1. Introducing…JP Morgan Coin?
JPMorgan Chase is the largest U.S. bank, sixth largest in the world. It holds over US$2.6 trillion in assets. In the cryptocurrency community its CEO Jamie Dimon is most known for calling Bitcoin a ‘fraud’ and that he’d fire any employee trading Bitcoin for “being stupid.”
On February 14, 2019 the bank announced a project dubbed ‘JPM Coin’ which would allow its institutional investors to make ‘instant payments using Blockchain technology.’ Imaginations are running wild as to whether this ‘stablecoin’ is set up in direct competition to Circle’s USDC (backed by Goldman Sachs) or infamous Tether (both being the only competitors named on JPM Coin’s website). Other stablecoins are primarily used to transfer assets between cryptocurrency exchanges, and indeed an important characteristic of popular fiat-backed tokens is their listing on exchanges. JPMorgan classifies its competitors as being used primarily for investment, while it aims to position JPM Coin for payments.
Why it matters: Institutional clients of JPMorgan can already transfer assets between each other instantaneously and with low costs without using Blockchain technology. Intrabank transfers aren’t new or revolutionary. JPM Coin is not a cryptocurrency as many find important to point out. And yet it is borrowing Bitcoin’s terminology and actively comparing itself to Bitcoin’s most popular on-ramping mechanisms, while at the same time being dismissive of their core value proposition.
Bitcoin Association of HK’s Take: This is a perfect example of a Cargo Cult. Banks see Bitcoiners as foreigners with a different culture and language, and they fear being colonized by this new tripe. From afar, Bitcoin looks magical. It created value from what seems to be nothing, while also allowing to transfer this value almost instantly to any corner of the planet, all without a central entity controlling it. The bankers want two things: They want to retain their way of life and culture, but they also want to harvest its magical powers. Without understanding what makes Bitcoin function at its core, they replicate it at its surface. They copy the branding, the terminology, the meetups and some meaningless features (what’s a Blockchain good for, anyway?) in the hopes it will replicate the functionality.
2. Losses for Bitmain Losses and CEO Departure
As Bitcoin mining giant Bitmain is still pursuing its IPO on the Hong Kong Stock Exchange we learn of US$500 million losses in the third quarter of 2018. $100 million of this is due to the drop in cryptocurrency prices, mainly Bitcoin Cash, which Bitmain self-reports to be massively exposed to.
Jihan Wu, who led the company into the Bitcoin Cash (and later Bitcoin ABC) chain splits has been reported to be stepping down from his position of CEO already a month ago and is now rumored to be leaving the company entirely, doubling down on his bets on Bitcoin ABC.
Why it matters: Who is in charge of Bitmain? The company is still shrouded in mystery and many have speculated that the company is ultimately not driven by a profit-motive, but rather ego or politics. The high-profile backing of Bitcoin contenders like Bitcoin Cash was always seen as an attack on Bitcoin, attempting to bring it into the control of… someone. That Bitmain focuses on what commercial sense and giving up its ambitions to control or destroy Bitcoin through a variety of meaningless forks should calm the community down about the Chinese giant that so desperately wants to seek funding on HKEX.
Bitcoin Association of HK’s Take: I wish Jihan best of luck in his new adventure. That he failed to “take over” Bitcoin will always be an important anecdote in Bitcoin’s development.
3. Coinbase acquires and Fires Blockchain Analytics company Neutrino
Coinbase’s acquisition of Blockchain Analytics company Neutrino two weeks ago was widely criticized as disrespecting user privacy and even endangering their security after it was revealed that key Neutrino employees previously worked for Hacking Team, an Italian firm that sold spyware to authoritarian regimes for use against human rights lawyers and activists. After much public backlash especially on social media Coinbase CEO Brian Armstrong announced that these employees would be let go, without going into details of which team members would be let go when, and providing reassurance they wouldn’t later be hired back as independent contractors. This all comes amid news that Coinbase lost customer data through a previous intermediary, who sold it to unknown third parties. Coinbase’s competitors however regard Neutrino as an inferior product, while others insist they never sell or lend customer data.
Why it matters: Financial data is seen as highly sensitive, especially when related to Bitcoin, which might be more attractive to robbers and kidnappers than other forms of capital. Any cryptocurrency company should collect as little data as legally possible and deeply respect the privacy needs of its customers, who may be located in countries where their authorities are unable to protect them from violent crime. As cryptocurrency exchanges mature and explore new products in uncertain markets, whether we are developing a new financial system that respects its users, or sells them out.
Bitcoin Association of HK’s Take: Luckily cryptocurrency exchanges are not yet functioning in a market as monotonous as banks or other financial institutions. There is still choice, and it’s very important we consciously make these choices.
4. Localbitcoins AML
Localbitcoins, the world’s largest peer-to-peer Bitcoin trading platform announced that it will cave in to demands from EU regulators and implement Know Your Customer procedures across its site. As users on such sites, which also include Paxful and Hodl Hodl, send money directly between each other, these sites were previously expected to be exempt from KYC and AML laws. Localbitcoins, which has operated almost without changes since 2012 has developed into one of the most trusted and recognized brands, though fraud between users has always remained an issue.
Why it matters: Can cryptocurrencies in the long run exist outside of the control of the state? Will regulators be able to capture popular sites like localbitcoins and dry up the market for anonymous Bitcoin, or will users move on to the next platforms, such as Bisq, which are decentralized and do not rely on a server or webpage anymore.
Bitcoin Association of HK’s Take: Localbitcoin and Paxful are especially popular in authoritarian regimes like Venezuela or Iran. Requiring users in these countries to ‘register’ with their real names and identities puts them in danger of prosecution and crime. Users are wise to not abide by these new rules and seek other platforms.
5. Lightning Torch
The Lightning Torch is a snowball-like social experiment in which mainly anonymous participants collect a sum of Satoshis, add a few and pass them on. It was created January 20 by user Hodlnaut valued at 100k Satoshis (~US$3) and passed onto user “fartface”. Last week it fell into hands as prominent as Twitter CEO Jack Dorsey, Binance CEO CZ and, most controversially Tron founder Justin Sun. It looks like the torch will continue to be passed around until it reaches the current maximum capacity of a Lightning transaction, where it should be donated to a Venezuelan charity of the creator’s choosing.
Why it matters: Lightning is one of the major promises to scale the Bitcoin network, which like all Blockchains suffers from slow transaction speeds and throughput. Being just over a year in production, the Lightning Network still suffers from many infancy problems, though it seems to mature rapidly with many new ‘Lapps’ and wallets coming out every month.
Bitcoin Association of HK’s Take: The Lightning network is incredibly cool, and it’s satisfying to see people having fun with it and forming a highly interactive community. So far we still have trouble figuring out what exactly we will be able to use this for, but at least the possibilities seem endless, with gaming and paid API calls being the strongest contenders. If the Lightning Network fails for whatever reason, the future for Blockchains looks very bleak.