Biden's Crypto Executive Order

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ALSO: Binance plans M&A spree, EmpireDAO builds Web 3 “WeWork” and more |

The biggest crypto news and ideas of the day

Mar. 9, 2022

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Welcome to The Node.

In today’s newsletter: President Biden signs first-of-its-kind executive order on crypto. Binance plans non-crypto M&A spree. And EmpireDAO is building a Web 3 “WeWork.”

Questions? Feedback? We’d love to hear from you – simply reply to this email.

–Daniel Kuhn

Today’s must-reads

Top Shelf

STATE OF BLOCKCHAIN: U.S. President Joe Biden signed a first-of-its-kind executive order on cryptocurrencies on Wednesday, directing federal agencies to coordinate their approach to the sector. The executive order does not lay out specific positions the administration wants agencies to adopt, or impose new regulations on the sector. Aiming to crack down on cryptocurrency, Sen. Elizabeth Warren (D-Mass.), is preparing a bill to make it more difficult to use cryptocurrency to circumvent sanctions. The announcement was made in a tweet Tuesday. Meanwhile, the European Union has clarified that sanctions placed on Russia and Belarus extend to crypto assets.

BIG BUYERS: Binance is planning to buy more companies in non-crypto industries “to make the crypto industry bigger,” CEO Changpeng Zhao said in a Financial Times interview. “We want to identify and invest in one or two targets in every economic sector and try to bring them into crypto,” he said. In February, Binance invested $200 million in Forbes, the U.S. publication looking to list on the New York Stock Exchange. Meanwhile, Singapore-based Cake DeFi has invested $100 million in its new Cake DeFi Ventures (CDV) investment arm. Cake DeFi CEO Julian Hosp said the fund will offer money, insights and industry connections to investment companies, but the fund will take a hands-off approach in terms of operational responsibilities and board seats.

BIG BUSINESS:Custodial banking giant State Street (STT) has entered a licensing agreement with institutional custody provider Copper to develop and launch an institutional-grade digital asset custody product. The move follows the launch of State Street’s crypto division in June of last year, which aimed to support cryptocurrency trading. The State Street custody product will be subject to regulatory approval.

CRYPTO SPACES: EmpireDAO is building a “WeWork” for Web 3. The DAO will open its doors at 190 Bowery in lower Manhattan, where stakeholders will lease 36,000 square feet to build a coworking space for crypto builders. Meanwhile, down South, Miami Nightclub E11EVEN is rolling out a crypto division to push further into Web 3. The so-called “E11EVEN Crypto '' developed in partnership with blockchain firm Horizen Labs, will “drop” its first product, a non-fungible token (NFT) collection titled “11 Captain's Club,” in April.

CRYPTO OASIS? Aiming to be a “major player” globally in digital assets, Dubai’s ruler announced the creation of a regulatory and licensing authority. The Emirate of Dubai is one of seven emirates forming the nation of the United Arab Emirates (UAE). Another emirate, Abu Dhabi, has also been aggressive in its aim to become a crypto hub. Tuesday, The Securities and Commodities Authority of the UAE issued a statement saying it was nearing the issuance of a regulatory framework related to digital assets.

–Fran Velasquez

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What others are writing...

Off-Chain Signals

Adobe Taps Polygon to Scale NFT Functionality in Behance Social Platform (Decrypt) BitMEX co-founder Samuel Reed pleads guilty to Bank Secrecy Act violation (The Block) Pantera Capital’s Blockchain Fund Has $1B in Commitments (Blockworks) Privacy Coins Shake Off Their Slumber and Spike 25% in 24 Hours (The Defiant) Terra Is Now DeFi's Network of Choice After Ethereum (Decrypt) The hunt for Russian crypto is on (Protocol) Bain Capital Ventures sets up a half-billion-dollar fund for crypto projects (Cointelegraph)

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Putting the news into perspective

The Takeaway

Crypto Could Benefit From Financial Fragmentation

The stunning excommunication of Russia from the global financial system will dramatically reshape the way global entities of all sorts move money. According to one corporate treasury expert, that will likely include more openness to cryptocurrency as a way for big companies to do business around the world.

“Going forward, you will see more [corporate] adoption,” said Mitch Thomas of FinLync, a corporate treasury services firm. “You will see more conversations among corporate finance and treasury officials.”

Given the risks of smaller fiat currencies and the potentiality of the West cutting access to the dollar-based economy, companies could potentially look to crypto – non-state, universally accessible and censorship-resistant monetary networks – as “a global settlement system,” Thomas said.

Thomas thinks big companies are having those conversations internally right now. “Should we be looking into how to invoice and settle in crypto in the future? Not just for situations like [the war in Ukraine], but for countries where corporates don’t care to have banking or don’t want to be exposed to a very risky Middle Eastern or African or South American currency?”

Thomas is North American head of solutions engineering for FinLync, which provides a non-SWIFT method for connecting corporations and banks as well as treasury management services.

Thomas does not foresee a broad shift towards crypto or other digital tools for payments, though, in part because corporate usage hasn’t reached enough saturation to create network efficiency.

“There aren’t enough companies that have fully thought through the ability to settle and trust company invoices with cryptocurrency … So I don’t see it being used broadly from a corporate perspective,” he said.

Fragmentary adoption of crypto for trade with marginal nations is not, to be clear, good news on the whole. Post-9/11 banking restrictions, usually framed as “de-risking,” have already led to many banks in geopolitically troubled regions losing access to the global financial system, with serious impacts for everyday people. Moving so swiftly against Russia will hopefully help save Ukrainian lives, but in the longer term many agree with Thomas’ prediction of further financial fragmentation.

That would inevitably put downward pressure on the global economy. Remember your Adam Smith: Division of labor and specialization increase productivity, but shrinking and restricting markets interferes with the ability to specialize. This strangulation would be slow and subtle, its impacts stretched over not years, but decades.

At the highest level, it aligns with other trends towards “de-globalization,” such as America’s (so far largely rhetorical) effort to “re-shore” medical production and other key industries from China. From the fragile hyper-efficiency of just-in-time production, we are shifting back to a world of shorter supply chains – but also higher costs and lower profits.

Crypto can be seen in similar terms. As anyone who understands blockchains knows, they are less efficient in most senses than traditional trust-based banking. At least in the case of global payments, crypto is not so much a hopeful bit of technological progress as an emergency backstop when human frailty undermines the current streamlined but politically fragile banking network.

–David Z. Morris

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