Philakone drama began to spread throughout tweets, retweets, subtweets, and the like. It seems that his claims of being hacked, or stolen from, or some other sort of drama had crypto twitter abuzz.

The short version was this: Philakone claimed to have had $1.6MM stolen from him as a result of a break up he had just suffered. This coming shortly after an avowed social media ‘break’ (of which he seems to take often) that was supposed to last until March 1.

Narrator: It didn’t last that long.

Philakone responded to the break up by outing his ex-girlfriends identity, calling for legitimate violence against her, and exhibiting behavior that doesn’t necessarily surprise many that have paid attention to his particular styling of ‘personal brand’.

The real issue was the threats of violence after a break up. Given the amount of avowed ‘baby whale’ followers that Philakone possesses, this was a dangerous stunt.

In response his ex-girlfriend outed him for buying tens of thousands of followers and being a fraud.

Twitter chose not to suspend his account, but did restrict several tweets that referenced the abhorrent behavior. Respected members of the crypto community came to the aid of the ex-girlfriend/victim and admonished Philakone along the way.

Several others commented on Philakone’s mental health and his need to carefully evaluate his life choices. Of course, others took the opportunity to meme Philakone in fresh new ways, as he seems to be an easy target.

Crypto twitter has found creative ways to psychologically cope with the ever lengthening bear market. And yesterday seemed to be one of the most creative yet. Many timelines were inundated with Fidelity and Philakone commentary from across the globe.

Never change crypto twitter, never change.

FIDELITY DROPS: MARCH CRYPTO DATE SET: Fidelity Sources Claim The Firm Has A Set In ‘Near Stone’ Launch Date

One could make the case that Fidelity’s involvement in crypto is even bigger than Bakkt. As a massive asset manager to the masses, Fidelity’s commitment (albeit from an institutional standpoint at first) will absolutely raise awareness amongst the investing public.

Several sources familiar with the roadmap at Fidelity’s digital assets group told us that the firm has set a date in March to bring their crypto strategy to market.

The crux of Fidelity’s ‘use case’ for their service has to do with custody and Wall Street names that are looking for a ‘named’ trustworthy partner to dip their toes into the crypto waters.

Per Bloomberg:

Custody, a commonplace practice in conventional financial markets like stocks, involves a third party holding onto securities to reduce the risk they’ll be lost or stolen. But while a number of startups have sought to offer the safekeeping service, many Wall Street professionals have longed to work with a large financial services firm, a role Fidelity may fill. Others including Bank of New York Mellon Corp., JPMorgan Chase & Co. and Northern Trust Corp. have explored entering the field. Meanwhile, digital coins are constantly stolen, underscoring the need for better safeguards.”

The other backdrop here is this – Bakkt and Fidelity could be on the cusp of a “Goliath versus Goliath” battle for the hearts and minds (and wallets) of institutional investors as they allocate assets into the crypto space. Fidelity passed on the opportunity to invest in Bakkt nearly a year ago; presumably because they knew they were about to launch their own likeminded solution.

And one marketing note…Fidelity has a leg up on Bakkt strictly from a name recognition standpoint. When you say ‘Fidelity’ very few, if any, investors are going to ask you “who’s that”? When you bring up Bakkt to even sophisticated investors you don’t get the same response – rather, you have to take time to describe what and who Bakkt is.

It remains of interest who hits the markets first. Both Bakkt and Fidelity look to be running neck and neck at the moment.