Letter to The FT re: How safe are your digital assets? #TechFT
Updated: Dec 7, 2021
bitcoin, the brand, is now something that even eskimos have probably heard of, so it is right on trend for The FT to come out with a supplement. Here is my response to the editorial.
Beeple: You suspect the Beeple NFT purchase may end up as worthless (the one that sold for $69 mn @ Christies entitled Beeple’s collage, Everydays: The First 5000 Days). Well I will have egg on my face if it does. Auction houses tend to ensure high selling items remain on their websites as ATH (all time high) pricing and they perpetuate this story with knock on publicity about only one story: the prices, which the media soak up like dry sponges . The likelihood that anyone will pay £5 for it as such a unique piece and artist because the artist was launched into the limelight after years of making painstaking conceptual art is like 'don't get in a taxi, people get killed in taxi's'. Yes its true but why focus on the extreme negative? Moving onto Central bank coins and blockchains: Generally understand there are two types of blockchain: public and private (example: Ripple is private a payment blockchain within banks). And a central bank coin has a clue in the name: it is centralised so just like a bank and so therefore not decentralised crypto. Your name check for Solana, Avalanche and binance coin. If you are going to mention the big platforms why not mention their native coins Sol and Avax? And binance coin is bnb fyi. Additionally in all your NFT commentary there is not one mention of Cryptokitties the original NFTs nor Dapper Labs who created them to demonstrate use case for the Ethereum blockchain. NFTs are dangerous. I beg to differ. Just drawing your attention to the 45 page report from Morgan Stanley last week with reams about the financial possibilities for luxury brands to cash in on unique items in the gaming world and to reduce production costs thus raising profits considerably. Your mention of wallets for NFTs is just Metamask. It is a great wallet, no dispute, but for beginners it takes time to use - it has multiple layers including a browser function like Google. There are plenty of wallets that are much easier, even Coinbase and Crypto.com have good simple offerings. Throwing Discord into the limelight, again, Discord is not easy to use for the layman, so if you are providing a dummies guide, you just went into a dark place which is most of the problem with crypto. Crypto and NFTs are made to look complicated when it really has grown up a lot and isn't. Discord is actually where the communities of these coins/NFTs sit; its customer service; its review, rewards and AMA (ask me anything). Its also the home of the airdrops which is the free stuff if you sign up early enough for whatever is coming to market or if you own something in crypto or NFT already and are a member of their Discord group, then you will get more, because the founding projects reward the users as a method of adoption and publicity. On the subject of scams, I feel there is so much focus on scams. In my 4.5 years in crypto I would estimate it to be only about 3% of my portfolio in losses and they always teach a valuable lesson - ask the community if the offer or project is viable. 3% is not great but its not 100%. If Visa can connect to crypto but in normal credit card world build in fraud costs to the users surely crypto can with a levy on the whole industry to support an overseer? Throw in some disclaimers and insurance? Statements in this supplement veer into tech fear without even considering real life. However I do accept that scams are very convincing in emulating celebrities and looking real and obviously it should be stopped. There is a big rise in fraud detection applications through companies like Chainanalysis which undoubtedly help institutional and corporates get involved with a safety net. Facebook/Meta coin (Novi, Diem). Based on the Cambridge Analytica court case and FB involvement, I think a Meta coin is cause for concern with governments and for the public. However it would be centralised not decentralised so is not crypto. China. With reference to the Central bank digital coin, I would be very concerned as a Chinese citizen that the cashflow tap would get turned off, cutting access to my money. Again its centralised so is not a crypto. Despite the Chinese ban, I think pushing this will push people into bitcoin rather than away in order to have access to funds if all else fails, even if it is banned.
Stablecoins. Your commentary misses the whole point that they are already used substantially with crypto natives despite the debate about whether then are pegged properly or not. The crypto world is using crypto as currency and taking payments in multiple stablecoins for seed funding; NFTs and swops into other crypto 'currencies'. On the Monetary Authority of Singapore. Lawyers in the region are deep in NFT projects and it may well become a hub but Switzerland and Cayman are there already. Security. If everything can be traced on blockexplorer.com why is there so much belief in voodoo disappearing coins?
Family offices. Yes they are getting involved but there is no mention of a very interesting story: the rise of the trustee acting for family offices to enter and navigate crypto. Watch this space as successful entrepreneurs ask trusted advisors to operate in this space on their behalf. Although it is not without complication because of trust structures, beneficiaries and liability. Cold storage. Cold storage which means storing crypto offline is generally good practice, it is not expensive as you suggest, its approx £100 for a device. However it is slightly 'fingers and thumbs' to use and you do feel like you are Alan Turing 'Breaking the Code'. Meme coins like Shiba Inu and their losses. The reality is people invest big scale early particularly if someone like Vitalik (Eth founder) touches anything because he is a crypto legend. If there is a pump or rise in market price, then traders will dump or sell to take profit. Crypto is a trading industry looking for opportunity like FX and hedge funds or indeed a combo of both. The difficulty with meme coins or stocks is the new actors who may be Revolut style customers like retail investors have no understanding of trading behaviour nor the fact that meme coins are perceived as low value coins by the crypto market. So they buy them. As with doge they are very likely to plummet. Buyer beware. AML: The reality with the regulatory world is that they are putting AML on small time private investors who are being clunked with the same hammer as a bank. As many sensible books have said, "why not have a £1000 level before AML is required?" Not all transactions need to be tracked. I am sure like myself many who have purchased crypto have spent time with their bank having to convince them they are not a drug lord and in fact they have a full financial history of many years or decades on their files which might include salary slips. I see this as the scourge of the introduction of AI in financial services. Now everyone is to be shut down. Celebs endorsing campaigns on social media re crypto and other dicey stuff. Celebrities have endorsed coins which clearly look like a scheme to rip people off. Notably the boxer Floyd Mayweather Jr. and music producer Khaled Khaled, known as DJ Khaled, for failing to disclose payments they received for promoting investments in Initial Coin Offerings (ICOs). But these have been reported and fines issued. Without admitting or denying the findings, Mayweather and Khaled agreed to pay penalties and interest. Mayweather agreed to pay $300,000 in disgorgement, a $300,000 penalty, and $14,775 in prejudgment interest. Khaled agreed to pay $50,000 in disgorgement, a $100,000 penalty, and $2,725 in prejudgment interest.
In addition, Mayweather agreed not to promote any securities, digital or otherwise, for three years, and Khaled agreed to a similar ban for two years. You also have commentary from B2C2 who have been involved in a fascinating court case, one of the first in the sector which is helping set case law where crypto natives sue crypto native. Quoine, a Japanese exchange were sued by B2C2 for reversing trades when their algorithm failed. However isn't the fraud problem, generally, social media rather than crypto? I could throw in a bit of stupidity as well with the squid coin but as I have said already, watch out for meme coins. The power of social media to distribute messages is 'greater than god'. The media has legislation and rules. Why can these not be applied to social media and those who post there? Sponsored, paid for or free gifts should be made clear to the viewer. It seems these platforms can give us a 100 boxes to untick to get out of their advertising options but not even one to say this is identified as a paid promotion or free goods were given. To me it does not seem that hard to regulate.
And finally...not one mention of Mark Cuban anywhere? As big a god as Elon. Nevertheless, at least you are bringing balanced content on this topic even if it needs a bit of fine tuning. For that I say bravo.
https://www.sec.gov/news/press-release/2018-268
https://www.sicc.gov.sg/docs/default-source/modules-document/judgments/quoine-pte-ltd-v-b2c2-ltd.pdf
