Blockchain Bites: PayPal, Mastercard Inch Closer to Crypto

Fintech giant PayPal is leaning on Paxos to handle its crypto services, Mastercard is expanding its crypto program and a prominent Canadian crypto platform has been accused of wash trading as much of 90% of its volumes.

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PayPal Picks Paxos
PayPal, the fintech giant planning to bring crypto trading to its massive user base, has chosen Paxos to handle the new service’s supply of digital assets, according to two people familiar with the matter. Paxos launched a brokerage service last week, which provides an API solution to allow businesses to begin offering crypto buying, selling, holding and sending capabilities – while handling all regulatory compliance aspects. It’s unknown what cryptocurrencies PayPal intends to offer, though its entry into the space makes it one of the most mainstream companies to do so.

Wash Trading
Canada-based crypto trading platform Coinsquare has been accused by the Ontario Securities Commission (OSC) of inflating its trading volumes in an illegal practice called wash trading. In a Statement of Allegations from the OSC, filed last Thursday, the regulator alleges Coinsquare’s executives directed staff to wash trade as much as 90% of the platform’s reported volume between July 2018 and December 2019. The alleged misconduct occurred while Coinsquare was applying to the OSC to register a subsidiary, Coinsquare Capital Markets.

Crypto Cards
Mastercard is expanding its cryptocurrency program by granting Wirex, a crypto payment business, principal membership status. This status makes Wirex the first native crypto company to be able to directly issue payment cards to its customers. The Financial Conduct Authority (FCA) regulated-Wirex offers a payment facility that automatically exchanges crypto into fiat currencies.

Custodial Entrant
Standard Chartered’s venture and innovation arm has been working on a crypto custody offering for the institutional market that could be piloted later this year. Alex Manson, the head of SC Ventures, said as many as 20 institutions have expressed interest in the custodial solution. He added, institutional adoption has been hindered by a lack of proper custodial offerings. Initially, SC Ventures had been looking at creating a market service, but realized it had to go a couple of steps back as many wouldn’t touch the digital asset space “with a flagpole” until they had ready access to an institutional-grade storage solution.

Promo Oversight
The U.K. government is looking to increase oversight into cryptocurrency promotions in order to protect investors. On Monday, the country’s Treasury said it would clamp down on "misleading and inadequate promotions" that endangered retail investors, like crypto promotions. John Glen, the City Minister responsible for the U.K.'s financial services sector, said any firm looking to approve the financial promotions from unauthorized firms would first need to have the consent of the Financial Conduct Authority. He added the proposals would bring crypto product promotions up to the same levels as those for other asset-classes.

Quick bites

• A Welsh author memorializes the ICO bubble in novel form
• Wanted Wirecard executive is thought to be sheltered by Russia’s Secret Service
• Third Centra Tech founder pleaded guilty to ICO fraud
• Balaji proposed a decentralized plan to exit Twitter (Decrypt)
• $1.6 billion was invested in institutional-focused crypto custody services (The Block)

The big story

Elon Musk’s OpenAI opened its third-generation language processing model to private beta, and crypto is aflutter with prognostications. GPT-3, short for Generative Pre-training Transformer, is a new AI-driven tool that revolutionizes how computers process and produce language.

“When properly primed by a human, it can write creative fiction; it can generate functioning code; it can compose thoughtful business memos; and much more. Its possible use cases are limited only by our imaginations,” Forbes reports.

Fed with nearly all the text available on the internet (roughly 175 billion parameters, or two orders of magnitude larger than its predecessor) GPT-3 can take any chuck of language a human gives it and run wild. It’s the one of the most advanced machine-learning language models to date.

Manuel Araoz, Zeppelin Solutions CTO, already used it to write a 746-word blog about a fake experiment looking at how GPT-3 can be used to deceive Bitcointalk forum members, Decrypt reports. This meta-blog demonstrates how language generators could be employed to create fake news and misinformation.

Araoz wonders whether GPT-3 will be “the biggest thing since bitcoin.” Citing its raw processing power, and Turing Test-passing blogs and tweets, it’s likely this technical edge will have a profound effect on how we judge content – once it's released to the wild world wide web.

There’s plenty to suggest this tool will deepen the skepticism of online content, but Gwern, a pseudonymous researcher in crypto, has already used it to find beauty.

“GPT-3’s samples are not just close to human level: they are creative, witty, deep, meta, and often beautiful. They demonstrate an ability to handle abstractions, like style parodies, I have not seen in GPT-2 at all,” he writes, after testing it for a week. “Chatting with GPT-3 feels uncannily like chatting with a human.”

Other early testers have their doubts. Delian Asparouhov, a Principal at Founders Fund, cautioned not to “get too excited, this isn’t some sort of general AI, and the machine doesn’t really have a way of understanding if what it is outputting is true or not.”

While GPT-3 can predict language and finish a human being’s sentences, paragraphs, essays, it lacks internal understanding of language. It cannot reason. It cannot create. It can only mimic.

Whether that’s enough to match the revolutionary potential of a self-sovereign financial system is an open question. But it seems like the genie is out of the bottle in both instances.

Market intel

Futures: Bleak
Trading activity in bitcoin futures listed on the Chicago Mercantile Exchange (CME) has cooled notably as the leading cryptocurrency languishes in the price doldrums. Only 1,895 contracts, representing $87 million in daily trading volume, were placed. This is the lowest level since mid-April. This is one part of a larger trend. Total global daily volume, as calculated by adding numbers from BitMEX, Deribit, Kraken, OKEx, bitFlyer, CoinFlex, CME. Huobi, FTX, Bitfinex, Binance, Bybit, and Bakkt, tanked to $4.65 billion – down 87% from the $36 billion observed on May 11.

Opinion

Two of CoinDesk's senior-most leaders weigh in on the Twitter hack aftermath in their newsletters: Money Reimagined and Crypto Long & Short. You can sign up to get the full account in your inbox here.

This Isn’t Good for Crypto
“No, blockchain does not fix this,” CoinDesk’s Chief Content Officer Michael Casey begins his weekly newsletter, Money Reimagined. He’s referring to the conversation on social media following the Twitter hack that left heads-of-state, corporate leaders and prominent crypto accounts exposed on Wednesday. Crypto Twitter responded with arguments that the exploit would shake trust in centralized systems and lead to a digital-first, self-sovereign revolution. That may be true, but Crypto Twitter isn’t likely to change any hearts and minds, Casey argues, especially if the community keeps calling its critics “morons.”

On Second Thought
In her latest Crypto Long & Short newsletter, CoinDesk Head of Research Noelle Acheson argues the Twitter hack was good for Bitcoin, though not for the obvious reasons. While some have labeled the event a “bitcoin scam,” and called for the regulation or eradication of crypto, the hack highlights how this would be impossible: “One of the strengths of bitcoin is that it is out of the range of state actors.” This reassurance may assuage the anxieties of interested, though cautious, investors waiting for regulatory clarity. Further, because Bitcoin is built on a public ledger, a trail of the hacker’s conduct is in full view. “This should reassure regulators that bitcoin-related crime is not the threat to society some skeptics claim.”

Podcast

Bitcoin's First Metric
What are bitcoin days destroyed (BDD)? CoinDesk’s research team dive in to give a complete overview of what’s thought to be Bitcoin’s first on-chain metric.

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