Developments in Future of Money

Our inaugural biweekly survey of notable happenings in the world of digital assets

Compiled by the Oliver Wyman Forum

Crypto-native and traditional finance institutions are forging ahead with digital asset strategies even as the shakeout from the recent plunge in prices continues to reverberate through the market. Here is our review of significant developments over the past two weeks.

Business Moves

BlackRock Allies with Coinbase for Crypto Services

BlackRock, the world’s largest fund manager, on August 4 announced a partnership over digital asset services with cryptoasset exchange Coinbase. Under the arrangement, Coinbase will provide crypto trading, custody, and prime brokerage services as well as reporting capabilities to institutional clients of BlackRock’s Aladdin investment management platform.

The agreement represents a significant vote of confidence in the potential of cryptoassets from an established financial institution, considering that BlackRock managed $8.5 trillion in assets at the end of June.

“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, Global Head of Strategic Ecosystem Partnerships at BlackRock.

DeFi Platforms Embrace Stablecoins      

The decentralized lending platform Aave will develop its own stablecoin, named GHO, following an overwhelming endorsement from members of its governing decentralized autonomous organization, or DAO, on July 31. Aave said users will be able to mint the stablecoin against a diversified set of crypto assets, and that borrowers of GHO will continue to earn interest on the underlying collateral.

Aave’s initiative comes as Curve, a decentralized liquidity pool, is working to develop its own stablecoin. The market capitalization of stablecoins, which declined in the wake of the collapse of TerraUSD in May, has stabilized in recent weeks at a little over $150 billion.

Big Exchanges Grow During Market Shakeout

The largest cryptoasset exchanges have expanded their market share during the so-called crypto winter of recent months, the Wall Street Journal reported on July 29. Binance increased its share of spot trading to 50% in June from 45% in January while FTX grew its share to 9% from 6%.

Microstrategy Takes $918 Million Hit From Bitcoin

Software company MicroStrategy posted a $1.06 billion loss in the second quarter after incurring a $918 million impairment charge from the decline in value of the company’s Bitcoin holdings. The company raised $2.4 billion in debt to buy Bitcoin and disclosed holdings of 129,699 BTC at June 30. Bitcoin’s value against the dollar declined by more than 50% during the quarter.

Michael Saylor announced he would relinquish his position as chief executive and become executive chairman to “focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives.” President Phong Le succeeded Saylor as CEO.

FC Barcelona Signs a Metaverse Partner

The Spanish soccer club FC announced an agreement with blockchain-based fan engagement and rewards platform to develop digital assets including non-fungible tokens (NFTs) and Web3 metaverse strategies. Chiliz, the technology provider that owns, will invest $100 million in Barca Studios and acquire a 24.5% stake in the club’s digital content arm. The partners will work on projects to reward and build connections with fans. They previously teamed up to launch a $BAR fan token on that enables fans to redeem rewards including VIP tickets and merchandise. 

Virginia Pension Bets on Yield Farming

A local US pension fund is looking to boost returns by investing in cryptoasset yield farming, the Financial Times reported on August 4. The board of trustees of the $6.8 billion pension fund of Fairfax County, a suburb of Washington, D.C., recently authorized the fund to begin lending cryptoassets.

“Some of the yields that you’re able to achieve in a yield farming strategy are really attractive because some of the people have stepped back from that space,” said Katherine Molnar, chief investment officer of the Fairfax County Retirement Systems. Crypto lending platforms Celsius Network and Voyager Digital filed for bankruptcy in July.

Policy Front

China Looks to Expand its CBDC Pilot

The People’s Bank of China on August 2 announced the “orderly expansion” of its digital yuan pilot project as one of its key objectives in the second half of this year. The central bank, which launched the central bank digital currency pilot in 2020, said it recorded 264 million CBDC transactions with a combined value of over 83 billion yuan ($12.3 billion) in the first five months of this year.

Binance.US Delists Token After SEC Move

Binance.US, the American arm of the cryptoasset exchange, on August 1 announced it would delist the AMP token from its exchange as of August 15. The move came less than two weeks after the Securities and Exchange Commission identified AMP as a security in an insider trading complaint against a former Coinbase employee. 

New York State Appeals to Crypto Investors to Turn Whistleblowers

New York State Attorney General Letitia James on August 1 urged cryptoasset investors who have been locked out of their accounts or been unable to access their investments to file whistleblower complaints with her office. The announcement cited the collapse of the TerraUSD and LUNA cryptocurrencies as well as the freezing of accounts at crypto lending platforms including Anchor, Celsius Network, and Voyager Digital.

Crime Beat

SEC Charges 11 Over Alleged Crypto Ponzi Scheme

The Securities and Exchange Commission on August 1 charged 11 individuals with fraud for creating Forsage, an alleged Ponzi scheme that raised more than $300 million from retail investors around the world. Forsage used smart contracts that enabled investors to earn profits by recruiting others into the scheme, the complaint alleged. The people charged included the four founders of Forsage, who were last known to be living in Russia, as well as three US-based promoters.

Hackers Rob Thousands of Digital Wallets  

A hack drained funds from nearly 8,000 wallets holding digital assets on the Solana blockchain, causing the loss of more than $5 million. The hack appeared to affect so-called hot wallets, which are connected to the internet for ease of use. The provider of Slope wallets confirmed the breach had occurred and affected wallets owned by some of its staff and founders. It said it was working to identify and rectify the problem.

The Solana Foundation said the incident did not appear to stem from a bug with the blockchain’s code and that Slope’s hardware wallets, which are not connected to the internet when not in use, remained secure. 

Bridge Attacks Take an Estimated $2 billion Toll

In the latest attack on infrastructure that enables users to transfer cryptoassets between blockchains, hackers stole nearly $200 million from the Nomad token bridge. Nomad offered a bounty of up to 10% of stolen monies for any hacker that returns at least 90% of what they stole.

Hackers have stolen an estimated $2 billion from cross-chain bridges so far this year, or nearly 70% of funds stolen in the crypto space, according to analytics firm Chainalysis.  

Notable Views

Buterin Outlines Ethereum’s Scaling Strategy

Ethereum co-founder Vitalik Buterin outlined his strategy for scaling the blockchain’s processing power after it shifts from the current proof-of-work consensus mechanism to a proof-of-stake system. Speaking at an Ethereum Community Conference in Paris, Buterin said the network would use techniques including sharding, which breaks data up into more easily managed pieces, and rollups, which perform transactions outside of the blockchain’s base layer. When completed, the changes should enable Ethereum to process 100,000 transactions a second, compared with as little as 15 a second currently.