Maven’s Insights - January 2022

03 February 2022

The Ethereum Foundation, which is the primary non-profit organization behind Ethereum development, announced that they would formally be renaming ETH2.0, which is the name of the long-awaited Proof-of-Stake iteration of the network. While this may seem like minor news on the face of it, the renaming instead demonstrates a fundamental change in the future vision for Ethereum. Instead of referring to ETH1 or ETH2, these two will now be named ‘execution layer’ and ‘consensus layer’, respectively, with the combination of both layers being named ‘Ethereum’. This renaming is fully in line with our future vision on the modular blockchain design space, in which these layers will be separated.

January was generally marked by tumultuous financial markets, but NFTs and the broader metaverse concept saw strong signs of institutional adoption across the board. The first to cross the line this month was big-box retailer Walmart, who aims to venture into the metaverse, signalled by their intent to create and sell NFTs of virtual goods and the launch of their own cryptocurrency. Next up were Nike, who is hiring a Director of Metaverse Engineering, and Apple’s CEO Tim Cook, who said the company sees the metaverse as having lots of potential and is investing accordingly. Then there was also Microsoft, who mentioned that their almost 70 billion USD acquisition of Activision Blizzard was considered a building block for the metaverse.

Other large companies showed more than intent, and directly integrated crypto technology into their products. Google struck a partnership with Coinbase and BitPay to allow users to hold Bitcoin and other cryptocurrencies on their digital payment cards, and Twitter added functionality for users to utilize their NFTs as profile pictures on the platform. Meta, the parent company of Facebook and Instagram, announced that the company is planning a similar NFT display-feature, while also allowing users to display NFTs on their profiles, but also the ability to mint, trade and collect their own NFTs facilitated by their marketplace. Meta is also winding down Diem, their stablecoin project formerly known as Libra, for good. The Diem association has confirmed the sale of all their assets including intellectual property and the payment network to Silvergate, and blamed federal regulators for having fizzled out.

On the regulatory front, the executive order that was hinted at back in November is now being worked out. The Biden administration seems to be readying the executive order for as early as next month, which would require multiple federal agencies like the Treasury Department, the Commerce Department, the CFTC and the SEC, and many more to study the crypto industry and provide recommendations for their oversight. Furthermore, the Federal Reserve shared both their new CBDC whitepaper and their stablecoin research report. Their CBDC whitepaper speaks positively about the crypto technology involved in CBDCs, and mentions that a CBDC could co-exist with existing private digital money, while their stablecoin research report indicated that the Fed considers stablecoins to be safe havens and lays out their view of how stablecoins will impact the US financial system and the existing banking system.

On the aforementioned front of CBDCs, Visa and ConsenSys are teaming up on the development of new infrastructure that will support the rollout of new CBDCs. They have been consulting with central banks around the world about its development and potential, and they mentioned to be looking into pilot cases in the spring. Similarly, the Swiss National Bank  has successfully tested the integration of a wholesale central bank digital currency settlement with commercial banks in a trial coordinated by the Bank for International Settlements in which Goldman Sachs, Credit Suisse, Citi, UBS participated. The outcome was very positive, with the BIS saying that “a wholesale CBDC can be integrated with existing core banking systems and processes of commercial and central banks”.

2022 started off well for our portfolio company Maple Finance, in which we participate as a Pool Delegate on their institutional lending & borrowing platform. Our liquidity pool is now nearing the 200 million USD value, having originated another 15 million USD in loans this month. In order to expand and further capitalize on our yield-generating efforts, Martijn van Veen has been appointed partner and director for our asset management business. Martijn brings over two decades of trading and fund management experience and has held several senior roles in portfolio management and business development, including positions at hedge funds and investment boutique Dasym. We hope to continue growing our involvement in Maple Finance and our broader asset management business further during the coming year. If you would like to learn more about being a lender on Maple Finance or preliminary information about our asset management activities, you can reach out to us directly.