This week on Unchained, Congressman Ro Khanna goes deep on crypto, explaining why decentralization is important to him, and why he thinks more Democrats should get on the web3 train. He talks all about how these ideals inspired his book, "Dignity in a Digital Age: Making Tech Work for All of Us."
Plus, he tells us what he would say to anti-crypto lawmakers such as Congressman Brad Sherman and Senator Elizabeth Warren about crypto. Be sure not to miss this episode!
I just launched a premium offering of Bulletin, and subscribers to it will get access to these interviews with up-and-coming projects. You can think of them as "Unreleased" Q&As with founders -- a more casual, shorter version of Unchained. Our first one -- an interview with Kevin Owocki of Gitcoin -- went out on Wednesday, and it was a fascinating discussion about how crypto can be used to fund public goods.
Additionally, subscribers will have a say in which guests and topics are covered on Unchained itself, both in terms of feature and newsy episodes. We'll also do special subscriber-only chats with guests in which only premium subscribers get to ask questions.
We are having our first AMA today at 12 pm ET on crypto taxes with our guests from this week's show, Shehan Chandrasekera, certified public accountant and head of strategy, Tax, at Cointracker, and John Cardone, senior director of Washington National Tax at RSM US LLP. (John used to be the crypto person at the IRS.)
Check out the Discord here! (However, to get access to the AMA, you need to sign up for premium on Bulletin).
Without further adieu, here is the weekly recap!
BlockFi, a popular crypto lender, is paying $50 million to the US Securities and Exchange Commission and $50 million across 32 states to settle investigations into whether BlockFi’s interest-earning accounts, in which customers lend digital assets to BlockFi in return for yield, is a securities offering. Current customers will remain unaffected by the settlement – though they will not be able to deposit more crypto into their accounts, and BlockFi will discontinue offering it to new US customers. As part of the settlement, BlockFi will be filing an S1 for a BlockFi Yield product, which would allow the lender to offer interest-earning accounts to US customers as a security registered with the SEC.
Said SEC Chair Gary Gensler in a press release, “This is the first case of its kind with respect to crypto lending platforms. Today’s settlement makes clear that crypto markets must comply with time-tested securities laws.”
Source: @crypto_bobby
SEC commissioner Hester Peirce had a different take on the settlement, writing, “Is the approach we are taking with crypto lending the best way to protect crypto lending customers? I do not think it is, so I respectfully dissent.” She went on to add, “it is difficult to understand how the civil penalty will protect investors” and called on the SEC to do a better job in “accommodating innovation,” rather than hurting companies who attempt to work under the scope of US regulation.
The BlockFi settlement does not come as a surprise, as the lender has been under scrutiny since last summer when five states issued either cease and desist or show-cause notices against BlockFi.
While the Rams and Bengals battled in Los Angeles, crypto fought to make it fully mainstream, with multiple crypto exchanges taking out commercials during last weekend’s Super Bowl. Coinbase, FTX, and Crypto.com (disclosure: a sponsor) each ran ads, and TurboTax and eToro mentioned crypto.
Coinbase ran its ad in the first quarter. In an on-brand move, the company purchased a minute-long ad showing a QR code bouncing across the screen. Viewers who scanned it were prompted to download the app and participate in a $3 million giveaway. Data from The Block shows that the ad was a roaring success, with the exchange jumping from 186 to 2 on the App Store in the day following the Super Bowl. And, speaking of on-brand, Coinbase had to briefly throttle back access to its website due to increased traffic.
Where Coinbase stayed simple, FTX swung for the fences. Its ad was headlined by the famous comedian Larry David (from Curb Your Enthusiasm and Seinfeld) faux denouncing inventions like democracy, portable music, and, of course, crypto. Crypto.com also ran an ad starring NBA superstar Lebron James.
Source: @JackNiewold
JPMorgan, the largest bank in the US, is now a proud resident of Decentraland, the play-to-earn metaverse game. This week, the bank opened up a metaverse branch called “The Onyx by J.P. Morgan Lounge,” located in the Metajuku mall in Decentraland. Metaverse natives who visit The Onyx are greeted with a portrait of CEO Jamie Dimon framed in the lobby. Also featured is a timeline of JPMorgan’s blockchain history. Upstairs, visitors can listen to analysts talking about crypto via virtual TVs attached to the virtual wall.
Source: Unchained Daily
One humorous addition is a pet tiger pacing the foyer, which is a stroke of genius according to Bloomberg’s Matt Levine. “I feel like the tiger is a good idea? If you walk into the offices of an investment bank there should be a roaming tiger to make you nervous, keep you on your toes. Obviously in a real bank the tiger would pose liability problems — it might eat the clients, or the bankers for that matter — but in the metaverse it is just some nice symbolism,” wrote Levine.
JPMorgan’s crypto team Onyx also published an 18-page paper outlining its metaverse thesis. In its report, JPMorgan revealed a bullish outlook for the metaverse. “The asymmetrical risk of being left behind is worth the incremental investment needed to get started and to explore this new digital landscape for yourself,” the bank recommended. “Our long-standing core competencies in crossborder payments, foreign exchange, financial assets creation, trading, and safekeeping, in addition to our at-scale consumer foothold, can play a major role in the metaverse,” the JPMorgan team concluded.
Reports indicate that Canada’s Royal Canadian Mounted Police (aka mounties) and Ontario Provincial Police are barring all firms, including cryptocurrency exchanges, registered with Canada’s anti-money-laundering authority FinTrac from transacting with 34 cryptocurrency addresses tied to funding the trucker-led protests in the country.
The protests began in January over Canada’s vaccination requirement for all entrants of the country. The protests were deemed illegal by Canadian Prime Minister Justin Trudeau this week via the Emergencies Act, giving banks the power to immediately freeze or suspend bank accounts tied to the truckers for 30 days.
In a leaked document, it appears that Canadian authorities believe this power extends to crypto addresses. Regulators ordered crypto exchanges to “cease facilitating any transactions” associated with 34 crypto addresses, where donors had already sent more than 20 BTC in an attempt to continue funding the protests once Canadian authorities froze the $9 million that had been donated to GoFundMe.
Source: @blockworks_
Notably, Canada’s decision had many on crypto Twitter pointing to Bitcoin. “For years it was difficult to explain to Canadians why #Bitcoin is necessary. It was always a conversation of “yes banks are currently reliable in Canada, but they aren’t in other countries.” Now their own bank account is at risk. The transition is inevitable,” wrote Atomic Wallet co-founder Matt Black.
Eighteen companies have banded together to bring anti-money laundering technology to digital assets via a coalition called Travel Rule Universal Solution Technology, or TRUST. Headed by Coinbase, the group includes other industry leaders like Anchorage, Bitgo, BlockFi, Circle, Fidelity Digital Assets, Paxos, Kraken, and Robinhood.
Essentially, the group was formed to implement the “travel rule” recommended by the Financial Action Task Force, which requires financial institutions to share information about customers with transaction partners. According to Coinbase, TRUST is built in such a way to “protect the security and privacy of” customers’ personal information – which is of paramount importance in the privacy-focused blockchain space. The coalition has a three-part plan to make this happen:
information will be sent directly from exchange - exchange via encrypted channels
exchanges must prove their identity before receiving customer information
coalition members must meet core anti-money laundering, security, and privacy requirements through a partnership with compliance and risk management firm Exiger
Source: @christine_hall
The group does not plan to stay at eighteen – or in the US. “The next step is adding new members, so that TRUST can provide comprehensive compliance across the crypto industry. The Travel Rule’s reach is expanding internationally, and so must the TRUST solution. TRUST is focused on expanding to many other jurisdictions this year,” concluded Coinbase in its launch statement.
Sequoia Capital, a prominent venture capital firm based in Silicon Valley, is moving into the crypto space in a big way. Sequoia is looking to raise between $500 million to $600 million in its first sector-specific crypto fund. According to its press release, Sequoia’s foray into the crypto space will be focused primarily on “liquid tokens and digital assets,” and Sequoia plans to dabble in staking, providing liquidity, and governance of protocols.
Sequoia has previously invested in FTX, Block, StarkWare, and Fireblocks.
This week, Charlie Munger, Berkshire Hathaway’s 98-year-old vice chairman, had a few choice words for cryptocurrency.
“I certainly didn't invest in crypto. I'm proud of the fact that I've avoided it. It's like some venereal disease or something. I just regard it as beneath contempt…I admire the Chinese for banning it. I think they were right, and we've [the US] been wrong to allow it,” he said. (and yes, he did just compare crypto to an STD.)
On the other hand, Paradigm, one of the most highly respected firms in crypto and recent investor in Citadel Securities, just hired a high schooler as a research engineer. The engineer, who goes by Transmissions11, was a core developer and founding member of Rari Capital and will work at Paradigm on lowering transaction fees. Humorously, Transmission11’s bio says that “In his spare time, he attends high school in California.”
If you're interested in learning more about crypto and Web3:
subscribe to my 5.5-year-old podcast Unchained, which is available on YouTube, Apple Podcasts, Spotify, Google Podcasts, Pandora or wherever you get your podcasts
sign up for the Unchained Daily newsletter, which comes out Monday-Friday
and/or buy my forthcoming book, which is all about Ethereum and the 2017 ICO craze, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze
