The Breakdown - Corporate Crypto Makes Government Bans Less Likely

Episode Date: February 13, 2021

On this edition of the weekly recap, NLW breaks down the entrance of corporates into the crypto space this week, including: Tesla BNY Mellon Mastercard Twitter Amazon He also argues that more corporate actors investing in bitcoin and crypto makes it significantly less likely the U.S. government would look towards severe regulation. -- Earn up to 12% APY on Bitcoin, Ethereum, USD, EUR, GBP, Stablecoins & more. Get started at nexo.io -- Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   The Breakdown is produced and distributed by CoinDesk.com

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. The breakdown is sponsored by nexo.io and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, February 13th, and that means it's time for the weekly recap. This was a truly insane week. I mean, can you believe that? that it was Monday of this week that we got Tesla's $1.5 billion Bitcoin buy announcement. When all is said and done, however, what's super clear to me is that this week has shown the two new extreme polls of what this industry faces. Indeed, the fact that they are so extreme

is what reinforces the extremity of the other one. To explain what I mean, I want to go back to a week ago and my conversation with Travis Kling. Travis and I went deep into the most recent round of Bitcoin criticism, and his TLDR thesis is that much of it is disingenuous. And here's his main point. It's not that the things that people are saying are by definition wrong. It's just that the way that you deal with them is by thinking in terms of risk adjustment. In other words, what's the probability that a thing, either a good thing or a bad thing, happens, and what's the cost or opportunity of it if it does?

you then take this and weigh it into a thesis about allocation percentage and price. Instead, what he's seeing is all these people who are saying, because there is risk, you shouldn't invest at all, which clearly feels like there's an agenda. Now, within this context, one of the risks that he mentioned, and certainly the one that I think is the biggest on people's concern right now, is the risk that if these assets, Bitcoin specifically becomes too big, governments will ban them.

And this week, we did see some embers of truth to that argument. Wednesday's show was all about what's happening in India and Nigeria. In Nigeria, the central bank of Nigeria reinforced a position on crypto that banks should not be interacting with crypto that it had held since January 2017. In India, it's been all about proposed legislation that would ban private cryptocurrency and simultaneously create a framework for the Reserve Bank of India to create a digital rupee. Interestingly, in subsequent days, these countries seem to maybe be going two separate directions from where they started. Yesterday, I gave a brief update about the debate in the Nigerian Senate, but net-net, what's happening is that the Senate kind of put a halt to the CBN's ban and said,

You guys got to come in and talk about this, and we have to decide together what's the right way to approach this from an overall standpoint. It seemed to me that there are many senators who feel that this is too important for too many young Nigerians to simply ban and write off. Meanwhile, in India, Bloomberg Quint has an exclusive report arguing that the Indian ban is going to be a full ban with a small grace period of three to six months for investors to get out entirely. Of course, all of this is just part of a theoretical consideration for all of these municipalities, all of these governments. Control of currency on the one hand versus opportunity to participate in key financial rails of the future on the other. Many investors want to be a part of the next bull run. Others seek to build their dream home, finally launch that startup or fund their education. Try NXO's instant crypto credit lines and borrow against any major cryptocurrency with no minimum or maximum withdrawal amounts, no fees whatsoever, no credit checks, and flexible repayment.

Not to mention the APR starts at just 5.9%. Stay on top of your investment game with nexo.io. And remember, it's your crypto, your credit, your choice. Get started at nexo.io. So with that, let's shift to America. Janet Yellen spoke for the third time on crypto in recent weeks and repeated the argument that they're for crimes. She said, I see the promise of these new technologies,

but I also see the reality. Cryptocurrencies have been used to launder the profits of online drug traffickers. They've been a tool to finance terrorism. Now, just to be clear, especially for new listeners, this simply isn't the case. According to chain analysis, the percentage of crypto activity used in, crime fell in 2020 to 0.34%, 10 billion in transaction volume. That's down from 2.1% a year before in

2019. However, almost regardless of that bluster, the story of crypto in America this week could not be more opposite. You had Tesla Monday announcing a $1.5 billion Bitcoin position on its treasury. On Wednesday, you had the Twitter CFO on TV saying that they were exploring something similar, in part, because they wanted to be able to potentially pay employees and vendors in Bitcoin. Also on Wednesday, MasterCard came out and said that they would be incorporating crypto into payment rails this year. News broke of an Amazon job posting about their own digital currency used for the prime ecosystem. On Thursday, we had BNY Mellon, the world's biggest custodian. of assets, 41 trillion of assets custodied, announced that they were getting into the

crypto custody game and that it was just the beginning of a much wider set of services. The point is that you're seeing an undeniably growing private sector financial interests in Bitcoin and crypto as a whole. And this makes it unfathomably harder to try to regulate away. It's not just a bunch of us libertarian crypto crazies now. It's Fidelity and BNY Mellon who have built these massive business bets on this space. India, sad as it is, has nothing comparable in terms of a private sector forced to advocate

on behalf of the crypto space. Nigeria doesn't either, but as I mentioned, even regardless of that, it's not clear that the conversation won't head in exactly the opposite direction about financial empowerment for a new generation. China, meanwhile, who India is holding up as an example, has functionally no private sector power. Certainly, They have market power, but it's communist-controlled market power, which is entirely different. And when it comes back home to America, how far these companies would be willing to push to preserve their ability to engage in this space is a reasonable question. If the entire Congress and Senate were dead set against Bitcoin because it was a terrorist financing tool, would Fidelity stand in the way?

Probably not. But every day that goes on, it gets harder and harder for an outright ban to actually work. We win more and more allies on both the corporate and the government side. Last night, New York City mayoral candidate and former presidential candidate Andrew Yang tweeted out, as mayor of NYC, the world's financial capital, I would invest in making the city a hub for Bitcoin and other cryptocurrencies. This was retweeted by Cynthia Lummis, our new Bitcoin ally in the Senate, and said, Wish you the best of luck keeping up with Wyoming. Reach out when you need to unravel the bit. license. I know some folks who would be happy to help. Earlier this week, I was on the Bitcoin magazine

Happy Hour, and the host, C.K, made reference to a sentiment shared by his colleague Tommy, who's at Young Gucci T on Twitter. And basically the sentiment was this. There's no such thing as a nation banning Bitcoin. There are only nations banning their citizens from Bitcoin. That's what every nation, every government, every local regulator has to contend with and think about. Do you want to cut off access of your citizens to the infrastructure of the future? Or do you want to make it easier for them to compete to carve out a new part of this space? There is going to be a lot of back and forth on that battle, but I'm glad to have, frankly, this new wave of allies in the U.S., in the corporate sector that make it less likely that the government can go the wrong direction.

Until tomorrow, guys, be safe and take care of each other. Peace.