On Monday, Sept. 10, 2018, the New York Department of Financial Services (DFS) announced that it has authorized both Paxos Trust Company LLC and Gemini Trust Company LLC to offer price-stable cryptocurrencies pegged to the U.S. dollar, commonly known as "stablecoins." According to a DFS press release, the approvals of these new financial products came after rigorous review and will be subject to ongoing examinations to ensure compliance with BSA/AML and OFAC regulations; adherence to cybersecurity standards; prevention of market manipulation; maintenance of proper information reporting and consumer protection; and assurances that the stablecoins are fully exchangeable for the U.S. dollar. Paxos Standard is built on the Ethereum blockchain and is backed by U.S. dollar deposits held in segregated accounts at multiple FDIC-insured U.S. banks, with the account balances verified by independent audit firms. All Paxos Standard tokens in circulation will be backed by U.S. dollars, and upon redemption for dollars, the Paxos Standard tokens will be immediately destroyed. The Gemini Dollar also runs on the Ethereum blockchain, with each Ethereum-based token backed by a U.S. dollar. The dollars backing the Gemini Coin will be held at a major U.S. bank in an FDIC-insured account, with monthly audits to be performed on the account by a public accounting firm.

Also on Sept. 10, various news outlets reported that a major U.S. bank is planning to begin acting as an agent issuing so-called digital asset receipts (DARs) that would effectively allow parties to trade in bitcoin without having to take actual ownership of bitcoin. According to reports, the DARs would function similar to American depository receipts (ADRs), which enable parties to trade baskets of foreign stocks that do not trade on U.S. exchanges. In the same way that an ADR is held by a bank that issues a depository receipt, with a DAR the bitcoin will be held by a custodian, with a receipt issued by the bank. In a separate report this week, another major U.S. investment bank announced that it is working on a bitcoin derivative product that would be settled in U.S. dollars. And on Sept. 12, startup Seed CX announced a $15 million Series B funding round that it will use to expand its offerings of institutional trading and settlement for cryptocurrency spot markets and CFTC-regulated cryptocurrency futures. These developments come amid the announcement of the Blockchain Association, the first ever D.C. lobbying group dedicated to the blockchain industry.

As institutional products evolve, according to new data published by Autonomous Research, nearly half of all ICOs since 2017 have failed to raise any funds. According to the new research, the month of August 2018 saw the lowest rates of return on startup ICOs since May 2017, with such efforts raising only $326 million compared with the $3 billion-per-month average observed during the first three months of the year. The report also found that roughly 40 percent of the ICOs examined raised more than $1 million each, and found that the number of hedge funds specifically focused on cryptocurrency has increased significantly. The move away from ICOs to so-called securitized token offerings appears to be further illustrated by recent news that the Malta Stock Exchange's fintech and digital asset subsidiary, MSX PLC, recently signed a Memorandum of Understanding with cryptocurrency exchange Binance to jointly launch a new security token digital exchange that seeks to take advantage of the island-nation's pro-crypto regulatory stance.

According to joint research from the World Economic Forum and Bain & Company, small and medium-sized enterprises (SMEs), particularly in the developing world, could stand to become some of the biggest beneficiaries of blockchain financing, as global businesses could reduce the supply-demand gap in trade financing and generate roughly $1.1 trillion in new trade volume through effective blockchain deployments. In China, the "Guangdong, Hong Kong and Macao Dawan District Trade Finance Blockchain Platform" has begun pilot operations with the backing of the People's Bank of China that aim to facilitate cross-border trading across provinces and reduce trade financing costs from 7-8 percent to less than 6 percent for SMEs.

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