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Welcome to the Merge
The headline news of the month is that Ethereum’s long-awaited transition from Proof of Work to Proof of Stake, known as the Merge, has been scheduled for the Ethereum mainnet. This announcement came following the successful upgrade of all Public testnets. The Merge will occur in two phases. The first phase is called Bellatrix and will occur on September 6th. The second and final phase called Paris is expected to occur between September 10th and September 20th and will switch the consensus mechanism to Proof of Stake.
There has been much speculation on the price of ETH following the Merge and as such, there has been an increase in trading volume and open interest for ETH futures and micro-sized ETH future options. In relation to this, the world’s largest derivatives exchange, the Chicago Mercantile Exchange (CME), announced that they will start offering options on ETH futures on September 12th. They also launched euro-denominated Bitcoin and Ethereum futures. In addition, Coinbase’s derivatives exchange launched a Nano Ether futures contract.
Large Corporates Making Moves
BlackRock announced that it will start to offer crypto for institutional clients through a partnership with Coinbase Prime. Through the partnership, mutual customers of Coinbase and BlackRock’s investment management platform, Aladdin, will have access to crypto trading, custody, prime brokerage, and reporting capabilities. Brazil’s largest investment bank, BTG Pactual, announced the launch of a crypto trading platform called Mynt. The platform allows users to trade BTC, ETH, SOL, DOT, and ADA. Finally, it was announced that Chinese technology company, ANT Group, is working with Malaysian investment bank, Kenanga, on a crypto ‘SuperApp’. According to reports, the app will include crypto trading, e-wallets, and portfolio management.
UK based neobank, Revolut, received regulatory approval from the Cyprus Securities and Exchange Commission. This will allow Revolut to offer additional crypto services and exposure to crypto assets to its 17 million customers in the European Economic Area even after the EU Markets in Crypto Assets (MiCA) bill is enforced. Galaxy Digital abandoned plans to acquire crypto custodian BitGo due to claims that BitGo had failed to provide required audited financial statements for 2021 by July 31st. BitGo is reportedly seeking $100m in damages. The $1.2bn acquisition was announced in May of 2021 and was expected to close by the end of 2021.
Tech, Tech, and Starbucks?
Meta started the month by announcing that it is expanding its digital collectibles (NFTs) support on Instagram to 100 more countries and that it is integrating the Flow Blockchain. As of now, Instagram supports Ethereum, Polygon, and Flow. Meta also recently announced that it is adding support for NFTs on Facebook. Reddit has continued its venture into blockchain by airdropping free NFTs to its top users with high amounts of Karma. Karma is Reddit’s internal ecosystem point system that rewards users for participating and engaging in Reddit communities. The airdrop of the Polygon-based “Collectible Avatars” has already begun. Finally, Starbucks teased the release of a Web3 rewards program to attract new customers. According to CEO Howard Schultz, “This will create an entirely new set of digital network effects that will attract new customers and be accretive to existing customers in our core retail stores.” The full reveal is expected during their investor day on September 13th.
Is the US Clamping Down?
The US Treasury Department sanctioned cryptocurrency mixer Tornado Cash and blacklisted Ethereum addresses that utilized its services. Tornado Cash enables users to enhance transaction privacy between deposits and withdrawal addresses. The Treasury accused Tornado Cash of laundering more than $455m for North Korea’s Lazarus Group. In addition, Alexey Pertsev, the developer behind Tornado Cash, was arrested and accused of concealing criminal financial flows and facilitating money laundering. This has generated concern from parts of the Web3 community who believe this could negatively impact the development of open source software and privacy within transactions.
Following the collapse of Celsius and Voyager, questions were raised about how safety deposits were represented to clients. In July, the FDIC sent cease-and-desist letter to Voyager stating the firm falsely told clients that they would receive FDIC insurance (FDIC insures federally regulated bank accounts up to $250k). This has continued into this month as the FDIC ordered crypto exchange FTX US and 4 others to cease ‘misleading’ claims that suggested their products may be insured by the agency.
Disclaimer: this newsletter was put together for informational purposes only based on our review and analysis. This should not be construed as a solicitation, offer, or recommendation to acquire or dispose of any investment or engage in any transaction.