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Tokenised is your weekly read to navigate and mine the rich vein of crypto developments that flow through India and SouthEast Asia
Good Evening Dear Reader,

Welcome to Tokenised. This week’s issue is structured a little differently. While we usually look at one main story each edition, this time around two things popped up on my radar and they seem to have something in common that may elude the eye at first glance. 


First, the central bank of the United States has aired some thoughts around issuing a digital dollar. Second, old social media giants are jumping into the shiny, new business of hawking non-fungible tokens (NFT). The common thread in both seems to be a fear of being left behind. 


Let’s jump right in.

Event 1: US Fed shares its thoughts about a digital dollar


In a much anticipated discussion paper released last week, the US Federal Reserve (nicknamed the Fed)—arguably the most important central bank in the world—laid out its thinking on a digital dollar. 


While the Fed has made no firm conclusion on whether it should create one, the discussion paper observed that the issuance of a digital dollar “would represent a highly significant innovation in American money.”


At its core, the Fed’s ambitions for a central bank digital currency (CBDC) rely on an intermediated (using commercial banks, private partners for distribution) approach for a public-facing digital dollar. In addition to using intermediaries, the central bank demarcated three other pillars that the CBDC must deliver on: 

  1. Privacy-protection: The Fed noted that a CBDC will need to strike the appropriate balance between safeguarding privacy and allowing for enough transparency to deter criminal activity.
  2. Transferable: It should be readily moveable between customers and different intermediaries.
  3. Identity-verified: In practice, intermediaries (like commercial banks or Visa/Mastercard) would need to verify the identity of a person using a digital dollar, just as banks currently verify customer identities. 

Reacting to the paper released by the US central bank, analysts at Bank of America (BofA) predicted in a Monday report that the United States will likely issue a digital currency of its own between 2025 and 2030. Such an issuance will also help preserve the dollar’s status as the world’s reserve currency, they noted. 


There are other approving noises. “While elsewhere such central bank digital currencies can appear ‘a solution in search of a problem’, America’s lacklustre retail banking system and the importance of the dollar in cross-border money flows make an obvious case for reform,” observed an opinion piece from the editorial board at the Financial Times. The piece argues that while the US central bank has been cautiously slow on digital currencies compared to its peers in China or Europe, it cannot remain a laggard forever. 


My personal takeaway on CBDCs so far has been that they’re much ado about nothing if the main objective is to make payments more efficient. There are cheaper ways to do that, Indian’s United Payments Interface (UPI) and Thailand’s PromptPay being two prominent examples. And making cross-border payments better via CBDCs will require immense coordination on rules and standards between central banks of the world. 


But, the “cannot remain a laggard forever” sentiment seems to be pushing the Fed’s CBDC ambitions for now.  


Which brings us to the second event we’re looking at this week. 


Event 2: Internet giants eye the next transaction business

  • Twitter has started to allow users to use NFT-linked art as profile pictures. 
  • Facebook and Instagram are working on plans that will allow users to mint and sell NFTs.
  • And, YouTube is exploring adding NFT features for video creators on the platform. 

For the uninitiated, non-fungible tokens (NFT) are digital tokens that represent ownership of digital items such as an image or a video clip. If you’d like to know more about NFTs, you can check out this October edition of Tokenised where we looked deeper into them.


Coming back to the social media giants though, their move towards NFTs seems to have been spurred by the desire to cash-in on a booming market that has grown to be worth over US$40 billion. By comparison, the traditional art market saw activity worth US$50 billion last year. 


While Twitter has bundled the NFT functionality with its Twitter Blue subscription, Financial Times reported that Meta (formerly Facebook) and Instagram have also discussed launching NFT marketplaces. Such platforms are likely to work on a model resembling OpenSea’s—acting like a trusted intermediary for exchange while also taking a bite out of the transaction value. The largest NFT marketplace, OpenSea currently charges a 2.5% fee on each transaction that occurs on its platform. 


YouTube, meanwhile, hasn’t specified how it will roll out or monetise its potential NFT play. Nevertheless, this marks parent firm Alphabet Inc.’s first foray into crypto activity after having kept it at arm’s length for quite some time. 


Now, the entry of old internet giants into a new internet business is perhaps the least surprising move of all. But amusingly enough, as in the case of the Fed, it is a fear of being left behind that is driving the ambitious plays at social media companies.


Common Thread


And that’s why I chose to write about these two seemingly separate events in conjunction. In many ways, that’s what crypto’s narrative has been for the longest time: ‘the train is leaving the station, you better get on.’


But what puzzles me deeply—and maybe this is just me—is how people will react to such activity. In many ways, the entry of big players like Twitter, Facebook, and YouTube, will eat at the libertarian roots that crypto platforms are so proud of touting. That said, a lingering question continues to be whether most people actually care about ideas like decentralisation, or reducing monopoly tech power, or whether it’s all just a matter of who can make it the easiest for users to play with the next shiny, new thing. 


As for CBDCs, they’re largely motivated by the need to counter a rising threat. For countries like Nigeria, issuing a CBDC is about fighting the appeal of a non-localised reserve asset—like Bitcoin or dollar-pegged stablecoins. And for nations like the United States, it’s about fending off a potential challenge to the dollar’s reserve status and upgrading payments architecture. 


In many ways, both these reactions are consistent with what crypto-assets have spurred since they broke into the limelight. There’s a new thing on the block that seems to be good business and stakeholders react in one of two ways: either try to co-opt it, or design something of their own to counter it. 


With that, let’s turn to a few other things that happened in crypto over the last few days.

Crispy bytes


  • Indonesia’s financial regulator has banned financial firms in the county from facilitating crypto sales. [Reuters]


  • Mark Zuckerberg’s ambitions to build a digital currency seem to have hit a dead-end as Meta-backed Diem explores a sale of assets. [Bloomberg]


  • Turkish citizens are turning to crypto-assets to seek stability as the Lira faces significant turmoil. [Financial Times]


  • The recent crypto-meltdown has been pretty hard on decentralised finance platforms due to wide-spread liquidations. [Bloomberg]


  • Traders managed to buy US$1 million worth of NFTs for a few thousands by exploiting a bug on NFT marketplace OpenSea. [Bloomberg]


  • Venture capital firm Andreessen Horowitz is seeking to raise US$4.5 billion for new investments in the crypto landscape. [Financial Times]


  • Russia’s central bank has proposed a full-scale ban on crypto mining and trading. [Al Jazeera]
Deeper dives

A few reading suggestions for those who’d like to sink their teeth a little deeper into the cryptoverse.

  • A Reuters investigation has found that the world’s largest crypto exchange, Binance, misled regulators on its compliance measures. Even though the exchange’s top executives publicly welcomed government oversight, the firm maintained weak checks on customers and acted against the advice of its own compliance department. [Link]


  • When tokens associated with venture capital-backed firms list on marquee crypto exchanges like Coinbase, their price usually sees a short-lived pop. While usually taken to be a signal of success, Fais Khan argues in this piece that the pop is more a function of limited liquidity than actual demand, and that listing on major exchanges might just be a quick way for VC firms to offload investment stakes once they’re done with them. [Link]

[Bonus: The Onion, a satirical publication, published its guide to Web3 a few days ago. All of it is worth a read, but here’s one bit in particular that made me smirk:

Q: What’s wrong with Web 2.0? 

A: Earlier iterations of the internet have nearly zero exploitative value left. ]
What caught my eye this week


[Source: Bloomberg (Top), Google Finance (Bottom)]

A tale of two zealots—President Nayib Bukele and Michael Saylor. 


While seperated massively in terms of both job profile and geography, Bukele and Saylor share a love for crypto that has turned them into icons for some, and unnecessarily risky gamblers for others. Bukele was the guy who declared bitcoin to be legal tender in El Salvador, and Saylor was the first chief executive of a major corporation to add the digital asset to its balance sheet. 


Even as El Salvador’s bonds have greatly underperformed the entirety of the sovereign bond market and Microstrategy’s stock is down over 33% year-to-date, the two remain exceptionally committed to their gambles. Bukele stated earlier this week that his country bought 410 bitcoins following the market crash. And last week, Saylor said that his company will never sell the bitcoin they own. 


Though I’d be the last person to criticise a gamble made on personal fortunes, playing with taxpayer and shareholder money is a different ball game altogether. Maybe Saylor and Bukele are maverick geniuses that know something all of us don’t (I doubt that though) or they’re just so deep in the hole that an exit could be fatal. I guess only time will deliver that verdict.

Share this edition

That’s all for this week’s edition. If you have any overarching thoughts (or even nitpicky ones) about this newsletter, please do write to me at [email protected]. As I am sure you noticed, I tried something new with the Tokensied format this week. If there’s something you specifically liked or disliked about it, please do let me know. 

If you enjoyed this issue of Tokenised, please do share this link. Or you can just use the easy-share buttons below.

Take care.
Jaspreet Kalra
Tokenised is your weekly read to navigate and mine the rich vein of crypto developments that flow through India and SouthEast Asia
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This newsletter has been discontinued. But you can read The Stack which includes our newsletters around cleantech, fintech, personal finance and e-commerce in India!