OCC Wants 'Overall Strategy' for Crypto

What you need to know today in crypto and beyond

June 3, 2021

Sponsored By:

Welcome to The Node.

If you were forwarded this newsletter and would like to receive it, sign up here.

Questions? Feedback? We'd love to hear from you! Simply reply to this email.

-Daniel Kuhn

Today's must-reads

Top Shelf

REINTERPRETATION: The Office of the Comptroller of the Currency (OCC) is looking to create an “overall strategy” for digital assets, Acting Comptroller Michael Hsu said in a virtual press conference Wednesday. In this, the agency is taking a broad review of former agency lead Brian Brooks’ pro-crypto interpretative guidance. “I’ve instructed the team, everything’s on the table ... while being cognizant of factors [like] constraints around decisions that have already been made,” Hsu said.

CRYPTO ATTACKS: Cryptocurrency is at the eye of the storm of a recent spate of ransomware attacks hitting everything from oil pipelines to meat producers. In a press conference yesterday, a White House spokesperson said the Biden administration will consider cyberattacks a matter of national security and direct efforts to "expanding cryptocurrency analysis to find and pursue criminal transaction[s]."

EURO WALLET: The European Union is set to announce plans for a digital wallet to store payment details and identity credentials, among other information. The wallet will interact with local government websites and could be operational in around a year's time, according to reports. EU officials are in talks with member states about a rollout. Meanwhile, Britain’s Financial Conduct Authority extended the deadline for crypto businesses to register under a new license, concerned about the high number not meeting its anti-money laundering standards.

WOZ’S LOSS: Apple co-founder Steve Wozniak lost his lawsuit against social media giant YouTube for the unintended use of his image in videos promoting a bitcoin scam. Wozniak was one of 18 plaintiffs who filed suit against YouTube last year seeking punitive damages for advertisements using his likeness and attempting to challenge Section 230 of the Communications Decency Act, the federal law protecting social media platforms from being sued for their users’ content. California state court Judge Sunil R. Kulkarni said federal law protected YouTube.

–D.K.

A message from Nexo

Your digital assets deserve a savings account in their BEST INTEREST. Leading crypto lender Nexo treats you, your crypto and your fiat to industry-best Crypto & Fiat services, featuring:

* Up to 12% interest on digital assets, paid out daily!

* Yields available on BTC, ETH, LTC, BCH, XRP, XLM, EOS, TRX, LINK, BNB, PAXG, USDT, USDC, TUSD, PAX, DAI, HUSD, GBP and EUR.

* No minimum or maximum limits on funds deposited, offering infinite opportunities to earn.

* #ZeroFees on all transactions.

* Military-grade wallet security and top-tier insurance on all custodial assets with SOC 2 Type 2 certified crypto custodian BitGo.

Get started at nexo.io

A message from CoinDesk

CoinDesk's new reward token soft-launched at Consensus 2021, but $DESK lives on. Attendees can still cash in at the $DESK store, or hodl and accumulate. Join the Telegram group for announcements and airdrops.

What others are writing...

Off-Chain Signals

–D.K.

A message from Masterworks

Tired of Dogecoin and Meme Stocks? Give art a shot. Contemporary art prices crushed S&P 500 returns by 174% over the last 25 years. For the first time, this billionaire asset class is open to everyone, thanks to Masterworks. Invest in multi-million dollar, SEC-qualified works by artists like Banksy, Basquiat and KAWS. Node Subscribers can skip their 27,000 person waitlist today.

* See disclaimer

Putting the news in perspective

The Takeaway

This is a guest essay from EY Global Blockchain Leader Paul Brody.

DeFi's Sticky Future

When we look back now upon the growth of the cloud computing industry, it was the arrival of cloud storage in 2006 that marked the transition from interesting new technology to essential, high growth industry. The tipping point was the creation of a simple, scalable and very useful service that could be easily plugged into existing tech start-ups.

The world of blockchain will be no different. Every industry must have such a tipping point where the product goes from curiosity to genuinely useful, which will trigger a shift from experimentation to mass adoption. When we look back at what event separated the early era of blockchain experimentation into the era of rapid adoption, it will be the arrival of decentralized finance (DeFi).

What makes DeFi similar to cloud storage is the way it delivers two things we did not really have before in the world of blockchain: useful smart contracts and interoperability. Note the emphasis on useful here, because token standards and smart contracts were available before, but it wasn’t until they were applied to DeFi that we could see a real-world case for their value proposition.

In the same way that cloud storage could suddenly give a startup infinite storage capacity by plugging into an existing application, DeFi did the same for financial operations. Want to buy and sell in dollars? Stablecoins can be used anywhere. Want to set up a lending operation? You don’t need to build your own stablecoin, because you can use any of the digital currencies already out there – ERC-20 tokens, the standard for digital assets on the Ethereum blockchain, are all (theoretically) interoperable.

DeFi may prove to be particularly powerful because once people start using it, they will find it hard to stop as it gets woven into more and more of their daily business and personal activities. This is driven from the nature of DeFi innovations, which build atop each other, and how those innovations, in turn, will yield further innovations.

The process is happening right in front of us. The original building blocks of DeFi were algorithmic and fiat-backed stablecoins like MKR and USDC. From there, it was a direct step to lending and deposit contracts. The first innovation built on those innovations was yield farming, where smart contracts actively seek out the best return for your assets.

The world of DeFi will get bigger and stickier as off-chain assets are integrated. The European Investment Bank’s decision to issue digital notes on the Ethereum blockchain is just the start. However, stickiness isn’t just more assets or different types of assets and services, it is integration into automated business processes. Individuals and companies will start to plug their cash flows and assets into DeFi ecosystems as a routine part of their personal and business financial processes.

The most immediate example I am hoping to implement is the integration of the enterprise procurement process into DeFi. Specifically, I want to tokenize and then integrate purchase orders, receivables and product inventory. A seller should be able to obtain working capital against the value of the purchase order, and then once the product has shipped, obtain early payment on the receivables as well. At any time, companies should be able to borrow against the value of their inventory to unlock working capital.

To get there, there are a few sticky problems that need to be solved. First and foremost, companies do not want to share the identity of their suppliers or the prices they pay with the general public, so privacy is essential. At the same time, the credit-worthiness of the buyer and the history of the seller’s reliability are extremely important in pricing the credit being offered. I believe there is a big role here for zero-knowledge proofs to do things like prove the long-term payment record without sharing buyer or seller identity.

Assuming we can get past these problems, I expect the injection of DeFi into the enterprise workstream to be not only quick but very sticky. If you can unlock working capital in an automated way, why do it only once? Indeed, why not just build the workflow into your systems and do it with every single purchase order and invoice? Processes like this will make cash flow much more reliable and automatic for companies.

Once these types of automatic integrations are completed, they tend to stick around. The average piece of enterprise software stays in place for between six to eight years and automated processes that are plumbed into the software tend to stick along with those systems. This is also increasingly true for individuals. I have been using IFTTT.com since it was founded in 2011. I rarely log in, it just works in the background, connecting up my different systems with pre-set and programmed automations.

If DeFi is successful, its future is invisible, automatic and essential to every enterprise.

–Paul Brody

The cryptocurrency movement has never been so sprawling, reaching every corner of the planet.

Crypto State by CoinDesk aims to connect with local communities to explore this movement of financial disruption and how it trickles down to every corner of the globe, from DeFi investment opportunities to alternative ways to transact and store wealth.

We're making virtual stops with audiences in Nigeria, the Middle East and Southeast Asia this year. Register for the Crypto State virtual tour.

The Chaser...

ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is.

The Node

A newsletter from CoinDesk

See Previous Editions

Copyright © 2021 CoinDesk, All rights reserved.

250 Park Avenue South New York, NY 10003, USA

You can manage your preferences here or unsubscribe from all CoinDesk email.