1st May 2023 > > Venmo & Operation Choke Point 2.0.

tl;dr

Venmo and legacy banking issues both boost retail crypto adoption, whilst Operation Choke Point 2.0 is destined to fail.

Market Snap (at time of writing)

Market Wrap

A slightly disappointing start to the week but I am cheered by the rising prospect of a short squeeze as evidenced by the negative perpetual futures funding rates.

Curious Cryptos’ Commentary – Venmo

Venmo is a mobile payment platform owned by PayPal with 70 million customers.

In 2021 Venmo introduced a feature allowing for buying, holding, and storing a narrow range of cryptos comprising BTC, ETH, LTC, and, strangely, BCH.

The company has announced that withdrawals to other wallets will be rolled out during May 2023:

https://newsroom.paypal-corp.com/2023-04-28-Introducing-Crypto-Transfers-for-Venmo-Customers

Wallets can be within the Venmo or PayPal ecosystem or external to it such as online wallets, offline wallets like Ledger Nano, or centralised cryptocurrency exchanges.

Simple trade execution, provision of a custodial solution and a more intuitive means of transferring cryptos between wallets are all key to growing retail adoption of cryptos.

Venmo would not be investing cash and senior management time into developing greater crypto functionality unless they believe there is real customer demand.

Crypto adoption is happening right here, right now.

Curious Cryptos’ Commentary – Operation Choke Point 2.0

Cross River Bank is a crypto focussed bank with clients such as Coinbase and Circle, the issuers of USDC, a stablecoin.

In a 34-page consent order FDIC (Federal Deposit Insurance Corporation) stated:

“The FDIC considered the matter and determined, and the bank neither admits or denies, that it engaged in the unsafe or unsound banking practices related to its compliance with applicable fair lending laws and regulations by failing to establish and maintain internal controls, information systems, and prudent credit underwriting practices.”

We have seen with SVB (Silicon Valley Bank), Silvergate, and more recently with First Republic Bank, that liquidity issues can very quickly overwhelm a banking institution.

The positive response in crypto markets to the collapse of SVB and Silvergate took many by surprise. The consensus was that a reduction in the provision of banking services to crypto firms would be negative for the industry.

On the contrary, as we discussed on 14th March 2023 in these missives, the problems seen at both institutions are systemic to the legacy banking industry. The root causes of these problems lie in poorly designed regulation, and QE (quantitative easing) though no-one in the bureaucratic and technocratic elite will admit so, for they remain blameless in their own eyes regardless of their actions and the outcomes stemming from those actions.

Cryptos provide a haven from the problems that infest the entire legacy financial system. Operation Choke Point 2.0 is destined to fail.