WEEKLY – Identification stress + the tokenization of money
plus: deposit tokens vs tokenized deposits, assorted links, food life and more
Hello everyone! I hope you’re all doing well, and getting ready for a fulfilling summer…
You’re reading the free weekly send of the premium daily Crypto is Macro Now, where I re-share a couple of the week’s posts and add some non-crypto and non-macro links since it’s the weekend. 🌼
PUBLISHED IN PARTNERSHIP WITH: ✨ ALLIUM ✨
Allium’s first State of Onchain Finance is out!
Using Allium data, it frames the expansion of onchain finance with numbers and charts, showing how much of stablecoin volume is real activity, where that activity is happening, the evolving use cases, the spread of tokenization across chains, the role of weekend markets and much, much more.
→ Read the full report: https://allium.so/reports/state-of-onchain-finance-q2-26
In this newsletter:
A system based on identity is vulnerable
Stablecoin hybrids and the “singleness” of money
Deposit tokens vs tokenized deposits
Assorted links: cheese curds, doom books, frustrating tech, climate confusion and the enhanced self.
Weekend: the life around food
Crypto is Macro Now offers ~daily commentary and updates on the overlap between the crypto and macro landscapes. Plus links and more.
If you’re a premium subscriber, thank you!! ❤
✨ Monetary Forces with Noelle Acheson and Izabella Kaminska ✨
This week, Izabella Kaminska (author of The Peg and The Blind Spot) and I did a Substack Livestream for our first episode of a joint podcast in which we talk about the impact of new technologies on the monetary forces that make the global economy turn. If you missed it, you can catch the playback here.
We’re keeping it low-key and simple for now, with zero production styling, and I still have to figure out the distribution. Our plan is to stream/record weekly until the end of July, take a summer break, and then regroup in September.
In each episode, we discuss a couple of key yet overlooked headlines, and we dive into a recent and relevant paper, pulling out what AI summaries miss and media coverage has overlooked.
If you enjoy nerdy details as well as big-picture takes on the new monetary forces shaping our landscape, come and join us!
First episode: Tuesday, June 23rd at 10am EST / 4pm CEST.
Link to livestream: https://open.substack.com/live-stream/255145
Some of the topics discussed in this week’s premium dailies:
Podcast announcement
Coming up this week: stablecoins, PCE
Monday mood: A system based on identity is vulnerable
Podcast episode recommendations
The US bans CBDCs
A twist in the perps debate
Term of the day: Margin Period of Risk (MPOR)
Markets: ouch
Special note: congrats to Allium!
Monetary Forces podcast: first episode in the bag!
Stablecoin hybrids and the “singleness” of money
Deposit tokens vs tokenized deposits
Pax Silica widens the wedge
Markets: clouds gather
China’s techno-industrial strategy: resilience
Macro: PCE clouds
Markets: feeling wobbly
Term of the day: Bear flattening
Podcast episode recommendations
A system based on identity is vulnerable
You know the tale of the scorpion and the frog? The scorpion asks the frog to ferry him to the other side of the river. The frog says no, you’ll sting me. The scorpion assures him he wouldn’t because then they’d both drown. So the frog agrees, and halfway across the scorpion stings him. As they’re sinking, the frog asks, why did you do that? “I’m a scorpion”, said the drowning killer, “it’s what we do.”
This story came to mind as I was reading the latest proposed GENIUS Act rulemaking and related statements.
For my non-American readers, legislation in the US works differently than in most other jurisdictions: the laws that get passed by Congress tend to be broad brushstrokes, and the individual regulators have to fill in the details that concern them. They submit proposals for public comment, prepare an amended draft for some inter-agency debate and review, and then publish the final rules in the Federal Register – only then does a law get implemented. In the case of the GENIUS Act, this will be 120 days after Federal Register publication, or on January 18, 2027, whichever comes first.
Last week, we got a joint proposed rule from five key US financial regulators: the Federal Reserve (its first participation in a GENIUS rulemaking proposal), the Office of the Comptroller of the Currency (OCC), the Financial Crimes Enforcement Network (FinCEN), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA).
It’s a long document but mostly padded with procedural issues (over six pages dedicated to where you should send comments to, not joking), definitions as well as a long summary of the GENIUS Act and what agencies have already done regarding crafting more detailed rules.
But the gist is this:
Stablecoin issuers should have to identify the accounts they onboard, in line with current Bank Secrecy Act standards – a Customer Identification Program (CIP). In other words, no entity should be able to mint or redeem stablecoins directly with an approved issuer without full identification.
Actually, that makes sense. Stablecoin issuers should be careful who they allow to create this new type of dollar, much like banks have to be careful who they allow to transfer huge funds across borders. We can all agree that preventing money laundering and other financial crimes where possible is a good idea, and top-tier account identification is low-hanging fruit.
So, I don’t have a problem with the identification proposal. In this case, the scorpion in my parable is Fed Governor Michael Barr (although I do only mean symbolically, I don’t know Mr. Barr personally and he is probably a nice guy).
He felt compelled to put out a separate statement saying that:
“the GENIUS Act regulatory framework does not do enough so far to address the risks of illicit finance conducted through secondary market transactions in payment stablecoins”. (my emphasis)
He went on to heavily imply that he thinks some of the CIP rule should be extended to secondary market activity.
On the one hand, I get it – regulated finance is all about identification.
But this is a head-scratching limitation of regulatory vision. Essentially, what the drive for more identification says, quite loudly, is that money-launderers should move to areas where full identification is not needed. Put differently, basing crime prevention on identification makes it absurdly easy to circumvent.
Now, if we were to base crime prevention on, you know, deterrence because you’re likely to be caught, we’d be able to cast a wider net without the utterly inefficient layers of identification requirements that put an onerous burden on everyone, especially smaller, more innovative businesses hoping to improve the payments experience.
So, the goal should be to onboard as many users as possible to monitored stablecoins, which means keeping identification requirements to a minimum. Add steps, and users will seek out more convenient alternatives, such as stablecoins without monitoring.
The main reason we want to encourage more “lit” stablecoin use is that the more criminals use them, the more we’ll learn about their connections, creating real-time maps and enabling the authorities to do a lot more than swat at figurative flies while the big insects transact elsewhere.
It’s frustrating that more regulators don’t understand this. In his statement, Barr says:
“it is far too easy for bad actors to evade these restrictions and operate without detection when transacting in digital assets”.
That is not true. Onchain forensics is not a perfect science, but it has repeatedly shown its effectiveness in tracing movements and in helping authorities and issuers seize illicit funds. As it continues to integrate with AI, it will get better.
There’s a reason the use of stablecoins for money laundering is actually low, compared to in the fiat system. Onchain forensics firm Chainalysis estimates that illicit use accounts for less than 0.5% of total stablecoin activity. The United Nations Office on Drugs and Crime, on the other hand, estimates the amount of money laundered each year to be 2-5% of global GDP.
After all, criminals will always have a choice of payment networks, and adding friction encourages the development of new ones.
Over the weekend, I read an article in Aeon, published in March, on underground banking. Well-written and eye-opening, I learnt quite a bit about the efficiency of informal banking in underserved communities. The author focuses on hawala, feiqian and similar systems involving cash, codes and trust. Crypto assets, he argues, are less trusted because of their transparency. Fair. But then he goes on to say this:
“It is one of the great ironies of modern finance that a technology designed for anonymity has produced its antithesis.”
My inner pedant can’t help herself. First, neither Bitcoin nor most subsequent public blockchains were designed for anonymity. They were designed for decentralization, not the same thing at all.
Second, they have not produced its antithesis – public blockchains are usually pseudonymous, and sophisticated data analysis can reveal identities when the incentives to do so compensate the cost. But most of us can transact peer-to-peer without onerous identification, and most of us will find that easier to trust than handing over cash to a stranger.
But the author is correct that transparent networks are not ideal for illicit finance. It is therefore baffling that regulators would rather push criminals onto darker networks than instead focus on honing detection and tracing, especially given the tools available today.
Of course, financial regulators have to regulate finance, it’s what they do – and the fragmentation of traditional banking networks, with no global oversight and little real-time cooperation between jurisdictions, makes user identification the key. It will take a leap of imagination and a fair amount of homework for yesterday’s regulators to understand that the emerging substrate of tomorrow’s payments don’t work the same way.
🌻If you find this newsletter at all worthwhile, would you mind sharing it with a friend or colleague and nudging them to subscribe? I’d appreciate it!
Stablecoin hybrids and the “singleness” of money
We’re used to thinking of the evolution of onchain money as a stablecoins vs deposit tokens battle, with fierce advocates for each insisting the other just cannot survive in the real world of finance.
But over the past few weeks, we’ve seen two concrete examples of a compromise that also offers the user more choice.
Last month, SoFi launched its SoFiUSD stablecoin on Ethereum and Solana, and made it available via the SoFi app for the platform’s almost 15 million users. Like other stablecoins, SoFiUSD can deploy throughout the crypto ecosystem, and – as of a couple of days ago – trades on the centralized exchange Bullish for institutional distribution outside the app. Meanwhile, the bank is preparing a twist: users that choose to hold their onchain money balances within the SoFi app will be able to do so in the form of a potentially yield-bearing, FDIC-insured deposit token (this feature is not yet live, but is expected soon).
Last week, Custodia and Vantage Bank released a white paper detailing the Hazel Network. Participating banks will be able to issue tokenized deposits that can be freely transferred to other participating banks. This is more than your typical bank consortium project, though: bank clients will also be able to transfer their onchain money outside the network, whereupon the deposit token converts into a stablecoin, issued by Custodia. What’s more, this conversion happens programmatically – no extra steps for users. As far as the user is concerned, it’s the same token. The Hazel Network went live in beta on Ethereum in March, and is expected to start onboarding banks by the end of this year.
Both solutions are similar in that they bridge deposit tokens and stablecoins, allowing users to benefit from the advantages of each. When the token is held on its respective platform, it’s a bank-issued deposit token that can earn interest. But they don’t have to stay within the limited network, they can be sent outside in the form of a stablecoin.
Also, for now, both run on public networks – Ethereum for Hazel, and Ethereum + Solana for SoFi.
One notable difference is that the SoFi solution was built by a bank for enterprise partners, other banks and fintechs as stablecoin infrastructure, while also serving its own mainly retail users. The Hazel Network was built by banks for other banks.
Another is that the Hazel Network melds the concept of deposit token and stablecoin in the user experience, while SoFi, if I understand correctly, requires in-app user conversion.
Hats off to all involved in both initiatives, for these innovations as well as the other crypto-tradfi connections they have been working on over the years.
SoFi is not your typical bank – one of its co-founders was Mike Cagney, who left in 2017 and went on to found onchain lender Figure which recently went public at almost $800 million. So, it was early to crypto, and last November became the first nationally chartered US bank to offer retail crypto trading directly in a banking app. From the beginning, it has seemed more like a technology company with a banking charter than a tech-forward bank – after all, it’s registered name is “SoFi Technologies”.
Custodia’s founder and CEO Caitlin Long is a long-time crypto advocate with deep tradfi roots, who has been involved in pushing crypto policy at both the state and federal level. Her bank was awarded one of Wyoming’s earliest Special Purpose Depository Institution (SPDI) licenses to offer full-reserve banking services, and is currently involved in legal action against the Federal Reserve due to what many of us see as wrongful denial of a master account.
Not for nothing, but earlier this month, Vantage Bank’s CEO Jeff Sinnott and Custodia’s CEO Caitlin Long were awarded #1 and #2 respectively in American Banker’s 50 Most Innovative People in Finance rankings.
Stepping back, the hybrid approach highlights what deposit tokens and stablecoins have in common – both are based on new types of ledgers that enable them to more efficiently move between accounts as well as slot into new types of applications and directly interact with assets on the same ledger. (I know, I’m abstracting the considerable difference between private and public blockchains, but the principle holds.)
It also highlights the key difference: what backs the tokens. For deposit tokens, it’s bank deposits; for stablecoins, it’s short-term US Treasuries and other cash-like assets.
With the hybrid approach, the difference in the underpinning value (deposits vs cash-like securities) becomes a back-office issue, not a user choice. The difference abstracts into the background.
It’s early days yet, but it will be interesting to see what this does to monetary authorities’ concerns that the fragmented stablecoin landscape threatens the “singleness” of money, with all forms fungible with each other and exchangeable with minimal friction. Stablecoins are not the same as deposit tokens – but if users can seamlessly switch between the two, if conversion friction gets smoothed, then from the user’s point of view, the boundaries get blurred.
What’s more, this kind of hybrid approach can do more than help overcome the “walled garden” limitations of deposit tokens and the fragmentation inherent in stablecoin networks. It could also help banks see stablecoins as less of a threat and more of an opportunity, while moving the industry towards a new understanding of what money even is.
See also:
How tokenized deposits could compete with stablecoins (June 2026)
SoFi: A bank goes full crypto (Nov 2025)
Deposit tokens vs tokenized deposits
You might have noticed that I avoid using the term “tokenized deposits” wherever possible. I am aware this is a battle I will lose because vocabulary gets ingrained fast, even when it makes no sense. But here is the reasoning behind my objection:
Deposits aren’t a thing you can tokenize.
I looked up the official meaning according to the Federal Reserve, which for some reason insists on defining it in the plural: “funds that customers place with a bank and that the bank is obligated to repay on demand”. This links the customer’s money to a contract between the depositor and the financial institution. Put differently, a deposit is not just money, it is also an obligation. How do you tokenize that?
Of course, onchain tokens can represent obligations as well as value and these can be transferred, just like bonds can be traded. But a deposit contract is not necessarily fungible, whereas the funds are, and the tokenized funds certainly should be.
A “deposit token”, on the other hand, is a token that represents funds in a deposit – makes much more sense, right?
Let’s extend my pedantry even further to scrutinize the order of the words.
In the term “tokenized deposit”, tokenized is the describing word, deposit is the noun. As I’ve established, you can’t tokenize a deposit and expect it to be fungible.
But with “deposit token”, token is the noun and “deposit” indicates what backs it, much like the terms “gold token” or “real estate token” efficiently describe what backs them.
Again, makes more sense, right?
Stepping back, this matters.
Tokenized deposits imply an onchain representation of a banking relationship.
Deposit tokens are an onchain representation of commercial bank money.
Which term do you think sounds like it has more innovation potential?
ASSORTED LINKS
(A selection of reads I came across this week that I think are worth sharing, not about crypto nor macro. I try to choose links without a paywall, but when I feel it’s worth making an exception, I specify.)
Derek Thompson argues that the spreading obsession in the US with the “Enhanced Self” – with improving physical fitness, sleep scores, weight, etc. – is no doubt good for our body’s health – but what about our mental health? What exactly are optimizers optimizing for? (The Cult of the Enhanced Self, Derek Thompson)
One of the reasons I’ve long found “green” political parties so sinister is that they insist they have the answers, they know how to fight climate change, we just have to give them power and huge budgets – but, as Quico Toro explains , no-one has the answers. (Against Climate Narratives, One Percent Brighter)
This rant by Brian Phillips starts off uplifting, veers into irreverent but funny, and wraps up with a truly cathartic (while a bit off-the-rails) naming and shaming of why many of us say we hate tech, while relying on it. (The 40 Most Rage-Inducing Problems in Tech, The Ringer)
Ted Gioia shares his top-22 books for understanding today’s threats to civilization as we know it. (A Reading List for the End of Civilization, The Honest Broker)
A thoroughly enjoyable post that changed my appreciation of cheese curds and other forms of local, truly local, food. (Cheese Curds and the Things That Still Have an Address, Titty Boobowitz)
HAVE A GREAT WEEKEND!
(in this section, I share stuff that has NOTHING to do with macro or crypto, ‘cos it’s the weekend and life is interesting)
Regular readers will know by now that I love sharing professional photos every now and then, as a reminder of how stunning the world we inhabit can be, and how much our appreciation depends on our personal lens.
Today, some evocative images from the World Food Photography Awards 2026 – I’ve chosen a few examples depicting the life around food from the gallery of Finalists, but there are also still lifes, fantasy, humour and more. I strongly recommend you check them all out.
photo by Yanqin Zhu
photo by Kayako Sareen
photo by Patrick Mateer
photo by Edwin S Loyola
photo by Judith Balari
DISCLAIMER: I never give trading ideas, and NOTHING I say is investment advice! I hold some BTC, ETH and a tiny amount of some smaller tokens, but they’re all long-term holdings – I don’t trade. Also, I often use AI for research instead of Google, but never for writing.