In this week’s edition of The Context, Google loosens its policies around crypto advertising, El Salvador erupts, and KuCoin gets kicked out of New York.
[Google: It all ads up ➕]
Google is updating its rules to allow verified advertisers to promote “cryptocurrency coin trusts.”
What Journalists Said 🧑💻:
Google continually revises its advertising policies, said James Hunt (The Block). In the spring, 🌱 it allowed ads for hardware wallets. In the fall, 🍁 NFT games became marketable. For the moment, “unregulated [decentralized applications], initial coin offerings, and DeFi trading protocols” remain prohibited.
Google hasn’t specifically said these “trusts” include exchange-traded funds (ETFs), expected to hit the U.S. in January, wrote Sander Lutz (Decrypt). But the move seems clear: “The famously risk-averse tech behemoth is preparing for a future in which crypto-based financial products will become an accepted and mainstream feature of the global economy.”
In the background, BlackRock and Fidelity have been quietly negotiating their spot Bitcoin ETF rollouts, specifically with regard to redemptions, reported Sarah Wynn (The Block). At stake is whether the asset managers would redeem shares for BTC (as they prefer) or cash (which “the SEC likely favors”). It all comes down to how much risk the firms agree to take on.
PR Perspective 🔎 :
Google needs to remain with the times. The probability of approval for a Spot Bitcoin ETF now stands at 90% and it will mark huge milestone for Bitcoin’s role in the world economy. Therefore, if Google weren’t to update their policy allowing the advertisement of Cryptocurrency Coin Trusts, it could be seen as a rejection of what is now a pertinent fact: Bitcoin is here to stay.
On another note, BlackRock, Fidelity and the SEC’s decision not to comment is interesting. It is typically recommended to comment as it gives organisations the chance to have some say on the spin of a story. The reluctance to comment could indicate that either the negotiations are not going very well or that an agreement is so imminent that they are holding off on media attention until the agreement is reached.
[El Salvador: Fire up the volcanoes 🇸🇻]
El Salvador plans to issue Bitcoin-backed bonds in Q1 2024, according to government posts on social media. Sales of the bonds will purportedly raise money for a “Bitcoin City” that harnesses geothermal energy created by volcanoes to mine BTC. 🌆
What Journalists Said🧑💻:
President Nayib Bukele announced the bond in 2021, right after El Salvador became the first country to adopt Bitcoin as its national currency, said Marco Quiroz-Gutierrez (Fortune). But in 2022, it was “sidelined by the nation’s finance minister as crypto prices plummeted.” 📉 It then faced other delays before the legislature paved the way with a new law in January.
El Salvador is sticking with Bitcoin despite “dogged criticism from outside parties,” wrote Sabrina Toppa (TheStreet Crypto). Just last week, it kicked off the Freedom VISA program, giving residency to up to 1,000 people who invest $1 million in Bitcoin or tether in the country.
That criticism is also coming from inside the country, said Agence France Presse. Bukele said Bitcoin would make remittances cheaper and easier while improving access to financial services for the 70 per cent of Salvadorans without a bank account. But a May survey “found that 71 per cent believed the cryptocurrency ‘has in no way helped to improve their family economic situation.’” 👪
Why It Matters ⁉️:
Being the first country to recognize Bitcoin as legal tender during the height of the previous bull market, El Salvador has been pretty quiet during the bear. However, as crypto winter thaws and geothermal energy continues to pump in ‘The Land of Volcanoes’, expect it to spotlight its experience as a test case for Bitcoin adoption. Whether the Salvadorean experiment proves to be successful or not, the volcano bond may prove to be an effective case study for sustainable Bitcoin mining initiatives.
[KuCoin: Exchange of address]
Seychelles-based crypto exchange KuCoin settled a lawsuit brought by New York Attorney General (NYAG) Letitia James. The state accused KuCoin of operating an unregistered exchange. As part of the deal, it’s agreed to pay $22 million and stop offering its services to New Yorkers.
What Journalists Said 🧑💻:
This is just “the latest in an aggressive push by New York to help shape the crypto landscape,” wrote Erik Larson (Bloomberg). James has already sued Celsius CEO Alex Mashinsky and settled suits against BlockFi and Nexo. [The NYAG is also suing Genesis, Digital Currency Group, and Gemini for $1 billion.]
Perhaps the bigger deal here was that the NYAG asserted that Ethereum—available for trading on KuCoin—is a security, said Sander Lutz (Decrypt). [In contrast, the SEC has not labelled ETH a security in similar lawsuits.] But in the settlement, KuCoin didn’t “admit that any particular cryptocurrency it offered was a security—only that some of the tokens it bought and sold were either securities or commodities.”
Why It Matters ⁉️:
New York is a commercial center with a large population. Not being able to operate there is a blow for crypto exchanges and firms. And with Wall Street moving toward an ETF, the NYAG could be in the position of deciding winners and losers as crypto expands to new investors.
[Tweet Of The Week]
Credit: @NebularBuilders
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: “Inflationary Cryptocurrencies” by Alice Li.
Inflation has been at the top of the economic agenda following Tuesday’s news that the US headline inflation rate dropped to 3.1%, despite core inflation seemingly rising.
Looking at the world of crypto, just as in traditional economics, inflation plays a major role in determining the value of investment returns. Inflationary cryptocurrencies are characterized by a built-in mechanism designed to gradually increase coin supply. This results in a decreasing value for each coin as more coins are generated. These inflationary cryptocurrencies employ various factors to maintain the cryptocurrency supply and foster network participation - including predetermined inflation rates, supply limits, and token distribution mechanisms.
Each cryptocurrency has a unique system for coin production and supply management tailored to its monetary structure. In the case of inflationary cryptocurrencies, the overall coin supply steadily grows over time. The rate at which this supply increases is typically predetermined through an inflation rate. Moreover, there is a maximum supply of inflationary tokens, which can be either fixed or variable. Once this predetermined supply limit is reached no additional tokens can be created.
Inflationary cryptocurrencies can be advantageous for individuals using digital currencies for day-to-day transactions, as the lower value of each coin enables smaller transactions. However, continuous coin creation can also lead to inflation and a long-term decline in coin value.
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 Jeff Benson, Sam O'Donohoe, Ewan Brewster, Damian Alvarez, Andrew Wickerson, 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.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and brands through impactful storytelling. Find out more about us here.