July 22, 2022
Photo: Valerie Pleasch/Bloomberg via Getty Images
Fair greetings, and welcome to Protocol Fintech. This Friday: the SEC’s power play in crypto regulation, Three Arrows Capital’s Su Zhu emerges and buggy crypto code gets put on blast.
Visa founder Dee Hock died at home this month at 93. There really wouldn’t be a fintech sector without him. While he didn’t invent the credit card, he created the four-party system — cardholder, issuer, acquirer, retailer — that runs much of modern commerce. In his later years, he took inspiration from how he wrangled a bunch of warring bankers into creating a unified card network and applied it to reinventing the corporation. There’s still so much to learn from Hock, including this recent tweet: “Little of the past can be known, little of the present settled, and little of the future anticipated, yet life pushes us on unprepared into choices between good and evil. Why can't life just leave us alone for a bit?”— Owen Thomas (email | twitter)
For years, the crypto industry has been in a state of confusion about which tokens are in fact securities and which are not. A case filed by the SEC alleging insider trading by a former Coinbase employee and two accomplices could provide some clarity — but it also threatens to roil the industry and Washington as the march to regulate digital assets continues.
The SEC may be looking to set a new standard. In the complaint, the SEC argues that nine of the 25 tokens that the three individuals traded in are securities under the Howey Test, a longstanding judicial standard that would mean they should be regulated by the SEC.
The case also brought to the forefront a behind-the-scenes struggle in Washington. More than one federal agency is seeking to regulate crypto: the CFTC, SEC, FinCEN, IRS, OCC and FDIC, among others.
The stakes are high. While the Lummis-Gillibrand bill winds its way through Congress and the Biden administration orders additional studies of crypto, the Coinbase case could determine which tokens are securities and which aren’t.
Ultimately, the SEC’s filing of the case may be a strong signal for Congress to act. There’s only so much agencies can do on their own. The “malleability of digital assets” is contributing to the struggle, said Michael Fasanello, chief compliance officer at LVL. His proposal: Set up a coordinating body like the Office of the Director of National Intelligence, which was created to coordinate intelligence after 9/11.
Chip shortage could undermine national security: The global shortage of semiconductors has impeded the production of everything from pickup trucks to PlayStations. But there are graver implications than a scarcity of consumer goods. If the U.S. does not ensure continued domestic access to leading-edge semiconductor manufacturing, experts say our national security could suffer.
American Express says cardholders are still spending. The credit card company said second-quarter revenue rose 31% as cardholder spending on travel and entertainment topped pre-pandemic levels in April and has continued to improve.
JPMorgan sees a thaw in crypto winter. Demand among retail investors in the crypto market is improving, according to a new JPMorgan Chase report.
On Protocol: One idea to stop email spam? Require a donation from first-time senders.
Blockchain.com is laying people off. The crypto exchange said it would cut 25% of its workforce. The firm is shuttering its Argentina office and pausing expansion in several other countries.
Minecraft NFT backers ready a plan B. The leader of the Minecraft-based project NFT Worlds said it would reveal a plan of action soon in response to Minecraft instituting a ban on blockchain technology and non-fungible tokens.
Some workers still want to be paid in crypto. About 5% of all payments accepted by remote workers were made in crypto in the first six months of the year, up from 2% in the last six months of 2021, according to more than 100,000 worker contracts analyzed by Deel.
Central Washington's crypto-mining gold rush has slowed. Many of the miners who flocked to the abundant hydropower of Washington state's Columbia Basin over the past decade have either gone out of business or moved to other states, like Texas.
The U.S. is “missing from the table” as other countries advance their CBDC plans, the Atlantic Council’s Josh Lipsky told CoinDesk.
“People may call us stupid. They may call us stupid or delusional. And, I’ll accept that. Maybe,” Three Arrows Capital co-founder Su Zhu told Bloomberg. He said he’d been in hiding because of death threats following his crypto hedge fund, but was communicating with liquidators.
The maintainer of the Websockets open-source project, Qonto CTO Aymeric Augustin, has had it with low-quality crypto software. “I will summarily close issues related to bitcoin or cryptocurrency in any way,” he wrote on the project’s website, citing proof-of-stake’s high energy usage, but he clarified on Twitter for those not in on the joke that his real issue was requests that showed “either the person lacked basic skills to debug their own code or they connected to buggy servers.”
Tesla bought $1.5 billion worth of bitcoin in early 2021, with plans to sell cars for crypto. Then Elon Musk grew leery of bitcoin’s environmental impact and canceled the bitcoin payment option, but said Tesla would HODL its holdings. That changed in the second quarter as Musk grew worried about the lockdown of Tesla’s Shanghai plant, he told investors. Tesla sold off three-quarters of its bitcoin at a significant loss.
Chip shortage could undermine national security: To ensure American security, prosperity and technological leadership, industry leaders say the U.S. must encourage domestic manufacturing of chips in order to reduce our reliance on East Asia producers for crucial electronics components.
Thanks for reading — see you Monday!