Coinbase, Fidelity, Robinhood Back AML Efforts

The biggest crypto news and ideas of the day

Feb. 16, 2022

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Welcome to The Node.

In today's newsletter: Berkshire Hathaway invests in a digital bank. Oil giant uses flared gas for bitcoin mining. And Russian banks pilot CBDC.

Questions? Feedback? We'd love to hear from you – simply reply to this email.

–Daniel Kuhn

Today's must-reads

Top Shelf

LATIN AMERICA: Berkshire Hathaway bought $1 billion in shares of Nubank, a Brazil digital bank, during the fourth quarter of 2021. According to an SEC filing, the Nebraska-based holding company acquired 30 million of the bank's shares for $250 million. Meanwhile, venture capital investments in crypto and blockchain firms in Latin America reached $653 million in 2021, almost 10 times more than was invested in 2020, according to a report published by the Association for Private Capital Investment in Latin America (LAVCA).

GAS-LESS?: Texas-based ConocoPhillips, the giant oil and gas exploration and production company, is routing excess natural gas from one of its Bakken region projects in North Dakota to supply necessary power to a bitcoin mining operation. On a recent conference call, the company said it is committed to further reducing its methane emissions and has a "zero routine flaring ambition" by 2025. Likewise, the Russian subsidiary of bitcoin miner BitRiver said it was "net zero" for carbon emissions in the second half of last year, a standard regulated by the Russian government.

LEGITIMATE PAYMENTS: Three Russian banks are piloting a CBDC, or central bank digital currency, which would support transactions for their clients using existing mobile bank apps. Separately, the Bank of Russia said it started the pilot stage of its digital ruble. The bank is offering its CBDC as an alternative to cryptocurrencies, while reiterating its call to ban blockchain-based digital assets. Meanwhile, the U.K.'s Financial Conduct Authority has raised concerns over crypto exchange Binance gaining access to the country's primary payments network through a deal with the Paysafe corporation. However, the financial watchdog has "limited powers to object to arrangements of this kind."

CRYPTO CRIME: A trio of crypto heavyweights – Coinbase, Fidelity and Robinhood – have joined forces to bring digital assets in step with global anti-money laundering (AML) rules. In total, there are some 18 virtual asset service providers (VASP) participating, including Gemini, Kraken and Paxos, in the launch of the Travel Rule Universal Solution Technology (TRUST). The TRUST platform was created in response to AML data sharing requirements. Such standards might be necessary, as analytics firm Chainalysis has found that 4% of "crypto whales," or wallets with at least $1 million worth of digital assets, are so-called "criminal whales," having received at least 10% of their funds from illicit sources.

NFT TRADEMARK: Tech stocks are hot and the New York Stock Exchange (NYSE) is buying in on the hype. The NYSE has filed an application with the U.S. Patent and Trademark Office (USPTO) to provide an online marketplace for various digital goods including non-fungible tokens (NFT), cryptocurrencies, digital media and network.

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Overheard on CoinDesk TV...

Sound Bites

"Our focus is to move 100% of the government services online."

–Ukraine's Minister of Digital Transformation Alex Bornyakov, on CoinDesk TV's "First Mover."

What others are writing...

Off-Chain Signals

PayPal to limit some NFT transactions for its merchant-focused Seller Protection program (The Block)
FTX's Amy Wu: How Crypto and Gamers Can All Get Along (Decrypt)
Fidelity International Enables Direct Investment in Bitcoin (Blockworks)
Bakkt, Once Wall Street's Hot Crypto Play, Has Cooled (WSJ)
Why you can't rebuild Wikipedia with crypto (The Verge)
Crypto, for cool girls (Vox)

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Putting the news in perspective

The Takeaway

What Web 3 Can Learn From 3D TV

I often get the sense that outside of the crypto industry most people are still skeptical about all the things grouped under the "Web 3" brand. More than skeptical, sometimes, but also downright antagonistic.

Yesterday, Jared Holt, the Atlantic Council's resident expert on domestic extremism and digital culture, and the brains behind the "SH!TPOST" Substack newsletter and podcast, tweeted the hope that American consumers would band together to reject next-gen, crypto-based web technologies.

"It is my sincere hope that we can come together enough to forcibly reject [Web 3] as the hyper-commodified disease that it is," Holt said.

Strong words from Holt, a reporter turned talking head. I don't know much about Holt's politics, other than he has built a brand covering right-wing extremism and misinformation, but if they veer anywhere close to his employer's it's the establishment norm.

The Atlantic Council pushes the "neoliberal" line, a word that, like "Web 3," is often used but lacks a coherent definition. Essentially, neoliberalism is the mainstream political posture in the U.S. – the pro-markets, anti-regulation, strain of capitalism that took hold after Lyndon Johnson's push for a "Great Society."

Neoliberalism is about consumer choice, so long as mega-corporations are in the position to present those choices. It's about austere public-private partnerships rather than expansive government-provided services or purely competition-derived solutions. And, perhaps ironically for Holt, in fetishing privatization it leads to commodification.

As always, it's worth asking "cui bono?" Who benefits from crypto? Earlier this year, bitcoin advocate Jack Dorsey suggested "crypto" markets have already been cornered by venture capitalists and other major crypto investors. That's not a question Holt raised; he questioned the very idea of technological progress.

"There's always this talk about growth and development as if it's innately good. That framing needs to be aggressively questioned. 'Growth' can be bad," Holt added. We already live with a high degree of technological sophistication and convenience – like the smart phones in our pocket, he said. When is enough enough?

Web 3, still in development, wants to give power, influence and monetary rewards to regular internet users. It does this, by and large, by decentralizing the internet stack and adding tradable crypto tokens. Instead of top-down corporations shipping products, token holders would have influence over a platform's management and share in its upside. It's "commodification," adding another element of monetization to the web, but for a purpose.

Web 3's solutions may not ultimately be desirable, but it seems like an experiment worth undertaking. Someone who studies disinformation ought to know how contemporary economic models play a hand in boosting extreme voices for engagement. Such maladjusted behavior may not be the case when advertising is no longer the end goal for internet platforms, or when users have an explicit economic stake (something to lose) tied to their identities.

Consumer resistance

In a reply to Holt, Bellingcat investigative reporter Robert Evans said, "We killed 3D TVs. We can kill this," referring to Web 3. It's an illustrative example.

According to Livewire, 3D TV became television's "next big thing" after the success of James Cameron's 2009 film "Avatar" – in what's now called the "Avatar effect." Big entertainment studios and manufacturers started preparing for a world of embodied televisual experiences. But the trend was dead on arrival.

It was a combination of expensive equipment (goggles, remotes, etc.), the number of consumers upgrading to HDTVs and reports the holograms created caused nausea that killed 3D TV. Most importantly, there was a lack of genuine demand. Samsung and Sony stopped releasing 3D tech in 2016, according to Livewire.

This might be a trend "metaverse" builders should study, but it also has bearing for Web 3. It's already an issue that people like Evans and Holt, and likely average Joes, see Web 3 as something being forced on them. There may be benefits, maybe even better consumer experiences, but it still appears like a trend that's mostly coming from the top down.

Despite the fact that Andreessen Horowitz is leading a "Web 3" charge to get governments to support (or at least not regulate out of existence) crypto development, there's no group or agency that can make this shift happen. Web 3 is neoliberal in the sense that it's all about open markets, about competition at the protocol level and private solutions. But either consumers will adopt it or they won't.

-Daniel Kuhn

Staking Claims: Abra's CEO Talks Passive Income

Bill Barhydt is the kind of smart person other smart people listen to. Before he was an investment banker at Goldman Sachs, he developed rocket simulations at NASA, the fancy term is computational fluid dynamics. He spent the dawn of the Internet Age at Netscape, leaving behind the high-paying Wall Street job.

In his current incarnation as founder and CEO of Abra — a global crypto platform that offers a popular brokerage for buying and selling cryptos combined with interest-bearing wallets – Barhydt gave CoinDesk Studios a bit of his time recently to answer our questions about how to draw passive income from digital holdings.

*This is sponsored content from Abra.