The independent statistical research company, Statitsica, claims there are only 40 million Digital wallets in existence globally. Can Coinbase really have 75% of all wallets?

Source: www.Statitsica.com

According to the website Blockchain.com, as at 22/07/2019, there were just over 40.6 million Bitcoin wallets so it would appear that potentially Statitsica’s stats may be a little out of date. 

One has to be careful when looking at statistics, as according to Finder.com, 97% of Brits are yet to buy a cryptocurrency and 31% have not bought because they believe it’s too high a risk. However, the figures Finder.com is quoting in its June 2019 article were taken from a survey carried out in 2018!

Nevertheless, Digital Assets continue to be a niche asset class although, with Facebook’s announcement wanting to launch its own Digital Currency, Libra will potentially massively increase the number of digital wallets.

This idea is now being considered by Club Atlético Peñarol, in Uruguay, that could be used by fans to pay for tickets, as a type of loyalty scheme, as well as getting access to discounted club merchandise.

Also, in South America, two Brazilian football teams, Atlético-PR and Corinthians, have reportedly signed partnerships with Hong Kong-based crypto start-up Inoovi, which recently launched its “IVI” token, specifically for football clubs. Inoovi is looking at offering fans access to Virtual Reality and 360º streaming technology, so allowing fans an experience as if they were actually attending the match.

Meanwhile, in the USA, The Miami Dolphins football team have recently agreed to adopt Litecoin, which has a market capitalisation of over $6 billion, as its official cryptocurrency coin. Charlie Lee, Litecoin’s founder and managing director, said “This collaboration propels Litecoin in front of an audience of millions of people around the world at a time where adoption of cryptocurrencies continues to gain momentum and the ecosystem is able to support real-world use cases in ways previously not possible. We see this as a powerful way to raise awareness and educate people about Litecoin and cryptocurrencies on a tremendous scale.”

These examples of how Cryptocurrencies are being used globally by sporting clubs illustrate how sentiment is turning more positive to this New Asset class, and organisations are understanding how they can use them!

Reg A+ is as an alternative to an Initial Public Offering (IPOs), allowing businesses that have a shorter trading history a way to raise capital, with fewer disclosure requirements than a typical IPO. Many of these mini-IPOs have not performed well and some have been dogged by concerns over fraud, prompting both Nasdaq and the New York Stock Exchange (NSE) to raise their listing requirements for Reg A+ companies.

However, Blockstack is being heralded as the first approval from the SEC since it started it’s “crackdown” on Cryptocurrencies, in particular, ICOs, as many of the ICOs were perceived as being securities by the regulator. This is significant as it sets a precedent for other firms that wish to raise capital in the USA using Reg A+ regulations i.e. obtaining investments from non accredited investors – the general public. Blockstack has used the SEC approval, and in doing so, has raised $28 million via the sale of its digital token. Approval from the SEC did not come without a significant cost for Blockstack, as it spent $2 million to get approval for its ICO.

Blockstack’s achievement to gain permission from the SEC could prove to be an inflexion point for Cryptocurrencies, but investors will still need to be vigilant. However, are we now going to see other firms using this route to raise capital and get listed on Nasdaq or the NSE, as opposed to the various new Digital Asset exchanges currently being established?

With the announcement of Libra, Facebook’s new Digital Currency, it was reported in The South China Morning Post that Wang Xin - a director of the People’s Bank of China (PBOC) – said recently at an academic conference hosted by Peking University’s Institute of Digital Finance “If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system?” China was one of the first countries to look at Digital Currencies back in 2015. Indeed China has enjoyed huge success replacing cash as its economy goes digital. Wepay (owned by Tencent) recorded 460 billion annual transactions in 2018, while Alipay (owned by Alibaba) recorded 197.5 billion transactions.

The widespread use of Alipay has created Yu’e Bao (Chinese for secret treasure), the world’s largest money market fund at $150 billion in size! Merchants use Alibaba’s fully digital C2C and B2C platforms which connect consumers and businesses while providing logistics, payments, and credit facilities. This means that merchants often decide to leave, in effect, their cash flow in Alipay’s Yu’e Bao’s fund.

Possibly, given the fact that daily life for many Chinese people is conduction without using cash, the PBOC does not wish to lose control and see a foreign Digital Currency, especially one backed by non-Chinese fiat currencies such as Facebook, gain too much traction in the Chinese economy. The PBOC, after receiving approval from the State Council, has been working with market institutions on creating a central bank digital currency, according to Wang Xin. However, there have been no public announcements of progress.

Cai Weide, a Chinese professor of Blockchain and crypto, who has worked around the world said “China was “lagging behind and that they should not underestimate the importance of Libra, an invention that, is (one of the) major financial technology reforms in the past 500 years”. 

There is no guarantee that Libra’s Facebook will succeed, but the ‘genie is out of the bottle’ causing many organisations and governments to take Digital Assets more seriously, as they begin to understand the challenges and opportunities these Digital Assets offer!

The CEO of Goldman Sachs, when asked if his firm is looking to launch a Digital Currency like JP Morgan, replied “Assume that all major financial institutions around the world are looking at the potential of tokenisation, stablecoins, and frictionless payments” 

Meanwhile, Wall Street seasoned-investor Henry Kravis (co-founder of KKR), has been investing in Parifi Capital which has $190 billion under management, and claims he now spends most of his time researching Blockchain and Cryptocurrency opportunities. Billionaire Peter Theil (co-founder of PayPal) has, according to Blomberg, also been investing in Blockchain and Digital Assets.

The chart shows the volume being traded in Bitcoin, and as you can see, even though the price of Bitcoin is still over 40% below the 19,454 it reached in 17th December 2017, the volume of Bitcoins being traded has been strong over the last few months.

Fidelity, with over $2.5 trillion under management, carried out a survey of 441 of its institutional clients and found that 22% had already bought a Cryptocurrency, and 47% thought that this asset class had a place in the funds it manages.

One of the concerns that have held back institutions has been that many of those that use Cryptocurrencies, like Bitcoin, are carrying out illegal activities. Therefore, in the recent analysis from Chainalysis, Bitcoin transactions have fallen in 2012 from 7% to less than 1% in 2018.

BitMex, which is the world's’ largest Crypto platform, last week reported over $16 Billion of trades in a day, demonstrating the clear demand and interest in this new asset class. Meanwhile, the Chicago Mercantile Exchange (CME) announced Bitcoin futures hit $1.7 billion in notional value traded on June 26th, 2019. This represents a 30% increase from its previous high, reportedly as a result of institutional interest.

So, why is this the case? Well, Binance - which is one of the world’s biggest Crypto exchange - has a turnover of over $1.5 billion worth of Digital Assets a day, and just announced (despite only 15% of its turnover coming from the USA) that as of September 2019, it will offer a separate Digital Asset exchange for US investors and another exchange for non-US investors. Therefore, it would appear that it is unlikely in the near future that it is going to be possible to have one global exchange that anyone, regardless of where they live, can trade on.

However, with a G20 meeting being held on June 28th  2019 in Osaka, Japan, Crypto-exchanges are on the agenda. Maybe we will see some clearer guidance being given about how Crypto exchanges are to be regulated going forward.

The Financial Action Task Force (FAFT), which is an intergovernmental body established in 1989, and which focuses on money laundering and terrorist financing, will be presenting its recommendations on how Crypto-exchanges ought to be regulated before the G20 meeting. Although, given the traceability and transparency that Blockchain technology offers and the fact that you can, in effect, programme-in checks and balances, could make FAFT obsolete! Such checks are impossible with the current largely paper-based analogue systems and platforms that we currently use, but will FAFT see it this way?