Dispatch #46: The Latest Hiccup in Crypto’s Progress in the US

Jul 30, 2021 5 min read

Dispatch

In this patch of your weekly Dispatch:

Regulatory pressure in the US
NFTs get a boost
The Nexo app, revamped

The Big Idea

Elizabeth Warren and the New Infrastructure Bill

Regulatory intrigue around crypto in the United States took a pretty dramatic turn this week. On Tuesday, the US held three separate hearings that all touched on crypto. One focused on ransomware attacks, another on central bank digital currencies, and the third – a Senate Banking Committee hearing – asked: “Cryptocurrencies: what are they good for?”

In that hearing, Senator Sherrod Brown and Senator Elizabeth Warren took the crypto industry to task. Brown accused Bitcoin of “phony populism,” while Warren introduced a completely new meme of crypto being controlled by “shadowy super coders.” Indeed, Warren seems to have adopted the belief that crypto is just the same sort of financial exploitation she hates the traditional financial sector for.

At the same time, as she was raking crypto over the coals on the Hill, Warren also sent Treasury Secretary Janet Yellen a note asking her to look into the risks cryptocurrencies represent to financial stability.

Still, that isn’t the biggest thing that has the US crypto community concerned. At the last minute, provisions were added to the US Infrastructure bill that seek contributions of around $28B from the crypto industry through new tax reporting requirements on crypto intermediaries. The issue for the industry isn’t the taxes – it’s that the proposed new definition of brokers would be extremely broad, and potentially force everyone from miners to wallet software developers to decentralized exchanges to collect data about transactions – even when they do not hold assets in custody.

There are serious implications and groups like CoinCenter are working quickly to try to refine the language. The challenge is that it has now been embedded in legislation considered “must pass.”

We’ll share an update next week.

The Latest In…

NFTs

NFTs had another week that showed that, while some of the early-year hype may have quieted down, big industries are still extremely focused on NFTs. Shopify announced this week that they’ll be allowing the 1.7 million businesses that use their company to power their e-commerce sites to sell NFTs directly to consumers. Talk about extending their reach! But if reach is one aspect of the industry, demand is the other. On that front, Ashton Kutcher and Mila Kunis surprised everyone when they posted a video about crypto and NFTs from their house that featured…Vitalik! Vitalik is apparently joining the cast of their new animated NFT show Stoner Cats. What a world!

The Latest In…

Exchanges

Based on a recent set of actions, it seems clear that exchanges are sensing a change in the regulatory winds. One topic that has aroused the ire of some regulators is the excessive leverage in the crypto space. Last weekend, FTX announced that they were eliminating all leverage over 100x. They said that it represented a tiny fraction of trade volume, but that it still was likely a net negative for the whole space. Within hours, Binance had followed suit. Binance’s CEO CZ also gave a press conference on Tuesday where he shared that they were looking for a potential replacement for him who had experience with regulatory matters.

The Latest In…

Crypto Funding

If you had any concerns that private investors were losing interest, never fear. This week has been insane, with more than a dozen big raises being announced. The headliner raise was probably crypto infrastructure provider Fireblocks snapping up $310M. Eco, a crypto wallet incubated by Uber co-founder Garrett Camp, raised a fresh $60M. Argentinian Exchange Lemon Cash collected $16M with an eye to expanding across Latin America. Bitcoin rewards company Lolli raised $10M. Genesis Digital Assets raised $125M to expand mining activities in the US and the Nordic region. So, yeah, there is some interest.

The Latest In…

Nexo

What. A. Week. It’s a gazillion degrees in the Northern hemisphere and over here at Nexo we are on fire. Over the past week only, we’ve launched:

The Nexo App 2.0 – the freshly revamped Nexo app, featuring an improved user experience and numerous new functionalities, such as Showcase Mode and a ‘How It Works’ section that makes you feel at home faster than ever.
DOGE on the Nexo platform – you can now buy, earn up to 3%, and borrow against Dogecoin natively on Nexo. Here are the juicy details.
Antoni’s July AMA – in this session, Antoni covered questions about the growing regulatory involvement in crypto, Flare’s Songbird airdrop, and updates on the community’s most-wanted features.
Nexo Brainer Episode Two – our bizdev George sheds light on why our credit lines are the most dynamic ones in the space and all the ways in which you can use your collateral to the best of your advantage.

The Week’s Most Interesting Data Story

Ether’s Massive First Half

By any measure, Bitcoin had a monster beginning of the year. Trading volume grew 489% and price grew 20% outpacing the S&P500 and gold. Still, even Bitcoin lags significantly behind the growth in ETH whose price rose 210% in the first six months of the year. Even more impressively, trading volume increased an astronomical 1,461%. One of the reasons? According to Coinbase’s H1 report, it wasn’t just DeFi degens but hedge funds, high net worth individuals and other institutional investors who made their first bets. The report also identified enthusiasm about DeFi and excitement around Ethereum transitioning to proof of stake as major drivers of that activity. With the EIP-1559 on the horizon, will that appeal continue to grow?