Playing debt ceiling roulette

#Web3Weekly: May 14–20, 2023

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The increasingly worrisome possibility of a sovereign debt default by the United States should be instructive for crypto folks in two ways.

First, there is the obvious face value: If this highly avoidable disaster comes to pass in the next few weeks, it will cause great harm to the conventional finance system — and the public’s trust in it going forward. That may in turn drive more users to blockchain networks as alternative (and unexpectedly saner) venues for financial transactions.

Second, a default would be instructive as a window onto the state of U.S. governance in general. We should all ask, if Congress and the White House can’t collaborate on something so basic as passing what could be a one-paragraph bill to avoid a multi-trillion dollar economic disaster, what else can’t they do? What other business might these institutions’ basic dysfunction affect?

To mention a couple of pertinent examples: How could we expect this very same group of policymakers to pass a comprehensive framework for crypto regulation anytime soon? Or regulations for artificial intelligence, as recommended by OpenAI CEO Sam Altman in Senate testimony Tuesday?

These are things that are big and complex and not imminently likely to cause a meltdown in the broader economy. They would thus seem even harder politically to pull off than resolving the current debt impasse.

Yes, legislation to address pressing technological issues might make for a better future, provide welcome clarity to the marketplace, and encourage innovation. But until evidence surfaces proving otherwise, foresight is not exactly official Washington’s strong suit right now.

The week’s other notable headlines:

• Strike founder Jack Mallers announced plans to expand availability of his company’s bitcoin payments app from three countries to 65. Yowza.
• Coinbase said it will begin offering its Coinbase One subscription service to the United Kingdom, Ireland, and Germany.
• Attendance was down at Miami’s Bitcoin 2023 conference, a gathering that had become a major industry event in recent years. Attendees attributed the smaller crowd to the lingering effects of the bear market in crypto, Decrypt reports.
• Custodia Bank, a Wyoming-based institution that has tussled with regulators over offering fully backed deposits, plants to launch a new bitcoin custody service for clients.
• Digital asset companies must provide “proof of reserves” in under a new state law passed by the Texas legislature.

• Some interesting number crunching from Bloomberg News: The top five performing non-leveraged U.S. exchange-traded funds so far in 2023 all track some form of crypto investment. But those ETFs have seen surprising little investor interest, with only $12 million of inflows so far this year. Separately, Bloomberg conducted a survey of 60 large crypto companies about governance. Many still don’t have basic transparency measures in place like independent auditors and outside board members, Bloomberg said.
• The Block reports that the U.S. government holds more than 50,000 bitcoin seized in various enforcement cases. That technically makes it one of the biggest “whales” in the global crypto market. Hmmmm…
• The Australian Securities Exchange scrapped plans to integrate blockchain technology into its core trading software.
• CoinDesk’s Michael Casey says AI and web3 “belong together” as complementary technologies.
• The New York Times reports that e-sports franchises are struggling, with many laying off employees or even putting themselves up for sale
• ICYMI: Cointelegraph recently posted an explainer video about how venture capitalist Tim Draper became a bitcoin billionaire. For reasons I can’t quite discern, the video is narrated by an animated rabbit who appears to live inside an old 8-bit Nintendo video game. But if you can put those things aside a moment, the information is indeed accurate.
• The startup Keyp is converting Old Game Boys into crypto wallets.

That’s it for now. Thanks for reading the newsletter today! If you want to receive updates like this in your inbox every Sunday, please join our email list.

Note: #Web3Weekly content is intended for journalistic purposes only, not as investment advice. Always DYOR and consult appropriate financial professionals before making investment decisions.

Best wishes for a healthy and productive week ahead.