9th December 2023 > > TradFi stablecoins & sanctions.

tl;dr

TradFi gets involved with stablecoins, and cryptos adopts some TradFi practices. Both pieces of news are good news.

Market Snap

Market Wrap

Leveraged longs are out in force, which would normally raise the risk of a long squeeze induced correction lower. In current times though – with the prospect of SEC approval for a raft of spot BTC ETFs in the second week of January – I suspect any minor correction will be met with a strong bid wall.

Gas fees are spiking for both BTC and ETH as activity ramps up on both networks. This is positive on three fronts. The value of a network is associated with the network activity. Increased activity will drive prices higher. Secondly, all crypto enthusiasts own plenty of mining stock, whose leverage with respect to the price of BTC makes for an interesting 2024 even after this year’s stellar performance. The third positive is that these fees drive innovation and adoption of L2 solutions which provide near instantaneous transaction times for minimal fees.

Curious Cryptos’ Commentary – SocGen’s EUR stablecoin

h/t to the Financial Times (not a comment made frequently in these missives):

https://www.ft.com/content/cd733a7c-2e74-412f-b234-6f495c118cc6

SocGen (Société Générale) has launched its own stablecoin called EUR CoinVertible on Bitstamp, a registered centralised cryptocurrency exchange based in Luxembourg. Jean-Marc Stenger, CEO of SocGen Forge, explains the motivation behind this initiative:

“The crypto ecosystem is highly concentrated on a few existing stablecoins, 90 per cent denominated in US dollars . . . we definitely think that there is a place for a bank in this field and there is a place for a euro [denominated] stablecoin.”

This new coin is MiCA-compliant and is a true crypto, open for anyone to use on any platform, unlike the JPM Coin, which is on a private blockchain, and which has none of the advantages of cryptos but all the disadvantages inherent in CBDCs. J.P. Morgan pushing ahead with a dystopian product comes as no surprise to anyone.

The first documented use of CoinVertible is by one of the giants of the industry, Axa, using it to settle an investment in a digital green bond.

When we see investment banks and investment managers coming together to use cryptos to improve current processes, for the benefit of investors and all other stakeholders (that’s all of us when industry’s cost of capital is reduced), and we hear naysayers claiming there is no point to cryptos apart from nefarious purposes, we know who is talking nonsense.

Curious Cryptos’ Commentary – Tether sanctions

Tether – the company behind stablecoin USDT – has frozen coins held in crypto wallets identified and sanctioned by OFAC (Office of Foreign Asset Controls):

https://tether.to/en/tether-introduces-new-policy-to-strengthen-ecosystem-security/

CEO Paolo Ardoino elaborates:

“This strategic decision aligns with our unwavering commitment to maintaining the highest standards of safety for our global ecosystem and expanding our close working relationship with global law enforcement and regulators. By executing voluntary wallet address freezing of new additions to the SDN List and freezing previously added addresses, we will be able to further strengthen the positive usage of stablecoin technology and promote a safer stablecoin ecosystem for all users." 

Maxis are not happy about this development, but I suspect it is a rare event indeed that puts a smile on their faces.

Supporters of cryptos who wish to see the world transformed for the better by global adoption would do well to welcome developments like this. There will always be trade-offs in the interaction between the centralised world and the decentralised world, for the latter cannot exist without the former, and the former’s limitations without the latter are becoming plain to see.

In any case, who really wants to be on the side of terrorists, gangsters, and the money-launderers who support their activities, even at the very margins? The TradFi world already excels at doing so, and this is one area where cryptos do not need to compete with the masters.