September 30, 2022

Exploring transformation of value in the digital age

By Michael J. Casey, Chief Content Officer

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With a meltdown in the British pound exposing the fragility of the global financial system, the debate of what form a digital dollar will take in the future has never been more urgent. This week's column lays out the case for a stablecoin-fueled model of money in which the dollar functions as an open "protocol" on which innovation can thrive. It also lays out some warnings about the downside of that vision.

This week's episode of the "Money Reimagined" podcast was recorded at Circle Internet Financial's Converge conference in San Francisco, where we dove into the thorny issue of self-sovereign digital identity. My co-host Sheila Warren and I talked to Daniel Buchner, who is building privacy-preserving identity solutions for Block's tbDEX exchange, and to Chi Nnadi, the CEO of Mara, which is creating crypto products for African consumers. Have a listen after reading the newsletter.

Launched in September 2017, KuCoin is a global cryptocurrency exchange with its operational headquarters in Seychelles. As a user-oriented platform with focus on inclusiveness and community action reach, it offers over 700 digital assets, and currently provides spot trading, margin trading, P2P fiat trading, futures trading, staking, and lending to its 20 million users in 207 countries and regions.

In 2022, KuCoin raised over $150 million in investments through a pre-Series B round, bringing total investments to $170 million with Round A combined, at a total valuation of $10 billion. KuCoin is currently one of the top 5 crypto exchanges according to CoinMarketCap. Forbes also named KuCoin one of the Best Crypto Exchanges in 2021. In 2022, The Ascent named KuCoin the Best Crypto App for enthusiasts.

The Dollar Can Be a Protocol for the Future of Money

(Ralf Hiemisch/Getty Images)

This week in San Francisco I attended Circle Internet Financial's star-studded Converge conference and was struck by the wide array of projects working with its USDC stablecoin.

Participants included Latin America-based payments company Ripio, which is seeing surging demand for USDC transfers in Brazil and Argentina, or the Web3 service provider Recur, which solely accepts the stablecoin from users of its various metaverse worlds, including Star Trek Continuum.

It seems USDC, the second most-traded stablecoin, is developing its own "ecosystem," a word (perhaps overused) that open-source advocates apply to networks of third-party developers and providers that build on a tech platform. Below I'll get to a lesson I see here for U.S. lawmakers contemplating what digital form the dollar should take. But let's first reflect on these ecosystem ideas as they pertain to a stablecoin like USDC. It's not an obvious concept, though its implications are profound.

Let's compare Converge to NEARCon, the annual conference sponsored by the Near Foundation I attended two weeks ago in Lisbon. It's easier to understand that event as an "ecosystem conference." Like other such gatherings – Ethereum's Devcon being a prime example – Near uses it to bring together and energize the far-flung community of developers and companies building dapps and other services with smart contracts that run on its protocol.

USDC isn't a smart contract protocol for dapps. It's primarily a payment vehicle, conceived of by most people as a "coin." It is a tokenized expression of dollar-based value that happens to be more fluid than non-digital dollars, one that can be exchanged peer-to-peer over public blockchains. (Circle's launch on Wednesday of a new cross-chain transfer protocol brings USDC a little closer to a more common definition of a crypto protocol, but it's not why all those third-party, USDC-tied providers attended the event.)

Yet, as I see it, USDC is developing the mother of all protocols.

Read the full story here...

Off the Charts: BTC Still Tied to Stocks

There were times of late, in BTC's seesawing above and below the $20,000 mark, when it seemed like bitcoin was breaking free of its months-long tethering to U.S. stocks.

On one occasion this week, it briefly jumped sharply over that threshold even as stocks plateaued, but then quickly fell back below it without much connection to what was going on in equities.

Might we be seeing a breakdown in the recent coupling of stocks and bitcoin as "risk asset" in a period of rising interest rates? I asked CoinDesk's Sage Young to check.

(Sage Young/CoinDesk)

Sorry, folks, not much relief there.

While the positive correlation between BTC and the S&P 500 is not as extreme as it was in the spring, we're still nowhere near bitcoin's historical, once-vaunted status as an "uncorrelated asset."

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The Conversation: Meta Meme

With mainstream finance consumed by a mounting currency crisis in the U.K., and decentralized finance (DeFi) focused on news of Interpol issuing an international arrest warrant for former Terraform Labs CEO Do Kwon on the South Korean government's behalf, former BitMEX Arthur Hayes produced a tweet for the ages. It has multiple layers of meta meaning to contemplate.

The surface level joke is funny: Terra's monetary policy for its UST algorithmic stablecoin and its sister LUNA token was a disastrous failure for the entire crypto industry earlier this year.

That the tweet comes from Hayes, who was also on the run from authorities before being sentenced to two years probation in May for violating the Bank Secrecy Act, adds another layer of meaning.

And then there's the fact that other Twitter users are now accusing Hayes of a crime: that of "stealing" the Kwon-U.K. meme without attribution.

Relevant Reads: Staying Above Water

(Bruno Kelzer/Unsplash)

As we continue to reflect on the importance of developing a "programmable" form of money for the future, we have to keep in mind the macro picture and how the current U.S. monetary strategy is affecting the value of bitcoin and the dollar. CoinDesk's reporters have looked at this from a variety of angles this week.

Omkar Godbole explains that bitcoin's seasonal October bullishness might not play out this year, given that USD liquidity has slipped to a year-to-date low.
Jocelyn Yang reported that investors have been piling into bitcoin over the past week, even though there is still doubt over whether bitcoin is actually an inflation hedge.
Helene Braun observed that the Fed may not be able to pivot from its aggressive monetary strategy, even though the Bank of England was able to do so on Wednesday by returning to outright purchases of bonds.

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