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Crypto Biz: Bidding war for SVB Capital, new crypto funds and Citi’s private blockchain

September 22, 2023 Coin Telegraph

Blockchain Capital

This week’s Crypto Biz explores SVB Capital bids, new funds from Blockchain Capital, the Hut 8-US Bitcoin merger and Citigroup’s private blockchain.

The venture capital industry appears to be gearing up for portfolio rebalancing in 2024, with investors positioning themselves to increase exposure to digital assets in the next bull market. Blockchain Capital, for instance, closed two new funds this week, with $580 million in capital to be deployed in crypto gaming and decentralized finance projects.

Likewise, SkyBridge Capital, Atlas Merchant Capital and Vector Capital are among the final bidders to acquire SVB Capital, the venture arm of the collapsed Silicon Valley Bank. SVB Capital is reportedly a backer of other major venture capital firms in the crypto space, including Sequoia and Andreessen Horowitz.

Meanwhile, Bitcoin-based investment products from mainstream financial giants are becoming more popular. Japan’s largest investment bank, Nomura, launched through its subsidiary, Laser Digital, a new Bitcoin (BTC) fund for institutional investors looking to cater to the demand for Bitcoin exposure.

A growing number of newcomers are also attracting funds. Web3 startup Bastion disclosed $25 million in a seed round to bridge Web3 infrastructure into enterprise technology. The round was led by Andreessen Horowitz, Laser Digital Ventures (Nomura’s crypto venture arm), Robot Ventures, Aptos Ventures and Alchemy Ventures.

This week’s Crypto Biz explores SVB Capital bids, new funds from Blockchain Capital, the Hut 8-US Bitcoin merger and Citigroup’s private blockchain.

Scaramucci leads bidding for Silicon Valley Bank VC arm: Report

SVB Financial Group, the former parent company of Silicon Valley Bank, is getting closer to a deal that will see the institution sell its venture capital arm, SVB Capital. According to a report from The Wall Street Journal, Anthony Scaramucci’s SkyBridge Capital and Atlas Merchant Capital are jostling with the San Francisco firm Vector Capital in the final stages of the bidding process. Sources claimed that SVB’s venture capital arm could be sold off for between $250 million and $500 million but warned that a final sale is not guaranteed and would still require the review of the creditor’s committee. SVB Capital conducts a wide range of investments, including backing other major venture capital firms, such as Sequoia and Andreessen Horowitz. The company is not part of SVB’s Chapter 11 bankruptcy proceedings, and a decision on the sale is expected in the coming weeks.

*SVB Capital holdings overview as of December 2022. Source: SVB Capital*

Hut 8 receives green light from Canadian Supreme Court for US Bitcoin merger

Canadian Bitcoin mining firm Hut 8 is set to wrap up its planned merger with US Bitcoin following final approval from the Supreme Court of British Columbia. Hut 8 and US Bitcoin announced the move in February 2023, subject to shareholder and regulatory approval. The merger will see the two companies form Hut 8 Corporation, or “New Hut,” which will become a publicly traded United States-based business. An initial announcement from Hut 8 highlighted that the merger would open up 825 megawatts of capacity across six different Bitcoin mining and data center facilities. New Hut also plans to list its shares on the Nasdaq and Toronto stock exchanges, trading under the ticker HUT.

Blockchain Capital closes funds totaling $580 million for investments in crypto gaming, DeFi

Venture capital group Blockchain Capital announced the closing of two new funds, totaling $580 million, for investment in infrastructure, gaming, decentralized finance (DeFi), and consumer and social technologies. The funds will operate as Blockchain Capital’s sixth early-stage fund and its first “opportunity fund,” which will serve as an entry point for companies that have already attracted funding. The funds will be split, with $380 million reportedly going to the early-stage fund and $200 million earmarked for the opportunity fund. The company did not specify which projects will be prioritized by the investment fund; however, a spokesperson noted that it has no plans to invest in artificial intelligence-related projects or act as a hedge fund.

We're thrilled to share the closing of 2 new funds – our 6th early stage fund and 1st opportunity fund.

Together, they total $580 million and serve to reinforce our commitment to leading the global transition to decentralized, blockchain-based systems. ↓https://t.co/Vr2uYnGlF7
— Blockchain Capital (@blockchaincap) September 18, 2023

Citi Token Services will provide payments, liquidity to institutional customers

Institutional clients can now access cross-border payments, liquidity and automated trade finance solutions through Citi Token Services, a private blockchain by Citigroup. According to the financial giant, its Citi Treasury and Trade Solutions is licensed in over 90 countries and has completed two pilot programs. It worked with Danish shipping company Maersk and an unnamed canal authority on a program that made instant payments to service providers via smart contracts, reducing transaction processing times from days to minutes. The service replaces bank guarantees and letters of credit, the statement said. A second pilot enabled clients to transfer liquidity between Citi branches, allegedly reducing “frictions related to cut off times and gaps in the service window.” Citi was among the large financial institutions that participated in a proof-of-concept headed by the Federal Reserve Bank of New York that concluded in July.

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Coinbase stock will be ‘weighed down’ until US rules are clear: Citi

May 3, 2023 Coin Telegraph

Analyst

The investment bank downgraded Coinbase stock to "Neutral" amid the exchange's ongoing battle with U.S. regulators.

Crypto exchange Coinbase’s stock price will continue to be “weighed down” until regulators establish the legal “rules of the road” in the United States, according to investment analysts from Citi.

As per reports on May 1, the investment bank downgraded shares of the crypto exchange from “Buy” to “Neutral” and lowered its price target — citing “too many unknowns” as the company battles it out with regulators.

*Screenshot of the analyst note from Citi. Source: Twitter*

"Until the regulatory 'rules of the road' are better established in the U.S., the stock will remain weighed down by this high level of uncertainty," Citi analyst Peter Christiansen wrote in a May 1 note.

In March, Coinbase disclosed it had received a Wells notice from the Securities and Exchange Commission (SEC) over possible violations of securities laws — signaling possible future enforcement action.

In April, it shot back at the SEC, filing a federal court action compelling the SEC to give clarity into the regulatory treatment of certain digital assets.

Later in the month, Coinbase CEO Brian Armstrong and Chief Legal Office Paul Grewal released a public response to the March Wells notice on YouTube.

1/ Today we’re sharing our “Wells response” to the SEC. As part of our response, @iampaulgrewal and I sat down to explain why we’re confident in the facts and on the law, and why a Wells notice is not in the best interest of the US. https://t.co/zkNaWGgtcK
— Brian Armstrong ️ (@brian_armstrong) April 27, 2023

“As it stands, both long and short debates begin and end with Coinbase's regulatory predicament,” said Christiansen, noting there could be a few ways the regulatory scuffle could play out:

“Clarity could come from: (i) a lengthy legal process vs. the SEC, where the possibility of an operating injunction cannot be ruled out, (ii) long-awaited legislative movement amidst a challenging legislative calendar and an upcoming election year, and/or even (iii) Ripple’s ongoing legal process, which could be potentially precedent setting,” the analyst wrote.

The analyst noted that the latest SEC developments don’t suggest that the parties are close to any resolution.

At the time of writing, Coinbase is trading at $51.32, down 58.5% over the past year, as per Yahoo Finance.

*Coinbase share price over a year period. Source: Google*

Itsstock price slumped around 16% on March 22 after it disclosed it received the Wells notice.

The company has recently become the target of two proposed class action lawsuits, one of which alleges it breached privacy laws in Illinois over its collection of customer biometrics, and the other alleging certain executives profited from insider information when the company went public.

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Citigroup Predicts 80X Explosion in Tokenization, Forecasts Timeline for Mass Adoption of Digital Assets

April 3, 2023 The Daily Hodl

‘Killer use case’: Citi says trillions in assets could be tokenized by 2030

March 31, 2023 Coin Telegraph

Apollo

The bank predicts the private equity market to become the most “tokenized” asset class because it is more liquid and can be fractionalized.

Investment bank Citi is betting on the blockchain-based tokenization of real-world assets to become the next “killer use case” in crypto, with the firm forecasting the market to reach between $4 trillion to $5 trillion by 2030.

That would mark an 80-fold increase from the current value of real-world assets locked on blockchains, Citi explained in its “Money, Tokens and Games” March report.

“We forecast $4 trillion to $5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030,” the firm's analysts said.

Of the up to $5 trillion tokenized, the bank estimates $1.9 trillion will come in the form of debt, $1.5 trillion from real estate, $0.7 trillion from private equity and venture capital and between $0.5-1 trillion from securities.

*Blockchain-based tokenization total addressable market by asset class. Source:* *Citi*

The research suggests that private equity and venture capital funds will become the most tokenized asset class, capturing 10% of its total addressable market, with real estate coming in next at 7.5%.

Private equity markets will likely see faster adoption rates because of their favorable liquidity, transparency and fractionalization properties, the bank said.

KKR, Apollo and Hamilton Lane are three private equity firms that have already set up tokenized versions of their funds on platforms like Securitize, Provenance Blockchain and ADDX.

*If Citi’s bullish estimates are reached by 2030, tokenized assets would still only represent a small share of the total addressable markets. Source:* *Citi*

Citi said that blockchain tokenization would supersede legacy financial infrastructure because it is technologically superior and it provides more investment opportunities in private markets.

“Traditional financial assets are not broken, but sub-optimal as they are limited by traditional systems and processes,” it said. “Certain financial assets — such as fixed income, private equity, and other alternatives — have been relatively constrained while other markets — such as public equities — are more efficient.”

Citi argues that blockchain tokenization negates the need for expensive reconciliation, prevents settlement failures and makes tedious operations ever more efficient:

“What DLT and tokenization offer is an entirely new tech stack that lets all stakeholders do all activities on the same shared infrastructure as one golden source of data — no more expensive reconciliation, settlement failures, waiting for the faxed documents or ‘originals to follow’ by post, or investment choices being restricted by operational difficulty in access.”

The investment bank did, however, acknowledge that there are drawbacks at present, such as a lack of legal and regulatory framework, challenges with building the infrastructure and obtaining a widely followed set of interoperability standards.

Citi also noted that some industry players remain “skeptical” too, particularly in light of the Australian Securities Exchange (ASX) recently scrapping its failed $165 million DLT project in November.

There are many more “growing pains” to come, Citi added. But the bank remains confident that the ecosystem will mature as the technology develops:

“Once this intermediate, skeuomorphic ‘straddle’ state is crossed, the new disruptive technology breaks free from the old and ideally directionally trends towards the envisioned end-state.”

Citi envisions this “end state” as a “digitally native financial asset infrastructure, globally accessible, operating 24x7x365 and optimized with smart contract and DLT-enabled automation capabilities, which enable use cases impractical with traditional infrastructure.”

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‘Metaverse’ a top 3 contender for Oxford’s Word of the Year

November 23, 2022 Coin Telegraph

Citi

Oxford University has opened public voting for the first time with polls set to close on Dec. 2.

The word “Metaverse” is one of three in the running to be crowned the Oxford "Word of the Year” (WOTY) in a competition run by the Oxford University Press (OUP), the publisher of the Oxford English Dictionary.

OUP officially announced the launch of the competition and its three finalist words for 2022 on Nov. 22 with this year marking the first time the public can participate in voting for the WOTY.

“Metaverse” will compete against the terms “#IStandWith” and “Goblin Mode”.

1️⃣ metaverse

Usage increased as we discussed #hybrid working, debated the ethics, and wondered about the feasibility of an entirely online future. pic.twitter.com/Lk0pLfc1mW
— Oxford University Press (@OxUniPress) November 22, 2022

In OUP’s video pitch for the Metaverse, it described it as “a hypothetical virtual reality environment in which users interact with one another’s avatars and their surroundings in an immersive way.”

“The term dates back to the 1990s, with the first recorded use in the Oxford English Dictionary in 1992 in the science fiction novel Snow Crash by Neil Stephenson,” the video stated.

Oxford noted that "Metaverse" has quadrupled in usage in Oct. 2022 compared to that of Oct. 2021. The video stated that more lifestyle and work-related activities taking place in virtual reality environments may bring about “more debates over the ethics and feasibility of an entirely online future.”

As for the other two WOTY candidates, “#IStandWith” has become an increasingly used phrase for political activism, while “Goblin Mode” emerged as a post-COVID-19 lockdown concept in which one rejects “returning back to normal” and instead does what they want to do.

As for how the three phrases were chosen, OUP stated that they ran an analysis on a language data system in order to narrow down the candidates to three.

In order to officially vote for “Metaverse” or the other two candidates, voters must cast their vote on Oxford Languages’ website.

Over 237,000 votes have been cast so far, with voting set to close Dec. 2.

Oxford did not state when the winning word would be announced.

In what could spell how the votes are panning out, at the time of writing a Twitter poll by OUP shows 63% of 929 voters favored "Goblin Mode", followed by "Metaverse" at 22% then "#IStandWith" at 15%:

Are you #Teammetaverse, #TeamGoblinMode, or #TeamIStandWith? Vote now for Oxford Word of the Year 2022.
— Oxford University Press (@OxUniPress) November 22, 2022

Whatever the results of the poll, the Metaverse is predicted to be a significant industry in the near future, with a recent report by international consulting firm McKinsey estimating Metaverse-related technologies to be worth $5 trillion by 2030.

Investment bank Citi upped that prediction, saying the total addressable market for the Metaverse economy may fall within the range of $8-13 trillion over the same time frame.

The understanding of the Metaverse has been most significantly influenced by the blockchain and cryptocurrency industry, along with Meta CEO Mark Zuckerberg’s rebranding of Facebook to Meta in Oct. 2021 and its recent developments on its Metaverse products through its Reality Labs business.

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