The Digital Yuan is Coming

Good morning. Today we've got an update on China's rollout of the digital yuan, asset managers piling into the industry, upcoming clarification on the "crypto broker" definition, and more!

Also introducing...the SSS or "sat-sized summary". At the end of most articles you'll see an SSS that summarizes the key points and puts the story into terms that you could share with your dad. The name of course is an homage to the "satoshi" which is the smallest unit of a bitcoin.

Bonus Content Coming: I'm targeting early next week the end of the month to have my notes out from Messari's Crypto Theses for 2022. I'll include a link to my notes in this newsletter, however, the full report is definitely worth a read.

Market Update (as of 7:50am ET):

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Top 5:

1. China is pushing for broader use of its digital currency, but challenges remain
After launching last week, China's digital currency wallet has become one of the country's most downloaded apps. The digital yuan or e-CNY as the currency is known is a central bank digital currency (CBDC) that is under the control of the country's central bank. The e-CNY faces stiff competition from apps like WeChat and Alipay that have payment functions already built into their platforms and are integral to everyday life in China. The e-CNY is still limited to certain cities and a date for a nationwide rollout has not yet been set.

SSS (sat-sized summary): China's digital currency is growing rapidly, but faces major competition with existing payment platforms. China continues to pursue a policy of a government controlled digital currency after essentially banning cryptocurrencies in 2021

2. WisdomTree Adds Bitcoin Futures Exposure to Fund, Refiles for Spot ETF
Last week Wisdom Tree announced that they have added bitcoin futures exposure to their commodities-focused Managed Futures Strategy ETF. The fund, which has around $164 million in assets, has made a 1.5% allocation to bitcoin futures contracts. “Our view was that bitcoin is serving a role similar to gold and why people buy gold in commodities strategies,” said Jeremy Schwartz, global chief investment officer of WisdomTree, in an interview with CoinDesk. The allocation comes just a month after WisdomTree's spot-bitcoin ETF proposal was rejected by the SEC. They have since refiled another application.

SSS: Asset managers and other institutional players continue to move into the crypto space and offer products to their clients. The SEC has yet to approve a spot-bitcoin ETF (this is a fund that would hold bitcoin directly rather than indirectly via futures contracts, which is currently allowed by the SEC)

3. Binance.US Is Building an Office in the Solana Metaverse
The trend of "building" offices in the metaverse continues, as Binance.US, the US arm of the global cryptocurrency exchange, announced their upcoming downtown office in Portals, a Solana based metaverse platform. According to Binance.US spokesperson Zachary Tindall, "it’s the first of many steps we’re taking to be forward-looking as we build and reach our community in new environments." To be frank, I don't get this trend, but Binance is far from the only company to make such a move. Samsung has launched a pop-up version of their New York City store in metaverse platform Decentraland.

SSS: Real-world (aka meat-world) companies are building out virtual offices and meeting spaces in the metaverse. It's a trend that shows no signs of slowing

4. Some Perspective on the Market
While Bitcoin and other cryptocurrencies are down significantly from 2021 highs it's important to put that price drop in perspective. @WClementeIII lays out bitcoin progress over the past year in the below tweet and @Pastore1314 provides a somewhat funny comparison of the Bitcoin Fear and Greed Index at similar price levels just one year apart.

5. Crypto Firms Brace for New Tax-Reporting Rules to IRS
In the 2021 infrastructure bill a provision was included that provided an extremely broad definition of a crypto broker. The new provision would require any crypto broker to provide a range of disclosures including: customers’ names and addresses, gross proceeds from sales, and any capital gains or losses to both the IRS and investors. The issue with this broad tag is that miners, stakers, and software providers, all who could be potentially considered "crypto brokers", do not have access to this information. Collecting this information from customers would be almost impossible as many times in decentralized finance the party on the other side of a transaction is not known. This could impact crypto innovation in the US by encouraging customers of these providers to move to non-US entities to avoid theses reporting requirements. The *hopefully* good news is that the Treasury Department is likely to clarify the definition of a broker in the coming weeks.

SSS: A provision in the infrastructure bill may put burdensome reporting requirements on some crypto companies that could push customers to non-US entities. Clarification on this provision is expected from the Treasury Department in the coming weeks

Top Sharers of the Crypto Top 5:
1. Jake Y. - Greenville, SC
2. Cameron S. - New York, NY
3. Lauren A. - Nashville, TN

Disclaimer: The information contained in this newsletter shall not be understood or construed as financial advice. I am not an attorney, accountant or financial advisor, nor am I holding myself out to be, and the information provided is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.