6th May 2023 > > The US and Stripe.

tl;dr

Governments make the case for crypto by their actions, and the private sector responds by providing the functionality to escape the centralised fiat world.

Market Snap (at time of writing)

Market Wrap

A brief attempt at reaching $30k overnight was quickly rebuffed. We have stayed within the $25k-$30k range for two months now providing a layer of stability within the $16k-$36k range for the last twelve months. With gold rallying to an all-time high this week, probably reflecting concerns about the stability of the banking system, and the degradation of fiat (see below for more info) BTC’s recent negative correlation to stocks suggest a decent probability of upside from here.

Curious Cryptos’ Commentary – That $1 TRILLION coin is back

The US is unique, as far as I am aware, in having a legislative limit to the size of government debt.

With US government debt hurtling towards $32 TRILLION dollars, it isn’t clear to me that this restraint has had any noticeable mitigation against overspending. What it does allow for is political grandstanding each time the limit is approached. Janet Yellen, Treasury Secretary, has posited June 1st as the day that the government will run out of money. Predictably, the ruling party wants to raise the limit and continue spending, whilst the opposition will agree to raise the limit in exchange for cutting spending.

It doesn’t matter which political party is in power or in opposition – it’s the same stance every time the debt limit is approached even when roles are reversed.

It wasn’t so long ago that the annual government surplus was such that there was a fear that the entirety of US government debt would be retired, causing all sorts of valuation problems in financial markets, which rely upon a “risk-free” interest rate. Now there is no chance that this debt ever gets paid back, which brings its own set of unique problems.

…

During the Global Financial Crisis, an idea was put forward that the US Treasury could mint a $1 TRILLION platinum coin, deposit it in its own accounts, and repay that amount of debt.

Though apparently legal, this is an extreme form of debt monetisation. My suspicion was always that it was put forward not as a serious suggestion, but as a means of clearing the path for QE (quantitative easing), as the lesser of two evils.

Now that QE has been called out for its disastrous side effects, this platinum coin idea is brought to the fore once more.

The economic and monetary effects of the first $1 TRILLION platinum coin are too scary to contemplate, for once that Rubicon has been crossed, it won’t be the last of these coins minted. We can all be trillionaires this time next year, Rodney!

Predictably Paul Krugman says it’s all OK. We need no more evidence other than this conviction of his to be sure of the contrary.

…

Cryptos provide the only practical means of protecting some of your assets from this degradation of the centralised fiat world.

Curious Cryptos’ Commentary – Stripe

Stripe is an online payments facilitation company – it provides APIs to embed into Web2 sites to process fiat payments (at significant cost, or so it seems to me) for goods and services. The three, admittedly huge advantages, are ease of integration, KYC and AML processes, and anti-fraud tools. Proud of its relationships with companies like BMW and Amazon, Stripe is clearly doing something right.

Stripe has announced Web3 and crypto functionality:

https://stripe.com/gb/newsroom/news/fiat-to-crypto-onramp

The core concept here addresses a key problem for Web3 – until now users would have to have a crypto wallet funded with the appropriate crypto. This usually involves a centralised exchange such as Coinbase or Binance to deposit fiat, an exchange for crypto, and then a transfer to your Web3 wallet, probably MetaMask preferably powered by a Ledger Nano X.

Stripe’s solution allows for an immediate fiat-crypto onramp within your wallet when interacting with Web3.

Once again, I feel duty bound to point out that Stripe would not be investing senior management time and money into this initiative unless there is real demand for it.

It feels to me that on a weekly basis we find a new way of moving fiat into the crypto world. With each new iteration, that process becomes easier, quicker, and cheaper.

This doesn’t happen by chance. This doesn’t happen just because crypto supporters like the CCC wish it to happen.

It happens because enough customers want it to happen.

…

I still come across so many people who fall for those tired old tropes that cryptos are a Ponzi scheme, with no use-case except for speculation, money-laundering, and financing of terrorists.

I gain succour that the CCC community knows otherwise.