This week in The Context, Donald Trump talks crypto (kinda), Terraform shows signs of life, and Asian regulators are warning investors against trading US crypto ETFs.
[Trump: No CBDC From DC 👱]
Former President Donald Trump said he would “never allow the creation of a central bank digital currency” (CBDC) because it would give the “federal government absolute control over your money.” 🏦
What Journalists Said 🧑💻:
CBDCs have become a campaign issue, first with former candidate Ron DeSantis and now with Trump, despite little appetite for a digital dollar in DC, suggested Stephanie Lai and Gregory Korte (Bloomberg). The Federal Reserve researched the idea but indicated “it won’t move ahead without the backing of lawmakers and the executive branch,” which have said zilch. “Yet Trump’s pledge to prevent any digital currency adds to his populist appeal.” 🇺🇸
Actually, “most Americans have never heard of CBDCs,” said Callan Quinn and Joanna Wright (DL News). Putting them on blast is probably about China, which Trump loves to criticize. That country is moving toward a digital yuan, which critics say could be used along with the country’s social credit system to monitor individuals.
Credit former candidate (and enthusiastic crypto supporter) Vivek Ramaswamy for getting Trump to mention CBDCs, wrote Sam Reynolds (CoinDesk). But “with DeSantis and Ramaswamy out of the primary, crypto might now take a back seat,” popping up only on the periphery.
Why It Matters ⁉️:
Trump famously said, "I could stand in the middle of Fifth Avenue and shoot somebody, and I wouldn't lose any voters.” But an anti-CBDC stance, however tepid, could be enough to gain a few single-issue crypto voters, who have become disillusioned with regulators’ hostile stance to crypto under the Biden administration.
[Terra Infirma 🌍]
Crypto firm Terraform Labs, creator of the TerraUSD stablecoin and Luna tokens, has filed for bankruptcy as co-founder Do Kwon faces fraud charges. 📉
What Journalists Said 🧑💻:
Terraform Labs was a “central player in [the] 2022 crypto collapse,” wrote Crystal Kim (Axios). When twin currencies TerraUSD and LUNA lost all their value, it was the “first domino” that led to the fall of Three Arrows Capital, FTX, and others.
According to Terraform, it will “continue expanding its web3 business” post-bankruptcy, said Kate Park (TechCrunch). It bought portfolio manager Pulsar Finance in November and just released a crypto wallet this month. But first, it must sort out what to do with its $100-500 million in assets and liabilities.
Whatever happens with the bankruptcy, the firm’s—and Kwon’s—troubles are far from over, wrote Stephen Graves (Decrypt). Both are the subject of a securities fraud lawsuit brought forward by the SEC. Moreover, the Terraform frontman is serving time in Montenegro while both South Korean and US authorities seek his extradition.
PR Perspective 🔎 :
Terraform Labs has an uphill climb to repair its tattered reputation following the collapse of the TerraUSD and Luna tokens. In addition to navigating regulatory relations, it must manage media scrutiny about past and future practices. Its first steps should be to prioritize transparent communication, articulate a clear legal strategy, and position the case as a catalyst for industry improvement. Actively engaging with the crypto community and emphasizing the commitment to meeting financial obligations during Chapter 11 will showcase responsible corporate behavior and, perhaps, restore confidence in Terraform Labs within the industry.
[ETF: East Won’t Meet West]
After the release of spot Bitcoin exchange-traded funds in the US earlier this week, securities regulators from three Southeast Asian countries—South Korea, Singapore, and Thailand—warned investors against trading these foreign ETFs. 🌏
What Journalists Said🧑💻:
Regulators haven’t forgotten 2022, wrote Dylan Loh and Francesca Regalado (Nikkei Asia). Three Arrows Capital, the now-defunct crypto hedge fund connected to Terra’s collapse, was based in Singapore, as was Zipmex, a now-bankrupt exchange that was widely used in Thailand.
South Korea, however, is on the fence, suggested Danny Park (The Block). 🤺 After the Financial Services Commission’s warning prompted “several major local securities companies [to suspend] trading of existing foreign spot bitcoin ETFs,” the Office of the President urged the regulator to consider allowing a local Bitcoin ETF.
Wait. This is unusual, said Callan Quinn and Sebastian Sinclair (DL News): “Asian regulators usually wave through SEC-approved fund offerings.” Are they defending their countries from crypto crime…or giving “home grown efforts time to catch up” to Wall Street? 🧱
Why It Matters ⁉️:
Asia’s ETF market is expanding, but a recent UN report linking stablecoins to Southeast Asian crime syndicates, along with the bad taste left by the 2022 collapse, has countries proceeding with caution when it comes to crypto.
[Tweet Image Of The Week]
Credit: @EverstakeCosmos
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: ‘’Modularity” by Liam Quinn.
Modularity became a buzzword in 2023, with ecosystems such as Ethereum and Cosmos testing out modular blockchain designs.
Modularity is about splitting the blockchain into distinct, independent modules, each handling a specific function. This enhances the flexibility and adaptability of the blockchain, allowing for easy updates and maintenance. Modular blockchains can tailor their components, like consensus mechanisms and smart contract protocols, to specific needs, making them versatile for various applications.
The modular structure also aids scalability and interoperability. Individual modules can be optimized for increased workload, ensuring efficient scalability. Moreover, modularity enables seamless integration between different blockchain systems, facilitating data exchange and broadening the technology's application across diverse sectors like finance and supply chain management.
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.