Posted in NEWS

Kleiner Perkins Backs $2 Million Seed Round for Crypto Derivative Data Firm

Cryptocurrency data analytics startup Skew has raised $2 million in seed funding from several venture capital firms, including Silicon Valley icon Kleiner Perkins.

Announced Wednesday, the seed round was led by London-based FirstMinute Capital, with participation from Seedcamp, Kima Ventures and QCP Capital. The company declined to disclose its valuation.

The company’s skewAnalytics service, launched concurrently with the raise announcement, provides a real-time overview of crypto derivatives markets with more than 100 charts on crypto futures and options. A company of 10 employees, many from traditional finance, London-based Skew is building out features for institutional clients to visualize historical data as well as create dashboards and is hiring in engineering and eventually in distribution. 

“Where we want to focus is on corporates and institutions that need this data to run their business,” Skew CEO and co-founder Emmanuel Goh told CoinDesk. “We have had heard concerns from interested traders and firms, and they would be able to generate backtest strategies from this data.”

Goh and his co-founder Tim Noat worked as traders of flow derivatives and exotic options at JPMorgan Chase and Citi, respectively, before starting the company. 

The firm’s analytics tools resemble the institutional-grade tools one would find for established products such as foreign exchange and equity, Monica Desai, an investing partner at Kleiner Perkins, told CoinDesk by email.

“As a former trader I’ve found many of their tools (some forthcoming) to feel the most trading floor-native or Bloomberg-esque and am excited to see how they evolve the product as the crypto derivatives space grows exponentially in the next year,” said Desai, who used to manage bond portfolios at JPMorgan.

Derivatives’ day

Crypto derivatives took off in 2018 after the brutal market correction of 2017 and are showing a resurgence driven by institutional adoption, Goh said.

Swaps are being traded in the billions every day on offshore venues, and regulated entities are ramping up offerings. For example, CME plans to launch bitcoin options in Q1 2019 and Intercontinental Exchange’s bitcoin futures platform Bakkt debuted Monday (though it didn’t do much volume).

“Bakkt is the first time large institutions can build physical coins,” Goh said, referring to the fact that the futures contracts are settled in real bitcoin rather than cash. “It’s going to be a moment of proof for the industry.”

While crypto derivatives markets are fragmented, Skew has contracted a number of licensing agreements with crypto exchanges.

According to Skew’s data, aggregated bitcoin options have grown more than sixfold from last year’s fourth quarter to $34.8 million this quarter.  


Bitcoin Price Risks Drop to $7.5K After Third Biggest Daily Loss of 2019


  • BTC looks set to test support near $7,500, having confirmed a bearish reversal with a high-volume triangle breakdown on Tuesday.
  • The cryptocurrency’s violation of the historically strong 55-candle exponential moving average (MA) on the three-day chart also favors a deeper price slide.
  • The outlook would turn bullish if prices quickly rise above Tuesday’s high of $9,782, although that looks unlikely at press time.

Bitcoin fell sharply on Tuesday, confirming a bearish reversal and opening the doors for a test of crucial price support near $7,500.

The leading cryptocurrency by market value ran into selling pressure around $9,700 in the early U.S. trading hours and fell to a 3.5-month low of $7,998 at 19:45 UTC on Bitstamp.

BTC had been on slippery ground following Tuesday’s volatility band breakdown. A widely-followed indicator was also reporting the strongest a bear bias in nine months, as discussed earlier this week.

The price slide was likely exacerbated by a long squeeze, when investors square off (or sell) long positions to cut losses in a falling market, thereby creating further downward pressure on prices.

So, while a price drop was expected, the magnitude of the sell-off has caught many by surprise. The cryptocurrency fell by 11.83 percent on Tuesday – 2019’s third-biggest single-day drop, as per Bitstamp data.

  • BTC has seen double-digit daily losses four times this year.
  • The biggest single-day loss of 2019 witnessed on June 27 marked a healthy correction from a 17-month high of $13,880 reached on the preceding day.

The latest double-digit price slide has taken the cryptocurrency below major support levels. Therefore, a deeper drop toward $7,500 – a level seen a week ahead of Facebook’s launch of Libra – could be seen over the next few days.

As of writing, BTC is changing hands around $8,400 on Bitstamp. It’s worth noting the cryptocurrency is still up about 127 percent on a year-to-date basis.

Daily and monthly charts

Bitcoin dived out a three-month contracting triangle on Tuesday (above left), confirming an end of the bull market, which had started from April’s low near $4,000.

Currently, prices are flirting with the 200-day moving average (MA) support at $8,309. That long-term MA has come into play for the first time since April and will likely be breached, as the post-triangle breakdown price drop looks to have legs – volumes hit three-month highs on Tuesday.

BTC, therefore, risks extending losses to support at $7,500 – lows seen before Libra hype gripped the market in mid-June

Moreover, the triangle breakdown could yield a drop to $4,000 (target as per the measured move method), as tweeted by bitcoin skeptic and CEO of Euro Pacific Capital Peter Schiff. That target looks far-fetched, however.

The monthly chart (above right) is also now teasing a bearish reversal. The cryptocurrency charted inside-bar candlestick patterns in the previous two months, signaling an impending bullish-to-bearish trend change.

The outlook as per the monthly chart would turn bearish only if prices close below $9,049 (first inside bar’s low) on Sept. 30. That looks likely, with prices currently trading at $8,400 and the daily chart reporting a strong bearish setup.

The bearish case would weaken if prices find acceptance above $9,097 – a higher high created on May 30. The outlook would turn bullish if prices bounce from the 200-day MA and chart a quick V-shaped recovery to levels above Tuesday’s high of $9,782. That, however, looks unlikely.

3-day chart

BTC has found acceptance below the 55-candle exponential moving average, which served as a strong base during the 2016-2017 bull market.

Back then, the cryptocurrency charted bullish higher lows along the key EMA and not once did the sellers managed to secure a close below the crucial support.

Hence, the latest close below the 55-candle EMA could be considered a strong bearish development.

Oversold daily RSI

The 14-day relative strength index (RSI) is currently hovering below 23, its lowest level since November 2018. A reading below 30 indicates oversold conditions and suggests scope for a corrective bounce.

That said, indicators can and do remain oversold for a prolonged period in a strong bearish market, especially when a sell-off is preceded by a major bout of consolidation. BTC was trapped in a narrow range for almost three months before breaking lower.

In such situations, seasoned trades consider an oversold reading on the RSI as an indicator of trend strength. So, expecting a notable price bounce on the basis of the oversold reading on the RSI could prove costly.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Posted in BİTCOİN

Bitcoin Shopping App Fold Raises $2.5 Million to Bring Lightning to Retailers

The lightning-friendly Fold App, which allows users to spend bitcoin on goods like clothes and pizza and then earn bitcoin-back rewards, just added fiat capability after raising its first round as an independent startup.

Fold product lead Will Reeves told CoinDesk the startup spun out of Thesis with a $2.5 million raise led by Craft Ventures, CoinShares, Slow Ventures, Goldcrest Capital and Fulgur Ventures, among others. Reeves said that capital will go towards cementing partnerships, both in the cryptocurrency and retail space.

“We’ll be rolling out subscription options for merchants and consumers soon that will provide premium services and highest rewards,” Reeves said, adding:

“When people spend fiat at retailers they will receive BTC rewards. They can spend those rewards or withdraw them to an on-chain address. In the future, we are releasing an update that allows people to withdraw rewards directly to lightning, which will lower fees and make it more usable.”

In short, the app can be connected to a debit card for bitcoin-back on regular purchases through the app, or users can send bitcoin to the Fold App from their independent wallets. A mobile Fold App with the full features currently available via desktop, Reeves added, is slated for launch in October. Until then, the mobile app is also available to users that sign up through Fold’s website for early access.

CoinShares co-founder Meltem Demirors told CoinDesk Fold App is unique, compared to other retail-focused bitcoin apps, because it encourages users to use non-custodial wallets.

“I’m excited to work not only with Fold, but also with our community of portfolio companies, corporate partners, and other service providers to build an integrated user experience around bitcoin payments,” she said.

Lightning ecosystem

While there are several other retail-focused crypto apps gaining traction, like Lolli and Flexa, Fold is the most focused on lightning payments. Fold App is already integrated with two lightning-friendly wallets, BlueWallet and Breez. This is what attracted Fulgur Ventures partner Oleg Mikhalsky to the investment.

“We believe the lightning network has the ability to become an interesting payments rail for various applications due to features like instant final settlement, cost-efficient micro-transactions, the ability to ‘stream’ payments and the support of other assets over Lightning in the future,” Mikhalsky told CoinDesk, adding:

“We, as investors, are in a learning mode as well. We’re placing our bets on different types of applications and models and learning from them. Supporting startups that experiment with how to drive adoption is one of our priorities.”

Lolli told in July that it, too, was planning to eventually add lightning options. So it remains to be seen how the retail app race will play out.

In the meantime, Fold is offering a type of crypto training wheels to retailers like Macy’s, Target and Amazon. On the merchant side, they only see a payment processed by Fold, not the users’ credit card or bitcoin wallet address. This offers more privacy than directly shopping via the merchant’s website. Fold then cashes out the payment for merchants, which typically choose to receive the value in fiat.

“We can settle in fiat or bitcoin, yet all major merchants choose to settle in fiat now so they don’t take volatility risk or accounting overhead,” Reeves said, adding:

“Fold can seamlessly transition them when they are ready because we are already directly integrated into their point-of-sale systems.”

Posted in NEWS

Deutsche Bank Joins JPMorgan’s Crypto Payments Network

JPMorgan’s blockchain-based payments initiative has added Deutsche Bank as its latest member.

The addition brings the total number of banks signed up for the Interbank Information Network (IIN) to 320, according to a report from the Financial Times on Sunday.

Announced in October 2017, IIN is built on Quorum, the ethereum-based blockchain network developed by the banking giant, and employs a stablecoin dubbed JPM Coin. JPMorgan said at the time that the platform would slash the time and costs required when resolving interbank payments delays.

IIN saw the start of remittance trials with JPMorgan’s client banks in June.

As per the FT report, the bulk of the member banks use JPMorgan to process USD payments. Deutsche Bank, though, ranks number one globally for clearing of euro-denominated payments.

Takis Georgakopoulos, managing director of treasury services at JPMorgan, told the newspaper that, since IIN would have “very big natural limitations” if IIN members were only drawn from the bank’s client pool, the addition of Deutsche Bank “is going to help us drive towards ubiquity.”

IIN brings efficiencies by writing all the data on payments a shared ledger, thus allowing problematic payments to be resolved more quickly and with less manual processes, said Deutsche Bank’s global head of cash management, Ole Matthiessen.

With his bank having recently cut back its investment banking business and now relying more on transaction banking, he said joining IIN is “an important step” that would reduce Deutsche’s costs and also allow it to offer better services to clients.

Matthiessen added that IIN’s plan to have 400 members by the end of 2019 is on track, and that other major banking members are likely to be announced very soon.


US Politician Uses Crypto to Buy Cannabis for Tax Remittance Demo

A Californian politician has become the first elected official to use cryptocurrency to purchase cannabis in the United States.

A press release shared with Cointelegraph on Sept. 11 revealed that Berkely City Councilmember Ben Bartlett used Bitcoin Cash (BCH) and the stablecoin Universal Dollar (UPUSD) to make the purchase at Ohana Cannabis, a dispensary in Emeryville, CA.

The purchase was part of a live demonstration of crypto-financial technology conducted by blockchain company Cred and the Blockchain Advocacy Coalition. The latter is a group of California-based businesses and consumers that work to promote transparent blockchain legislation at a state and national level.

Cannabis Tax Remittance Via Stablecoin

According to the press release, the initiative forms part of the Blockchain Advocacy Coalition’s sponsorship of a new bill (AB 953) that would enable California to accept cannabis tax remittance via stablecoin. During the demonstration, the team at Cred was reportedly on hand to explain the ins and outs of blockchain and stablecoin technology to local elected officials.

The transaction involved Ohana accepting Bitcoin Cash by using Cred’s LBA token as a translation utility, with sales and city tax proceeds settled in Universal Dollar. 

Universal Dollar — which runs on the Ethereum blockchain and is pegged to the US dollar — was developed by the Universal Protocol Alliance, a coalition of blockchain firms including Cred, Uphold and Blockchain at Berkeley. 

In a statement, Dan Schatt — co-founder of Cred and the Universal Protocol Alliance — outlined:

“Not only does crypto result in significant cost reduction for consumers and merchants, but it also enables highly productive tax collection, transparency, and predictability for city and state governments.”

Crypto for the Green Rush industry

As the press release notes, 70% of California’s state cannabis industry is unbanked, significantly increasing both the risks and costs faced by local governments required to accept tax remittance in large cash deposits.

Councilmember Bartlett remarked that in providing a cash-free mechanism for cannabis tax remittance, the proposed AB 953 bill represents a piece of innovative legislation appropriate for the 21st-century so-dubbed Green Rush industry.

The politician has now reportedly requested Berkley City staff to prepare a report on acceptance of cannabis taxes using stablecoin technology.

Back in 2018, the state of Ohio was hailed for its pioneering acceptance of Bitcoin (BTC) for enterprises’ tax liabilities. Several other U.S. states had pursued — but not yet succeeded in implementing — similar initiatives prior to Ohio.

Posted in NEWS

New Head of China’s Digital Currency Says It Beats Facebook Libra on Tech Features

The Chinese central bank has a new digital currency chief who says its upcoming digital yuan has features not offered by Facebook Libra.

Changchun Mu – previously deputy director of the payments and settlement division at the People’s Bank of China (PBoC) – recently stepped into the lead role at the Digital Currency Research Institute, reports Shanghai Securities News.

According to the state-run news source, Mu recently published details on PBoC’s digital currency – apparently being carried out in a secret office away from the bank’s Beijing headquarters – describing it as a digital currency and electronic payment tool with “value characteristics.”

“Its functional attributes are exactly the same as paper money, but it is just a digital form,” Mu said.

Perhaps most notably, he set out some of the digital currency’s technical aspects, and compared it with Facebook’s Libra.

PBoC’s digital yuan will be able to be transferred between users without an account and without a mobile or internet network, the report cites Mu as saying. Providing a user’s mobile phone has a wallet, the digital currency can be transferred to another person by placing the two phones in physical contact. Presumably, this feature is enabled by near-field communication (NFC).

“Even Libra can’t do this,” Mu said.

PBoC’s digital currency also doesn’t need a bank account to be used, and is “free from the control of the traditional bank account system,” Shanghai Securities News cites Mu as saying. He further suggested it allows users to preserve their privacy when using the system.

However, the digital currency will be delivered via commercial banks like fiat currency. The banks must open accounts with the PBoC and buy the token at 100 percent value. After that, users may open digital wallets for the digital currency through the banks or commercial organizations.

According to the report, Mu added that the main reason for developing the digital currency is “planning ahead” to protect monetary sovereignty and China’s legal currency. That may be a hint that the advent of Facebook’s Libra is behind the sudden rush of development at the central bank.

Former People’s Bank of China (PBoC) governor Zhou Xiaochuan said in July that “Libra has introduced a concept that will impact the traditional cross-border business and payment system.”

As such, China should “make good preparations and make the Chinese yuan a stronger currency,” Zhou said.

Posted in NEWS

Messaging Giant LINE Wins Japan License for Crypto Exchange Business

LINE, provider of Japan’s most popular messaging app, has just been approved for a cryptocurrency business license in the country.

The news, reported by CoinDesk Japan on Friday, means it will be able to offer its crypto exchange services in Japan where it has 80 million monthly active users. The new platform is to be called BitBox, according to the company.

The license was awarded by Japan’s Financial Services Agency, which indicated on its website that the registration was completed on Sept. 6 in the name of LVC Corp., which oversees LINE’s digital asset and blockchain business units.

LINE President Takeshi Dezawa also disclosed completed FSA registration to the Tokyo Stock Exchange today, as per the report.

The messaging firm said last month it’s aiming to build a “token economy” around its own blockchain LINK Chain. It will offer two tokens – LINE Point in Japan and LINK for other nations – aimed to connect users and service providers. Five decentralized dapps (decentralized applications) will soon be launched across categories including “prediction, Q&A, product review, food review and location review using social media.”

LINE said at the time that it “aims to flatten the relationship structure between users and service providers to promote co-creation and mutual growth.”

CoinDesk Japan also reports that impending legislative changes will soon have an impact on Japan’s crypto exchanges.

Revisions to laws related to cryptocurrencies scheduled for spring 2020 will mean cryptocurrency transactions and trading will be subject to the regulation of the Financial Instruments and Exchange Act.

Further, in addition to the virtual currency exchange business license, crypto firms will have to register as first-class financial instruments businesses under the new regime.


As Crypto Markets Go Cold, Who Will Pay for Open-Source Code?

Earlier this year IBM purchased Red Hat, the oft-referred to model for how open source can thrive, for $34 billion.

Long the consultant to enterprises, IBM is going through a transitional period as a business and needs a boost. Red Hat’s open-source software offers IBM the ability to better compete in cloud services offered by Amazon, Microsoft and Google.

Why is this important? Red Hat is one of the most name-checked examples of how open-source software can be successful. It is often used as an example of how championing open source can lead to business success. This is particularly pertinent to the cryptocurrency ecosystem, where open-source ethos rule the technology.

But, something is being lost in this conversation. Namely, open source requires funding for developers to contribute.

Despite what some may think, open source isn’t free. That’s a problematic proposition in the rollercoaster markets that make up open blockchains.

The Volume Issue

Crypto can enable almost ridiculous levels of transparency and control.

Yet in order for it to move forward, incentives must be aligned. Scaling technologies and design experiences must make cryptocurrency easier to use. However, most cryptocurrencies are used primarily for speculation. And the speculative market is in the doldrums, with low levels of volume.

BTC trading volume is at one of the lowest points it has been over the last two years. Source: Bitcoinity

I wrote about this issue years ago, discussing the existential threat facing bitcoin. This was during the 2015-2016 bear market when Bitcoin Core was really the only group working on the protocol. Not long after my piece was published on CoinDesk, an MIT initiative providing $900,000 worth of funding for bitcoin development was announced.

This isn’t to say markets are the single unifying force in crypto, but it’s important to recognize the significance. Augur seems to be an example of this as news comes out about that project seems to affect price. Augur went up as its 2018 launch approached. Yet as volumes hit $1 million and an assassination market developed the price began to decline.

Augur is an interesting project funded directly by crypto via its own token. But Augur depends on other projects to use its network in an open source fashion. When a trader’s market depends on that, it’s an issue.

Veil, which relied on Augur’s protocol, closed up recently. It is an example of this and how the market perspective can impact things. Less trading means less interest in projects like prediction markets.

Zcash and Litecoin

Zcash and Litecoin are experiencing difficulties funding development and other expenses. Both projects have indicated it is the market causing these issues.

The Litecoin Foundation’s finances are in the red. Founder Charlie Lee seemingly is just funding it at this point. Blame for this has been put on crypto’s bear market, which shows projects are more influenced by trading than most in the ecosystem realize.

“The goal, of course, is to get Litecoin Foundation to be self-sustaining from donations, partnerships and merchandise sales,” Lee said. “Until we get to that point, I have and will continue to support the Litecoin Foundation financially as necessary.”

Litecoin isn’t much different than bitcoin, although they did experiment with things like SegWit before BTC implementation. Yet the litecoin community clearly doesn’t see a reason to put forth money to keep the Litecoin Foundation operational.

Zcash can be considered differentiated from both bitcoin and litecoin with increased privacy features. Zcash’s shielding technology is indeed novel, though only a small number of transactions are shielded.

The black line represents unshielded transactions, while the blue line indicates shielded Zcash transactions. Source: Zchain

Is there a community in need of zcash and its privacy protections? Time will tell, although from a trading perspective banks seem to have issues with it. And example of this is when Coinbase UK dropped the asset in Europe likely due to banking pressure.

“I opted for the initial Dev Fund to sunset itself, so that in the future, if Zcash were a success and a community were to grow up to support it, that community would have to collectively decide what to do next,” said Electric Coin Company CEO Zooko Wilcox.

Time will tell how much support Zcash will get.

Where Funding Comes From

“I think things have improved greatly in terms of the breadth of different funders.… We’ve had an explosion in people that want to fund open source work in the space,” Matt Corallo told CoinDesk recently after joining Square Crypto.

If there’s an explosion of funders for open-source crypto, they are keeping it pretty quiet. Coinbase has talked about support for open source, offering $2,500 per month starting in early 2018. However, there hasn’t been any updates since 2018 and the Coinbase Open Source Engineering site no longer works.

Square Crypto is willing to pay its developers salaries in BTC to fund bitcoin development. Jack Dorsey wants to “improve money.” That statement seems to indicate Dorsey’s not really sure what cryptocurrency is. Yes, people did buy $125 million of BTC from the Cash App. But are they using bitcoin for payments?

Why don’t miners help pay for more open source development? Traders? What are the stakeholders providing funding? Square Crypto. Blockstream. Lightning. MIT. The Ethereum Foundation. Who else is putting resources into crypto development?

2019 has been a good year for Gitcoin. Source: Gitcoin

OKCoin just announced a contest where users vote which version of bitcoin (core, cash, SV) to fund development. The exchange is donation up to a whopping 1,000 BTC. Something feels a little bit divisive about a campaign like this, even though the effort is called “Let’s Build Bitcoin Together!”. Sounds more like building very different versions of bitcoin very separately.

In the ethereum and dapp ecosystem, Gitcoin has paid out over $2 million to developers, with ConsenSys apparently leading the way. Maybe other cryptocurrency projects should have a community-based resource like this. Despite low volumes in the trading market, Gitcoin appears to be working.

Developers over Investors

Recently, Binance announced funding for 40 developers to work on open-source projects.

However, the requirements for an “evangelist” to receive funding means building exclusively on the Binance platform. That seems trading related, although with Binance X and Venus, its likely to compete with Facebook’s cryptocurrency project.

Could it be, shocking as it may seem, that Libra, with 28 members, could help move crypto open source forward?

Despite criticism from literally everyone, the project is still expected to become an open network. Endpoint wallets will still need to provide the KYC/AML compliance. Yet there could be a lot of money contributed to open source surrounding the project. This might be true if they follow the Gitcoin playbook.

Markets don’t always go up. Litecoin has had to cut salaries despite Charlie Lee’s salvo. And the Zcash foundation is spending more than it’s bringing in. Ironic for there to be funded bailouts for cryptocurrency development. Or running deficits. In these cases, it’s easy to blame it on the performance of the crypto market. Because one has to wonder: How will open cryptocurrency development do financially in the future if some of these big-name projects can’t find funding?

Market dynamics have never stopped open source outside of crypto.

Look at Red Hat – no market ever stopped it from figuring out open source. It focused on developers, not investors. Crypto projects should pay attention to what has worked in open source over the years. It should not depend on donations correlated with the whims of the market.

Posted in NEWS

Cryptocurrency Has ‘Long-Term Potential,’ Says Apple Exec

Apple is “watching cryptocurrency,” according to an executive at the tech giant.

Apple Pay vice president Jennifer Bailey, talking to CNN at a private event in San Francisco, said “We think it’s interesting. We think it has interesting long-term potential.”

Bailey did not elucidate about the possible uses of the technology Apple might pursue. She had been taking about the future of payments at the CNN event.

With Facebook planning to launch its Libra stablecoin next year, it would be surprising indeed if Apple were not watching crypto. But, Bailey’s comments may come as confirmation that more might be going behind the scenes at Apple’s Cupertino HQ.

In February, Apple submitted a filing with the Securities and Exchange Commission (SEC) that contained rare details about the computing giant’s interest in blockchain tech.

The document indicated that Apple was involved in the drafting of “Blockchain Guidelines” for the Responsible Business Alliance’s Responsible Minerals Initiative and had been working with the RBA’s blockchain team.

Elsewhere in the CNN report, Bailey said that in launching Apple Pay, the firm has made it harder for users to tip. The firm is looking at the problem, she indicated.

The exec also explained why the company had recently suggested users of the new Apple Card should keep it away from other credit cards, as well as leather and denim. “We want it always to look perfect,” she said.

Apple image via Shutterstock

Posted in NEWS

Paxos Launches Gold-Backed Cryptocurrency

Many bitcoiners are former gold bugs who believe in “hard money,” so one crypto company is hoping digitized gold will attract more traders.

Paxos, the New York-based exchange and stablecoin issuer, just launched a gold-backed crypto asset called Pax Gold (PAXG), with each ethereum-based token encapsulating the legal title to a physical bar of gold stored in the Brink’s London vault. Pax Gold has been approved by the New York Department of Financial Services.

“It’s not a representation of the commodity, it’s actual legal title to it,” Paxos CEO Chad Cascarilla told CoinDesk. “This is the exact point of the blockchain, the exact premise, that you can now make [assets] easily moveable and divisible and not be tied to a manual, physical process.”

Each token costs the same as an ounce of gold and can be redeemed for a physical bar at partnering institutions such as Bullion Exchanges in New York. Cascarilla said Paxos will expand its list of global partners from the traditional commodities industry to ensure users can claim real gold even if they’re not in London or New York. Plus, the crypto loan startup SALT now offers PAXG-backed loans as well, available in fiat or stablecoins such as PAX, TrueUSD or USDC.

“We’re going to do more products like this where we are taking real-world assets and putting them on the blockchain,” Cascarilla said.

Still, it remains to be seen whether tokenized gold will appeal to crypto enthusiasts. Messari co-founder Dan McArdle told CoinDesk that assets issued by and custodied with centralized entities don’t rival bitcoin’s role as “digital gold.”

“Bitcoin achieves all of gold’s relevant properties, plus a lot more, and is just better gold for the modern era,” McArdle said. “Bitcoin achieves its properties precisely because it has no centralized or federated anchors to the physical world. You simply can’t get the trustless/uncensorable properties of bitcoin if some relatively small set of people/entities has to manage physical objects represented on a blockchain.”

Product-market fit

Paxos will need to find an audience of gold traders who are interested in crypto beyond bitcoin, as traditionalists on both sides are wary of tokens.

Bitcoin skeptics like Roy Sebag, founder of the precious metals custodian Goldmoney, don’t believe a self-custodied, relatively fungible cryptocurrency would bring new and compliant use cases to the broader gold market. It still requires a know-your-customer process.

“There’s zero value being added in terms of a decentralized blockchain,” Sebag said. “A closed system that is permissioned would be fine. We’ve already been doing that for five years.”

Indeed, the World Gold Council estimated gold-backed financial products like exchange-traded funds accounted for nearly $100 billion of the global market holdings in 2018. Paxos’ commodities trading platform, Post-Trade, secured a chunk of that pie by processing precious metal trades since July 2018. Now, with Pax Gold, retail investors will be able to participate in a broader range of digital gold trades beyond institutional platforms.

“We’re acting at that gateway, as a trusted holder of the assets, but also has trusted verifier of participants,” Cascarilla said. “Just like our Pax stablecoin, it’s audited.”

For traders who might want to buy gold on-the-go and then pick it up in another location, Cascarilla believes Pax Gold could offer a regulated alternative to physical ownership.

“You can own that gold but you don’t have to pay a custody fee, and you can send it around the world 24 hours a day, 7 days a week,” he said. “This is a groundbreaking product in the history of gold.”

Paxos CEO Chad Cascarilla image via CoinDesk archives