Thursday, Dec 28, 2023

newsletter changes, big regulation steps, re-tokenization for institutions, web3 hiring

“What lies behind you and what lies in front of you, pales in comparison to what lies inside of you.” – Ralph Waldo Emerson ||

Hello everyone! I sincerely hope the past few days have gifted you with some snuggly moments and wonderful memories – I know you have all earned it, after the year we’ve collectively had. Only a few more days before we can welcome 2024 with the fanfare we hope it deserves.

You’re reading the daily premium Crypto is Macro Now newsletter, where I look at the growing overlap between the crypto and macro landscapes. There’s also usually some market commentary, but NOTHING I say is investment advice. For full disclosure, I have held the same long positions in BTC and ETH for years, and have no intention to either buy more or sell in the near future.

If you’re not a subscriber, I do hope you’ll consider becoming one! It would help enable me to continue to share what I learn as I work on figuring out where we’re going. It’s only $8/month ($90/year) for the next few days, going up to $12/month ($108/year) in January.

And if you find this newsletter useful, would you mind hitting the ❤ button at the bottom? I’m told it boosts the distribution algorithm.

IN THIS NEWSLETTER:

• Coming up in the newsletter

• Two giant steps toward greater crypto adoption via regulation

• Layered tokenization for institutions

• Web3 hiring

• Key figures

WHAT I’M WATCHING:

Coming up in the newsletter

So, I have some changes coming up, which I’m excited about. As of next week, I’m stepping back from hosting the CoinDesk Markets Daily podcast. It was fun, and I have nothing but the highest praise for the CoinDesk podcast team. But I want to spend more time focusing on big picture issues and going deeper on some of the trends that could shape the markets and economies of tomorrow. Markets are important, and I will continue covering crypto and macro market trends – just not on a granular, daily basis (unless there are important stories to tell).  

Part of my plan involves raising the price of the subscription. I wish I didn’t need to, and I understand that for some of you it might be a hefty cost jump, for which I apologize (given the range of great premium newsletters out there, I know this all adds up). But I hope to make it worth it for you. I’m quadrupling the discount on the annual subscription, so the increase there is less. As of January 7, the premium subscription will be $12/month or $108/year. Current subscriptions won’t be affected until renewal.

In exchange for this rate hike (inside joke), you get:

• A daily (Monday-Friday) email with trends, narratives and news items that illustrate where we’re heading, plus some useful links. (I will probably have to miss 2-3 days each month because of reasons.)

• Regularly updated snapshots of where we are with tokenization and CBDCs (starting mid-January).

• The occasional essay and deep dive (at least one every two weeks, my goal is to get to weekly).

• The occasional interview, starting in February.

Also, I’m thinking of adding audio to the newsletters, in case you have more listening time than reading time. Would that be helpful?

I’m excited about experimenting with new formats, media and content styles in coming months. If you have any suggestions, please let me know in the comments.

Two giant steps toward greater crypto adoption via regulation

The past few days delivered strong signals that crypto regulation is coming in two of the ecosystem’s largest potential markets: Nigeria and Turkey.

Neither have made moves to create legal frameworks as yet, despite active crypto communities. Nigeria went as far as to attempt to shut crypto businesses out of the economy by forbidding banks to service them.

Nigeria

The ban is being walked back. Last week, the Central Bank of Nigeria (CBN) issued a circular authorizing banks to open accounts for licensed cryptocurrency businesses. This is a big deal for a country that ranked second in Chainalysis’ 2023 Global Adoption Index.

According to Chainalysis, Nigeria not only accounts for the bulk of Sub-Saharan crypto transaction volume, it also was one of only six economies in the top 50 ranked by size that saw crypto activity increase in the year leading up to mid-2023. In part, this is due to the country’s unstable monetary policy, with cash shortages and an inflation rate of 28% and climbing. In naira terms, BTC is up more than 420% over the past year.

(chart via Google)

Crypto’s appeal in Nigeria is also due to the country’s entrepreneurial spirit – with a youth unemployment rate of over 7% and a median age of 18, many have no option but to trade whatever they can, and new technologies tend to be seen as opportunities – Lagos is widely regarded as Africa’s “Silicon Valley”. Crypto assets are a relatively easy market for young Nigerians to get into, and the high volatility can earn savvy traders enough to support families.

The change in central bank policy regarding bank services should help crypto exchanges to expand operations, extending investor protection by giving more users access to businesses that conform to certain legal requirements. It also signals the government’s acceptance that a comprehensive legal framework for crypto activity in the country is inevitable – a poll earlier this year suggested that almost half of the population own or use cryptocurrencies daily.

Turkey

Many countries are gearing up to address the convergence of crypto and macro markets – Turkey is taking a somewhat unusual approach. Last week, Bloomberg reported that President Erdogan has appointed Fatma Ozkul, a professor who teaches about crypto assets and blockchain technology, to the central bank’s rate-setting committee.

This does not mean that crypto assets will form part of central bank policy going forward – but Professor Ozkul is an intriguing choice, given her deep knowledge of the crypto industry. In 2022, she published a book on crypto asset accounting, and more recently has focused on blockchain, crypto assets and their implications on finance.

This move comes as the country, which came in 12th in Chainalysis’ 2023 Global Adoption Index and ninth in terms of retail crypto exchange activity, is gearing up to design rules for licensing and taxation, according to reports. About time – a PwC report published earlier this month singled out Turkey as trailing other mid-sized economies in addressing crypto issues.

While Turkey is one of the few large democracies without an election coming up, a crypto asset regime is likely to be politically popular, which never hurts. As with Nigeria, a recent survey showed that around half of the population has invested in crypto assets, with most activity focused on bitcoin.

Next?

Overall, these two moves taken together reinforce the global march toward regulatory clarity around crypto-related businesses and investment, just as awareness is spreading about the role of hard digital assets and stablecoins in protecting savings in uncertain currency environments.

Another economy to watch is India (ranked first in Chainalaysis’ global adoption list), which concluded its G-20 presidency earlier this year by wrangling a group agreement to make coordinated crypto policy a priority for 2024. Not that long ago it was heading in an even more drastic direction than Nigeria, actively considering a crypto currency ban. That, thankfully, now seems to be off the table.

Layered tokenization for institutions

If (like me) you’re here for the market impact of crypto technologies, you’ll have invested some thought into the inevitable convergence of crypto and traditional exchanges. By “traditional”, I mean markets for stocks, bonds, commodities and other assets that trade on exchanges with centralized ledger-based ownership control.

The advantage of blockchain-based exchanges is the possibility of instant settlement, the transparency of transfers and ownership behaviour, the real-time reporting saving significant back-office costs, the flexibility, the programmability, the fractionalization, etc. The disadvantage is the colossal task of adapting layered, intertwined and regulated processes to a new type of platform with different data structures and rules.

Well, we can safely say that 2023 ushered in significant steps toward that eventual melding, which is both astonishing and encouraging, given how overwhelmingly complex the task is.

I’m in the process of combing through the year’s headlines in this field to determine key progress indicators and identify the main barriers, and I’m coming across some illuminating twists. I’ll be writing more about these in January, but for now, here’s one item from December that caught my attention.

In one of the more “meta” stories I’ve seen this year, a digital asset exchange tokenized Ethereum-based tokens issued by a tokenization company. Or, to put it more succinctly, a tokenized tokenization security was tokenized. (I’m laughing just typing this.)

I’ll unpack this for you.