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Off Chain 2/9/23: Britcoin is coming
347 Plays1 year ago
In this week's episode of Off Chain, we discuss the following:
- The UK release more information on their plans for a digital Pound CBDC.
- Robinhood Wants to Buy Its Shares Back from Sam Bankman-Fried
- Arbitrum announces the launch of “Stylus”, it’s next-gen programming environment
- Signature Bank Lawsuit Alleges It 'Substantially Facilitated' FTX Fraud
- Binance Will Temporarily Suspend US Dollar Bank Transfers
Recommended![CBDCs: The [Dark] Future of Money (Part 2 of 2) image](https://media.zencastr.com/cdn-cgi/image/width=112,quality=85/image-files/61fc0461fb20e00040aeb09e/5b9f1396-2a8e-418d-82a0-30fd00969266.jpg)
Transcript
Introduction to Podcast
00:00:13
Speaker
Hello, and welcome to the Decrypting Crypto Podcast. It's February 9th, and this is Off Chain, your weekly recap of the biggest stories in Web 3. I'm Matthew Housebarbie, and back alongside me after a bit of a bout of sickness, Austin Knight. How you doing, Austin? I am recovering and super pumped about some Bitcoin NFTs. That was some cool stuff that you were diving into there.
00:00:37
Speaker
It's to say I've been down the rabbit hole is an understatement. I have been in the depths of discord and believe me, the surface of discord, isn't that great? Wait till you get to the depths. So it's been pretty interesting for anyone listening. If you haven't listened to the deep dive episode that we released yesterday, go have a little look. It's a good primer on everything that's happening there. But today,
Upcoming Crypto News
00:01:05
Speaker
We're going to be talking through a few quick news stories, important stories that are kind of coming up. One centers around central bank digital currencies. We're going to be doing a deep dive, deep dive episode into that. Some exciting announcements in the Arbitrum ecosystem, Robinhood, and of course, our friend Sam Bankman Fried back in the news. And then a little update on some just additional FTX fraud, of course.
00:01:35
Speaker
Let's jump into our first story of the day.
The UK's Brit Coin Exploration
00:01:45
Speaker
The UK has just wrapped up the first paper from a consultation around their plans for a digital pound sterling. This is a central bank digital currency. If you haven't heard of what that is, what that means, strap yourself in because we're going to be talking about it a lot over the next few years and it is going to be in the news a lot.
00:02:09
Speaker
I like to affectionately refer to the digital pound as Brit coin. I think that's the best way to coin this. It's a few years away from release yet, but the Bank of England
00:02:22
Speaker
actually believes it could supplant cash by the end of the decade, which I do think is a bit of a focus, even though on one side I'm hearing that that is something they believe might happen, but also they're being very cautious about saying that. People are very touchy about cash over here, as I'm sure they are in the US.
00:02:40
Speaker
But what was interesting is just from within this paper, there are a lot of things to pull out from it. So I'm going to give you a bit of a quote just to give an overview of what the UK government are describing the Brit coin as. So, quote, a digital pound would be a new form of digital money for use by households and businesses for their everyday payment needs.
00:03:06
Speaker
Now, this is an important piece because there's this big stress on like these everyday payments and where they're trying to frame the digital pound is actually they're very anti people using this to hold and save money. And there's kind of been a few comments here around it not being a store of value and actually just for smaller purchases that can be used kind of
00:03:32
Speaker
in the exact same way as you'd view cache. And I think they're looking at this as a kind of one-to-one, but the digital version of like actual physical cache in the way that it should be used. So this recently published consultation paper, it also alluded
00:03:48
Speaker
to a potential 20,000 pound limit on holdings. So you couldn't actually hold more than 20,000 brick coins in your wallet. They said, I quote, we judge that a limit of between 10,000 and 20,000 pounds per individual is likely to strike an appropriate balance between hanging risks and supporting wide usability of the digital pound. So it's basically avoiding this as a store of wealth, and it seems like
00:04:17
Speaker
them hedging against any risk of anything going wrong, which, to be honest, doesn't fill me with the most confidence. But it seems it's much more for everyday spending. I just don't understand this. Even just thinking about actively discouraging people to hold larger amounts of the currency, surely, surely,
00:04:37
Speaker
you want that to be the case and it's very confusing design to me and actually what happens what they've said would happen of course these are still plans that are in progress and i believe they said that 2025 they will have the plans finalized but
00:04:55
Speaker
The idea would be if anything that came over that balance of £20,000 in your digital wallet, it would actually be swept up and stored into a commercial bank as like real pound sterling. So, you know, that's kind of strange experience, but
Global CBDC Interest and Concerns
00:05:16
Speaker
Central Bank digital currencies are going to be a big theme here. Close to 30 governments, including China, the Bahamas, Jamaica, have either fully launched CBDCs or are running pilot schemes. We're going to be talking about this a lot.
00:05:31
Speaker
We're definitely, Austin, I know you've been itching for us to do a deep dive into CBDCs. We're gonna do a dedicated episode and we're gonna definitely jump in and get a few more voices on the pod to chat through the implications of this, because this is a big one, right?
00:05:48
Speaker
It really is. It's a huge topic. And I think there's also just a deficit of information out there on it and awareness. Matt, you were talking about, you know, cashing up being used as a store of wealth. Well, say speak for yourself, man. I mean, you should my house is insulated.
00:06:05
Speaker
With cash. And we'll be tweeting out Austin's home address for everyone to pull apart his walls sometime soon. I think there's obviously going to be huge resistance to this type of thing and for good reason. I was at my barber yesterday and he was talking about how it turns out there's a law in Texas
00:06:30
Speaker
that says that if you are a business open to the public you legally must accept cash as legal tender and so you know all of these businesses that are kind of trying to say like nope we're like card only and everything like that Texas it says hey
00:06:46
Speaker
No says I, all right. So there is, yeah, and of course there's a whole host of reasons for that, you know, going all the way back to privacy and, you know, financial freedom, and also just, I guess you could say some some form of habit, right. But
00:07:04
Speaker
I think generally, you know, you're right. Like CBDCs are something that everybody should be paying attention to personally. I think that they come with serious risks. I think in some ways they're incompatible with the concept of freedom. But at the same time, 80 percent of central banks are investigating them in some way or another. I think the writing is on the wall. This is going to continue to move forward. And when it does, you're going to have no choice but to use them. Right. Because it's you are subject
00:07:34
Speaker
to the monopoly that is your government, the government gang, the mafia that rules over you will say how you must pay them. So I think that we need to be aware of their dangers and shape policy accordingly. Like you were talking about with the Brit coin in particular, I was reading the proposal, and there were a couple elements to it that I thought were somewhat smart. Like, for example, it says that neither the government
00:07:59
Speaker
nor the Bank of England would have access to personal data. That's just in this original early white paper. But privacy is a huge concern when it comes to CBDCs in addition to unstable monetary policy, financial discrimination, security, hacks, all of these things. And so I think that being aware of the risks will be, it's really important for the populace, the voter base, what have you,
00:08:28
Speaker
to educate themselves on this so that they can shape how their policymakers think about this and put things like CBDCs into play if we all accept that, you know, to one extent or another, it is an inevitability. So I'm really looking forward to diving into CBDCs in a future deep dive. I think it's a super interesting topic.
00:08:50
Speaker
Couldn't agree more. And I think there's a whole lot to unpack there. I agree with you. They are an inevitability.
Robinhood and SBF's Legal Entanglements
00:08:57
Speaker
So yeah, let's dive in in more detail, but let's jump into our second story of the day. It's our favorite man, SPF again.
00:09:09
Speaker
Robinhood wants to buy its shares back from SPF. You may have recalled over the entire SPF and XFTX saga that we've mentioned a few times that SPF had bought a 7.6% stake in Robinhood through a holding company. And now this is a contested factor in SPF's criminal case and FTX's bankruptcy. More detail on that later. But that amounted to 55%
00:09:38
Speaker
Million shares and now Robin Hood is attempting to buy that back In fact, they've already gotten it approved by their board of directors and when this was announced Their stock popped by about 5% up to $11
00:09:53
Speaker
Not too great in the grand scheme of things, but hey. It is a positive reaction from the market. You may recall Robinhood's all-time high was I think somewhere around $70, maybe a little over back in August of 2021. And so this immediately got me thinking like, okay,
00:10:13
Speaker
if Robinhood is trying to buy these shares back now, does that mean that they're like trying to get them at a discount from when SPF bought those shares? As far as I could tell, he purchased them back in May of 2022 when they were around the $10 mark as well. So it's roughly the same. But the purchase price has fluctuated over the course of time. It looks like he purchased them for $648 million. And most of that was
00:10:42
Speaker
through a $546 million Alameda research loan, which is really like where the contested aspect of this comes into play. Well, I think from Robinhood, it's interesting, right? Because there's one piece where it's like, okay, there's probably a fair bit of leverage they have because these assets need to be liquidated. They might get them for discount. On the other side, it's pretty obvious they're in a precarious situation because if they don't buy them and they get dumped on the market,
00:11:10
Speaker
Well, that five percent is going to quickly get wiped out and they're going to be sinking much, much further down. Yeah. Oh, absolutely. And yeah, as far as I can tell, I don't think they'd be purchasing them at much of a discount anyway. So it seems to me like this is really an attempt to, you know, secure the safety of their business and their shareholders. But the thing is right now, the U.S. Department of Justice has custody of those shares.
00:11:38
Speaker
And Robin Hood isn't the only party trying to get to get them from the DOJ. In fact, BlockFi is attempting to gain custody of them. You may remember in our episode on December 1st of last year when we were talking about the BlockFi bankruptcy in their bankruptcy filing, BlockFi claimed that that these shares, the Robin Hood shares were part of an agreement that they made with FTX last November. So they feel
00:12:07
Speaker
that they have the rights to these shares. And then separately, SBF's own lawyers have filed a motion to keep the shares, claiming that he needs them to pay for his criminal defense. Oh, wow. Yeah, poor SBF.
00:12:24
Speaker
Pour us beer. Give him the shares. Give him the shares. It'll be a mean block fight. Come on. Hey, come on. All you people that lost your life savings, maybe you're living on the streets now, and it was all used in that $546 million loan from Alameda Research. Pocket change. Pocket change. Yeah, absolutely. That's how many hours of work from his lawyers. Not many.
00:12:50
Speaker
Really, you know, you want to just completely hold off on getting what is rightfully yours so that SPF can use the money that was stolen from you to defend himself from being brought to justice for stealing that money from you. I hear you. I hear you. Amen. Amen. The fun continues with FTX. Don't worry. We've got some more FTX drama on the way, but first let's jump into an interesting story about Albatrim.
Arbitrum's Innovations and Market Impact
00:13:23
Speaker
Arbitrum the exciting and kind of pretty sexy right now layer to blockchain that's getting wrapped up in all of the hype around layer twos Just made a pretty interesting announcement. I think this is a really cool one Austin. I don't always dig into like
00:13:39
Speaker
the more technical announcements on blockchains, because I think a lot of it is more hype than anything. But this is something that I think is really interesting. So they announced the launch of Stylus, which is coming later on this year, but they revealed all of the information about it. It's a kind of next gen programming environment. So the high level here, right, is that
00:14:01
Speaker
Right now, you want to kind of deploy code building on Ethereum or an Ethereum virtual machine compatible chain. Well, you need to know Solidity. And that is not an easy language to work with. It makes developer tooling very, very difficult.
00:14:20
Speaker
What stylus is going to bring? It basically enables developers to deploy code using popular programming languages like Rust, C, C++, directly onto Arbitrum, which will be EVM compatible. So this is just going to really reduce the barriers to entry and cost to deploy code. I think in areas, and we've got an episode next week,
00:14:43
Speaker
coming out with Carole Vong from Treasure. And Carole talks a bit about this where it's going to really open up the gaming space and make more developers come in and make it a lot easier for DeFi applications and other innovative developers to come in without the big technical barriers of really getting to grips of solidity, which is not an easy language to work with or to learn.
00:15:10
Speaker
And I think this is really interesting you know I talked a little bit about how arbitrum along with the likes of like the optimism chain where it's it uses optimistic roll ups to ultimately help with scaling Ethereum so transaction volumes greater lower costs.
00:15:29
Speaker
that the entire ecosystem in Arbitrum is just insane right now in terms of just pure price action. So if we look at like the past 30 days, GMX, which many of you have probably had us talking about before, the big decentralized options protocol, up 70%. Grail, the native token of Camelot, which is quickly becoming one of the most popular decentralized exchanges on Arbitrum. Really cool one to look out at. Up
00:15:56
Speaker
640% Austin. Wow. Yeah. Oh my goodness. Pretty good. Jones, part of Jonestow. We've had them on the podcast.
00:16:07
Speaker
year, two years ago, but there are decentralized managed investment vaults, 128%, Dopex, DPX, that is, up 68%. There's a lot of exciting stuff on Arbitrum. We're actually going to have the chief marketing officer from Arbitrum come on the podcast in a couple of weeks as well to talk a bit more about that ecosystem. But
00:16:28
Speaker
I think this is very exciting. I think this is cool. I love seeing ways where not just for user onboarding, but for developer tooling and developer onboarding, it's going to help make kind of like those, uh, those innovative and like talented developers come on building interesting decentralized applications and more within blockchains like this. That's ultimately going to help with.
00:16:51
Speaker
you know, creating more utility and entry points into Ethereum and the wider ecosystem, and Arbitrum is a key gateway for that. So we'll be digging in more. I would definitely recommend tuning in next Tuesday for the episode with Karel from Treasure, where we dive a little bit deeper into that. Austin, let's dive into our last story of the day, and you know it's going to be one of our favorite topics again, right?
FTX's Legal Fallout and Banking Impacts
00:17:21
Speaker
A lawsuit against Signature Bank is alleging that it, quote, substantially facilitated FTX fraud. That was fraud in FTX. Oh, my goodness. And now now we're starting to think, OK, maybe it's it's not just.
00:17:40
Speaker
held within the famous walls of that Bahamas. Yeah. Yeah. The many walls in the shape of an F or at least the future walls, right? Oh, my favorite office building in the world. So good.
00:17:57
Speaker
All right, so yeah, there's this bank. It's based out of New York. It's called Signature Bank. They have been hit with a class action lawsuit alleging that they facilitated FTX's activities prior to the collapse. Now, this was filed on Monday in the US District Court for the Southern District of New York. Hmm. Does that sound familiar to you, Matt?
00:18:20
Speaker
Yeah, rings a bell. Rings a bell. That's where the FTX case is at as well. That makes sense. Now, what's being alleged in this lawsuit is actually pretty interesting. It's alleging that Signature, quote, had actual knowledge of and substantially facilitated
00:18:38
Speaker
the now infamous FTX fraud," end quote. It says that Signature was aware of the FTX fraud since at least June of 2020. Remember, the collapse happened in November of 2022. So, I mean, that's quite an amount of time.
00:18:55
Speaker
Yeah. The plaintiffs, it says, expressly told the bank that suspicious funds transfers to Alameda were initially for FTX. So they were basically watching these suspicious fund transfers from Alameda to FTX and back and forth.
00:19:16
Speaker
And what's being alleged in the lawsuit is that they were aware of these funds transfers and that they had flagged them and that they still allowed the funds to be transferred to Alameda anyway. So that's odd, right? Basically, you could imagine Signature Bank sitting there and saying, okay, there's a funds transfer that's coming in.
00:19:37
Speaker
That's like from a customer or an institution that's supposed to be for FTX and it's going to Alameda. That looks odd, but we're still going to allow that to happen anyway. At least that's what's being alleged in the lawsuit. And it says that signature quote substantially facilitated
00:19:55
Speaker
the FTX fraud by, one, publicly promoting the crypto exchange, two, failing to close, suspend, or otherwise limit any Alameda or FTX accounts, even though the bank knew that the accounts violated FTX's own terms of service. And this is, you know, by the funds that were meant for FTX going to Alameda and vice versa. And then three, accepting additional customer deposits into Alameda accounts after learning of the fraud.
00:20:24
Speaker
That's pretty damning. Yeah, this is pretty serious. And I think it's interesting because this is really the first that I've heard, Matt, tell me if I'm wrong here, of an entity outside of FTX really being majorly implicated in the FTX fraud.
00:20:45
Speaker
And Signature is not doing too well right now as far as we can tell. Their Q4 2022 report indicated a $1 billion net loss attributable to shareholders and of course
00:20:58
Speaker
This is set to the backdrop of US senators going after other banks like Silvergate right now in connection to fraud. So I think it's an interesting one to keep a close eye on. But you may be thinking to yourself, wait, I've heard
00:21:15
Speaker
that name Signature Bank before. Yeah, it was brought up in connection with Binance. So recently we talked about how Signature Bank had suspended transactions under $100,000 with Binance through Swift. So yeah,
00:21:37
Speaker
What was it that like two, three episodes ago, we were talking about a signature bank who is Binance's Swift partner said that they're going to suspend any USD transactions under $100,000. Well, now Binance has said that it will temporarily suspend all US dollar bank transfers. And this is a quote from them. They said,
00:21:59
Speaker
We are temporarily suspending USD bank transfers as of February 8th. Affected customers are being notified directly. It's worth noting that only 0.01% of our monthly active users leverage USD bank transfers, but that we are working hard to restart service as soon as possible. Again, I'm actually quite surprised about that 0.01%. Yeah, that seems odd to me as well.
00:22:26
Speaker
I mean, like how else are people, like if you want to take your money out of finance and put it into your bank, how else are you really doing it other than through a bank transfer? I know that there's other routes that you could take, but for it to be 0.01% just seems shockingly low to me. It is strange, isn't it? It might be a combo of the fact that
00:22:49
Speaker
Binance is far less popular in the US and right that's that's the one yeah Yeah, and I think it's like okay You've got I would imagine most of their European and Asian like for me I use like bank transfer via Binance right, but obviously not in USD But as a as a percentage of their global base, I know that the US is much much less so it's probably that's the case but
00:23:16
Speaker
Yeah, there's a lot of, like, fear around this. I think clearly this is an issue that stems of Signature Bank. I don't know how worried I would be personally around some of this stuff around Binance per se, but you can see the ripple effects that are happening from all of this. Yeah.
00:23:33
Speaker
Yeah, it's wild. Now, it is worth mentioning that with regards to Binance, all other methods of buying and selling crypto are going to remain unaffected. And that includes deposits and withdrawals for euros. It includes buying and selling with credit cards, Google Pay, Apple Pay,
00:23:49
Speaker
and on the Binance peer-to-peer marketplace. So I don't think that this is a huge cause for alarm as much as it is interesting to your point, Matt, to kind of see the ripple effects here all the way from, you know, Signature Bank pausing or ending, you know, USD Swift transactions with Binance to them being sued over FTX, alleged FTX fraud to Binance halting USD bank transfers altogether. It's a wild,
00:24:18
Speaker
uh, tangled ecosystem here. Yeah. And I think what we're all kind of trying to keep an eye on is, you know, is that, is this it or is, are we waiting for another bombshell? And I think that's kind of the, the question mark around some of this stuff, but.
00:24:34
Speaker
We'll keep a close eye on it. Clearly, there's going to be a lot more developments. And just before we go, kind of plug a few upcoming exciting episodes we've got. Of course, we're going to be doing a deep dive in central bank digital currencies over the next few weeks. But we've got next week, Karel Vong from Treasure coming on, talking about Arbitrum Gaming. We'll have Andrew Saunders, CMO of Arbitrum, talking a bit more about the wider ecosystem coming soon. Yesterday, we had our deep dive
00:25:01
Speaker
primer into Bitcoin NFTs from Ordinals. And of course, next week, Austin, we'll be back for another episode of Off Chain. See you then, Austin. Talk to you later, Matt.
00:25:35
Speaker
The contents of the Decrypting Crypto podcast should not be used and are not intended as investment advice. Please do your own due diligence before making any investment, cryptocurrency or otherwise.