Tag: Bitstamp

Société Générale’s useless euro stablecoin: when bank blockchain units go feral

  • By Amy Castor and David Gerard

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Société Générale’s euro-backed stablecoin, EUR CoinVertible (EURCV), has been listed on the Bitstamp exchange in Luxembourg!

This is the first stablecoin issued by a bank! If you stretch the word “first” and the word “stablecoin.”

EURCV is as useful as every other enterprise blockchain scheme — it doesn’t do anything, but you can market it with ancient bitcoin slogans with a different buzzword in them.

EUR CoinVertible: what it is

Société Générale (SocGen) is France’s third largest bank. SocGen Forge is their experimental blockchain unit, founded in 2018.

Jean-Marc Stenger, chief executive of SocGen Forge, promoted EUR CoinVertible to the Financial Times by talking about the huge US dollar domination of the stablecoin market — meaning Tether and USDC. [FT, archive]

Here’s the EUR CoinVertible white paper. [SocGen Forge, PDF]

SocGen has big ambitions for EURCV:

… we want our solution to be widely available through major Digital Asset exchanges to offer market participants a robust alternative for their needs. We also hope to see our solution used as a quality asset for various on-chain transactions (collateral, margining, wrapping to another blockchain etc.).

The trouble is that SocGen can do hardly any of these fancy DeFi tricks — because they can’t get away with setting up a money-laundering coin.

How EUR CoinVertible works, or not

EUR CoinVertible is “open to anyone who wants to use it, either operations on our own platform or other platforms,” Stenger told FT. This is only true in the sense of “anyone” who’s signed up with SocGen as an authorized user of the token.

EURCV will be issued on the public Ethereum blockchain as an ordinary ERC20 token. But you will only be able to move tokens if you’re whitelisted with SocGen as an authorized customer. Only “qualified investors” under French law — analogous to “sophisticated investors” in the UK or “accredited investors” in the US — can become EURCV customers.

So you can trade EURCV on Bitstamp against EUR and USDT — but you can’t move it off again unless you’re a fully qualified and KYCed customer of SocGen. [Bitstamp, archive]

Functionally, EURCV is a zero-interest bank account with SocGen — but less flexible.

EURCV is so locked down that we can’t even think of a way to use it for scamming.

Why would you even do this?

SocGen Forge has produced multiple blockchain products. Very few of these have more than pilot usage. That doesn’t matter, because the project existing at all matters much more than whether it’s of the slightest use. [Forge]

Banks want to chase the crypto buck — they think it’s cheap, free money from morons. This is true, but only if you break as many laws as crypto does.

Banks can’t really do that — so they end up creating things that don’t work for the crypto guys and also don’t work for conventional finance.

The potential is incredible, of course. Just imagine the hypothetical wins!

Banks were worried that a new wave of fintech startups — online banking, mobile lending, etcetera — were going to steal business from them. So in the mid-2010s, they formed fintech innovation teams.

Those bank innovation teams have to justify their existence. Sometimes they come up with something useful! But usually they just go with blockchain. We hear it’s the future of money.

Bank blockchain teams tend to coalesce around a few hardcore coiners who see it as their sacred mission to evangelize the good news about crypto. Anyone who isn’t a hardcore coiner moves elsewhere, to spend their life on something less futile.

The only reason to put EURCV on the public Ethereum chain is so that SocGen can say they’re doing a public stablecoin.

For similar reasons, SocGen Forge did an 11 million EUR “green bond” on Ethereum in November. It’s got all the finely permissioned and documented legal requirements of any other bond — but it’s also on Ethereum, for no functional reason. [Press release]

The attraction for SocGen is to claim it’s bringing “tech” to France, and it doesn’t matter if the tech is incoherent trash.

The Byzantine Manager Problem

Bank culture is about minimizing risk. So banks are terrible at innovation. Issuing a “stablecoin” is easier than being in any way actually innovative.

There are also many in the financial sector who want things to stay just as they are: lack of transparency, bad systems, no competition.

And there’s no better way to keep things the same than to invest in “innovation” that can’t work.

Blockchain is the perfect solution to this Byzantine Manager Problem:

  1. Imagine a group of senior Byzantine managers who need to implement a new system.


  2. If managers do not support any ideas, they will be fired for failing to show leadership.


  3. Anyone supporting a strategy for implementing the new system knows that if it fails, the other managers who did not support the idea will unite to blame them and crush them.

  4. All the managers know that none of them are capable of predicting what will work.


  5. If managers do not support an idea that subsequently succeeds, the supporters of the successful idea will drive them out of the organization for failing to support them.

  1.  The solution is to find an idea that is guaranteed not to work, i.e., blockchain. Every manager can support the strategy because guaranteed failure means everyone can show leadership with no chance of another faction blaming them for failure or lack of support.

Images: Teodor Kreczmar-Schuldorff

Other bank stablecoin tokens

The current favored euphemism for bank stablecoins is “tokenized deposits.”

Tokenized deposits represent traditional bank deposits — e.g., J.P. Morgan’s JPMCoin is a token traded on a private Ethereum instance they run in-house, and only JPMCoin customers can access it. This sounds pointless because it is.

Citibank has Citi Token Services. This doesn’t do anything. But it could and it has potential! Citi did a test transaction with Maersk. [Bankingdive; Citigroup; Bloomberg, archive]

ANZ Bank in Australia issued a tokenized deposit in 2022. It did two test transactions!

The crypto world has TassatPay, the successor to Silvergate Exchange Network and SIGnet, for internal settlement between US crypto companies. Somehow the banks involved don’t talk this one up so much.

When you read a puff piece that talks about companies doing a real, genuine single blockchain transaction, it means the two companies’ blockchain innovation units are both trying to justify their existence.

SocGen’s innovation is to put their useless private altcoin on a public blockchain — but they have to maintain the same level of absolute control as with anything else that touches real money to keep the crooks out, or the regulators will be deeply unhappy with them.

You might think that all of this sounds completely pointless, and you must just be missing the subtle reasons why it’s actually very clever and useful. We would just tap the sign again:

Posted on by Amy Castor 0

News: $250 million longs wiped out by bitcoin whale, Binance reopens withdrawals, Bitfinex set to trade LEO

Screen Shot 2019-05-18 at 5.17.10 PMThe price of bitcoin (BTC) is organically decided by traders—big ones, and only a few of them.

In the morning of May 17, the price of bitcoin did a nosedive, dropping from around $7,726 to $6,777 in about 20 minutes. The plunge was due to the actions of a single large trader (a “whale”) putting up 5,000 BTC (worth about $40 million) on crypto exchange Bitstamp.

The massive liquidation wiped out $250 million worth of long positions on BitMEX, a bitcoin derivatives exchange based in Hong Kong. (The BTC price it used bottomed at $6,469.15.) This, in turn, caused bitcoin’s price to plummet on other exchanges.

It’s hard not to view this as intentional price manipulation. 

BitMEX relies on two exchanges—Bitstamp and Coinbase Pro—equally weighted, for its Bitcoin-US dollar price index. Bitstamp and Coinbase both have low trading volumes, which makes them particularly vulnerable to price manipulations. It is like rolling a bowling ball down an alley and there are only two pins. You just have to aim for one.

Dovey Wan, partner at crypto asset investment fund Primitive Ventures, was the first to spot the dump on Bitstamp. She tweeted, “As NO ONE will simply keep 5000 BTC on exchange, this is deliberately planned dump scheme, aka manipulation imo.” 

Despite the hit, the price of bitcoin magically recovered. As of this moment, it is trading at around $7,300. Bitstamp has launched an investigation into the large trade.

Delay, delay, delay

In the wake of such blatant price manipulation, it is tough to imagine that the SEC will ever approve a bitcoin exchange-traded fund (EFT).

On May 14, the US regulator again delayed a decision to approve the Bitwise ETF proposal. The deadline for the SEC’s ruling on the VanEck bitcoin ETF is May 21, but I’m betting that will get pushed out again, too.  

Bitfinex

The New York Supreme Court has ordered Bitfinex to stop accessing Tether’s reserves for 90 days, except for normal business activities. The judge modified the New York Attorney General’s original order to ensure it does not restrict Tether’s “ordinary business activities.” Bitfinex played up the event as a “Victory! Yay, we won!” sort of thing, but the NYAG’s investigation is ongoing, and the companies still have to hand over documents.  

Traders clearly don’t have much confidence in Bitfinex at the moment. Amidst the regulatory drama swirling around Bitfinex and Tether, they are moving a “scary” amount of bitcoin off the exchange. 

Meanwhile, Bitfinex is pinning its hopes on its new LEO token. Paolo Ardoino, the company’s CTO, tweeted that Bitfinex raised $1 billion worth of tethers—not actual dollars, mind you, but tethers—in a private sale of its new token LEO. Bitfinex has yet to disclose who actually bought the tokens, but I’m sure they are totally real people. 

Bitfinex announced that on Monday, May 20, it will begin trading LEO in pairs with BTC, USD, USDT, EOS, and ETH. It will be interesting to see if traders actually buy the token. US citizens are not allowed to trade LEO. 

Binance

After freezing deposits and withdrawals for a week following its hack, Binance opened up withdrawals again on May 15. Traders are now free to move their funds off the exchange. 

Binance is looking to create utility around its BNB token. The exchange burned all of its Ethereum-based BNB tokens and replaced them with BEP2 tokens—the native token of Binance Chain. The cold wallet address is here.

Cryptopia, Poloniex, Coinbase

New Zealand crypto exchange Cryptopia is undergoing a liquidation after it experienced two security breaches in January, where is lost 9.4% of all its assets. Its customers are understandably pissed and outraged.

After the breach, the exchange was closed from January until March 4, when it relaunched in a read-only format. Ten days later, traders woke up to a message on the exchange’s website that read, “Don’t Panic! We are currently in maintenance. Thank you for your patience, and we apologize for the inconvenience.” Cryptopia closed permanently on May 15. Grant Thornton NZ, the company handling the liquidation, expects the process will take months.

In the US, regulatory uncertainty continues to plague exchanges. Boston-based Poloniex, which Circle acquired last year, says it will disable US markets for nine tokens (ARDR, BCN, DCR, GAME, GAS, LSK, NXT, OMNI, and REP). “It is not possible to be certain whether US regulators will consider these assets to be securities,” the exchange says. 

Meanwhile, Coinbase is using the $300 million it raised in October to gobble up other companies. The San Francisco-based exchange is in talks to buy Hong Kong-based Xapo for $50 million. Xapo’s coveted product is a network of underground bitcoin cold storage vaults. The firm is rumored to have $5.5 billion worth of bitcoin tucked away in bunkers across five continents. 

Elsewhere in Cryptoland 

John McAfee has disappeared. “He was last seen leaving a prominent crypto person’s home via boat. He is separated from his wife at the moment. Sources are claiming that he is in federal custody,” says The Block founder Mike Dudas.

McAfee’s twitter account is now being operated by staff, who later denied he was in custody, posting pics of McAfee with his wife in their “new” backyard. 

Decrypt’s Ben Munster wrote a hysterical piece on Dudas, who has a habit of apologizing post tweet. “He tweets like Elmer Fudd shoots his shotgun; from the hip, and nearly always in the foot.” The story describes Dudas as a real person with human foibles.  

Bakkt says it’s moving forward with plans to launch a physically settled bitcoin futures product in July. The company does not have CFTC approval yet—instead, it plans to self-certify, after which time, the CFTC will have 10 days to yea or nay the offering.

Both CME and CBoe self-certified their bitcoin futures products as well. The difference is this: they offer cash equivalents to bitcoin upon a contract’s expiration. Bakkt wants to deliver actual bitcoin, which may give the CFTC pause.

The SEC has fined Alex Tapscott, co-author of the book “Blockchain Revolution,” and his investment firm NextBlock, $25,000 over securities violations. (Here is the order.) And the Ontario Securities Commission fined him $1 million.

In 2017, NextBlock raised $20 million to invest in blockchain and crypto companies. In raising the money, Tapscott falsely touted four blockchain bigwigs as advisors in slide decks. After being called out by then-Forbes writer Laura Shin, the company returned investors’ money. But the damage was done, and the SEC went after them anyway.

Tim Swanson pointed out that the the Stellar network went down for about two hours, and only those who run validator nodes noticed. Apparently, nobody actually cares about or uses the Stellar network.  

According to a report by blockchain analysis startup Chainalysis, 376 Individuals own one third of all ether (ETH). Based on a breakdown of the Ethereum initial coin offering, which I wrote for The Block earlier this year, this comes as no surprise.  

Robert-Jan den Haan, who has been researching Bitfinex and Tether since way back when, did a podcast interview with The Block on “What the heck is happening with Bitfinex.” If you are Bitfinex-obsessed like I am, it is worth listening to.   

Apparently, kicking back at regulators is super costly and something you may want to consider before you launch a token that doesn’t have an actual use case. SEC negotiations have cost Kik $5 million, as the media startup tries to defend its KIN token.

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Posted on by Amy Castor 0