Officials from China’s Liaison Office may be tacitly endorsing a regulatory proposal that would legalize crypto trading in Hong Kong. Some have drawn a comparison from the would-be crypto hub to the Special Administrative Region of China’s experiments with a less restrictive legal system and open markets in the 20th century. Meanwhile, the Hong Kong Monetary Authority has concluded a consultation about the proposal, which may require stablecoin issuers to maintain a headquarters on the island if they want to be fully licensed. Bernstein researchers see Hong Kong’s “regulate to protect” approach to crypto as a potential draw for foreign capital. Elsewhere, Saudi Aramco signed a memorandum of understanding with New York-based Web3 development company droppGroup while trading platform eToro secured a BitLicense to offer crypto services in New York State.
What’s Happening, Web3?
Decentralized asset management platform Factor attracted over $4.3 million for its initial coin offering in its first 12 hours after going live. The ICO is expected to run for three more days. The project is built on and offers 10 million FCTR tokens to Arbitrum’s Camelot launchpad, a middleware infrastructure system built to aggregate DeFi services. Meanwhile, the wireless communication network Helium is sunsetting its bespoke blockchain and migrating to Solana by March 27, developers said on Friday. Electronics giant Bosch and AI crypto protocol Fetch.ai are co-creating the new Fetch.ai Foundation to research Web3 and AIR compatibility. The foundation is inspired by the open-source Linux Foundation. Finally, security firm PeckShield has found scammers are launching crypto honeypots with unofficial OpenAI, Microsoft and/or ChatGPT branding, to catch the AI-driven trading frenzy. At least 132 suspicious tokens have been issued on BNB Chain, 25 tokens on Ethereum and 10 on other chains including Solana, Arbitrum, OKChain and Cronos.
Protocol Panic
Polygon Labs, the dev group behind the Ethereum scaling solution, laid off around 100 employees. “Earlier this year, we consolidated multiple business units under Polygon Labs. As part of this process, we’re sharing the difficult news that we’ve reduced our team by 20% impacting multiple teams,” the company said Tuesday. This comes as one of the largest crypto-focused quantitative funds, Galois Capital, is winding down. The firm lost a sizable portion of its capital in the FTX collapse, which the founder said would take years to recover. FTX bankruptcy claims are trading for 20 cents on the dollar in private over-the-counter markets. Some $27 million worth of individual claims alone have sold on bankruptcy marketplace XClaim. Last, Bitcoin developer Anthony Gurrera has put a version of Ordinals, a script used to create NFT-like objects on Bitcoin, on Litecoin. Similar tweaks could fork to code for a number of other proof-of-work-based blockchains.
Sound Bites: Fractured System
“In environments like this … you want to focus on the ones [projects] that can actually build instead of just focusing on business development.”
– Tribe managing partner Boris Revsin, on CoinDesk TV’s “First Mover”
The Takeaway: BUIDL Week
In April 2020, at the height of the first wave of the coronavirus pandemic, Silicon Valley heavyweight Marc Andreessen published a call to action for the innovators and dreamers of the world: “It’s time to build.” The U.S. seemed to be in dire straits, according to Andressen’s diagnosis, after decades of political stagnation and misspent investment. Where were the flying cars, robot assistants and grand public infrastructure we were promised?
Andresseen, who co-created the first web browser Mosaic and went on to reinvent the venture capital industry, drew some amount of criticism for his exhortations. But if you look closely, it seems like even skeptics of Andresseen’s brand of techno optimism would agree that little is getting built in America. For instance, Ezra Klein, while still at Vox, wrote “America’s inability to act is killing people” – finding an explanation in the type of political gridlock that political scientist Francis Fukuyama neatly describes as a “vetocracy.”
The world has changed significantly since Andreesen’s original essay, but few could honestly disagree that the message still applies. After witnessing COVID-era medical shortfalls, global supply chain disruptions and rising consumer prices – hardships that affect all, but perhaps unequally – it’s clear there’s room yet for innovation. But the old political disagreements still seem to apply. U.S. President Joe Biden made “Build Back Better” a core promise of his election campaign, and was arguably hamstrung when he actually got into office.
That’s partially why the crypto industry remains relevant, and should likely be elevated higher in the public conversation. At their best, crypto protocols are open-source systems available for all. That sounds like a general statement, but it’s only because the core mentality of building “credibly neutral” and “general purpose” technologies can be applied anywhere. Web3, rightfully called a buzzword, has hopes for reinventing everything from money to social media and even the internet itself.
This is a challenging time to be writing an essay like this. Last year, after the collapse of a systemically important stablecoin, several bankruptcies and also the collapse of one of the most high-profile crypto on-ramps the world saw “crypto” at its worst. In the wake of FTX, a massive fraud almost without precedent, the industry must rebuild itself and regain public trust. I’m optimistic that’s not only possible, but probable – as many have noted the many failures of centralized companies has only proven the viability of and need for true decentralized alternatives.
CoinDesk’s “BUIDL Week,” the second edition of Consensus Magazine’s flagship theme week series in 2023, is focused on just that issue. The package will feature profiles of developers like Casey Rodamir, the creator of Bitcoin ordinals, who remains as committed as ever to making Bitcoin resilient; essays by experts like SingularityDAO’s Marcello Mari, who is probing the far reaches of where Web3 and artificial intelligence collide; and features covering a range of topics including a community-led hackathon for Solana, a data-driven exploration of Bitcoin’s patronage system and Ethereum’s much-anticipated Shanghai upgrade.
Crypto has taken a hit, but as a friend and former colleague of mine has once said, “DeFi has already won.” With exception, disintermediated crypto protocols designed to function during crises have not only done just that but are continuing to grow. That may be why venture capitalists CoinDesk’s Brandy Betz interviewed have said they’re plowing money into crypto “infrastructure,” having learned a hard lesson about the dangers of “CeFi.”
Yet, this optimism comes at a challenging time for crypto. The industry can likely weather another market downturn, but it looks as though the real threat to crypto’s growth will come from the political sector. Ironically, it looks as though many disparate parts of the U.S. legislative and executive branches are finally able to collaborate on regulating crypto – in what some industry experts have called “Operation Choke Point 2.0,” drawing a comparison to the Obama-era policy of directing banks to disfavor legal but unseemly industries.
No doubt rebuilding crypto will involve a collaboration between industry participants and lawmakers to pass laws protecting consumers from fraudulent companies and predatory actors. The hope is that lawmakers will also learn to see crypto as crypto is meant to be, which uses code to advance everyone’s interests. It’s time to build.
Aave and Maker Pull Back From Paxos Stablecoins (The Defiant)
Bored Apes accused of stealing logo from online drawing tutorial (Protos)
A majority of crypto app users in “nearly all economies” have made losses on their bitcoin holdings, with whales selling “at the expense of smaller holders,” a new report by the Bank for International Settlements reads. (BIS, Protos)
Blur Overtakes OpenSea as Ethereum NFT Trading Skyrockets (Decrypt)
CoinShares ‘Unsure’ It Can Recover Any of $31M FTX Exposure (Blockworks)
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