Welcome to The Node. This is Daniel Kuhn and Prachi Vashisht, here to take you through the latest in crypto news and why it matters. In today’s newsletter:
Binance.US received court approval on Tuesday to acquire over $1 billion worth of assets from bankrupt crypto lender Voyager Digital, bringing the deal one step closer to finalization. This comes as bankruptcy Judge Michael Wiles overruled the U.S. Securities and Exchange Commission (SEC) and state regulators’ objections on the proposed acquisition. Meanwhile, the SEC faced a panel of skeptical judges during an appeals court hearing in Grayscale’s ongoing bid to convert its Grayscale Bitcoin Trust (GBTC) to an exchange-traded fund. Grayscale, a subsidiary of Digital Currency Group (CoinDesk’s parent company), argued the SEC’s decision to block a spot bitcoin ETF was “arbitrary,” while the judges questioned SEC’s logic in drawing a distinction between bitcoin spot and futures market prices.
Bankers Say
Federal Reserve Chair Jerome Powell cautioned financial institutions against crypto-associated risks, citing high-profile frauds in the industry during his testimony at a Senate Banking Committee hearing on Tuesday. Still, he added, “We don’t want to stifle innovation” and suggested that Congress create a “workable legal framework” for digital assets in the U.S. Elsewhere, troubled crypto-focused bank Silvergate Capital reportedly has been in talks with Federal Deposit Insurance Corp (FDIC) consultants about keeping the bank in business. In a meeting held last week, the FDIC examiners proposed recruiting crypto industry investors to help boost Silvergate’s liquidity, according to Bloomberg sources.
New Releases
The much-awaited Shibarium scaling system for Ethereum is set to release its beta version this week, developers of the memecoin Shiba Inu said on Wednesday. Meanwhile, Coinbase said recent blocked transfers to the exchange from Binance were the result of a technical issue that labeled Binance an “OFAC-sanctioned address.” The company sent an email saying deposits will be credited shortly, and that fewer than 100 individuals were affected. Elsewhere, just over a week after its launch, Conic Finance, a new tool that captures yields from stablecoin swapping service Curve, has attracted over $60 million from depositors. The tool, which went live March 1, allows users to deposit tokens into its omnipools that diversifies exposure across the Curve ecosystem while increasing rewards. Coinbase also released a new wallet service that lets app developers add crypto functionality. Finally, DeFi protocol Maverick unveiled a UniSwap competitor on Ethereum, Solana is getting generative art NFTs and KeepDAO, a liquidity protocol disgraced investors Kyle Davies and Su Zhu backed, is seeing a bump in usage on rumors that bankrupt hedge fund Three Arrows Capital could soon start repaying creditors.
Sound Bites
“The commission could, in an effort to treat these products the same, disapprove previously approved bitcoin futures [ETFs].”
– Grayscale Investments Chief Legal Officer Craig Salm, discussing possible outcomes of the firm’s legal bid to convert its bitcoin trust to an exchange-traded fund, on CoinDesk TV’s “First Mover”
The Takeaway: Bitcoin Moment
Paul Krugman has been rugged by a centralized payments provider. Maybe he’s learning something new about the value of Bitcoin.
This morning, Wednesday March 8, the Nobel Prize-winning economist and longtime crypto skeptic took to Twitter to announce that the payments app Venmo has seemingly blacklisted him. And even he – one of the most famous and influential economic analysts on the planet – isn’t getting any help, or even an explanation of the block, from the centralized platform’s customer service.
It’s a delicious moment for cryptocurrency advocates because one of their self-appointed adversaries gets his pants pulled down by the exact problem they’ve continually warned about: the threat of capricious, seemingly arbitrary financial censorship in the digital age.
And Venmo isn’t just any centralized payments tool: It’s one of the worst out there from a privacy perspective. Venmo sets new users’ transactions and notes to display publicly, by default, as part of its broader, deeply misguided goal of being a kind of social network for payments.
“We make it [public by] default because it’s fun to share [information] with friends in the social world,” a Venmo representative told CNET in 2021. “People open up Venmo to see what their family and friends are up to.”
This is quite obviously irresponsible, even malicious product design (though it has led to a few moments of incredible comedy). Krugman’s apparent openness to using such an anti-privacy product suggests he doesn’t spend a lot of time thinking about the issue.
Shortly after the initial tweet, Krugman followed up to announce that “tweeting got results” and his account “seem[s] to be up again.” This is hardly a vindication for Venmo – to the contrary, it’s a further demonstration of just how much Western elite privilege is baked into dismissals of uncensorable financial tools. It isn’t even clear whether Venmo reps were able to offer Krugman an explanation for his brief banning, highlighting the constant and opaque risk such services present.
But his shock at being suddenly deplatformed is even more revealing of his enduring biases. As Bitcoin advocates in his replies are crawling over each other to point out, while this may be an edge case for Americans and Europeans it’s an everyday reality for many residents of developing or unstable regions.
Shortly after the initial tweet, Krugman followed up to announce that “tweeting got results” and that his account “seem[s] to be up again.” This is hardly a vindication for Venmo – to the contrary, it’s a further demonstration of just how much Western elite privilege is baked into dismissals of decentralized financial tools. It isn’t even clear whether Venmo were able to offer Krugman an explanation for his brief banning, highlighting the constant and opaque risk such services present.
One might also ask Krugman exactly why he was being blocked from using Venmo. He himself has in the past argued that “unless you’re buying drugs, assassinations, etc.,” “trusting a third party” for payments is “not a big deal.”
Personally, I’ve got a lot of respect for Krugman’s economic commentary and his public advocacy on a wide array of subjects. Here’s hoping his annoying run-in with the real risks of financial censorship helps open his mind about crypto, too.
Alpha Sigma Capital and Transform Ventures Raise $100 Million for Two Blockchain Funds Amid Crypto Industry Scrutiny (Decrypt)
Tim Draper joins EtherMail’s advisory board, leads $4 million raise (The Block)
MakerDAO Eyes More US Treasury and Bond Investments (Blockworks)
Hacked Coinbase user sues crypto exchange for $96,000 life savings lost (Markets Insider)
SEC’s Gensler rejects crypto’s threat to move overseas (Politico)
City regulator joins Met in raids on suspected crypto ATM operations (The Guardian)
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