Big Brother’s digital dollar

Is banning CBDCs the answer?

Author

Angelina Berger
March 28, 2023

Welcome back. Some friendly words of advice: If you happen to own a bluechip NFT and intend to borrow money against it to buy another NFT, be very careful. Or you might just end up permanently deleting your $135K CryptoPunk—true story. 

Today: CBDCs ruffle feathers in the U.S., Do Kwon finally gets caught, and the SEC goes bananas. Let’s dive in.

—Angelina

Should CBDCs Be Banned?

With two high-profile politicians proposing a ban on central bank digital currencies (CBDCs) in the U.S., discussions about the digital dollar are heating up. Let’s take a look at what sparked last week’s commotion.

Some context: The idea of a digital dollar isn’t new—the Fed has been exploring the pros and cons of issuing its own CBDC since 2016. Now, CBDCs are gaining the White House’s interest as well. Why? A CBDC could foster financial inclusion, reduce money laundering, and increase payment efficiency. The Biden administration even issued an executive order probing into a digital dollar last year, ordering government agencies to get aligned on a crypto roadmap. 

But there’s backlash. There’s a general sentiment among crypto crowds that CBDCs pose a threat to individual freedom by furthering financial surveillance—their underlying blockchain tech gives central banks full insight into where, when, and by whom money is used. 

Last week, two high-profile Republicans demonstrated that they share similar fears:

  • Florida Governor (and potential GOP presidential candidate) Ron DeSantis proposed legislation that would outlaw any U.S. or foreign CBDC from Florida. Speaking from behind a podium with “Big Brother’s Digital Dollar” plastered across it, DeSantis portrayed the ban as a measure to protect citizens’ financial privacy.

  • Just a day later, Texas Senator Ted Cruz introduced a bill that aims to block the Fed from issuing a CBDC in the first place.

Quotable: “What [a CBDC] is all about is surveilling Americans and controlling Americans,” DeSantis said. “You're opening up a major can of worms, and you're handing a central bank huge, huge amounts of power, and they will use that power.” 

But a U.S. CBDC also has the potential upside of “maintain[ing] the dollar's status as the world's reserve currency in a digital age,” according to Minnesota Rep. Tom Emmer.

Zoom out: Like other forms of technology, CBDCs are simply a tool that can be used in good or bad ways. But with the 2024 U.S. presidential elections coming up, expect the CBDC discussion to become heavily politicized. On the bright side? Crypto is becoming a more important part of U.S. political discourse. 

Montenegro's Good Deed for Crypto

It’s the end of one of crypto’s biggest manhunts and the beginning of justice for Terra (LUNA) investors, Do Kwon’s stint as the gingerbread man is over.

Local police arrested Kwon at an airport in Montenegro last Thursday after he tried to board a flight to Dubai with a forged Costa Rican passport. Authorities in South Korea, Kwon’s home country, confirmed his identity on Friday.

ICYMI: Ever since the Terra ecosystem imploded back in May 2022 (wiping out an estimated $40 billion and triggering a death spiral of crypto collapses), Kwon, its founder, has been wanted by Interpol and South Korean and U.S. authorities on counts of fraud. Until last week, Kwon’s whereabouts remained a mystery.

What’s next? Just hours after the arrest, U.S. prosecutors charged Kwon with eight additional criminal indictments, including conspiracy and securities fraud. But with both the U.S. and South Korea seeking his extradition, it’s unclear where he’s headed.

Either way, things are about to get interesting. When Kwon inevitably gets dragged into court, he’ll have to answer some uncomfortable questions about Terra. Which means? We’ll get all the details on the whos, whats, and whys we’ve been after for almost a year. Stay tuned…

The SEC Goes Haywire

When it rains SEC lawsuits, it pours. Last week, the Commission went bananas on crypto.

The highlights:

  1. Coinbase was served a Wells notice (an official letter informing firms that the SEC plans to bring charges against them) for potentially violating U.S. securities laws. This indicates that the SEC might pursue enforcement action against the exchange and its products. Coinbase said that it’s ready for a legal battle, should that become necessary.

  2. Justin Sun, the controversial crypto entrepreneur and billionaire, and three of his crypto companies were charged by the SEC for selling unregistered securities and fraud. The SEC also alleged that Sun manipulated crypto markets by directing employees to artificially inflate trading volumes of BTT and TRX tokens. 

  3. Jake Paul, Lindsay Lohan, Soulja Boy, and five other celebrities were sued for illegally touting cryptos tied to Sun. Six out of the eight already settled with the SEC.

In other news:

  • Here’s what Amazon’s web3 expansion could look like.

  • Crypto made its debut in the Supreme Court—kind of.

  • Greenpeace’s “Skull of Satoshi” campaign to move Bitcoin to proof-of-stake hit home with Bitcoiners (not in the way you’d expect). 

  • The Fed finally explained why it won’t grant Custodia Bank membership to the Federal Reserve System. 

  • The White House blasted crypto in a scathing new economic report.

Crypto Job Board

And that's what you need on your radar today in crypto. Which celeb will the SEC go after next? Curious to hear your thoughts. Catch you back here next week!