Dispatch #6: Global Financial Institutions in the CBDC Era

In this patch of your weekly Dispatch:

• Everyone from the WEF to the OECD to the G20 to the IMF is talking CBDCs
• Bitcoin hash rate hits a new ATH as OTC desks report a shift back from DeFi
• Moving treasury holdings from cash to bitcoin is becoming a permanent trend

The Big Idea

Global Financial Institutions in the CBDC Era

It has been an absolutely explosive week for central bank digital currencies (CBDCs) - particularly concerning involvement from the institutional heavyweights of global finance. Take a look:

• The Bank for International Settlements and seven central banks (including the Fed) released a report on the core principles for CBDCs
• The ECB is pursuing a public consultation on a potential "digital euro"
• The G20, IMF, and World Bank are teaming up to lay some global regulatory frameworks for CBDCs
• The OECD is preparing a tax framework to pitch to the G20 next year
• The World Economic Forum released a report about blockchain technical standards

And this is to say nothing of news about new pilots in countries ranging from Japan to Russia to South Korea. Of course, much of this is happening around a big virtual IMF meeting, but the fact that there is so much focus on this domain should send a clear signal that digital currencies are on the agendas of these institutions.

If you haven’t spent time yet thinking about the implications of central bank digital coins - now is the time.

The Latest In…

Bitcoin

Most of our social discussion of Bitcoin is - of course - about the price. But many other fundamentals can give us insight into the health of the network, and the hash rate is right at the top of that list. This week, bitcoin’s seven-day average hash rate hit a new all-time high. Overall, the hash rate is up nearly 40% this year, despite the halving. This is an extremely bullish signal from miners that the rest of us should be paying attention to.

The Latest In…

Altcoins

After years of anticipation, Filecoin is finally coming to mainnet. According to news reports, some of the biggest exchanges are ready to service the token once it does, but the question remains – how legit is Filecoin? In another interesting altcoin tidbit, Litecoin is moving more aggressively to add privacy-enhancing features. It doesn’t seem like a market motivated decision, but it is worth noting that Zcash and Monero have seen their token price triple and double this year, respectively.

The Latest In…

Institutions

It was a big week for institutional news - just see this week’s Data Story below! Beyond Stone Ridge, another institutional player was in the news, as Grayscale announced its best quarter ever, seeing more than $1B in new investment across its products. That brings Grayscale’s 2020 haul to $2.4B - more than twice what it saw 2013-2019 combined. JP Morgan also put out a research note on Bitcoin, focusing on the bullish signal of Square’s treasury investment.

The Latest In…

Crypto Markets

We’ve spent a lot of time over the last few months looking at DeFi. It has undeniably been where crypto attention is. That said, recent reports from OTC trading desks suggest something of a shift back to the blue chips: bitcoin and ether. Will that trend continue? Only time will tell.

The Week’s Most Interesting Data Story

The Rise of Bitcoin Treasuries

First, it was MicroStrategy (Saylor is a bull bull bull). Then last week, it was Square. This week also got a related announcement when Stone Ridge Asset Management revealed it was holding 10,000 BTC (worth ~$115M) as its primary reserve asset. Thanks to bitcointreasuries.org we can track live public companies holding BTC. Below are some of the publicly-listed companies holding BTC, ranked on the Y-axis by the % of market capitalization that their BTC represents*.

Hot Topics

What the Community Is Discussing

Speaking of CBDCs, you can bet that part of the urgency we noted above is coming from how quickly China’s DCEP project is advancing - including a massive $2M equivalent digital yuan giveaway in Shenzhen last weekend

Between the BitMEX action in the US and the UK’s derivatives ban, there is a sense that a regulatory tide is shifting

You might be getting a bit of a Bitcoin bull tingle. If you are, you’re not alone

Our Take

@AntoniNexo This Week

Weighing in on the ECB’s discussion of a digital euro, Nexo’s Antoni Trenchev noted: “The potential introduction of a digital Euro would be a serious milestone in creating a fully-functioning Digital Single Market for Financial Services in the EU and would help improve the efficiency of the financial system. With financial technologies gaining credibility, Europe is witnessing the organic formation of new financial habits and it’s very encouraging to see this shift embraced by an institution of ECB’s importance. I see Christine Lagarde’s announcement as a quasi-official endorsement of the work and mission of Nexo and similar companies operating on the continent.”

What to Watch for Next Week:

• Will another domino fall in the Bitcoin treasury trend?
• Will US election questions impact the markets?
• Will Filecoin excite the markets 2017-style or launch with a thud?