GiD Report#178 — The WSJ’s FB investigation and Gary Gensler’s Senate testimony

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GlobaliD

5 min readSep 21, 2021

Welcome to The GiD Report, a weekly newsletter that covers GlobaliD team and partner news, market perspectives, and industry analysis. You can check out last week’s report here.

This week:

The WSJ FB expose
Gary Gensler’s Senate hearing
The future of NFTs and DeFi
Stuff happens

1. The WSJ Facebook expose that everyone’s talking about

Facebook COO Sheryl Sandberg, Photo: Fortune Live Media

Throughout Facebook’s lifetime, we’ve seen a consistent pattern of behavior that goes something like this:

Facebook does something bad that stirs up controversy. In the early days, it was typically about privacy or security. These days, that controversy has expanded into human/cultural/social impact, moderation, democracy, monopoly power (and its abuses), etc.
Facebook acknowledges the issue, pledges to fix it, and promises the company will “do the right thing” — whatever that might be.
Some time passes, the news cycle moves on, and Facebook never really addresses the problem.

That playbook worked for years — as the budding social network grew from scrappy startup to post-IPO Big Tech behemoth.

A series of investigations from the WSJ suitably called The Facebook Files more or less reveals that fact:

Facebook Inc. knows, in acute detail, that its platforms are riddled with flaws that cause harm, often in ways only the company fully understands. That is the central finding of a Wall Street Journal series, based on a review of internal Facebook documents, including research reports, online employee discussions and drafts of presentations to senior management.
Time and again, the documents show, Facebook’s researchers have identified the platform’s ill effects. Time and again, despite congressional hearings, its own pledges and numerous media exposés, the company didn’t fix them. The documents offer perhaps the clearest picture thus far of how broadly Facebook’s problems are known inside the company, up to the chief executive himself.

For most people, it’s probably not the most surprising revelation.

Relevant:

Also relevant:

2. The other big news of the week: Gary Gensler’s Senate hearing

Not much new here if you’ve been following the newsletter. Gary Gensler doubles down on his crusade against crypto, in particular, targeting crypto exchanges.

From his Senate testimony on the subject:

“I’ve suggested that platforms and projects come in and talk to us. Many platforms have dozens or hundreds of tokens on them,” Gensler said.
“While each token’s legal status depends on its own facts and circumstances, the probability is quite remote that, with 50, 100, or 1,000 tokens, any given platform has zero securities.”
He added: “Make no mistake: To the extent that there are securities on these trading platforms, under our laws, they have to register with the Commission unless they qualify for an exemption.”

Felix Salmon provides some sober analysis:

State of play: Few if any U.S. crypto companies can say that they are regulated by the SEC or any other national regulator. Most of them are regulated at the state level, as money transmitters.

…

The SEC complains that crypto companies like Coinbase don’t come to it for regulation. They should do so, says Gensler, because those companies deal every day in tokens that can be considered securities, and a thumbs-up from the SEC would confer a degree of legitimacy that would be extremely reassuring to investors both small and large.
The crypto companies, on the other hand, complain that they can’t stand still waiting for regulatory approval on the basis of decades-old securities laws, while the rest of the world leaps ahead with innovations like distributed exchanges — smart contracts where it can be hard to even find a corporate entity to regulate.

…

The bottom line: The bigger the money, the more the demand from conservative investors for clear rules and regulations. “The DeFi guys want the TradFi money, but they don’t want the rules,” Ledger’s Joel Edgerton said at the Blockworks conference, contrasting crypto-based decentralized finance with dollar-based traditional finance. “It doesn’t work like that.”

Nice timing then for Coinbase to look to offer futures and derivatives trading. Meanwhile, the U.S. government worries about stablecoins.

Coinbase to offer futures and derivatives trading

Relevant:

3. NFTs and DeFi — two pieces worth your time

First, The Information interviewed OpenSea CEO Devin Finzer to discuss the future of NFTs.

Next, The Economist provides a deep dive on DeFi.

GiD Report#178 — The WSJ’s FB investigation and Gary Gensler’s Senate testimony

1. The WSJ Facebook expose that everyone’s talking about

Relevant:

Also relevant:

2. The other big news of the week: Gary Gensler’s Senate hearing

Relevant:

3. NFTs and DeFi — two pieces worth your time

Relevant:

Bonus:

4. Stuff happens

Written by GlobaliD