Blockchain Confidential - 4 March 2022
The Crypto War heats up, a blockchain performance primer, and State Street apes in
The Week
With Russia’s invasion of Ukraine, the Washington Post said this could be the world’s first “crypto war,” and the shocks played out across the industry. Ukraine proposed and then backed off on an airdrop for donations, donations flowed in, a DAO was set up for fundraising, and as explored below, questions arose about crypto as a vector for sanctions evasion. The Layer-2 space appears to be cooling off with the exception of Arbitrum, with transactions slowing down; the whole question of whether ultra-scalable Layer-1’s alone or Layer-1 settlement layers plus Layer-2’s will dominate is still very much an open one. For partisans on one side or the other of the Bitcoin ESG debate, this week’s report that the mining industry’s move out of China led to a 17% increase in carbon emissions will provide plenty to chew on.
In TradFi and Big Tech engagement, custodial banking giant State Street is jumping into the crypto custody business. Block’s Cash app brought in nearly $2B in Bitcoin transaction revenue in Q4’21 as Jack Dorsey fully focuses on blockchain post-Twitter. Bank of America’s analysis do not see a repeat of the “crypto winter” in 2022 given growing user engagement. Crypto payment options are coming to eBay. And finally, how much do we love it when Ken Griffin says he was wrong about crypto? A lot.
The Good Read
One thing I have found frustrating exploring the blockchain universe is the lack of mature, independent blockchain performance benchmarking: you end up with a lot of lies, damn lies and statistics flying around. For this reason you may wish to read Cardano, Solana, Polkadot, Fantom and Telos vs the Clock! on Medium this week to see at least one high-level way to approach this. Note “independent” is a key point that’s still missing here, perhaps even in this Medium post, so caveat hackor: there is as of yet no equivalent of TPC for blockchains.
Regulator Radar
It’s impossible to separate the geopolitical situation in Ukraine from the regulatory news this week. The U.S. Treasury explicitly called out crypto as a channel for sanctions evasion, and there was a lot of discussion around what the established digital asset exchanges should or should not do in terms of blocking trading linked to Russian accounts; Treasury Secretary Yellen underlined this point in a response to a Senate inquiry. Fed Chair Powell cited this as well when calling for comprehensive crypto regulation during House testimony. France’s Finance Minister, Bruno Le Maire, also indicated the EU is taking measures to prevent sanctions evasion.
Beyond KYC / AML / CFT / sanctions list concerns, the SEC is looking at how qualified custodian rules from the Adviser Act apply to crypto held by investment advisors on behalf of their clients. Finally, New York State is moving forward on a potential Bitcoin mining moratorium; New York was an early and aggressive rule-maker in crypto with its BitLicense. On the other side of the pond from New York, EU lawmakers are going to drop a similar PoW mining ban from their pending Markets in Crypto Assets (MiCA) regulatory framework. We suspect the PoW-ESG debate is far from over. Finally, in the CBDC space, Brazil announced nine different projects have been selected by its innovation lab to drive development of the digital real.
At the Office
Ilya, Boris and Sonakshi and Ilya are pushing ahead with market data, and we are negotiating with two digital asset data vendors to get them the high-quality data they need. Barry and Makas got Serenity working front-to-back on Azure, and we started setting up automated cloud deployment tools and cloud monitoring so we can offer our clients the dial-tone reliability that institutional asset managers require. Bob Guzman joined as Chief Product Officer (CPO), and dove right into his critical work with our clients and the R&D team. We will be announcing our final executive hire, our CTO, in four weeks. Our UX designer also started this week; Tanya will be working with Barry on refining Serenity’s user experience and visual design. We are seeking senior digital asset quants in both NYC and Singapore currently as well as senior Python developers, so if you are excited to be part of the digital asset risk revolution, reach out via our careers page.