Word on the Street: Tether resumes peg, announces new bank relationship

Tether confirms new bank relationship and 1:1 reserves

Tether’s dominance in BTC global trading is up slightly to ~59% from ~55% last week, most likely due to sentiment towards the largest stablecoin improving after the depegging last week. It has resumed its 1:1 USD peg after dropping to ~80c earlier in the month.

A holder of Tether would be down -0.97% year-to-date, compared to +0.71% for a holder of its main competitor TUSD – on top of which there’s depreciation from core inflation around 2.2% for US investors.

Although USDT has regained its ~$1 peg, on a year-to-date comparison to TUSD, an investor would be down ~1%.

On Thursday, Tether announced in a letter its new banking partner Deltec Bank & Trust Ltd, based in the Bahamas. The letter confirmed the cash value of its account was $1,831,322,828, in line with its recent market capitalization, or the 1:1 reserve ratio it’s meant to have. The letter also revealed Tether’s main office is located in Taiwan.

Of the four largest USD exchanges Bitfinex continues to controls the Lion’s share of volume, around 39%.

__Japanese financial regulator deems stable coins not crypto __

The Japanese regulator (JFSA) said stable coins would not be exempt from the capital gains tax that regular cryptocurrencies benefit from. "In principle, stable coins pegged by legal currencies do not fall into the category of ‘virtual currencies’ based on the Payment Services Act," it said.

"Generally speaking, companies need to register as the ‘Issuer of Prepaid Payment Instruments’ or the ‘Funds Transfer Service Providers’ based on Payment Services Act, when virtual currency broker dealers trade stable coins."

This opens the question as to how stable coins will be regulated in the US as the minting of USD is supposedly the remit of the US government only.

Morgan Stanley report recognizes crypto as an asset class

Morgan Stanley, the investment bank run by the most crypto-bearish CEO in banking, Jamie Dimon, deemed cryptocurrencies as a legitimate asset class in a report titled ‘Bitcoin Decrypted: A brief teach-in and implications’ which outlined the evolution of bitcoin and cryptocurrencies over the years.

In the evolution thesis it says "by 2016 it was clear that having a permanent record of transaction eliminates anonymity", which has helped rid the image of cryptocurrencies being purely a currency of the dark markets. This change in perception has paved the way for $7.1b of institutional money to flow into crypto funds.

*Morgan Stanley research shows crypto assets under management (AUM) hitting $7.1b this year. *

Of $7.1b of assets in crypto funds, 45% are hedge funds, 48% venture capital and 3% is private equity.

This corroborates with a report from crypto fund provider Greyscale also out this week which shows its institutional investor base is growing and far outweighs the rest of its customer base.

The Greyscale customer base shows instituional investors far outweigh the rest

The Morgan Stanley report also touched on stable coins and concluded that many of them will not survive: “we watch for ones with the lowest transaction costs, highest liquidity and defined regulatory structure which will all increase adoption.”

Trump roadblocks Venezuela’s part gold-backed Petro

Venezuelan President Nicolás Maduro, who officially launched the world’s first national digital currency two weeks ago, has changed the composition of the reserves backing the currency from just barrels of oil to a mix of oil, gold and diamonds.

However, President Trump has sanctioned the Venezuelan gold sector in a bid to disrupt trade between it and Turkey (another country sanctioned by the president), and undermine Maduro. Venezuela has some of the largest gold and oil reserves in the world and for years has been exporting its gold ore to Turkey for refinement. However, Trump has taken aim at the sector recently, saying it is being run by criminal gangs. Unsurprisingly, the administration has also voiced concern that some of the gold could find its way to Iran in violation of US sanctions.

The Petro is Venezuela’s last ditch attempt to stabilize its currency which is suffering from hyperinflation of over 60,000% annually. A cup of coffee now costs over 7 million Bolivars, which is the equivalent of $0.50c.

Follow @AndrewBNC