“This Week in Crypto” Summary for August 2, 2019
When will CoinMetro start making profit? What precautions are taken against a hack? When will new fiat currencies be added? If you want to know the answers to these questions, read the AMA summary!
Check out our weekly “This Week in Crypto” summary in our blog post or watch the full video here.
Crypto Market News Highlights
1) IRS Sends 10,000+ Letters of Warning to Crypto Holders
The IRS is fishing. Not up to date on who owns what and where, but if the IRS has seen you do some transactions to Coinbase or other regulated exchanges in the US that holds a BitLicense, these exchanges have to file these reports.
2) The U.S. Securities and Exchange Commission (SEC) is looking for contractors that would run Bitcoin, Ethereum, and XRP nodes on its behalf. The regulator said the nodes will support its efforts to monitor risks and improve compliance
Basically help them monitor all transactions, will likely cater to the IRS so they will definitely know when you owe taxes and not have to send out letters asking you to pay them. The SEC knows that STOs are probably coming, regulated assets coming on the blockchain, and the SEC simply wants to understand what’s happening before it’s reported.
3) Malta proposes a regulatory framework for Security Token Offerings
Just like every other Malta framework, this one is subpar. It doesn’t do anything that the existing law doesn’t do. Malta is in the EU, EU has directives under MiFID II, under EMIR, CSDR.
They don’t mention CSD in this new law, Kevin briefed through it – under CSDR in Europe, you need to register any tradable security with the CSD, and it needs to be settled there. And they don’t even mention it.
4) U.S. Lawmakers Are Realizing They Can’t Ban Bitcoin
They can’t ban a protocol, can’t really ban the internet. But you can screw with it, really bad. If they truly wanted to ban Bitcoin, and they simply started to push on every regulated institution, that they couldn’t do any business with a crypto-currency whether it’s direct or via exchange, they shut of the funnel.
The protocol doesn’t die, blockchain doesn’t die, but crypto as a payment gateway or however you want to define it, is very crippled. So let’s hope they don’t continue down that path. Banning crypto is difficult. Smothering it? Not so difficult.
5) Kraken Boosts Institutional Offerings With Acquisition of Dan Held’s Interchange
Kevin imagines this is a long term play for Kraken. Basically, just like in Europe, we have EMIR which is a reporting standard for regulated institutions, similar laws in the US. They are starting to see that the CFTC will probably start moving in and classifying these as assets under their guise, and the SEC will come in on the other side. Building these mechanisms from scratch, for an asset like crypto, is going to be quite difficult. Buying something that already does it – a little bit easier.
Live YouTube questions
How is margin posting going to work from a tax perspective? Just regular capital gains tax?
Probably would be seen as payroll tax/income tax in many countries. Depending on how you explain that, it could also be perceived as capital gains. I would consult a local tax professional where you live.
How do you plan to capitalize on Binance stopping to serve US citizens?
Marketing. Everybody else is thinking the same, and there are already big exchanges in the US. Obviously we’ll take some US traders, but once marketing comes, it’s for sure one thing that will be focused on. (Marketing to US)
Where is the FUD regulator?
He’s omnipotent, he’s here even when he’s not.
Would there be big tickets coming? How much?
We have interest out of Latin America and the UK. Those tickets range from 6-7 figures. One out of Latin America starts at mid-6 figures and phase two would be 7 figures – basically the entire sum we’re looking to raise.
Maybe CoinMetro can provide some content so the community can post on social media?
We do already, Ambassador pack with banners/images/vectors/fonts. We’ve been interviewing for different marketing positions to beef back up the marketing team, by then we expect one of these tickets close and will have some money for the marketing budget and start to pivot more from content marketing to actually sales, now that we have platforms to sell.
Any news on those fiat currencies?
Fiat currencies got cut down from 33 to 25-26 after narrowed down some of the currencies we aren’t going to be able to use because of local laws around crypto or just local regulations. Still all the majors are there, except for USD at the beginning. Most of the secondary currencies of the world are there.
We could do it today, but the pricing right now isn’t that great – .5% in, .1% out – in about 1-2 months, we’ll be able to lower that down to a fixed fee which will be much lower than most of those transactions. So we’re waiting rather than launching it now.
Why is CoinMetro not allowed in New York/Hawaii (and Washington)?
Local regulation. New York requires BitLicense that has specific rules around crypto, and you need to have an MSB license to even onboard clients.
What about LHV, any news? Or about the framework to list coins/tokens?
Three tokens have been approved as of last friday, you may have seen them on the demo platform already. BAT/ELF/ENJ. There will be some deposit time for a few days and then we’ll launch the token.
Self-assessment guide, we’re actively trying to help them get that done. We just submitted four new tokens as well, as of today. So we’re continuing down the road, instead.
IEO news August 15?
There will be a bit of IEO news in the coming days, just to let you know what project/company will be. Around the 15th is when the full brunt of news with a press release that discusses exactly how it’s going to happen, when it’s going to happen, whitelisting, things like that.
Will CoinMetro apply for BitLicense?
At some point we more than likely will, but there will likely be national regulation at some point, either by the CFTC and/or SEC, and will probably override the BitLicense.
But it’s in the plans.
When will CoinMetro start to make a profit?
In terms of the revenue we see right now, it’s probably about 5% about what our burn rate is, so it’s a small percentage. A couple of months ago, it wasn’t even 1%. So we’re increasing the amount of revenue we see quite substantially.
In terms of just commission from the exchange, we’d need to see around 3-6 million of exchange traded volume on a daily basis in order to cover our expenses. When you bring on margin trading with roughly 4 million in open exposure on margin as a daily average, over 30 days, that alone would cover our burn rate.
So somewhere towards the end of the year, conservatively speaking, we should be somewhere between 20-40% of our burn rate. This is not calculating new products, like TAM. TAM and Margin Posting will likely add significant count in terms of revenue.
Into Q1 one next year, I think we’ll go into slight profitability end of Q1and Q2 next year.
TAM/Margin Posting/new website news?
No real news, still on track! 2-4 weeks. Margin Posting will be more towards the beginning of that, TAM towards the end, new website probably by the middle of the month.
Will you have any market makers on these new tokens?
Just talked with a market maker who should be sufficient. They will be ready to write to our platform at the end of the month, and by September 15th, ready to do some market making according to their own timeline.
I’ve been hearing a few institutions are interested in using TAM. Can you confirm?
Confirmed. There’s two that are both algo trading companies that want to use TAM to basically market their algos to retail traders. There’s more than two, but in recent talks, these two are the most active we’ve been in talks with.
Any future Airdrops of XCM possible?
The XCM airdrop promised for ETCF launch is still coming.
In the near future they could be depending on listings/IEO. Nothing finalised.
What precautions do you take against a hack? And related to a hack: In the unlikely event that CoinMetro should go bankrupt, is there a guarantee?
We use BitGo right now for storing all our Bitcoin, we use a combination of what you would say a hot/warm cold wallet inside BitGo. BitGo has yet to be hacked.
We have protocols internally, very specific people who have access to these wallets. Most is read-only. Only three people in this organization that can actually move funds. It’s all multi-signature. It’s all about protocols.
Is there a deposit guarantee for the cash? In the event CoinMetro where to go “bankrupt”, it would be creditors, because we went bankrupt. Right now, we don’t really have creditors. We have some small debt on the book, things that we’ve decided to postpone payment for a bit of time as we move forward to kinda extend our runway. Bankruptcy means you have creditors. If you don’t have creditors you don’t go bankrupt, you just close.There’s no deposit guarantee per se, but client money is client money, and client money would make it way back to clients. In case of bankruptcy, it wouldn’t be given to creditors, in any type of liquidation scenario, that money would be going back to the clients.
Could you comment on:
The United States Securities and Exchanges Commission (SEC) is planning to run through contractors a bitcoin and an ethereum node
Modum might swap its ERC-20 token for tokenised shares on the blockchain
The first one we already talked about, they simply want to operate nodes, they do it through contractors, because they don’t want to do it themselves. Whether that be for risk mitigation, simply don’t want to spend money on the development, they want people who know how to do it and they don’t want to hire those people because then they can’t fire them immediately. So, they bring in contractors because they want nodes. Why do they want nodes? Because they want to track transactions.
You need settlement for tokenized shares. Right now there’s no real way to do that globally. Everyone who is doing it isn’t solving any problems, they’re simply doing something for PR. That’s why the CSD.
The sandbox project is great, but isn’t there a big threat that competition will catch up?
I agree and disagree with that. News aren’t the same as product releases and no product releases were promised in July. We talked about probably having news towards the end of July. There’re companies that have great success, but they’re slow at executing. I can name a ton of them, Apple, Microsoft, IBM. Microsoft is actually famous for pushing things out that do not work. Apple takes a long time to push things out because they expect it to take a long time to push out.
We’re moving, pretty fast, considering the size of the team we have. We’d love to move faster, but moving faster means we need to close one of those tickets.
When is the merge of trade and margin planned for?
Something like September/October.
Could we please have more than 50k XCM exposure on margin? Perhaps even a bump in collateral allocation?
The reason for that obviously ties into market orders, people not understanding how a book works and then getting screwed on the book. We will raise that over time, but we need more data to be able to do it.
“Kevin Explains Crypto” Term: Arbitrage
Not necessarily a crypto term, it’s a financial term. Basically in terms of financial assets, buying and selling the same asset through different gateways to take advantage of price differences.
Want to know more? Check for more details in the video below.
Listen to Last Week’s TWiC on the Go
Get the complete scoop by tuning in to our audio version of last week’s TWiC on SoundCloud. Happy listening!
Well, that’s it for this week’s AMA with CoinMetro Founder Kevin Murcko! Please join us next week on CoinMetro’s Facebook and YouTube Channel at 12:00 (UTC) for another round and make sure you submit your questions to the CoinMetro subReddit!
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