NFTs and DeFi in FATF's Sight

What you need to know today in crypto and beyond

March 22, 2021

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Top Shelf

Today's must-reads

TIGHTER RULES: The Financial Action Task Force (FAFT) released an updated draft of guidance Friday that could expand its purview over an even larger swath of the cryptocurrency industry. Notably, decentralized finance (DeFi) and non-fungible tokens (NFT) are in the anti-money laundering authority's sight. Technical considerations make regulating these pseudonymous-by-design tools difficult, though new rules could see founders, investors and VC firms responsible for these open platforms.

DELAYED OFFERING: Coinbase's highly anticipated public offering has been shifted to April after its plan for a March listing "slipped." No reason was given for the delay, Bloomberg first reported. The U.S. Securities and Exchange Commission (SEC) has been reviewing the San Francisco-based exchange's plan for a direct listing. On Friday, Coinbase settled with the Commodity Futures Trading Commission (CFTC) over allegations it self-traded cryptocurrencies between 2015 and 2018. It will pay a $6.5 million fine.

PRIVACY PREVARICATION: A People's Bank of China official said a fully anonymous digital yuan is "not feasible" because of technical limitations and the need to balance user rights with "international consensus" on risk control. The central bank digital currency will be tied to mobile phone numbers, limiting privacy, though would offer more pseudonymity than commercial payments products like bank cards, WeChat or Alipay, the official claimed.

ATTEMPTED BAN? After public pushback, the central bank of Nigeria (CBN) has clarified a statement that seemed to order financial institutions to shut down all accounts associated with cryptocurrency trading, saying the order is not an outright ban. Meanwhile, peer-to-peer bitcoin trading volumes in Morocco have increased during the last three years despite a long-standing ban.

– Daniel Kuhn

Sound Bite

Overheard on CoinDesk TV

"The people that are betting long-term on bitcoin really are betting that bitcoin takes a place within the network and structure of global reserve currencies. It becomes money."

Veteran trader and founder of Factor Trading Co. Peter Brandt said Monday on CoinDesk TV's First Mover.

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Off-Chain Signals

What others are writing....

A look at BitClout, the "crypto celebrity network" that monetizes everyone's Twitter profile with or without their consent. (Decrypt)

Nic Carter takes a crypto-philosophical approach to NFTs, which are "a process, rather than a product."

Everything you ever wanted to know about Coinbase. (Mirror)

The Guardian's bi-weekly puzzle is based on zero-knowledge proofs!

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The Takeaway

Putting the news in perspective

The In-Group and the NFT Group

My all-time favorite movie review came out in 2012 when The New Yorker tasked Anthony Lane with covering "The Amazing Spider-Man" and "Take This Waltz." Really, I just like the end of the first paragraph, which makes a distinctly New Yorkerly objection to the first film. Lane wrote:

"Marvel Comics could at least have taken the opportunity to elide the intensely annoying hyphen in the title. Or does merely suggesting such a change make me a total ass-hole?"

As if The New Yorker should talk about punctuation ... but, no, stop – I mustn't digress. See, I have this theory about the truly rarefied publishing organs. I believe in every one there's a few irascible editors around who understand that it is their publication's job, its role in the very order of the society that trusts it, to studiously hate new and strange phenomena.

In particular, they must hate that which has any hint of having "bubbled up" into public consciousness, while providing a bit more latitude for that which has "trickled down."

In my head, Lane had a conversation something like this with his assigning editor:

"Hey, Anthony, can you pick up this new thing with Seth Rogen and Sarah Silverman? 'The Lousy Waltz' or something?"

"Yeah sure."
"Oh and the new Spider-Man?"
"You bet."
"Listen, on the Spider-Man...?"
"Yeah?"
"You hate it."
"OK."
"You can hate it for whatever reason you want, but you hate it."

"Sure thing, Chief."

Something like that. This is almost certainly not like anything that happened except for, perhaps, within their hearts.

So, it is in this spirit that I entered into Jason Farago's critic's notebook entry in the comparably venerable The New York Times: "Beeple has won. Here's what we've lost," which grapples with the sale of 5,000 artworks in one non-fungible token at Christie's for $69 million in ETH.

I confess, I began reading this skeptical that anything's been lost simply because one guy managed to get paid for a kind of output that previously folks have had a hard time getting paid for. But, ok, let's go through what Farago has to say.

He opens with a little Andy Warhol and does some explaining about crypto. Then he puts the Beeple sale into a kind of historical/cultural context. I think this part might be on point ... but really, I don't have any clue what he is saying:

"Today's new money prefers its own systems of both finance and culture, where cryptocurrency's anarcho-libertarianism dovetails with certain boys' amusements: the subliterate comedy of Salt Bae and Boaty McBoatface, the penny-ante heroism of online role-playing games, and the stunted emotions of streaming porn."

Next, he offers a quick history of prior artistic commentary on ownership and commerce before the obligatory parenthetical on Ethereum's environmental impact (Did you know that every time an NFT gets made a family of sea turtles must be blendered into smoothies for expat Italian nobility? There was a Medium post on it.)

Finally, he gets into his criticism. And of course that's fine. Criticism is its own kind of art.

I don't want to argue about whether Beeple's work is or isn't good or about just how Farago dismisses it. I want to make a different point, the point I was hinting at in my imagined vignette about The New Yorker and its review of "The Amazing Spider-Man."

It doesn't matter what these pieces actually say about the new thing that is dismissed; that's not the work these essays are doing.

These are about instructing the in-group about what they should care about and what they definitely should not (that is, the out-group's leavings). New things, after all, can be confusing, now more than ever.

These works are a sort of service journalism. It needs to be easy enough to say, "Well, I read about that in the Times and it sounded ridiculous" and that's the end of it. That's the actual point. No one needs to remember what was said; the permission to ignore it just needs to be printed somewhere estimable.

Upon rereading the Farago passage quoted above, I do understand it. It only takes two words to do so: "new money."

Do cinematic treatments of comic books mean the form has crossed over – like 18th century novels – from a mere mass market diversion to a form worthy of the more refined? No, not yet? Oh, good.

And does the fact that an auction house like Christie's sold one of these pieces mean the artistically interested need to actually – you know – be seen taking an interest? No? What a relief. Who has the time?

But you know what they say: "First they ignore you, then they laugh at you and then you have a contentious chain split and weirdly the total value across both blockchains only goes up because nothing makes sense on the internet. So it goes."

I am going to make a prediction: One day, estimable people will be expected to have estimable opinions on the works of crypto artists (or at least to parrot someone else's, probably published in the Times), just as they do about painting and ballet and esoteric film (none of which are going anywhere).

But not yet, Connecticut crowd! Never fear, Park Avenue. The Times has given you a pass on NFTs. You don't need to worry about them quite yet.

It's ok if the smart set takes a pass on the blockchain's artworks. I'm taking a pass on "The Crown." Both will be fine.

Before we part, just allow me this last aside in response to Lane's question about punctuation: Since you asked – kinda. Yes?

– Brady Dale

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