A few weeks ago, when Facebook announced its plans for Libra, a commonly heard sentiment in the crypto community was that Libra would ultimately be good for Bitcoin.
That was seen in small but highly symbolic ways yesterday. First, speaking to the Senate Banking Committee about Libra, Federal Reserve Chair Jerome Powell compared Bitcoin to gold and called it a “speculative store of value.” Then, later that evening, President Donald Trump tweeted comments that started off as critical about Bitcoin, but eventually turned into condemnation of Facebook’s Libra. (Amazingly, Trump used the term “crypto assets.”) That sparked a discussion on this morning’s CNBC Squawk Box that was about the real pros and cons of Bitcoin, rather than the price. 😲
In this week’s Unconfirmed, we cover some of the other big regulatory news this week: the SEC statement on broker dealers custodying digital assets and Blockstack’s Reg A+ filing. Plus, Unchained reveals how some experiments with central bank digital currency have gotten underway.
If a weekend discussing crypto and doing yoga sounds fun to you, sign up for the retreat I’m leading with Meltem Demirors and Jalak Jobanputra at the Omega Institute!
This Week’s Crypto News…
The President tweeted about Bitcoin! Given their proper spelling and decent punctuation (though poor capitalization), his tweets about Bitcoin may have been given more thought than his typical 280-character fare. However, they still contain a few misconceptions, starting with the connotation that Bitcoin’s value being based on “thin air” is different from any previous form of money in history. Second, his idea that the U.S. dollar will forever be the dominant currency is laughable. (Just ask cowrie shells, Rai stones and gold.) But his real ire seemed directed at Facebook, indicating that this is the first time the highest levels of government are beginning to perceive the threat that crypto can pose to governments worldwide.
His tweets certainly got Crypto Twitter all in a lather, with a good response from Caitlin Long, the Blockchain Association, and a hilarious one from Preston Byrne (all previous guests on Unchained/Unconfirmed). Everyone began wondering which Democratic candidates would now come out in favor of Bitcoin, but the Yang Gang is a step ahead: They’ve created YangDao.
In his testimony to the Senate Banking Committee, Powell compared Bitcoin to gold. (🤯) However, the main thrust of his testimony, recapped here and here by the NYT and WSJ, was about Libra: “Libra raises a lot of serious concerns, and those would include around privacy, money laundering, consumer protection, financial stability,” he said. “Those are going to need to be thoroughly and publicly assessed and evaluated before this proceeds.”
Earlier in the week, David Marcus, head of Calibra and the head of the team that created Libra, sent a deferential letter to the Senate Banking Committee trying to address questions about privacy, where Facebook’s poor track record has especially caused concern about Libra, and saying Facebook “can’t do this alone.” Juan Llanos predicts that what Facebook proposes to do will soon be required for all custodial wallets and fiat-backed stablecoins. (Meanwhile, Gemini, which wants crypto to have rules, may join the Libra Association.)
Paul Vigna writes a roundup of various crypto bills Congress is considering, with one of the most notable being a bipartisan one to apply a de minimus exemption to cryptocurrency, meaning transactions under a certain threshold would be exempt from tax rules.
The top U.S. exchange by volume is looking at creating its own “captive” insurance company, which is a subsidiary that would be wholly owned by Coinbase itself. “With a captive … the funds are segregated and held in a regulated, audited vehicle, which can help the firm go out and attain more cover from the reinsurance market. To be clear: the captive would insure only its parent company, not competitors,” Ian Allison writes.
After Bitfinex claimed to have pulled out of New York in January 2017, the New York Attorney General’s office showed evidence that users were logging in as recently as December 2018.
Sadly, this is double the bankruptcy value.
So much happens in a week. Let’s not forget about Bitcoin Bag Guy, who made waves Monday when a photo of him leaving Deutsche Bank, which slashed one in five staff, got people thinking he was a departing banker. Turns out, he was a tailor.