Crypto Newsletter 2/6: Kraken’s 9-Figure Acquisition
Last week’s tZERO launch was a step forward for regulated markets. This week, trading markets continue to make big moves. First and foremost, the Bitcoin & cryptocurrency exchange Kraken made an eye-popping 9-figure acquisition of Crypto Facilities, a futures trading platform that is registered with the U.K. Financial Conduct Authority (FCA) and specializes in derivatives. The deal, rumored to be $100 million at minimum, will bring greater liquidity to Kraken by enabling 24/7 trading for both spot and futures trading (Kraken would be the first exchange to offer both). The acquisition also greatly accelerates the company’s time table as Kraken no longer needs to acquire the regulatory licenses that Crypto Facilities already had.
The acquisition is an aggressive move from Kraken and suggests that perhaps the exchange is reconciling its philosophy with regulation, at least to a degree. Jesse Powell, Kraken’s CEO, has long been outspoken against US regulators in the space and to date has publicly refused to answer regulator inquiries. While the acquisition of Crypto Facilities shows a maturing Kraken, one that is looking seriously at regulation (and paying a lot for it), a push to enter European markets does little to suggest that Kraken will be more cooperative with US authorities in the future either.
Kraken wasn’t the only exchange with announcements this week. Binance, one of the largest crypto exchanges in the world, now lets its users buy Bitcoin and other cryptocurrencies with their credit card, a noteworthy addition for consumer onboarding. Yet for every step forward, there is another step back.
This week, the founder of QuadrigaCX, another crypto exchange, passed away unexpectedly, and he was the only one who knew the passwords to the exchange’s cold storage and the cryptocurrency held there. The result? $190M worth of crypto held by the exchange are now frozen, with no way for the exchange’s clients to recover their money.
This tragedy marks the latest episode of an ongoing question that first began with the hacking of Mt. Gox: how can exchanges better protect the funds held in their custody? Or is the solution an exchange that does not take custody at all?
What’s Happening In the News
Fidelity, one of the only financial services institutions that has remained proponents of crypto, is in the final stages of testing their Digital Asset Manager.
Prime Trust, a trust company based in Nevada and StartEngine’s banking partner, announced this week that they are not charging fees for storing digital assets and currencies in custody.
Despite the bear market, Genesis Capital is raking in business. announcing that they loaned over $500M in Q4 of 2018 alone, bringing their total loans to over $1B in 2018.
Articles We Read (And You Should Too)
This list of 50 businesses is a who’s who of crypto. If you want to get a better understanding of the space, what people are building, and what shape the industry is taking next year, this is a useful map to get started.
In Howard’s latest article, he traces the collision of regulators and crypto markets and why it was inevitable. Crypto exchanges were built for peer-to-peer transfer, and it turns out that peer-to-peer trading is nowhere near as fair as it may seem on paper.