Consolidating The Lobby; Crypto Out, CBDCs In Says Morgan Stanley

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consolidating the lobby

Industry trade organization Blockchain Association (BA) is consolidating its New York offices into its Washington base. BA’s CEO Kristin Smith said in a statement provided to CoinDesk, “Blockchain Association is shifting resources out of New York State to focus on federal policy – and we continue to hire and build out our full-time staff in Washington. Our mission remains the same: to advance the future of crypto in the United States.” Read more.

crypto out, CBDCs in

In a new research report titled “Crypto is Out, CBDCs are In,” Morgan Stanley analyst Sheena Shah sees Central Bank Digital Currencies (CBDCs) coming on fast particularly due to new momentum in the European Union.

She writes, “We expect more digital (tokenised) government bonds and equities to be launched in the Eurozone in coming years, which could be settled using the CBDC. Depending on the type of CBDC introduced, they have the potential to have major implications for the current banking and payments system. We also expect more regulated euro stablecoins to be issued as MiCA (crypto regulation) provides a framework for their issuance.”

Another snippet from the report distills feedback from payment companies and the limited demand they’re seeing from merchants who are looking to accept crypto: “Fiat-crypto on- and off-ramps are also being limited by US banks, and the regulators’ current approach to perceived risk in this market suggests it is going to get even more difficult. Worldpay estimates that crypto payments amounted to ~0.2% of global e-commerce transaction value in 2022 ($11.6bn). We continue to see barriers to crypto payment acceptance due to: 1) regulatory and tax treatment uncertainty; 2) complexity; 3) lack of payment chargeback/dispute processes; 4) price volatility and 5) transaction costs. Merchants that do accept crypto favour existing payment processors, avoiding direct integrations with the crypto ecosystem. It is notable that Adyen, one of the largest e-commerce acquirers, has indicated that it doesn’t plan to accept crypto partly due to low merchant demand, while Worldline has introduced a crypto service but only for Swiss merchants initially.”

DeSantis in on CBDCs out

Having floated legislation in March to inhibit the growth of CBDCs and mimicking the positioning of Majority Whip Rep. Tom Emmer (R)‘s “CBDC Anti-Surveillance State” bill in the U.S. House, Governor Ron DeSantis (R) of Florida doubled down earlier this week. Speaking at a news conference, DeSantis said, “I think what the danger of the digital currency is that, one, they want to make that the sole currency, they want to get rid of crypto. (…) They don’t like crypto because they can’t control crypto. So they want to put everything in a central bank digital currency.” Read more from Floriday’s Voice.

Democrats and crypto

In an article on Tuesday reviewing Republican-led efforts on digital assets legislation and this month’s consolidated hearing on crypto market structure by the House Financial Services Committee and House Agriculture, RollCall finds skepticism from Democrats. Read more.

But, HFS Digital Assets Subcommittee Chair French Hill (R, AR) hold out hope in reference to Democratic support saying, “I believe that we still will have good bipartisan interplay as we have these hearings, we have the roundtables, we discuss potential bill text in and around both the stablecoin discussion draft and future market structure discussion draft. (…) So I anticipate bipartisan engagement.”

If Tuesday’s blog post from the Council of Economic Advisors is any indication, Democratic caucus leadership has not changed its position – anti-crypto remains the chosen position in preparation for the 2024 general election.

A bill getting through the House is attainable due to the Republican majority. The challenges are in the Senate and, of course, the Executive Branch. Few Senate Democrats have said anything pro-crypto in the 118th Congress other than Senator Kirsten Gillibrand (D, NY).

Senator John Hickenlooper (D, CO) was critical of the Securities Exchange Commission and its Chair Gary Gensler about crypto regulations in October just prior to the FTX blowup. He will participate in a fireside chat with Axios on May 17 – perhaps a reporter will ask a crypto question?

investment: developers

In another report highlighting European crypto trends, crypto investment firm Greenfield has cranked out its “2023 State of European Crypto Report.” The report’s data is informed in part by Greenfield’s own portfolio, the firm admitted to Decrypt. Nevertheless, the top 10 cities for investment are intriguing: 1) Lisbon 2) New York, Berlin (tie) 4) Singapore 5) San Frandcisco (Silicon Valley) 6) Miami 7) Denver 8) Denver 9) “None” 10) Decentralized. Greenfield’s Jascha Samadi tells Decrypt, “Even amidst the current bear market and compared to the last market downturn in 2018, we see remarkable growth in the European builder community…” Get the report (PDF).

investment: infrastructure

In the venture world, investing in crypto is a selective undertaking. The latest trend among venture capital investors looking to plant a flag in the crypto space is infrastructure. Dragonfly Capital’s Tom Schmidt explains to the Information, “Infrastructure investments act [as] an index of all crypto activity versus betting on a specific product or vertical. (…) It is a nice safe category to bet in a bear market.” Another element of the investment strategy is that there’s lower regulatory risk in a business-to-business focus rather than business-to-consumer with blockchain or distributed ledger technology. Read more.

QuickNode, “a blockchain development platform,” Sovereign Labs, an ecosystem of “interoperable and scalable rollups that can run on any blockchain” and Caldera, a platform for launching “customizable blockchain rollups,” are mentioned as examples of infrastructure companies receiving recent investments.

digital cash mood

Axios covers a new report out from Moody’s which reviews the digitization of money. Trends in the the U.S. and Europe point in the digital direction with digital payments increasing by approximately 30% and 100% since 2016, respectively. That said, “Despite the wave of digitization, Moody’s does not expect unbacked cryptocurrencies, like bitcoin and ether, to gain traction as a form of payment over the next 10 years, largely due to their volatility,” reports Axios. Read more.

more tips:

Related: How the U.S. eroded the dollar – Felix Salmon in Axios

regulating crypto ads

It was just last week that Senator Kyrsten Sinema (I, AZ) introduced Senate bill 1357 with co-sponsor Senator Cynthia Lummis (R, WY) requiring “accurate advertising and clear disclosures on crypto product ads.” The bill has been referred to Senate Banking. In France, momentum has called for restrictions on crypto ads, but one French senator is asking for moderation. CoinDesk reports, “The amendment, passed in committee and set to be discussed in the [French] Senate plenary next week, would allow crypto companies to pay for publicity via influencers if they are either registered with or have a license from regulators.” Read more.

more tips:

A bill to address advertising by digital asset intermediaries, and for other purposes –

from the Twitter

From United Kingdom parliamentary proceedings yesterday: “Today Crypto & Digital Assets All-Party Parliamentary Group chaired by [Dr Lisa Cameron MP] asked the Secretary of State for Science, Innovation and Technology [Chloe Smith, MP of Norwich] how Government will harness the job potential of #Crypto and #blockchain technologies & ensure these opportunities are inclusive and open to all.” See the video and hear Smith’s answer. Hint: they’re on the same page.

still more tips

Republicans turn up the heat on Biden’s crypto regulation: ‘driving innovators out of America’ – Fox Business

A very theatrical Bitcoin bet collapses – Politico

Mitsui readies $1.7 billion real estate for tokenization as digital securities – Ledger Insights

Celsius Network Seeks to Fold U.K. Affiliate Into Bankrupt U.S. Operation – The Wall Street Journal

SEC Crypto Enforcements on Track to Eclipse 2022 – Blockworks

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