The Breakdown - Binance Executives Arraigned in Nigeria

Episode Date: April 5, 2024

NLW updates a set of stories, including the latest out of Nigeria where the Binance executives who were detained have now been arraigned with numerous charges. Today's Show Brought To You By Ledger - 5% to Bitcoin Developers When You Buy https://shop.ledger.com/pages/bitcoin-hardware-wallet Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, April 4th, and today we are catching up on finance and Nigeria, crypto venture funds, and much, much more. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit All right, friends, like I said, today we are catching up on a number of different topics,

and we start with the situation with the Binance executives in Nigeria. A pair of Binance executives have been arraigned in criminal charges in Nigeria as of this week. You might remember that the pair were detained in February after they flew into negotiate with the Nigerian government after Binance was accused of causing a currency crisis. They were held without charge for over a month, triggering an outcry from the crypto industry. The situation was particularly outrageous as one of the executives, Tigran Gambarian, is a U.S. citizen and highly decorated former IRS investigator. Two weeks ago, the other executive managed to escape capture and flee the country using a secondary passport. The Nigerian government claimed to be seeking the assistance of Interpol to track down the escapee, but his whereabouts remain unknown.

Throughout the last two months, Binance have maintained that they are working with the Nigerian government to reach a satisfactory outcome. They maintained that their key goal was to secure the release of the two executives. Two weeks ago, Nigerian authorities decided to charge Binance with tax evasion. The pair of executives would also be charged personally. Earlier this week, local reporting suggested that money laundering charges would be added to the indictment. The executives have filed their own lawsuit, claiming that their human rights have been violated. With the executive set to be arraigned today, Binance released a statement which read like a plea

for clemency. It said, Binance respectfully requests that Tigra and Gambarian, who has no decision-making power in the company, is not held responsible while current discussions are ongoing between Binance and Nigerian government officials. This story is weird and getting weirder. Everyone is making decisions that don't make any sense, parties that seem like they should be involved like the State Department just aren't, and I frankly don't know what the hell to make of it. We will continue to follow along and hope that it gets resolved. But yeah, it's one of the weirder ones out there right now. Next up, following up on some of our stories from yesterday around

venture capital and cryptoventure specifically, as another sign that CryptoVenture is experiencing a resurgence, Galaxy Digital are reportedly raising a $100 million fund. The venture wing of the crypto conglomerate has been investing in early-stage startups across multiple cycles, but until now, Galaxy has only deployed their own money into venture plays. This fund will be the first to accept outside capital. According to investor documentation, the fund will seek to invest in as many as 30 startups over the next three years. They are seeking to write checks at a million dollars and above. The fund will focus on financial applications, software infrastructure, and protocols. The existing Galaxy Ventures Division was moved into the larger asset management business in

2023. The division has been a very active part of Galaxy's overall strategy, investing $200 million into more than 100 projects over the past six years. In investor communications, Galaxy said the new fund, quote, will continue the success of our proprietary balance sheet investing, but through a direct institutional grade fund. This isn't a huge story on its own, but I think is relevant, one, because of the trendline we've been talking about around the resurgence of crypto venture capital, broadly speaking, but two, also because Galaxy is definitely positioning itself to be a big deal this cycle. At a time when a lot of the big institutions, especially ones that can intersect with traditional finance, have been brought to their

knees or proven hollow, Galaxy remains standing and is certainly positioning themselves to be the beneficiaries of just surviving. Next up, some interesting comments from Kathy Wood. Even though Bitcoin has been a little soft over the past week, Kathy is taking the longer view, attributing this year's bull run to broader macro dysfunction. During an appearance on CNBC, the ARC CEO, downplayed the importance of the launch of Bitcoin ETFs, suggesting that Bitcoin is also being used as a flight to safety. Would claim that Bitcoin is a, quote, insurance policy against rogue regimes and against horrible fiscal and monetary policies. She added, there is something else going on around the world. There are currency devaluations taking place that people are not talking about. The Nigerian

Naira is down 60% in the last nine months. Egypt just devalued by 40%. Argentina is continuing to devalue. I think there is a flight to safety taking place, a hedge against devaluation, a hedge against the loss of purchasing power and wealth. What would also pointed out that the risk of capital loss has reared its ugly head domestically, noting, we saw this even here last year in the United States. Regional banks imploded. Bitcoin went up 40%. Bitcoin does not have counterparty risk.

This is both a risk-on asset and it is risk-off. I remember we got in at $250 when Greece was threatening to leave the euro. Kathy is not the only Tradfai leader who is making this connection. BlackRock CEO Larry Fink, for example, recently called Bitcoin a, quote, hedge against the onerous problems of any one country. Hello, breakers. Today's episode is sponsored by Ledger. As another cycle ramps up,

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This makes Ledger a safe and secure way to manage your digital assets without all the stress. Check out the link to the Bitcoin Ledger Nano in the show notes. 5% of all sales of the Bitcoin Ledger Nano go to support Bitcoin development. Thanks once again to Ledger for supporting the breakdown. One positive story for those who have been paying attention to the upsets, and downs of lightning over the years, Coinbase has partnered with LightSpark to bring Lightning integration to the platform finally. Bitcoin Faithful have been calling for Coinbase to support the Lightning Network for months, really years, with every fee spike adding more urgency to those

calls. CEO Brian Armstrong pledged to get it done back in September, but this is the first tangible sign of progress. Part of the issue is that running Lightning nodes at scale is not an uncomplicated task. Balancing liquidity and managing channels has become the basis for entire companies. That makes outsourcing the solution to Lightspark, something of a logical choice. LightSpark was established by former Facebook crypto lead David Marcus in 2022 after the Libre project was finally shut down. The company has recently launched LightsPark Predict, which uses AI to optimize liquidity and routing in order to maximize transaction success rates. Christian Catalini, the chief strategy officer at Lightspark tweeted,

Coinbase has consistently been at the forefront of crypto innovation, playing a crucial role in driving us towards mainstream adoption. It has been a pleasure collaborating with Coinbase's engineering, product, and business teams to bring Lightning to Coinbase in the near future. Bitcoin was the very first asset listed on Coinbase more than a decade ago. With Lightning, Bitcoin transactions will soon be real-time and low cost, a much-needed upgrade giving the recent surge in interest in Bitcoin. There was no firm timeline for when Lightning integration will be up and running, but Coinbase CEO Brian Armstrong said that it should be launching soon. Over in the UK, regulators have begun a consultation on draft guidance for their digital security

sandbox. The initiative is being run by the Bank of England and the Financial Conduct Authority and seeks to give firms the ability to test DLT in financial services. For those not hip with the acronyms, that is distributed ledger technology. I think that Tradfai loved to call blockchain back in the day so that they didn't have to call it blockchain or crypto. The regulators intend that the sandbox will be ready to go by Q3 of this year and plan to operate it over five years. They claim the sandbox will help inform a new regulatory regime for digital security Sasha Mill, the BOE's executive director for financial market infrastructure, said in a statement, The Digital Security Sandbox is an important tool for regulators to learn how we need to react to

benefit safely from developments and technology and changes to vital financial market processes such as security settlement. FCA executive director Sheldon Mills added, the new Digital Security sandbox reshapes how we regulate by allowing firms to test regulatory changes using real-world situations before these changes are made permanent. We hope this will be a more effective, collaborative, and quicker way of delivering regulatory change. Successful applicants will be able to provide securities depository and settlement services as well as operating as a trading venue under modified regulations. The intention is to test the use of distributed ledgers for the trading and settlement of tokenized shares and bonds. Volume limits are relatively small to ensure

financial stability is not compromised. Derivatives contracts and crypto-native assets are not within the scope of the project. The consultation period will run until May 29th, with plans to issue final guidance and process applications towards the end of the second quarter. Staying in this experimental land for a moment, the latest digital asset project from the bank for international settlements will see seven central banks collaborate on monetary tokenization. Monetary authorities from the UK, Japan, South Korea, Mexico, Switzerland, New York, and Europe will be taking part alongside private financial firms. Called Project Angora, the BIS are billing this as their most ambitious experiment to date.

In a statement, they said that the project, quote, will investigate how tokenized commercial bank deposits can be seamlessly integrated with tokenized wholesale central bank money in a public-private, programmable core financial financial financial platform. The BIS said that this could, quote, enhance the functionality of the monetary system and provide new solutions using smart contract and programmability while maintaining its two-tier structure. Overall, this is another sign of how much the idea of tokenization is infiltrating the mainstream financial system. We've moved from it being lumped in and compressed with crypto and blockchain things to something that most are assuming is just part of the future.

Indeed, this project appears to be much more practical than previous BIS efforts, testing theoretical system design in real-world applications. The BIS head of research said, we're aiming for something which will eventually will be very much usable and something which will make a real difference. Now, perhaps part of the reason that tokenization continues to be so interesting is that examples of tokenized products, specifically stablecoins, just continue to grow. The combined supply of the top three stable coins, tether, USDC, and die, has reached $141 billion. That's the highest level since May 2022. Stablecoin supply is up 16% so far this year. What's driving this? Well, movement in stable coin supply is generally viewed as a proxy for inbound liquidity. Reflexivity research wrote in a

report this week. As stable coin supply continues to trend up, this shows that capital continues to flow into crypto markets. Tether, of course, continues to dominate stable coin market share. Tether, crossed $100 billion for the first time in early March, and has continued to trend upwards. It now sits at a little above $106 billion, according to Coin Gecko data. Almost two billion has been added in the past week, the largest weekly growth since January. Lastly, an update from the SEC on spot Ethereum ETFs. The SEC is now soliciting public comments on spot Ethereum ETF applications from Fidelity, Grayscale, and Bitwise. Comments are due within three weeks, closing prior to the May 23rd deadline for a final decision on the Vanek product.

Most view that date as the effective deadline for all Ethereum ETFs during this round of applications. This wouldn't normally be particularly noteworthy. We saw similar calls for public comment on some of the other Ethereum ETFs last month. However, some crypto influencers latched onto this as improving the chances that the SEC would approve the products. Experts in both ETFs and securities law begged to differ. James Safart, ETF analyst for Bloomberg tweeted, apparently there's a lot of people that need to hear this. Asking for public comments on a 19B4 is standard procedure. Every single 19B4 ETF filing goes through the same process, whether approved or denied. It's not bullish in any capacity for Ethereum ETFs. Mike Seleig, a partner at Wilkie Far, added, public notice and comment can provide cover

for controversial regulatory agency decisions. Regulators like being able to point to overwhelming public pressure to approve a matter as justification for an agency decision. Adding some credence to that thought, Better Markets has submitted a comment letter strongly against the Ethereum ETFs. It is, of course, riddled with half-truths and FUD, generally suggesting that the Ethereum network is controlled by a small group of insiders, but it shows what some parts of the traditional market are thinking about this particular product.

Look, Bloomberg analysts are still suggesting that there has been no meaningful staff engagement on the SEC's part with these applications, which is just a very very very, very bad sign. But we will, of course, see. That is going to do it for today's breakdown. Big thanks to my sponsor for today's show. Check out the Ledger Orange Bitcoin Nano. 5% of sales will go to support Bitcoin development. Until next time, be safe and take care of each other. Peace.