CRYPTO & REAL ESTATE
▸ Startup Builds Real Estate Trading Platform on Blockchain Startup company, Parcl, has a mission that anyone should be able to invest in real estate and reap the rewards. However, Parcl users won’t acquire ownership of physical real estate. Instead, they will own tokens tied to real estate. A user would invest in a digital square foot of an actual building. The price of the digital square foot, or Parcl, is determined by Parcl’s price index which mirrors property market values. According to their website, users will have “access to price exposure without the burdens of owning or transacting hard assets.” Uh oh, my spidey senses are tingling. Parcl claims there’s “immediate liquidity, anytime you want to sell your position” and, transaction fees so low they are “almost unnoticeable.” Yikes! Transaction fees “almost unnoticeable” and “immediate liquidity”? I’m not schooled in finance, but I know that if I want to sell something, it’s meaningless unless there is a buyer. If there isn’t a buyer on the other side of my Parcl that I want to sell, how can I sell it? There are not any details on the website, but the company envisions liquidity coming from “Parcl Liquidity Pools.” This structure seems a lot like the the stablecoin TerraUSD backed by the LUNA coin. As the world witnessed over the last two weeks, that did not turn out so well for the investors.
▸ Propy Jumps Into the Title Business
The company that brought us two homes sold as NFTs, a crypto agent certification course, and an offer management/transaction platform, announced this week that they are now in the title business.
Why title? Why isn’t Propy focused on selling homes as NFTs? They shouted from the rooftops that selling homes as NFTs would be the future of real estate. Are they changing their business model? In February 2022, a Tampa homeowner who was planning on listing her home, hired Propy to help her sell her house as an NFT. Propy marketed her property as the first home to be auctioned as an NFT and the NFT auction was successful. However, Propy encountered many challenges in transferring ownership from the seller to the NFT buyer. One insurmountable challenge was that title insurance was not allowed. This is a risk most buyers would not accept. Perhaps Propy has realized that title is a key to growing their business.
▸ Fannie Mae Issues Crypto Guidelines
The Federal National Mortgage Association, known as FNMA or Fannie Mae, is a government-sponsored enterprise. Its role is to securitize mortgage loans as mortgage-backed securities.
Lenders must follow Fannie Mae’s requirements to be an approved seller and servicer of residential mortgage loans.
On May 4, 2022, Fannie Mae published these revisions to its cryptocurrency requirements – ▪ Income paid in the form of virtual currency may not be considered when qualifying a borrower.
▪ Assets used to establish continuance for certain income types cannot be in the form of virtual currency.
▪ The purchase price of the property and any earnest money deposit may not be designated in virtual currency.
▪ The payment used as rental income must be in U.S. dollars.
▪ Payment on any installment debt secured by virtual currency must be included in the debt-to-income ratio calculation.
▸ Goldman Sachs Co-Leads $70M Fund Raise for Crypto Platform Elwood Technologies
Elwood’s platform will provide institutional-level access to cryptocurrency markets. Institutions are seeing increased demand for cryptocurrencies. Matthew McDermott, global head of Digital Assets at Goldman Sachs, said that Goldman is “broadening its market presence to appeal to client demand.”
In a Goldman-Sachs Research Newsletter interview with Michael Novogratz, CEO of Galaxy Digital Holdings Ltd., Novogratz commented on the current crypto price decline.
Novogratz said, “Everyone from the major banks to PayPal and Square is getting more involved, which is a loud and clear signal that crypto is now an official asset class.
There’s still a lot of volatility, so people will wash in and out. But crypto is not going away.”
▸ Insider Trading and Crypto
The Wall Street Journal reported that a handful of crypto investors made early trades on crypto currencies based on inside information. When a crypto coin is listed on a crypto exchange, it is common for the price to rise.
Crypto coin Gnosis was mentioned in a blog post by crypto exchange Binance and within an hour its price jumped from $300 to $410.
When crypto is exchanged, the identification of the parties (in alphanumeric characters) is visible on the blockchain. The Journal reported that four minutes after the listing announcement by Binance, the owner of the wallet sold over $500,000 in Gnosis coins within four hours, netting a 40% return. The wallet owner did the same thing with three other tokens. Major crypto exchanges have policies to prevent employees from sharing news about upcoming listings. However, insider trading laws for stocks or commodities have not yet been applied to crypto trading.
▸ Upcoming Senate Bill to Regulate Stablecoins Following last week’s spectacular crash of stablecoin TerraUSD, Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) announced they will release a draft bill focused on stablecoins and agency authority. Gillibrand was a securities lawyer and Lummis was an early bitcoin enthusiast. It has been reported that their bill will give greater regulatory jurisdiction to the Commodity Futures Trading Commission (CFTC).
CRYPTO CLASS – CRYPTO WALLET
Cryptocurrency owners have a password, known as a private key, that gives them access to their crypto. A crypto wallet holds the private keys and keeps them secure.
Crypto wallets hold access to crypto, not the actual crypto. The actual bitcoin lives on the blockchain and is only accessible with a private key. If a private key is lost, the crypto cannot be accessed.
When a crypto exchange such as Coinbase or Gemini holds a customer’s private key, the exchange has custodial ownership. There are several types of crypto wallets. Hardware wallets, similar to thumb drives, are only connected to a computer when the owner needs access to their crypto. Online wallets store private keys on an app or in software. They are more convenient than a hardware wallet, but less secure.
INFLUENCERS – People to follow
Balaji Srinivasan – @balajis
Balaji is a tech founder, angel investor, former CTO of Coinbase, and General Partner at venture firm Andreesen Horowitz. He is a macro thinker and a frequent guest on business podcasts. I first heard him on Tim Ferriss. It’s a 4-hour interview. (I watched it twice!)
RESOURCES – Books, websites, podcasts, articles
Blockchain Revolution, a book by Don Tapscott and Alex Tapscott, is a comprehensive review of how blockchain has changed some industries and is poised to impact others.
CRYPTO WORDS – CHAOS MONKEY
While not a pure crypto word, I am seeing it used frequently by crypto commentators. Chaos monkey is a software tool created by Netflix that tests resiliency.
OH, ONE MORE THING – Michael Saylor, CEO of MicroStrategy and highly-visible bitcoin maximalist whose company holds 129,218 bitcoin ($3.91 B) in corporate treasuries, just tweeted how bitcoin will prevail. Now, I understand!