Highlights of the Week #44
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Last week, financial giants such as JPMorgan, BNY Mellon, MassMutual, and more disclosed investments in bitcoin exchange-traded funds, indicating growing institutional interest in bitcoin. zkSNACKs announced the discontinuation of its CoinJoin coordination service due to regulatory uncertainties in the United States, while assuring the continued operation of Wasabi Wallet as a standard BTC wallet. Lightning Labs is about to introduced stablecoins running on bitcoin, leveraging the network's Taproot upgrade, promising lower transaction costs compared to traditional finance systems. Binance secured approval from the Indian Financial Intelligence Unit to resume operations in India, becoming the second offshore exchange to do so after KuCoin. In regulatory news, the White House expressed opposition to legislation allowing financial firms to custody Bitcoin, while Senator Elizabeth Warren urged action against Iran's bitcoin mining activities. Economic updates include the US experiencing sluggish GDP growth in Q1 2024 with consumer spending growth and tech investment, while the UK emerged from recession with a 0.6% GDP growth in the same period. Finally, Bitcoin's tech development saw the network reaching one billion transactions and the introduction of BOLT 12, simplifying transactions for merchants through static identifiers. For more details, continue reading below.
A. Bitcoin Ecosystem
1. Major banks and financial institutions disclose spot bitcoin ETFs holdings in SEC filings
2. zkSNACKs announced discontinuation of CoinJoin service
3. Stablecoin on bitcoin to be launched soon
4. Binance secures FIU approval to resume operations in India
B. Regulation
1. The White House has announced that President Joe Biden will veto any legislation permitting financial firms to custody bitcoin
2. Senator Warren urges to confront Iran's bitcoin mining, citing national security concerns
C. Macroeconomy
1. US consumer spending and tech investment signal potential growth
2. UK Emerges from recession with 0.6% GDP growth in Q1, beating expectations
D. Bitcoin Tech Development
1. Bitcoin network hits one billion transactions, marks historic milestone in 15-year journey
2. BOLT 12: simplifying transactions for merchants
A. Bitcoin Ecosystem
1. Major banks and financial institutions disclose spot bitcoin ETFs holdings in SEC filings
Major financial services and investment firms such as JPMorgan, BNY MellonBNP Paribas, Wells Fargo and Susquehanna International Group, LLP (SIG) have disclosed investments in Bitcoin exchange-traded funds (ETFs). JPMorgan revealed its Bitcoin ETF holdings on Friday, indicating shares in spot Bitcoin ETFs managed by BlackRock, Bitwise, and Fidelity as of March 31. With filings dating back to the end of March, JPMorgan's exposure to these ETF assets may exceed what has been disclosed. The bank's total investment in Spot Bitcoin ETFs exceeds $1 million. This development is surprising given CEO Jamie Dixon's public skepticism toward Bitcoin. The Bank of New York Mellon Corporation (BNY Mellon), the oldest and one of the largest banks in the United States, has disclosed its investments in ETFs for $1.2 Million. This strategic move by BNY Mellon underscores a broader trend of traditional financial institutions embracing bitcoin. Susquehanna International Group, LLP (SIG), a global trading, technology, and investment firm, disclosed holdings of over $1.8 billion in Bitcoin ETFs.The filing details SIG's investment portfolio, with the largest positions held in Grayscale's Bitcoin ETF GBTC, totaling $1,091,029,663. In contrast, Wells Fargo's Bitcoin-related holdings appear relatively small for around $143,111 in bitcoin exposure which is significantly less for the major bank. Wells Fargo reported approximately $1.7 trillion in assets as of June 2023, ranking it as the third-largest bank in the US by holdings. In addition, BNP Paribas has roughly $40,000 investment in IBIT. MassMutual bought $100m Bitcoin for its balance sheet in 2021 and was founded in 1851. The movements indicate that Bitcoin as a treasury asset has already gained attention from major banks and financial institutions.
Reference: Insights, Cointelegraph, SEC Filing, Bitcoin Magazine, Wells Fargo
2. zkSNACKs announced discontinuation of CoinJoin service
zkSNACKs announced to discontinue the CoinJoin coordination service. The decision was driven by the need to comply with recent legal and regulatory changes in the United States. Max Hillebrand, CEO of zkSNACKs cited the lack of regulatory clarity surrounding cryptocurrency and privacy tools as a key factor in the closure. Despite this, Wasabi Wallet, zkSNACKs' Bitcoin wallet incorporating CoinJoin, will continue to operate as a standard BTC wallet, allowing users to generate private keys for sending and receiving Bitcoin. While the closure affects products like Trezor Suite and BTCPayServer, Hillebrand highlighted Wasabi's client-side filtering architecture, Tor integration, and custom coin selection as still providing significant privacy for users. However, he acknowledged that the unmatched privacy offered by CoinJoins will be missed. As Hillebrand explained, a CoinJoin service provides a method by merging multiple inputs and outputs from various users into a single transaction, thus making it considerably more difficult for external observers to discern specific transaction details. Wasabi Wallet, launched in 2018 after extensive research, utilizes Tor for anonymity, adopts a light client approach to check balances without compromising privacy, and employs block filters for efficient and secure transaction verification without requiring the entire Bitcoin blockchain to be downloaded.
Reference: Cointelegraph
3. Stablecoin on bitcoin to be launched soon
Stablecoins running on Bitcoin are nearing reality with Lightning Labs' new functionality leveraging the network's Taproot upgrade from late 2021. Lightning Labs CEO Elizabeth Stark shared these developments at FT Live's Crypto and Digital Assets Summit in London, highlighting Bitcoin's secure and decentralized nature as ideal for stablecoin use. She emphasized the growing adoption of stablecoins, particularly in emerging markets, as a store of value amidst inflation concerns. Stark noted that Lightning-powered stablecoins offer superior infrastructure for issuing stablecoins and real-world assets on the Bitcoin blockchain, enabling transactions at significantly lower costs compared to traditional finance systems like Visa. This innovation holds potential for global transactions at a fraction of the fees charged by conventional networks.
Reference: Cointelegragh
4. Binance secures FIU approval to resume operations in India
Binance, a global cryptocurrency exchange, has received approval from the Indian Financial Intelligence Unit (FIU) to operate within India. This recent development positions Binance as the second offshore crypto exchange to gain regulatory clearance, following KuCoin. Binance, along with KuCoin and several other foreign exchanges, had previously received a notice of noncompliance from Indian authorities in December 2023. Subsequently, the Indian Finance Ministry directed its IT department to block access to URLs and mobile applications associated with banned crypto platforms in mid-January 2024. In response to the ban, various crypto platforms engaged with Indian regulatory bodies to achieve FIU compliance and continue offering services to Indian users. While KuCoin and Binance successfully navigated this process, others like OKX and BitStamp ceased operations in the country. India's crypto market faced challenges, including a 30% tax on crypto gains and a 1% tax deduction at source on transactions. This led many Indian investors to utilize foreign exchanges to circumvent the tax regulations. Binance reportedly dominated 90% of the trading volume from India during this period. Despite the vibrant crypto market, India's regulatory landscape and tax policies have deterred some investors. Many traders and crypto-focused businesses have relocated overseas, while remaining exchanges struggle with banking limitations, hindering investor trust.
Reference: Cointelegraph
B. Regulation
1. The White House has announced that President Joe Biden will veto any legislation permitting financial firms to custody bitcoin
The Executive Office of President Joe Biden opposes H.J. Res. 109, which aims to permit regulated financial firms to custody cryptocurrencies. The Administration cites concerns about disrupting the SEC's investor protection efforts and financial system stability, pledging a veto if the bill reaches the President. H.J.Res. 109 seeks to overturn SEC's SAB No. 121, which limits financial institutions from custodying digital assets. Proponents argue it removes barriers for regulated firms to act as custodians for cryptocurrencies. Congressman Patrick McHenry criticizes SAB 121 as regulatory overreach, hindering financial institutions from properly safeguarding digital assets. He emphasizes the burdens it imposes on banks, making custodying cost-prohibitive. Congressman French Hill supports H.J. Res. 109, denouncing SAB 121 as misguided and not aligning with standard financial practices.
Reference: Bitcoin Magazine
2. Senator Warren urges to confront Iran's bitcoin mining, citing national security concerns
U.S. Senator Elizabeth Warren, representing Massachusetts, has urged the Biden Administration to confront Iran's involvement in bitcoin mining. Warren asserts that Iran is exploiting lucrative bitcoin operations to evade international sanctions. In a letter addressed to the Secretaries of the Treasury and Defense, as well as National Security Advisor Jake Sullivan, Warren highlighted Iran's bitcoin activities as a direct threat to national security, according to The Hill. As one of the Senate's most vocal critics of cryptocurrency, Warren requested that the administration provide clarity on Iran's reliance on bitcoin mining to generate revenue and bypass sanctions, emphasizing the urgency of addressing this issue. "Iran has generated millions of dollars through crypto mining, providing a consistent revenue stream that enables it to procure imports, transfer funds domestically and internationally, and finance groups like Hamas and other terrorist organizations," Warren stated.
Reference: The Block
C. Macroeconomy
1. US consumer spending and tech investment signal potential growth
The US government reported that real GDP expanded at an annualized rate of 1.6% in the first quarter of 2024, falling short of investor expectations and marking the slowest pace of growth since the second quarter of 2022. The sluggish growth was primarily attributed to a decrease in business inventories, a decline in Federal government purchases, and a significant increase in imports, resulting in a negative net contribution from trade. However, other components of GDP performed well, including consumer spending, business investment, and investment in residential property. Real consumer spending, adjusted for inflation, increased by 2.5% from the previous quarter. This consisted of a 1.2% drop in spending on durable goods, driven by a sharp decline in automotive purchases, stable spending on non-durable goods, and a substantial 4% rise in spending on services. Real business fixed investment rose by 2.9%, with a 2.1% increase in business equipment investment, the first uptick in three quarters, led by investments in information technology, offset by a notable decrease in transportation equipment investment. Investment in structures saw a slight decline of 0.1%, while investment in intellectual property, encompassing software and R&D, surged by 5.4%. Real investment in residential property showed significant growth, increasing at a rate of 13.9%. However, a reduction in business inventories detracted 0.35 percentage points from real GDP growth. The robust increase in information technology investment signals potential demand growth for consulting services.
Reference: Reuters, Deloitte insights
2. UK Emerges from recession with 0.6% GDP growth in Q1, beating expectations
The U.K. economy exited recession, with first-quarter GDP climbing 0.6%, surpassing expectations. Economists anticipated 0.4% growth. Recession hit in late 2023 due to ongoing inflation woes. While a technical recession typically entails two consecutive quarters of negative growth, the U.K. saw growth across sectors in January-March, with production up 0.8% but construction down 0.9%. Services, critical to the economy, expanded by 0.7%, led by transport services. Prime Minister Rishi Sunak hailed the turnaround, while acknowledging ongoing challenges. Suren Thiru of ICAEW cautioned that political uncertainty could dampen spending despite lower inflation. The Bank of England cited persistent inflation but maintained its 5.25% interest rate, projecting near-term inflation around 2%.
D. Bitcoin Tech Development
1. Bitcoin network hits one billion transactions, marks historic milestone in 15-year journey
The Bitcoin network has achieved a significant milestone, processing its one billionth transaction, a testament to its growth over 15 years since its inception. According to Clark Moody’s Bitcoin dashboard, transaction 1,000,000,000 was recorded in block 842,241 at 9:34 pm UTC on May 5. This milestone arrives 15 years, four months, and four days after Satoshi Nakamoto, the pseudonymous creator of Bitcoin, mined the network’s inaugural block on January 3, 2009. Throughout its 5,603-day existence, the network has averaged 178,475 daily transactions. Notably, data from the Bitcoin-only exchange River indicates that the Lightning Network alone processed a lower-bound estimate of 6.6 million transactions in August 2023, indicating substantial activity since its launch in January 2018. Daily transactions surged around Bitcoin's fourth halving event on April 20, reaching a peak of 926,000 transactions on April 23, largely driven by the introduction of the Runes protocol at block 840,000. However, the daily transaction count has since moderated to 660,260 on May 4.
Reference: Cointelegraph, Clark Moody Dashboard
2. BOLT 12: simplifying transactions for merchants
BOLT 12 essentially provides a method for merchants to receive payments using a static identifier, which can be long-lived. However, it's important to note that offers do not replace the necessity of invoices; rather, they complement each other. When a recipient reads an offer, they can request invoices via onion messages using a blinded path to maintain privacy. This privacy measure extends to all onion messages, not just those related to offers. PR #2294 introduces onion message handling for offers within LDK, enabling the interpretation of offer payloads. It also includes support for responding to onion messages via reply paths, which is crucial for the offer protocol and other applications of onion messages. Upon reading an offer, the recipient can generate an InvoiceRequest payload to send to the merchant, utilizing the blinded path provided in the offer contents. The merchant then responds with either an Invoice requesting payment or an InvoiceError. Upon receiving an Invoice, the payer can proceed to fulfill the payment, also using a blinded path, or respond with an InvoiceError.
Reference:LDK PR review club, Torq, Lightning dev kit