The Breakdown - Crypto Daily 3@3 - 8.12 | Impending currency crisis? Plus, Binance US listing criteria and prospects [LRS Top 5]

Episode Date: August 12, 2019

Bonds. Dollars. Bitcoin. Gold. That's what some are saying pay attention to at the beginning of a global currency crisis? On this week's LRS Top 5, we also look at: news from Binance US about its listing criteria and prospective token listings; KIK's aggressive response to the SEC lawsuit; Trump Administration proposals to police social media for censorship, and more. Produced in partnership with BlockTV.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another Crypto Daily 3 at 3. As with every Monday, today is Long Read Sunday top five days. So Long Read Sunday is my weekly curation of the most interesting, important events and content that happened the week before. And then on Monday mornings, I collaborate with Block TV to turn it into a video top five countdown of the five most important threads, essays, and just generally most important topics that I saw all week. This week is no different. We talk a little bit about Binance, US, and the narrative watch of de-Americanization. We get into some questions of censorship, social media, technology, and power. And then we end on, again, this kind of mega-trend of the convergence of the global macro narrative

with the Bitcoin narrative and see. So with that, I'm going to say adios and tune in to the Block TV long. I will see you tomorrow on Tuesday for a regular crypto daily 3 at 3. Thanks for watching, thanks for listening and I will talk to you soon. Welcome back to Block TV. It's time now for Longreed Sundays. And every Sunday the crypto community receives a treat in the form of a well-researched and thought-out Twitter thread by one of the top writers documenting the ecosystem.

I'm of course talking about Nathaniel Whitmore and his Long Read Sunday's Twitter column. Nathaniel, thanks so much for joining us. Hey, thanks for having me. Hey, thanks for having me. All right, so this week, kicking off your top highlights from Long Reads Sundays, we started with number five, which continues a Binance's long-running trend of being a great communicator with their larger network.

Speaking of course about the listing by Binance US, talking about their asset listing framework, as well as 30 prospective assets under review. Why did this catch your attention? Yes, so there's a couple things going on here. The first is that obviously Binance is, you know one of the biggest exchanges in the world they have huge impact on the market so any any time that they're opening a new product especially one that's

going to have mainstream access in a major market like the US it's worth paying attention to it's also interesting because over the last couple months we've been watching this narrative of de-americanization of crypto in a lot of ways where regulatory pressure or just simple lack of regulatory clarity is forcing some exchanges to actually leave the US right circle is setting up shop in Bermuda, I think, officially and seeing more and more of their business happening in Asia and elsewhere. So, Binance U.S., it was announced a couple months ago, at the same time as Binance announced

that it would be geo-blocking U.S. customers from its Binance.com service. So the question has been, what are the assets that are actually going to be on Binance, U.S.? Is it going to basically just be Coinbase? And sure enough, a lot of the assets that it seems like they're listing are similar to those that are on Coinbase. So in addition to the 30 or so assets that they suggested are under consideration and they haven't made any promises, they gave actually their framework for how they're looking at this, which is really valuable. So first they you know the big thing the banner headline is

it has to be in their estimation compliant with US regulators. Obviously that's the whole point of this exchange is to compete in a compliant way. Second they're looking for whether the team is actually trying to to solve a real problem and do they have a clear strategy for getting there? I think the idea here is to basically just to have to say that it's real coins that real people are working on. They also mention whether the candidate asset community has a record of reaching compromises and consensus to move the project forward.

Those are their words. I think this is a subtext for, you know, can this project evolve or is it just going to hard fork into a million confusing side chains? And they have a couple more as well. But the idea here is that, you know, in addition to just seeing what assets they're considering, we're getting a sense of how they're choosing. And this also, in some ways, de facto, almost creates a template for how tokenized projects might think about themselves, you know, for future listings as well. And now I understand as well.

An interesting point that's come out of this, of course, is that they're saying that they will list their Binance coin. And there was some speculation early on when they talked about the geo-blocking and sitting up the U.S. dedicated exchange. perhaps they might have faced some regulatory issues with their own coin. Does that seem to have been addressed in any way by Catherine Coley in this statement? Or does that still seem to be in the air? No, that's definitely still in the air. And, you know, again, from their standpoint, all they've done is suggest that they're weighing whether or not they should do that, which I think was enough to get a lot of people excited.

But obviously, there's a lot of folks in the legal community who think that that's, there's some pretty clear issues there. But that'll be extra interesting. If they go through this regulatory process, you know they have very expensive lawyers, digging deep to figure out what they think the tenor of the US is right now. And if they think they can get away with BNB, that'll be a real interesting signal to the rest of the market.

Certainly, it would be a chance for them to break in in a very powerful way to the US market. We'll have to see how that one plays out. So now moving to your number four, Nathaniel, and we've got kick back in the headlines after a little time. on the sidelines, making some pretty big statements and kicking back pretty hard. What can you tell us?

Yeah, so for those of you who were paying attention a couple months ago, the SEC sued KIC for its token sale, effectively. This is one of the biggest kind of most high-profile enforcement actions we've seen from the SEC. And what's more, the SEC complaint against KIC was pretty aggressive, right? Now, this was all preceded by KIC creating or announcing the Defend Crypto Fund. which was supposed to rally the crypto world around a legal defense of tokens and kind of create a slush fund or pool of resources or whatever you want to call it, that could be used to combat the SEC in court to try to actually bring clarity to,

not only clarity to token designation, but to make it clear that most tokens or many tokens are not, in fact, security. They need their own designation. Now, this, a lot of people, when we were first having this conversation, were a little uncomfortable with the idea of KICC as kind of the standard bearer. Defend crypto as a campaign kind of went nowhere. In fact, KIC's money was withdrawn from it so they could just defend themselves. And so this is kind of the latest salvo where basically KIC is accusing the SEC of all sorts of, you know, manipulating their words and this and that. And I think the thing that was notable, so I'm taking my clues from Catherine Wu, who formerly of Masari, now at Notation Capital, who annotated the entire 117-page document. An impressive feat, no doubt.

Yes, I think she said it took her like five hours. He was up to like 3 a.m. doing it. But, but yeah, so, you know, it seemed like in terms of her assessment that the thing that was notable was just how aggressive they were being. And it a little bit seemed like showmanship, right? It a little bit seems like this is kind of for the narratives and for the headlines. I think why it matters to the rest of the crypto community is that the reality is that U.S. companies are still at a loss for real clarity when it comes to how tokens are considered. And there are some that say, well, that's not exactly true. The SEC has made clear its positions, but it really hasn't.

And there's confusion across different departments about what tokens are. There's high profile Senate hearings about how to regulate and, you know, senators and Congress people even asking, should there be a new agency. And I think it's just the case that there is not clarity, at least sufficient clarity, when it comes to how the government is going to look at different types of tokens or are they going to treat different types of tokens differently. And we're starting to actually see that impact where companies are choosing to domicile themselves. So it's kind of interesting for the blunder and heavy language, but it's more interesting long-term for what comes out of the case. And I guess that will be a case closely watched,

particularly for US crypto interests, to see how that all pans out. But I guess there's a wait-and-see sort of situation. While we do, let's move now to the number three for this week, which I guess moves a little out of strict crypto, but certainly very important for anyone interested in digital security and censorship laws. in the United States, the executive branch looking to perhaps step in when it comes to social media

censorship. What can you tell us? Yeah, so, you know, I think that it's important to always view crypto, not just as this independent asset class that's exciting new technology or something like that, but in the context of the forces that almost created the motivation for it, right? And I think a lot of those forces are things like impending surveillance, fears of censorship, right? Fears of what centralization might mean if played out in less stable, more turbulent times. And so this, you know, this latest salvo from the U.S. government, it's a little bit political, right? So for those who maybe aren't paying attention closely to U.S. politics, there's a war around the idea of whether social media companies are politically biased, particularly against conservatives. This has been a conservative

argument for the last, for a while, but it's gotten some extra attention lately. The White House held a social media summit with kind of some highly controversial figures, you could say. And one of the things that they came out of it was this proposal to empower the Federal Communications Commission and the FTC together to police social media censorship. And Preston Byrne, who is both a lawyer and is historically conservative, and coming from that perspective, basically throws down the hammer and says it's just not constitutional.

It's absolutely outside of the powers of the executive branch to do this. And this is something that we can't be doing. We can't, you know, the government doesn't have the power and shouldn't have the power to tell companies what they do with regard to content

outside of extremes of illegal content. And so it's interesting because there's, again, to me, it is exemplary of this back-and-force tension of technology and tech companies in particular present a very new and different type of corporate force vis-a-vis the government. It's a type of power that we haven't seen before at a scale that we haven't seen before. And, you know, governments don't know exactly what to do with it. And a lot of the challenges, what's the right way to regulate these companies or kind of, you know, draw, lines around what they can do without just completely instituting a surveillance state.

So, you know, this is, this is again kind of an example, I think, of the power of, or the fight, I guess, for power in the context of a new media landscape. And certainly this doesn't just come to a matter of censorship, but as you pointed out in another tweet where Marty Bent addresses the fact that there also seems to be pushes to take control of encryption mechanisms, which has been a hot, long a hot topic of debate, whether public forces, government should have the right to access some of those more encrypted documents that private citizens hold. Yeah, absolutely. And this is, this is in some ways a more worrisome thing. You know, the social media censorship piece, as I said, is a lot of, it does have meaningful

impact, and I'm glad that people are kind of getting noisy about it. However, what Marty was focusing on is a story I think that we've talked about here as well, which is the Attorney General William Barr continues to bring up this interest in basically ending and and encryption and creating back doors for law enforcement in in apps like in messenger apps for example and and there was even more with that this week with with Attorney General Barr so this is an ongoing story but this is one of those key battle lines again in the new tech landscape of you know how much power will technology companies be able to have to resist

the long arm of the government using, you know, kind of ending, end-to-end encryption. And that's a big TBD with huge implications. There's certainly massive implications could potentially be in place. But now moving to your number two for this week, and this is one that particularly caught my interest here, this thread by Alex Rampel talking about the way that currency systems and the way governments use currency systems has fundamentally changed in the digital economy. Talk a little bit about this concept, maybe break it down for our viewers here. Yeah, it's a really fascinating thread. And so basically, what Alex is noting is that originally, when governments had the power to kind of print money

and control currency, they were controlling the flow of transactions happening within their borders and by their citizens. As payment networks have globalized, that's become less and less the case. And it's kind of happened quietly underneath, under, you know, in front of everyone's eyes without us really knowing it, right? So things like Visa and MasterCard haven't historically threatened, you know, government's ability to print money in the same way that we think about, you know, or we talk about potentially cryptocurrencies impacting the power of sovereign money or providing an alternative. However, they do create a de facto international power center that lies outside of those governments. And so the example that he used was Crimea, where Visa and MasterCard are no longer supporting bank cards that are there or I think even citizens who are using those cards elsewhere. So that obviously has, you know, significant impact on what the power of that local jurisdiction is relative to the larger world.

And Alex goes on to kind of speculate that he really thinks that as time proceeds, governments are going to recognize more and more that the risks that they have, political risk isn't just traditional resources like oil, for example. It is, in fact, where power and networks lies. And that's, you know, in his estimation, pretty much the only government that's really thinking about this is China. And of course, that segues neatly onto the other point that you made that China is indeed taking this action seriously and attempting to create their own form of digital currency, something they've recently announced. Yeah. And so, so, you know, one of the conversations in in the crypto space more largely has been what kind of the the we're seeing I think maybe a bifurcation or even a trifurcation of this industry now you know from

one big monolithic thing called crypto into public open list permissionless chains on the one hand corporate chains enterprise chains permission chains on the other and then government chains is kind of the third leg of this stool potentially and you've started to have some different you know nationalities, municipalities announce that they're exploring central bank digital currencies. Obviously you have very notably and very kind of cynically the Petro in Venezuela, but the People's Bank of China, an official from there said after five years of research and development, they're close to being ready to go live with a digital currency. So a central bank digital currency. And these things are hugely important to watch for a variety of reasons, not least of which going back to our kind of previous point about surveillance,

nothing more hits at the challenge of the battle between convenience and surveillance as a central bank digital currency. It is the most surveillable, the most trackable, the most manipulable form of money that will ever have been created. Yet at the same time, for the average citizen going about their lives, it will likely be the most convenient form of money ever created. And that presents a real challenge. So it's interesting to see, I don't think it's surprising

that China is one of the first major powers to get there. But I wouldn't be surprised, especially as we see more hearings in the U.S. about cryptocurrency in general and Libra in specific, to see this move by China create some pressure on other powers like the U.S. to follow suit or at least catch up intellectually and figure out what's going on. Certainly it seems there's a lot of catching up to do around the world with various different governments and economies. It'll be interesting to see how they do it.

Moving now to your number one for this week. Now this is an interesting one. I'm going to need your help with this one a little, Nathaniel, because there's a technical analytical breakdown here by Raul Pahl talking about what he sees is a convergence of threats and issues coming into the global economy. What do you see is the central point to take away from here?

Yes, so I would say that there's two ways to look at this. One is he's making a specific point about what he sees as looming currency crises where all kind of, you know, a huge number of different sovereign currencies are poised for really challenging times ahead, particularly in relation to the U.S. dollar. So that's kind of part one. Part two, which I think is the reason that it's number one and the more interesting context

for me is that, you know, Raul's kind of the ground zero right now for the converging narratives between Bitcoin and the global macro community. And this has been happening for a little while, you know, for obviously when Bitcoiners talk about store of value. They're not just talking about kind of as a way to preserve wealth over the next couple months. They're talking about a long-term hedge against systemic crisis. And it's been interesting to watch as the global macro community who are more focused on things like foreign exchange and kind of these big credit flows to start to look over to the Bitcoin world and to the cryptocurrency world more broadly and start paying attention in a major way, not just as an

interesting investable asset, but I think in that thread, Rao calls it a call option on a potentially new system, which I think is a phenomenal way to put it, right? And, you know, this was the narrative over the course of all of last week, was, you know, after Trump put new sanctions on China and China devalued the yuan, and then we labeled them a currency manipulator, and then the stock markets tanked, Bitcoin was performing well that whole time. What's more, over the last few months, Bitcoin has started to correlate more to gold in having meaningful correlation in a way that it really hasn't before. And so all of this brought up the question for people is Bitcoin the new safe haven asset.

I think that's kind of a short-term question in some ways in the sense that it obviously still has volatility. And there's a million arguments that you could kind of say against this. But if you take this idea of Bitcoin not in kind of a short-term, not just in a short-term market sense, but in this idea of it as a call option on a future system, on a new future potential system, it starts to get a lot more interesting. Certainly it brings up a lot of questions of potential

and really highlights where some concerns in the mainstream system can so clearly be addressed by the crypto ecosystem. But I want to thank you so much, Nathaniel Whitmore, for breaking down some of the key elements and stories coming through this week, getting into that deeper analysis in New Long Read Sunday. I look forward to reading next week and continuing this discussion further on.

And Nathaniel, thanks so much for being with us. And stay with us at blocktv.com for all the latest in news and information and of course the best in-depth analysis. I'm Asha Westrop Evans. Thanks for watching. For more news and updates, follow us on Twitter.