As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
PAYPAL, VENMO TO OFFER CRYPTO BUYING, SELLING: PayPal (PYPL) plans to allow buying and selling of crypto directly from PayPal and Venmo in the next few months, CoinDesk's Ian Allison reported Monday. PayPal currently can be used for withdrawing funds from exchanges like Coinbase, but this would be a first in terms of offering direct sales of crypto. "My understanding is that they are going to allow buys and sells of crypto directly from PayPal and Venmo,” one source said. “They are going to have some sort of a built-in wallet functionality so you can store it there." Following the report, Rosenblatt analyst Kenneth Hill said he would not be surprised by the potential addition as he believes a crypto offering would fit well with the user base, particularly Venmo users. Hill, who estimates the average revenue per user for Square's (SQ) Cash App is more than triple that of Venmo's, believes a crypto trading offering as well as other "free" features that drive engagement should have the positive long term effect of attracting new users that will turn into paying customers. He has a Buy rating on PayPal shares. Meanwhile, Wedbush analyst Moshe Katri, who views direct sales of cryptocurrency as another monetization vehicle, said he thinks early monetization effort on both sides of the company's platforms will result in improving revenue growth and better margins. Katri maintains an Outperform rating on Paypal with a $176 price target for the shares.
NY DFS LAUNCHES VIRTUAL CURRENCY INITIATIVES: New York Superintendent of Financial Services Linda Lacewell announced Wednesday that the New York State Department of Financial Services and State University of New York have signed a Memorandum of Understanding expressing their intent to launch a new SUNY-related virtual currency program, "SUNY BLOCK." The agency also proposed a new conditional licensing framework that makes it easier for start-ups to enter the New York market. The agency said, “Once licensed by DFS, SUNY BLOCK will be able to support nascent virtual currency entities from local communities, including those started or run by students or alumni, through the proposed conditional licensing framework announced. This agreement will help expand the state's virtual currency ecosystem to new geographies and demographics, and support Governor Andrew Cuomo's efforts to foster an innovative New York economy and help New York build back better and stronger from the impacts of the COVID-19 pandemic.” Start-ups participating in the SUNY BLOCK program will be able to apply for a conditional license from DFS. Under the proposed conditional licensing framework, entities may apply for a conditional license when partnering with an existing entity authorized by DFS to engage in virtual currency business activity. The existing licensee would provide the conditional licensee with the operational, staffing, and other support the conditional licensee may need until it can obtain a full DFS virtual currency license or limited purpose trust charter on its own.
W3BCLOUD RAISES $20.5M: W3BCLOUD, a joint venture between Advanced Micro Device (AMD) and ConsenSys, announced Thursday that it has completed its initial close of $20.5M in convertible notes from Advanced Micro Devices and ConsenSys, along with several family offices in the United Arab Emirates. With this first round of funding, W3BCLOUD will ramp and operate its first Ethereum blockchain data centers. W3BCLOUD will expand its network of decentralized data centers across the globe as more funding is raised. “The trustless, permissionless and decentralized economy requires robust and dedicated data centers to scale. W3BCLOUD brings together the pre-eminent GPU manufacturer and the leading blockchain developer to build the compute infrastructure for the blockchain economy,” said co-Founder and CEO Sami Issa.
IDEANOMICS CALLED ‘ZERO’ BY SHORT-SELLER: In a Thursday short report, J Capital Research's Anne Stevenson-Yang called Ideanomics (IDEX) "a zero" and a company that "changes its name and promotional story so frequently that it's hard to keep up." Staff from four of five organizations mentioned in the company's most recent five press releases around electric vehicle group sales "vehemently denied doing any deal" with Ideanomics, according to J Capital's report. Following the report, Ideanomics said, “Ideanomics would like to announce that it intends to respond with all means possible to the apparently coordinated attack on the company's credibility in order to seek financial gain from a drop in the company's share price. The Company refutes entirely the claims that it has less than three months operating cash. On the contrary, the Company has sufficient cash to maintain its current operations for at least 12 months. We believe that the hydrogen fuel cell vehicle and battery electric vehicle industries and New Energy Vehicle ecosystem have a tremendous future, and this is evidenced by all of our recent orders and fulfilments.”
ABRAMOFF TO PLEAD GUILTY IN CRYPTO CASE: The Securities and Exchange Commission on Thursday charged NAC Foundation, its CEO Marcus Andrade, and political lobbyist Jack Abramoff with conducting a fraudulent, unregistered offering of AML BitCoin, a digital asset security the defendants claimed was a new and improved version of bitcoin. The SEC alleges that Nevada-based NAC Foundation raised at least $5.6M from more than 2,400 investors by selling tokens that could later be converted to AML BitCoin. According to the SEC’s complaints, NAC and its CEO portrayed AML BitCoin as superior to the original bitcoin, with anti-money laundering, anti-terrorism, and theft-resistant technology built into the coin on NAC’s own “privately regulated public blockchain.” The SEC's complaints allege that in reality none of the touted capabilities existed and the development of AML BitCoin and its blockchain was in the very early stages. Abramoff has agreed to a settlement imposing permanent and conduct-based injunctions, officer-and-director, industry, and penny stock bars, disgorgement of the $50,000 in commissions he received, plus prejudgment interest of $5,501, and reserves the issue of civil penalties for further determination by the court upon motion of the SEC. The settlement is subject to court approval.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices and Nvidia (NVDA) in select research. Overstock (OSTK), DPW Holdings (DPW), Kodak (KODK), Ideanomics (IDEX), Riot Blockchain (RIOT), Pareteum (TEUM) and Social Reality (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin dropped roughly 2.2% this week to $9,178 in U.S. dollars, according to TradeBlock.
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