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Satoshi&Co Daily Crypto Newsletter

October 14 · Issue #240 · View online
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Check out past issues of the newsletter along with more interesting crypto content as well as short (but great) conversations with leading crypto industry participants at our newly-launched website www.satoshiand.co

As many of you may have noticed, we could not send out too many newsletters this past week, as we focus on getting Qume ready for a beta launch. Keeping that in mind, we cover key events from last week in today’s newsletter.
Binance and the curious case of the vanishing fiat on-ramps
Earlier last week, Binance announced that it would be accepting fiat through Alipay and WeChat, opening up the p2p exchange for crypto trading in China. 
While this announcement underscored the strong demand for crypto trading in China, it also came as a surprise to many - How could Binance facilitate crypto trading in a country that has legally banned crypto exchanges for a while now. There has been enough evidence in the past that suggested strong demand for p2p and OTC trading in ‘alternative’ marketplaces in China in the absence of legitimate crypto exchanges, but accepting fiat from Alipay and WeChat, which together have more than 1.5 billion users raises concerns over regulatory clampdown.
Alibaba was quick to deny that it supports crypto-to-fiat OTC transactions and patently stated that it would censor any payments linked to Bitcoin or other digital currencies. The following conversation between @lawmaster and @CZ (now deleted) gives some interesting insights into how crypto trading in China takes place despite the ban. 
With China having expressed its interest in launching a state-backed cryptocurrency with the help of Alibaba and WeChat as distribution partners, it will be interesting to see how they react to Binance using Alipay and WeChat for p2p trading. 
As we had noted in one of our newsletters some time ago, tolerance for ambiguity is especially high in China. There might be the letter of the law, but there is also the spirit of the law that is even more important. Official government bans have their place, which seems primarily to be to scare off the pretenders and the dilettantes. What is clear is that China will continue to be important to crypto and crypto will continue to thrive in China, at least as long as certain unspoken ‘rules of engagement’ are not violated by the various stakeholders. The above tweet thread was a rare instance where one of the key stakeholders in China strayed dangerously close to the line, maybe even crossing it for an instance before pulling back. 
Multi Collateral DAI Coming Soon…
(Read up some of our past coverage on DAI here, here and here)
DeFi giant MakerDAO is is in the middle of a massive revamp as part of its upgrade to multi collateral DAI (DAI). The new upgrade allows users to hold their collateral in multiple ERC20 tokens, not just ETH. This could include commodity-backed tokens and ERC-20 version of bitcoin (wBTC). Using the new multi collateral system, users can gain leveraged exposure to the underlying collateral in various currencies.
Amongst the new features proposed is the DAI interest rate. Users can now earn interest on their minted DAI tokens without having to lend them out on a borrowing/lending app. The savings rate is a new monetary feature that can be adjusted to control the supply of DAI and maintain its price stability. 
In addition, MakerDAO is launching a frontend portal called Oasis that allows DAI users to seamlessly borrow, save and trade DAI tokens. This is a nifty bit of forward integration, and gives MakerDAO direct access to end-users, and also puts it in direct competition with platforms like Compound, Dharma, Nuo(Juno), Instadapp etc. Remember, these DeFi platforms all use DAI extensively in their lending businesses.
Regulators’ knock Libra off balance
(Read up some of our coverage on Libra and Facebook here, here, here and here).
After the initial hype, things have been going south for Libra ever since Facebook announced the launch of Libra back in June. The project has faced severe criticism and backlash from various central bank regulators. The regulatory scepticism and the backlash have finally gotten to Libra’s founding partners as several key early supporters such as Visa, Mastercard, Paypal, eBay, etc. have announced their departure from the projects, raising serious questions over the project’s future course and its eventual success.
What probably was the proverbial final straw on the camel’s back was this letter by a couple of US Congress members to various Libra participants. The letter, among other things, touched upon:
  • Facebook’s egregious track record with data protection
  • Statistics that point to child pornography still being rampant on Facebook
  • Facebook’s reluctance to shoulder the responsibilities of being a financial services player with Libra, which the Congress members accuse Libra of pushing onto the various consortium members
  • There was an implicit threat in the letter; Any company working with Libra would be doing so at their own risk, and might be liable to face punitive regulatory action
Source: TechCrunch
The departure of leading payment companies from the consortium calls into question the viability of Libra’s vision to become a leading p2p payment mechanism, including cross-border transfers. The presence of the payment giants, who perhaps wanted to piggyback on Libra’s success, with their strong penetration and partnerships would have helped Libra tap into the existing payments markets with relative ease. With their departure, Libra is essentially a business rival to each of them. The remaining founding members are expected to meet soon to discuss the governance structure and the launch roadmap for the project. It would be interesting to see how the project responds to the exit of some of its key founding members and the strong criticism being levelled at them. 
What does this mean for Facebook and Zuckerberg? For one thing, this was an ambitious plan for a company which was facing a maturing core business with its various social networks stagnating in growth. By dangling the power of its various networks and user bases, Facebook cleverly managed to cobble together a consortium of some of the leading players across a range of industries, with the notable exception of the banks. In spite of the fact that Libra would also have been a direct threat to these payment companies, they likely went along after being FOMOed into it. But with all the negative publicity and the scrutiny threatening to distract from their core business, they have probably decided to pull back for now.
Facebook will definitely be back with another iteration of the Libra, and will start making tweaks to the design to make it more truly decentralized. This is a good thing, as we have often felt that Libra in its current avatar is more an oligarchy like EOS from a governance perspective. A truly decentralized design will be able to better withstand regulatory pressure as we have seen from the likes of Bitcoin, Ethereum etc. Facebook has too much at stake, and more than enough cash in hand, to give up the crypto fight just yet.
Meanwhile in Crypto Wonderland....
“Booking.com The Latest To Exit Libra”
The Libra Association hasn’t officially launched but has already lost a quarter of its membership, as Booking Holdings Inc., an online travel company that operates websites including Kayak.com and Priceline.com, joined Visa Inc., Mastercard Inc. and four other companies in leaving the controversial cryptocurrency project spearheaded by Facebook Inc. With the departure of Norwalk, Connecticut-based Booking, the Libra Association now has 21 founding members remaining of the original 28 companies that signed on to the association in June. PayPal Holdings Inc., Stripe Inc., MercadoLibre Inc. and EBay Inc. in the past two weeks have also said they would abandon the project.
“Coinbase Obtains e-money License”
Coinbase has obtained an e-money license in Ireland, joining a growing number of crypto firms that have secured permission from the nation to offer financial services across the European Union. The license will enable Coinbase, which keeps its non-US headquarters in London, to process payments, issue e-money, and handle electronic money wallets. The license, granted by the Irish central bank, gives it permission to operate throughout the EU. The development also allows San Francisco-based exchange to operate under their legal entity name, which demonstrates how the crypto space is maturing and having a greater impact in the financial world.
“Telegram ICO Likely To Be Delayed”
Telegram could delay the original plan of issuing its own cryptocurrency on the Telegram Open Network by Oct. 31 after the U.S. Securities and Exchange Commission (SEC) ordered it to halt the allegedly “unlawful” token sale in the country. According to a report from Bloomberg on Monday, Telegram sent a note to investors saying it is considering ways to resolve the temporary restraining order from the SEC , including the possibility of postponing the issuance after the Oct. 31 deadline. The SEC said on Friday last week that it filed for and obtained an emergency action and restraining order halting Telegram from selling or distributing its gram tokens in the U.S. The agency said Telegram sold 2.9 billion gram tokens worldwide, with more than 1 billion to U.S. investors allegedly without registering the offering with the securities regulator.
“Ripple Invests In A Crypto Exchange”
Ripple, the firm behind the third biggest cryptocurrency XRP, has led an investment round in Bitso, one of the biggest crypto exchanges in the Spanish-speaking world. An early partner of Bitso, Ripple has led the new investment round to support the first cryptocurrency exchange in Mexico, the company officially announced on Oct. 14. As reported by crypto publication The Block, the new investment round also involves major investors including United States-based crypto exchange and wallet provider Coinbase, Jump Capital as well as existing investors such as Digital Currency Group and Pantera Capital. The amount of investment has not been disclosed.
Crypto Twitter Pick
Ari Paul ⛓️
We're still at the "command line interface" phase of cryptocurrency. In 3 years you'll be able to buy BTC on a non-custodial exchange, transfer it to a custodian or hardware wallet, via a mobile app interface, and send it to a friend, without needing to deal with a public key.
2:30 PM - 4 Oct 2019
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