March 4 – 10, 2019 | Fidelity Digital Assets, Cryptoasset Surveillance & More Crypto News

North iQ Weekly Newsletter is curated to provide insights on digital asset industry developments, market announcements, and performance analysis.

Fidelity’s Bitcoin Custody Service is Now Online

March 8 – Fidelity Investments, the Boston-based multinational financial services company with over $7.2 trillion USD in assets under management (AUM), has announced that its Bitcoin custody service, Fidelity Digital Assets, is now online for a select group of eligible clients. Clients who are initially qualified to use the custody service will range from “hedge funds, family offices, pensions, endowments, [and] other institutional investors”. The custody service will only operate for Bitcoin at this time, as further developments are required to integrate alternative cryptocurrencies. The Bitcoin custody service has been long awaited by many market-players, particularly hedge funds and other investment fund managers (IFMs), as new financial products that are based on Bitcoin have been under the scope of federal and other regional regulators for having issues surrounding custody.

In a recent interview, Tom Jessop, the leader of Fidelity Digital Assets, discussed his thoughts about the Bitcoin custody solution and provided several interesting numbers relating to digital asset adoption from experienced market participants. Notably, Jessop cites a recent survey that Fidelity conducted on 450 institutions which concluded that many are expecting or have already allocated some of their portfolios to digital assets. “We just completed a survey of about 450 institutions, so everything from family offices to registered investment advisors to hedge funds. It’s interesting, I think about 20% indicated that they currently allocate to digital assets with an intention to grow that. I think when you think about blockers, and the issues that people cite for not being in the space, interestingly, volatility is number one, which is a solvable problem. Lack of regulatory certainty is number two, and in some cases, lack of fundamental data is a third.”

Read the full article here.

Chainalysis: Bitcoin Whale Selling Has “No Strong Relationship” to Moving Prices Intraday

March 7 – Last Thursday, a leading crypto surveillance and analysis company used by law enforcement and other government agencies, Chainalysis, hosted an online webinar discussing the topic of “Crypto Whales”, a named dubbed for large holders of cryptoassets such as Bitcoin. Crypto Whales have often been blamed by retail crypto investors as those responsible for either large sell or buy orders that move the price of cryptoassets more than other market participants. According to Chainalysis, to classify as a Bitcoin Whale, an individual needs to hold at least 15,000 BTC, meaning that crypto exchange cold-wallets who hold those amounts would not classify. The webinar focused on both Bitcoin and Bitcoin Cash Whales with hopes to provide transparency around their ability to create liquidity risks for crypto exchanges, and narrowed their findings into four types of whales, “Criminal Whales”, “Early Adopter Whales”, “Trader Whales”, and “Lost Whales”, which make up 11%, 24%, 43%, and 22% of their taxonomy respectively.

Some notable findings in the webinar were that both Criminal Whales and Lost Whales have the lowest price and liquidity risk for exchanges, potentially because Criminal Whales wish to keep their Bitcoin holdings off exchanges that have proper KYC/AML procedures in place, and Lost Whales simply do not have access to their coins meaning they cannot liquidate them on exchanges. Additionally, Trading Whales who may have been blamed for large buy and sell orders that move prices on exchanges actually accumulate more Bitcoin in bear markets, and have no strong relationship in moving prices intraday when they sell directly into exchange orderbooks. Other important numbers presented in the webinar were that only 22 million entities hold Bitcoin, and only 3% of those hold more than 1 BTC. Around 49 large holders control 21% of all outstanding Bitcoin, and 28 Bitcoin Whales control 5% of all outstanding Bitcoin.

Read the full article here.

Why Crypto Companies Still Can’t Open Chequing Accounts

March 3 – Despite several new multibillion-dollar institutional entrances into the digital asset industry, basic banking services for digital asset companies are still being refused by entities such as HSBC Holdings and JPMorgan Chase. Some entrepreneurs in the industry have noted that many of these major banks still do not have the proper monitoring and compliance systems in place to mitigate the risks that could be associated with providing basic banking services to digital asset companies. Building and maintaining these monitoring systems could be expensive, and some banks may have concluded that the costs associated with such operations are not worth it. According to one estimate, fighting money laundering already costs financial firms around $25 billion USD per year. However, at their ethos, digital assets and other cryptocurrencies do pose some sort of “existential risk” for major banks, so slower-adoption in implementing compliance procedures for digital assets could be expected.

“The banking system has never been friendly to crypto, and while maybe that made some sense in the early days, continuing to label all crypto businesses as high-risk is indefensible and protectionist,” said Mark Lamb, the CEO of a newly launched crypto derivatives exchange. “The standard answer of ‘just go to your local Chase branch’ doesn’t work in crypto,’’ said Sam Bankman-Fried, the CEO of Alameda Research. “It’s not illegal for big banks to bank the crypto industry, but it’s a massive compliance headache that they don’t want to put the resources in to solve.’’

Read the full article here.

Cryptocurrency Investors Targeted With Audits by Canada Revenue Agency

March 6 – Several sources have reported that the Canada Revenue Agency (CRA) has targeted several cryptocurrency investors with audits this tax season. Those who have been targeted have been given a set of comprehensive questions relating to their historical cryptocurrency activities. Some of the questions relating to cryptocurrencies are quite industry-specific, such as Question 3, which asked the target “Do you use any cryptocurrency mixing services and tumblers? If so, which services do you use?”. Cryptocurrency mixers and tumblers essentially “scramble” cryptocurrency transactions across user addresses in attempts to hide the original user of the cryptocurrency. Although, if a user did indeed scramble their cryptocurrency transactions in order to help evade taxes, they would still need to convert their cryptocurrency holdings to fiat on a cryptocurrency exchange. Most leading crypto exchanges who offer fiat pairings and fiat withdrawal methods have implemented KYC/AML procedures to be able to determine who that user is.

“The CRA established a dedicated cryptocurrency unit in 2017 to build intelligence, and conduct audits focused on risks related to cryptocurrencies. This unit has enhanced the CRA’s ability to monitor and enforce compliance in areas of emerging risk, including the cryptocurrency space. There are currently over 60 active audits related to cryptocurrency,” said the CRA in a statement.

Read the full article here.

The First Bitcoin Expert Witness Used to Testify in Canadian Criminal Court

March 6 – CipherTrace, a blockchain surveillance and security company based in Silicon Valley, has recently announced that its CEO, Dave Jevans, has been used in a Canadian criminal court to testify as an expert witness. This is reportedly the first time an expert witness has been used during a bitcoin forfeiture hearing in Canada, and is also the first time a seizure of cryptocurrencies has been made by a Canadian police force. Jevans testified against the defendant, Matthew Phan, who was a cryptocurrency user convicted for trafficking drugs and weapons over the dark web.

“I would have loved to have access to a tool such as CipherTrace when I originally conducted this investigation in May of 2015. The report prepared by Dave really was the pivotal piece in the Crown’s case for forfeiture,” said Dwayne King, Senior Manager of Grant Thornton Canada LLP. “As the crypto market expands, Canadian policymakers and law enforcement officials need to leverage external parties who specialize in blockchain forensic analysis if they intend to build resistance to illicit activity,” said Dina Mainville, the Canadian Sales Director of CipherTrace. “Dave Jevans demonstrated that CipherTrace can bring transparency and accountability to illegal and fraudulent cryptocurrency transactions.”

Read the full article here.

3iQ Global Cryptoasset Fund: Price as at March 8, 2019

3iQ is the first regulator approved multi-cryptoasset portfolio manager in Canada, providing accredited investors with exposure to bitcoin, ether, and litecoin through its 3iQ Global Cryptoasset Fund.

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This Weekly Cryptoasset Newsletter is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of services or products by 3iQ Corp (“3iQ”). Investors should determine for themselves whether a particular service or product is suitable for their investment needs or should seek such professional advice for their particular situation.3iQ Corp. makes no representation or warranty to any investor regarding the legality of any investment, the income or tax consequences, or the suitability of an investment for such investor. All content is original and has been researched and produced by 3iQ unless otherwise stated therein. No part of the content may be reproduced in any form, or referred to in any other publication, without the express written permission of 3iQ. All statements made regarding companies, securities or other financial information contained in the content or articles relating to 3iQ are strictly beliefs and points of view held by 3iQ and are not endorsements of any company or security or recommendations to buy or sell any security. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. By visiting and/or otherwise using the 3iQ website in any way, you indicate that you understand and accept the terms of use as set forth on the website and agree to be bound by them. If you do not agree to the terms of use of the website, please do no access the website or any pages thereof. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with 3iQ with respect to any linked site or its sponsor, unless expressly stated by 3iQ. Any such information, products or sites have not necessarily been reviewed by 3iQ and are provided or maintained by third parties over whom 3iQ exercises no control. 3iQ expressly disclaims any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites. The information contained herein, while obtained from sources believed to be reliable, is not guaranteed as to its accuracy or completeness and confers no right on purchasers. Past performance of cryptoassets is not indicative of future performance and should not be used to forecast any return that an investor may realize.

Fred Pye

Frederick T. Pye


Frederick T. Pye is the Chairman, Chief Executive Officer and Director of 3iQ Corp. He is also the Chairman and Director of 3iQ Digital Holdings Inc. Mr. Pye is recognized for creating and promoting creative and unique investment products for the investment industry.

Mr. Pye has managed private client portfolios with Landry Investment Management and various other investment dealers. Prior to this Mr. Pye was Founder, President & Chief Executive Officer of Argentum Management and Research Corporation, a company dedicated to managing and distributing quantitative investment portfolios including the first long-short mutual fund in Canada.

He was also Senior Vice-President and National Sales Manager of Fidelity Investments Canada and an integral part of the team that saw assets rise from $80 million to over $7.5 billion in assets under management during his tenure. He also held various positions with Guardian Trust Company, which listed the first Gold, Silver and Platinum Certificates on the Montreal Exchange.

Mr. Pye obtained a Masters in Business Administration from Concordia University.