CoinDesk Reports

As the Biden Administration gets underway, what can we expect for cryptocurrency technologies alongside an ascendent bitcoin?

One day into the new President’s tenure we’ve brought in Kristin Smith, executive director of the Blockchain Association and Amy Davine Kim, Chief Policy Officer at the Chamber of Digital Commerce. In this episode we'll take a look into the regulatory future as we explore the relationships, lobbying and policymaking efforts within Washington. 

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In this episode, Anna Baydakova, Danny Nelson and Tanzeel Akhtar discuss why one of Justin Sun’s companies is linked to extremism, the insurrection of the Capitol on a blockchain, Iran taking the mining industry under control and also if Europe can regulate bitcoin.

Rioters storming the U.S. Capitol on Jan. 6, livestreamed the action in DLive; a video streaming platform owned by BitTorrent, which, in turn, is owned by the Tron founder Justin Sun. They also received donations through the blockchain-based service. Crypto, extremism, deplatforming and the history of Justin Suns' ventures all are wrapped up in this story, which is too big to ignore. 

The government of Iran wants to control crypto mining and has clamped down on miners again. In January, the country shut down 1,620 illegal cryptocurrency mining farms. The mining operations were disconnected from the national power grid and miners will face prosecution. Iran has been cash-strapped by the international sanctions for years, and bitcoin looks like another way to get the government the money it needs. But will it work? And will the rest of the world allow it?

In Europe, European Central Bank President Christine Lagarde is eager to go after “funny business” in the cryptocurrency markets. Lagarde believes the world needs to adopt comprehensive regulation to stop criminals, such as money launderers, from turning to bitcoin for help. She has called bitcoin a "highly speculative" asset. This is not the first time Lagarde has cautioned that cryptocurrencies should be taken seriously and called for global cooperation among worldwide regulators. Whether or not Lagarde is being taken seriously is yet to be seen. 

CoinDesk reporters Anna Baydakova, Danny Nelson and Tanzeel Akhtar mentioned these stories in today’s episode:

• CoinDesk: Tron-Owned Video Platform Dlive Criticized for Hosting Extremists, US Capitol Rioters 
• The Verge: Hype Man of The Century
• CoinDesk: BitGo Launches Wrapped Bitcoin, Ether on Tron Blockchain 
• Iranian Authorities Close 1,620 Illegal Cryptocurrency Mining Farms: Report 
• Motherboard: The Era of Government-Friendly Bitcoin Miners Is Here
• The University of Cambridge: Bitcoin Mining Map
• ECB’s Christine Lagarde Says ‘Speculative’ Bitcoin Needs Global Regulation

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What impact will crypto have on the nature of organizations? Will experiments in crypto’s governance lab lead to lasting trends in how companies are orchestrated?

This week on the “Opinionated” podcast we discussed this big topic with Jeff Dorman, the chief investment officer at Arca, a crypto hedge fund.

Dorman, a CoinDesk columnist, argues that “community tokens” (like LINK or SUSHI) will inevitably outpace “VC tokens” (like COMP, ATOM) because of the preferable incentives at play.

And he believes the trend of community ownership in crypto will meld with the wider shift towards companies doing right by a range of stakeholders as well as just their shareholders.

Dorman contrasts a decentralized finance (DeFi) project like Uniswap with Airbnb and DoorDash, which are now heading for initial public offerings. The former rewards liquidity providers (and soon token holders) who share in the system’s success. The latter companies were built on the work of homeowners and delivery guys, but all the gains from a public listing will go to stock holders.

“With digital assets, you’re starting to democratize access to these companies and you’re starting to spread out income inequality,” he says.

Incentives are key to make more democratic governance work. “Nobody cares about governance until it affects their bottom line. Twitter isn’t going to change its governance for the sake of ideology. If there’s governance for the sake of cash flows, that is another story.”

A sharp thinker with two decades of investing experience, Dorman had plenty of insights in our conversation covering bitcoin, nonfungible tokens (NFT) and Twitter in the wake of the Capitol attack this week.

Check out the episode now and read Dorman’s CoinDesk columns here.

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On this episode of Money Reimagined the discussion comes home for an insiders look at how new, disruptive technology and government interact. For this discussion, hosts Michael Casey and Sheila Warren of the World Economic Forum are joined by Marvin Ammori, best known for his work on network neutrality and Internet freedom issues. Rounding out the panel is Christopher Giancarlo, former CFTC chairman and founding principal of the Digital Dollar Foundation.

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"My background is really 20 years of working on the internet. And I remember in the early days of the internet." said Marvin Ammori, "you know, one kind of piece of deja vu is what jumped out to everyone. The internet began with all the bad stuff. Congress couldn't believe there was porn on the internet. We had to protect the children from the number one thing that people noticed on the internet.

And in fact, the first major case about the internet, had the Supreme Court upheld Congress's action, pretty much every website would have needed to get your credit card number and verify you're 18 to go on. The internet would have been for adults only."

Marvin continued, "The entire trajectory of the internet would have been different, but luckily the Supreme Court pushed back on congressional action under the First Amendment. But the first impulse of congress 20 years ago with the internet was 'let's cripple this thing.' [...] We've seen all the tremendous benefits. [T]hings we could have never imagined back then. Now when it comes to cryptocurrency we see something similar."

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"The first wave of the Internet was an internet of information. And interestingly, it emerged into a federal regulatory structure that was really a pretty light zone because of our First Amendment protections of freedom of speech," said former CFTC chair Christopher Giancarlo. "So the internet, actually, in the first case, it didn't face a lot of opposition, I think, Marvin is absolutely right. There was certainly calls in Congress for banning because of pornography, but at the end of the day, the Democrat White House of President Clinton, the Republican Congress under Newt Gingrich came up with the 'first do no harm approach.'

And the internet flourished and a lot of lessons learned were 'don't ask permission, seek forgiveness', 'keep going until you break something.' And the first internet wave, the wave of information flourished pretty successfully.

We're now in a new construct, where in fact what we're talking about, as an internet of 'things of value', whoa... Well, it's a very different construct. We have at least three federal bank regulators regulating holdings of people's things of value, market regulators in Washington. And then in every state level.

And so this new wave of the internet is not running into a regulatory light zone. It's actually running into a regulatory heavy 'no go zone.' And we've seen the clash. I mean, just look at the ICO challenge a few years ago. That was a statement by one regulator that they were not conceding ground in this new internet of value. [... It's] a product of our past and our approaches and our constitutional liberties, but also these new technologies, new waves, the internet bring new challenges to old constructs that we haven't often been successful in working through."

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On Dec. 18, the U.S. Treasury published a proposal to expand the Financial Crimes Enforcement Network’s requirements for identity monitoring and reporting by crypto exchanges. Under these proposed new rules, that powerful agency, known as FinCEN, would require exchanges to collect names and home addresses from the owners of private, self-custodied digital wallets that receive more than $3,000 in cryptocurrencies daily and to file special currency transaction reports about any wallet that receives more than $10,000 a day.

The announcement prompted an outpouring of criticism from the crypto community and among digital rights activists. Many saw it as an attack on privacy. As of this recording, more than 7,500 comments have been posted to FinCEN’s site. That constitutes more than two thirds of all public comments received by the agency for various rules and proposals dating back to 2008. 

Then, on Monday last week, the Office of the Comptroller of the Currency, which sets and coordinates federal banking rules, offered a rule change that was much more favorably received among the crypto community.  

The OCC said banks could now use stablecoins to conduct payments and other activities, including stablecoin tokens issued on public blockchains such as Ethereum. It prompted some breathless commentary on how integrating the old world of banking with the new world of decentralized finance paves the way to a new global financial system of programmable money. 

To many this seemed like a weird good cop/bad cop routine out of Washington. Is the Administration pro- or anti-crypto? 

But to Michael Casey, there’s much more coordination here than meets the eye. 

There’s a common theme with respect to how both rules fit into geopolitical tensions that digital currency technology is stirring up. We’ll go into that in this week’s episode, which is why one of our guests today is Christopher Giancarlo, the former Chairman of the Commodities Futures Trading Commission who is now senior counsel at Willkie Farr & Gallagher and, among other roles, founding principal of the Digital Dollar Foundation. As someone who knows the ropes in Washington and is thinking hard about how the U.S. should prepare for a world of digital currencies, his insights will be invaluable.  

The other question this throws up is: how do we forge a more constructive relationship between the crypto community and policymakers, not just in the U.S. but in the global setting in which this technology exists? 

For that we’ve brought in Marvin Ammori, the chief legal officer for the decentralized exchange protocol, Uniswap. Not only does that role give Marvin a solid foot in the crypto community’s regulatory concerns, but we think his past influential work for the internet tech industry developing a common framework for net neutrality laws comes with real lessons on how to do these things right. And as an influential activist for digital civil rights, the questions here of privacy and digital autonomy are right in his wheelhouse.

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Join Michael Casey and Sheila Warren as they speak with Matthew Davie the Chief Strategy Officer of Kiva and Alpen Sheth Senior Technologist of Blockchain at Mercy Corps. It's Finally 2021, the year we all were promised. Even though the calendar has turned, the world is still on a wild ride. So today we go back to the fundamentals.

They call it the charitable-industrial complex: a system where money for development, for humanitarian needs, and for improving the lives of billions is controlled through a top-down process, run by U.S. charities and shaped by U.S. tax rules and regulations.

The first Money Reimagined podcast episode of 2021 dives into the problems this creates. Can we get away from this top-down, centralized system to build a bottom-up model that empowers the people charities are trying to help? And will the decentralizing power of crypto and blockchain technology play a meaningful role?

In this episode we dig into the "why" of this empowering new technology. What's the point? And more importantly, who is it for?

“Reimagining money isn’t about money at all but more about the complexity of the systems surrounding it. [...]The exciting part about Crypto is that it has the potential to be a partial fix for the problems of exclusion plaguing our financial system” said Sheila Warren.

According to Matthew Davie, “There is a gap between the informal sector and the formal sector, and you can’t build a bridge without figuring out how to solve that problem. So, we came at this from the system side saying we need verifiable identity and how do we do that?”

“What we find is that the unbanked are just too broad of a category to comprehend so it has to be broken down. There [are] substantial gender inequalit[ies]. Whether its device ownership, around participation in the economy, around disasters... People are just stuck underneath layers and layers of intermediaries to just do basic activities” said Alpen Sheth

About our guests:

Matthew Davie @KIVA focuses on long term strategic initiatives to help drive systemic financial inclusion for the world’s most venerable populations. He oversees corporate strategy, emerging technology development, and policy and regulatory engagements.

Alpen Sheth, PhD, is Senior Technologist, Blockchain, at Mercy Corps. a blockchain advisor for companies in the insurance, identity, and energy sectors. Previously, he co-founded the Economic Space Agency, a blockchain R&D startup, and later became the Head of Product at etherisc.com, an insurtech company, creating smart-contract based applications in several different countries

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Join Michael Casey and Sheila Warren as they speak with tech ethnographer Tricia Wang and metaMe CEO Dele Atanda, as they dig into social media privacy and the value of personal data.

For the first time since the “Internet 2.0” era began at the turn of the millennium, the dominant social media, search and e-commerce platforms are facing existential challenges. The disruption could come from legal efforts as anti-monopoly lawsuits evolve in both the U.S. and Europe. Or it could come via some nascent alternatives to the platforms’ centralized model, including from blockchain-inspired startups. 

Wang, who joined us on this week’s episode of the “Money Reimagined” podcast, says these responses won’t lead to a meaningful alternative until we gain a better appreciation of the role data plays in our internet interactions. Data, she says, “is not just information. Data is relationships.”

The algorithms of Google, Facebook, Amazon and others place the greatest value not in static, simple information points like your name, address and income, but data that reveals your relationships with other people. That matters, Wang says, because the story of those connections is equally important to humans because it is our connections to others that describe who we are. 

The imbalance is not just that ad dollars flow to Facebook and Google rather than to the users who generate the content and build the audiences the platforms and their advertisers monetize. It’s that, as detailed in Shoshana Zuboff’s “The Age of Surveillance Capitalism”, we are trapped in an ever-tightening feedback loop in which these companies use our data to modify our behavior. There’s a scary Matrix-like aspect to all this. 

It’s why the other guest on this week’s podcast, metaMe CEO Dele Atanda, views his company’s work building a more decentralized, blockchain-powered data marketplace as an exercise in protecting people’s human rights. Creating that marketplace and figuring out a meaningful expression of the value of people’s data is how we will ultimately restore agency over our digital lives, he says. 

“We need to create a unit of account that we can measure – not just on the basis of size [as bytes] but on the basis of sensitivity, identifiability. These issues are central to how this information can be used to help or harm us,” he said. 

Also important, Atanda says, is the governance structure of the database storing the information, which speaks to the role to be played by blockchain. The more “permissionless” and decentralized the architecture behind the data marketplace, the more confident individuals can be that the rights to their data are protected. 

All of this seems pertinent in a week in which society was once again found vulnerable to data failures at centralized systems. 

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This week on the Opinionated podcast, we’re joined by PwC’s Henri Arslanian, the consultancy’s very smart global crypto hand. 

Arslanian wrote a 2021 look-ahead op-ed for CoinDesk giving 10 Predictions for 2021: China, Bitcoin, Taxes, Stablecoins and More

He thinks next year will see a number of big trends in crypto come to fruition. 

“2020 has been a terrible year for pretty much the entire world but when we look at it from a fintech and crypto perspective, it has been a game-changing year,” Arslanian tells me. 

“COVID-19 really acted as a catalyst.”

Take bank notes. We’ve been using them less for years but the pandemic has really stopped us using them. At the same time, people are hoarding bank notes (because it’s a crisis), leading central banks to think more seriously about issuing their own digital currencies. 

Next year, Arslanian expects to see the first retail digital currencies. All eyes will be on China’s advanced project. 

Arslanian also discusses bitcoin, derivatives and taxes. He expects lots of M&A activity as crypto unicorns become “crypto octopuses.”

Listen in for one of the smartest consultants in the crypto space.

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Raoul Pal, CEO of RealVision and influential global macro investor, found himself in the middle of this fight recently after he tweeted to bitcoiners that KYC is in their interest because it will bring institutional money into the asset and boost its value. As someone with an account bearing the name SexyWebCamPro100x noted in one of more than 700 replies to that remark, the tweet begged for a meme of someone kicking a hornet’s nest.

Pal is an influential thinker about Bitcoin’s place in the future financial system. So we invited him onto this week’s Money Reimagined podcast to discuss his brawl with Crypto Twitter. For balance, we also invited CoinDesk columnist Jill Carlson, who, among other roles, is a founder of the Open Money Initiative, which focuses on boosting financial access and economic freedom for underserved communities. 

Pal offered a nuanced explanation of his position. He said while his point was partly about allowing both bitcoin HODLers and institutions to “get rich,” it was also that for the Bitcoin system to be a transformative force it needs the “network effect” of more money coming into the space, which in turn requires institution-friendly regulation. 

“For people to realize their ambitions that it’s a stateless money … for it to be adopted by people who live within the confines of a sovereign state, unfortunately it will have to be regulated and there’s almost nothing we can do about it,” Pal said.

Some might see a contradiction: for Bitcoin to realize its power as a “stateless” network, the state must exercise more control over it. But Pal’s point is about sequencing. He says we need to first go through a process of official accommodation within the existing system to advance Bitcoin’s journey along “Metcalfe’s Law.” Once it becomes a ubiquitous network, then it is in a position to properly challenge that system. 

Indeed, as Carlson pointed out, the positive thing, for those who believe in Bitcoin’s disruptive potential, is that “you’re not going to implement KYC and AML at the protocol level.” Since “there is nothing inherent to Bitcoin that can be regulated, enforced or controlled in that way,“ it can at that level always resist official coercion. 

But she also worried that the ever-growing encroachment of compliance requirements on applications built on top of that protocol impedes access to it among marginalized and financially excluded people. 

Carlson cited how LocalBitcoins, a peer-to-peer exchange network that was once a “gateway to economic freedom” in places that impose capital controls and other forms of monetary repression, has “increasingly come under scrutiny and has to institute more and more KYC and AML standards and protocols. She added, “That’s problematic where we are talking about people who don’t have any identity or are unbanked and are refugees and so forth.”

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Dominatrix Mistress Harley sees bitcoin as a crucial part of her business. The tech-savvy sex worker talks with CoinDesk reporter Leigh Cuen about bitcoin, sex and the kinky community. 

Mistress Harley, a “techdomme” who specializes in digital BDSM, said “if you think about power exchange, there’s almost nothing in our society more powerful than money.”

Harley is among the growing cohort of online sex workers that offer financial domination (findom) experiences. Findom has also become a popular category on video streaming platforms that accept bitcoin, like Chaturbate and Fancentro. Fancentro marketing representative Mark Asquith said findom “broke out into the mainstream in 2020.” Fancentro alone now has hundreds of influencers offering more than 1,500 porn clips in this niche. 

“COVID gave findom its 50 Shades moment. It’s not just about exchanging money for content anymore, it’s about providing income to the influencer,” Asquith said. “In the next year or so, we’re going to see a dissolution of the findom binary, an understanding that there’s an entire spectrum of fandoms that involve elements of sexual thrill for financial support.”

Likewise, Pornhub VP Corey Price said in 2020 the platform has roughly seen 12,000 searches for “findom” per month. There are many ways for findom aficionados to practice their art. Sometimes they sign automatic payment contracts, without exchanging porn at all, because part of the humiliation is paying the dominatrix to ignore the submissive. In other circumstances, the submissive completes complex tasks, like mining bitcoin, to earn money for the dominatrix. For yet another example, some submissives give the dominant control over digital wallets or bank accounts. 

Such is the case with developer Niki Flux, a coder by day and dominatrix by night. She once drained a client’s bank account, using teamviewer, locking him out of the account as part of the roleplay. 

“The idea was he was powerless to do anything about it,” Flux said. “It was an amazing session. I was tripping on endorphins for three days after, as was he.” 

Flux said “real findom” is rare, that most of the hype on Twitter is just for show. In reality, few can afford real findom experiences, since some submissives don’t get their money or data back. The risk is real. 

“The threat of blackmail and exposure can be a very powerful thing and it’s not something you’d engage in casually with some rando,” Flux said.

Thanks to COVID-19, dominatrixes are experimenting with new punishments and tasks. 

“I can get right into their crypto wallet and send myself as much currency as I want,” Harley said. “I have a lot of subs in places where porn is illegal, places like Kuwait and Qatar and Saudi Arabia. And the easiest way for them to pay is using a cryptocurrency” 

Bitcoin is proving to be an unparalleled boon for findom kinksters. 

Kinky bitcoiners

Asquith said there were “thousands of dollars worth of bitcoin payments” facilitated through Fancentro so far in 2020, a platform with more than 5,000 active monthly users. 

Since many platforms are not as open to kink content as Fancentro, sex workers like Flux and Harley are ramping up their experiments with bitcoin. 

“You so much as mention smothering, choking, pissing...and you’re en route to a stern warning from your [payments] provider,” Flux said. “As censorship and surveillance get ever more invasive, we need to have platforms and tools ready and working before it [deplatforming] kicks in.” 

As such, Flux offers developer services to other sex workers looking to add bitcoin payment options to their sites. A few of Flux’s clients pay her directly with wallets. However, she said bitcoin’s technical skill requirements are “way higher than most of my clients could operate.” Many such submissives prefer the speed of a website plug-in.   

“By definition, my audience has a tendency toward one-handed navigation,” she added. “To stop and wait 20 minutes for [bitcoin] confirmations doesn’t fit well with that.”

Longtime findom expert Mz.Kim said “bitcoin has the potential to be a useful and much needed tool for findom.” But, like most performers interviewed about this topic, she added the biggest limitation isn’t utility, it’s clients. 

“The barrier to using bitcoin has not been easy enough to cross for clients.  Unless crypto becomes more widely used as a currency, people won't take the time to start an account,” Mz.Kim said.

As for Harley, she said cryptocurrency is her favorite type of findom tool to work with because she can transfer money (almost) anonymously and instantly. She added findom is very different than actually ripping someone off because there is consent involved. There is often a type of “buy out” condition, where the submissive can pay an agreed amount to stop the findom relationship. Plus, dominatrixes must clarify limits with their submissives. 

“We engage in a conversation asking their limits, what’s too far?” Harley said, describing consent in findom. “Sometimes people tell me their limits are bankruptcy, that’s a very reasonable limit. But some people do not have that limit, so swirl that around in your head for a minute.” 

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Join Michael Casey & Sheila Warren as they speak with Elizabeth Rossiello, CEO of AZA Finance and Sebastian Serrano, CEO of Ripio for a discussion on the past, present and future of bitcoin and stablecoins in Africa and South America.

Bitcoin, Stablecoins and International Adoption

This week’s accompanying Money Reimagined podcast episode looks at the adoption of cryptocurrencies and stablecoins in emerging markets, which over the past year has seen real signs of life. Is this finally the moment to realize one of the great hopes of this technology: to enable financial empowerment in developing countries where traditional finance is constrained? 

To explore that question, my co-host Sheila Warren and I are joined by Elizabeth Rossiello, the founder and CEO of AZA, which has for seven years been developing digital payment solutions in African markets, and Sebastian Serrano, the founder and CEO of Ripio, which has been doing similar work in Latin America for more or less the same amount of time.

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