This week, after months of speculation and anticipation, the world of cryptocurrencies and blockchain were finally greeted with Facebook’s upcoming project. This project is being overseen by a subsidiary of Facebook, known as Calibra.
While the official launch won’t occur for several more months, details of the project have been released, including a thorough whitepaper.
Calibra will provide its clients with a digital wallet. This wallet will allow for users of Calibra, Facebook Messenger, and WhatsApp, to easily send and receive tokens between one another. These tokens, known as Libra, are intended to function similarly to a stablecoin, and are ‘pegged’ to the various FIAT currencies, through use of currency pool known as the ‘Libra Asset Reserve’.
Among various factors, many believe the anticipation for this release has helped aid in the market recovery being experienced over the past months. While there has been a generally positive reaction to the project thus far, it time will tell if we see a major sell-off, post announcement.
Reactions to the whitepaper release have been positive for a variety of reasons, with one being noted above all – awareness.
While it may seem odd to those involved with crypto and blockchain, the majority of the population has minimal knowledge on the industry. Facebook has a massive, global reach, and with their entrance, an enormous amount of people will gain exposure to what crypto is, and what it can offer.
Beyond simply raising awareness, there are those that have viewed this news in a negative light. Facebook has already been guilty of poor security practices, along with gathering obscene amounts of data on the public. Do we really want a corporation with such a reputation now gaining intimate knowledge on our finances as well? While there are those that prioritize privacy, the simple convenience of the offering will trump privacy for many.
While much of the information divulged in their whitepaper release is unsurprising, many were not expecting the release of TWO tokens.
The tokens to be released include not only the aforementioned ‘Libra’, but a second which will act as a security token. This will be known as the Libra Investment Token. This token will be distributed to early investors, with the proceeds of its sale being used to generate the Libra Asset Reserve (the asset pool used to ‘back-up’ the frontline Libra tokens).
Investors in the Libra Investment Token will be part of the Libra Association Council. Each will receive equity share in the reserve, providing them with dividends garnered from the interest generated on the reserve, along with certain voting rights. For full details on the benefits and responsibilities of being a council member, check out the Libra Council Principles page, HERE.
While the backing of Facebook may be enough to make Calibra a success, they will not need to do it on their own. Based on the promise of the platform, Facebook has managed to get the backing of over 25 various companies. These companies include, but are not limited to, the following.
Each of these companies is a founding member of the Libra Association Council. With a minimum $10 million contribution each, this means that the reserve pool is well on its way towards generating a beginning target of $1 billion.
While the public may be willing to accept this new offering with open arms, governments are more hesitant to do so. Simply put, governing bodies needs assurances on how the data and assets in use will be used.
This has already been made evident as the Senate Banking Committee of the United States has scheduled a hearing for July 16th. The purpose of this hearing is to discuss the Calibra project, and the potential concerns which may arise through its use.
On an interesting note, Calibra has not filed with the Reserve Bank of India, for the usage and dispersion of Libra within the country. With India representing the most populous nation in the world, this is a large market set to be left untapped. While these are early days, previous stances taken by Indian authorities should prove difficult to surmount. Despite this, the global presence of Facebook should still prove enough to lift Libra to great heights.
While Facebook is a huge, global influencer, they are not the only company of this stature. Along with Facebook, there have been rumblings in recent months that competitors such as Amazon and Alibaba will be releasing their own offerings.
This, however, has recently been shut down, as these competitors have indicated that there are no immediate plans for diving in to the industry. The speculation has garnered a response from the Vice President of Amazon, Patrick Gaulthier. At a recent conference, he commented on Calibra, stating,
“It’s fresh, it’s speculative; at Amazon, we don’t really deal with the speculative, in the now…At Amazon, we deal with data a lot, so I’ll be happy to have that conversation two or three years from now.”
Overall, the Calibra project exudes more positive than negative. While Facebook stands to gain even more user data, they are providing the world with a means to efficiently transfer value. Beyond the convenience of use, this has the potential to positively impact millions of unbanked individuals around the world – giving access to a better way of life along the way. This has been a goal of Bitcoin since the beginning, and whether this is achieved through Libra, or through Bitcoin, it has come one step closer to being reality.
Word on the Streets
With the potential that this project holds, it shouldn’t come as a surprise that it has caught the attention of many. Here are a variety of quotes from noteworthy individuals, expressing their thoughts on Calibra.
Jonathan DeCarteret, CEO of INDX, stated,
“Facebook’s LIBRA coin will most probably reshape the payment industry and quite possibly the de-dollarization of the world economy.”
Markus Feber, Member of German Parliament, stated,
“If Facebook will expose its two billion users to the risks of virtual currencies, this would be a good reason for the European Commission to start work on a proper regulatory framework governing the rules of virtual currencies”
Anthony Pompliano, Cofounder of Morgan Creek Digital, stated,
“Imagine a world where Facebook’s digital wallet, Calibra, didn’t just custody financial assets, but also allowed you to store and permission your data. One Wallet. Every asset you own. Low probability of happening, but high potential impact. Wilder things have happened.”
Andreas Antonopoulos, Bitcoin Advocate, stated,
“While Facebook’s Libra doesn’t compete against any open, public, permissionless, borderless, neutral, censorship-resistant blockchains, it *will* compete against both retail banks and central banks. This is going to be fun to watch.”
Copper to Securitize Custom Indices with ‘Catalyst’
Over the past few years, one thing has been made clear within digital securities. This would be a need to develop services which ‘bridge the gap’ between tradition markets, and those of the future. Simply creating new services and offerings will not, necessarily, spur adoption. Rather, by providing an easy transition for those already enveloped in financial markets, seems to be a more prudent path to follow.
With this in mind, Copper has announced the creation, and launch, of a new service, dubbed ‘Copper Catalyst’.
Simply put, Copper describes Catalyst as providing the ability to ‘enable crypto funds to create and issue securities on digital assets rapidly, and cost-effectively’.
What does it do? And How?
Catalyst allows for institutional investors to gain access/exposure to cryptocurrencies – all while removing the need for self-storage. This is done through the use of actively-managed certificates (AMCs). As a result, by using AMCs, Copper is enabling cryptocurrency indices to be treated as clearable securities.
Bringing even greater appeal to Catalyst, is the use of Swiss ISINs – meaning the securities will be fully bankable (easily converted to cash). As a result, access will be provided through various regulated European exchanges.
To date, Catalyst is the only service of its kind. Depending on its success, there will surely be competitors that arise in the future.
ISIN is short for ‘International Securities Identification Number’. These numbers are attached to specific issuances of stock, and provide information on the underlying product.
Think of an ISIN as being similar to a VIN (Vehicle Identification Number) on your automobile. When decoded, a VIN will provide information, such as date of manufacturing, options, and etcetera. Similarly, when decoded, an ISIN will provide information, such as a stock identifier, issuance country, etc.
An ISIN is used primarily to identify the underlying product, reducing the risk of various forms of fraud.
Beyond offering the various capabilities discussed above, Copper notes another major draw towards Catalyst – cost savings.
They attribute this cost savings, primarily, to the ‘initial and on-going regulatory compliance’. By offering various services, surrounding KYC/AML, trade management, and more, Copper surmises that clients will save, both, time and money. For example, they provide the following comparisons between utilizing the Catalyst suite vs. independent sourcing of services.
- Completion in days
- Completion in months
Upon announcing the launch of Catalyst, Copper CEO, Dmitry Tokarev, took the time to comment. He states,
“The crypto fund industry has shown enormously promising growth over the last decade, with impressive strategies and excellent return for investors. But it is no secret that there has been a clear barrier to their graduation into the investment mainstream: the lack of feasible securitisation options. With sky-high costs and extensive compliance issues associated with most available structures, there is a gulf between traditional financial markets and this next generation of funds: a gulf that Copper Catalyst will bridge.”
With the launch of Catalyst, Copper now has a well-rounded suite of services. The following are just a few examples.
As this product suite rounds in to form, Copper has the potential to become a leader in a sector rife with potential.
The development, and launch, of Catalyst is a promising sign. It shows that Copper is not squandering their recently completed Series A.
We recently covered the success of this funding round, as Copper was able to generate $8M in investments through a variety of companies. To learn more about this round, and those that participated, make sure to peruse the following article.
Founded in 2018, Copper maintains headquarters in London, UK. Above all, the team at Copper is working to develop a comprehensive suite of services, tailored towards digital assets.
CEO, Dmitry Tokarev, currently oversees company operations.
While their services have expanded well beyond simply that of custody, this is certainly an area of speciality for the company. Over the past year, we have touched on various instances of adoption, including that of SWARM, as they turned to Copper to custody security tokens.
Blockchain Capital’s BCAP Token Outperforms Market in Q2, 2020
Today they announced that the net asset value (“NAV”) of each BCAP token as of June 30th, 2020, is $4.47, based on the NAV of the underlying venture capital fund, Blockchain Capital III Digital Liquid Venture Fund, LP. Weekly NAV updates can be found at: http://www.loop.blockchain.capital/
The BCAP NAV finished up 25.6% for the second quarter of 2020. The Q2 increase was driven by the liquid/token portion of the fund’s portfolio. The NAV is up 22.8% year-to-date.
The BCAP portfolio is up 347.0% since inception, post-STO from April 2017, and has a Net IRR of 59.0%. Performance figures are net of all fees and estimated carry.
The composition of the portfolio as of June 30th, 2020 is as follows:
While there are plenty of traditional cryptocurrencies in the portfolio, some special companies to note are Securitize and Harbor which are heavily involved in the digital securities and security tokens space.
About Blockchain Capital
Blockchain Capital was founded in 2013 with the mission of helping entrepreneurs build world-class companies and projects based on blockchain technology – providing founders with the tools they need to succeed: capital, domain expertise, partnerships, recruiting and strategy.
Blockchain Capital is one of the earliest and most active venture investors in the blockchain industry and has financed 90+ companies and projects since its inception. The company invests in both equity and tokens and is a multi-stage investor. Blockchain Capital also pioneered the world’s first ever tokenized investment fund and by extension the blockchain industry’s very first security token, the BCAP, which the company sold through a security token offering in April of 2017.
The company’s view is that blockchain technology holds the promise to disrupt legacy businesses and create whole new markets and business models. Blockchain Capital believes its network of entrepreneurs, investors and advisors brings unrivaled resources to founders who want to leverage blockchain technology to change the world in profound ways.
Real-World Assets as Collateral for DeFi, Made Possible with MakerDAO
The cryptocurrency space was borne out of a desire to bring about a better financial system and infrastructure that is inclusive for anyone, anywhere.
The crypto industry has matured significantly since 2010 when Bitcoin kicked off a new wave that today spawned a whole new industry. The crypto community continually progressed with new tools and capabilities being gradually built up.
Nonetheless these capabilities that promise quicker settlement times, trustless global accessibility and granular asset control have mostly remained gated within the crypto realm.
Bringing Together Real-World and Crypto Assets
Now, the ambition is to bridge the gap between real-world assets and cryptocurrencies. Specifically in the DeFi space, that aims to provide a borderless financing infrastructure, the first steps are being made to bring real-world assets as collateral for loan issuance.
The community of MakerDAO, that is behind the DAI stablecoin, arguably one of the most popular DeFi projects, has confirmed the vote on whether to allow real-world assets to be included as collateral options.
This comes following the effort led by the startup Centrifuge, that developed a protocol that lets users turn real assets into securities against which ERC20 tokens can be issued. This enables real world asset securitization as these tokens are interest-bearing and will be issued as NFTs (Non-Fungible Tokens).
DeFi applications built mostly on top of the Ethereum blockchain promise to give more people access to borrowing, lending, and other services because they eliminate the need to go and transact through a financial institution.
In the case of MakerDAO, the system built with Maker (MKR) and DAI lets users deposit cryptocurrency-denominated collateral to take out loans denominated in the U.S. dollar-pegged stablecoin DAI.
While recently the DeFi space celebrated a huge milestone with $1 billion locked in various applications across the board, participation in DeFi today is limited because it requires that users have purely crypto-native assets.
Getting real-world assets involved in the DeFi industry is what Centrifuge is pursuing with its Ethereum Dapp called Tinlake. The app allows for the securitization of real-world assets and have these represented on the blockchain as tokens, which can in turn be used to gain access to DeFi services.
What is Asset Tokentization?
Asset tokenization refers to the act of turning the ownership of a real-world asset into a digital token. This can be done in various ways, but all result in the legally-upheld bridge between the physical asset and its representative token.
Deeds, titles, and certificates are all traditional versions of a token. A deed to a house represents ownership of that house. The token refers to the digitally native asset which represents the real-world asset itself.
The first two types of assets that are available for tokenization are music streaming royalties enabled by PaperChain and ConsolFreight’s freight shipping invoices.
With the positive vote from the MakerDAO community, now anyone – be it individuals or companies – is able to utilize future cash flows from music streaming royalties or shipping invoices as collateral to take out loans for example.
Centrifuge’s Lucas Vogelsang notes the partnership could be the world’s first application of DeFi to a real-world business issue. Particularly, the solution helps ensure quick liquidity for artists and supply chain firms, without the hassles of going through traditional ways of financing.
MakerDAO’s Rune Christensen has also shared a highly optimistic vision as the two proposals represent the first step towards the expansion of DeFi’s field of application:
“These should be seen as the first two [RWAs] in the greatest portfolio of assets that’s ever been built. It’s just the first step. Thousands and thousands of assets will exist alongside them.”
There are still issues and restrictions when it comes to securitization of real-world assets and introduces new risks to the DeFi space.
For instance, Centrifuge’s tokenization process through its app still falls under the securities law. Since both Paperchain and ConsolFreight are based in the U.S. only accredited investors will have access to these assets.
Another compromise that was made in order to bring real-world assets to DeFi is Centrifuge setting up a special purpose vehicle (SPV) that will have the assets associated with, from a legal touchpoint. Lenders, in the event of default, would have to rely on the legal system to enforce their rights to the collateral, rather than an automated smart contract that can do so with on-chain assets.
While this is necessary to have a claim for the tokenized real-world assets, it represents a single-point of failure. But this is a trade-off that Centrifuge’s Lucas Vogelsang says is necessary in order to bring real world assets on-chain.