The Breakdown - Meet Visa's New Crypto Advisory Unit

Episode Date: December 9, 2021

This episode is sponsored by NYDIG. Today’s episode covers a set of topics, including: Visa’s new crypto advisory unit An AWS official is leaving for Unstoppable Domains AWS downtime brings up questions of decentralized infrastructure Saule Omarova withdraws nomination for OCC chief  Dan Tapiero’s 10T raises a fresh $500 million  Eric Schmidt joins ChainLink Labs as an advisor  Ubisoft announces NFTs coming to games  NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: Thinkhubstudio/iStock/Getty Images Plus, modified by CoinDesk.

Two things that are interesting here trends to keep your eye on. The first is client demand, B2B client demand, is forcing a company like Visa to stay up and even become a leader in the crypto space. Visa is clearly making a bet that they can't just wait and absorb. They're going to have to be proactive and carve out their space in the Web3 era starting now. 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 Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, December 8th, and I am recording this show even as the crypto hearings in the House Financial Services Committee are happening. And I had gone

back and forth about whether I wanted to record this show today about what was going on in those meetings or wait a day to digest the full tone, tenor, specific quotes, specific questions of the meaning, and I decided that it was more valuable to get the full take based on everything that we had seen and all of the reflections and commentary that will come after, versus just trying to speed out half of an analysis. So tomorrow you will have my look at the crypto hearings in Congress right now. And today, instead, I'm going to go through a bunch of interesting news from yesterday. First up, Visa is, of course, no stranger to crypto. They have been working on a variety of initiatives that plug in exchanges and stable coins to their system that position themselves

as a leader in the new central bank digital currency era. They're currently working with something like 60 crypto platforms globally. They have partnerships that allow exchanges to issue cards. They even this year bought a crypto punk for what was at the time $150,000. Now, Kai Sheffield, whose VISA's head of crypto at the time, explained what they're thinking around the NFT was and said, from a commercial perspective, NFTs are gaining momentum. him as digital first sports memorabilia. With platforms like NBA Topshot, fans can collect and display their favorite game moments. We expect a huge range of new cases in the years ahead. The ability to track and leverage a digital asset in multiple environments can mean exciting

new opportunities in ticketing, gaming, music, art, and beyond. NFTs are rapidly gaining traction and we expect continued growth. For example, there has already been $1 billion in payment volume in August alone up from less than $100 million in all of 2020. Enabling secure commerce is what we do. We're the network working for everyone. And that extends to new forms of digital commerce that unlock access. So it's not surprising that we're thinking deeply about this space and how we can apply our expertise in enabling seamless and secure digital payments to make NFT commerce accessible and usable for buyers and sellers. I think it's worth sharing that full quote because it shows how thoughtfully these guys are engaging with the space, how much they're connecting the dots

between all this new stuff happening in their business. And now they're expanding their crypto footprint once again. Visa is going to be creating a new consulting and advisory unit, and basically they want to help companies figure out what the hell to do with crypto. They've been offering this sort of consulting in the past, but they're formalizing it because of growing demand. This new group will sit within their broader consulting and analytics division, which offers payments relating consulting to businesses around the world today. At the same time as they released this news, they also released the results of a survey of more than 6,000 financial decision makers. Awareness of, of course, crypto is now at 94% and one-third of those with awareness already own it. Of that group of owners,

62% say their usage of crypto has increased in the past year. So I think two things that are interesting here trends to keep your eye on. The first is client demand, B2B client demand, forcing a company like Visa to stay up and even become a leader in the crypto space. And second, I think is a broader question of how companies that come from the traditional financial sector adapt and evolve to become leaders in this new sector. Visa is clearly making a bet that they can't just wait and absorb. They're going to have to be proactive and carve out their space in the Web3 era starting now. NIDIG sponsors this podcast and they are helping banks, corporate treasuries, and fintechs

integrate Bitcoin into their products and balance sheets. See why Bitcoin means business at NIDIG.com slash NLW. That's NYDIG.com slash NLW. For all the companies that are trying to adapt to the crypto age, there are many that are not adapting fast enough, at least according to their executives. We discussed yesterday recently the move of Brian Roberts from Lyft to OpenC where he's becoming CFO. There was much speculation on Twitter that that meant that OpenC was headed in a one-way direction towards an IPO, but Brian Roberts clarified last night saying there was inaccurate reporting about OpenC's plans.

Let me set the record straight. There's a big gap between thinking about what an IPO might eventually look like an actively planning one. We're not planning an IPO, and if we ever did, we would look to involve the community. Remember, the reason that people were frustrated is that they had wanted to see OpenC go in the direction of an open governance token held by users of the platform versus a traditional equity IPO route. Today, there was news of another big departure from the traditional world. Amazon Web Services VP Sandy Carter has left the land of Bezos and has joined Unstoppable Domains as their VP of Business Development. Now, Unstoppable Domains focuses on

NFT domain names that are alternative to traditional wallet addresses. And I think we're going to see a lot more of this sort of move from either Web 2 and Big Tech to Web 3 or from the traditional financial sector to this new world of open decentralized finance. Still, that wasn't the only story intersecting Amazon Web Services and Web 3. Yesterday, a little before 11 a.m. Eastern time, AWS went down in a big way and the outages hit everything from websites like Alexa to the Kindle app to Amazon Music, to Ring, to all the apps using Amazon Web Services like CashUp and Venmo, Amazon warehouses were out. But for our purposes, the real interesting thing was how it impacted the infrastructure of theoretically decentralized exchanges. DYDX tweeted due to a major

AWS outage, DYDX exchange is currently down. We are experiencing greater latency across services and impaired functionality with endpoints not working and the website not loading. Now, this generated a lot of responses from crypto-Twitter. Mr. Schmekels wrote, so really it's only as decentralized as the AWS network. L.O.L. I'm going to start calling it Bezos YDX. Icebergi wrote, so in exchange the Americans can't use is running on U.S. East One, referring in this case to which AWS instance went down. Altcoin Psycho wrote, funny how 90% of our decentralized, quote-unquote, ecosystem goes down whenever

AWS has an outage. Alex Gladstein, if your cryptocurrency relies on AWS, you are not going to make it. And Jake Chivinsky, defy devs, your regular reminder to decentralize. everything. Now, I don't think that this is necessarily a dunkable moment. I think that it's an important reminder that decentralization is multidimensional and there are numerous points of failure. It's a reminder that at each point in the system we're making trade-offs, and we have to decide consciously what those trade-offs are. So in the case of a decentralized exchange, maybe the decentralized value that we're looking for is not a question of whether the system is online 24-7,

but about whether a small group of decision makers can deny access to a particular type of trader. I'm not making value judgments on whether that's a good idea or not, but those are ultimately pretty different outcomes of decentralization. Still, if it's a reminder and perhaps a painful reminder to existing decentralized protocols and platforms, it's also an argument for decentralization more broadly. Or at least it begs the question. Should critical infrastructure, such as the money system or key logistics infrastructure, have single points of failure in the form of a company like Amazon.

That sort of compromise certainly brings massive efficiency, but what are the tradeoffs we're willing to make ultimately in terms of efficiency versus resilience? These are real questions in an era where companies are as powerful as nations, if not more powerful. Those are the types of tradeoffs that we have to get comfortable debating and then living within. Back now to the regulatory sphere, Saleh Omarova has withdrawn from the nomination for the Office of the Comptroller of

currency. Now, Omerova was undeniably controversial. I don't want to get into my take on it, but instead, just to give you a sense of the perspective on left versus right, Sherrod Brown wrote, Dr. Omerova was one of the most qualified nominees ever for this job. But because she wasn't in Wall Street's pocket, corporate interest in their allies and Congress waged a relentless smear campaign reminiscent of Red Scare McCarthyism. Elizabeth Warren echoed these sentiments. It's no secret that big banks oppose strong rules and regulators that protect the economic security of families. After living the American dream, Saleh Amarova deserves better than outrageous redbaiting. She's a leading expert on financial regulation and staunch consumer advocate. On the flip side, we have Representative Tom

Emmer, who wrote Salé Amarova's radical and communist views on America's free market, clearly disqualified her for the position of Comptroller of the currency. Glad to see she's come to the same conclusion. So, how does this matter for crypto? Well, it's not necessarily clear that it does. At this point, it's all counterfactual. There wasn't enough to know her feelings on crypto, really. Might it have been that her focus on banking regulation might have predisposed her to a nascent competitor to the traditional banking system? On the one hand, maybe there would be room for optimism there. However, many folks had that same sort of optimism around Elizabeth Warren, and that's not how her views have evolved. She's chosen and said to see the crypto industry as more of the same, Wall Street and

sheep's clothing. Still, there's no doubt that the OCC has an important role for crypto, whether it's Omerova or someone else at the head of it. They just released their semi-annual risk report for banks and had this statement. Distributed ledger technology and digital assets, including stablecoins and other crypto assets, may broaden delivery channels and the functionality of financial services. The OCC is approaching crypto-related activities in the federal banking system very carefully, with a high degree of caution and expects its supervised institutions to do the same. All right, and now just to round out the show a few last quick ones. Dan Tapiero, friend of the breakdown who's been on the show multiple times, has raised $500 million for a third digital assets fund. And Dan is crushing it. He's got 12

unicorns and counting in his funds, over $770 million in assets under management with 90% deployed, and his bets are all about businesses adjacent or within the crypto sector that already have revenue that they can see. He's basically playing a mezzanine capital role that hasn't necessarily been there, and it's great to see that availability of capital translating to success for him and the availability of more capital for companies hitting that stage. Eric Schmidt, the former CEO of Google, has joined Chainlink Labs as strategic advisor. Chainlink, of course, is an Oracle protocol known for helping bring real-world data to Defi and also for their army of online advocates.

And Eric Schmidt, in their press release about this, said the launch of blockchains and smart contracts has demonstrated tremendous potential for the buildings of new business models. But it has become clear that one of blockchain's greatest advantages, lack of connection to the world outside itself, is also its biggest challenge. Chainlink is a secret ingredient to unlocking the potential of smart contract platforms and revolutionizing business and society. Now, it is almost entirely impossible to tell what an advisor designation really means in practice. Strategic advisors can be super, super engaged and actually valuable. They can also be just window dressing, a thing to stick on an investor prospectus.

What I think is notable, if anything, about this one right now is that you're actually not seeing a lot of the sort of people slapping a name on a project just to get clout so that it's a suggests to me that Eric Schmidt is actually pretty interested in this space. Finally, Ubisoft has announced that NFTs are coming to games, starting with their title Ghost Recon Breakpoint. Of course, people in the NFT space are excited, but Normies are hating on this yet again. The narrative of NFTs as boiling the oceans and killing the world

is one of the things that I did not see coming this year, and I continuously find amazing. Doge Toshi, Stephen from the block, captured a lot of my sentiments saying, this is built on Tezos, which is POS, or proof of stake. That didn't stop the anti-NFTE. from saying Ubisoft was destroying the environment. They don't care about the facts. They just want to be loud and angry to social signal. No point in trying to appease these folks. Finally, even though there is a

hearing going on right now in Congress, there will be another hearing focused on Stablecoins next week in the Senate Banking Committee. The session is called Stablecoins. How do they work? How are they used? And what are their risks and will take place on Tuesday, December 14th. This one doesn't have industry witnesses like the folks who are testifying today. It's mostly professional and academics so far, although that could change. The added hype here is that Senate Banking Committee chair, Sherrod Brown, sent letters to stablecoin operators demanding quite a bit of information on November 23rd. So I expect we'll see a lot of connection points to that in this session.

All right, guys, as I said, tomorrow I will have a full breakdown of everything going on in the House Committee on Financial Services today. But until then, be safe and take care of each other. Peace.