AI + blockchain
In a post on his personal blog, Ethereum co-creator Vitalik Buterin published an intriguing new position paper: “The promise and challenges of crypto + AI applications.”
As the title suggests, Mr. Buterin sees a convergence with the two technological opportunities and sets up his argument saying that blockchain is a platform for “games,” in a very broad sense of the word.
He sees four main “game” categories at the intersection of blockchains and AI including:
- “AI as a player in a game [highest viability]: AIs participating in mechanisms where the ultimate source of the incentives comes from a protocol with human inputs.”
- “AI as an interface to the game [high potential, but with risks]: AIs helping users to understand the crypto world around them, and to ensure that their behavior (ie. signed messages and transactions) matches their intentions and they do not get tricked or scammed.”
- “AI as the rules of the game [tread very carefully]: blockchains, DAOs and similar mechanisms directly calling into AIs. Think eg. ‘AI judges'”
- “AI as the objective of the game [longer-term but intriguing]: designing blockchains, DAOs and similar mechanisms with the goal of constructing and maintaining an AI that could be used for other purposes, using the crypto bits either to better incentivize training or to prevent the AI from leaking privacte data or being misused.”
what you should know: What Congress is working on today with digital assets and blockchain legislation will have arguably much bigger and broader implications for the Country’s future – it’s not “just about crypto.” Today’s blockchain legislation will evolve into tomorrow’s AI + blockchain legislation.
Senator Kennedy on SEC
Senator John Kennedy (R, LA) told Fox Business’ Eleanor Terrett yesterday that the hack of the Securities and Exchange Commission’s X account right before approval of Bitcoin spot market ETF applications was a “risk to investor privacy.”
Kennedy told Fox in a statement, “The recent hacking of the SEC’s X account proves just how badly Americans need the ‘Protecting Investors’ Personally Identifiable Information Act’ [S.2230] to safeguard their sensitive data. (…) The risk is clearer than ever, as is Congress’s responsibility to act.” Read more.
what you should know: Is the full court press from Senate and House Republicans (see the House’s Jan. 10 letter on the hack) ramping up? – or down given a myriad of other priorities in an election year?
crypto PAC updates
Political action campaigns (PACs) sprayed Beltway media with new data on donations supporting pro-crypto positions and candidates yesterday. The PACs report that they’ve raised $85 million to-date (was $79 million at the end of last year).
Coinbase and Ripple, which have been sued by the SEC, have contributed $24.5 million and $20 million, respectively, reports Axios. The publication links to a Pro Publica database and says about the PAC funds, “Beneficiaries include House Financial Services Committee Chair Patrick McHenry (R, NC) and Majority Whip Tom Emmer (R, MN).” Read more in Axios.
what you need to know: The McHenry and Emmer funds look to be a part of donations recorded last September –before Chair McHenry decided to retire from Congress. Open Secrets shows that Defend American Jobs is targeting Republican races and apparently giving to Governor Jim Justice’s (R, WV) campaign for the U.S. Senate.
crypto PAC updates – Dems
Assuming it’s an accurate representation of pro-crypto donations, what may be most interesting with the ProPublica database is the presence of two Democratic Members of Congress who have received “pro-crypto” funds and have kept a low profile on digital assets: Rep. Yadira Caraveo (CO) and Rep. Don Davis (D, NC). The idea that there are a lot more Democrats who support a digital assets regulatory framework would be counter to Democratic leadership’s recent desires.
The markup for “FIT 21” (i.e. digital asset market structure bill) in House Ag in July was by voice vote, so it was impossible to say which way each Democrat would vote. (…now whose idea was that?) But an educated guess – given Democrats’ questions and statements during the markup hearing – suggests there was significant Democratic support.
For example, Rep. Yadira Caraveo, who is the Ranking Member on the Digital Assets subcommittee in House Agriculture, said during the House Ag markup, “We have heard resoundingly at many meetings and through hearings that there’s a gap in our oversight of the digital assets cash market, and that the status quo is currently unacceptable. I believe we must act to [prevent more] FTX-like disasters.”
Another example of “low profile” Dem support is Rep. Henry Cuellar (D, TX) who quietly signed on as a co-sponsor of “FIT 21” (i.e. digital asset market structure bill) in October.
what you should know: The relative silence of the pro-digital assets House Democrats makes one wonder what is going on in the Senate with certain Democrats -except for Senator Kirsten Gillibrand (D, NY) who is a very public co-sponsor of Lummis-Gillibrand Responsible Financial Innovation Act [S.2281].
Senator Debbie Stabenow (D, MI) or Senator Cory Booker (D, NJ), for example….? Both went silent once FTX imploded and laid waste to digital assets’ reputation in DC late in 2022. Before FTX, Senate Agriculture Chair Stabenow was pushing a bipartisan digital assets regulatory framework (DCCPA) with Sen. Booker as a co-sponsor. And CFTC Chair Rostin Behnam (D), a former Stabenow staffer, had on his proverbial catcher’s mitt readying his agency for new crypto oversight powers.
FTX Expects to Fully Repay Customers but Won’t Restart Defunct Crypto Exchange – CoinDesk
Celsius Network starts $3 billion payout after emerging from Chapter 11 bankruptcy – The Block
Tether Holdings Limited, issuers of the world’s largest dollar-backed stablecoin UST or Tether, reported its Q4 2023 “Attestation” yesterday courtesy of auditing firm, BDO.
With a mix of gold, US Treasuries and cash providing most of the reserves for UST, the company said it generated a $2.85 billion profit in Q4 with over $97 billion in assets and $91 billion in liabilities. The company claims to be over $5 billion over-collateralized. Read the report.
(Bitwise CIO Matt Hougan commented on X that Tether’s profit was $750 million more than traditional finance stalwart Goldman Sachs in Q4.)
Tether CEO Paolo Ardino trumpeted his company’s success on X. Ardino has been on his heels due to U.S. government and Congressional inquiries over the UST stablecoin’s role in illicit finance. See the the late October letter from Sen. Cynthia Lummis (R, WY) and HFS Vice Chair French Hill (R, AR). Then, see Ardino’s December response.
Fortune’s Leo Schwartz pointed out on X yesterday that the Tether “still has nearly $5bn in loans despite pledging to reduce the number to zero by 2024” and while “its excess reserves now exceed its loans, its reserves still contain a significant [amount] of Bitcoin and ‘other investments.'”
what you should know: If there was a stablecoin framework such as the one proposed in the House – read: CRS’ summary of the “Clarity for Payment Stablecoins Act [H.R. 4766]” – Tether might grow even further. And, so would the competitors – particularly from U.S. traditional finance. Who doesn’t want to make at least a sliver of that $2.85 billion in Q4?
state of anti-CBDC
Blockchain Association’s Dan Spuller said on X yesterday that he “testified before the Indiana State Senate in support of SB180, which addresses…CBDC testing & adoption. It passed unanimously out of committee.” He thanked Indiana State Senators Scott Baldwin and the bill’s author, Eric Hoch. Both are Republicans.
Senate Bill 180 – Indiana State Senate
what you should know: The anti-CBDC positioning could run the table in red state legislatures particularly if a 2024 presidential candidate is promoting it – as former President Donald Trump has begun to. Even former CFTC Chair Chris Giancarlo’s (R) Digital Dollar Project seems to be sliding away from the CBDC.
Today, 6 p. ET – Financial & Regulatory Law Panel featuring CFTC Commissioner Caroline Pham – GWU.edu
still more tips
A survey of crypto mines’ electricity consumption in the US is set to start next week – The Verge
Former UK Chancellor George Osborne joins Coinbase as crypto firm faces US court fight – The Guardian
Transak Partners With Visa for Rapid Crypto to Fiat Conversion in 145 Nations – Bitcoin.com News
Bitcoin worth £1.4bn seized after ex-takeaway worker tried to buy £23m mansion, court hears – Sky News