Visa Settles USDC Transaction on Ethereum, Plans Rollout to Partners

Visa Settles USDC Transaction on Ethereum, Plans Rollout to Partners

Bloomberg

(Bloomberg) – From his perch high above Midtown Manhattan, just across from Carnegie Hall, Bill Hwang was quietly building one of the world’s greatest fortunes.Even on Wall Street, few ever noticed him – until suddenly, everyone did.Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the biggest margin calls of all time – a multibillion-dollar fiasco involving secretive market bets that were dangerously leveraged and unwound in a blink.Hwang’s most recent ascent can be pieced together from stocks dumped by banks in recent days – ViacomCBS Inc., Discovery Inc. GSX Techedu Inc., Baidu Inc. – all of which had soared this year, sometimes confounding traders who couldn’t fathom why.One part of Hwang’s portfolio, which has been traded in blocks since Friday by Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co., was worth almost $40 billion last week. Bankers reckon that Archegos’s net capital – essentially Hwang’s wealth – had reached north of $10 billion. And as disposals keep emerging, estimates of his firm’s total positions keep climbing: tens of billions, $50 billion, even more than $100 billion.It evaporated in mere days.“I’ve never seen anything like this – how quiet it was, how concentrated, and how fast it disappeared,” said Mike Novogratz, a career macro investor and former partner at Goldman Sachs who’s been trading since 1994. “This has to be one of the single greatest losses of personal wealth in history.”Late Monday in New York, Archegos broke days of silence on the episode.“This is a challenging time for the family office of Archegos Capital Management, our partners and employees,” Karen Kessler, a spokesperson for the firm, said in an emailed statement. “All plans are being discussed as Mr. Hwang and the team determine the best path forward.”The cascade of trading losses has reverberated from New York to Zurich to Tokyo and beyond, and leaves myriad unanswered questions, including the big one: How could someone take such big risks, facilitated by so many banks, under the noses of regulators the world over?One part of the answer is that Hwang set up as a family office with limited oversight and then employed financial derivatives to amass big stakes in companies without ever having to disclose them. Another part is that global banks embraced him as a lucrative customer, despite a record of insider trading and attempted market manipulation that drove him out of the hedge fund business a decade ago.A disciple of hedge-fund legend Julian Robertson, Sung Kook “Bill” Hwang shuttered Tiger Asia Management and Tiger Asia Partners after settling an SEC civil lawsuit in 2012 accusing them of insider trading and manipulating Chinese banks stocks. Hwang and the firms paid $44 million, and he agreed to be barred from the investment advisory industry.He soon opened Archegos – Greek for “one who leads the way” – and structured it as a family office.Family offices that exclusively manage one fortune are generally exempt from registering as investment advisers with the U.S. Securities and Exchange Commission. So they don’t have to disclose their owners, executives or how much they manage – rules designed to protect outsiders who invest in a fund. That approach makes sense for small family offices, but if they swell to the size of a hedge fund whale they can still pose risks, this time to outsiders in the broader market.“This does raise questions about the regulation of family offices once again,” said Tyler Gellasch, a former SEC aide who now runs the Healthy Markets trade group. “The question is if it’s just friends and family why do we care? The answer is that they can have significant market impacts, and the SEC’s regulatory regime even after Dodd-Frank doesn’t clearly reflect that.”Valuable CustomerArchegos established trading partnerships with firms including Nomura Holdings Inc., Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG. For a time after the SEC case, Goldman refused to do business with him on compliance grounds, but relented as rivals profited by meeting his needs.The full picture of his holdings is still emerging, and it’s not clear what positions derailed, or what hedges he had set up.One reason is that Hwang never filed a 13F report of his holdings, which every investment manager holding more than $100 million in U.S. equities must fill out at the end of each quarter. That’s because he appears to have structured his trades using total return swaps, essentially putting the positions on the banks’ balance sheets. Swaps also enable investors to add a lot of leverage to a portfolio.Morgan Stanley and Goldman Sachs, for instance, are listed as the largest holders of GSX Techedu, a Chinese online tutoring company that’s been repeatedly targeted by short sellers. Banks may own shares for a variety of reasons that include hedging swap exposures from trades with their customers.‘Unhappy Investors’Goldman increased its position 54% in January, according to regulatory filings. Overall, banks reported holding at least 68% of GSX’s outstanding shares, according to a Bloomberg analysis of filings. Banks held at least 40% of IQIYI Inc, a Chinese video entertainment company, and 29% of ViacomCBS – all of which Archegos had bet on big.“I’m sure there are a number of really unhappy investors who have bought those names over the last couple of weeks,” and now regret it, Doug Cifu, chief executive officer of electronic-trading firm Virtu Financial Inc., said Monday in an interview on Bloomberg TV. He predicted regulators will examine whether “there should be more transparency and disclosure by a family office.”Without the need to market his fund to external investors, Hwang’s strategies and performance remained secret from the outside world. Even as his fortune swelled, the 50-something kept a low profile. Despite once working for Robertson’s Tiger Management, he wasn’t well-known on Wall Street or in New York social circles.Hwang is a trustee of the Fuller Theology Seminary, and co-founder of the Grace and Mercy Foundation, whose mission is to serve the poor and oppressed. The foundation had assets approaching $500 million at the end of 2018, according to its latest filing.“It’s not all about the money, you know,” he said in a rare interview with a Fuller Institute executive in 2018, in which he spoke about his calling as an investor and his Christian faith. “It’s about the long term, and God certainly has a long-term view.”His extraordinary run of fortune turned early last week as ViacomCBS Inc. announced a secondary offering of its shares. Its stock price plunged 9% the next day.The value of other securities believed to be in Archegos’ portfolio based on the positions that were block traded followed.By Thursday’s close, the value of the portfolio fell 27% – more than enough to wipe out the equity of an investor who market participants estimate was six to eight times levered.“You have to wonder who else is out there with one of these invisible fortunes,” said Novogratz. “The psychology of all that leverage with no risk management, it’s almost nihilism.”(Adds comment from Archegos in 8th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Visa will settle transactions in USD Coin via the Ethereum blockchain

March 29, 2021 3 min read

This story originally appeared on ValueWalk

Visa Inc (NYSE:V) will start allowing the cryptocurrency USD Coin to be used for payment settlements on its network. It’s the latest sign that mainstream financial companies are starting to accept digital currencies.

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Visa Starts Using USD Coin For Payment Settlements

According to CNBC, Visa launched the pilot program with Crypto.com, a payment and crypto platform. The companies plan to offer the option to use USD Coin to more partners to settle transactions later this year. The USD Coin’s value is pegged to the U.S. dollar.

Mastercard, BlackRock and Bank of New York Mellon have also embraced cryptocurrencies recently, so many have started to speculate that they will become a standard part of investment portfolios soon. Tesla CEO Elon Musk announced last week that customers could use bitcoin to buy their electric vehicles, a key step toward broader use of the cryptocurrency in commerce.

Visa’s crypto chief, Cuy Sheffield, told CNBC that they are seeing growing demand from consumers globally to be able to access, use and hold digital currencies. He also said they are seeing demand from their clients “to be able to build products that provide that access for consumers.”

How the partnership with Crypto.com will work

Previously, when customers chose to use a Crypto.com Visa card to pay for something, the cryptocurrency had to be converted into fiat currency. The cryptocurrency wallet deposits traditional money into a bank account, and it’s then wired to Visa at the end of the day to settle transactions. The process increases costs for businesses and makes things more complicated.

Visa’s new plan will be completed on the Ethereum blockchain. It eliminates the need to convert digital currencies into fiat money for the settlement of the transaction. The credit card company said it partnered with Anchorage, a digital asset bank, to complete the first transaction involving USD Coin this month, using Crypto.com to send the digital currency to Visa’s Ethereum account at Anchorage.

Visa Chief Product Officer Jack Forestell said in a statement that today’s announcement “marks a major milestone in our ability to address the needs of fintechs managing their business in a stablecoin or cryptocurrency.”

Anchorage co-founder and President Diogo Monica said in a statement that Visa came to them in 2019 with the idea to “make secure, efficient and seamless settlement payments possible in digital currency.” The payment company wanted to connect its treasury with Anchorage’s custody platform, providing “the next generation of crypto native issuers the option to directly settle with Visa in a digital currency over a public blockchain.”

Visa Partners with Crypto.com to Allow Fiat Transaction Settlement on Ethereum

Credit card and payments giant, Visa is launching a pilot program that would allow its partners to settle fiat transactions on the Ethereum blockchain. The new program is the result of a collaboration with Crypto.com.

Through the new program, the credit card issuer’s partners will have the ability to exchange USD Coin (USDC) through its payments network. Crypto.com will send USDC to Visa’s Ethereum address as a way of settling some of the transactions that have been sent through Crypto.com’s Visa card program. To facilitate this process, Visa’s treasury will be linked with Anchorage, a federally-chartered crypto bank.

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”Billions of Dollars in Fiat” Are Used to Clear and Settle Transactions on the Visa Network

Visa is seeking to make the system available to Fintech companies and neobanks that deal in cryptocurrency in particular, in USDC, Bitcoin (BTC) and Ether (ETH). According to CoinTelegraph, the company “reports [that] ‘billions of dollars’ in fiat are involved in clearing and settling transactions daily.” The use of the Ethereum blockchain could potentially cut down on some of these costs.

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Jack Forestell, Visa’s Chief Product Officer, said in an announcement that: “crypto-native fintechs want partners who understand their business and the complexities of digital currency form factors.”

“The announcement today marks a major milestone in our ability to address the needs of fintechs managing their business in a stablecoin or cryptocurrency.”

Crypto.com & Visa Announced Their Partnership Earlier This Month

The announcement of the pilot program follows Visa’s announcement that it would be partnering with Crypto.com earlier this month. Through the partnership, Crypto.com is expanding the availability of its cryptocurrency debit card.

When the partnership was launched, Crypto.com said that it would be offering a fiat lending program that would allow cardholders to use their crypto holdings as collateral for fiat loans. These funds can be spent on merchant platforms that support Visa payments.