Hello, hope you're well. Here’s this week’s glimpse at the crypto space:
Our plan is to keep things short and concise, and try to pull together strands that might shed light on deeper trends, or angles that might otherwise have got lost. We’re not here to evangelise or criticise, but hopefully to add perspective, context and a bit of insight about the week’s moves within crypto and DeFi, as well as on its fringes.
Here’s our tl;dr:
Central bank digital currencies are really a thing, at least in China. Who’s next?
Finance may soon be whole again, with decentralised finance, fintech and traditional finance building pipes, tunnels and rails between them. Expect more this year.
The lines are blurring, too, by companies not known for their financial chops venturing into DeFi. Not all such encroachments have been welcomed with open arms
Your feedback is welcome, and if there's anything we can help more on, don't hesitate to ping us at thecontext@yapglobal.com
Thanks for reading.
[CBDCs: a 70s NY disco, or the future?]
China is furthest along with its central bank digital currency; next month's Chinese New Year and Winter Olympics are a key test for interest in what is officially called the Digital Currency and Electronic Payment (DCEP) (China’s digital yuan: e-CNY wallet tops download charts in Apple and Xiaomi app stores ahead of Lunar New Year)
China is being watched closely, especially by those countries concerned about the rise of crypto, DeFi and any payments system that operates outside those already regulated (and understood). But not everyone is convinced of the need for a central bank digital currency: The Telegraph reports that in the UK a House of Lords committee points out that, among other problems, personal privacy may be compromised. ("Peers cast doubt on 'Bitcoin' project) For some governments, that might be more of a feature than a bug.
[Joining the tunnels]
This year is likely to see the extensive building of infrastructure and services linking DeFi and TradFi. At some point it may not be clear where one side ends and another starts.
Coinbase, for example, bought FairX, a derivatives exchange regulated by the (U.S.) Commodity Futures Trading Commission, with the plan of leveraging FairX's infrastructure to offer crypto derivatives to all Coinbase customers in the U.S. (Coinbase’s path to creating a robust and regulated crypto derivatives market | by Coinbase | Jan, 2022 | The Coinbase Blog)
Checkout.com provides online payment processing for the likes of Grab and Klarna, putting it in the fintech category. But it also handles moving money in and out of crypto for the likes of Coinbase and Meta Platforms. Last July CNBC quoted its CEO Guillaume Pousaz as saying crypto adoption was "relatively low." (Checkout.com founder Guillaume Pousaz on fintech, cryptocurrency) When The Wall Street Journal caught up with him this week, after Checkout.com had raised $1 billion recently, in part to enlarge its crypto business, he said crypto and fintech transactions accounted for more than half of payments volume.
PayPal, the world's biggest online payment system, is considering its own stablecoin, which might well be intended for payments. Not for a while, though: The code discovered inside the app was added as part of a recent hackathon. Notably, PayPal said they would work closely with regulators if they moved forward with a stablecoin, something that Facebook/Libra didn’t do successfully. (PayPal Explores Launch of Own Stablecoin in Crypto Push - Bloomberg)
[Catering to the middle ground]
We'll also see a lot more companies try to cater to interest in crypto and DeFi. Not all will make a lot of sense, or even be welcome. But there's clearly an appetite to experiment.
Qualcomm's CEO pointed out that the latest version of their smartphone chip, the Snapdragon 8 Gen, enables users to mint and generate NFTs, which he believes will "enable incredible scaling of these new technologies", though he did acknowledge he had not himself had time to dabble in crypto. (What comes after the smartphone, with Qualcomm CEO Cristiano Amon - The Verge)
Signal, the privacy-focused messaging service, has quietly added cryptocurrency payments to the app via MobileCoin, which has elicited some concern in and outside the company that easy anonymous payments may attract criminals -- and regulators. (How Signal is playing with fire - by Casey Newton)
A decision by Norton, once a name synonymous with PC tools, to add crypto mining capabilities to its security software has elicited some outrage online. Upon closer inspection the functionality, though installed alongside the app, is off by default. What is most noteworthy, perhaps, about this is the financial arrangement: if the user opts to make use of his computer's idle processing capacity to mine cryptocurrencies as part of a pool, Norton would take 15% of the proceeds for itself. This is a model that on first blush looks far better for Norton than it does for the user, but with a better alignment of interests, this hybrid mining model may appeal to those who lack the interest or skills to join a mining pool directly. (Here’s the truth about the crypto miner that comes with Norton Antivirus - The Verge)
[Other tidbits:]
web3
There's been a lot of discussion about web3 online, prompted by founder and former (he resigned on Jan 11) CEO of Signal Moxie Marlinspike.
A couple of links to start you off: Moxie Marlinspike >> My first impressions of web3 Ethereum founder Vitalik Buterin's response
This newsletter is pulled together by a team led by Jeremy Wagstaff, formerly of the WSJ, BBC and Reuters and Samantha Yap, founder of YAP Global. Other members: Farhan Musa, Rebecca Campbell and Ruby Wu. Many thanks to Joey Woo for production. Any views expressed here are not necessarily those of the writers, YAP Global or its clients.