SBF talks about consumer protection and Crypto Titans Clash
Good morning. Here’s what happens:
Prices: A positioning battle breaks out between crypto titans over the FTX exchange’s FTT token, while Solana’s SOL token suffers from a post-conference hangover. Crypto traders look ahead to this week’s US midterm elections and an important inflation report.
Insight: Speaking the same language as regulators is a ticket to making digital assets mainstream, an opportunity worth trillions.
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Prices
By Bradley Keoun
The weekend brought no shortage of crypto market dramabut it wasn’t about bitcoin: Intense speculation seemed to lead to heavy losses on the FTX exchange’s FTT token and Solana’s SOL.
The FTX token, which pushed into headlines (and Twitter chatter) last week after CoinDesk reported how significant the asset was on trading firm Alameda Research’s balance sheet, came under further pressure after Binance CEO Changpeng “CZ” Zhao tweeted that the firm would sell its remaining holdings of FTT, a stake worth more than $500 million. The FTT price bounced back after CEO Alameda, which like FTX is part of billionaire Sam Bankman-Fried’s empire, tweeted that it would be happy to buy FTT for $22 each. But by late Sunday, FTT had reversed course and fallen again, around $22.24, down 7.6% in the past 24 hours.
Solana’s SUN spiked as Google Cloud announced plans to become a validator on the blockchain network, but by press time it had also edged lower and was one of the day’s biggest losers among the 162 holdings in the CoinDesk Market Index, down 11% over 24 hours. The token had gained in the weeks before Solana’s Breakpoint conference currently taking place in Lisbon, Portugal, ended on Monday. These blockchain conferences often make a series of announcements that tend to rile up investors, developers, and fans, but it’s not uncommon for enthusiasm to quickly fade.
Dogecoin (DOGE), which more than doubled in October to become the top performer in the CMI, is now licking its wounds; the meme token often mentioned by billionaire Elon Musk (Twitter’s new owner) is down 19% so far this month.
Bitcoin (BTC), for what it’s worth, traded around $21,000 after hitting a fresh seven-week high on Saturday. The largest cryptocurrency’s recent gains have pushed it above key levels on price charts, potentially signaling a decisive shift towards a more bullish trend.
Stock markets ended last week with a moderate gain as tech-heavy Nasdaq, the S&P 500 and the Dow Jones Industrial Average (DJIA) closed Friday up more than a percentage point — in sync with a 4.7% gain that day for bitcoin. Safe haven gold rose 3%, a rare exception to its recent form. Brent crude, a widely regarded benchmark in energy markets, climbed near $99 a barrel, up 5% from the start of the week.
In the coming week, crypto traders will be focused on Tuesday’s US midterm elections, which could have major implications for regulatory policies or economic decisions. On Thursday, the U.S. Labor Department is set to report the latest reading of the consumer price index, which is expected to show the headline inflation rate holding at 8% or higher in October — still not far from a four-decade high and indicating how much work the Federal Reserve needs to do to cool down the economy and get the number down again.
“The average and inflation data will no doubt keep market participants busy,” Deutsche Bank economists wrote in a report.
Insight
By Sam Reynolds
JPMorgan’s Umar Farooq, the head of the blockchain unit, said something in very simple language about the future of institutional involvement in crypto during the Singapore Fintech Festival: “We can’t lose your money.”
Farooq referred to exactly what it would take for banks to get involved in digital assets. Consumer protection, along with the ability to identify both parties to the transaction, is key to building a digital asset sector that can integrate into the world’s banking system and its trillions in assets.
Consider what happens if you send crypto to the wrong wallet. It’s gone, as Coinbase puts it bluntly on a help page.
“Due to the irreversible nature of cryptocurrency protocols, transactions cannot be canceled or reversed once initiated,” the exchange writes. “Because of this, it is important to exercise caution when sending and ensure that the address you are sending to exactly matches the recipient’s address.”
Chain analysis estimates that around 20% of all bitcoin has been lost this way, and cannot be recovered. Anecdotes abound of eight-figure sums effectively evaporating because they were sent to the wrong wallet.
This certainly also happens in the traditional financial world.
But in TradFi there are ways to reverse these transactions. SWIFT has a built-in revocation mechanism, which has collectively saved victims of various forms of wire fraud hundreds of millions of dollars. In the United States, the Consumer Financial Protection Bureau (CFPB) acts as a watchdog over the money transfer industry and provides consumer protections, such as the right to cancel a money transfer and the right to resolve errors. These mechanisms do not exist in crypto.
As a technical matter, it can be said that parts of crypto have this, but only when the wallets are KYC’ed, or follow the Know Your Customer rules. For example, Crypto.com sued a woman in Melbourne who was mistakenly refunded $10 million.
SBF weighs in
FTX CEO Sam Bankman-Fried caught some flak from the libertarian wing of big crypto by suggesting in a policy white paper that there is a necessity for KYC and respecting the Treasury Department’s sanctions wing, the Office of Foreign Assets Control (OFAC).
“Maintaining a blocking list is a fine balance: prohibiting illegal transfers and freezing funds associated with financial crime while otherwise allowing trade,” the SBF wrote. “To be clear, this does not mean that passports and social security numbers are required to buy a bagel from 7-11 – but issuances and redemptions of stablecoins should be [Bank Secrecy Act]-level KYC’ed activity.”
SBF sees this as a necessity to integrate crypto into the liquidity pools worth trillions of dollars in the TradFi market.
Erik Voorhees dismissed all this as tyranny and seemed to have the support of many people behind him.
But dismissing this as tyranny is going to be a nonstarter for the likes of JPMorgan’s Farooq.
“I can’t foresee people sending money across borders if nobody checks and nobody knows who is sending money to whom, because sooner or later they will be in a money laundering incident,” he said. “These are the very basic things that need to be addressed before you even get to systematic problems.”
While some sympathy must be extended to the libertarians due to how backward and geriatric regulators have historically been, dismissing the need for some oversight of crypto by calling it “tyranny” invites the industry to establish more regulatory controls.
Yes, rules on securities stemming from lawsuits that occurred in the 1940s need to be updated. But there must be rules.
Not speaking the same language as regulators is a ticket to missing out on an opportunity worth trillions of dollars. Farooq and SBF both want to make digital assets mainstream, and know what needs to happen. It’s people like Erik Voorhees who hold things back.
Important events.
10:00 HKT/SGT(2:00 UTC) China’s trade balance USD (Oct)
07:30 HKT/SGT (23:30 UTC) Japan’s Aggregate Household Consumption (YYYY) (Sept)
07:30 HKT/SGT (23:30 UTC) Australia Westpac Consumer Confidence (Nov.)
CoinDesk TV
In case you missed it, here’s the latest episode of “First Mover” on CoinDesk TV:
Bitcoin Pops After October Jobs Report; Coinbase Sees Crypto Headwinds Continuing Into 2023
The US economy added 261,000 jobs in October, while the unemployment rate rose to 3.7%. Ben Emons of Medley Global Advisors joined “First Mover” to discuss what the jobs report means for crypto markets. In addition, Coinbase transaction revenue continued to be significantly impacted by macroeconomic and crypto market headwinds. John Todaro of Needham & Co. examined the crypto exchange’s latest quarterly results.
Headings
Helium, the Building Out Mobile Network, plans to provide free trials to Solana phone users: Under the agreement, Saga phones sold in the US will receive a 30-day free subscription to Helium Mobile.
Litecoin Mining Troubles Reach New Heights, Foundation Says: The network’s mining difficulty peaked on Friday, indicating increased competition for miner rewards.
Huobi Exchange Users Furious After GALA Inventory Is Converted To “Meme Token”: The move came after a glitch forced a bridge service to relaunch the wrapped version of GALA traded on the Binance Smart Chain, sparking widespread confusion.
The US added 261,000 jobs in October, topping expectations for 200,000: Bitcoin prices are likely to face continued headwinds as the strong report should keep the Federal Reserve on a tightening path.
MATIC Rally Gathers Speed ​​as Meta Announces Polygon-Driven NFTs, Map Signals Golden Cross: “Polygon’s MATIC could be a long core position,” one strategist said.
CBDCs Could Cut FX Transaction Speeds to 10 Seconds, NY Fed Says: The New York Fed simulated currency transactions using a distributed ledger to test for improvements over the current system.
