Crypto Crime, Mine and more

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

2. 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.

3. 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

4. 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

5. 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