Harmony Allocates $300M to Poach From Ethereum

The biggest crypto news and ideas of the day

Sept. 10, 2021

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Today's must-reads

Top Shelf

BIG SPENDERS: The Algorand Foundation has launched a 150 million ALGO (US$300 million) fund to support DeFi innovation on the Algorand network. Meanwhile, the Harmony Foundation is allocating more than $300 million in the network's ONE token over the next four years to attract projects away from Ethereum.

DIGITAL ASSETS: Swiss stock exchange SIX has been given regulatory approval to launch an exchange and depository for digital assets by Swiss financial regulator FINMA. It is not clear yet exactly which digital assets will be supported, though SIX's initial announcement three years ago made reference to tokenizing traditional securities.

EURO ADOPTION: The European Securities and Markets Authority published a report on financial trends and risks last week that called cryptocurrencies "volatile" but "innovative." Meanwhile the U.K.'s Post Office will next week start offering users the ability to purchase crypto through its identity-verification service, EasyID.

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Overheard on CoinDesk TV...

Sound Bites

"I don't necessarily think applying 80-year-old laws to these kinds of dynamics are really the best way that government can promote innovation wealth creation and access to financial inclusion."

–Former CFTC official Brian Quintenz on the regulatory girdlock in the U.S., on CoinDesk TV's "First Mover."

What others are writing...

Off-Chain Signals

The New Yorker is auctioning off an NFT of its cover to benefit 9/11-themed charities
Inside the cult of crypto (Financial Times)
How Joseph Lubin became Wall Street's crypto whisperer (Financial Times)
Benoit Coeure calls on central banks to 'act now' on crypto and DeFi (The Block)
Acting US Comptroller Hsu says he's looking to the lessons of 2008 for crypto regulation (The Block)

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Putting the news in perspective

The Takeaway

Bukele's MS-13 Double-Bind

Among the reactions to El Salvador's adoption of bitcoin as legal tender, which became official this week, has been concern about Salvadoran President Nayib Bukele's relationship with the country's violent gangs. Those gangs, including the California-bred group MS-13, have made El Salvador one of the most dangerous places in the world.

Bukele's administration is known to have met with leaders of the dominant gangs, mostly in prisons, as documented by the Salvadoran news service El Faro. The Bukele administration officially denies the meetings, which has raised significant suspicion.

These meetings have often been loosely bundled with Bukele's strong-arm legislative and judicial moves to characterize him, particularly in the international press, as corrupt and authoritarian. One looming worry based on this assessment is that the new Salvadoran bitcoin policy, particularly the national dollar-bitcoin exchange facility, could be abused by criminals via influence among national leaders, particularly for money laundering.

But this is at best a simplistic picture of Bukele's relationship with the gangs, and quite likely simply inaccurate. Though there are many unknowns, there's no clear evidence the Bukele administration, or its bitcoin policy, have been subverted by gang ties.

According to all available evidence, Bukele's negotiations with gang leaders have involved giving them concessions, including increased prison privileges and limited amnesty for former members, in exchange for the bosses reducing murders across the country. The sub-rosa negotiations appear to have been successful, with the murder rate down by nearly half since Bukele took power in 2019 (though those numbers were already trending downwards).

According to Tiziano Breda, an analyst covering Central American conflicts for the think tank The Crisis Group, the negotiations are, if anything, less corrupt than those that led to a brief 2012 truce. That deal, under former President Mauricio Funes, allegedly included shuttling prostitutes into prisons and establishing "no go" zones for Salvadoran police.

The problem for Bukele is that negotiating with the gangs is viewed with suspicion by both the Salvadoran public and, it seems, the international community. Domestically, Bukele has officially denied negotiations and instead claimed the drop in murders is the result of a militarized "Iron Fist" approach to the gangs. That approach is much more popular with the Salvadoran public than any sort of negotiations, Breda told me – even though there's no evidence that military force is an effective solution to the complex social and economic failures underpinning the gang situation.

Negotiations are certainly not what the international community wants, either; powerful global players benefit immensely from constant combat in Central America. Though Breda says Salvadoran gangs are not deeply involved in drug trafficking, the international stance towards the entire region has been shaped by U.S. drug war policies. Those have included billions of dollars in military spending for operations including the training of terrorist paramilitaries [https://www.dukeupress.edu/the-school-of-the-americas] to combat both drug cartels and left-wing governments.

Those plans have meant big bucks for American firms, even as they destabilized the region and significantly contributed to El Salvador's decades of violence. So while we still have much to learn about Nayib Bukele, critics seeking to use his de-escalation policies against him deserve at least as much skepticism as he does.

–David Z. Morris