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VeradiVerdict - International Playbook For Exchanges - Issue #30

Hi, I am Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional
March 26 · Issue #30 · View online
Hi, I am Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing into blockchain companies and cryptocurrencies. I focus on early stage investments and want to share my thoughts and what’s going on in the industry in this weekly newsletter.
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Pantera has invested into quite a few local cryptocurrency exchanges, covering Latin America, Europe, Asia, Africa, and the Middle East. The thought process is that Coinbase won’t likely dominate the entire world anytime soon, and those that are situated in these geographies have an advantage of knowing the local culture, being able to recruit and market, and having the ability to build relationships for banking and regulations.

The biggest risk of investing in an exchange internationally is the potential of regulatory crackdown. Before we make an investment, we travel to the geography to chat with banks and legal experts in the region. Even after coming out confident, you’re still banking on the entrepreneur to continue to build the company brand, strengthen the relationship with regulators, and to de-risk the investment opportunity by educating the central bank and creating/obtaining the necessary licenses for fintech or cryptocurrencies.

The hope is for governments and banks to work with the leading exchanges to develop regulations/licensing so that there is clarity and protection for customers. In negative instances, countries like China and India have made it very tough for exchanges to operate by blocking their access to banking. Earlier this week, Mexico also announced that they would like banking institutions to distance themselves from crypto exchanges.

We’ve seen this story before of blockchain banking access to exchanges and those companies have been agile through a few different strategies:
  • Creating an offshore entity and obtaining licenses/banking there
  • Setting up crypto-to-crypto exchange
  • Enabling cash-to-crypto through a local bitcoins equivalent
  • Looking into setting up a decentralized version of their exchange
The bet is that the teams will figure out ways to navigate the hurdles and continue their business, keeping a stronghold on their geography but opening up avenues for international expansion.
95% Of Reported Bitcoin Trading Volume Is Fake, Says Bitwise
Presentation to the U.S. Securities and Exchange Commission
Sand, Death and Cryptocurrency: Life in a Decentralized Syria - CoinDesk
In the Tweets
Dan Zuller
1/ Just attended a very interesting @duffandphelps luncheon on valuing #cryptoassets. Here’s a thread on my key takeaways, as I understood them.
#BitcoinTwitter and #CryptoTwitter! Square is hiring 3-4 crypto engineers and 1 designer to work full-time on open source contributions to the bitcoin/crypto ecosystem. Work from anywhere, report directly to me, and we can even pay you in bitcoin! Introducing @SqCrypto. Why?
Circle CEO: Cryptocurrency Business Is Down But We're Still Growing | Fortune
Crypto Mining Giant Bitmain's IPO Application Has Officially Expired - CoinDesk
New regulation would effectively ban crypto exchanges in Mexico | Coin Center
Did the SEC Chairman Confirm Ethereum Isn’t a Security? Not Quite, but It’s Optimistic
Swiss Federal Council Initiates Blockchain Law Consultation Period
New Products and Hot Deals
BitGo Launches Custody for Blockchain Capital’s Security Token BCAP
Lock Up Ether, Get Free Crypto: Twist on Airdrops Attracts Top VCs - CoinDesk
Numerai Token Sale Raises $11 Million From VC Firms Paradigm, Placeholder - CoinDesk
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New York, Consensus Conference, May 13-15
New York, Token Summit, May 16
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