Major U.S. stock exchange Nasdaq is dropping its plans for a crypto custody service due to the “shifting business and regulatory environment” in the U.S., CEO Adena Friedman said in a Wednesday earnings call. In March, Nasdaq said it began discussions with the New York Department of Financial Services (NYDFS) to oversee a proposed limited-purpose trust company slated to go live in Q2. The U.S. Securities and Exchange Commission (SEC) proposed a rule change in February that would only allow “qualified custodians” to hold investment assets including crypto, a move that was pilloried by JPMorgan and others. Meanwhile, bipartisan U.S. Senate members have drafted the Crypto-Asset National Security Enhancement Act of 2023, which would require DeFi protocols to impose bank-like capital controls in a bid to bolster anti-money laundering (AML) standards. Finally, Societe Generale’s cryptocurrency division, SG Forge, received France’s first license to offer crypto services.
Solid Backing?
In June, U.S. authorities seized funds belonging to Deltec, a Bahamian bank with several crypto clients including Tether, following an investigation into international money laundering, newly published federal documents show. The Secret Service executed several warrants to confiscate funds from the bank’s U.S. accounts, including apprehending approximately $58 million from a Mitsubishi UFJ Trust account opened by Deltec for its corporate clients. Separately, speaking at a Heal-the-Divide PAC event, U.S. Democratic presidential candidate Robert F. Kennedy Jr. unveiled plans to exempt bitcoin-to-dollar conversions from capital gains taxes, and back the greenback with “real finite assets” such as gold, silver, platinum and bitcoin.
New Moves
Top Latin American crypto exchange Bitso has integrated Stellar’s Anchor Network to expand the payments corridor between Latin America and the rest of the world. A partnership with the Stellar Development Foundation will enable USDC transactions in Argentina, Colombia and Mexico, where Bitso has a direct connection to local banks. Meanwhile, DeFi platform Stride is upgrading its security model, choosing to rely on Cosmos’ ATOM validator set rather than its own token-based staking system. The move will impact Stride’s tokeneconomics, but will boost the platform’s economic security from roughly $25 million to $2.3 billion, a blog said. Last, a wallet associated with an early ICO experiment has moved $116 million worth of ETH to Kraken after eight years of inactivity.
The Takeaway: ‘Get a Horse!’
(Wikimedia Commons)
A fascinating time capsule came across my desktop this week. Originally published in 1930, this Saturday Evening Post essay by automotive pioneer Alexander Winton recounts his early efforts, beginning in the 1890s, to convince the public that the “horseless carriage” was the future.
Winton was a Columbus, Ohio-based bicycle manufacturer who turned to developing cars, and by 1898 completed one of the first commercial sales of an automobile in the United States. That vehicle is now in the collection of the Smithsonian Institution.
Winton’s story is fascinating in itself, and also offers broader insights into how new technologies are developed and adopted. The parallels to challenges faced by crypto developers are particularly uncanny: Winton describes facing down endless mockery, fraudulent competitors, the hostility of banks – and a case of automotive “patent trolling” that calls to mind a particularly notorious crypto figure.
These common threads between the development of the automobile and of cryptocurrency and blockchain technology aren’t simply a cosmic coincidence. The same challenges have accompanied many modern innovations, thanks above all to the way capitalist investment and speculation shape human behavior.
Most notable in Winton’s account is the difficulty he found separating his real (and ultimately very successful) auto company from both competitors with flawed ideas, and from outright frauds.
The well-intentioned bad ideas for cars are fascinating to look back on. One early automaker built a literal mechanical horse, which rode on a single wheel and attached to buggy shafts just like a real horse. It was guided not by a steering wheel, but with reins attached to the “mouth” of the motorized stallion. Other early experimental cars ran on compressed natural gas (yikes), steam, compressed air and even, yes, electricity.
These were honest efforts that failed thanks to technological flaws or market mismatches. They parallel a variety of early digital cash efforts, from Liberty Reserve through Colored Coins on Bitcoin – useful iterations that didn’t become long-term functional products.
(Winton also refers to a late 19th century technology magazine called “The Horseless Age.”These lunatics dared to start a publication about a transformative technology that barely existed, and … well, you can draw your own parallels.)
“We had to … fight the wildcat automobile companies on the outside,” Winton wrote of those early days. “It was difficult for the public to distinguish between the genuine and the ephemeral, and there are towns that can still [in 1930] point to windowless factories that were built [in the 1890s] from the stock sold by glib promoters, but which never manufactured more than two or three cars.”
Winton claims that more than 500 automobile companies “came in and went out” in the early years of the industry. That incredible churn, too, sounds more than a little familiar.
Aside from diverting investment capital from better projects, these frauds fed skepticism of the very idea of the automobile. Not unlike the way crypto critics will often point to PayPal or Venmo as perfectly acceptable digital payments tools (pro tip: they’re not), automobile skeptics were just fine with existing transportation technology: horses and trains.
Winton cites a reporter named E.P. Ingersol, who argued that the idea that automobiles would compete with trains for long-distance travel “is visionary to the point of lunacy.” That comment was made in response to the truly unhinged 1899 proposal of a bus line between Chicago and St. Louis.
Winton, already a successful bicycle manufacturer when he started tinkering with cars, also got heat from his own banker. The financier told him, “You’re crazy if you think this fool contraption you’ve been wasting your time on will ever displace the horse.”
To try and make his case, Winton cited inventor Thomas Edison’s opinion that automobiles would “add to the general wealth” by making commerce more efficient. The banker, displaying an all too familiar mindset, dismissed Edison’s comments as “just another inventor talking.”
It is now more important than ever to set industry standards and align on practical short-term and long-term objectives through pointed conversations with the best legal minds and Washington D.C.’s most important decision makers.
Join us at State of Crypto: Policy and Regulation on October 24 in Washington D.C. for an unprecedented opportunity to evaluate, dissect and ultimately shape crypto regulatory frameworks that support a vibrant, secure and healthy future for the digital economy.
