The Weekly Take
Last week, President Biden issued the long-awaited Executive Order on “ensuring responsible development of digital assets.” While the order itself does not prescribe any specific actions, it does outline a vision for a unified federal government approach to regulating cryptocurrencies and other digital assets. More importantly, it outlines an approach that takes for granted a future where digital assets exist. This is in stark contrast to what many believed was to be the first salvo against the industry by regulators.
While many advocates of cryptocurrency adoption see any regulation as a priori against the spirit of the technology, this measured approach should be welcomed. It was always going to be the case that any innovation in financial technology in the United States would be scrutinized by regulators. KYC/AML already requires billions of dollars in compliance costs for financial institutions. Consumer protection remains a challenge especially where promises of instant wealth are combined with unfamiliarity with the technology. And we have even yet to see the implications for financial stability if crypto markets start to become even more interconnected with the rest of the economy.
It is still early days. Ultimately, we will need to find a balance between the interests of financial regulation and the right to transact in private. The current state of public blockchains can make this balance difficult and so increased scrutiny can feel much too intrusive. However, the development and increased acceptance of privacy tools can allow for a world of regulated fiat on/off-ramps in and out of the financial system without invasive scrutiny of individual transactions - much like what already exists with physical cash today.
Chart of the Week
NFT trading volume increasingly becoming concentrated onto the Ethereum blockchain.
News
Yuga Labs, the creators of the Bored Ape Yacht Club collection, bought the intellectual property rights of the Meebits and CryptoPunks collections from Larva Labs last Friday. As they have already done for Bored Apes holders, Yuga Labs has signalled that they will allow CryptoPunks owners to have full commercial use of their CryptoPunks. Yuga Labs now owns the two most valuable NFT PFP collections.
Crypto data analytics firm Nansen recently released a report comparing their benchmark NFT indices against the price of ether. Their main finding suggests that NFTs may well be a safe harbour as other cryptocurrencies decline with NFTs appreciating by 68.5% against ETH from Jan 1st, 2022 to March 9th, 2022. However, it remains to be seen whether 2 months of performance translates into a longer-term relationship between the two.
Animoca Brands’ F1 Delta Time is shutting down tomorrow (March 16th) after revealing they were unable to renew their license with Formula 1 Racing. While the company intends to provide compensation to holders through their other racing franchises, it is unclear if the original assets will retain F1 branding. This uncertainty highlights the importance of on-chain metadata as the only guarantee that collectibles maintain their original form as would be the case with a physical collectible.
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The author has no investment position in any of the companies or NFT projects mentioned, and has no business relationship with any company or project that is mentioned in this article.