Dear Reader,
It didn’t take long at all.
As we discussed yesterday, the heavy-handed attempt at a power grab by U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler over the crypto sector didn’t sit too well for some. Gensler has been actively petitioning for more power and oversight over the cryptocurrency markets and the blockchain industry.
Former Commodity Futures Trading Commission (CFTC) Chairman Chris Giancarlo quickly responded to Gensler’s comments with a tweet:
Only one U.S. regulatory agency has experience regulating markets for bitcoin & crypto and it is not SEC. It is CFTC. If [the] Biden administration is serious about sensible cryptocurrency regulation, it needs to nominate a CFTC chairman.
Giancarlo didn’t mince his words. And he makes a great point. The CFTC may be a fairly small regulatory agency, but it has a massive mandate. Not only is it responsible for regulating the entire commodities futures markets, it is also responsible for the global swaps market, which is a $400 trillion market (not a typo).
It’s ridiculous that we’re now in August and the CFTC is without leadership for such a critical role. And clearly, Gensler saw this as an opportunity to strike in an effort to obtain regulatory control over cryptocurrencies.
The motives are easy to see, which is why they are eliciting such a strong response. Current CFTC commissioner Brian Quintenz went one step further with the following comment:
Just so we’re all clear here, the SEC has no authority over pure commodities or their trading venues, whether those commodities are wheat, gold, oil… Or crypto assets.
So which is it? Are cryptocurrencies a commodity or a security?
As we’ve seen in the last two days, there are “experts” who feel strongly that they are securities and others who feel equally that they are commodities. Ironically, there is no consensus at all.
It’s incredible that blockchain technology has been around for more than a decade, and there is still zero clarity or agreement about what cryptocurrencies are. U.S. government regulators are still arguing over basic definitions, let alone a clear regulatory framework.
And somewhat incredibly, the SEC’s securities laws were created in 1933. Perhaps they’re due for an update?
Either way, I do not believe that most cryptocurrencies are securities at all. They are money – a medium of exchange.
And many cryptocurrencies are designed as the economic incentives for a technology network to be designed, built, and maintained. They provide immense utility and value, and in time, they democratize and demonetize access to goods and services of all kinds for all people.
Blockchain technology and cryptocurrencies are the future. They are the foundation for an entirely new way to work, earn, invest, transact, and even have fun.
Distributed and decentralized technological development cannot be stopped. It was designed to be resilient against centralization and control.
And a country with lack of clarity, or a heavy-handed approach to regulation for blockchain technology, will only cause damage to itself. The capital to invent, create, and build great things will simply move to other jurisdictions where it can be treated well.
Shopify just made a groundbreaking announcement. The e-commerce giant is going to empower merchants to sell non-fungible tokens (NFTs) directly using its platform. This is a brilliant move.
As a reminder, NFTs are digital collectibles. They allow us to cryptographically secure and authenticate unique assets or data on a blockchain. They are one of the hottest trends in the digital asset space today, and we can think of them as the next generation of collectibles.
And Shopify is one of the best financial technology (fintech) companies in the world. It provides technology that allows online merchants to sell goods online in a seamless way.
Shopify’s tech makes it so merchants can simply drop a few lines of code onto their website and convert it into a full-blown e-commerce store. Shopify’s system then handles every aspect of the sale. It even allows consumers to receive text updates when the products they purchased have shipped.
And get this – over 1.7 million businesses around the world now use Shopify as their back-end e-commerce platform. And as I write, Shopify is trading at an enterprise value of $235 billion. The fact that such a large, established company is getting into NFTs is telling.
And here’s the most significant piece…
Up to this point, anyone selling NFTs had to go through a third-party marketplace like OpenSea. That puts the marketplace in control of the transaction, for which it takes a healthy commission.
With Shopify enabling NFTs, sellers will be able to handle transactions directly on their own websites. They won’t have to pay a marketplace commission. And they will retain control over the entire process.
That will allow merchants to control the marketing and branding that customers see. It’s all about relationship building. That’s not the case when they have to send customers to a third-party marketplace to finalize the sale.
And Shopify has some heavy hitters lined up to pioneer its new offering. The Chicago Bulls franchise announced that it will be among the first to sell its own NFTs using Shopify’s technology. I’m sure many more franchises will follow suit.
Here’s an example of one of the Bulls’ NFTs:
Chicago Bulls NFT
Source: Chicago Bulls
We’ve talked quite a bit about NFTs over the last several months, and each time it becomes clearer that this is an asset class that’s here to stay. In fact, Shopify’s new offering will lead to further exponential growth for the entire NFT market.
I’m very excited about this. As I said earlier, I think this is a brilliant move.
And rest assured, we have been hard at work researching ways for normal investors to get exposure to new digital assets and the burgeoning NFT trend. Readers can expect to hear more about our efforts in this space within the next week or so.
We have talked before about how the race to develop a COVID-19 vaccine using mRNA technology last year showed the world the speed with which the biotechnology sector could move.
Until last year, vaccine development often took a decade or more. Operation Warp Speed was the greatest public/private partnership that I’ve ever seen. The industry, with the support and backstop of the U.S. government, produced COVID-19 vaccines in less than nine months.
Well, BioNTech – the company that partnered with Pfizer on their COVID-19 vaccine – just announced that it’s going to focus its mRNA tech on malaria. And the company plans to move almost as fast as it did on COVID-19. BioNTech expects to advance its malaria vaccine in human clinical trials within four or five quarters.
This is an exciting move. If successful, BioNTech will help prove that it wasn’t just COVID-19 – the industry can move fast on many other disease targets as well.
And from my perspective, the world needs a malaria vaccine even more than it needs one for COVID-19.
To put things in context, about 400,000 people die every year from malaria. And nearly 70% of those deaths are children under age five. It’s absolutely heartbreaking.
The impact of malaria on the world’s population over just the last two decades will dwarf that of COVID-19 and its variants.
For comparison, COVID-19 has almost no impact on children whatsoever. And we know over 99% of people who died from COVID had multiple underlying health conditions. They were people in poor health already.
And think about this – there is only one malaria vaccine available on the market today. It employs old technology and is about 40% effective. That’s not much of a winner in my book.
So I’m very glad to see BioNTech focusing its attention on malaria with the same vigor as it did COVID-19.
And the CEO said the company expects the mRNA approach to produce a vaccine that’s 90% effective against malaria for a period of one to two years. That would be an incredible improvement.
If BioNTech’s vaccine is anywhere near as effective as it expects, it will help prevent hundreds of thousands of unnecessary deaths every single year. These are the statistics I get excited about.
And what an incredible validation of mRNA technology this would be if BioNTech does for malaria what it did for COVID-19.
We’ll wrap up today with a first in the blockchain industry. The city of Miami just launched its own cryptocurrency.
It’s called MiamiCoin. I don’t have any inside information, but I can tell they spent a lot of time figuring out what to call it… Ha ha! Not very creative at all, is it?
MiamiCoin will allow anyone to invest in the city and earn a return on their investment at the same time. It’s very much like a municipal bond, except it’s a digital asset. Here’s how it works…
MiamiCoin is powered by a blockchain technology called the Stacks (STX) protocol. This is a blockchain project designed to enable smart contracts on the Bitcoin blockchain. That would give the Bitcoin blockchain some of the flexibility needed to run decentralized finance (DeFi) applications, much like Ethereum does.
Like all blockchain protocols, Stacks has a native token. The ticker is STX, and it allows holders to “stack” their STX tokens to earn a yield. They can choose to get paid in more STX tokens or in bitcoin (BTC) itself. We can think of this like depositing the tokens into a savings account.
The Miami government will use this technology to receive revenue when people buy MiamiCoins. At the same time, those MiamiCoins can be used to stack STX tokens, thus enabling holders to earn a return in STX or bitcoin.
Put more simply, MiamiCoins have the potential to work very much like municipal bonds. The city of Miami generates revenue from investors, and investors are paid interest in return.
That’s what I find interesting about this. This could be a new way for municipalities to raise capital to undertake important projects.
Some might wonder… Why would investors buy MiamiCoin instead of a municipal bond? Isn’t it more complicated?
My response to that is this: How many normal investors know how to buy municipal bonds today? What if you went out and asked 100 of your friends how to do it? How many would have the answer?
I suspect the answer to that is very few. Maybe none. In most cases, we can’t just log on to our brokerage account or call our normal stockbroker to buy municipal bonds.
Instead, municipal bonds are typically sold through a specialized broker. These brokers must be licensed in each state they deal in, and they aren’t always going to have a particular bond available for sale.
We’re talking about an antiquated market here. It’s not nearly as liquid and seamless as the stock market or cryptocurrency market. Most of the municipal bond industry still works with fax machines… That should tell us something.
That’s why it’s primarily institutional investors who deal in municipal bonds. Normal investors often have no idea how to access this massive $500 billion market.
On the other hand, something like MiamiCoin could be made available for purchase directly through a smartphone application. Buying it would be as simple as downloading a software application, linking a bank account, and pressing buy. This would enable anyone to buy any amount of MiamiCoin at any time. It would be completely liquid.
So I’m very excited to see how this experiment is received. Will there be a lot of interest in MiamiCoin?
I do think Miami is the perfect place to launch something like this. There are a lot of people who live in or regularly visit Miami. It’s also a city that’s very friendly to blockchain technology and innovation in general.
And I should add that MiamiCoin is part of a larger project called CityCoins. If MiamiCoin is successful, the CityCoins project will help other municipalities establish their own cryptocurrencies as well.
So this is something to keep a close eye on over the next year. Will other municipalities follow suit? The municipal bond market is ripe for disruption, and this might be just the ticket.
This is just the latest example of how blockchain technology is revitalizing and innovating many of our legacy systems.
Investors don’t want to miss out on the developments we’re seeing in the cryptocurrency space. And if you’d like to learn about my most recent crypto recommendations, go right here for the details.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
