The NEAR Foundation, the non-profit developing the NEAR protocol, is partnering with Alibaba Cloud, the Chinese tech giant’s arm for computing and storage, to accelerate Web3 growth in Asia and the Middle East, the organization said Monday. The partnership grants the foundation and NEAR developers access to Alibaba Cloud’s developer ecosystem in those regions and access to tech, including Alibaba Cloud’s “plug-and-play” infrastructure to host NEAR validator nodes and services to help build apps. Meanwhile, Terra Classic community members have proposed an ecosystem revival plan to break away from disgraced founder Do Kwon and Terra 2.0 fork. Terra Classic’s LUNC token (technically the original network asset created by Terraform Labs) has a valuation of $580 million currently, which could help community members self-fund development, engineers calling themselves the “six Samurai ” said in a governance proposal.
Asset Inflows
ProShares’ Bitcoin Strategy ETF (BITO), a bitcoin futures fund in the U.S., recorded its highest weekly inflows in over a year last week as bitcoin (BTC) prices breached the $30,000 level and several institutions including BlackRock submitted bids for new spot market exchange-traded funds (ETF). BITO, which saw $65 million in inflows, gives investors exposure to bitcoin’s prices with a regulated product and holds over $1 billion worth of CME Bitcoin Futures. Meanwhile, on Friday some 150,633 BTC options contracts worth $4.57 billion and 1.23 million ether (ETH) contracts valued at $2.3 billion are set to expire on Panama-based Deribit exchange, which sees over 85% of the global options activity. The bitcoin contracts account for 43% of the total open interest, according to Amberdata.
A message from PayPal
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Belgium’s top markets regulator ordered Binance to immediately cease serving local customers on Friday, because the embattled crypto exchange offered services “between virtual currencies and legal currencies… [and] from countries that are not members of the European Economic Area.” Binace, which is being sued by the U.S. Securities and Exchange Commission, has also recently exited the Netherlands, Cyprus and Canada. Speaking of, Dubai-headquartered crypto exchange Bybit has gained a license to offer trading and custody services in Cyprus. Meanwhile, Japan’s National Tax Agency clarified that crypto issuers will not have to pay capital gains taxes on tokens they issue. This is a reversal of an earlier policy, in part meant to encourage startups to remain in the country afterit imposed heavy tax burdens last year. Last but not least, the Monetary Authority of Singapore (MAS) collaborated with the Bank for International Settlements’ (BIS) and several financial institutions including HSBC, Standard Chartered and Citi on a pilot for tokenizing assets called Project Guardian.
The Takeaway: Not Innovative
Earlier this week the International Monetary Fund (IMF) – a United Nations organization that effectively operates as a global lender of last resort – and the Bank for International Settlements (BIS) – a super-governmental central banking agency – published separate reports about the future of the monetary system. Both reports mentioned crypto and central bank digital currencies (CBDCs) and were generally positive about the potential for tokenization.
In any event, the IMF and BIS reports this week provide an interesting insight into how the bureaucrats view crypto because they both coalesce around the idea that tokenization is the killer application for crypto. The BIS wrote: “Today, the monetary system stands at the cusp of another major leap. Following dematerialisation and digitalisation, the key development is tokenisation – the process of representing claims digitally on a programmable platform.”
Parsing this quickly, dematerialization and digitalization have both happened and have worked wonders for the world economy and commerce. Dematerialization, as in, banks keeping records on ledger entries rather than requiring the movement of physical currency with every transaction and digitization, as in, when that ledger entry practice moved from paper to digital. Tokenization, meanwhile, is the forward-looking idea that is “the process of representing claims digitally on a programmable platform,” to use the BIS’ words.
Tokenization is the process … of representing claims … digitally … on a programmable platform.
Hold on. Is this anything? Digitization of the monetary system is clearly the digital representation of financial claims. Does that mean financial technology companies, which often operate programmable platforms, is the next leap? Is that tokenization?
Well, no. Tokenization, in the eyes of the IMF and the BIS, is the practice in which claims are traded on programmable platforms. If a blockchain is involved, those claims likely be represented as tokens. Tokens are not just digital entries in a database. Rather, they integrate the records of the underlying asset normally found in a traditional database with the rules and logic governing the transfer process for that asset.
For a homebuyer, tokenization might mean that their deed is represented as a token on a blockchain like Bitcoin or Ethereum. Instead of a deed transfer signaling who the homeowner is, it’ll come from the transfer of a token.
Admittedly, tokenized real estate today stands on shaky foundations. Sure, the “rules and logic governing the transfer process for that asset” could exist on a token platform, but the exact moment a legal document or legal proceeding governs some aspect of ownership then you invalidate the entire use case for a token representing that piece of real estate.
Given the actual contents of the IMF’s and BIS’s reports, it appears institutions are less focused on the tokenization of commodities or real estate and are far more interested in the tokenization of central bank digital currencies.
The central idea connecting the IMF’s and BIS’s reports on tokenizing CBDCs is the existence of some single or unified ledger. So distrustful are these organizations of non-central bank money (of course they are) that they must create a centralizing force to ensure the stability of settlement and “singleness of money.”
The BIS defines this unified ledger as “a ‘common venue’ where money and other tokenised objects come together to enable seamless integration of transactions and to open the door to entirely new types of economic arrangement.”
Now we’re not sure what will come of these discussions and explorations and examinations into tokenization, if anything at all. Plenty of countries are researching CBDCs, but only a handful have implemented these systems.
If the IMF, BIS and organizations like them want to create a CBDC with a single, unified, centralized ledger they don’t need to pretend they’re using cryptocurrency to do it. Conflating things like Bitcoin and the tokenization of CBDCs is misguided. At best, it’s a misunderstood yearning for a more tech-enabled money system. At worst, it’s a treacherous, intentional distraction from what makes Bitcoin and crypto attractive – which aren’t attractive because they are digital, but because they lack central control. Exactly what the central banks and regulators are trying to insert.
Simply signaling innovation is not actually innovating. And tokenization is hardly an improvement over what financial institutions already do. It is a distraction. It is nothing.
If we’ve learned one thing about the crypto space in the past year, it’s this: Trust matters.
One way to earn trust is to get vetted by a reputable financial institution. Which is why it’s notable that Alchemy Pay, a gateway between fiat and crypto, has been given the stamp of approval, of sorts, by a trusted brand in finance: Mastercard. Continue reading
