The big news, of course, is FTX. The writing was on the wall – or at least inside the Magic Money Box, an analogy Sam Bankman-Fried used to explain yield farming, which now applies to his businesses. After a bank run led to a liquidity crisis for FTX, trapping at least $1 billion in customer assets, US prosecutors are investigating the one-time ‘King of Crypto’ (and Joe Biden’s second-biggest donor).
Bankman-Fried, the founder and former CEO of the exchange, never said he would funnel customers’ money to Alameda Research, his hedge fund; only that, in such circumstances, he could denominate this debt in tokens created out of – tokens that will now disappear into – thin air.
Crime abounds on the blockchain, too, not just around it: since 2020, a new scam smart contract has been created every four minutes on average. This is one reason why Mastercard has deployed a new tool to assess the risk of fraud for individual crypto transactions.
In the stake-proven world of Ethereum, the price to play – i.e., how gas fees are calculated and charged – remains unchanged. The new protocol is also understood to incentivise the accumulation of more and more ether. With the move to staking, at least one top US regulator believes the Merge has made Ethereum into a security, rather than a commodity.
But in Washington, the crypto lobby is digging in its heels, and making use of the revolving door between government and industry. Watchdogs have tracked 235 federal officials’ movement to and from crypto companies – a third of whom worked for financial regulatory agencies, including two former chairmen of the SEC and the Commodity Futures Trading Commission (CFTC) each. All this while internecine conflict (or, if you’d like, an ‘inter-agency pissing match’) flares within the SEC, and between it and the CFTC.
One regulatory goal will be to insulate traditional finance from crypto’s chaos. But the turbulence seen in British markets last month – together with the ongoing downturn in tech stocks – has emboldened crypto ideologues. In other words: it’s the same as always, including on the energy front. For Bitcoin miners, high electricity costs mean the ‘prolonged profit pinch’ will continue: Argo, one mining company, saw margins shrink from 80 percent to just 20 since last December.
Among our selections this month – curated with just a bit more care than FTX’s final balance sheet – find a book illustrating the similarities between the current fintech hype and the dot-com bubble; two articles weighing the promises and perils of a Big Tech-driven metaverse; and a paper exploring privacy-compliance technologies on the blockchain. The rest of the readings continue below.
Fintech: A Revolution or a Transitory Hype?
This book assesses the costs and benefits of financial technologies, debunking popular myths, highlighting the risks that necessitate regulation, and examining fintech-related fraud. In investigating the propaganda used to justify the ‘war on cash’ and glorify cryptocurrencies, it considers whether fintech is an evolution or a revolution.
Criptodivisas: la batalla final entre el Estado y el liberalismo
Looking at the regulation of crypto mining and cryptocurrencies in Paraguay, this report identifies a longer struggle waged by economic liberalism to privatise money. The bulwark against these efforts have been norms and regulations that position the State as the driver of democratic political processes.
Metaverse Through the Prism of Power and Addiction: What Will Happen When the Virtual World Becomes More Attractive than Reality?
As power relations in society stand, the concentration of power among Big Tech firms could expand even more if the metaverse becomes mainstream. What's more, technology deployed by the metaverse, which will aim to mimic direct reality, could further stimulate media addiction in society.
#buildbanksbetter: Central Bank Digital Currencies (CBDCs), Public Banks and Money’s Potential as a Non-Scarce Medium of Communication and a Source of Local Self-Determination
Public banking at the local and community level is the most effective monetary technology for restoring the powers of finance to the people, argues this paper. Yet CBDCs, as they are being used, threaten to undermine local, community-led self-determination by further centralising monetary control in the hands of central banks – whose mandate is to serve private interests.
Metaverse Beyond the Hype: Multidisciplinary Perspectives on Emerging Challenges, Opportunities, and Agenda for Research, Practice and Policy
Gathering experts with varied disciplinary backgrounds, this study looks at the impact the metaverse may have on sectors including marketing, education, and healthcare; as well as the possible effects widespread adoption would have on issues relating to trust, privacy, bias, disinformation, law, and psychology.
All That is Solid Melts in the Ethereum: The Brave New (Art) World of NFTs
Among the problems raised by NFTs and explored here: the question of collective vs. individual authorship within digital aesthetics; the most recent developments in AI and their creative potential with regard to NFTs; and crypto's role as a tool for artists’ empowerment – or, conversely, for selling out, under new technological guises, to the market.
The Citizens’ Ledger: Digitizing Our Money, Democratizing Our Finance
With crypto and fintech now threatening to transform finance in destabilising and anti-democratic ways, this book shows how the US and other democratic commercial societies can democratically digitise their currencies, their national payments systems, and the authorities that respectively issue and administer them.
Blockchain Financial Geographies: Disrupting Space, Agency and Scale
In this study, scale serves as a way into three case studies – on initial coin offerings, real estate investment, and the 'money memory' of blockchain-based currencies – that shed light on the ways the financial sector's structure is (and isn't) being transformed.
‘Hodling’ On: Memetic Storytelling and Digital Folklore Within a Cryptocurrency World
Although they engage with a highly technical digital money form, participants on crypto image boards and forums produce stories akin to digital folklore. These stories address the uncertainty that characterises cryptocurrencies, help make the online cryptocurrency world more inhabitable, and allow people to subvert and resist ‘economic reason’.
Layers of Privacy in the Blockchain: From Technological Solutionism to Human-Centred Privacy-Compliance Technologies
Ensuring privacy on blockchain platforms is a known challenge, but many of the solutions proposed thus far imply a techno-regulatory approach that ignores the choices already made when designing blockchains themselves. If we disregard the need for human participation and contestability in these platforms, we risk undermining the role of privacy-compliance technologies in the blockchain.