Hi all, hope you had a good week. Despite the many encouraging signs of growth that suggest that crypto is moving forward, the industry continues to suffer at the hands of the now infamous line of questioning; securities or commodities? We also explore Binance’s bid to set up a consortium with the objective of supporting Web3, but will they struggle to bolster their workforce?
The usual disclaimer: This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/Web3/NFT land and tries to provide unbiased context. It's aimed at anyone who wants to keep an eye on the space. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
The team: founder Samantha Yap and consulting editor Jeremy Wagstaff, Sam O'Donohoe, Ewan Brewster, Tiffany Mac Sherry, Becky Corbel and Delon Chan. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
[tl;dr]
Web3 is marching forward against the backdrop of regulatory scrutiny
Summers are built in winter, or so several companies say (or pray)
A week of upgrades, intellectual property wins, checks notes, and pig butchering
[Forward march: Canto pops on Variant stake]
Some logical, and less logical, positive moves within Web3:
A meteoric rise in Canto — from 7 cents on Jan 2 to 62 cents on Feb 9 — has been largely attributed to news that VC fund Variant had invested in the company. But the enthusiasm may also be connected to Canto’s focus as an infrastructure player built on Cosmos, offering ‘feeless’ services.
Payment processor Visa has added some detail to its December announcement (which we covered in #50 of The Context) about making payments easier; it's focusing on large value settlement payments between traditional dollars and 'digital tokenised dollars’ — stablecoins.
TassatPay, a blockchain payment solution deployed by six U.S. banks, has reached $1 trillion in transactions. TassatPay was set up in 2019 and enables bank balances to be tokenised, supporting 24/7 real-time payments between customers of the same bank.
Mania for AI-driven search and chat has sent crypto fans scurrying for any tokens related, however tangentially, to artificial intelligence. Most analysts saw the stampede as faddish, but one said the interest was also a sign of “improvement in market sentiment.”
In any case, it’s not all a mirage: artificial intelligence which can generate images are an obvious source of potential NFT content: Alethea AI’s CharacterGPT on the Polygon blockchain is one of the first to explore this.
And NFTs are finding a new market on the Bitcoin blockchain, via a new “Ordinals” protocol which stores NFT data in the ‘witness space’ of Bitcoin blocks.
Sources:
Here’s Why Artificial Intelligence Focused Cryptocurrencies Are Vastly Outperforming Bitcoin (CoinDesk’s Shaurya Malwa )
What Is Canto? The Token That Rallied 700% in a Month (Decrypt’s Nathan Reiff)
Visa’s crypto strategy targets stablecoin settlements: (Cointelegraph’s Ana Paula Pereira)
Blockchain bank payment solution TassatPay logs $1 trillion transactions (Ledger Insights)
A Beginner’s Guide to Canto (Bankless)
Crypto Fans Pile Into AI Tokens as OpenAI’s ChatGPT Mania Intensifies (Bloomberg's Vildana Hajric)
The Ordinals Protocol Has Caused a Resurgence in Bitcoin Development (CoinDesk's Will Canny)
Polygon Has a New AI Project. Will It Rival ChatGPT? (The Motley Fool's Dominic Basulto)
[A Consortium to Clear the Clouds]
Efforts are being made to draw a line under the winter, but there’s still uncertainty. A consortium hopes to address that.
US cryptocurrency exchange Gemini will pay up to $100 million in cash to its customers after an agreement between Gemini owners the Winklevoss twins and bankrupt Genesis Global Capital and its parent Digital Currency Group. The deal appears to end weeks of squabbling between the Winklevoss twins and the DCG’s Barry Silbert.
Coinbase CEO Brian Armstrong caused jitters when he tweeted that the SEC would like to ban crypto staking in the U.S. for retail. Even his own chief legal officer said the rumours were ‘totally false.’
Major players like Coinbase are all grappling to put their houses in order (and be seen to be doing so) as regulators and investigators circle. Coinbase’s staking program has been under SEC scrutiny since last summer, as is crypto exchange Kraken, months after a three-year-long investigation by OFAC led to a $362,000 settlement over potential U.S. sanction violations.
Binance is reportedly setting up a consortium of other exchanges and analytics firms to try to rebuild confidence in the industry. At the same time, it’s still trying to find an accountant who knows enough about crypto to audit its balance sheet.
Indeed, there is still a dearth of qualified Web3 specialists. Blockdata, a research firm, says that 36 of the top 100 companies by market cap are looking for blockchain staff. The survey follows one from Sept 2021 that found Facebook/Meta employed 252, such staff. It no longer seems to be looking for them, though JP Morgan is, reporting vacancies for 91.
They may have problems finding them. Data compiled by CoinGecko suggests that while layoffs at crypto companies jumped in those months following major fallouts in 2022, and again in January 2023, most of these were from cryptocurrency exchanges, and accounted for around 4% of layoffs across the tech sector as a whole.
Sources:
Gemini, Genesis Reach $100 Million Agreement Over Earn Program (Decrypt’s Jason Nelson )
DCG, Bankrupt Crypto Firm Genesis in Credit Accord With Gemini, Others (Bloomberg's Olga Kharif, Vildana Hajric and Erin Hudson)
Gemini to contribute $100 million to Genesis bankruptcy recovery plan (CNBC's Rohan Goswami and MacKenzie Sigalos)
Are Regulators Taking Aim at Crypto Staking? Rumors Suggest New SEC Scrutiny: (Decrypt's Jason Nelson)
Consumer Stocks Outperform After Earnings. The Case for Caution (Barron’s Jack Denton)
Crypto Exchange Kraken Faces SEC Probe Over Unregistered Securities (Bloomberg's Allyson Versprille)
Binance Signals Full Audit for Crypto’s Biggest Exchange Remains Some Way Off (Bloomberg's Suvashree Ghosh)
Binance Is Organizing a Consortium to Try to Rebuild Trust in Crypto: Source (CoinDesk’s Ian Allison)
Data:
How many Blockchain employees do the top 100 companies have? (Blockdata)
Which Public Companies Are Still Hiring for Blockchain Roles? (Blockdata)
Crypto Layoffs by Month, 2022 to 2023 (CoinGecko)
[tidbits]
Plans are still on track for Ethereum’s next upgrade. A test network (testnet) successfully simulated withdrawals of staked ether (ETH) for the first time. The test network is designed to provide developers with a dress rehearsal of the withdrawals similar to those that will happen on the main Ethereum blockchain following the Shanghai upgrade expected next month.
French luxury group Hermès has won a landmark case over how U.S. intellectual property rights are applied to digital assets or NFTs.
In case you didn’t know what ‘pig butchering’ is in crypto: A 63-year-old Hong Kong investment manager has lost $1.5 million to a supposed female crypto investing expert.
A lengthy, thoughtful piece by Derek Edws of Collab+Currency, VC for early-stage Web3 projects (hat-tip to Carly Reilly). Tl;dr: “While the digital asset ecosystem is still only a decade old, I believe we’re in the midst of a fundamental, once-in-human-history transition from physical stores of value to digital stores of value.”
Sources:
Ethereum Testnet Zhehiang Successfully Processes First-Ever ETH Staking Withdrawals (CoinDesk's Margaux Nijkerk)
Hermès wins landmark lawsuit over ‘MetaBirkin’ (FT's Joe Miller, Adrienne Klasa, Cristina Criddle)
Hong Kong investment manager loses $1.5M inheritance in crypto scam (Protos)
Storing Value in Digital Objects (Derek Edws)
[Tweet of the Week]
[Events]
The Blockchain Event | February 14th - 17th 2023 | Fort Lauderdale, Florida, USA
**Blockchain Fest** | February 14th - 17th 2023 | Singapore, Singapore
European Blockchain Convention | February 15th - 17th 2023 | Barcelona, Spain
PRCA Workshop - What is Crypto PR? | February 15th 2023 | Singapore, Singapore - A YAP Run Event: RSVP here if you’d like to attend.
Melbourne Hacker House | February 20th 2023 | Melbourne, Australia
Buidl Week / EthDenver | February 23rd - March 5th 2023 | Denver, Colorado, USA
[DeFi Definitions]
An occasional segment exploring one particular aspect of DeFi.
This week "Central Bank Digital Currency" by Sam O’Donohoe
As the world continues to digitise, many countries are beginning to test different ideas for digitising their economies. One such idea that is inspired by the advent of digital assets are central bank digital currencies (CBDCs).
A CBDC is a type of centralised digital asset that is pegged to the value of a country’s fiat currency and issued by central banks. Unlike stablecoins which aim to bridge the worlds of cryptocurrency and fiat currency, CBDCs aim to replicate the properties of fiat currencies in a digital format. As the architects of CBDCs, this will allow central banks to increase financial inclusion, reduce cross-border transaction costs, and preserve their position at the heart of financial services.
Despite these potential benefits, many are concerned that CBDCs will act as a dystopian instrument for state surveillance, infringing on citizens’ privacy and liberty. In the case of authoritarian regimes, CBDCs may allow central banks and governments to access the transaction data of every single digital payment in their country.
Many countries are currently undergoing research periods to assess the properties of CBDCs. The Bank of China’s digital yuan, or e-CNY, was one of the first CBDCs to be rolled out by a major economy back in 2021. It is currently accessible in all major cities across China, with domestic mobile payments providers Alipay and WeChatPay offering features to support its wider roll-out.
We will continue to see the development of CBDCs across the next decade as central banks continue to dabble in the digitisation of their financial services.
This newsletter is prepared by YAP Global, an international PR Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and Web3 brands through impactful storytelling. Find out more about us here.