Plus: SBF sentenced; Crypto.com goes to SK
This week in The Context: What the SBF sentence means for crypto, why Crypto.com is expanding into South Korea, and who wants MakerDAO to back its stablecoin with stables.
[SBF’s Quarter-Life Crisis 🌜]
Former FTX CEO Sam Bankman-Fried was sentence to 25 years in a federal prison for fraud and conspiracy.
What Journalists Said 🧑💻:
Here was a man who showed no remorse and kept lying even during sentencing hearings, said David Z. Morris (Dark Markets). It was personally “gratifying” when Judge Kaplan “firmly debunked all of the disingenuous, weaselly excuses Bankman-Fried and his defenders have vomited out over the last year.”
Many crypto people are outraged the sentence wasn’t longer, explained Jeff John Roberts (Fortune), especially as Silk Road founder Ross Ulbricht languishes in prison for life. 🕸️ But the sentence is fair—and it “sends a message that crypto fraud is a serious crime.” 🦹♂️
The sentence ends a crypto era “characterized by greater-fool get-rich-quick schemes on the way up…and fraud investigations and indictments on the way down,” claimed Matt Rosoff (TechCrunch). But the next era probably won’t be any better. “Nearly everything else that’s being built on or enabled by blockchains replaces something that’s already being done fairly well.” Maybe just go back to Bitcoin’s original use case: an alternative to fiat.
PR Perspective 🔎:
The 25-year sentence for Sam Bankman-Fried is a stark reminder of the fine line between ambition and arrogance. In an era where the boundaries of finance are being redrawn, this sentencing underscores the critical need for ethical leadership and regulatory adherence. For aspiring crypto moguls, SBF's downfall is a lesson in humility and accountability, reminding everyone that in the rush for innovation, integrity should never be left behind.
[’Movin on up…to the East Side’ ↗️]
Crypto exchange Crypto.com said South Korean citizens will be able to use its app later this month. 🇰🇷
What Journalists Said 🧑💻:
The deal was made possible when Crypto.com bought up two Korea-based exchanges in 2022. At the time, Shalini Nagarajan (Blockworks) wrote, it seemed to deem South Korea and its 6 million active traders a “critical” market.
South Korea’s stance toward crypto is almost the reverse of other jurisdictions. ⏪ As Zoltan Vardai (Cointelegraph) explained, “Since the country’s financial regulators refuse to recognize crypto as financial assets, institutions are also banned from investing in crypto-related exchange-traded funds.” ✋ Retail investors, however, can buy and sell.
But there are “strict regulations,” said Danny Park (The Block). That includes partnering with a bank in order to trade fiat for crypto. It’s all part of mitigating money laundering and market manipulation.
PR Perspective 🔎:
Crypto.com’s expansion into South Korea is a strategic chess move in the global crypto game, ♟️ showcasing a keen understanding of regulatory landscapes. This move is less about geographic expansion and more a testament to adaptability and resilience in the face of stringent regulations. For the industry, it’s a signal that with the right approach, barriers become gateways, turning regulatory challenges into opportunities for growth and trust-building with a critical market.
[Opening the Stable Door 🚪]
Stablecoin issuer Ethena Labs began allowing people to redeem its airdropped governance token, ENA. 📦 Meanwhile, MakerDAO members are considering whether to allocate $600 million in DAI stablecoin to Ethena Labs’ USDe and staked USDe stablecoins.
What Journalists Said🧑💻:
What is USDe? It’s complicated but, said Jamie Crawley (CoinDesk), it’s a “synthetic dollar” that pays out “yields to investors by pairing ether liquid staking tokens with short ether (ETH) perpetual futures position in the derivatives market to maintain a ‘rough target’ of $1 price.” 🎯
USDe’s “architecture has been lauded by many in the crypto community,” wrote Pedro Solimano (The Defiant), 📐 “while triggering LUNA PTSD for its double-digit yield.”
If MakerDAO votes to link USDe t o DAI, that would be a boon for Ethena’s market cap, but it could “create systematic risk,” suggested Protos. Aave DAO delegate Marc Zeller has proposed making DAI unavailable for borrowing on the DeFi lending protocol. But his stance might be “influenced by the protocol via which the Dai is being issued, Aave-competitor Morpho.” [Disclosure: Morpho is a YAP Global client.]
PR Perspective 🔎:
Backing one stablecoin with another stablecoin sounds risky, but the devil is in the details. 😈Ethena Labs and MakerDAO's potential dance raises eyebrows but could redefine stablecoin synergy if played right. It’s a high-wire act that demands meticulous scrutiny and an unflinching commitment to risk management. This bold move could either usher in a new era of stablecoin innovation or serve as a cautionary tale about overreach.
[Tweet Of The Week]
Credit: @divine_economy
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here.
This week: ‘’Margin Trading” by Vasundhara Singh.
Margin trading involves borrowing funds from a broker or exchange to trade assets, aiming to increase both potential profits and losses. Investors open a margin account and must meet a minimum margin requirement, typically a percentage of the total trade value, to engage in margin trading.
Additional leverage allows investors to control larger positions than their initial investment would permit. However, if the value of the assets falls below a certain threshold, known as the maintenance margin requirement, the broker may issue a margin call, requiring the investor to deposit additional funds or risk liquidation of their positions. Therefore, Margin Trading offers the potential for higher returns but carries greater risks due to leverage.
Investors should carefully assess their risk tolerance and understand the mechanics of margin trading before participating. Regulatory oversight helps protect investors and maintain market stability in margin trading.
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, Andrew Wickerson, Tiffany Mac Sherry, Liam Quinn, 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.