Coin News

Huobi Japan Holding Ltd. has acquired a majority stake in Japanese cryptocurrency exchange BitTrade, marking the top-three exchange’s formal entry into the Japanese market.

BitTrade, which is one of the 16 government-approved crypto exchanges in the country, announced the news yesterday, September 12, 2018.

Japan's Financial Services Agency (FSA) began issuing exchange operating licenses in 2017, but in light of the Coincheck hack in January 2018, the approval rate has plummeted as the agency has tightened its requirements.

Huobi Japan, which is a wholly owned subsidiary of Huobi Global, plans to "aggressively scale up the platform" in partnership with the management team of BitTrade. The subsidiary will work on making the platform user-friendly for its international customers, while providing more professional and compliant services as well.

Huobi CFO Chris Lee hailed the partnership as a strategic success, saying the companies’ synergy will strive toward improvement “through continued investment into R&D and compliance.”

“Leveraging on BitTrade's leadership team and its Japanese government-approved license, this is just the beginning,” he added.

Huobi, currently ranked the third largest crypto exchange in the world by trade volume, has shown an inclination toward expanding into new regions through partnerships with local companies. The exchange currently operates in Singapore, Korea, Canada, Australia, the UAE, Luxembourg, Brazil and others.

BitTrade's owner Eric Cheng, a Singaporean millionaire who acquired a 100 percent stake in BitTrade Co. Ltd. for $50 million earlier this year, said both parties would scale the platform into the "largest in Japan with the potential to extend its services globally."

He went on further to state:

“Together, we will leverage on Huobi's global footprint, excellent management team, and advanced security systems to grow BitTrade into a market-leading position in Japan. Having a long-term partnership with an established brand such as Huobi is the right step for BitTrade as we look to continue our rapid growth trajectory."

Morgan Stanley is joining Wall Street’s race toward an institutional-friendly bitcoin derivative.

According to anonymous sources reporting to Bloomberg, the financial institution is devising price return swaps tied to bitcoin. These derivatives would allow investors to indirectly invest in the market’s flagship currency, allotting them the option to buy into long or short positions through the contracts.

Taking their prices from bitcoin futures, the swaps will not handle bitcoin directly. Seeing as Morgan Stanley is a regulated and established financial institution, tying the product to futures contracts is a safer bet than basing them on bitcoin’s spot price, as the Chicago Mercantile Exchange and Chicago Board of Exchange offer fully-regulated bitcoin futures from which Morgan Stanley can pool pricing data.

Bloomberg’s source claimed that the derivatives are ready for launch, but it’s waiting on an in-house approval process and sufficient investor demand before taking them to market. In the original reporting, a Morgan Stanley spokesperson declined to comment on the developments.

If the tip is valid, it would make Morgan Stanley the latest in legacy financial groups looking to open a doorway for institutional investors to enter the cryptocurrency market. Despite false reports claiming that Goldman Sachs had put hopes for a bitcoin strategy behind it, the bank has a strategy desk in the works, a service that, if opened, would add to the bitcoin futures options it facilitates for its clients.

Citigroup also reportedly has so-called digital asset receipts in the works. Like its traditional counterpart in American depository receipts, these receipts offer investors an option to purchase an asset that doesn’t trade on local markets from a foreign exchange.

Institutional-tier offerings such as those detailed above are seen as much-needed catalysts to stimulate the flow of institutional money into the market, offering heavyweight financial players a less-risky way to buy into assets like bitcoin. For the same reason, custody services like those offered by Coinbase, BitGo and others are necessary for safely storing and managing these investments as well.

BitGo has received the green light from the South Dakota Division of Banking to act as a qualified custodian for digital assets, according to a Business Wire press release.

The approval means the BitGo Trust Company can now offer secure storage for digital assets “designed for institutional customers,” Chief Compliance Officer Shahla Ali told Bitcoin Magazine. “Built on BitGo’s multisignature security, BitGo Custody delivers modern security for modern assets,” Ali continued.

Ali went on to explain that “BitGo has been working on its application for its charter to be a qualified custodian for the past year.” Per South Dakota regulations, the company won't begin storing assets under the Trust until a 30-day period has elapsed.

Along with the volatility of cryptocurrencies — which stablecoins are seeking to remedy —  the obstacle of having a safe storage option for cryptocurrencies has obstructed institutional investors from entering the market. Seeing as these investors are used to having their funds safely stored or being FDIC insured, BitGo CEO Mike Belshe believes the lack of readily available custodial services have kept "institutional investors out of the market."

BitGo is not the first cryptocurrency company to offer custody services. Digital assets platforms Coinbase and Gemini have both launched their own custody solutions in a bid to attract institutional investors to the market, as well, and financial institutions such as Goldman Sachs and Northern Trust are reportedly planning to launch similar services.

In the press release, Belshe points out that, unlike custody services offered by exchanges, BitGo is solely focused on cryptocurrency custody. Built on the technology behind BitGo’s wallet services, the custody will offer cold wallet support with storage in “bank-grade Class III vaults,” support for over 75 cryptocurrencies, multi-user accounts and around-the-clock support.

The custody service is the latest attempt by the company to build out its services. Recently, BitGo implemented a predictive Unspent Transaction Output (UTXO) management system. The UTXO system manages micro-units of cryptocurrencies “by minimizing transaction sizes at high fee rates, while automatically sweeping up and processing many small fragments of coins when fees are low.”

University of Berkeley Professor Barry Eichengreen has taken a swipe at the viability of stablecoins in an op-ed published on Project Syndicate. The critique, entitled “The Stable-Coin Myth,” argues stablecoins are not automatically "viable" just because they are pegged to an asset, though Eichengreen does believe they have an advantage over "conventional cryptocurrencies" such as bitcoin which he says "is highly unstable" and "unattractive as units of account."

“Stable coins purport to solve these problems. Because their value is stable in terms of dollars or their equivalent, they are attractive as units of account and stores of value. They are not mere vehicles for financial speculation. But this doesn’t mean that they are viable," he writes.

Stablecoins are digital tokens intended to retain a stable value, usually one pegged to a traditional currency like the dollar or euro. Typically, they are backed by a fiat currency or other assets, though this is not always the case.

Citing Tether (USDT) in its U.S. context, Eichengreen believes that fully collateralized stablecoins won’t gain traction because it would mean trading in a currency that is “supported by the full faith and credit of the U.S. government, for a cryptocurrency with questionable backing that is awkward to use.” To him, “it is not obvious that the model will scale, or that governments will let it.”

Since its launch in 2014, USDT has been the most widely used stablecoin, and it's currently the eighth most popular cryptocurrency by market cap. Going mainstream comes with challenges, though, and Tether has suffered some adversity. Analysts and investors alike have criticized the stablecoin for its lack of transparency, and its affiliation with popular cryptocurrency exchange Bitfinex has raised questions as to whether it is printing more USDT than it can back.

Despite the controversy surrounding Tether, other companies seem to be learning from Tether's missteps, including fiat-collateralized competitor True USD. 2018 has seen an influx of stablecoins hit the market, some of which are funded by traditional financial institutions.

Two days ago, Gemini announced the launch of the Gemini dollar (GUSD) after getting the green light from the New York Department of Financial Services (NYDFS), an announcement that was quickly followed by the introduction of the Paxos Standard (PAX) stablecoin by Paxos.

According to the NYDFS’ press release, both tokens are subject to the Bank Secrecy Act, anti-money laundering controls and Office of Foreign Assets Control oversight to prevent them from being used in connection with money laundering or to finance terrorism.

Unlike Tether, which runs on the Omni Layer on top of the Bitcoin blockchain, both Gemini Dollar and Paxos Standard are ERC-20 coins that run on the Ethereum blockchain.