Jan 25, 2021 • 5M

Crypto Crime, Mine and more

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Some say Crypto is a scam. Others swear it's a breakthrough technology. But which is it? Join us, as we explore Crypto in real life (IRL).
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Each week, I cover the “So What?” of 5 stories from the world of crypto in about 5 minutes. Let’s go.

  1. Crypto crime drops to 0.34%

  • Chainalysis reports total cryptocurrency sent or received by criminals dropped to 0.34% of total in 2020 down from 2% in 2019

  • In contrast, the United Nations Office on Drugs & Crime estimates money laundering takes up 2-5% of the global GDP each year

So what?

  • Cryptocurrencies like Bitcoin earned a bad reputation because criminals were amongst its earliest adopters; now it appears that cryptocurrency has a lower share of criminal activity than the traditional fiat payment systems

  • Scams accounted for 54% of the criminal crypto activity with ransomeware accounting for 7% of crime but increased 311% year-over-year

  • Firms like Chainalysis partner with the FBI, IRS, DEA, ICE and EuroPol to track the flow of illicit funds along the blockchain; they have identified and seized substantial amounts of money

    Source: Chainalysis 2021 Crypto Crime Report

  1. Coinbase has over 43M users:

  • Coinbase now reports 43+M users across 100+ countries with $90+B assets on the platform

  • The number of users has increased by 8M (22%) since the last update in mid-2020

  • Coinbase’s custody business for institutional investors now has $20B assets with $14B received within the past 6 months

So what?

  • Coinbase is cementing it’s leading position in the cryptoexchange market as interest has grown

  • Some industry analysts estimate that it’s IPO could fetch $28B or more.

  • Coinbase could see increased competition for institutional investors as Anchorage recently obtained a federal banking charter and is well positioned to provide sub-custodial services and other crypto-related financial services to large institutions.

  1. New $10B Samsung plant could support US bitcoin mining

  • Samsung may invest $10B in a 3nm computer chip making facility in Austin, TX

  • These chips could be used by bitcoin mining operations; however, there could also be demand from the likes of Apple and Nvidia

So what?

  • China has ~65% of global bitcoin mining capacity while the US and Canada account for ~10% led by 15 mining facilities at scale (>50MW)

  • China’s dominance is largely due to access to low cost energy after a decade of investing in hydroelectric, coal, and wind energy facilities

  • Bitmain is building the world’s largest bitcoin mine in West Texas to take advantage of abundant wind energy and deregulated power market; there are couple other large bitcoin mining operations planned or in operation in the Lone Star State

  1. Retail bank develops stablecoin

  • Sber, the largest retail bank in Russia is developing a stablecoin for use by its corporate clients

  • The stablecoin will be backed by the Russian Rubble, and could enable low cost, instant payments saving corporate clients high fees

So what?

  • Sber is the 3rd largest bank in Europe with ~140M retail clients and 1.1 million corporate clients across 22 countries

  • Sber could eventually apply lessons learned to its retail business

  • Banks in the US and abroad are receiving regulatory clarity as new guidelines are issued regarding their use of digital currencies; expect more announcements

  1. China is expanding its DCEP pilot

  • China’s pilot of the Digital Currency and Electronic Payments (DCEP) has netted over 4 million transactions valued more than $300M

  • It’s now being expanded to Shenzhen where officials will conduct $3M red envelope giveaway

So what?

  • 80% of central banks in major economies are conducting R&D into digital currencies

  • China’s pilot is one of the most advanced and has morphed from small-scale closed loop to larger-scale open loop tests

  • Expect rollout beyond China’s Tier 1 cities later this year