Standing in for Michael Casey this week, CoinDesk's Chief Columnist David Z. Morris writes about the continued criticism of crypto from Senator Elizabeth Warren and Fed Chair Jerome Powell. Morris diagnoses what he sees as an inherently illogical bent to these critiques and even brings a touch of French philosophy to bear. His essay is well worth a read.

On the “Money Reimagined” podcast, Sheila Warren and Michael Casey are joined by Sen. Pat Toomey (R-Pa.) to reflect on the impact of the infrastructure bill, explain the difficulties of applying regulation to an evolving technology and take a look at where policy on stablecoins and token investing might be headed.

Have a listen after reading the newsletter.

Rachel Sun/CoinDesk

Hello readers, David Z. Morris here, pleased to be filling in for Michael this Friday.

This week saw the unveiling of the Biden administration’s promised executive order on cryptocurrency regulation. By most accounts, the order appears to be cautious and balanced, largely a call for more research and debate toward a coordinated crypto strategy across U.S. agencies and regulators.

There are a lot of unanswered questions about what a more centralized approach would mean, given that U.S. financial regulators are engaged in a constant internecine cold war for jurisdictional power. But a simple executive demand for clarity feels welcome after nearly a decade during which regulators targeted individual crypto entities for enforcement, without doing much to update or clarify the rules of the road for a radically new technology.

The order also, optimistically, arrives at a moment when the public perception of crypto is primed for a major shift. Russian President Vladimir Putin’s barbaric invasion of Ukraine has showcased in quite clear terms the positive utility of open finance, in the form of close to $100 million in cryptocurrency donated to Ukrainian defense from around the world. Those tokens arrived much faster than some aid from allied governments and went directly to supplies like bulletproof vests and rations for Ukrainian fighters.

Meanwhile, there has been broad consensus among experts that blockchain networks don’t provide a meaningful way for Putin’s Russia to evade economic sanctions intended to punish Russia for the invasion. That’s partly for reasons of scale – even a mid-sized economy like Russia’s is too big to entirely run on crypto today – but mostly because of crypto’s inherent traceability.

These real-world events undermine the dark narrative that has shadowed cryptocurrency over the years and that seems to inform many regulators now. Early association with darknet markets like Silk Road, and spectacular instances like its use by North Korean ransomware attackers, created an early default consensus that crypto is useful primarily for bad actors. Some political theorists were also very quick to extrapolate from the libertarian values of its cypherpunk founders to argue that cryptocurrency was inherently antisocial.

But the real impacts of crypto in Ukraine contradict that story. The preponderance of benefits, at least in this moment, seems to be accruing to the good guys and helping bind together a global pro-democracy community in ways that would be impossible if it didn’t exist.

Unfortunately, as the development of the Biden crypto framework ramps up, some high-profile U.S. officials still do not seem to be paying attention to this real-world complexity. Instead, they are hanging on ferociously to early interpretations of cryptocurrency as inherently criminal, illicit or anti-democratic. Two notable examples of that are Sen. Elizabeth Warren (D-Mass.) and, at least in one strange bit of recent testimony, Federal Reserve Chairman Jerome Powell.

Warren is a longtime and almost mechanistically predictable opponent of cryptocurrency. Now, in the teeth of Russian aggression and a humanitarian crisis on the ground, Warren’s focus has been proposed legislation to prevent crypto-based sanctions evasion – despite assurances from within Treasury itself that further rules aren’t necessary.

Read the full column here.

Off the Charts

The Grayscale Discount

The Grayscale Bitcoin Trust (GBTC) was launched in 2013 by Grayscale to provide investors with exposure to bitcoin in the form of a security without the challenges of buying, storing and safekeeping bitcoin. (Disclosure: Grayscale, owned by Digital Currency Group, is a CoinDesk sister company.)

Although secondary shares of GBTC trade like stocks, GBTC is structured as a grantor trust that is open only occasionally for new investments at net asset value (NAV). It doesn’t allow investors to redeem GBTC for BTC at NAV.

This means that the share price can trade at a premium or discount to NAV (in other words, investors are benefiting or losing against the price of the underlying asset). Early on, GBTC traded at a premium. That is, the price of each share of GBTC exceeded the dollar value of the dollar value of bitcoin each share represented. This was mainly due to a lack of viable substitutes.

In 2021, with the launch of cheaper-to-maintain bitcoin exchange-traded funds in Canada and other similar products, GBTC moved to a discount. In fact, GBTC is trading below December 2017 levels, when bitcoin hit a then all-time high of $19,363.19. With bitcoin price hovering at around $40,000, this is not an ideal situation for GBTC investors.

To combat this, Grayscale has committed to converting GBTC to an ETF, which should alleviate the NAV discount if successful. GBTC has provided useful exposure for mainstream U.S. investors to get into crypto assets. Ending the uncertainty around its discount/premium will help bring in even more.

-- George Kaloudis, CoinDesk research associate

The Conversation

Happy International Women’s Day

If you’re going to debut your $560 million all-male crypto fund, it’s probably best not to do it on a day dedicated to female empowerment. But on the morning of March 8, Bain Capital Ventures partner Stefan Cohen proudly announced just that.

Substack writer Doree Shafrir was quick to note that the whole team was male and wearing similar clothing. The tweet set off a series of caustic replies, pointing to a lack of diversity (along with some predictable responses from men who asked why Bain should be called upon to make token female hiring decisions).

The blowback, though, was fierce enough for Cohen to eventually delete the original tweet and issue a mea culpa that evening.

“The mess up we had today is one of many, many reasons why it’s critical to have a diverse team to provide much needed perspective. We are sorry.”

There's a lesson in substance and optics here.

The big regulatory news this week emerged from the White House with an executive order on cryptocurrencies. The order instructs federal departments to coordinate their approach to the future of money and sends important signals on investor protection and a possible digital dollar.

CoinDesk’s regulatory editor Nik De had a comprehensive rundown of the contents on Wednesday.

Regulation reporter Cheyenne Ligon followed up with a reaction piece from industry players and another looking at the implications for central bank digital currencies (CBDCs). And Nik De was back to look at the surprisingly bipartisan response.

Rounding out our coverage, we had op-eds on the national security implications and impact in Washington, and a podcast episode from NLW describing the order as “watershed moment.” Indeed, it was.