Dogecoin Dogged by Main Dev's Exit ~ CEOM Coin

The biggest crypto news and ideas of the day

Feb. 17, 2022

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Welcome to The Node.

In today's newsletter: Circle is planning to go public at a $9 billion valuation . Binance temporarily halts operations in Israel. And a core developer of the shiba inu-themed crypto, Dogecoin, is stepping back.

Questions? Feedback? We'd love to hear from you – simply reply to this email.

–Daniel Kuhn

Today's must-reads

Top Shelf

LARGER CIRCLE: Circle, the backer of the USDC stablecoin, is planning to go public in a deal that values the company at $9 million, doubling the previous $4.5 million valuation in July. The announcement comes after a negotiation with special purpose acquisition company (SPAC) Concord Acquisition Corp. Circle said the deal is part of a reflection on improvements in their financial outlook and competitive position.

MIDEAST: Israel's Capital Markets Authority, the regulator responsible for crypto exchange licensing, has asked Binance to clarify what services it provides to the Israeli market. In the meantime, Binance has ceased operating in the country. Meanwhile, the United Arab Emirates is preparing to issue federal licenses for virtual assets service providers by the end of this quarter, bidding to become a crypto exchange hub. The approach will follow a hybrid model, where the Securities and Commodities Authority (SCA) and central bank are responsible for regulation.

PLATFORM RESHUFFLING: Bakkt expects to incur quarterly net losses this year as the company invests up to $170 million to grow its business. The digital asset platform has carved out a niche for crypto rewards and other consumer "points" (like Starbucks rewards) systems – though interest hasn't been strong. Separately, Uphold, a cryptocurrency trading platform, is reshuffling its top brass, while New York-based alternative investment platform, Yieldstreet, adds crypto access via a partnership with VC firm Pantera Capital. Investors would gain access to the Pantera Early Stage Token Fund I, which invests in pre-initial coin offering tokens.

THAT BITES: Ross Nicoll, a core developer of the shiba inu-memed cryptocurrency dogecoin, said he is stepping away as doge developer but will remain an adviser to the Dogecoin Foundation. Nicoll cites "overwhelming" stress and a potential conflict of interest, according to a Wednesday blog post. Nicoll told CoinDesk his departure is not absolute or instantaneous, but rather a change of role, which follows a period of transition.

WARNING BUKELE: A bipartisan U.S. Senate proposal is raising alarms over El Salvador's move to adopt bitcoin. The Accountability for Cryptocurrency in El Salvador (ACES) Act would require a State Department report on mitigating risks to the U.S. financial system and, if passed, would require El Salvador to meet anti-money laundering requirements for remittances between the countries, and mean reduced use by El Salvador of the U.S. dollar. President Bukele's reaction drew a partly comic and partly angry response from the nation's leader on Twitter.

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Overheard on CoinDesk TV...

Sound Bites

"It behooves all of is, including companies like Circle, to lead by example, walk through the front door and take a regulation first posture on how these continue to evolve."

–Chief Strategy Officer of Circle Dante Disparte, on CoinDesk TV's "First Mover."

What others are writing...

Off-Chain Signals

Illinois lawmakers want to attract bitcoin miners to the state with data center tax incentives (The Block)
FBI Forms New Crypto Crimes Unit as DOJ Names Enforcement Team Director (FBI)
Ethereum NFT Protocol TreeTrunk Promises New Royalty Options for Artists (Decrypt)
Investors Bolster The Graph With $205M Ecosystem Fund (Blockworks)
Snoop Dogg to Turn DeathRow Records into an NFT Label (NFT Plaza)
Zero Knowledge Proofs Can Save the Metaverse From Becoming a Dystopian Surveillance State (The Defiant)

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Putting the news in perspective

The Takeaway

No, Warren Buffett Did Not Invest in Crypto

At best, he's touching it with a 10,000-foot pole.

Yesterday, Berkshire Hathaway, the temple of 20th century industrial capitalism, led by "the Oracle of Omaha" himself, Warren Buffett, invested in the largest "neobank" in Latin America. Brazil's Nubank has some (very) indirect exposure to cryptocurrency, which caused a stir given Buffett's long-time aversion to all things crypto and blockchain. Has Buffett, a man known for eating the same McDonald's breakfast every day, changed his mind?

It would be a very big deal indeed if he did. Berkshire Hathaway is one of the most profitable corporations ever. Buffett's investment thesis is taught in business schools around the world. Lehman Brothers asked Buffett for a bailout in 2008 – before imploding (he declined). And so far he has stayed at arms length from bitcoin, famously calling the digital asset "rat poison, squared." A reversal, even just a softer view, would be great for validation.

But some stories are too good to be true. To start, this isn't even the first investment Berkshire made in Nubank – it took a $500 million stake a few months before the company went public in December 2021. And while the bank does offer roundabout bitcoin exposure through its investment arm, at this point it just looks like a single BTC exchange-traded fund (ETF).

Buffett's right hand man, Berkshire Vice President Charlie Munger, did the press rounds yesterday afternoon to clear the air. At a Daily Journal conference in Los Angeles, Munger reiterated the famed financial duo's hatred of crypto. "I certainly didn't invest in crypto. I'm proud of the fact that I avoided it. It's like some venereal disease," he told Yahoo Finance Editor-in-Chief Andy Serwer.

That said, in the same interview, Munger suggested that although he wished crypto had "never been invented" or was regulated out of existence it's likely to stick around for the long haul. "We can't do much about it, so we spend our time on the matters we can do something about," he said. (He did say, if he were the "benign dictator of the world," he'd make it "infeasible" to make short-term profits from securities.)

This gets at something much deeper and much more interesting about the state of the crypto markets. Crypto, the great disrupter, is increasingly embedded within the financial system. Over the past two-plus years, more than a handful of formerly skeptical institutions have begun rolling out crypto services. JPMorgan offers crypto to wealthy investors, despite CEO Jamie Dimon's deep skepticism. Its competitors have similar offerings. Billionaire investors, like Munger and Buffett's peer Ray Dalio, discuss bitcoin as a potential inflation hedge.

Munger said the asset class is nothing more than "heavily promotional capitalism." But it's also an industry that, whether you like or not, people can no longer avoid. Even though Nubank is not a "crypto" firm, it's likely to increasingly take on exposure to the region's blockchain industry. The Association for Private Capital Investment in Latin America found that crypto-related venture spending increased tenfold in 2021 compared to the year before. Two of Latin America's latest unicorns, or private firms with at least a $1 billion valuation, Mercado Bitcoin and Bitso, are crypto exchanges.

There's money to be made in the crypto industry, in part by disrupting the very industries and practices that made Berkshire Hathaway so profitable. But that doesn't necessarily mean crypto is incommensurate with Buffett's "value investing" tenets. You don't even need "dog tokens" to finance a real-world monstrosity like the "Munger dorm." Crypto, like any market, would basically go to bed with anyone. Whether that makes it a "speculative orgy," as Munger said, or a going concern is an open question.

-Daniel Kuhn

How Blockchain is Bridging the Trade Finance Gap

In 2018, the World Trade Organization (WTO) reported that over 60% of trade finance requests by small and medium-sized enterprises (SMEs) are rejected globally. As a result, trade finance is regularly listed as one of the top three obstacles to exporters. Indeed, in many cases, if the request is not accepted by the financial institutions, the transaction does not take place.

A further issue that besets SMEs which are exporting their goods and services is that of late payments. In times of distress, payment terms of 60, 90 or even 120 days are demanded by buyers, and suppliers have little option but to agree.

A solution to these dual problems of late payment and lack of trade finance can now be found in the crypto market.

*This is sponsored content from Polytrade.